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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10
GENERAL FORM FOR REGISTRATION OF SECURITIES
PURSUANT TO SECTION 12(b) OR 12(g) OF
THE SECURITIES ACT OF 1934
DEMEGEN, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
COLORADO 84-1065575
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
1051 Brinton Road, Pittsburgh, PA 15221
(Address of Principal Executive Office) (Zip Code)
(412) 241-2150
(Issuer's Telephone Number)
Securities to be Registered under Section 12 (b) of the Act:
NONE
Securities to be Registered under Section 12 (g) of the Act:
Common Stock, $0.001 par value
(Title of Class)
This Registration Statement contains forward-looking statements which involve
risks and uncertainties. When used in this Registration Statement, the words
"believe", "anticipate", "expects" and similar expressions are intended to
identify such forward-looking statements. The Company's actual results may
differ significantly from the results discussed in the forward-looking
statements. Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release the results of any revisions to
these forward-looking statements which may be made to reflect events or
circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
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ITEM 1 - BUSINESS
THE COMPANY
The Company was formed after the July 27, 1992 acquisition of the assets of The
Demeter Corporation by Excelsior Capital Corporation ("Excelsior"). Excelsior
was incorporated in Colorado on September 16, 1987. Excelsior acquired all of
the assets of The Demeter Corporation in exchange for 6,625,821 shares of
Excelsior's $0.001 par value common stock. The Demeter Corporation's assets
consisted of intangible assets related to various biotechnology applications in
the fields of human and animal health care, agricultural and commercial
chemicals. Subsequent to the acquisition, Excelsior changed its name to Demeter
BioTechnologies, Ltd. On September 18, 1998, shareholders approved the proposal
of the Company's Board of Directors to change the Company's name to Demegen,
Inc. The Company is currently incorporated in the State of Colorado
For accounting purposes, the acquisition was treated as a reverse acquisition
whereby The Demeter Corporation acquired Excelsior Capital Corporation. The
historical financial statements prior to the acquisition are those of The
Demeter Corporation utilizing the capital structure of Excelsior. However, The
Demeter Corporation had no operating activities from the date of inception,
December 6, 1991, through July 27, 1992. Likewise, Excelsior had no operating
activities prior to December 6, 1991.
The Company is a life science company located in Pittsburgh, Pennsylvania. The
Company is developing two types proprietary products. These products include
peptide (small protein) therapeutics for pharmaceutical applications and
peptide-encoded plant genes for agricultural applications.
The Company's business strategy is to focus its resources on the design and
development of its core technology, while licensing to larger partners its many
potential applications for commercialization. The Company has a platform
technology which can be commercialized by using specific compounds as the active
ingredient for many different potential products. The compounds have
demonstrated activity against many different types of infectious diseases and
cancer. The Company is targeting specific peptides or plant genes, disease
targets and commercial partners with whom products will be fully developed and
commercialized.
The Company has discovered key structural design parameters to construct
proprietary synthetic compounds with potent anti-cancer and anti-bacterial
performance characteristics. In the peptide form, the Company's compounds are
stable and soluble and have demonstrated efficacy in treating certain diseases
in animals. The anti-cancer and anti-bacterial performance represent significant
market opportunities - both in terms of the size of the market and also because
there are no cures or effective treatments for the important diseases being
targeted. In the plant gene form, the Company's compounds have been transformed
successfully in crops. In vivo disease resistant results have been obtained in
both potatoes and tobacco, both important demonstration crops. Significant
nutrition enhancement in sweet potatoes has also been obtained including both
qualitative and quantitative increases in overall plant protein content.
The Company has assembled an experienced team that will further develop, enhance
and protect its core technology, as well as aggressively develop product
applications from the technology. In general, the Company's primary sources or
revenue will be license fees, milestone payments, royalties, research grants and
revenues from supplying materials to licensees. The Company's November 1997
license agreement with Mycogen Corporation, a large agricultural biotechnology
company owned by The Dow Chemical
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Company, was the Company's first major success at licensing technology which the
Company has developed.
The Company received an initial payment of $1.25 million for licensing its
disease resistant agricultural technology. Additionally, the Company will
receive future milestone payments, as Mycogen commercializes the agricultural
technology, and royalties for licensing its disease resistant agricultural
technology. The Mycogen Agreement includes the license of certain technologies
for genetic disease prevention and spray-on treatment. The Mycogen partnership
is poised to become a major revenue stream for the Company as Mycogen pursues
the commercial application of the process. In November 1998 the Company expanded
the agreement to include its agricultural nutrition technology to Mycogen and
received an initial payment of $0.2 million plus a $0.15 million fee for
research support. The Company expects to receive $20 million, exclusive of
royalties, over the next four to six years in the form of license fees, research
support and milestone payments as Mycogen commercializes these agricultural
technologies. In addition Mycogen will be responsible for all development and
commercialization costs. By licensing agricultural applications, the Company
will be able to focus upon pharmaceutical applications and will have a revenue
source to help fund the pharmaceutical research and development.
In June 1998, the Company received a $2 million equity investment from the CEO
Venture Fund of Pittsburgh, PA. The financial commitment marked the largest
investment in the Company since the Company's inception. Since 1992, the Company
has raised in excess of $12 million of capital since inception.
OPERATIONS
The Company's primary focus is the development of human therapeutics. The
Company accomplishes this by developing and refining its core technology and
intellectual property, and secondly, by using its drug development team to bring
individual applications from the pre-clinical stage to human clinical studies.
The Company plans to out-license its pharmaceutical products, after completing
Phase I or Phase II human clinical trials for that application. The majority of
the Company's agricultural technologies are being developed and will be
commercialized by the Company's agricultural partner. In this role, Mycogen is
spending significant funds to develop enhanced crops using the Company's plant
gene technology. Mycogen is providing all of the development, patent and
regulatory costs and clearances for the individual crops.
During the past few years, the Company has explored the breadth of its
technology in order to determine the best targets for initial commercialization.
In order to attain proof of concept for an application, the Company has
collaborated with many renowned scientists with U.S. medical centers and
research universities, as well as in the laboratories of the NIH and USDA. In
doing so, the Company was able to develop numerous pharmaceutical and
agricultural applications with limited personnel and without large
infrastructure resources.
Since the Company's inception, an estimated $5 million and the use of
sophisticated laboratories have been expended by universities, governmental
agencies and private foundations developing products using the Company's
Peptidyl MIMs, while the Company maintains commercial rights and control.
The Company has not sought to build all of the pre-clinical facilities required
for drug development. However, the Company has established a core laboratory in
Pittsburgh to be able to perform microbiology, tissue screening, quality control
and chemistry necessary of the utility and potential of the Peptidyl MIMs as
well as testing the design theories of
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Dr. Jesse M. Jaynes, inventor of the Peptidyl MIM technology. The Company
expects to continue to out-source toxicology and animal efficacy studies
required in development of therapeutic application. The Company's strength lies
in that it has capable and experienced drug development personnel to accomplish
the required experiments in a timely and cost efficient manner.
PHARMACEUTICAL APPLICATIONS
The Company has selected a lead compound Peptidyl MIM D2A21, for development as
a cancer therapeutic. The majority of the Company's cancer results to date have
been directed towards prostate cancer. However, a number of evaluations by the
National Cancer Institute (NCI) and private laboratories have indicated that
this compound may have broad applicability against many types of cancers. In
addition to its cancer program, the Company has pre-clinical research programs
to prevent and treat bacterial and viral infections.
The Company has begun the process of finding a strategic partner for late stage
development and commercialization of its cancer application. However, the
Company will seek to accomplish Phase I human clinical studies before licensing
this application. The Company's strategy is to advance the Company's
applications as far as possible so that they are much more valuable before
licensing them to a large commercial partner.
During calendar 1999, the Company is planning to begin human clinical trials, to
assess D2A21's safety in patients whose cancer therapy has failed. In order to
meet this schedule, the Company is currently completing all of the efficacy,
toxicology, pharmcokinetic and chemistry and manufacturing tests necessary for a
new drug substance to get investigative new drug ("IND") approval from the
Federal Drug Agency ("FDA"). An initial pre-IND meeting with the FDA is planned
for the first quarter of 1999.
Prostate cancer, the second leading cause of cancer deaths in men in the United
States, affects 9.7 million Americans. Over 200,000 new cases are diagnosed each
year and more than 40,000 American men die of this disease annually. Carcinoma
of the prostate is the most commonly diagnosed cancer in men and the second most
common cause of cancer death in western civilization. It is predominately a
tumor of older men, which frequently responds to treatment when widespread and
may be cured when localized.
Currently therapeutic options include surgery, radiation therapy, hormonal
therapy and chemotherapy. The approach to treatment is influenced by the stage
of the disease, age and coexisting medical conditions. Surgery (radical
prostatectomy) and radiation are options for early stage cancer that has not
spread outside the prostate. Hormone therapy and chemotherapy are considered for
metastatic or recurring disease. The median age at diagnosis is 72 years. A
significant number of patients, especially when diagnosed at a more advanced
stage, relapse and develop incurable disseminated metastatic disease. None of
the current treatments for advanced disease provide significant benefit to
survival. Effective treatment modalities for patients with residual or
non-localized disease are clearly needed.
D2A21 has also demonstrated significant anti-tumor activity or solid tumors cell
lines, including lung, breast, ovarian, bladder, central nervous system and
melanoma. Additional studies in two laboratories indicates that prostate cancer
cell lines appear to be more susceptible to D2A21 than other solid tumor cell
lines. Therefore, the initial indication for this development plan is the
treatment of prostate cancer.
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D2A21 EFFICACY ANIMAL MODELS
D2A21, the Company's lead synthetic Peptidyl MIM, is undergoing evaluation in
several animal models of cancer, with the objective of optimizing dose and
schedule prior to entering into pre-IND safety studies. To date testing of D2A21
has promise as a potential anti-cancer agent, including the following:
o Significant in vitro anti-cancer activity against prostate, lung,
ovarian, breast, central nervous system and melanoma tumor cell lines
o Low dose (<1mg/kg) anti-cancer activity in an aggressive model of
prostate cancer in vivo. Data indicates a benefit to survival, growth
retardation and/or regression of primary tumor and reduction in
metastases
o Equivalent activity when given by intratumoral, intraperitoneal,
intravenous or subcutaneous route of administration
At the University of Pittsburgh Cancer Institute, the Company has been achieving
positive results in testing its lead compound Peptidyl MIM D2A21, in a number of
tumor xenograft models. In experiments in the Dunning rat model of prostate
cancer, animals were injected with Mat-Ly-Lu (MLL) prostate adenocarcinoma
cells, a very aggressive prostate cancer cell line that produces large primary
tumors as well as lung metastases. Without successful treatment, mortality
usually occurs within 30 days.
Rats treated with D2A21 achieved a 60% reduction in the growth of primary tumors
and a significant reduction in the number of lung metastases. D2A21 was
administrated intravenously at a low dose of just 0.179 mg per injection that
was effective without causing toxicity to the animals. Importantly, the survival
rate increased from 25% for controls to 75% for D2A21 treated animals.
D2A21 has been effective in reducing tumors when administered by the following
systemic routes, which include: sub-coetaneous, intra-parentinal (IP) and
intravenous (IV). The Company is in the process of selecting the final dosage
schedule for D2A21 to complete the pre-clinical efficacy and toxicology tests.
The Company will also be finalizing product manufacturing and packaging of the
product relative to the clinical tests.
HUMAN CLINICAL TRIALS
It is the Company's plan to begin Phase I human clinical trials in calendar
1999. The major purpose of a Phase I study is to define a safe dose and schedule
of administration of D2A21. Generally, cancer patients eligible for Phase I have
confirmed malignancy for which no effective therapeutic options are known.
Although the emphasis of the study is safety rather than efficacy, it would be
of use to maximize the opportunity for recognizing therapeutic benefit.
The specific Phase I protocols are being developed with the Prostate and
Urologic Cancer Center at the University of Pittsburgh Cancer Institute. It is
anticipated that the University of Pittsburgh Cancer Institute will conduct the
Phase I clinical trials.
Phase II studies will be designed to assess the anti-tumor efficacy of D2A21.
Using the dose and schedule found to be safe in Phase I studies, D2A21 will be
given to groups of patients with prostate cancer. The selection of cancers to
study in Phase II is usually based upon preclinical efficacy studies and any
promising results in Phase I studies.
Once D2A21 has demonstrated adequate efficacy and safety in Phase II studies, it
will enter Phase III testing where it will be compared to generally accepted
therapies for efficacy and toxicity. Demegen anticipates licensing during or
after Phase II clinical trials.
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SUPPORT FOR THE DEMEGEN CANCER PROGRAM
The Company has received considerable outside support for its cancer program.
Researchers and clinicians at the University of Pittsburgh Cancer Institute,
Duke University Medical Center and the National Cancer Institute have given
time, research and counsel to help the Company develop this cancer therapeutic.
The Company has also received over $1.2 million in research grants from
non-profit cancer foundations and institutes. In addition to direct financial
support, numerous university and governmental labs have conducted research with
D2A21, at no charge to the Company, to confirm the anti-tumor effectiveness of
this compound in animal models.
ANTI-BACTERIAL APPLICATIONS
In addition to its cancer program, the Company is conducting pre-clinical
experiments to assess using its Peptidyl MIM's in development of anti-bacterial
therapeutics. Furthest along is the development of an intravaginal gel that
prevents the transmission of Chlamydia, a sexually transmitted disease (STD)
which affect the reproductive health of 4 to 8 million U.S. women each year. The
Company's efforts to develop this application have been extensively supported by
the following institutions, which include: the Sexually Transmitted Diseases
Branch at the National Institutes of Health (NIH), the Division of AIDS at the
NIH and the Contraceptive Research and Development Program (CONRAD) - which is
affiliated with USAID. In addition to the Company's $100,000 Small Business
Innovation Research Program ("SBIR") grant from the NIH for STD Prevention, the
NIH has also been indirectly funding the Company's related research at the
University of Pittsburgh for the last two years. In early 1999, the testing of
D2A21 for prevention of Chlamydia in a primate model is expected to begin.
The Company is also conducting tests to determine the effectiveness of its
Peptidyl MIM's in treating pulmonary multi-drug resistant bacterial infections,
in appropriate animal models. The Company has received an additional $100,000
SBIR grant from the NIH for its pulmonary infection pre-clinical program.
The Company has demonstrated antimicrobial activity against a broad spectrum of
bacterial pathogen. The Peptidyl MIM's have potent in vitro activity against
pathogens from species of: Staphylococcus, Pseudomonas, Enterococcus,
Streptococcus, E. coli, Gonococcus and Chlamydia The Company's compounds have
shown in vitro efficacy against all of these dangerous pathogens, as well as
methicillin-resistant Staphyococcus aureus (MRSA) and vancomycin-resistant
enterococcus (VRE). The Company has demonstrated that its Peptidyl mimes are
effective in increasing survival when injected sub-eschar into Pseudomonas
infected mouse model. In another animal model, the Company compound successfully
eliminated a protozoal infection (Chagas disease), when administered
intravenously in mice.
A major problem, which strongly encourages the development of new class of
antibiotics agents, is the fact that many common pathogens are becoming
resistant to the therapeutics that have treated patients for the last forty
years. Each year in the United States, about two million cases of infection are
contracted by people while they are in the hospital. Infection remains the
principal cause of death of hospitalized patients in the United State, and one
of the leading causes of all deaths throughout the world. Treatment of infection
is a rapidly increasing concern because of the exponential rate of emergence of
antibiotic-resistant bacteria, compounded by the lack of new antibiotic options
effective against these
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organisms. The Company is optimistic that their Peptidyl MIM's will be an
effective alternative to antibiotics in treating infection. If the Peptidyl
MIM's are effective the evolution of antibiotic-resistant bacteria will also
become a moot issue.
PHARMACEUTICAL DEVELOPMENT SCHEDULE
In addition to its prostate cancer therapeutic, the Company is working to
develop a number of other pharmaceutical products. After completing its first
Phase I prostate cancer trials, the Company plans to begin additional clinical
programs for other cancers in late 1999. Set forth below is the Company's
present schedule of clinical trials:
CLINICAL TRIALS
PHASE I PHASE II PHASE III
Prostate Cancer Mid-1999 Mid-2000 Late 2001
Other Solid Tumor
Cancers Mid-2000 Late 2002
Chlamydia Prevention Early 2000 Early 2001 Late 2002
Infected Wound
Treatment Beginning 2001 Early 2002 Mid-2003
Antiviral Mid-2001 Early 2002
Human clinical trials are typically conducted in three sequential phases which
may overlap. Phase I involves the initial introduction of the drug into human
subjects or patients where the product is tested for safety, dosage, tolerance,
absorption, metabolism, distribution and excretion. Phase II involves studies in
a limited patient population to (i) identify possible adverse effects and safety
risks, (ii) determine the efficiency of the product for specific, targeted
indications, and (iii) determine dosage tolerance and optimal dosage. When Phase
II evaluation demonstrates that the product may be effective and has an
acceptable safety profile, Phase III trials are undertaken to further evaluate
dosage and clinical efficacy and to further test for safety in an expanded
patient population at multiple clinical study sites. A pivotal Phase III trial
is an adequate and well-controlled study which provides the primary basis for
determining whether there is "substantial evidence" to support the claims of
effectiveness for new drugs and forms the basis for an NDA. The regulatory
authority or the sponsor may suspend clinical trials at any point in this
process if either entity concludes that clinical subjects are being exposed to
an unacceptable health risk, that the trials are not being conducted in
compliance with applicable regulatory requirements, or for other reasons.
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AGRICULTURAL PLANT GENES
The development of pharmaceutical applications using Peptidyl MIM's is the
Company's primary focus. However, over the past few years, as the breadth of the
technology was explored, the Company's agricultural genes were also very well
received by the agribusiness community. So much so that business opportunities
developed rapidly and a substantial value has already been achieved. The Company
intends to use the proceeds from the license of its agricultural application to
help fund pharmaceutical product development of its anti-cancer therapeutics.
The application of biotechnology to agricultural crops is directed to the
creations of differentiated, value-added plants and products which improve
production, extend shelf life, prevent pathogenic disease, enhance nutritional
value and reduce the negative environmental impact of potentially hazardous
chemicals. Genetically engineering crops reduces the time to develop new crops
through accelerated cross breeding of crops. In addition to speed, genetic
engineering enables the designer to introduce characteristics, in particular
pest and disease resistance, which would most likely not be feasible with
traditional techniques.
Perhaps the most fundamental driving force for these new crops is the basic
recognition that the world's population is growing by over 50 million people per
year. At the same time, as economies improve in developing countries, the demand
for food increases faster than the population, or their ability to produce it.
The president of a large agricultural biotechnology company has stated that the
output per acre will need to double in the next thirty years, just to maintain
the current levels of hunger and malnutrition.
DISEASE RESISTANT CROPS
In November 1997, the Company concluded a significant licensing agreement with
Mycogen Corporation to utilize the Company's antimicrobial plant genes in
developing disease resistant agricultural crops. Mycogen is a large agricultural
biotechnology company based in San Diego, California. In October 1998, The Dow
Chemical Co. purchased the remaining share of Mycogen that it did not already
own thereby making Mycogen a wholly owned subsidiary of The Dow Chemical
Company. Dow Chemical is a $20 billion conglomerate with significant business
interests in the agricultural business sector.
The Company received over $1.2 million from Mycogen as an initial payment in
Fiscal 1997. Under the agreement, Mycogen will be responsible for all subsequent
development and commercialization costs to fully develop, protect and
commercialize this unique technology. Mycogen will also seek third parties for
commercialization in order to accelerate development and to expand the number of
different crops being commercialized.
In November 1998 the Company amended the aforementioned agreement with Mycogen
adjusting the milestone and related payments and minimum royalties. The
modification provided for an additional license for the Company's agricultural
nutrition technologies.
Including disease resistance and nutrition, the revised agreement calls for over
$20 million in payments to the Company, as Mycogen commercializes the
agricultural technology, exclusive of royalties, for license fees, research
support and milestone payments. In addition, if successful commercialization is
achieved the Company believes it will receive $75 million to $100 million in
royalty payments over the next 10 to 12 years.
The structure of the Mycogen partnership is such that Mycogen assume nearly all
responsibilities and costs for product development, regulatory approval and
marketing. The Company will need relatively few resources to support this
licensee of its technology
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except that the services of Mr. Jesse Jaynes, the Company's Chief Scientist, and
two to four full time equivalent employees will provide technical assistance and
research support.
One example of the effectiveness of the Company's technology was demonstrated by
the U.S. Department of Agriculture ("USDA") against Erwinia carotvora, commonly
known as potato "soft rot". Soft rot affects tubers while in storage or in the
soil prior to harvest and can decay to seed tubers or seed pieces after
planting. Soft rots also cause the decay of numerous other fleshy fruits and
vegetables, such as cucumbers, onions, tomatoes and lettuce and some ornamental
plants, such as iris. Soft rot can cause extensive damage to potatoes in storage
within a few hours.
The experiments conducted to test efficacy of soft rot protection indicated that
those tubers which contain the Company's genes almost totally resisted rotting.
The test results indicate that after a five day incubation period, compared to
the control group, the amount of soft rot reductions achieved ranged from 85% to
96%. This is a highly significant result that has not been achieved before in
potatoes. Losses caused by soft rot diseases are estimated at 10% in the United
States or about $300 million, and often much higher in other countries.
Most transgenic development for crop protection is targeted at replacing
insecticides or increasing herbicide resistance. The Company believes its
success and patent position in controlling bacterial and fungal diseases is
unique. Fungicide expenditures in the United States and the world are $550
million and $4.1 billion, respectively. United States farmers purchase about $4
billion of seeds each year. Set forth below are the Company's crops in
development:
CROP COLLABORATOR TYPE
Rice Cornell University Disease Resistance
Potatoes Albany, CA (USDA) Disease Resistance/Nutrition
Sweet Potatoes Tuskegee University Nutrition
Peanuts NC State/University of Georgia Disease Resistance
Peanuts Tuskegee University Nutrition
Tobacco North Carolina State Univ. Disease Resistance
Spruce Trees Canadian Forest Service Disease Resistance
Poplar Trees Canadian Forest Service Disease Resistance
Bartlett Pears Kearneysville, WVA (USDA) Disease Resistance
Walnuts UC Davis/USDA (New Orleans) Disease Resistance
Sugarcane Texas A&M University Disease Resistance
Sugarcane Texas A&M University Plant Factory
Cotton SW LA Un/USDA (New Orleans) Disease Resistance
Cassava Institute of Plant Sciences,
Switzerland Nutrition
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Lupin CSIRO, Canerra, Australia Nutrition
Grapes Florida (Private Company) Disease Resistance
Lettuce California (Private Company) Disease Resistance
Mellon California (Private Company) Disease Resistance
Rhododendron Univ. of Connecticut Disease Resistance
Alfalfa Private Company Nutrition
NUTRITIONAL ENHANCED CROPS
In addition to disease resistance traits, the Company has invented "storage
protein" or nutrition genes, DNP, which contain all the essential amino acids
for healthy animal or human growth. The first field proof of this concept has
been obtained in sweet potatoes, in testing conducted under the direction of Dr.
C.S. Prakash, Professor and Director of the Center for Plant Biotechnology at
Tuskegee University. Sweet potatoes grown with the Company's nutrition genes
produce all of the essential amino acids required for daily consumption.
Remarkably, the overall protein levels in the sweet potatoes averaged over 16%
compared to the normal levels of less than 5%.
One of the crops which historically valued additional protein is wheat for food
uses. Standard wheat flour contains about 11% protein. Commercial users of flour
often add wheat gluten to achieve a higher protein content. Wheat with a higher
protein content, in the 14% to 17% range, can command premiums ranging from
$0.20 to $1.25 per bushel. Accordingly, a higher protein wheat offers a market
opportunity of several hundred million annually.
The Company's patented nutrition technology could also be very important for
U.S. and world animal feed producers. In the future, animal feed producers may
be able to obtain the essential amino acids they require, in constructing their
feed rations for poultry and swine, directly from corn, sorghum or even
soybeans. The savings on their feed bill could be substantial, in addition to
avoiding some of the problems that occur occasionally from the use of
animal-based ingredients in feed rations.
Plants are generally deficient in the essential amino acids that all animals
including humans need to grow and sustain health. Of the twenty essential amino
acids humans need, only about twelve are synthesized naturally, the other eight
must be ingested regularly to sustain health. Infants and young children, are
particularly at risk. Millions of young people die or suffer permanent mental
and physical damage yearly as a result of insufficient essential amino acid
intake. In developed countries, such crops could have considerable appeal to
vegetarians.
Worldwide, the market for the Company's nutrition genes could easily be $1
billion per year within ten years. This technology, another example of Dr.
Jaynes' design methodology, is also supported with a United States patent and a
number of additional filings.
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GOVERNMENT REGULATION
Drug Approval Process
Regulation by the governmental authorities in the United States and other
countries is a significant factor in the development, production and marketing
of the Company's proposed products. All of the Company's products will require
regulatory approval by governmental agencies prior to commercialization. In
particular, human therapeutic products are subject to rigorous preclinical and
clinical testing and other approval procedures in the United States by the FDA
and similar health authorities in foreign countries. Various federal statutes
and regulations also govern or influence the testing, manufacturing, quality
control, safety, labeling, storage, record-keeping and marketing of such
products. The process of obtaining these approvals and the subsequent compliance
with appropriate federal and foreign statutes and regulations require the
expenditure of substantial resources. Any failure by the Company or its
collaborators or licensees to obtain, or any delay in obtaining, regulatory
approval could adversely affect the marketing of any of the Company's products
and its ability to receive revenues therefrom. The Company has neither applied
for nor received regulatory approval to market any products.
The steps required before a pharmaceutical agent may be marketed in the United
States include (i) preclinical laboratory, in vivo and formulation studies, (ii)
the submission to the FDA of an IND, which must become effective before human
clinical trials may commence, (iii) adequate and well controlled human clinical
trials to establish safety and efficiency of the proposed drug in its intended
indication, (iv) the submission of a New Drug Application ("NDA") to the FDA,
and (v) the FDA approval of the NDA.
In order to clinically test, produce and market products for diagnostic or
therapeutic use, a company must comply with mandatory procedures and safety
standards established by the FDA and comparable agencies in foreign countries.
Before beginning human clinical testing of a potential new drug, a company must
file a IND and receive clearance from the FDA. The IND is a summary of the
preclinical studies which were carried out to characterize the drug, including
toxicity and safety studies, as well as an in-depth discussion of the human
clinical studies which are being proposed. Approval of a local institution
review board ("RIB") and informed consent of trial subjects is also required.
Human clinical trials are typically conducted in three sequential phases which
may overlap. Phase I involves the initial introduction of the drug into human
subjects or patients where the product is tested for safety, dosage, tolerance,
absorption, metabolism, distribution and excretion. Phase II involves studies in
a limited patient population to (i) identify possible adverse effects and safety
risks, (ii) determine the efficiency of the product for specific, targeted
indications, and (iii) determine dosage tolerance and optimal dosage. When Phase
II evaluation demonstrates that the product may be effective and has an
acceptable safety profile, Phase III trials are undertaken to further evaluate
dosage and clinical efficacy and to further test for safety in an expanded
patient population at multiple clinical study sites. A pivotal Phase III trial
is an adequate and well-controlled study which provides the primary basis for
determining whether there is "substantial evidence" to support the claims of
effectiveness for new drugs and forms the basis for an NDA. The regulatory
authority or the sponsor may suspend clinical trials at any point in this
process if either entity concludes that clinical subjects are being exposed to
an unacceptable health risk, that the trials are not being conducted in
compliance with applicable regulatory requirements, or for other reasons.
The results of product development, preclinical studies and clinical studies are
submitted to the FDA as part of an NDA for approval of the marketing and
commercial shipment of the product. The FDA may deny approval of an NDA if
applicable regulatory criteria are not satisfied, or may require additional
data. Even if such data is submitted, the FDA may ultimately decide that the NDA
does not satisfy its criteria for approval. Once issued, a product approval may
be withdrawn if compliance with regulatory standards is not maintained or if
problems occur after the product reaches the market. In addition, the
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FDA may require testing and surveillance programs to monitor the effect of
approved products which have been commercialized, and it has the power to
prevent or limit further marketing or a product based upon the results of these
post-marketing programs.
Satisfaction of these FDA requirements, or similar requirements by foreign
regulatory agencies, typically takes several years and the time needed to
satisfy them may vary substantially, based upon the type, complexity and novelty
of the drug product. The effect of government regulation may be to delay or to
prevent marketing of potential products for a considerable period of time and to
impose costly procedures upon the Company's activities. There can be no
assurance that the FDA or any other regulatory agency will grant approval for
any products being developed by the Company on a timely basis, or at all.
Success in preclinical or early stage clinical trials does not assure success in
later stage clinical trials. Data obtained from preclinical and clinical
activities are susceptible to varying interpretations which could delay, limit
or prevent regulatory approval. If regulatory approval of a product is granted,
such approval may impose limitations on the indicated uses for which a product
may be marketed. Further, even if regulatory approval is obtained, later
discovery of previously unknown problems with a product may result in
restrictions on the product, including withdrawal of the product from the
market. Delay in obtaining or failure to obtain regulatory approvals would have
a material adverse affect on the Company's business. Marketing the Company's
products abroad will require similar regulatory approvals and is subject to
similar risks. In addition, the Company is unable to predict the extent of
adverse government regulation that might arise from future United States or
foreign governmental action.
Before the Company's products can be marketed outside of the United States, they
are subject to regulatory approval similar to that required in the United
States, although the requirements governing the conduct of clinical trials,
product licensing, pricing and reimbursement vary widely from country to
country. No action can be taken to market any product in a country until an
appropriate application has been approved by the regulatory authorities in that
country. The current approval process varies from country to country, and the
time spent in gaining approval varies from that required for FDA approval. In
certain countries, the sales price of a product must also be approved. The
pricing review period often begins after market approval is granted. No
assurance can be given that, even if a product is approved by a regulatory
authority, satisfactory prices will be approved for the Company's products.
No assurance can be provided that the Company's INDs or NDAs will be
successfully reviewed by the FDA, or that similar applications will be
successfully reviewed by foreign regulatory authorities. Further, the FDA and
foreign authorities may at any time take legal or regulatory action against a
product or the Company is it concludes that a product has not complied with
applicable laws and regulations or that earlier evaluations of a product's
safety or effectiveness may not have been adequate or appropriate. Such action
may include, but is not limited to, restrictions on manufacture and shipment of
products, seizure of products, injunctions and civil and criminal penalties. The
FDA's policies may change and additional government regulations may be
promulgated which could prevent or delay regulatory approval of the Company's
potential products. Moreover, increased attention to the containment of health
care costs in the United States and in foreign markets could result in new
government regulations which could have a material adverse effect on the
Company's business. The Company is unable to predict the likelihood of adverse
governmental regulation which might arise from future legislative or
administrative action, either in the United States or abroad.
<PAGE> 13
COMPETITIVE CONDITIONS
There exists intense competition in the pharmaceutical and biotechnology
industries. The Company faced competition from a variety of sources, both direct
in indirect. There are at least seven other biotechnology companies that are
developing peptide compounds for antimicrobial or anti-cancer applications.
These companies include: Applied Microbiology, Cubist Pharmaceuticals,
Intrabiotics, Magainin Pharmaceuticals, Micrologix Biotech, Microcide
Pharmaceutical, Inc. and Xoma Corporation.
One company, appears to be the leader in getting a product into the marketplace
with the development of a topical infection treatment of diabetic foot ulcers.
It has been submitted to the FDA for NDA approval. Should it be approved, it
would be the first peptide based antibiotic approved by the FDA. Upon that
event, cationic peptides would be considered a new class of anti-infective
therapy. The Company believes that FDA approval may foster acceptance of other
peptide therapeutics. Also, with the increase of multi-drug resistant bacterial
strains, peptide therapeutics may soon be in high demand, since they utilize a
different mechanism of action than traditional antibiotics.
Based on the potency of its Peptidyl MIMs as reported to the Company by
independent medical collaborators, the Company believes that its Peptidyl MIMs
will be more effective than their competitors', at much lower concentrations.
The Company's competition appears to be focusing primarily on anti-bacterial
applications, and unlike the Company, has not reported similar successes in the
cancer area. Nor do these competitors have any agricultural products in their
pipeline. Given the Company's patent position in the agricultural area, the
Company feels it is in a strong position to dominate this area as compared to
the aforementioned competitors. To the best of the Company's knowledge, there
are few, if any, peptide biotechnology companies in the plant genetic arena.
In addition to peptide competitors, there are, of course, many companies working
to develop new antibiotics and cures for infectious diseases and cancers. This
bodes well for the Company since large pharmaceutical companies are actively
seeking new compounds. As the Company's product development progresses, its
technology becomes more appealing to a wider selection of potential partners.
TECHNOLOGY BASE
The Company's technology was designed by Dr. Jaynes, who has over fifteen years
of peptide design experience and is a biochemist by training. He is a Co-Founder
of the Company and serves as Vice President of Research. The Company believes
having a molecular architect as part of the management team distinguishes the
Company from its peptide biotech competitors which have typically in-licensed
their lead molecules. As a result, the Company has a structure and process in
place for creating a pipeline of new molecular product applications.
Peptides with lytic properties occur in nature and are part of the natural
immune systems of many plants, animals and insects. The Company's core science
is the ability to design molecules which are many times more powerful that those
occurring in nature, with minimal toxicity. The Company's Peptidyl MIMs range in
length from 17 to 40 amino acids and they have no sequence homology to the
peptides found in nature. In its discovery process, the Company has identified
and filed patents on a number of characteristics, which, when incorporated into
the design of the molecule, create compounds with unique properties. These
design "rules" include parameters for charge density, length, amphipathy,
hydrophobicity and spatial orientation. When organized, these characteristics
permit the ability to design molecules with increased specificity and
<PAGE> 14
activity, which means some Peptidyl MIMs are more effective against cancer than
bacteria, for example.
Understanding the rules for creating the desired properties an important aspect
of the Company's core technology. The Company has identified several thousand
different molecules which define each class of Peptidyl MIMs. This relatively
small number represents the spectrum of molecules with the most desirable
features and benefits compared to the hundreds of millions of potential
combinations and permutations which could theoretically be created.
The understanding of these core discoveries are currently being significantly
expanded. In a partnership with Mycogen, an extensive evaluation process is now
underway. Should this process yield new breakthroughs or discoveries, the
Company will retain all rights to non-agricultural applications.
MECHANISM OF ACTION
In general, the Peptidyl MIMs are believed to act by disrupting the membrane or
cell wall, thereby allowing fluids to enter the cell and cause the cell to be
destroyed or lysed. Because healthy human cells have a more complex cytoskeletal
structure, which a pathogenic cell does not possess, the healthy cell has the
ability to repair any damage. In the case of bacteria, this method of action
effectively precludes bacteria from mutating to avoid destruction, thereby
giving the Company's compounds a competitive advantage over most other
antibiotics where drug resistance is becoming a major problem. The Peptidyl MIMs
are also effective directly against cancer cells. Cancer cells are, in effect,
unhealthy cells, and therefore have weakened cytoskeletal structures. In the
case of cancer, the Company's in vivo results are better than the in vitro
results. Hence, additional mechanism of actions are being investigated.
For cancer, the general theory for mechanism of action of the Peptidyl MIMs has
been that of initial membrane disruption with subsequent cell lysis and death of
the patient or the cell. However, research results suggest that additional
factors come into play in the in vivo situation. The Company is accumulating
evidence which indicates that D2A21 may have anti-angiogenic properties in
addition to its lytic function. The anti-angiogenic property interferes with
tumor blood supply, and reduces the growth rate for the primary tumor
GENETIC ENGINEERING
The Company has designed plant genes that destroy many agricultural fungal and
bacterial pathogens once inserted transgenically into the genome of crops. The
crops then take on the disease resistant trait and are able to express the
peptide into future generations of the plant. The Company has constructed an
inventory of genes which are being used to incorporate disease resistance into
plants, securing good yields while reducing the use and cost of environmentally
undesirable chemicals.
Genetically engineering crops accelerates the traditional time consuming cross
breeding of crops. In addition to speed, genetic engineering enables the
designer to introduce characteristics, in particular pest and disease
resistance, which would likely not be feasible with traditional techniques.
Although plant genetic engineering still faces regulatory hurdles, there have
been significant recent breakthroughs in acceptability of biologically enhanced
crops. Bt genes (developed by Monsanto, Mycogen and others), which help resist
insects, are examples of the major efforts underway to genetically modify
plants.
<PAGE> 15
The Company has also designed another type of plant gene, a custom designed
storage protein which has significant potential for improving animal feeds as
well as human nutrition, by improving the amino acid profile of various food and
feed crops. Recent independent results of this gene indicate that the total
protein content, not just the deficient amino acids, could be increased four
fold.
The principal goal in plant protein design has historically been to increase one
or two individual amino acids. The historic approach has generally not been
successful because they were unable to stabilize sufficient quantities of the
target proteins. Dr. Jaynes took a broader approach and built upon the
structural requisites he used to design proteins with anti-bacterial traits.
Dr. Jaynes designed protein molecules which when produced by the plant, would
produce the eight most essential amino acids needed by humans, and offsetting
those in which the crops, on average, were most deficient. A key step was to
create a molecular structure that mimics a natural plant storage protein's
ability to form stable aggregates and accumulate within the plant cell. This
design concept ASP (Artificial Storage Protein) achieved the goal of a
qualitative improvement in protein content. The structural arrangement also
facilitates the bioactivity of the essential amino acids by setting up targets
for the main digestive enzymes of the mammalian gut, and thereby breaking down
the protein into its constituent amino acids.
The design concept developed by Dr. Jaynes also accomplished a quantitative
increase in total protein content. Normally a plant produces a variety of
proteins. Many of these are broken down to accomplish various plant tasks and
the plant produces new proteins. The ASP gene reduces the "turnover" (loss of
protein) of the natural proteins within the plant, thereby allowing for greatly
increased protein content. The reasons given for the turnover reduction are not
yet understood, but the result of inserting an ASP gene yields significant
qualitative and quantitative improvement in protein content without degradation
of other important characteristics.
Building on the ASP success, Dr. Jaynes has established a design methodology for
optimizing a given crop for a given application, e.g. corn that satisfies the
specific feeding requirements of hogs.
PEPTIDYL MIM PRODUCTION
Peptides are currently produced using a chemical synthesis process. Using
synthesis, the Company's Peptidyl MIM's typically cost $1,200 to $5,000 per
gram, depending upon the volume and other characteristics. Large scale
production will lower this cost significantly. Nevertheless, for most
pharmaceutical application, because Peptidyl MIMs are active in very low
concentrations, even at this high cost level, the Peptidyl MIMs are expected to
be competitively priced.
The peptide for nonclinical and initial clinical development activities have
been manufactured by a third party vendor, using a manufacturing method based
upon currently available solid phase peptide synthesis technology. The
development of specifications and establishment of analytical methods is being
carried out jointly by MPS and the Company. The manufacturer selected by the
Company will perform quality control and stability testing of the drug
substance. For commercial quantities there are a number of companies with
capabilities to produce peptides on a large scale. The Company anticipates it,
or its licenses, will be able to contract for suitable large scale peptide
production. Implementation of all of the methods is the responsibility of the
manufacturer. The
<PAGE> 16
Company has established a relationship with a manufacturer to produce the
clinical supplies that the Company currently requires.
PATENTS, LICENSES AND PROPRIETARY RIGHTS
The Company has filed a number of United States patent applications, as well as
corresponding applications in the PCT and foreign countries.. The Company's
patent strategy is to strive for broad coverage for a class of molecules for a
wide range of diseases in humans, animals and plants. The Company's lead
molecule, D2A21 is patented as a composition of matter. Additionally, the
Company has in excess of 40 molecules patented a compositions of matter.
For its agricultural applications, the Company has acquired the rights to three
U.S. and five international patents from Louisiana State University ("LSU").
These patents include broad claims for plants with bacterial and fungal
resistance or enhanced nutrition. Dr. Jaynes, the Company's Vice President of
Research, was the principal investigator on these patents when he was a
professor and researcher at LSU. These patents also carry early filing dates,
thereby giving the Company a very strong patent position in the disease
resistant and nutrition enhanced plant area. The Company has also been assigned
Dr. Jaynes' rights to patents related to has earlier work at LSU.
STATUS OF DEMEGEN PATENTS
<TABLE>
<CAPTION>
Patent # Title
- -------- -----
<S> <C>
5,561,107 Method of Enhancing Wound Healing by Stimulating Fibroblast
and Keratinocyte Growth in Vito, Utilizing Amphipathic Peptides
5,597,945 Plants Generically Enhanced for Disease Resistance
5,597,946 Method for Introduction of Disease and Pest Resistance into Plants
and Novel Genes Incorporated into Plants Which Code Therefore
5,717,064 Methylated Lysine-Rich Lytic Peptides and Method of Making Same by
Reductive Alkylation
5,744,445 Method of Treating Pulmonary Diseases with Non-Naturally
Occurring Amphipathic Peptides
5,773,413 Method of Combating Mammalian Neoplasias and Lytic Peptides
Therefor
5,811,654 Plants genetically enhanced for nutritional quality
Pending Numerous other applications have been submitted
</TABLE>
EMPLOYEES
The Company currently has nine employees but also supports, directly or
indirectly, some twenty researchers at academic and other research institutions.
<PAGE> 17
COMPANY HISTORY AND GENERAL INFORMATION
The Company was formed after the July 27, 1992 acquisition of the assets of The
Demeter Corporation by Excelsior Capital Corporation ("Excelsior"). Excelsior
was incorporated in Colorado on September 16, 1987. Excelsior acquired all of
the assets of The Demeter Corporation in exchange for 6,625,821 shares of
Excelsior's $0.001 par value common stock. The Demeter Corporation's assets
consisted of intangible assets related to various biotechnology applications in
the fields of human and animal health care, agricultural and commercial
chemicals. Subsequent to the acquisition, Excelsior changed its name to Demeter
BioTechnologies, Ltd. On September 18, 1998, the shareholders approved the
recommendation of the Company's Board of Directors to change the Company's name
to Demegen, Inc.
The Company is a "Development Stage Company" that designs synthetic
peptide/protein compounds and genes for pharmaceutical and agricultural
applications. Current development programs include a new treatment for prostate
cancer and sexually transmitted diseases, and two transgenic agricultural
applications - one to prevent plant diseases, the other to increase the
nutritional value of food and feed crops.
The Company has two licenses in place for its agricultural technology, disease
resistance and nutritional enhancement, to Mycogen which has produced historic
revenue streams and will continue to produce revenue as Mycogen proceeds towards
commercialization of these technologies. The Company is focusing its
pharmaceutical efforts upon the commercialization of its cancer therapeutic
which it expects to license to a major pharmaceutical firm in 2000-2001, when
the therapeutic will be either in Phase II or entering Phase III clinical
trials.
The Company's offices and laboratory are located at 1051 Brinton Road,
Pittsburgh, PA 15221 and its telephone number is 412-241-2150. The Company
occupies 3,000 square feet of leased space. The lease is for a three year term,
expiring September 2001, at a monthly rental of $3793. Prior to the Company's
move to Pittsburgh in September 1998, the Company was located in Durham, North
Carolina.
ITEM 2 - FINANCIAL INFORMATION
SELECTED FINANCIAL DATA
The following table sets forth certain financial data for, and as of the end of,
the years ended September 30, 1998, 1997 and 1996 and for the period December 6,
1991 (inception) to September 30, 1998:
<TABLE>
<CAPTION>
December 6
Year Ended September 30, 1991 (Inception)
------------------------------------------------------ to September
1998 1997 1996 30, 1998
---- ---- ---- --------
<S> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Grant and Other Income $ 1,376,918 $ 764,834 $ 271,777 $ 2,697,921
Total Expenses 3,370,671 1,708,607 2,841,255 14,135,446
</TABLE>
<PAGE> 18
<TABLE>
<S> <C> <C> <C> <C>
Net Loss (1,993,753) (943,773) (2,569,478) (11,437,525)
Net Loss per Share (dilutive) $ (0.09) $ (0.05) $ (0.17)
Dividends per Share $ 0.00 $ 0.00 $ 0.00
Weighted Average Number
of Common Shares
Outstanding 23,867,091 19,537,047 15,479,889
BALANCE SHEET DATA:
Cash & Cash Equivalents 1,686,658 $ 310,252 $ 19,266
Working Capital (deficiency) 1,329,541 (1,498,477) (2,754,591)
Total Assets 2,114,750 651,963 156,147
Long-term obligations -0- -0- -0-
Deficit accumulated during
development stage (11,477,525) (9,443,772) (8,499,999)
Redeemable convertible preferred
Stock 1,983,873 -0- -0-
Shareholder's Equity
(Deficit) (595,519) (1,158,216) (2,642,523)
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION & RESULTS OF
OPERATIONS
GENERAL
Since commencement of operations in 1992, the Company has been engaged in
research and development activities, including conducting preclinical studies
and clinical trials, and recruiting its scientific and management personnel,
establishing laboratory facilities and raising capital. The Company has not
received any revenue from the direct sale of its products to the general public
but has received grant monies and license payments from other corporations from
the license of the Company's technology.
The Company is a "Development Stage Company" that designs synthetic
peptide/protein compounds and genes for pharmaceutical and agricultural
applications. Current development programs include a new treatment for prostate
cancer and sexually transmitted diseases, and two transgenic agricultural
applications - one to prevent plant diseases, the other to increase the
nutritional value of food and feed crops.
The Company has two licenses in place for its agricultural technology, disease
resistance and nutritional enhancement, to Mycogen which has produced historic
revenue streams and will continue to produce revenue as Mycogen proceeds towards
commercialization of these technologies. The Company is focusing its
pharmaceutical efforts upon the commercialization of its cancer therapeutic
which it expects to license to a major
<PAGE> 19
pharmaceutical firm in 2000-2001, when the therapeutic will be either in Phase
II or entering Phase III clinical trials.
RESULTS OF OPERATION:
SEPTEMBER 30 1998 VS 1997
In the year ended September 30, 1998 (Fiscal 1998) grants and other income
increased significantly to $1.4 million from $0.8 million in the year ended
September 30, 1997 (Fiscal 1997). This increase was due to a $0.9 million
licensing fee received from Mycogen Corporation ("Mycogen") as part of the
license entered into during Fiscal 1998. Additionally, a cancer charity made a
grant of $0.25 million during Fiscal 1998 as part of an ongoing program to fund
the Company's development of cancer fighting drugs. During Fiscal 1997 a grant
of $0.5 million was received from this fund. Additionally, the Company
recognized $0.1 million of revenue related to research expenses funded by
Mycogen and received $0.04 million of interest on its cash balances.
Research and development expenses increased to $0.9 million in Fiscal 1998 from
$0.6 million in Fiscal 1997 due to the Company's increased funding relative to
its cancer and sexually transmitted disease drug research. During Fiscal 1998
the Company focused its research and development on its cancer therapeutic
achieving positive results in the testing of its lead compound in a number of
models.
General and administrative expenses increased to $2.3 million in Fiscal 1998
from $0.9 million in Fiscal 1997. Included in general and administrative
expenses was a non-cash charge of $1.7 million for the issuance of below market
stock options issued to employees and directors during Fiscal 1998 that vested
during the year. Exclusive of the non-cash charge, general and administrative
expenses decreased by $0.25 million to $0.62 million due to decreased legal
costs and overall cost containment.
Interest expense decreased to $0.03 million in Fiscal 1998 from $0.17 million in
Fiscal 1997 due to the $1.6 million decrease in amounts payable to related
parties through the conversion of certain amounts to restricted stock and
forgiveness of certain amounts payable late in Fiscal 1997. The receipt of the
license fee from Mycogen in March 1998 put the Company in a cash positive
position and was used to eliminate the majority of interest bearing payables to
employees and directors. Additionally, the conversion and forgiveness of
employee debt in Fiscal 1997 eliminated a significant amount of liabilities
which were interest bearing.
Depreciation and amortization increased to $0.12 million in Fiscal 1998 from
$0.07 million in Fiscal 1997. The increase was primarily due to increased
amortization of the License Agreement with LSU which required an initial payment
of 700,000 shares (valued at $245,000) of the Company's common stock in May 1997
and the increase in amortization of capitalized patent costs associated with the
Company's product processes.
The Company did not have a federal or state income tax provision in either
Fiscal 1998 or 1997 due to the loss recorded in each year. An allowance was
recognized to offset the tax benefit until such time that the Company generates
taxable income.
The amounts described above resulted in a net loss of $2 million for Fiscal
1998. The net loss would have been $0.3 million if the aforementioned non-cash
charge was excluded
<PAGE> 20
SEPTEMBER 30, 1997 VS 1996
In the year ended September 30, 1997 grants and other income increased
significantly to $0.8 million from $0.3 million in the prior year. This was due
to increased grant revenue, primarily from a cancer charity, as the Company
began demonstrating the commercial possibilities of the peptide.
Research and development and general and administrative expenses decreased by
$0.16 million and $0.76 million, respectively, due to a significant refocusing
of the Company's research efforts.
Interest expense decreased by $0.25 million to $0.17 million due to the
settlements in Fiscal 1997 and 1996 where amounts payable and debt were either
extinguished or settled for a combination of cash and Common Stock of the
Company.
Depreciation and amortization doubled to $0.07 million due to an increase in
depreciation of property, plant and equipment. There was no amortization in
Fiscal 1996 as the Company has just begun capitalizing patent costs associated
with the Company's processes.
The Company did not have a federal or state income tax provision in either
Fiscal 1997 or 1996 due to the loss recorded in each year. An allowance was
recognized to offset the tax benefit until such time that the Company generates
taxable income.
LIQUIDITY AND CAPITAL RESOURCES
FISCAL 1998
During the year ended September 30, 1998, the Company's cash and cash
equivalents increased by $1.4 million to $1.7 million. Net cash provided by
financing of $1.6 million was partially offset by a $0.08 million of net cash
utilized by operating activities and $0.14 million of net cash utilized by
investing activities.
Specifically, cash inflows from financing activities included the $1.9 million
net proceeds from the issuance of preferred stock to the CEO Venture fund in
June 1998. Additionally, $0.09 million was realized from the exercise of stock
options. These sources of funds were partially offset by a $0.43 million
decrease in payables to related parties.
The $0.14 million of cash utilized by operating activities consisted of the net
loss of $2 million and a decrease of $0.14 million decrease in accounts payable
and other liabilities offset by the $1.7 million of non-cash compensation
related to the issuance of below market stock options issued to employees and
directors that vested during the year, $0.12 million of depreciation and
amortization, $0.09 million of stock issued for services and a $0.18 million
increase in unearned revenue relating to the $0.3 million three year
administration fee paid to the Company in October 1997 by Mycogen.
The $0.14 million of cash utilized by investing activities relates to $0.05
million for the purchases of property, plant and equipment and $0.08 million of
patent costs capitalized as intangible assets in the current year.
FISCAL 1997
During the year ended September 30, 1997, the Company's cash increased by $0.3
million. Net cash provided by financing of $0.9 million was partially offset by
a $0.6
<PAGE> 21
million of net cash utilized by operating activities and $0.07 million of net
cash utilized by investing activities.
Cash from financing activities was generated from $0.1 million net proceeds from
the issuance of the Company's Common Stock and $0.82 million increase in
payables to related parties due to services provided to the Company.
Cash utilized in operating activities was caused by the net loss of $0.94
million and a $0.2 million decrease in accounts payable and accrued expenses.
This was partially offset by $0.7 million of depreciation and amortization and
$0.48 million of stock issued for services rendered to the Company.
Cash utilized by investing activities was primarily due to a $0.08 million
increase in intangible assets due to the capitalization of patent related
expenses.
FISCAL 1996
During the year ended September 30, 1996, the Company's' cash increased by $0.02
million. Net cash provided by financing of $1.65 million was almost fully offset
by a $1.58 million of net cash utilized by operating activities and $0.05
million of net cash utilized by investing activities.
Cash from financing activities was generated from $0.48 million net proceeds
from the issuance of the Company's Common Stock and $1.2 million increase in
payables to related parties due to services provided to the Company.
Cash utilized in operating activities was caused by the net loss of $2.57
million and a $0.15 million decrease in interest payable. This was partially
offset by $0.04 million of depreciation and amortization, and a $0.5 million
increase in accounts payable and accrued expenses and $0.54 million of stock
issued for services rendered to the Company.
Cash utilized by investing activities was primarily due to a $0.02 million
increase in intangible assets due to the capitalization of patent related
expenses and $0.03 million of capital expenditures.
Year 2000
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure of miscalculations causing disruptions of operations including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
The Company has not completed a formal assessment of the Year 2000 issue;
however, the Company does not have any significant system interfaces with
outside vendors or customers which, in the opinion of management, are vulnerable
to those third parties' failure to remediate their own Year 2000 issues. There
are no internal computer systems which present a Year 2000 issue. While
management cannot reasonably estimate the cost that may be necessary to address
Year 2000 issues related to its outside vendors or customers, in the opinion of
management, such cost will not have an adverse material effect on the results of
operations.
<PAGE> 22
Prospective Information
The Company believes that it has adequate liquidity to fund its operations in
Fiscal 1999. On a long term basis, it will be necessary for the Company to
access additional funding so that it can continue funding the Phase I and Phase
II testing of its therapeutic agents. This funding may be in the form of a
private placement of equity securities or a secondary issuance of securities
into the market. Additionally, the CEO Venture Fund has a warrant (the
"Warrant") to purchase up to 4,965,556 shares of the Company's Common Stock at
$0.45 per share. If the entire warrant were to be exercised, the Company would
receive proceeds of $2.23 million.
ITEM 3 - DESCRIPTION OF PROPERTY
The Company's office and lab are located at 1051 Brinton Road, Pittsburgh, PA
15221. The Company occupies 3,000 square feet of leased space. The lease is for
a three year term, expiring September 2001 at a gross monthly rental, including
utilities, of $3,793. Prior to the Company's move to Pittsburgh in September
1998, the Company was located in Durham, North Carolina.
The majority of the Company's application research is conducted by independent
labs, academic and research institutions and commercial partners. The Company's
laboratory focuses primarily on research related to the Company's core
technologies.
The Company believes that these facilities are adequate for its current needs.
ITEM 4 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of December 31, 1998, the ownership of the
Company's Common Stock and Convertible Preferred Stock by (i) each director of
the Company, (ii) all executive officers and directors of the Company as a
group, and (iii) all persons known by the Company to own more that 5% of the
Company's Common and Convertible Preferred Stock.
<TABLE>
<CAPTION>
Beneficial Ownership
--------------------
Title of Number of
Name and Address Class Shares (1) % (1)
- ------------------ --------- ------------ -----
<S> <C> <C> <C>
Richard D. Ekstrom (2) Common 2,608,250 9.38%
1051 Brinton Road
Pittsburgh, PA 15221
Donald A. Guthrie, Ph.D. (3) Common 1,900,000 7.12%
1051 Brinton Road
Pittsburgh, PA 15221
Jesse M. Jaynes, Ph.D. (4) Common 2,172,726 7.84%
1051 Brinton Road
Pittsburgh, PA 15221
</TABLE>
<PAGE> 23
<TABLE>
<S> <C> <C> <C>
James E. Thornton (5) Common 733,001 2.79%
1051 Brinton Road
Pittsburgh, PA 15221
John Bridwell Common 972,601 3.72%
1051 Brinton Road
Pittsburgh, PA 15221
Alfonso Lovo-Cordero (6) Common 240,000 0.91%
1051 Brinton Road
Pittsburgh, PA 15221
Konrad Weis Ph.D. Common 200,000 0.77%
1445 Bennington Avenue
Pittsburgh, PA 15217
James Colker (7) Common 9,401,000 30.25%
2000 Technology Drive
Suite 160
Pittsburgh, PA 15219
Philip Sears Common 1,570,000 6.01%
4711 Tamarisk Drive
Oklahoma City, OK 73142
All Directors and Officers Common 18,227,578 51.61%
as a group (8 persons)
</TABLE>
(1) Beneficial ownership is determined in accordance with the rules of the
Securities & Exchange Commission and generally includes voting or investment
power with respect to securities. Shares of Common Stock subject to options or
warrants currently exercisable or convertible, or exercisable or convertible
within 60 days of December 31, 1998, are deemed outstanding for computing the
percentage of the person holding such option or warrant but are not deemed
outstanding for computing the percentage of any other person. Except as
indicated in the footnotes to this table and pursuant to applicable community
property laws, the persons named in the table have sole voting and investment
power with respect to all shares of Common Stock beneficially owned.
(2) Includes 1,700,000 shares of Common Stock issuable upon the exercise of
options that are currently exercisable.
(3) Includes 555,000 shares of Common Stock issuable upon the exercise of
options that are currently exercisable.
(4) Includes 1,600,000 shares of Common Stock issuable upon the exercise of
options that are currently exercisable and 15,000 shares of Common Stock owned
by Mr. Jaynes' minor child over which he claims beneficial ownership.
(5) Includes 200,000 shares of Common Stock issuable upon the exercise of
options that are currently exercisable and 2,000 shares of Common Stock owned by
Mr. Thornton's minor grand-children over which he claims beneficial ownership.
(6) Includes 190,000 shares of Common Stock issuable upon the exercise of
options that are currently exercisable
(7) Mr. Colker is the Managing General Partner of the CEO Venture Fund III
("CEO") and, therefore, has beneficial ownership over the Company's Convertible
Preferred Stock
<PAGE> 24
and related Warrant held by the Fund. The 4,444,444 shares of Convertible
Preferred Stock are convertible into 4,444,444 shares of the Company's Common
Stock. Additionally, CEO has a Warrant to purchase 4,965,556 shares of the
Company's Common Stock at an exercise price of $0.45 per share. The Warrant
expires on June 14, 2008.
ITEM 5 - DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS AND OFFICERS
The Company's executive officers and directors are as follows:
<TABLE>
<CAPTION>
Term as
Name Age Position Director Expires
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Richard D. Ekstrom 54 Chairman of the Board of 2000
Directors and President
Jesse M. Jaynes, Ph.D. 47 Vice President of Research 2000
and Director
John Bridwell 66 Director 2000
James Colker 70 Director 2000
Donald A. Guthrie, Ph.D. 72 Director 2000
Alfonso Lovo-Cordero, LL.D. 71 Director 2000
Konrad M. Weis, Ph. D. 70 Director 2000
Other Key Personnel:
Michael J. McKenna, Ph.D. 54 Director of Drug Development
James E. Thornton 67 Vice President of Agriculture
Todd B. Fortier 43 Chief Financial Officer
</TABLE>
Richard D. Ekstrom has served as Chairman of the Board of Directors and
President of the Company since January 1996. Additionally, Mr. Ekstrom was Chief
Financial officer from December 1994 until August 1998. Mr. Ekstrom holds a B.A.
from Cornell University and an M.B.A. from Boston University. From 1990 through
1991, Mr. Ekstrom was President of Cost Containment Corporation and from 1993
through 1994, he was Chief Operating Officer of Preferred Solutions Inc., both
of which were start-up pharmacy benefit management companies. Mr. Ekstrom is the
founder of Prescription
<PAGE> 25
Price Watch, a buying guide for pharmacy benefit programs. From 1968 to 1990, he
was employed by Westinghouse Electric Corporation where he served in a variety
of management positions, including controller, manufacturing manager and
corporate staff positions
Jesse M. Jaynes, Ph.D. is Co-Founder of the Company. He serves as Vice President
of Research and is the Company's Chief Scientist and the inventor of the core
technologies. He holds an AS. In Biology from the College of Eastern Utah, a BS
in Zoology from Southern Utah State University and earned his doctorate in
BioChemistry at Brigham Young University. He completed post doctoral fellowships
in the Department of Plant Pathology at Montana State University and the Plant
Growth Laboratory at the University of California, Davis before joining the
faculty at Louisiana State University. Dr. Jaynes was the first to demonstrate
that lytic peptides were active against pathogens other than bacteria and to
successfully introduce antimicrobial and nutrition storage genes into plants. He
has authored over seventy-five papers and over thirty meeting abstracts on
peptides.
John Bridwell has been President of Ditch Witch of Oklahoma for the past twenty
years. Presently, he is involved with an Oklahoma health care company; Health
Heaven, Shepard Mall Partnership, Riva Finance Co. and the City of Edmond
Economic Development. He also currently serves as director of First Enterprise
Bank of Oklahoma City
James Colker is the Managing General partner of the CEO Venture Fund. He is also
chairman of the Pittsburgh High Technology Council, the Pittsburgh Biomedical
Development Corporation, the Pennsylvania Technology Council and trustee of
Penn's Southwest Association, as well as a board member of a number of small
advanced technology companies. Previously, Mr. Colker was Chairman and President
of Contraves Goerz Corporation.
Donald A. Guthrie, Ph.D. is the former Executive Vice President and Co-Founder
of the Company. Previously, he has served as Vice President, Science and
Engineering, Gulf South Research Institute, Manager, New Product Planning, Ciba
Geigy Corporation and Vice President, Corporate Development, Lord Corporation.
Dr. Guthrie is a Founding Member of the Licensing Executives Society and is a
former member of the Pennsylvania Science/Engineering Foundation and a former
trustee of Edinboro College.
Alfonso Lovo-Cordero, LL.D., is the President and Founder of ALCOR International
Consultants, which specializes in agricultural and pharmaceutical business
development between the United States and the developing world. Dr. Lovo was the
former Head of State (President) of Nicaragua from 1972 to 1975. He also served
as Secretary of Agriculture of Nicaragua form 1968 to 1972. Dr. Lovo was the
former President of numerous FAO (United Nations) conferences throughout the
world related to agriculture.
Konrad M. Weis, Ph.D., retired in 1991 as President and Chief Executive Officer
of Bayer USA Inc., the North American subsidiary of Bayer AG, a chemical,
pharmaceutical and information technology company. Dr. Weis is currently on the
Board of Directors of Michael Baker Corporation, Titan Pharmaceuticals, Inc. and
Visible Genetics Inc, In addition, he is a life trustee of Carnegie Mellon
University and the Carnegie Museums of Pittsburgh.
<PAGE> 26
Michael J. McKenna, Ph.D., a consultant, serves as Director of Drug Development.
Dr. McKenna has over 15 years of pharmaceutical drug development experience. He
was a former Vice President of Drug Development for Parke-Davis Research, a
division of the Warner Lambert Company. In that position, he had responsibility
for the worldwide development of anti-cancer and anti-infective therapies. He
had direct involvement in the successful submission of approximately 15 IND's
and 3 NDA's in these therapeutic areas, as well as several international
applications. Dr. McKenna also served in several scientific and managerial
positions in the Toxicology Research Laboratory of Dow Chemical USA, during his
10 years with the company. He is a Diplomat of the American Board of Toxicology
and has authored over 30 publications.
James E. Thornton serves at Vice President of Agriculture. Mr. Thornton is a
graduate of the University of Denver in International Relation and of the Senior
Managers Program at the John F. Kennedy School of Government at Harvard
University. He was Assistant to the Secretary of Agriculture in the Kennedy and
Johnson Administrations and directed several federal committees on growth
management and agricultural issues. He also served as Associate Administrator of
the Farmer's Home Administration. In the 1980's, Mr. Thornton was Chief
Operating Officer for the Joint Agricultural Consultative Corporation (JACC), an
international agribusiness group facilitating joint ventures between United
States agricultural companies and similar entities in eleven developing nations.
Todd B. Fortier is the Chief Financial Officer of the Company. Mr. Fortier holds
a B.S. from the Pennsylvania State University and an M.B.A. from the University
of Pittsburgh. He spent 13 years with Ernst & Young reaching the position of
senior manager and has served as Chief Financial Officer for several public
companies. Mr. Fortier is a Certified Public Accountant in the Commonwealth of
Pennsylvania.
At the September 18, 1998 Special Meeting of the Shareholders an amendment to
the Company's Articles of Incorporation which, among other matters, reduced the
size of the Board to six members effective with the next Annual Meeting
currently scheduled for January 1999. The amendments provide that holders of
Preferred Stock will have the right to elect two directors; one director will be
elected by all stockholders (preferred and common); and three directors will be
elected solely by the Common Shareholders.
At the October 1998 Board of Directors meeting the Board was expanded to seven
members for one year with the consent of the holder of the Preferred Stock, as
permitted by the Amendments; the seventh member will be solely elected by the
Common Stockholders.
SCIENTIFIC ADVISORY BOARD
The Company's Scientific Advisory Board comprises leading scientists from
several disciplines. The Company frequently consults with its Scientific
Advisory Board on research and development and strategies and techniques. The
member of the Company's Scientific Advisory Board are as follows:
Paul L. Kornblith, M.D., is President and Founder of Precision Therapeutics. Dr.
Kornblith serves as an Adjunct Professor in the School of Health and
Rehabilitation Sciences at the University of Pittsburgh. Dr. Kornblith also
serves as Vice Chairman and Professor of Neurosurgery and Co-Director of the
University of Pittsburgh's Brain Tumor Center. He also serves on the editorial
boards of five other cancer and
<PAGE> 27
nuerosurgical journals. Previously, Dr. Kornblith served as Chief of the
Surgical Neurology Branch, NINCDA, and the National Institute of Health (NIH).
Roger A. Laine, Ph. D., is a Professor of BioChemistry and Molecular Biology and
Director of the LSU Mass Spectrometry Facility at Louisiana State University.
Dr. Laine serves as President and Founder of Anomeric, Inc. He was previously
the Scientific Founder of Glycomed, now part of Ligand Pharmaceuticals.
Wayne F. Tompkins, Ph.D., is Professor in the Department of Microbiology,
Pathology and Parasitology at North Carolina State University. Dr. Tompkins also
serves as the Immunology Programs Coordinator at North Carolina State. He
received his Ph.D. in Virology and Immunology from the University of Wisconsin.
Dr. Tompkins is the co-developer of the Feline Immunodeficiency Virus (FIV) cat
model, an accepted animal model for testing potential HIV therapeutics
Paul Zorner, Ph.D., is Vice President of Plant Biotechnology at Mycogen
Corporation in San Diego, a large agricultural biotechnology company which is a
wholly-owned subsidiary of The Dow Chemical Company. Dr. Zorner's
responsibilities include licensing and serving as program director for new
initiatives in plant health, nutrition, transformation and gene expression
technologies. Dr. Zorner has had over 20 U.S. patents issues. He is also
Chairman of the strategic planning committee, member of the publication board
and member of the sustainable agricultural committee of the Weed Science Society
of America.
PRINCIPAL SCIENTIFIC COLLABORATORS
The Company's primary scientific collaborators are as follows:
Cancer Therapeutics
Robert H. Getzenberg, Ph.D. Co-Director, Prostate & Urologic Cancer
Center, University of Pittsburgh Center Institute, Pittsburgh, PA
Cary N. Robinson, M.D., Urologist/Oncologist Associate Professor of
Urology, Duke University Medical School, Durham, NC
Bacterial Preventatives & Therapeutics
Sharon Hillier, Ph.D. Associate professor of Obstetrics, Gynecology &
Reproduction, Magee-Womens Research Institute at the University of
Pittsburgh Medical Center, Pittsburgh, PA
Crop Disease Resistance and Nutrition Enhancement
William Belknap, Ph.D. Plant Physiologist, Agricultural Research
Center, United States Department of Agriculture, Albany, CA
C.S. Prakash, Ph.D. Professor and Director of the Center of Plant
Biotechnology at Tuskegee University, Tuskegee, AL
<PAGE> 28
ITEM 6 - COMPENSATION OF EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth the total remuneration to be paid to the
President and all executive officers of the Company whose total salary exceeds
$100,000
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Annual Compensation Awards Payouts
------------------- --------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
Name Other All
and Annual Restricted LTIP Other
Principal Compen- Stock Options/ Pay- Compen-
Position Year Salary Bonus sation Awards SARS outs sation
($)(a)(b) ($) ($) ($)(c) (#)(d) ($) ($)(e)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Richard D
Ekstrom 1998 $ 120,000 -- -- -- 1,600,000 -- --
President 1997 $ 10,000 -- -- -- -- -- --
1996 $ -0- -- -- $ 15,075 600,000 -- --
Jesse M
Jaynes 1998 $ 120,000 -- -- -- 1,600,000 -- $3,833
Vice President 1997 $ 10,000 -- $ 17,000 -- -- -- --
1996 $ -0- -- -- -- -- -- --
James E
Thornton 1998 $ 120,000 -- -- -- 300,000 -- --
Vice President 1997 $ 120,000 -- $ 18,000 -- 200,000 -- --
1996 $ 106,000 -- 28,000 $ 15,075 -- -- --
</TABLE>
a) Represents fiscal years ended September 30.
b) In 1998 Mr. Thornton received $60,000 in the form of cash compensation
with the remaining $60,000 in the form of deferred compensation. The
deferred compensation shall accrue interest at 6% per annum and shall
be paid out in equal monthly installments of $3,500 beginning the next
month after the final payment has been made by the Company to Mr.
Thornton under his employment agreement. In 1997 Mr. Thornton agreed to
accept $140,000 due him for services and expenses in the form of
deferred compensation, payable in accordance with the aforementioned
agreement.
c) The Restricted stock issued to Messrs. Ekstrom and Thornton in Fiscal
1996 consisted of 25,000 shares (valued at $0.603 per share) for a
bonus
d) All options are fully vested. The options issued in Fiscal 1998 are at
an exercise price of $0.05 per share and expire on March 5, 2008. The
options issued in Fiscal 1997 are at an exercise price of $0.875 per
share and expire on October 2, 2001. The options issued in Fiscal 1996
are at an exercise price of $0.15 per share and expire on October 31,
2000.
e) Represents premiums on $1 million life insurance policy on the life of
Dr. Jaynes whose beneficiary is Dr. Jaynes' family.
Options Granted In Last Fiscal Year
The following table shows the options that have been granted to the Executive
Officers of the Company in the prior Fiscal Year.
<PAGE> 29
OPTIONS/SAR GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants Potential Realizable
Value at Assumed
Annual Rates
Number of % of Total of Stock Price
Securities Options Appreciation for
Underlying Granted to Option Term
Options Employees Exercise -------------------------------
Name Granted in Fiscal Price Expiration
Year (%) ($/Sh) Date 0% 5% ($) 10% ($)
<S> <C> <C> <C> <C> <C> <C> <C>
Richard D.
Ekstrom 1,600,000 27.5% 0.05 03/05/08 $528,000 $910,000 $1,497,000
Jesse M
Jaynes 1,600,000 27.5% 0.05 03/05/08 $528,000 $910,000 $1,497,000
James E
Thornton 300,000 5.2% 0.05 03/05/08 $ 99,000 $171,000 $ 281,000
</TABLE>
a) The market price as of the date of grant was $0.38 per share
b) All options are fully vested
c) Potential realizable value is based on the assumption that the Common
Stock appreciates at the annual rates shown (compounded annually) from
the date of grant until the expiration of the option term These assumed
rates of appreciation are mandated by the rules of the Securities and
Exchange Commission and do not represent the Company's estimate or
projection of the future Common Stock price. There can be no assurance
that any of the values reflected in this table will be achieved.
AGGREGATE OPTIONS EXERCISES IN LATEST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying In-the-Money
Unexercised Options at at Fiscal Year-End
Shares Value Fiscal Year-End 1998
Acquired On Realized
Name Exercise (#) ($)(b) Exercisable Exercisable
- ---- ------------ ------ ----------- -----------
<S> <C> <C> <C> <C>
Richard D.
Ekstrom 500,000 $165,000 1,700,000 $382,000
Jesse M.
Jaynes -0- N/A 1,600,000 $416,000
James E.
Thornton 300,000 $104,400 200,000 -$0-
</TABLE>
a) All options were vested, therefore, there were no unexercisable
options.
b) Based upon the difference between the market value of the Common Stock
at time of exercise and exercise price.
c) Based upon market value of Common Stock at September 30, 1998
<PAGE> 30
EMPLOYMENT AGREEMENTS
The Company has employment agreements with Richard Ekstrom, James E. Thornton
and Dr. Jesse Jaynes.
Mr. Ekstrom, Chairman of the Board of Directors and President, has a one year
employment agreement with the Company effective June 1, 1998. The agreement
automatically renews unless either he or the Company provides notice not to
renew to the other party 90 days prior to the expiration date. The agreement
provides that Mr. Ekstrom receive an annual base salary of $120,000.
Additionally, Mr. Ekstrom is eligible for performance based bonuses at the sole
discretion of the Board of Directors and to participate in any Stock Option
Plans established by the Company.
As an incentive to further the commercial applications of the Company's peptide
technology, the Company agreed that during the term of the agreement and
renewals that Mr. Ekstrom will receive a bonus of not less than $5,000 and not
greater than $50,000 for each IND of the Company submitted to the FDA. The
determination of amount of each IND Bonus is at the sole discretion of the Board
of Directors; provided, however, that if an IND is submitted to the FDA on or
before May 31, 1999, the IND Bonus for that submission shall not be less than
$25,000. In the event that the Company terminates Mr. Ekstrom's employment
without cause, the Company shall pay Mr. Ekstrom his salary for six months from
the date of termination.
The Company maintains a $1,000,000 life insurance policy upon Mr. Ekstrom for
the benefit of the Company.
Mr. Jaynes, Vice President of Research, has a five year employment agreement
with the Company effective June 1, 1998. The agreement automatically renews
unless either the employee or the Company provides notice to the other party 90
days prior to the expiration date. The agreement provides that Mr. Jaynes
receive an annual base salary of $120,000. Additionally, Mr. Jaynes is eligible
for performance based bonuses at the sole discretion of the Board of Directors
and to participate in any Stock Option Plans established by the Company.
As an incentive to further its research and the development of patent worthy
compounds, processes and/or methodology, the Company agreed that during the term
of the agreement and renewals that Mr. Jaynes will receive a Patent Registration
Bonus for each invention made (solely or jointly) by him which results in the
issuance of one or more United States or Foreign patents with potential
commercial applications. For Patents applied for after January 1, 1998 and
issuing on or after June 30, 1999, the amount of the Patent Registration Bonus
shall not less than $25,000 and not greater than $50,000. The determination of
the amount of the Patent Registration Bonus is at the sole discretion of the
Board of Directors. In the event that the Company terminates Mr. Jaynes'
employment without cause, the Company shall pay Mr. Jaynes his salary for six
months from the date of termination.
Additionally, the Company maintains a $1,000,000 life insurance policy upon Mr.
Jaynes for the benefit of his wife and children and another $1,000,000 life
insurance policy upon Mr. Jaynes for the benefit of the Company.
Mr. Thornton, Vice President of Agriculture, has a two year employment agreement
with the Company effective August 1, 1998, expiring August 31, 2000. The
agreement provides that Mr. Thornton receive an annual base salary of $60,000.
Additionally, Mr. Thornton is to receive in the form of deferred compensation,
$5,000 for each month of employment from August , 1998 until termination. The
deferred compensation shall accrue interest at 6% and shall be paid out in equal
monthly installments of $3,500
<PAGE> 31
beginning the next month after the final payment has been made by the Company to
Mr. Thornton under the terms of the Compensation Release Agreement dated
September 1997.
Additionally, $168,000 of payments due Mr. Thornton for services rendered in
previous years were deferred and are payable over the 48 months after his
retirement from the Company. This amount can be converted into shares of the
Company's Common Stock at $1 per share at Mr. Thornton's discretion.
The three executives noted above, along with four other officers, employees and
directors, share in a $185,000 bonus pool payable upon the Company achieving a
royalty milestone. The aforementioned bonus amounts may be received in the form
of Common Stock of the Company at a conversion price of $1 per share at the
option of the employee.
COMPENSATION OF DIRECTORS
The directors of the Company are reimbursed for expenses that they incur in
attending the Board of Directors' meeting.
During Fiscal 1998, the members of the Company's Board of Directors received the
following options to purchase shares of the Company's Common Stock for $0.05 per
share. The options expire March 8, 2008:
<TABLE>
<CAPTION>
Director Options to Purchase
- -------- -------------------
<S> <C>
Don Guthrie 530,000 shares
George Keeney (A) 150,000 shares
Alfonso Lovo-Cordero 150,000 shares
Antonio Maggioni (A) 150,000 shares
</TABLE>
(A) Messrs. Keeney and Maggioni did not stand for reelection as Directors
at the Company's Annual Meeting of Stockholders on January 22, 1999.
COMPENSATION OF SCIENTIFIC ADVISORY BOARD
The members of the Scientific Advisory Board receive, upon appointment, options
to purchase 5,000 shares of the Company's Common Stock at $0.45 per share. The
right to purchase the shares vests immediately and the option is exercisable
over the next five years. Additionally, each member receives $1,000 for each
meeting attended.
In October 1998 the four members were appointed to the Scientific Advisory
Board, therefore, options to purchase a total of 20,000 shares of the Company's
Common Stock were issued.
STOCK OPTION PLANS
On May 12, 1998, the Board of Directors unanimously approved the adoption of the
Stock Option Plan (the "Plan") for the issuance of up to 3 million shares of the
Company's Common Stock in accordance with the terms of the Plan subject to the
approval of the shareholders as part of the January 1999 Annual Meeting. Once
approved by the shareholders, all options issued prospectively under the Plan
will qualify as Incentive Stock Options as defined by the Internal Revenue Code
<PAGE> 32
Purpose
The Board of Directors believes that the attraction and retention of employees,
consultants and non-employee directors is essential to the Company's growth and
success. The purpose of the Plan is to encourage stock ownership by selected
employees, consultants and by non-employee directors and to provide them with
additional incentives to remain with the Company and increase their efforts on
its behalf.
The Plan is the only long-term incentive plan which the Company provides for its
employees, consultants and non-employee directors. The Board of Directors
believes that stock options are a superior incentive to motivate employees,
consultants and non-employee directors to act and think like owners of the
Company and to exert their best efforts on behalf of the Company and its
shareholders. Additionally, the Board of Directors believes that such long-term
incentive plans are essential for the Company to remain competitive in its
compensation practices and to continue to attract, retain and motivate
outstanding employees and non-employee directors.
Eligibility to Receive Options and Awards
All employees, consultants and non-employee directors of the Company are
eligible to be granted options under the Plan.
Administration, Amendment and Termination
The Plan is administered by the Board of Directors and/or by a duly appointed
committee of the Board. The Board and/or its duly appointed committee has the
sole discretion to determine the employees and consultants to whom options are
to be granted, the number of shares to be subject to such options and the terms,
conditions and any performance criteria for the options.
Without shareholder approval, no amendment may be made to the Plan to increase
the limit on the aggregate number of shares subject to the Plan (except for
adjustments resulting from stock splits and similar events), to extend the term
of an option beyond 10 years from the date of its grant, or otherwise to
increase materially the benefits accruing to participants under the Plan. In
substantially all other respects, the Plan can be amended, modified, suspended
or terminated by the Board of Directors or the Committee.
Options
Option agreements may provide that an optionee who is an employee or consultant
must agree to remain in the employ of the Company (or remain associated with the
Company in the case of consultants) for a certain period after the date of
grant. However, option agreements do not restrict the Company's right to
terminate such employment at any time.
The price of the shares subject to each option is set by the Board and/or
Committee shall, in the case of Incentive Stock Options, be not less than the
fair market value on the date of the granting of the Option and, in the case of
Nonqualified Stock Options shall be not less than 85% of the fair market value
on the date of the granting of the Option. Additionally, no Incentive Stock
Option shall be granted at an exercise price less than 110% of the fair market
value on the date of the grant of the Option to an Optionee who at the time the
Incentive Stock Option is granted owns stock possessing more than 10% of the
total combined voting power of all classes of stock of the Company
The Board and/or Committee shall have the power to set the time within each
Option shall be execrable or the event upon the occurrence of which all or a
portion of each Option shall be execrable and the term of each Option, provided,
however, that (i) no Option shall be execrable after the expiration of ten years
after the date such Option is granted, and (ii) no Incentive Stock Option
granted to a holder of more than 10% of the outstanding voting
<PAGE> 33
stock of the Company shall be execrable after the expiration of five years after
the date the Option is granted.
ITEM 7 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
AGREEMENTS WITH AFFILIATED PARTIES
None
ITEM 8 - LEGAL PROCEEDINGS
None
ITEM 9 - MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANTS' COMMON EQUITY AND
RELATED MATTERS
The Company's Common Stock has been quoted on the Over-the-Counter Bulletin
Board since 1994 under the symbol "DBOT". The following table sets forth, based
upon information received from the National Quotation Bureau, the high and low
bid prices for the Common Stock for the quarters indicated. The quotations
represent bid between dealers and do not include retail mark-up, mark-down or
commissions, and do not represent actual transactions.
<TABLE>
<CAPTION>
Fiscal
- ------
1998 December 31 March 31 June 30 September 30
----------- -------- ------- ------------
<S> <C> <C> <C> <C>
High $0.77 $0.60 $0.68 $0.50
Low $0.43 $0.34 $0.31 $0.25
1997
High $0.91 $0.47 $0.88 $0.69
Low $0.31 $0.20 $0.27 $0.32
</TABLE>
At October 31, 1998 there were 502 holders of record of 26,116,899 share of
Common Stock, exclusive of holders which maintain their ownership in
"Street-Name" at brokerage houses, and one holder of record of 4,444,444 shares
of Preferred Stock. The Company estimates that there are another 1,500
stockholders which hold their ownership in street name.
<PAGE> 34
SHARES ELIGIBLE FOR SALE
Sales in the market of substantial amounts of currently outstanding Common Stock
could have an adverse effect on the price of the Common Stock. At October 31,
1998 15,211,269 shares of Common Stock are freely trading shares with the
remainder of 10,905,630 shares of Common Stock currently subject to restrictions
as to their resale. Most of the shares subject to restrictions merely require
the holder of the Common Stock to have the Transfer Agent remove the restrictive
legend as the required holding period has expired. A total of 24,590,913 shares
of the 26,116,889 shares of Common Stock currently issued and outstanding are,
or within the next 12 months will be, eligible for resale, subject, in certain
cases, to the applicable volume and other limitations set forth in Rule 144 of
the Securities Act. The remaining 1,525,976 shares of Common Stock are held by
Messrs. Ekstrom and Jaynes (collectively "Principal Shareholders") and subject
to a Shareholder Agreement (the "Agreement"), dated, June 15, 1998, among the
Company, the CEO Venture Fund III ("CEO") and Messrs. Ekstrom and Jaynes. The
Agreement restricts the transfer and resale of shares of the Company's Common
Stock held by the Principal Shareholders by providing CEO with the right of
first refusal on all share sales by the Principal Shareholders. Additionally,
the Principal Shareholders may not enter into a transaction that reduces their
shareholdings by more than 50% without notifying CEO and upon termination each
Principal Shareholder the Company shall have the option to repurchase up to 50%
of that Principal Shareholder's holdings.
Additionally, CEO would receive 4,444,444 shares upon the conversion of the
Preferred Shares that they hold into Common Stock. The Company has granted
registration rights to CEO relative to the aforementioned Common Shares so that
those shares would become freely trading upon the Registration Statement
becoming effective.
DIVIDENDS
The Company anticipates that for the foreseeable future, earnings will be
retained for the development of its business. Accordingly, the Company does not
anticipate paying dividends on the Preferred Stock or Common Stock in the
foreseeable future. The payment of future dividends will be at the sole
discretion of the Company's Board of Directors and will depend upon. among other
things, future earnings, capital requirements, the general financial condition
of the Company and general business conditions. Refer to the discussion of the
Preferred Stock on Page 37 for a more detailed description of the Preferred
Stock dividend.
ITEM 10 - RECENT SALES OF UNREGISTERED SECURITIES
FISCAL 1999
COMMON SHARES
In October 1998, the Company received $12,500 from the exercise of stock options
for 250,000 shares (exercise price of $0.05 per share) held by an employee.
FISCAL 1998
COMMON SHARES
During the Fiscal Year ending September 30, 1998, the Company received $87,500
from the exercise of stock options (exercise price of $0.05 per share) held by
officers, employees and directors. The exercises occurred from April to
September 1998 and
<PAGE> 35
consisted of 500,000 shares by Richard Ekstrom, 250,000 shares by Thomas Roane,
550,000 shares by Bruce Guthrie, 300,000 shares by James Thornton, 150,000
shares by George Keeney. Additionally, 1,975,000 shares were issued (at a
current market price of $0.36 per share) in January 1998 to settle the claims of
a former employee, 85,000 shares were issued to two purchasers of the Company's
Common Stock in Fiscal 1997 to compensate them for a subsequent equity sale at a
price below their purchase price and 207,500 shares as compensation for services
rendered (average current market price of $0.33 per share).
PREFERRED SHARES
In June 1998, the Company issued 4,444,444 shares of Preferred Stock to the CEO
Venture Fund III for net proceeds of $1,943,873 (net of $56,127 of expenses
incurred in connection with the issuance). The Preferred Shares are convertible
into 4,444,444 shares of Common Stock. The proceeds were utilized by the Company
to fund current operations.
FISCAL 1997
COMMON SHARES
During the Fiscal Year ending September 30, 1997, the Company received proceeds
from the sale of 906,750 shares of Common Stock (average price of issuances of
$0.36 per share). The proceeds were utilized to fund operations. Additionally,
the Company issued 700,000 shares to Louisiana State University in exchange for
a patent and technology license, 145,000 in exchange for the cancellation of
redemption rights held by Mr. Ekstrom, 533,980 shares in settlement of debts
including 225,000 shares issued to Richard Ekstrom, 522,308 shares as
compensation for services rendered the Company and 150,000 shares to settle
legal claims. The current market price at the time of the issuance of the shares
discussed in the preceding sentence ranged from $0.33 to $0.46 per share.
FISCAL 1996
COMMON SHARES
During the Fiscal Year ending September 30, 1996, the Company received proceeds
from the sale of 531,750 shares of Common Stock (average price of issuances of
$0.703 per share). The proceeds were utilized to fund operations. Additionally,
the Company issued 3,780,153 shares in settlement of outstanding debt or other
obligations, 300,000 shares to settle legal claims, 600,000 shares to settle an
employment agreement with James Ladd (former President of the Company), 463,000
shares as compensation for services rendered the Company and 367,500 shares to
replace 210,000 shares of their freely trading Common Stock that they made
available to the Company. The current market price at the time of the issuance
of the shares discussed in the preceding sentence ranged from $0.474 to $0.78
per share.
ITEM 11 - DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
The Company has authorized for issuance 140,000,000 share of capital stock, of
which 40,000,000 share are designated as preferred stock, $0.001 par value and
100,000,000
<PAGE> 36
share are designated as common stock, $0.001 par value. The following is a brief
description of the Preferred and Common Stock.
COMMON STOCK
Each holder of Common Stock is entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders except for the
election of two directors. Additionally, all holders of Preferred Stock are
entitled to vote their shares on a one share for one share basis on all matters
submitted for the approval of the Common Shareholders. In all matters other than
the election of Directors, when a quorum is present at any stockholders'
meeting, the affirmative vote of the majority of shares present in person or
represented by proxy shall decide any question before such meeting. Directors
are elected by a plurality of the votes of the shares present in person or
represented by proxy at a stockholders' meeting. The Board of Directors of the
Company currently consists of eight members but effective with the Annual
Meeting on January 22, 1999 it will be reduced to six members. The Board of
Directors is divided into three classes of Directors serving one-year terms and
until their successors are elected and qualified. The holders of Preferred Stock
have the right to elect two of the members of the Board of Directors, the Common
Shareholders and Preferred Stockholders elect one member of the Board of
Directors; and the Common Shareholders elect three members of the Board of
Directors. At the October 16, 1998 meeting of the Board of Directors the Board
of Directors was expanded to seven members for one year with the Common
Stockholders electing this additional member of the Board of Directors.
The holders of Common Stock are not entitled to cumulative voting rights with
respect to the election of Directors, and, as a consequence, minority
stockholders will not be able to elect Directors on the basis of their votes
alone. Subject to preferences that are applicable to the outstanding shares of
Preferred Stock, holders of Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor.
In the event of a liquidation, dissolution or winding up of the Company, holders
of the Common Stock would be entitled to share ratably in all assets remaining
after payment of liabilities and the satisfaction of any liquidation preference
of any then outstanding series of Preferred Stock, including the Convertible
Preferred Stock. Holders of Common Stock have no preemptive rights and no right
to convert their Common Stock into any other securities. There are no redemption
or sinking fund provisions applicable to the Common Stock.. All outstanding
shares of Common Stock are fully paid and nonassessable.
As of November 1, 1998, there were 26,116,899 shares of Common Stock outstanding
(excluding 4,444,444 shares of Common Stock issuable upon the conversion of
4,444,444 shares of Convertible Preferred Stock) held of record by 502
stockholders. Options to purchase 5,095,000 shares of Common stock were
outstanding and 4,965,556 shares of Common Stock issuable upon the conversion of
the Stock Warrant held by the holder of the of Convertible Preferred Stock.
TRANSFER AGENT
The Transfer Agent and Registrar for the Company's Common Stock is American
Securities Transfer and Trust Company
<PAGE> 37
PREFERRED STOCK
The Company has 4,444,444 shares of Convertible Preferred Stock outstanding. The
Convertible Preferred Stock is convertible into 4,444,444 shares of Common
Stock. The following description of the preferences, limitations and relative
rights of the Convertible Preferred Stock is qualified in its entity by
reference to the Restated Articles of Incorporation of the Company which is
filed as an exhibit to this Registration Statement.
DIVIDENDS The holders of the Convertible Preferred Stock are entitled to
receive, when, as and if declared by the Board of Directors, out of funds
legally available therefor, dividends at the rate of $0.036 per share,
semi-annually, on each outstanding share of Convertible Preferred Stock, Such
dividends have a priority over any dividends paid on the Common Stock. Dividends
on the Convertible Preferred Stock are cumulative and the right to such
dividends shall accrue to holders of Convertible Preferred Stock until declared
by the Board of Directors. The Company does not anticipate declaring any cash
dividends in the foreseeable future.
LIQUIDATION PREFERENCE In the event of any liquidation, dissolution or winding
up of the Company, the holders of Convertible Preferred Stock shall be entitled
receive the greater of $0.45 per share of Convertible Preferred Stock, plus all
unpaid and accrued dividends thereon, computed to the date payment thereof is
made available or the amount the holders of such shares of Convertible Preferred
Stock would otherwise be entitled had each such share of Convertible Preferred
Stock been converted into Common Stock, as discussed in the following paragraph,
immediately prior to such liquidation, dissolution or winding up.
CONVERSION Each share of Convertible Preferred Stock is convertible at any time,
at the option of the holder thereof, into such number of fully paid and
nonassessable shares of Common Stock as shall be determined by multiplying the
number of shares of Convertible Preferred Stock so to be converted by $0.45 and
dividing the result by the conversion price of $0.45 per share. In addition, if
at any time the Company shall effect a firm commitment underwritten public
offering of shares of Common Stock in which the aggregate price paid for such
shares by the public shall be at least $8,000,000, then effective immediately
before the closing of the sale of such shares by the Company pursuant to such
public offering, all outstanding shares of Convertible Preferred Stock shall
automatically convert to share of Common Stock.
REDEMPTION The shares of Convertible Preferred Stock shall be redeemable on a
voluntary basis at the election of any holder of shares of Convertible Preferred
Stock upon at least 90 days notice to the Company, the Company shall redeem from
such holder on or at any time after May 31, 2003, 2004 and 2005 up to one-third
of the shares of Convertible Preferred Stock held by such holder, with the
intent that, should any holder so elect, at any time after May 31, 2005, the
total number of shares held by such holder would be subject to redemption. The
Convertible Preferred Stock to be redeemed shall be paid for in cash at an
amount equal to the greater of (I) $0.45 per share plus, in the case of each
share, an amount equal to all accruing dividends unpaid thereon (whether or not
declared), or (ii) such amount per share as would have been payable has each
such share been converted to Common Stock immediately prior to the actual date
of redemption.
VOTING RIGHTS The holders of shares of Convertible Preferred Stock vote on
matters on an as converted basis, ie. each share of Preferred Stock has one vote
as does each owner of a share of Common Stock.
WARRANTS The holder of the Convertible Preferred Stock has a warrant to purchase
4,965,556 shares of Common Stock of the Company at $0.45 per share of Common
Stock. The Warrant is exercisable, in whole or in part, through June 14, 2008.
The Company may call the Warrant at any time after December 31, 1998 provided
the Company's Common Stock has been in excess of $1.50 per share for each of the
forty consecutive trading days immediately preceding the date of the call.
<PAGE> 38
Upon receipt of the call, the Warrant holder shall have sixty days to elect to
exercise all or a portion of this Warrant. Upon such exercise, in addition to
receiving the number of shares of Common Stock to which the holder shall be
entitled, the holder of the Warrant also shall receive a new Warrant
("Replacement Warrant"). The Replacement Warrant shall be exercisable for one
share of Common Stock for every two shares of Common Stock purchased in response
to the aforementioned call. The exercise price of the Replacement Warrant is
$1.50 per share and the term of the Replacement Warrant shall be the longer of
two years from the date of the issuance or the balance of the original term of
the Warrant.
ITEM 12 - INDEMNIFICATION OF DIRECTORS AND OFFICERS
In accordance with the Colorado Business Corporation Act (the "Act"), the
Company's Articles of Incorporation (the "Articles") contain provisions which
provide indemnification rights to officers, directors, employees and agents of
the Company ("Potential Indemnitees"), subject to certain limitations set forth
in the Act and in the Articles. A Potential Indemnitee has a right of mandatory
indemnification by the Company if he is successful on the merits in defense of
any proceeding brought against him for actions taken on behalf of the Company.
Under the Articles, the Corporation may indemnify a Potential Indemnitee if the
Board of Directors shall determine that Potential Indemnitee acted in good faith
and in a manner he reasonably believed to be in the best interests of the
Company, and with respect to any criminal action or proceeding had no reasonable
cause to believe his conduct was unlawful. The Company may advance a Potential
Indemnitee the expense incurred in defense of any action upon receipt of an
agreement of the Potential Indemnitee to repay the expenses unless it is
determined that he is entitled to indemnification under the Articles. In
addition, the Articles also provide that the directors of the Company shall not
be liable to the Company or its stockholders to the fullest extent permitted by
the Act.
ITEM 13 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Information with respect to Item 13 is contained in the Company's financial
statements and is set forth herein beginning on page F-1.
ITEM 14 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL MATTERS
Not applicable
ITEM 15 - FINANCIAL STATEMENTS AND EXHIBITS
a. Each of the following items are contained in the Company's financial
statements and are set forth herein beginning on page F-1.
(i) Report of Ernst & Young LLP, Independent Auditors
<PAGE> 39
(ii) Balance Sheet as of September 30, 1998 and 1997
(iii) Statement of Operations for the Years Ended September 30,
1998, 1997 and 1996 and for the period December 6, 1991
(inception) to September 30, 1998
(iv) Statement of Stockholders' Equity for the Years Ended
September 30, 1998, 1997 and 1996 and for the period
December 6, 1991 (inception) to September 30, 1998
(v) Statement of Cash Flows for the Years Ended September 30,
1998, 1997 and 1996 and for the period December 6, 1991
(inception) to September 30, 1998
(vi) Notes to Financial Statements
b. Exhibits
3.1 Articles of Incorporation of the Company, as amended
3.2 Amended and Restated By-laws of the Company
4.1 Specimen of Common Stock Certificate
4.2 Stock Purchase Agreement, dated June 15, 1998, between the Registrant
and the Principal Shareholders of the Registrant and the CEO Venture
Fund III
4.2.1 Terms of Convertible Preferred Stock
4.3 Warrant to Purchase Common Stock, dated June 15, 1998, between the
Registrant and the Registrant and the CEO Venture Fund III
4.4 Shareholders' Agreement, dated June 15, 1998, by and among the Company,
Richard Ekstrom, Jesse Jaynes and the CEO Venture Fund III
10.1 License and Royalty Agreement, effective May 1, 1997, between the
Registrant and Louisiana State University*
10.2 Restated Demeter-Mycogen License and Royalty Agreement, effective
September 23, 1997, between the Registrant and Mycogen Corporation*
10.3 Addendum to Restated Demeter-Mycogen License and Royalty Agreement,
effective November 13, 1998, between the Registrant and Mycogen
Corporation*
10.4 Employment Agreement, dated June 15, 1998, between the Registrant and
Richard D. Ekstrom
10.4-1 Employment Agreement, dated November 1, 1995, between the Registrant
and Richard D. Ekstrom
10.5 Employment Agreement, dated June 15, 1998, between the Registrant and
Jesse M. Jaynes
<PAGE> 40
10.6 Employment Agreement, dated June 15, 1998, between the Registrant and
James E. Thornton
10.7 Compensation Release Agreements dated September 19, 1997:
a) Richard D. Ekstrom
b) Bruce A. Guthrie
c) Donald A. Guthrie
d) Jesse M. Jaynes
e) D. Thomas Roane
f) A. Lee Caldwell
g) James E. Thornton
10.8 Consulting Agreement between the Company and Progressive Media Group,
Inc., dated February 12, 1998
10.9 Settlement Agreement between the Company and Philip Sears dated
January, 1998
10.10 Settlement Agreement dated September 11, 1996, among the Company and
Gordon Julian and Sirius Enterprises, Inc.
10.11 Technology Transfer, Support and Royalty Assignment Agreement dated
February 19, 1992, between the Company and Dr. Jesse M. Jaynes
10.12 Letter of Understanding dated November 13, 1996 between the Company and
Pacific West Cancer Fund
10.13 Stock Option Agreements dated March 6, 1998
a) Richard D. Ekstrom
b) Bruce A. Guthrie
c) Donald A. Guthrie
d) Jesse M. Jaynes
e) D. Thomas Roane
f) A. Lee Caldwell
g) Alfonso Lovo-Cordero
h) Antonio Maggioni
i) George N. Keeney
j) James E. Thornton
k) Ute Schweb
10.14 Stock Option Agreements dated November 2, 1996
a) Bruce A. Guthrie
b) Thomas Roane
c) Alfonso Lovo-Cordero
d) Antonio Maggioni
e) George N. Keeney
f) James E. Thornton
10.15 Stock Option Agreements dated September 1, 1997
a) Donald A. Guthrie
b) Alfonso Lovo-Cordero
c) Antonio Maggioni
d) George N. Keeney
<PAGE> 41
10.16 Stock Option Agreements dated September 18, 1998
a) Roger A. Laine, Ph.D.
b) Wayne F. Topkins, Ph.D.
c) Paul Zorner, Ph.D.
d) Paul L. Kornblith, M.D.
10.17 Settlement Agreement dated, September 25, 1996 between the Company and
The Peregrine Group
10.18 Compensation Release Agreement dated September 19, 1997 between the
Company and Richard D. Ekstrom relative to the cancellation of the
Share Repurchase Agreement and the issuance of 145,000 shares of the
Company's Restricted Stock
10.19 Settlement Agreement and Mutual Release between the Company and James
Ladd dated December 31, 1996 with subsequent Letter Agreement of
December 31, 1997 between the Company and James Ladd
10.20 1998 Stock Option Plan
10.21 Sample Employee Nondisclosure, Noncompete and Developments Agreement
10.22 The Company's United States Patents
a) Patent # 5,561,107 Method of Enhancing Wound Healing by Stimulating
Fibroblast and Keratinocyte Growth in Vivo, Utilizing Amphipathic
Peptides
b) Patent #5,597,945 Plants Generically Enhanced for Disease Resistance
c) Patent #5,597,946 Method for Introduction of Disease and Pest
Resistance into Plants and Novel Genes Incorporated into Plants Which
Code Therefore
d) Patent #5,717,064 Methylated Lysine-Rich Lytic Peptides and Method of
Making Same by Reductive Alkylation
e) Patent #5,744,445 Method of Treating Pulmonary Diseases with
Non-Naturally Occurring Amphipathic Peptides
f) Patent #5,773,413 Method of Combating Mammalian Neoplasias and Lytic
Peptides Therefor
g) Patent # 5,811,654 Plants genetically enhanced for nutritional quality
10.23 Settlement Agreement, dated September 17, 1996, between the Company and
John Bridwell
24 Power of Attorney
27. Financial Statement Schedules
* Confidential Treatment Requested
<PAGE> 42
SIGNATURES
In accordance with Section 12 of the Securities and Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
Demegen, Inc.
Date: January 29, 1999
By: /s/ Richard D. Ekstrom
---------------------------------
Richard D. Ekstrom
Chairman of the Board of Directors,
President and Chief Executive Officer
(Principal Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
registrations statement has been signed below by the followings persons on
behalf of the registrant and in the capacities and on the dates indicated.
Date: January 22, 1999 By: /s/ Richard D. Ekstrom
-----------------------
Richard D. Ekstrom
Chairman of the Board of Directors,
President and Chief Executive Officer
(Principal Executive Officer)
Date: January 22, 1999 By: /s/ Jesse M. Jaynes, Ph.D.
---------------------------
Jesse M. Jaynes, Ph.D.
Vice President and Director
Date: January 22, 1999 By: /s/ James Colker
-----------------
James Colker
Director
Date: January 22, 1999 By: /s/ Donald A. Guthrie, Ph.D.
-----------------------------
Donald A. Guthrie, Ph.D.
Director
Date: January 22, 1999 By: /s/ John Bridwell
------------------
John Bridwell
Director
Date: January 22, 1999 By: /s/ Alfonso Lovo-Cordero, LL.D.
--------------------------------
Alfonse Lovo-Cordero, LL.D.
Director
Date: January 22, 1999 By: /s/ Konrad M. Weis, Ph.D.
--------------------------
Konrad M. Weis. Ph.D.
Director
<PAGE> 43
[ERNST & YOUNG LLP LETTERHEAD]
Report of Independent Auditors
Board of Directors
Demegen, Inc.
We have audited the accompanying balance sheets of Demegen, Inc. (a development
stage company) as of September 30, 1998 and 1997, and the related statements of
operations, shareholders' deficit, and cash flows for the years ended September
30, 1998, 1997, and 1996, and for the period from December 6, 1991 (inception)
through September 30, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits. The financial statements for the
period from December 6, 1991 (inception) through September 30, 1994, were
audited by other auditors whose report dated November 10, 1994, expressed an
unqualified opinion on those statements and included an explanatory paragraph
regarding the entity's ability to continue as a going concern, that is not
included in our current report as the result of additional financing obtained by
the Company. The financial statements for the period December 6, 1991
(inception) through September 30, 1994, include total revenues and net loss of
$1,116,800 and $3,056,682, respectively. Our opinion on the statements of
operations, shareholders' deficit, and cash flows for the period December 6,
1991 (inception) through September 30, 1998, insofar as it relates to amounts
for prior periods through September 30, 1994, is based solely on the report of
other auditors.
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 audits and the report of other auditors provide a reasonable
basis for our opinion.
In our opinion, based on our audit and the report of other auditors, the
financial statements referred to above present fairly, in all material respects,
the financial position of Demegen, Inc. (a development stage company) at
September 30, 1998 and 1997, and the results of its operations and its cash
flows for the years ended September 30, 1998, 1997, and 1996, and for the period
from December 6, 1991 (inception) through September 30, 1998, in conformity with
generally accepted accounting principles.
/s/ ERNST & YOUNG LLP
October 29, 1998 (except for Note 12,
as to which the date is November 13, 1998)
F-1
<PAGE> 44
Demegen, Inc.
(A Development Stage Company)
Balance Sheets
<TABLE>
<CAPTION>
SEPTEMBER 30
1998 1997
--------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $1,686,658 $310,252
Accounts receivable 59,929 --
Prepaid expenses and other current assets 11,859 1,450
--------------------------------------------
Total current assets 1,758,446 311,702
Property and equipment:
Furniture and equipment 38,440 32,168
Computer hardware and software 113,416 65,661
--------------------------------------------
151,856 97,829
Less accumulated depreciation and amortization (94,271) (63,447)
--------------------------------------------
57,585 34,382
Intangible assets:
Licenses 245,000 245,000
Patents 183,504 98,894
--------------------------------------------
428,504 343,894
Less accumulated amortization (129,785) (38,015)
--------------------------------------------
298,719 305,879
--------------------------------------------
Total assets $2,114,750 $651,963
============================================
</TABLE>
F-2
<PAGE> 45
<TABLE>
<CAPTION>
SEPTEMBER 30
1998 1997
--------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' DEFICIT
Current liabilities:
Payable to employees and directors $ 110,933 $ 1,415,263
Accounts payable 178,232 333,919
Unearned revenue 91,668 --
Other liabilities 48,072 60,997
--------------------------------------------
Total current liabilities 428,905 1,810,179
Payable to employees and directors 178,400 --
Unearned revenue 91,665 --
Other 27,426 --
--------------------------------------------
Total liabilities 726,396 1,810,179
Commitments and contingency
Redeemable convertible preferred stock, $.001 par value--
40,000,000 shares authorized; 4,444,444 shares issued
and outstanding 1,983,873 --
Shareholders' deficit:
Common stock, $.001 par value--100,000,000 shares
authorized; 25,866,899 and 21,849,399 shares issued
and outstanding in 1998 and 1997 25,867 21,849
Additional paid-in capital 10,856,139 8,263,707
Deficit accumulated during the development stage (11,477,525) (9,443,772)
--------------------------------------------
Total shareholders' deficit (595,519) (1,158,216)
--------------------------------------------
Total liabilities and shareholders' deficit $ 2,114,750 $ 651,963
============================================
</TABLE>
See accompanying notes.
F-3
<PAGE> 46
Demegen, Inc.
(A Development Stage Company)
Statements of Operations
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 6, 1991
(INCEPTION) TO
YEAR ENDED SEPTEMBER 30 SEPTEMBER 30
1998 1997 1996 1998
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Income:
License $ 906,651 $ 100,000 $ -- $ 1,006,651
Grant and other 425,398 664,834 271,777 1,646,401
Interest 44,869 -- -- 44,869
-------------------------------------------------------------------------------
Total income 1,376,918 764,834 271,777 2,697,921
Expenses:
Research and development 880,965 596,772 754,059 3,979,205
General and administrative 2,338,817 866,910 1,623,443 8,887,728
Interest 28,295 172,356 424,205 979,584
Depreciation and amortization 122,594 72,569 39,548 288,929
-------------------------------------------------------------------------------
Total expenses 3,370,671 1,708,607 2,841,255 14,135,446
-------------------------------------------------------------------------------
Net loss (1,993,753) (943,773) (2,569,478) (11,437,525)
Preferred dividend amounts (40,000) -- -- (40,000)
-------------------------------------------------------------------------------
Net loss applicable to common stock
$(2,033,753) $ (943,773) $(2,569,478) $(11,477,525)
===============================================================================
Net loss per common share, basic and
diluted $ (0.09) $ (0.05) $ (0.17)
===========================================================
Weighted average common stock
outstanding 23,867,091 19,537,047 15,479,889
===========================================================
</TABLE>
See accompanying notes.
F-4
<PAGE> 47
Demegen, Inc.
(A Development Stage Company)
Statements of Shareholders' Deficit
<TABLE>
<CAPTION>
COMMON STOCK
AVERAGE ---------------------------------
PRICE
PER SHARE SHARES AMOUNT
-------------- ---------------- ----------------
<S> <C> <C> <C>
Capital contributed by a shareholder -- $ --
Proceeds from the sale of unrestricted shares contributed by
shareholders in exchange for restricted shares $.62 439,045 439
Payment of debt with stock warrants -- --
Payment of interest with stock warrants -- --
Issuance of receivable from officer -- --
Net loss for the year -- --
---------------- ----------------
Balance at September 30, 1993 11,182,616 11,183
Proceeds from the sale of unrestricted shares by shareholders
in exchange for restricted shares .75 691,738 692
Issuance of stock for consulting services 1.54 58,336 58
Issuance of stock subscriptions for loan origination fee 1.14 131,250 131
Payment of interest with stock warrants -- --
Net loss for the year -- --
---------------- ----------------
Balance at September 30, 1994 12,063,940 12,064
Proceeds from the sale of restricted common shares 1.06 192,133 193
Issuance of restricted shares in exchange for unrestricted
shares contributed by shareholders 171,694 172
Proceeds from the sale of unrestricted shares contributed by
shareholders in exchange for restricted shares 2.18 -- --
Issuance of restricted shares for payment of services/compensation .89 402,251 402
Issuance of warrants -- --
Payment of interest with stock warrants -- --
Net loss for the year -- --
---------------- ----------------
Balance September 30, 1995 12,831,018 12,831
Proceeds from the sale of common shares .70 683,250 683
Issuance of shares for payment of services/compensation .60 890,868 891
Issuance of shares in settlement of outstanding debt
and other obligations .47 4,468,285 4,468
Payment of interest with warrants -- --
Net loss for the year -- --
---------------- ----------------
Balance at September 30, 1996 18,873,421 18,873
Proceeds from the sale of restricted and unrestricted common shares .36 340,000 340
Issuance of shares for payment of services/compensation .41 1,178,258 1,178
Issuance of shares in exchange for patent and technology license .35 700,000 700
Issuance of restricted shares in exchange for unrestricted
shares contributed by shareholders 162,720 163
Exchange of amounts due to related parties for restricted shares .33 450,000 450
Exchange of redemption right of related party for additional
restricted shares .33 145,000 145
Settlement of amounts due to related parties through debt
forgiveness and issuance of shares -- --
Net loss for the year -- --
---------------- ----------------
Balance at September 30, 1997 21,849,399 21,849
Proceeds from exercise of stock options $.05 1,750,000 1,750
Stock option activity -- --
Dividends on redeemable convertible preferred stock -- --
Issuance of shares for payment of collaborators $.47 20,000 20
Settlement of employee litigation $.36 1,975,000 1,975
Issuance of shares for services $.47 187,500 188
Issuance of additional shares to venture capital funds and
individual investors 85,000 85
Net loss for the year -- --
---------------- ----------------
Balance at September 30, 1998 25,866,899 $25,867
================ ================
</TABLE>
See accompanying notes.
F-5
<PAGE> 48
<TABLE>
<CAPTION>
DEFICIT
ACCUMULATED
ADDITIONAL DURING THE
PAID-IN RECEIVABLE DEVELOPMENT
CAPITAL FROM OFFICER STAGE TOTAL
--------------------------------------------------------------
<S> <C> <C> <C> <C>
Capital contributed by a shareholder $ 123,700 $ -- $ -- $ 123,700
Proceeds from the sale of unrestricted shares contributed by
shareholders in exchange for restricted shares 272,461 -- -- 272,900
Payment of debt with stock warrants 33,333 -- -- 33,333
Payment of interest with stock warrants 17,774 -- -- 17,774
Issuance of receivable from officer -- (65,117) -- (65,117)
Net loss for the year -- -- (1,044,154) (1,044,154)
--------------------------------------------------------------
Balance at September 30, 1993 759,949 (65,117) (1,288,254) (582,239)
Proceeds from the sale of unrestricted shares by shareholders
in exchange for restricted shares 517,708 -- -- 518,400
Issuance of stock for consulting services 89,942 -- -- 90,000
Issuance of stock subscriptions for loan origination fee 149,869 -- -- 150,000
Payment of interest with stock warrants 56,164 -- -- 56,164
Net loss for the year -- -- (1,768,428) (1,768,428)
--------------------------------------------------------------
Balance at September 30, 1994 1,573,632 (65,117) (3,056,682) (1,536,103)
Proceeds from the sale of restricted common shares 204,807 -- -- 205,000
Issuance of restricted shares in exchange for unrestricted
shares contributed by shareholders (172) -- -- --
Proceeds from the sale of unrestricted shares contributed by
shareholders in exchange for restricted shares 349,304 65,117 -- 414,421
Issuance of restricted shares for payment of services/compensation 357,681 -- -- 358,083
Issuance of warrants 11,625 -- -- 11,625
Payment of interest with stock warrants 127,500 -- -- 127,500
Net loss for the year -- -- (2,873,839) (2,873,839)
--------------------------------------------------------------
Balance September 30, 1995 2,624,377 -- (5,930,521) (3,293,313)
Proceeds from the sale of common shares 479,817 -- -- 480,500
Issuance of shares for payment of services/compensation 536,359 -- -- 537,250
Issuance of shares in settlement of outstanding debt
and other obligations 2,113,054 -- -- 2,117,522
Payment of interest with warrants 84,996 -- -- 84,996
Net loss for the year -- -- (2,569,478) (2,569,478)
--------------------------------------------------------------
Balance at September 30, 1996 5,838,603 -- (8,499,999) (2,642,523)
Proceeds from the sale of restricted and unrestricted common shares 104,660 -- -- 105,000
Issuance of shares for payment of services/compensation 477,629 -- -- 478,807
Issuance of shares in exchange for patent and technology license 244,300 -- -- 245,000
Issuance of restricted shares in exchange for unrestricted
shares contributed by shareholders (163) -- -- --
Exchange of amounts due to related parties for restricted shares 149,550 -- -- 150,000
Exchange of redemption right of related party for additional
restricted shares (145) -- -- --
Settlement of amounts due to related parties through debt
forgiveness and issuance of shares 1,449,273 -- -- 1,449,273
Net loss for the year -- -- (943,773) (943,773)
--------------------------------------------------------------
Balance at September 30, 1997 8,263,707 -- (9,443,772) (1,158,216)
Proceeds from exercise of stock options 85,750 -- -- 87,500
Stock option activity 1,699,440 -- -- 1,699,440
Dividends on redeemable convertible preferred stock -- -- (40,000) (40,000)
Issuance of shares for payment of collaborators 9,360 -- -- 9,380
Settlement of employee litigation 710,217 -- -- 712,192
Issuance of shares for services 87,750 -- -- 87,938
Issuance of additional shares to venture capital funds and
individual investors (85) -- -- --
Net loss for the year -- -- (1,993,753) (1,993,753)
--------------------------------------------------------------
Balance at September 30, 1998 $10,856,139 $ -- $(11,477,525) $ (595,519)
==============================================================
</TABLE>
F-6
<PAGE> 49
Demegen, Inc.
(A Development Stage Company)
Statements of Cash Flows
<TABLE>
<CAPTION>
PERIOD FROM
DECEMBER 6, 1991
(INCEPTION)
YEAR ENDED SEPTEMBER 30 TO SEPTEMBER 30
1998 1997 1996 1998
-------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss $(1,993,753) $(943,773) $(2,569,478) $(11,437,525)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 122,594 72,569 39,548 288,929
Stock issued for services 97,318 478,807 537,250 1,729,058
Loss on disposals of equipment -- 17,722 -- 17,722
Issuance of stock options to employees and
directors 1,699,440 -- -- 1,699,440
Warrants issued for interest -- -- 84,996 286,434
Notes payable issued for services -- -- -- 58,194
Write-off of intangible assets -- -- -- 6,626
Changes in operating assets and liabilities:
Accounts receivable (59,929) -- -- (59,929)
Prepaid expenses and other current assets (10,409) 23,363 (21,847) (11,859)
Unearned revenue 183,333 -- -- 183,333
Accounts payable and other liabilities (141,186) (206,861) 497,204 1,208,710
Interest payable -- -- (146,888) --
-------------------------------------------------------------------------------
Net cash used in operating activities (102,592) (558,173) (1,579,215) (6,030,867)
CASH FLOW FROM INVESTING ACTIVITIES
Purchase of property and equipment (54,027) (3,595) (29,478) (173,218)
Cash received on equipment disposals -- 9,643 -- 9,643
Intangible assets (84,610) (79,532) (19,362) (183,504)
-------------------------------------------------------------------------------
Net cash used in investing activities (138,637) (73,484) (48,840) (347,079)
CASH FLOW FROM FINANCING ACTIVITIES
Net proceeds from issuance of equity
instruments 1,943,873 105,000 480,500 4,309,500
Proceeds from exercise of stock options 87,500 -- -- 87,500
Proceeds from notes payable -- -- -- 1,127,500
(Decrease) increase in payable to employees
and directors (413,738) 817,643 1,189,011 2,600,798
Payments on notes payable -- -- (23,194) (60,694)
-------------------------------------------------------------------------------
Net cash provided by financing activities 1,617,635 922,643 1,646,317 8,064,604
-------------------------------------------------------------------------------
Net increase in cash and cash equivalents 1,376,406 290,986 18,262 1,686,658
Cash and cash equivalents at beginning of
period 310,252 19,266 1,004 --
-------------------------------------------------------------------------------
Cash and cash equivalents at end of period $ 1,686,658 $ 310,252 $ 19,266 $ 1,686,658
===============================================================================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION
Cash paid for interest $ 14,080 $ -- $ -- $ 21,642
===============================================================================
NONCASH ACTIVITIES
Common stock issued in satisfaction of related
party payable $ 712,192 $ -- $ -- $ 712,192
===============================================================================
Dividends on redeemable convertible preferred
stock $ 40,000 $ -- $ -- $ 40,000
===============================================================================
</TABLE>
See accompanying notes.
F-7
<PAGE> 50
Demegen, Inc.
(A Development Stage Company)
Notes to Financial Statements
September 30, 1998
1. HISTORY AND NATURE OF THE BUSINESS
Demeter BioTechnologies, Ltd. was formed after the July 27, 1992 acquisition of
the assets of The Demeter Corporation by Excelsior Capital Corporation
("Excelsior"). Excelsior was incorporated in Colorado on September 16, 1987.
Excelsior acquired all the assets of The Demeter Corporation in exchange for
6,625,821 shares of Excelsior's $.001 par value common stock. The Demeter
Corporation's assets consisted of intangible assets related to various
biotechnology applications in the fields of human and animal health care,
agriculture, and commercial chemicals.
For accounting purposes, the acquisition was treated as a reverse acquisition
whereby The Demeter Corporation acquired Excelsior Capital Corporation. The
historical financial statements prior to the acquisition are those of The
Demeter Corporation utilizing the capital structure of Excelsior. However, The
Demeter Corporation had no operating activities from the date of inception,
December 6, 1991, through July 27, 1992. Likewise, Excelsior had no operating
activities prior to December 6, 1991.
On September 18, 1998, the Board of Directors of the Company ratified the
shareholder vote changing the Company's name from Demeter BioTechnologies, Ltd.
to Demegen, Inc. (the "Company").
The Company designs unique molecules which have antimicrobial characteristics,
but with low toxicity and benign environmental impact. The Company's products,
called MIMS(TM) (Membrane Interactive Molecules), are peptides (small proteins)
or peptide-like molecules. Their primary feature is their ability to destroy a
wide range of bacteria, viruses, fungi, protozoa, and cancer cells at low
concentrations without harming healthy cells. The Company also designs genes
which, when incorporated into a plant, have the ability to confer disease
resistance or improve nutritional value. The Company uses university, corporate,
and governmental strategic alliance partners to determine efficacy in treating a
specific pathogen and then licenses the use of the compounds for that
application. If successful, the Company's primary source of revenues will be
from supplying the compounds to licensees, royalties, and research grants. The
Company has licensed substantially all of its plant agricultural technologies to
Mycogen Corporation.
F-8
<PAGE> 51
Demegen, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Actual results could differ from those estimates.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consists principally of currency on hand, demand
deposits at commercial banks, and liquid investment funds having a maturity of
three months or less at the time of purchase.
RECLASSIFICATIONS
Certain amounts reflected in the prior period financial statements have been
reclassified in order to conform with the fiscal 1998 presentation.
PREOPERATING COSTS
Costs incurred during the developmental stage, such as expenses associated with
research and development, raising capital, establishing markets, and developing
sources of supply, are expensed as incurred.
COMMON STOCK ISSUED FOR OTHER THAN CASH
Services purchased and other transactions settled in the Company's common stock
are recorded at the estimated fair value of the stock issued.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives (generally three to five
years) of the individual assets. Depreciation expense amounted to $30,824,
$34,554, and $39,598 during 1998, 1997, and 1996, respectively. Accelerated
depreciation methods are used for income tax purposes.
F-9
<PAGE> 52
Demegen, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INTANGIBLE ASSETS
Intangible assets include patent costs and purchased license agreements and are
stated at cost, net of accumulated amortization. Amortization is calculated
using the straight-line method over estimated useful lives ranging from 3 to 17
years. The Company assesses on an ongoing basis the recoverability of the cost
of its patents and licenses by determining its ability to generate future cash
flows sufficient to recover the recorded amounts over the remaining useful lives
of the assets. This process necessarily involves significant management
judgment. The Company currently anticipates fully recovering the recorded cost
of these assets and, accordingly, no valuation adjustment has been recognized to
date. Because of the development stage nature of the Company, significant
uncertainty exists as to whether revenue expectations will be met. Should the
Company determine in the future that permanent diminution in value of the
intangibles has occurred, a charge against operating results would be recorded.
GRANT INCOME AND FUNDED RESEARCH
The terms of grant agreements may restrict the use of grant funds to certain
activities and costs.
During 1998 and 1997, the Company received grant proceeds of $250,000 and
$500,000, respectively, from the Pacific West Cancer Fund in support of the
Company's cancer research efforts.
STOCK-BASED COMPENSATION
The Company has adopted the disclosure provisions of Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based Compensation ("SFAS No.
123"). SFAS No. 123 permits the Company to continue accounting for stock-based
compensation as set forth in Accounting Principles Board Opinion No. 25,
Accounting for Stock Issued to Employees ("APB Opinion No. 25"), provided the
Company discloses the pro forma effect on net income and earnings per share of
adopting the full provisions of SFAS No. 123. Accordingly, the Company continues
to account for stock-based compensation under APB Opinion No. 25 and has
provided the required pro forma disclosures.
F-10
<PAGE> 53
Demegen, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
3. INCOME TAXES
The Company accounts for income taxes using the liability method. Under the
liability method, deferred tax assets and liabilities are determined based on
differences between the financial reporting and tax basis of assets and
liabilities.
Gross deferred tax assets at September 30, 1998 and 1997 were approximately
$2,740,000 and $2,000,000, respectively. A valuation allowance equal to these
amounts was established as these deferred tax assets may not be realized. The
deferred tax assets primarily relate to net operating loss carryforwards of the
Company, differences related to the carrying amount of intangible assets for
financial and tax purposes, and current tax treatment of employee stock options.
Net operating losses totaling approximately $5,900,000 are currently available
and begin to expire in 2007. Deferred tax liabilities relate to differences in
the financial and tax carrying amounts of fixed assets.
4. RELATED PARTY TRANSACTIONS
During 1997, the Company reached agreements with certain current and former
employees related to amounts payable to these individuals for primarily wages.
The amounts payable to these individuals at August 31, 1997 of approximately
$2,200,000 were reduced to approximately $646,000 at September 30, 1997
primarily through the conversion of certain amounts to restricted stock and
forgiveness of certain amounts payable. The Company has recorded the forgiveness
of amounts payable as a contribution of capital from certain of its officers,
management, and key employees. Accordingly, common stock and additional paid-in
capital increased by approximately $1,600,000 related to the agreement. The
agreements also provide for either the payment of bonuses totaling $185,000 or
the issuance of 185,000 shares of the Company's common stock at $1.00 per share
to the employees in future years should target levels of license and/or royalty
revenues be achieved.
During 1996, the Company settled the majority of its notes payable to
shareholders through the issuance of common stock. Pursuant to the terms of
these settlements, notes payable of $1,091,667, accrued interest of $361,094,
and outstanding warrants covering 1,832,194 shares of common stock were
satisfied through the issuance of 3,605,285 shares of the Company's restricted
common stock.
In December 1996, a former employee filed a claim against the Company for
payment of back compensation, payment of outstanding promissory notes, and for
termination provisions of his employment contract. The Company filed for
arbitration, as called for in the employment contract. In October 1997, the
Court stayed the litigation and ordered the parties to proceed with
F-11
<PAGE> 54
Demegen, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
4. RELATED PARTY TRANSACTIONS (CONTINUED)
arbitration. In January 1998, the matter was settled with the issuance of
1,975,000 shares of the Company's common stock and a cash payment of $30,000.
The expenses related to this settlement were recorded in fiscal 1997 and prior
years.
5. COMMON STOCK
Included in the common stock account balances at September 30, 1998 and 1997 are
425,000 and 855,950 restricted shares for which the Company has received
consideration, either in cash or services provided, but has not yet issued the
restricted share certificates to the shareholders.
6. REDEEMABLE CONVERTIBLE PREFERRED STOCK
In June 1998, the Company issued 4,444,444 shares of redeemable convertible
preferred stock ("preferred stock") for net proceeds of $1,943,873 (net of
$56,127 of expenses incurred in connection with the issuance).
The holders of the preferred stock are entitled to receive, when, as and if
declared by the Board of Directors, out of funds legally available therefore,
dividends at the rate of $0.036 per share, semiannually, on each outstanding
share of convertible preferred stock. Such dividends have a priority over any
dividends paid on the common stock. Dividends on the preferred stock are
cumulative and the right to such dividends shall accrue to holders of
convertible preferred stock until declared by the Board of Directors. The
Company has accounted for the cumulative semiannual dividends through periodic
accretion to the preferred stock.
In the event of any liquidation, dissolution, or winding up of the Company, the
holders of preferred stock shall be entitled to receive the greater of $0.45 per
share, plus all unpaid and accrued dividends thereon, or the amount the holder
of the shares of the preferred stock would otherwise be entitled to receive had
each such share been converted into common stock immediately prior to such
liquidation, dissolution or wind-up.
Each share of preferred stock is convertible at any time, at the option of the
holder thereof, into an equal number of fully paid and nonassessable shares of
common stock. In addition, if at any time the Company shall effect a firm
commitment underwritten public offering of shares of common stock in which the
aggregate price paid for such shares by the public shall be at least $8,000,000,
then effective immediately before the closing of the sale of such shares by the
Company pursuant to such public offering, all outstanding shares of preferred
stock shall automatically convert to common stock.
F-12
<PAGE> 55
Demegen, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
6. REDEEMABLE CONVERTIBLE PREFERRED STOCK (CONTINUED)
The shares of preferred stock shall be redeemable at the election of the holder
upon at least ninety days notice to the Company. The Company shall redeem from
the holder on or at any time after May 31, 2003, 2004, and 2005, up to one-third
of the shares of preferred stock held by the holder, with the intent that,
should the holder elect, at any time after May 31, 2005, the total number of
shares held by the holder would be subject to redemption. The preferred stock to
be redeemed shall be paid for in cash at an amount equal to the greater of (i)
$0.45 per share plus, in the case of each share, an amount equal to all accruing
unpaid dividends (whether or not declared), or (ii) such amount per share as
would have been payable had each such share been converted to common stock
immediately prior to the actual date of redemption.
The shares of preferred stock vote on matters on an as-converted basis; i.e.,
each share of preferred stock has one vote, as do each owner of a share of
common stock.
The holder of the preferred stock has a warrant to purchase 4,965,556 shares of
common stock of the Company at $0.45 per share. The warrant shall be
exercisable, in whole or in part, through June 14, 2008. The Company may call
the warrant at any time after December 31, 1998, provided the Company's common
stock has been in excess of $1.50 per share for each of the forty consecutive
trading days immediately preceding the date of the call.
Upon receipt of the call, the call holder shall have sixty days to elect to
exercise all or a portion of this warrant. Upon such exercise, in addition to
receiving the number of shares of common stock to which the holder shall be
entitled, the holder of the warrant also shall receive a new warrant
("replacement warrant"). The replacement warrant shall be exercisable for one
share of common stock for every two shares of common stock purchased in response
to the aforementioned call. The exercise price of the replacement warrant is
$1.50 per share, and the term of the replacement warrant shall be the longer of
two years from the date of the issuance or the balance of the original term of
the warrant.
7. STOCK OPTIONS AND WARRANTS
The Company granted stock options to certain employees and directors during the
year ended September 30, 1998 at a $0.05 per share exercise price, which was
below the fair value at the date of grant. The shares were fully vested at
September 30, 1998, and a $1,699,440 noncash charge was recognized to reflect
the compensation value of the options issued. All of these options expire in
2008.
F-13
<PAGE> 56
Demegen, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
7. STOCK OPTIONS AND WARRANTS (CONTINUED)
The Company granted stock options to certain employees and directors during the
years ended September 30, 1996 and 1997 at exercise prices which approximated
fair value at the date of grant. Options granted to an officer in 1996 vested
200,000 shares each at the date of issuance and November 1, 1996, with the
remaining options vesting on November 1, 1997.
Options granted during the year ended September 30, 1997 vested immediately.
A summary of the Company's stock option activity is at follows:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
----------------------------------------------------------------
WEIGHTED
AVERAGE WEIGHTED AVERAGE
NUMBER OF SHARES EXERCISE PRICE FAIR VALUE
----------------------------------------------------------------
<S> <C> <C> <C>
Options granted during year 600,000 $0.15 $0.03
----------------------------------------------------------------
Balance at September 30, 1996 600,000 $0.15 $0.03
Options granted during year 425,000 $0.77 $0.17
----------------------------------------------------------------
Balance at September 30, 1997 1,025,000 $0.41 $0.09
Options granted during year 5,820,000 $0.05 $0.27
Options exercised for common stock during year
(1,750,000) $0.05 $0.27
----------------------------------------------------------------
Balance at September 30, 1998 5,095,000 $0.12 $0.23
================================================================
</TABLE>
As of September 30, 1998 and 1997, 5,095,000 and 825,000, respectively, of the
options were vested and exercisable.
Pro forma information regarding net income and earnings per share is required by
SFAS No. 123, and has been determined as if the Company had accounted for its
employee stock options under the fair value method of that Statement. The fair
value for these options was estimated at the date of grant using a Black-Scholes
options pricing model with the following weighted average assumptions for fiscal
1998, 1997, and 1996: risk-free interest rate of 6%; dividend yield of 0%; and
volatility factors of the expected market price of the Company's common stock of
0.97, 1.24, and 2.47 in fiscal 1998, 1997, and 1996, respectively.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics
F-14
<PAGE> 57
Demegen, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
7. STOCK OPTIONS AND WARRANTS (CONTINUED)
significantly different from those of traded options, and because changes in the
subjective input assumptions can materially affect the fair value estimate, in
management's opinion, the existing models do not necessarily provide a reliable
single measure of the fair value of its employee stock options.
Changes in the subjective input assumptions can materially affect the fair value
estimate, and therefore, the existing models do not necessarily provide a
reliable single measure of the fair value of employee stock options. Had the
compensation cost of the Company's stock option plans been determined based on
the fair value at the date of grant for awards in 1998, 1997, and 1996
consistent with the provisions of SFAS No. 123, the Company's net loss would
have been increased to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
1998 1997 1996
----------------------------------------------------------
<S> <C> <C> <C>
Net loss available to common stock:
As reported $(1,993,753) $ (943,773) $(2,569,478)
Pro forma $(3,569,887) $(1,370,617) $(2,597,900)
Basic and diluted earnings per share:
As reported $(0.09) $(0.05) $(0.17)
Pro forma $(0.15) $(0.07) $(0.17)
</TABLE>
At September 30, 1998, there were outstanding warrants to purchase 4,000 shares
of the Company's common stock at an exercise price of $2.50 per warrant. The
warrants expire December 31, 1999. Additionally, the holder of the preferred
stock holds a warrant to purchase common stock (refer to Note 6 for additional
information).
8. COMMITMENTS
The Company leases its office and laboratory facilities under a three-year lease
expiring September 30, 2001 at a monthly rental of $3,793. During 1998, 1997,
and 1996, the Company incurred rent expense totaling $34,105, $45,100, and
$48,540, respectively.
During 1996, the Company received equity investments totaling $285,000 from a
venture capital fund and/or its individual investors. The Company has issued an
aggregate of 577,000 shares
F-15
<PAGE> 58
Demegen, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
8. COMMITMENTS (CONTINUED)
related to these investments. The Company has subsequently issued 85,000
additional shares during 1998 as the per share price in the Company's next round
of financing was less than $.50 per share.
During 1997, the Company entered into a license agreement with a university to
obtain certain patent rights. In exchange for the license of the patents, the
Company issued common stock. In addition, the Company is obligated to pay
certain royalties under the terms of the agreement for each licensed product.
The agreement requires minimum royalty payments to maintain the license of the
patents. The Company paid $45,000 in royalty payments pursuant to this agreement
in 1998.
9. MARKETING
During 1997, the Company entered into a license agreement with Mycogen
Corporation whereby the Company licensed substantially all rights for disease
prevention and treatment for agricultural applications. The Company received
$1,250,000 in initial payments. Subsequently, over the future years, the Company
expects to receive substantial milestone payments as advances related to future
royalties. Mycogen will undertake management of future development, regulatory
approvals, seed production, and marketing. The companies will also undertake a
joint research effort to identify new molecular designs.
10. NET LOSS PER COMMON SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
1998 1997 1996
----------------------------------------------------------
<S> <C> <C> <C>
Numerator:
Net loss $(1,993,753) $ (943,773) $(2,569,478)
Preferred stock dividends (40,000) -- --
----------------------------------------------------------
Numerator for basic earnings per share--income
available to common stockholders (2,033,753) (943,773) (2,569,478)
Denominator:
Denominator for basic and earnings per share--weighted
average shares 23,867,091 19,537,047 15,479,889
----------------------------------------------------------
Basic and diluted earnings per share $ (0.09) $ (0.05) $ (0.17)
==========================================================
</TABLE>
F-16
<PAGE> 59
Demegen, Inc.
(A Development Stage Company)
Notes to Financial Statements (continued)
11. YEAR 2000 (UNAUDITED)
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Any of the Company's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900 rather than the year 2000. This could result in a system
failure of miscalculations causing disruptions of operations including, among
other things, a temporary inability to process transactions, send invoices, or
engage in similar normal business activities.
The Company has not completed a formal assessment of the Year 2000 issue;
however, the Company does not have any significant system interfaces with
outside vendors or customers which, in the opinion of management, are vulnerable
to those third parties' failure to remediate their own Year 2000 issues. There
are no internal computer systems which present a Year 2000 issue. While
management cannot reasonably estimate the cost that may be necessary to address
Year 2000 issues related to its outside vendors or customers, in the opinion of
management, such cost will not have an adverse material effect on the results
of operations.
12. SUBSEQUENT EVENT
In November 1998, the license agreement with Mycogen (Note 9) was modified to
provide for an additional license for the Company's agricultural nutrition
technologies. Including disease resistance and nutrition, the revised agreement
calls for substantial payments over the next several years, exclusive of
royalties, for license fees, research support, and milestone payments. In
addition, Mycogen will be responsible for all development and commercialization
costs. Mycogen is now owned by the Dow Chemical Company.
F-17
<PAGE> 1
Exhibit 3.1
[SEAL OF STATE OF COLORADO 1876]
STATE OF COLORADO
DEPARTMENT OF STATE
CERTIFICATE
I, VICTORIA BUCKLEY, SECRETARY OF STATE OF THE STATE OF COLORADO HEREBY
CERTIFY THAT ACCORDING TO THE RECORDS OF THIS OFFICE, THE ATTACHED IS A FULL,
TRUE AND COMPLETE COPY OF THE ARTICLES OF INCORPORATION AND ALL AMENDMENTS
THERETO OF
DEMEGEN, INC.
(COLORADO CORPORATION)
AS FILED IN THIS OFFICE AND ADMITTED TO RECORD.
Dated: October 30, 1998
/s/ VICTORIA BUCKLEY
--------------------------
SECRETARY OF STATE
<PAGE> 2
ARTICLES OF AMENDMENT
OF
ARTICLES OF INCORPORATION
OF
DEMETER BIOTECHNOLOGIES, LTD.
Pursuant to the provisions of the Colorado Business Corporation Act (the
"Act"), the undersigned corporation adopts the following Articles of Amendment
to its Articles of Incorporation:
FIRST: The name of the corporation is Demeter BioTechnologies, Ltd.
SECOND: The following amendments to the Articles of Incorporation were
approved by the Board of Directors and adopted by a vote of the shareholders as
prescribed by the Act, on September 18, 1998. The number of votes cast for the
amendments by each voting group entitled to vote separately on the amendments
was sufficient for approval by that voting group.
THIRD: The amendments to the Articles of Incorporation are as follows:
Article I of the Articles of Incorporation is amended and restated in its
entirety to read as follows:
The name of the corporation shall be Demegen, Inc.
Article IV of the Articles of Incorporation is amended and restated in its
entirety to read as follows:
ARTICLE IV
CAPITAL
The aggregate number of shares which this corporation shall have the
authority to issue is one hundred million (100,000,000) shares, with
a par value of $0.001 per share, which shares shall be designated
common stock. No share shall be issued until it has been paid for,
and it shall thereafter be nonassessable. The corporation may also
issue up to 40,000,000 shares of preferred stock at a par value of
$.001 per share. The preferred stock of the corporation shall be
issued in one or more classes or series as may be determined from
time to time by the Board of Directors. In establishing a class
of series, the Board of Directors shall give to it a distinctive
designation so as to distinguish it from the shares of all other
series and
<PAGE> 3
MAIL TO:
Colorado Secretary of State
Corporations Office
1560 Broadway, Suite 200
Denver, Colorado 80202
(303) 894-2251
ARTICLES OF AMENDMENT
to the
ARTICLES OF INCORPORATION
Pursuant to the provisions of the Colorado Corporation Code, the
undersigned corporation adopts the following Articles of Amendments to its
Articles of Incorporation:
FIRST: The name of the corporation is (note 1) EXCELSIOR CAPITAL
CORPORATION
SECOND: The following amendments to the Articles of Incorporation was
adopted on July 31, 1992, as prescribed by the Colorado Corporation Code, in
the manner marked with an X below:
___ Such amendment was adopted by the board of directors where no shares
have been issued.
_X_ Such amendment was adopted by a vote of the shareholders. The number
of shares voted for the amendment was sufficient for approval.
That the name of the Corporation shall be changed to :
Demeter BioTechnologies, Ltd.
THIRD: The manner, if not set forth in such amendment, in which any
exchange, reclassification, or cancellation of issued shares provided for in
the amendment shall be effected, is as follows:
N/A
FOURTH: The manner in which such amendment effects a change in the amount
of stated capital, and the amount of
<PAGE> 4
ARTICLES OF INCORPORATION
OF
EXCELSIOR CAPITAL CORPORATION
KNOW ALL MEN BY THESE PRESENTS:
That the undersigned incorporator, being a natural person of the age of
eighteen (18) years or more, and desiring to form a corporation under the laws
of the State of Colorado, does hereby sign, verify and deliver in duplicate to
the Secretary of State of the State of Colorado these ARTICLES OF INCORPORATION.
ARTICLE I
NAME
The name of the corporation shall be EXCELSIOR CAPITAL CORPORATION.
ARTICLE II
PERIOD OF DURATION
This corporation shall exist perpetually unless dissolved according to law.
ARTICLE III
PURPOSE
The purpose for which this corporation is organized is to transact any
lawful business or businesses for which corporation may be incorporated
pursuant to the Colorado Corporation Code.
ARTICLE IV
CAPITAL
The aggregate number of shares which this corporation shall have the
authority to issue is one hundred million (100,000,000) shares, with a par
value of $0.001 per share, which shares shall be designated common stock. No
share shall be issued until it has been paid for, and it shall thereafter be
nonassessable. The corporation may also issue up to 40,000,000 shares of
non-voting preferred stock at a par value of $.001 per share. The preferred
stock of the Corporation shall be issued in one or more series as may be
determined from time to time by the Board of Directors. In establishing a
series, the Board of Directors shall give to it a distinctive designation so as
to distinguish it from the
<PAGE> 5
shares of all other series and classes, shall fix the number of shares in such
series, and the preferences, rights and restrictions thereof. All shares of any
one series shall be alike in every particular. All series shall be alike except
that there may be variation as to the following: (1) the rate of dividend;
(2) the price at and the terms and conditions on which shares shall be
redeemed; (3) the amount payable upon shares in the event of involuntary
liquidation; (4) the amount payable upon shares in the event of voluntary
liquidation; (5) sinking fund provisions for the redemption of shares; and
(6) the terms and conditions on which shares may be converted if the shares of
any series are issued with the privilege of conversion.
ARTICLE V
PREEMPTIVE RIGHTS
A shareholder of the corporation shall not be entitled to a preemptive
right to purchase, subscribe for, or otherwise acquire any unissued or treasury
shares of stock of the corporation, or any options or warrants to purchase,
subscribe for or otherwise acquire any such unissued or treasury shares, or any
shares, bonds, notes, debentures, or other securities convertible into or
carrying options or warrants to purchase, subscribe for or otherwise acquire
any such unissued or treasury shares.
ARTICLE VI
CUMULATIVE VOTING
The shareholders shall not be entitled to cumulative voting.
ARTICLE VII
SHARE TRANSFER RESTRICTIONS
The corporation shall have the right to impose restrictions upon the
transfer or any of its authorized shares or any interest therein. The board
of directors is hereby authorized on behalf of the corporation to exercise
the corporation's right to so impose such restrictions.
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<PAGE> 6
ARTICLE VIII
REGISTERED OFFICE AND AGENT
The initial registered office of the corporation shall be at 11404 San
Juan Range Road, Littleton, CO 80127, and the name of the initial registered
agent at such address is Mark A. Schauer. Either the registered office or the
registered agent may be changed in the manner provided by law.
ARTICLE IX
INITIAL BOARD OF DIRECTORS
The initial board of directors of the corporation shall consist of
three (3) directors, and the names and addresses of the persons who shall
serve as director until the first annual meeting of shareholders or until
their successors are elected and shall qualify are:
Mark A. Schauer, 11404 San Juan Range Road, Littleton, CO 80127;
Dale E. Sauer, 10133 Harrison Road, Bloomington, MN 55437;
Thomas D. Krosschell, 4363 South Blackhawk Way, Aurora, CO 80015
The number of directors shall be fixed in accordance with the bylaws.
ARTICLE X
INDEMNIFICATION
Subject to the fullest rights of indemnification and limitation of
liability granted by the Colorado Corporation Code as it may be amended from
time to time;
1. The 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,
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, fiduciary or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary or agent or another corporation,
partnership, joint venture, trust, or other enterprise, against expenses
(including
- 3 -
<PAGE> 7
attorney 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 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. The
termination of any action, suit, or proceeding by judgment, order, settlement,
or conviction or upon a plea of nolo contendere or its equivalent shall not of
itself create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in the best interests of the
corporation and, with respect to any criminal action or proceeding, had
reasonable cause to believe his conduct was unlawful.
2. The 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 to procure a judgment in its favor by
reason of the fact that he is or was a director, officer, employee, or agent of
the corporation or is or was serving at the request of the corporation as a
director, officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorney fees) actually and reasonably incurred by him in connection
with the defense or settlement of such action or suit if he acted in good faith
and in a manner he reasonably believed to be in the best interests of the
corporation; but no indemnification shall be made in respect of any claim,
issue, or matter as to which such person has been adjudged to be liable for
negligence or misconduct in the performance of his duty to the corporation
unless and only to the extent that the court in which such action or suit was
brought determines upon application that, despite the adjudication of liability,
in view of all circumstances of the case, such person is fairly and reasonably
entitled to indemnification for such expenses which such court deems proper.
3. To the extent that a director, officer, employee, fiduciary or agent
of a corporation has been successful on the merits in defense of any action,
suit, or proceeding referred to in (A) or (B) of this Article X or in defense of
any claim, issue or matter therein, he shall be indemnified against expenses
(including attorney fees) actually and reasonably incurred by him in connection
therewith.
4. Any indemnification under 1 or 2 of this Article (unless ordered by
a court) and as distinguished from 3 of this Article shall be made by the
corporation only as authorized in the specific case upon a determination that
indemnification of the director, officer, employee, fiduciary
- 4 -
<PAGE> 8
or agent is proper in the circumstances because he has met the applicable
standard of conduct set forth in 1 or 2 above. Such determination shall be
made by the board of directors by a majority vote of a quorum consisting of
directors who were not parties to such action, suit, or proceeding, or, if such
a quorum is not obtainable or, even if obtainable, if a quorum of disinterested
directors so directs, by independent legal counsel in a written opinion, or by
the shareholders.
5. Expenses (including attorney fees) incurred in defending a civil or
criminal action, suit, or proceeding may be paid by the corporation in advance
of the final disposition of such action, suit, or proceeding as authorized in
3 or 4 of this Article upon receipt of an undertaking by or on behalf of the
director, officer, employee, fiduciary or agent to repay such amount unless
it is ultimately determined that he is entitled to be indemnified by the
corporation as authorized in this Article.
6. The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those indemnified may be entitled under
any bylaw, agreement, vote of shareholders or disinterested directors, or
otherwise, and any procedure provided for by any or the foregoing, both as to
action in his official capacity and as to action in another capacity while
holding such office, and shall continue as to a person who has ceased to be a
director, officer, employee, fiduciary or agent and shall inure to the benefit
of heirs, executors, and administrators of such a person.
7. The corporation may purchase and maintain insurance on behalf of any
person who is or was a director, officer, employee, fiduciary or agent of the
corporation or who is or was serving at the request of the corporation as a
director, officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity or arising out of
his status as such, whether or not the corporation would have the power to
indemnify him against such liability under provisions of this Article.
8. To the fullest extent provided in said Act, the Directors of the
Company shall not be liable to the Corporation or its Shareholders for
monetary damages.
ARTICLE XI
TRANSACTIONS WITH INTERESTED DIRECTORS
No contract or other transaction between the corporation and one (1) or
more of its directors or any other
- 5 -
<PAGE> 9
corporation, firm, association, or entity in which one (1) or more of its
directors are directors or officers are financially interested shall be either
void or voidable solely because of such relationship or interest, or solely
because such directors are present at the meeting of the board of directors or
a committee thereof which authorizes, approves, or ratifies such contract or
transaction, or solely because their votes are counted for such purpose if:
(A) The fact of such relationship or interest is disclosed or known to
the board of directors or committee which authorizes, approves, or ratifies the
contract or transaction by a vote or consent sufficient for the purpose without
counting the votes or consents of such interested directors.
(B) The fact of such relationship or interest is disclosed or known to
the shareholders entitled to vote and they authorize, approve, or ratify such
contract or transaction by vote or written consent; or
(C) The contract or transaction is fair and reasonable to the corporation.
Common or interested directors may be counted in determining the presence
of a quorum at a meeting of the board of directors or a committee thereof which
authorizes, approves, or ratifies such contract or transaction.
The officer, directors and other members of management of this Corporation
shall be subject to the doctrine of "corporate opportunities" only insofar as
it applies to business opportunities in which this Corporation has expressed
an interest as determined from time to time by this Corporation's board of
directors as evidenced by resolutions appearing in the Corporation's minutes.
Once such areas of interest are delineated, all such business opportunities
within such areas of interest which come to the attention of the officers,
directors, and other members of management of this Corporation shall be
disclosed promptly to this Corporation and made available to it. The board of
directors may reject any business opportunity presented to it and thereafter
any officer, director or other member of management may avail himself of such
opportunity. Until such time as this Corporation, through its board of
directors, has designated an area of interest, the officers, directors and
other members of management of this Corporation shall be free to engage in such
areas of interest on their own and this doctrine shall not limit the rights of
any officer, director or other member of management of this Corporation to
continue a business existing prior to the time that such area of interest is
designated by the Corporation. This provision shall not be construed to release
an employee of this
- 6 -
<PAGE> 10
Corporation (other than an officer, director or member of management) from
any duties which he may have to this Corporation.
ARTICLE XII
VOTING OF SHAREHOLDERS
With respect to any action to be taken by shareholders of this
corporation, a vote or concurrence of the holders of a majority of the
outstanding shares of the shares entitled to vote thereon, or of any class
or series, shall be required.
ARTICLE XIII
INCORPORATOR
The name and address of the incorporator is as follows:
Roger V. Davidson, 1401 Walnut St., Suite 200, Boulder, CO 80302.
IN WITNESS WHEREOF, the above named incorporator signed these ARTICLES
OF INCORPORATION on September 8, 1987.
/s/ ROGER V. DAVIDSON
-----------------------
Roger V. Davidson
STATE OF COLORADO )
) ss.
COUNTY OF BOULDER )
I, the undersigned, a notary public, hereby certify that on September 8,
1987, the above named incorporator personally appeared before me and being by
me first duly sworn declared that he is the person who signed the foregoing
document as incorporator, and that the statements therein contained are true.
WITNESS my hand and official seal.
/s/ SUSAN L. CLINE
-----------------------
Notary Public
10-27-90
-----------------------
My commission expires
[NOTARY SEAL]
- 7 -
<PAGE> 1
Exhibit 3.2
AMENDED AND RESTATED BY-LAWS
OF
DEMETER BIOTECHNOLOGIES LTD.
(FORMERLY NAMED EXCELSIOR CAPITAL CORP.)
ARTICLE I
Registered Office, Registered Agent
and Corporate Seal
Section 1. Business Offices. The registered office and registered agent of the
Corporation shall be as set forth in the Corporation's Articles of Incorporation
as may be amended from time to timer. Other offices may be established from time
to time by resolution of the Board of Directors, both within and outside the
State of Colorado.
Section 2. Seal. The seal of the Corporation shall have inscribed thereon the
name of the Corporation, and the words "Colorado" and "Seal," and shall be in
such form as may be approved by the Board of Directors, which shall have the
power to alter the same at pleasure.
ARTICLE II
Shares and Transfer Thereof
Section 1. Certificates. The shares of this Corporation shall be represented by
certificates signed by the president or a vice president and the secretary or an
assistant secretary of the Corporation, and may be sealed with the seal of the
Corporation or a facsimile thereof. The signatures of the president or vice
president and the secretary or assistant secretary 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. In case any officer who has signed or whose facsimile signature
has been placed upon such certificate shall have ceased to be such officer
before such 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. Regulation. The Board of Directors may make such rules and
regulations as it may deem appropriate concerning the issuance, transfer and
registration of certificates for shares of the corporation, including the
appointment of transfer agents and registrars.
Section 3. Cancellation of Certificates. No new certificates evidencing shares
shall be issued unless and until the old certificate or certificates in lieu of
which the new certificate is issued shall be surrendered for cancellation,
except as provided in Section 4 of this Article II.
Section 4. Lost, Stolen or Destroyed Certificates. In case of loss or
destruction of any certificate
<PAGE> 2
of shares, another certificate may be issued in its place upon satisfactory
proof of such loss or destruction, and, at the discretion of the Corporation,
upon giving to the Corporation a satisfactory bond of indemnity issued by a
corporate surety in an amount and for a period satisfactory to the Board of
Directors.
Section 5. Close of Transfer Book and Record Date. For the purpose of
determining shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or entitled to receive payment of any
dividend or in order to make a determination of shareholders for any other
proper purpose, the Board of Directors may provide that the stock transfer books
shall be closed for a stated period, but not to exceed, in any case, fifty (50)
days. If the stock transfer books shall be closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, such
books shall be closed for at least ten (10) days immediately preceding such
meeting. In lieu of closing the stock transfer books, the Board of Directors may
fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than fifty (50) days and, in
case of a meeting of shareholders, not less than ten (10) days prior to the date
on which the particular action, requiring such determination of shareholders, is
to be taken. If the Board of Directors do not order the stock transfer books
closed, or fix in advance a record date, as provided above, then the record date
for the determination of shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled to receive
payment of any dividend, or for the determination of shareholders for any proper
purpose, shall be thirty (30) days prior to the date on which the particular
action, requiring such determination of shareholders, is to be taken.
Section 6. Transfer of Shares. Subject to the terms of any shareholder agreement
relating to the transfer of shares or other transfer restrictions contained in
the Articles of Incorporation or authorized therein, shares of the corporation
shall be transferable on the books of the corporation by the holder thereof in
person or by his duly authorized attorney, upon the surrender and cancellation
of a certificate or certificates for a like number of shares. Upon presentation
and surrender of a certificate for shares properly endorsed and payment of all
taxes therefor, the transferee shall be entitled to a new certificate or
certificates in lieu thereof. As against the corporation, a transfer of shares
can be made only on the books of the corporation and in the manner hereinabove
provided, and the corporation shall be entitled to treat the holder of record of
any share as the owner thereof and shall not be bound to recognize any equitable
or other claim to or interest in such share on the part of any other person,
whether or not it shall have express or other notice thereof, save as expressly
provided by the statutes of the State of Colorado.
Section 7. Transfer Agent. Unless otherwise specified by the Board of Directors
by resolution, the Secretary of the corporation shall act as transfer agent of
the certificates representing the shares of stock of the corporation. He shall
maintain a stock transfer book, the stubs in which shall set forth among other
things, the names and addresses of the holders of all issued shares of the
corporation, the number of shares held by each, the certificate numbers
representing such shares, the date of issue of the certificates representing
such shares, and whether or not such shares originate from original issue or
from transfer. Subject to Article III, Section 7, the names and addresses of the
shareholders as they appear on the stubs of the stock transfer book shall be
<PAGE> 3
conclusive evidence as to who are the shareholders of record and as such
entitled to receive notice of the meetings of shareholders; to vote at such
meetings; to examine the list of the shareholders entitled to vote at meetings;
to receive dividends; and to own, enjoy and exercise any other property or
rights deriving from such shares against the corporation. Each shareholder shall
be responsible for notifying the Secretary in writing of any change in his name
or address and failure to do so will relieve the corporation, its directors,
officers and agents, from liability for failure to direct notices or other
documents, or pay over or transfer dividends or other property or rights, to a
name or address other than the name and address appearing on the stub of the
stock transfer book.
ARTICLE III
Shareholders and
Meetings Thereof
Section 1. Shareholders of Record. Only shareholders of record on the books of
the Corporation shall be entitled to be treated by the Corporation as
holders-in-fact of the shares standing in their respective names, and the
Corporation shall not be bound to recognize any equitable or other claim to, or
interest in, any shares on the part of any other person, firm, or corporation,
whether or not it shall have express or other notice thereof, except as
expressly provided by the laws of Colorado.
Section 2. Meetings. Meetings of shareholders shall be held at the registered
office of the Corporation in the State of Colorado, or any other place
designated by a vote of the majority of directors.
Section 3. Annual Meeting. The annual meeting of shareholders of the corporation
for the election of directors, and for the transaction of such other business as
may properly come before the meeting, shall be held at such time as may be
determined by the Board of Directors by resolution in conformance with Colorado
law. If the election of Directors shall not be held on the day designated herein
for any annual meeting of the shareholders, the Board of Directors shall cause
the election to be held at a special meeting of the shareholders as soon
thereafter as may be convenient.
Section 4. Special Meetings. Special meetings of shareholders may be called by
the president or, in the absence of the president, by the vice president, the
board of directors, or the holders of not less than one-tenth (1/10) of all
shares entitled to vote on the subject matter for which the meeting is called.
Section 5. Notice. Written or printed notice stating the place, day and hour of
the shareholders' meeting, and, in case of a special meeting of shareholders,
the purpose or purposes for which the meeting is called, shall be delivered not
less than ten (10) days or more than fifty (50) days before the date of the
meeting, either personally or by mail, by or at the direction of the president,
the secretary, the board of directors, or the officer or persons calling the
meeting, to each shareholder of record entitled to vote at such meeting, except
that if the authorized capital
<PAGE> 4
stock is to be increased, at least thirty (30) days' notice shall be given. If
mailed, such notice shall be deemed to be delivered when deposited int he United
States mail addressed to the shareholder at his address as it appears on the
stock transfer books of the Corporation, with postage thereon prepaid. Failure
to deliver such notice or obtain a waiver thereof shall not cause the meeting to
be lost, but it shall be adjourned by the shareholders present for a period not
to exceed sixty 960) days until any deficiency in notice or waiver shall be
supplied.
Section 6. Voting of Shares. Each outstanding share entitled to vote on any
matter presented at a meeting shall be entitled to one vote and each fractional
share shall be entitled to a corresponding fractional vote, in person or by
proxy, on each such matter submitted to a vote of such shares at a meeting of
shareholders, subject to the rights of cumulative voting, if any.
Section 7. Voting Record. The officer or agent having charge of the stock
transfer books for shares of this Corporation shall make, at least ten (10) days
before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting or any adjournment thereof, arranged in
alphabetical order, with the address of and the number of shares held by each,
which list, for a period of ten (10) days prior to such meeting, shall be kept
on file at the principal office of the Corporation, whether within or outside
Colorado, and shall be subject to inspection by any shareholder at any time
during usual business hours. Such list shall also be produced and kept open at
the time and place of the meeting and shall be subject to the inspection of any
shareholder during the whole time of the meeting. The original stock transfer
books shall be prima facie evidence as to who are the shareholders entitled to
examine such list or transfer book or to vote at any meeting of shareholders.
Section 8. Quorum. A quorum at any meeting of shareholders shall consist of a
majority of the shares of the Corporation entitled to vote thereat, represented
in person or by proxy. If a quorum is present, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders, unless the vote of a
greater number of voting by classes is required by law, the Articles of
Incorporation or these By-Laws.
Section 9. Manner of Acting. If a quorum is present, the affirmative vote of the
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders, unless the vote of a
greater proportion or number or voting by classes is otherwise required by
statute or by the Articles of Incorporation or these Bylaws.
Section 10. Proxies. A shareholder may vote either in person or by proxy,
executed in writing by the shareholder, or by his duly authorized attorney in
fact. No proxy shall be valid after eleven (11) months from the date of its
execution, unless otherwise provided in the proxy. All proxies must be filed
with the Secretary at or before the time of the meeting.
Section 11. Ex-Officio Chairman. The president of the Corporation shall be
ex-officio chairman at all meetings of the shareholders.
Section 12. Voting of Shares by Certain Holders. Shares standing in the name of
another corporation may be voted by such officer, agent or proxy as the bylaws
of such corporation may
<PAGE> 5
prescribe, or, in the absence of such provision, as the Board of Directors of
such other corporation may determine. Shares standing in the name of a deceased
person, a minor ward or an incompetent person, may be voted by his
administrator, executor, court appointed guardian or conservator, either in
person or by proxy without a transfer of such shares into the name of such
administrator, executor, court appointed guardian or conservator. 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 so to do be contained in an appropriate order of the court by
which such receiver was appointed.
A shareholder 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 shares of its own stock belonging to this corporation, nor shares of its
own stock held by it in a fiduciary capacity, nor shares of its own stock held
by another corporation if the majority of shares entitled to vote for the
election of directors of such corporation is held by this corporation may be
voted, directly or indirectly, at any meeting and shall not be counted in
determining the total number of outstanding shares at any given time. Redeemable
shares which have been called for redemption shall not be entitled to vote on
any matter and shall not be deemed outstanding shares on and after the date on
which written notice of redemption has been mailed to shareholders and a sum
sufficient to redeem such shares has been deposited with a bank or trust company
with irrevocable instruction and authority to pay the redemption price to the
holders of the shares upon surrender or certificates therefor.
ARTICLE IV
Directors, Powers and Meetings
Section 1. Board of Directors. The business and affairs of the Corporation shall
be managed by a board of directors, which shall be comprised of no fewer than
three (3) directors and no more than nine (9), who need not be shareholders of
the Corporation or residents of the State of Colorado and who shall be elected
at the annual meeting of shareholders or some adjournment thereof. Directors
shall hold office until the next succeeding annual meeting or until their
successors shall have been elected and shall qualify; however, no provision of
this section shall be restrictive upon the right of the Board of Directors to
fill vacancies or upon the right of shareholders to remove directors as is
hereinafter provided.
Section 2. Annual Meeting. The annual meeting of the Board of Directors shall be
held at the same place as, and immediately after, the annual meeting of
shareholders, and no notice shall be required in connection therewith. The
annual meeting of the Board of Directors shall be for the purpose of electing
officers and the transaction of such other business as may come before the
meeting.
Section 3. Special Meetings; Notice. Special meeting of the Board of Directors
may be called at
<PAGE> 6
any time by the president, a vice president, or by any director, and may be held
within or outside the State of Colorado at such time and place as the directors
may determine, or as the notice or waiver of notice may specify. Notice of such
meetings shall be given to each director at least three (3) days prior to the
date fixed for the meeting. Special meetings of the Board of Directors may be
held at any time that all directors are present in person or by telephonic
means, and presence of any director at a meeting shall constitute waiver of
notice of such meeting except as otherwise provided by law. Unless specifically
required by law, the Articles of Incorporation or these By-Laws, neither the
business to be transacted at nor the purpose of, any special meeting of the
Board of Directors need be specified in the notice or waiver of such meeting.
Section 4. Quorum. A quorum at all meetings of the Board of Directors shall
consist of a majority of the number of directors then fixed by these By-Laws,
but a smaller number may adjourn from time to time without further notice until
a quorum be secured. The act of the majority of directors present at a meeting
at which a quorum is present shall be the act of the Board of Directors, unless
the act of a greater number is required by the Statutes of this State or the
Articles of Incorporation or these By-Laws.
Section 5. Special Voting Requirements. A two-thirds (2/3) vote of the Board of
Directors shall be required to amend these By-Laws. A two thirds (2/3) vote of
the Board of Directors shall be required to set salaries, bonuses, dividends,
and directors' fees.
Sections 6. Vacancies. Any vacancy occurring in the Board of Directors may be
filled by the affirmative vote of a majority of the remaining directors even
though there be less than a quorum at any meeting of the Board of Directors
called to fill that vacancy. A director elected to fill a vacancy shall be
elected for the unexpired term of his predecessor in office, and shall hold such
office until his successor is duly elected and is qualified. Any directorship to
be filled by reason of an increase in the number of directors shall be filled by
election at an annual meeting, or at a special meeting of shareholders called
for that purpose.
Section 7. Fees and Expenses. Directors may receive such fees as may be
established by appropriate resolution of the Board of Directors for attendance
at such regular and special meetings of the board, and, in addition thereto,
shall receive reasonable traveling expense, if any is required, for attendance
at such meetings.
Section 8. Removal of Directors. The shareholders may, at a meeting called for
the express purpose of removing directors, remove the entire board or any lesser
number with or without cause by a vote of the holders of the majority of the
shares then entitled to vote at an election of directors.
Section 9. Participation by Electronic Means. Except as may be otherwise
provided by the Articles of Incorporation or Bylaws, members of the Board of
Directors or any committee designated by such Board may participate in a meeting
of the Board or committee by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other at the same time. Such participation shall constitute presence
in person at the meeting.
<PAGE> 7
Section 10. Presumption of Assent. A director of the corporation who is present
at a meeting of the Board of Directors at which action on any corporate matter
is taken shall be presumed to have assented to the action taken unless his
dissent shall be entered in the minutes of the meeting or unless he shall file
his written dissent to such action with the person acting as the Secretary of
the meeting before the adjournment thereof or shall forward such dissent by
registered mail to the Secretary of the corporation immediately after the
adjournment of the meeting. Such right to dissent shall not apply to a director
who voted in favor of such action.
ARTICLE V
Officers
Section 1. Officers-Elections. The elective officers of the Corporation shall be
a president, one or more vice presidents, a secretary, and a treasurer, who
shall be elected by the Board of Directors at its first meeting after the annual
meeting of shareholders. Unless removed in accordance with procedures
established by law and these By-Laws, the said officers shall serve until the
next succeeding annual meeting of the Board of Directors and until their
respective successors are elected and shall qualify. Any two offices, but not
more than two, may be held by the same person at the same time, except that one
person may not simultaneously hold the offices of president and vice president,
or that of president and secretary.
Section 2. Additional Officers. The board may elect or appoint a general
manager, one or more assistant secretaries and one or more assistant treasurers
as it may deem advisable, who shall hold office during the pleasure of the
board, and shall be paid such compensation as may be directed by the board.
Section 3. Powers. All officers of the Corporation shall, respectively, exercise
and perform such powers, duties, and functions as are generally exercised by the
like officers in corporation affairs and as may be directed by the Board of
Directors.
Section 4. Compensation. All officers of the Corporation may receive salaries or
other compensation if so ordered and fixed by the Board of Directors. The board
shall have authority to fix salaries in advance for stated periods or render the
same retroactive, as the board may deem advisable.
Section 5. Delegation of Duties. In the event of absence or inability of any
officer to act, the Board of Directors may delegate the powers or duties of such
officer to any other officer, director or person whom it may select.
Section 6. Removal of Officers. An officer or agent may be removed by a
two-thirds (2/3) vote of the Board of Directors at a meeting called for that
purpose whenever in its judgment the best interests of the Corporation will be
served thereby, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Election or appointment of an officer
or agent shall not of itself create contract rights.
<PAGE> 8
ARTICLE VI
Finance
Section 1. Reserve Funds. The Board of Directors, in its uncontrolled
discretion, may set aside, from time to time, out of the net profit or earned
surplus of the Corporation, such sum or sums as it deems expedient as a reserve
fund to meet contingencies, for equalizing dividends, for maintaining any
property of the Corporation, and for any other purpose.
Section 2. Banking. The monies of the Corporation shall be deposited in the name
of the Corporation in such bank or banks or trust company or trust companies, as
the Board of Directors shall designate, and may be drawn out only on checks
signed in the name of the Corporation by such person or persons as the Board of
Directors by appropriate resolution may direct. Notes and commercial paper, when
authorized by the board, shall be signed in the name of the Corporation by such
officer or officers or agent or agents as shall thereunto be authorized from
time to time by the Board of Directors.
Section 3. Fiscal Year. The fiscal year of the Corporation shall be determined
by an appropriate resolution of the Board of Directors.
Section 4. Dividends. Subject to the provisions of the Articles of Incorporation
and the laws of the State of Colorado, the Board of Directors may declare
dividends whenever, and in such amounts, as in the Board's opinion the condition
of the affairs of the corporation shall render such advisable.
ARTICLE VII
Contracts, Loans and Checks
Section 1. Execution of Contracts. Except as otherwise provided by statute or by
these Bylaws, the Board of Directors may authorize any officer 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 and, unless so authorized, no officer, agent or
employee shall have any power to bind the corporation for any purpose, except as
may be necessary to enable the corporation to carry on its normal and ordinary
course of business.
Section 2. Loans. No loans shall be contracted on behalf of the corporation and
no negotiable paper shall be issued in its name unless authorized by the Board
of Directors. When so authorized, any officer or agent of the corporation may
effect loans and advances at any time for the corporation from any bank, trust
company or institution, firm, corporation or individual. An agent so authorized
may make and deliver promissory notes or other evidence of indebtedness of the
corporation and may mortgage, pelage, hypothecate or transfer any real or
personal property held by the corporation as security for the payment of such
loans. Such authority, in the Board of Directors= discretion, may be general or
confined to specific instances.
<PAGE> 9
Section 3. Checks. Checks, notes, drafts, and demands for money or other
evidence of indebtedness issued in the name of the corporation shall be signed
by such person or persons as designated by the Board of Directors and in the
manner the Board of Directors prescribes.
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 such banks,
trust companies or Taher depositories as the Board of Directors may select.
ARTICLE VIII
Waiver of Notice
Any shareholder, officer or director may waive, in writing, any notice required
to be given by law or under these By-Laws, whether before or after the time
stated therein.
ARTICLE IX
Action by Directors or Shareholders
Without a Meeting
Nothing in these By-Laws contained shall be construed so as to prevent any
action required to be taken at a meeting of the directors or shareholders of
this Corporation, or any action which may be taken at a meeting of directors or
shareholders, to be taken without a meeting if a consent in writing, setting
forth the action so taken shall be signed by all of the directors or
shareholders entitled to vote with respect tot he subject matter thereof.
ARTICLE X
Amendments
These By-Laws may be altered, amended, or repealed at any regular
meeting of the Board of Directors or a special meeting of the Board of Directors
called for that purpose upon a proper motion and adequate vote.
The above Amended and Restated By-Laws approved and adopted by the
Board of Directors May 12th, 1998.
<PAGE> 1
Exhibit 4.1
NUMBER DEMEGEN, INC. SHARES
3158 INCORPORATED UNDER THE LAWS OF THE STATE OF COLORADO
AUTHORIZED CAPITAL 140,000,000 SHARES
100,000,000 COMMON SHARES, PAR VALUE $0.001 PER SHARE
40,000,000 PREFERRED SHARES, PAR VALUE $0.001 PER SHARE
-----------------------
CUSIP 24804S 10 6
-----------------------
SEE REVERSE
FOR CERTAIN DEFINITIONS
[SPECIMEN]
THIS CERTIFIES THAT
Is The Owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE $0.001 PAR VALUE COMMON STOCK OF
DEMEGEN, INC.
transferable only on the books of the Corporation by the holder hereof in
person or by attorney upon surrender of this certificate properly endorsed.
This certificate is not valid unless countersigned and registered by the
Transfer Agent and Registrar.
IN WITNESS WHEREOF, the Corporation has caused this certificate to be
signed by the facsimile signatures of its duly authorized officers and to be
sealed with the facsimile seal of the Corporation.
Dated:
/s/ DONALD A. GUTHRIE /s/ RICHARD D. EKSTROM
DONALD A. GUTHRIE, SECRETARY RICHARD D. EKSTROM, PRESIDENT
[DEMEGEN, INC. CORPORATE SEAL]
[COLORADO]
COUNTERSIGNED:
American Securities Transfer & Trust, Inc.
P.O. Box 1596
Denver, Colorado 80201
By _______________________________________________
Transfer Agent & Registrar Authorized Signature
<PAGE> 2
DEMEGEN, INC.
TRANSFER FEE: $20.00 PER NEW CERTIFICATE ISSUED
The Corporation is authorized to issue shares of more than one class,
namely 100,000,000 Common Shares and 40,000,000 Preferred Shares. The
Corporation will furnish to any shareholder upon request (addressed to the
attention of the Secretary of the Corporation) and without charge a full
statement of the designations, preferences, limitations and relative rights
of the shares of each class authorized to be issued by the Corporation and
of variations in the relative rights and preferences between the shares of
each series of the Preferred Shares of the Corporation insofar as any such
series has been fixed and determined, and a statement of the authority of the
Board of Directors of the Corporation to fix and determine the relative rights
and preferences of subsequent series of the Preferred Shares.
The following abbreviations when used in the inscription on the face of
this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM -as tenants in common UNIF GIFT MIN ACT- Custodian
TEN ENT -as tenants by the entities -----------------
JT TEN -as joint tenants with right of (Cust) (Minor)
survivorship and not as tenants under Uniform Gifts to Minors
in common Act
----------------------
(State)
Additional abbreviations may also be used though not in the above list.
_______________________________________________________________________________
_______________________________________________________________________________
For Value Received, _______________________________________ hereby sell, assign
and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
_______________________________________
_______________________________________
[SPECIMEN]
_______________________________________________________________________________
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS,
INCLUDING ZIP CODE, OF ASSIGNEE)
_______________________________________________________________________________
________________________________________________________________________ Shares
of the Common Stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint ___________________________ attorney-in-fact
to transfer the said stock on the books of the within-named Corporation, with
full power of substitution in the premises.
Dated ________________________
X ____________________________________________
X ____________________________________________
NOTICE: THE SIGNATURE(S) TO THIS ASSIGNMENT
MUST CORRESPOND WITH THE NAME(S)
AS WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY PARTICULAR,
WITHOUT ALTERATION OR ENLARGEMENT
OR ANY CHANGE WHATSOEVER.
Signature(s) Guaranteed:
______________________________________________
The signature(s) must be guaranteed by an eligible guarantor institution
(Banks, Stockbrokers, Savings and Loan Associations and Credit Unions with
membership in an approved signature guarantee Medallion Program), pursuant to
S.E.C. Rule 17Ad-15.
<PAGE> 1
Exhibit 4.2
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is entered into as of the 15th
day of June, 1998 by and among Demeter Biotechnologies, Ltd., a Colorado
corporation (the "Company"); the persons listed as Principal Shareholders on the
signature pages hereto (the "Principal Shareholders"); and CEO Venture Fund III
(the "Investor").
In consideration of the mutual representations, warranties,
covenants and conditions set forth in this Agreement, and for other good and
valuable consideration, the parties to this Agreement, intending to be legally
bound hereby, mutually agree as follows:
1. Purchase and Sale of Securities.
1.1 Sale and Issuance.
(a) The Board of Directors of the Company shall, prior to the
Closing (as defined below), adopt resolutions creating a series of Convertible
Preferred Stock having the terms set forth in Exhibit A hereto (the "Preferred
Stock").
(b) Subject to the terms and conditions of this Agreement, the
Investor agrees to purchase at the Closing, and the Company agrees to sell and
issue to the Investor at the Closing, 4,444,444 shares of Preferred Stock and a
Warrant for the purchase of 4,965,556 shares of the Company's common stock, par
value $.001 per share (the "Common Stock") at an exercise price of $0.45 per
share (the "Warrant") in exchange for payment by the Investor of the Purchase
Price, as herein defined. At Closing, the Company shall deliver to the Investor
stock certificates representing the shares of Preferred Stock and the Warrant
(hereafter sometimes referred to collectively as the "Securities") that the
Investor is purchasing against delivery to the Company by the Investor of a
check in the amount of Two Million Dollars ($2,000,000) (the "Purchase Price").
The Warrant shall have the terms and be subject to the conditions set forth in
the form attached hereto as Exhibit B and the Preferred Stock shall have the
rights, preferences, privileges and restrictions set forth in Exhibit A hereto.
1.2 Closing.
The closing on the purchase and sale of the Securities shall
take place at the offices of Buchanan Ingersoll Professional Corporation, 301
Grant Street, 20th Floor, Pittsburgh, Pennsylvania 15219 at 10:00 a.m. on June
15, 1998, or at such other time, date or place as the Company and the Investor
shall mutually agree (which time, date and place is referred to in this
Agreement as the "Closing"). At the Closing each of the parties to the
Shareholders' Agreement (as defined in Section 5.5) also shall execute and
deliver said agreement.
<PAGE> 2
2. Representations and Warranties of the Company and Principal Shareholders.
Subject to and except as disclosed by the Schedule of Exceptions set
forth on Exhibit C to this Agreement, the Company and, with respect to the
representation in Section 2.31, the Principal Shareholders, represent and
warrant to the Investor that:
2.1 Organization and Standing.
The Company is a corporation duly organized, validly existing
and in good standing under the laws of the State of Colorado, has all requisite
corporate power and authority to own its properties and assets, to carry on its
business as now conducted and as proposed to be conducted and to execute,
deliver and perform this Agreement and the Shareholders' Agreement. The Company
is duly qualified as a foreign corporation and is in good standing in all other
jurisdictions in which such qualification is required.
True, complete and accurate copies of the Company's Articles
of Incorporation and By-laws, as presently in effect, have been delivered to
counsel for the Investor. The copies of the minute book of the Company furnished
to the Investor contain minutes of all meetings of directors and shareholders
and all action by written consent without a meeting by the directors and
shareholders since the date of incorporation and accurately reflect all actions
taken by the directors (and any committee thereof) and shareholders with respect
to all transactions referred to in such minutes. Exhibit C lists the
jurisdictions in which the Company is qualified as a foreign corporation.
2.2 Capitalization.
After giving effect to the transactions contemplated by this
Agreement and immediately thereafter, the authorized capital of the Company
shall consist of:
(a) Preferred Stock: An aggregate of 40,000,000 shares of
Preferred Stock, par value $.001 per share of which 4,444,444 shares shall be
validly issued and outstanding. The rights, privileges and preferences of the
Preferred Stock will be as stated in Exhibit A hereto.
(b) Common Stock: An aggregate of 100,000,000 shares of Common
Stock, of which 25,291,899 shares (provided that such number may be increased to
the extent options described below are exercised after the date hereof) shall be
validly issued and outstanding, fully paid and nonassessable, and shall have
been issued in compliance with all applicable federal and state securities laws.
(c) Warrant: A Warrant to purchase up to 4,965,556 shares of
Common Stock.
The Company has reserved 8,520,000 shares of Common Stock for
issuance pursuant to its Employee Stock Plans, as herein defined. The Company
has reserved 4,444,444 shares of Common Stock for issuance upon conversion of
the Preferred Stock and 4,965,556 shares of Common Stock for issuance upon
exercise of the Warrant. There are no other options,
2
<PAGE> 3
warrants, conversion privileges, preemptive rights or other rights presently
outstanding to purchase or receive any of the capital stock of the Company. As
used herein, "Employee Stock Plans" shall mean those plans designated as such on
Exhibit C hereto and such additional employee stock option or bonus plans
adopted from time to time by the Board of Directors.
The Schedule of Security Holders set forth on Exhibit C is a
complete and correct list of the record owners and beneficial owners of all the
Company's outstanding securities (including the amount and type of security held
by each such owner) as of the date hereof. Neither the Company nor any Principal
Shareholder is a party or subject to any agreement or understanding, nor, to the
best knowledge of the Company is there any agreement or understanding between
any persons that affects or relates to the voting or giving of written consents
with respect to any security or the voting by a director of the Company.
2.3 Subsidiaries.
The Company does not own, control or have an interest in,
directly or indirectly, any other corporation, association, limited liability
company, joint venture, partnership or other business entity.
2.4 Authorization.
All corporate action on the part of the Company and its
officers, directors and shareholders necessary for the authorization, execution,
delivery and performance of all obligations of the Company under this Agreement
and the Shareholders' Agreement and for the authorization, issuance and delivery
of the Securities being sold under this Agreement (and the authorization,
reservation for issuance and delivery of the Common Stock issuable upon
conversion of all Preferred Stock and the exercise of the Warrant) has been
taken or will be taken prior to the Closing. This Agreement and the
Shareholders' Agreement, when executed and delivered, each shall constitute a
valid and legally binding obligation of the Company and Principal Shareholders,
enforceable in accordance with its terms.
2.5 Validity.
The Preferred Stock and the Warrant that are being purchased
hereunder, when issued, sold and delivered in accordance with the terms of this
Agreement, will have been duly and validly issued, fully paid and nonassessable,
will have been issued in compliance with all applicable state and federal
securities laws, and will be free of any restrictions against transfer other
than those set forth in the Shareholders' Agreement. The Common Stock issuable
upon conversion of the Preferred Stock and upon exercise of the Warrant has been
duly and validly reserved for issuance and, upon issuance in accordance with the
conversion provisions of the Preferred Stock and the exercise provisions of the
Warrant, will have been duly and validly issued, fully paid and nonassessable,
in compliance with all applicable federal and state securities laws and free of
any restrictions against transfer other than those set forth in the
Shareholders' Agreement. Neither the offer or sale of the Securities nor the
issuance of the Preferred Stock, the Warrant or the Common Stock pursuant
thereto is subject to any preemptive right of shareholders of the Company which
has not been waived.
3
<PAGE> 4
2.6 Financial Statements.
(a) The Company has furnished the Investor with (i) an audited
balance sheet and related statement of operations, shareholders' equity and cash
flows for the fiscal years ended September 30, 1997, 1996 and 1995 and (ii) an
unaudited balance sheet (the "Balance Sheet") and related statement of
operations, shareholders' equity and cash flows for the six months ended March
31, 1998 (collectively, the "Financial Statements"). The Financial Statements
are true and correct in all material respects, were prepared in accordance with
generally accepted accounting principles consistently applied ("GAAP") and
present fairly the financial condition of the Company as of their respective
dates and the results of its operations for the periods then ended. The Company
maintains a standard system of accounting established and administered in
accordance with GAAP.
(b) Except as fully provided for and reflected in the
Financial Statements, the Company has no liabilities, secured or unsecured,
absolute or contingent, except those arising after the date of the Financial
Statements in the normal course of business, none of which are unusual in type,
scope or amount.
(c) The accounts and notes receivable reflected on the Balance
Sheet are free and clear of any claim, suit, security interest, pledge,
mortgage, charge or lien or encumbrance of any kind or nature whatsoever (a
"Lien"), and have been collected or are fully collectable without setoff, third
party collection efforts or suit, and the subsequently created accounts and
notes receivable of the Company from March 31, 1998 to the date of the Closing
will be free and clear of any Lien, and will be good and fully collectible in
the normal course of business without setoff, third party collection efforts or
suit.
2.7 Changes.
(a) Since the date of the Balance Sheet, there has not been
any event or condition of any type that has materially and adversely affected
the Company's business, prospects, condition, affairs, operations, properties or
assets.
(b) Except as expressly contemplated by this Agreement or as
set forth on Exhibit C, since the date of the Balance Sheet, the Company has
not:
(i) issued any notes, bonds or other debt securities
or any capital stock or other equity securities or any securities
convertible, exchangeable or exercisable into any capital stock or
other equity securities;
(ii) borrowed any amount or incurred or become
subject to any liabilities, except current liabilities incurred in the
ordinary course of business and liabilities under contracts entered
into in the ordinary course of business;
(iii) discharged or satisfied any Lien or paid any
obligation or liability, other than current liabilities paid in the
ordinary course of business;
4
<PAGE> 5
(iv) declared or made any payment or distribution of
cash or other property to its shareholders with respect to its capital
stock or other equity securities or purchased or redeemed any shares of
its capital stock or other equity securities (including, without
limitation, any warrants, options or other rights to acquire its
capital stock or other equity securities);
(v) mortgaged or pledged any of its properties or
assets or subjected them to any Lien, except Liens for current property
taxes not yet due and payable;
(vi) sold, assigned or transferred any of its
tangible assets, except in the ordinary course of business, or canceled
any debts or claims, except in the ordinary course of business;
(vii) sold, assigned or transferred any patents or
patent applications, trademarks, service marks, trade names, corporate
names, copyrights or copyright registrations, trade secrets or other
intangible assets, or disclosed any proprietary confidential
information to any person;
(viii) suffered any extraordinary losses or waived
any rights material to the Company, whether or not in the ordinary
course of business or consistent with past practice;
(ix) made capital expenditures or commitments
therefor that aggregate in excess of $10,000;
(x) made any loans or advances to, guarantees for the
benefit of, or any investments in, any persons in excess of $10,000 in
the aggregate;
(xi) made any charitable contributions or pledges in
excess of $5,000 in the aggregate;
(xii) suffered any damage, destruction or casualty
loss exceeding in the aggregate $10,000, whether or not covered by
insurance; or
(xiii) entered into any other transaction other than
in the ordinary course of business or entered into any other
transaction, whether or not in the ordinary course of business,
material to the Company.
2.8 Title to Property and Assets; Liabilities.
Except (a) as reflected in the Financial Statements or in the
notes thereto, (b) for Liens for current taxes not yet delinquent, (c) for Liens
imposed by law and incurred in the ordinary course of business for obligations
not yet due to carriers, warehousemen, laborers, materialmen and the like, (d)
for Liens in respect of pledges or deposits under workers' compensation laws or
similar legislation, or (e) for minor defects in title, none of which,
individually or in the aggregate, materially interferes with the use of such
property, the Company
5
<PAGE> 6
has good and marketable title to its property and assets free and clear of all
Liens. With respect to the property and assets it leases, the Company is in
compliance with such leases and holds a valid leasehold interest therein, free
of any Liens, subject to clauses (b)-(e) above. The inventory of the Company is
in good and marketable condition, does not include any obsolete items, and is
salable in the ordinary course of business at currently applicable prices.
2.9 Governmental Consents.
All consents, approvals, orders or authorizations of, or
registrations, qualifications, designations, declarations or filings with, any
federal or state governmental authority on the part of the Company required in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated by this Agreement are set
forth on Exhibit C hereto, shall have been obtained prior to, and be effective
as of, the Closing, except that any notices of sale required to be filed with
the Securities and Exchange Commission pursuant to Regulation D promulgated
under the Securities Act of 1933 or any state securities law authority pursuant
to applicable blue sky laws may be filed within the applicable periods therefor.
2.10 Compliance with Other Instruments.
The Company is not in violation of or in default under any
provisions of its Articles of Incorporation, Restated Articles or By-laws as
amended and in effect on and as of the Closing, or, in any material respect, of
any provision of any mortgage, indenture, agreement, instrument or contract to
which it is a party or by which it is bound, or of any provision of any federal
or state judgment, writ, decree, order, statute, rule or governmental regulation
applicable to the Company. The execution, delivery and performance of this
Agreement and the Shareholders' Agreement by the Company and the Principal
Shareholders, and the consummation of the transactions contemplated hereby and
thereby will not result in any such violation, nor be in conflict with or
constitute, with or without the passage of time and giving of notice, a default
under any such provision, nor result in the creation or imposition of any Lien
pursuant to any such provision.
2.11 Litigation.
There is no action, suit, proceeding, claim, order or
investigation pending or threatened against the Company or any of its employees
before any court or administrative agency (or any basis therefor known to the
Company) that might result, either individually or in the aggregate, in any
material adverse change in the business, prospects, condition, affairs,
operation, properties or assets of the Company, or in any material liability on
the part of the Company. The Company is not subject to any arbitration
proceedings under collective bargaining agreements or otherwise, or to the best
of the Company's knowledge, any governmental investigations or inquiries
(including inquiries as to the qualification to hold or receive any license or
permit) which are reasonably expected to have a material adverse effect on the
Company and, to the best of the Company's knowledge, there is no basis for any
of the foregoing. The Company is not subject to any judgment, order or decree of
any court or other governmental agency which is reasonably expected to have a
material adverse effect on the
6
<PAGE> 7
Company. The foregoing includes, without limiting its generality, actions
pending or threatened (or any basis therefor known to the Company) involving the
prior employment of any of the Company's employees or their use in connection
with the Company's business of any information or techniques allegedly
proprietary to any of their former employers. There is no action, suit,
proceeding, claim or investigation by the Company currently pending or which the
Company intends to initiate.
2.12 Intellectual Property.
Attached hereto on Exhibit C is a true and correct schedule
which describes all of the patents (including all reissues, divisions,
continuations and extensions thereof), applications for patents, patent
disclosures docketed, inventions, improvements, trade secrets, trademarks,
trademark applications, trade names, brand names, copyrights, know-how,
processes and proprietary computer software or similar property (collectively,
the "Intellectual Property") owned by the Company, and all licenses, franchises,
permits, authorizations, agreements and arrangements that concern the same or
that concern like items owned by others and used by the Company. The Company has
sufficient title and ownership of or possesses the sufficient legal right to use
without payment to any other person, all Intellectual Property necessary or
desirable for the lawful conduct of its business as now conducted and as
proposed to be conducted, without any infringement of or conflict with the
rights of others. The Company has no knowledge of, nor has it received any
notice of infringement of or any conflict with, the asserted rights of others
with respect to any of said intellectual property rights, or any other
intellectual property rights used by the Company in its business. All technical
information developed by and belonging to the Company that has not been patented
has been kept confidential. The Company has not granted any options, licenses or
agreements of any kind relating to the foregoing and has not granted or assigned
to any other person or entity any right to manufacture, have manufactured,
process or have processed or sell the products or proposed products of the
Company. All subcontractors have assigned to the Company, in writing, all right,
title and interest in and to the work that they produced for the Company.
The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order of
any court or administrative agency, that would interfere with the use of his or
her best efforts to promote the interests of the Company or that would conflict
with the Company's business as proposed to be conducted. Neither the execution
nor the delivery of this Agreement or the Shareholders' Agreement, nor the
carrying on of the Company's business by the employees of the Company, nor the
conduct of the Company's business as proposed, will, to the Company's knowledge,
conflict with or result in a breach of the terms, conditions or provisions of,
or constitute a default under, any contract, covenant or instrument under which
any of such employees is now obligated. The Company does not believe it is or
will be necessary to utilize any inventions of any of its employees (or people
it currently intends to hire) made prior to their employment by the Company.
7
<PAGE> 8
2.13 Taxes.
The Company has accurately prepared and timely and properly
filed all tax returns that are required to be filed by it by any jurisdiction to
which it is or has been subject, and has timely paid or made provision for the
payment in full of all taxes, and any penalties and interest, that have become
due pursuant to such returns and periods. All such returns are true, correct and
complete in all material respects. The Company has made or caused to be made all
withholdings of taxes required to be made by it and such withholdings have
either been paid to the appropriate governmental agency or set aside in
appropriate accounts for such purpose. The Company has otherwise satisfied, in
all material respects, all applicable laws and agreements with respect to the
payment of taxes and the filing of tax returns. The United States income tax
returns of the Company have not been audited by the Internal Revenue Service.
The Company has not elected to be treated as a Subchapter S corporation or a
collapsible corporation pursuant to Section 341(f) or Section 1362(a) of the
Internal Revenue Code of 1986, as amended (the "Code"). No deficiency assessment
or proposed adjustment of the Company's United States income tax or state or
municipal taxes is pending and the Company has no knowledge of any proposed
liability for any tax to be imposed upon its properties or assets for which
there is not an adequate reserve reflected in the Financial Statements.
2.14 Employee Agreements and Plans.
The Company is not now, nor has it been, a party to or
obligated to contribute to any employee benefit plan as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974 ("ERISA") (an "Employee
Benefit Plan"), guaranteed annual income plan, fund or arrangement, or any
incentive, bonus, profit-sharing, deferred compensation, stock option or
purchase plan or agreement or arrangement, or any employment or consulting
agreement, or any collective bargaining agreement, or any other agreement, plan
or arrangement similar to or in the nature of the foregoing, oral or written.
Neither the Company nor any of its agents, representatives or employees has
committed any unfair labor practice as defined in the National Labor Relations
Act of 1947, as amended, or in any applicable state labor relations act, and
there is not pending or threatened any charge or complaint against the Company
by the National Labor Relations Board or any state labor relations board or
commissioner or any representative thereof. The Company does not have any
agreements or arrangements with persons titled as independent contractors or
consultants, as a result of which, by virtue of the control exercised by the
Company, the type of work performed by the persons or any other circumstances,
said persons could reasonably be deemed to be employees of the Company. The
Company does not have any employment contracts with any of its employees not
terminable at will and does not have any collective bargaining agreements
covering any of its employees. There is no strike, labor dispute or union
organization activities pending or threatened between the Company and its
employees.
2.15 Insurance.
The Company has outstanding valid and enforceable insurance
policies (including, without limitation, fire and casualty, workers'
compensation, business interruption, errors and omissions and liability
insurance), with extended coverage, sufficient in amount
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(subject to reasonable deductibles) to allow it to replace any of its properties
that might be damaged or destroyed, and to cover all other risks of loss or
liability customarily insured against by companies similarly situated and
against risks required to comply with laws and customarily maintained by
organizations similarly situated.
2.16 Registration Rights.
Except as provided for in the Shareholders' Agreement or on
Exhibit C, the Company is not under any obligation and has not granted any
rights to register under the Securities Act of 1933, as amended (the "1933
Act"), any of its presently outstanding securities or any securities into which
such securities may be converted or which may be subsequently issued.
2.17 Physical Condition of Operating Assets.
All the owned and leased real estate of the Company and the
structures erected thereon and all the owned and leased tangible personal
property of the Company are in good repair and condition and are suitable and
sufficient for the conduct of the present business of the Company.
2.18 Product and Service Warranties.
Included as part of Exhibit C hereto are (i) all the product
warranty claims made against the Company, (ii) the cost of satisfying such
claims, and (iii) the cost of servicing products and making adjustments or
providing replacements with respect to returned products. The Company is not
aware of any additional pending or threatened product warranty claims or any
basis upon which product warranty claims could be based. There are no design or
other defects that could give rise to future product warranty claims. Adequate
reserves have been provided for by the Company to cover its product warranty
liability.
2.19 Customers.
The Company has a good and ongoing relationship with each of
its customers, and has no reason to believe that there will be any adverse
change in any such relationship. Exhibit C contains a complete and accurate list
of all customers whose purchases from the Company exceeded 5% of the revenues of
the Company for the fiscal year ended September 30, 1997 and the six month
period ended March 31, 1998.
2.20 Customer and Vendor Contracts.
The Company is not in default under any of its contracts with
customers (including entities for which the Company acts as subcontractor) or
its vendors, and no claim of default under any said contracts has been asserted
against the Company. The Company has received no material customer complaints
concerning alleged defects in its products (or design thereof). No condition or
state of facts exists which, with notice or the passage of time or both, would
constitute a default under any of said contracts, as to time or manner of
performance, or as
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to warranties thereunder, or otherwise. Exhibit C contains a complete and
accurate list of all contracts and accurate copies have been provided to the
Investor.
2.21 Marketing Rights; Export of Products and Technologies.
The Company has not granted rights to manufacture, produce,
assemble, license, market or sell its products to any other person and is not
bound by any agreement that affects the Company's exclusive right to develop,
manufacture, assemble, distribute, market or sell its products. There are no
United States government restrictions prohibiting or, except for export
licensing requirements that the Company has fulfilled or satisfied to date,
otherwise affecting the Company in exporting its existing products and know-how
to the foreign countries to which such products and know-how are currently being
exported. A list of the products exported and each country to which they are
exported is contained in Exhibit C.
2.22 Personnel Contracts.
Exhibit C contains a list of all confidentiality agreements
and employment agreements between the Company and any of its employees, copies
of the forms of which have been delivered to the Investor.
2.23 Insider Transactions.
None of the Company's officers, shareholders, directors or
affiliates owns an interest in any (or acts as a sole proprietorship or as a
partner in a partnership that is a) customer, competitor, supplier or landlord
to the Company, except for an ownership of less than 2% of the outstanding
equity securities of any publicly held corporation. The Company has no
outstanding debt due any employee, director, shareholder, officer or affiliate
of any officer of the Company, and no employee, director, shareholder, officer
or affiliate thereof has any outstanding debt due the Company.
2.24 Other Agreements, Permits.
(a) There are no agreements, understandings, instruments,
leases, commitments, contracts or proposed transactions (collectively,
"Contracts") between the Company and any of its officers, directors,
shareholders, affiliates, or any affiliate thereof. For purposes of the
foregoing, an "affiliate" shall mean a person that directly or indirectly
through one or more intermediaries, controls or is controlled by, or is under
common control with, the person specified.
(b) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or series
of its capital stock, (ii) incurred any indebtedness for money borrowed or
incurred any other liabilities individually in excess of $2,000 or in excess of
$10,000 in the aggregate other than in the ordinary course of the Company's
business consistent with past practice, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than in
the ordinary course of business.
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(c) The Company is not a party to, nor is it bound by or
subject to, any Contracts (i) with any labor union; (ii) which restrict the
Company from freely engaging in any business or competing anywhere; or (iii)
otherwise which are material to the Company.
(d) Except for the Shareholders' Agreement and except as set
forth on Exhibit C, the Company is not a party to or aware of any voting trust
or agreement, stockholders agreement, pledge agreement, buy-sell agreement or
first refusal or preemptive rights agreement relating to securities of the
Company.
(e) The Company has all franchises, permits, licenses, and
similar authority necessary for the conduct of its business as now conducted and
as proposed to be conducted and is not in default as to any of the foregoing.
2.25 Environmental Matters.
The Company (i) is in compliance with all applicable
Environmental Laws, and has obtained all permits and other authorizations needed
to operate its facilities, (ii) has not violated any applicable Environmental
Law, and (iii) is unaware of any present requirements of any applicable
Environmental Law which is due to be imposed upon it which will increase its
cost of complying with the Environmental Laws. All past on-site generation,
treatment, storage and disposal of Waste, including Hazardous Waste, by the
Company and its predecessors have been done in compliance with the currently
applicable Environmental Laws, and all past off-site treatment, storage and
disposal of Waste, including Hazardous Waste, generated by the Company and its
predecessors have been done in compliance with the currently applicable
Environmental Laws. As used in this Agreement, the terms (i) "Environmental
Laws" include but are not limited to any federal, state or local law, statute,
charter or ordinance, and any rule, regulation, binding interpretation, binding
policy, permit, order, court order or consent decree issued pursuant to any of
the foregoing, which pertains to, governs or otherwise regulates any of the
following activities, including without limitation (a) the emission, discharge,
release or spilling of any substance into the air, surface water, groundwater,
soil or substrata; (b) the manufacturing, processing, sale, generation,
treatment, storage, disposal labeling or other management of any Waste,
Hazardous Substance or Hazardous Waste, and (ii) "Waste," "Hazardous Substance,"
and "Hazardous Waste" include any substance defined as such by any applicable
Environmental Law.
2.26 Compliance with Other Laws.
The Company has complied in all material respects with all
laws, statutes, rules, regulations, orders and engineering standards of, and has
secured all necessary permits and authorizations and licenses issued by,
federal, state, local and foreign agencies and authorities, applicable to its
business, properties and operations (including but not limited to those
concerned with control of foreign exchange, energy, environmental protection and
pollution control, franchising and other distribution arrangements, anti-trust
and trade regulation, civil rights, labor and discrimination, safety and health,
zoning and land use), a complete list of all such permits, authorizations and
licenses being included on Exhibit C (true and correct and complete copies of
which have heretofore been delivered to the Investor, and true and correct and
complete copies of
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all such permits, authorizations and licenses which are issued from the date
hereof through the Closing Date to be delivered on that date to the Investor).
2.27 Small Business Matters.
The Company, together with its "affiliates" (as that term is
defined in Title 13, Code of Federal Regulations, Section 121.103), is a "Small
Business" within the meaning of the Small Business Investment Act and the
regulations thereunder, including Title 13, Code of Federal Regulations,
Sections 107.50, 107.700 and 121.301(c) (the "SBIC Act"). The information
regarding the Company and its affiliates set forth in the Small Business
Administration Form 355, Form 652 and Parts A and B of Form 1031 to be delivered
at the Closing is or will be accurate and complete. Copies of such forms shall
have been completed and executed by the Company and delivered to the Investor at
the Closing together with a written statement of the Company regarding its
planned use of the proceeds from the sale of the Preferred Stock and the
Warrant. The Company: (i) does not presently engage in, and shall not hereafter
engage in, any activities, or (ii) shall not use directly or indirectly the
proceeds from the sale of the Preferred Stock or the Warrant for any purpose,
which in either case, a SBIC is prohibited from engaging in or providing funds
for by the SBIC Act and the regulations thereunder (including Title 13, Code of
Federal Regulations, Section 107.720).
2.28 Qualified Small Business.
The Company qualifies as a "Qualified Small Business" (as that
term is defined in Section 1202(d) of the Code) and covenants that so long as
its shares of capital stock are held by the Purchasers (or a transferee in whose
hands the shares are eligible to qualify as Qualified Small Business Stock (as
that term is defined in Section 1202(c) or the Code)), it will use its
reasonable best efforts to cause the shares to qualify as Qualified Small
Business Stock, as so defined.
2.29 Employee Confidentiality Agreements.
Each founder, officer and key employee of the Company has, or
prior to Closing shall have, executed an Employee Non-Disclosure Agreement in
substantially the form attached hereto as Exhibit E or such other form as is
reasonably acceptable to the Investor.
2.30 Misleading Statements; Business Plan.
The Company represents to the Investor that, and the Principal
Shareholders represent to the Company that to their knowledge, no representation
or warranty by the Company in this Agreement or in any Schedule or Exhibit
hereto, or in any written statement or certificate furnished or to be furnished
to the Investor pursuant to this Agreement or in connection with the
transactions contemplated by this Agreement contains or will contain any untrue
statement of a material fact, or omits or will omit to state a material fact,
necessary to make the statements made not misleading. There is no fact that the
Company or the Principal Shareholders, has not disclosed to the Investor in
writing and of which the Company or any Principal Shareholder is aware which
materially and adversely affects or presents a reasonable likelihood that it
could
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materially and adversely affect the business prospects, financial condition,
operations, property or affairs of the Company. The materials presented in the
Company's Business Plan, dated August, 1997, which has been presented to the
Investor, have been prepared in good faith by the Company to describe the
Company's present and proposed products, operations and projected growth, and
there are no misleading statements therein or material omissions therefrom
necessary to make the description of the Company and its business not
misleading. As of the date hereof, no facts have come to the attention of the
Company or the Principal Shareholders that would require the Company to revise
or amplify the assumptions underlying the projections and other estimates or
conclusions derived therefrom in such Business Plan.
3. Representations and Warranties of the Investor.
The Investor hereby represents and warrants to the Company as follows:
3.1 Authority.
The Investor has all requisite power and authority to enter
into this Agreement and to consummate the transactions contemplated hereby. This
Agreement, when executed and delivered by the Investor, will constitute a valid
and legally binding obligation of the Investor, enforceable against it in
accordance with its terms.
3.2 Investment Representations.
(a) The Investor understands that the Securities are not, and
any Common Stock acquired on the exercise or conversion thereof at the time of
issuance may not be, registered under the 1933 Act in reliance on an exemption
from registration under the 1933 Act pursuant to Section 4(2) thereof for the
sale contemplated by this Agreement and the issuance of Securities hereunder.
(b) The Investor represents that it is experienced in
evaluating and investing in high technology companies such as the Company, is
able to fend for itself in the transactions contemplated by this Agreement, has
such knowledge and experience in financial and business matters as to be capable
of evaluating the merits and risks of its investment, and can bear the economic
risks of its investment.
(c) The Investor understands that the Securities (and any
Common or Preferred Stock issued on exercise or conversion thereof) may not be
sold, transferred or otherwise disposed of without registration under the 1933
Act or an exemption therefrom, and that in the absence of an effective
registration statement covering the Securities (or the Common or Preferred Stock
issued on exercise or conversion thereof) or an available exemption from
registration under the 1933 Act, the Securities (and any Common or Preferred
Stock issued on exercise or conversion thereof) must be held indefinitely.
(d) The Investor is an Institutional Investor, as defined in
the Pennsylvania Securities Act of 1972, as amended (the "1972 Act").
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4. Additional Legends; Right to Withdraw.
The Investor acknowledges as follows:
(a) The Securities (and any Common or Preferred Stock acquired
upon the exercise or conversion thereof) must bear the following legend:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED
OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF
COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS
NOT REQUIRED.
(b) Said Securities (and any Common or Preferred Stock issued
upon exercise or conversion thereof) shall also bear any legend required by any
applicable state securities laws.
(c) The Investor has been informed of its right to withdraw
from this Agreement pursuant to Section 207(m) of the Pennsylvania Securities
Act of 1972, as amended as follows:
YOU MAY ELECT, WITHIN TWO BUSINESS DAYS AFTER THE RECEIPT OF
THIS AGREEMENT FROM DEMETER BIOTECHNOLOGIES, LTD., TO WITHDRAW
FROM THIS AGREEMENT AND RECEIVE A FULL REFUND OF ALL MONIES
PAID BY YOU. YOUR WITHDRAWAL WILL BE WITHOUT ANY FURTHER
LIABILITY TO ANY PERSON. TO ACCOMPLISH THIS WITHDRAWAL, YOU
NEED ONLY SEND A LETTER OR TELEGRAM TO DEMETER
BIOTECHNOLOGIES, LTD., C/O RICHARD EKSTROM, PRESIDENT, 5049
AMBERSON PLACE, PITTSBURGH, PENNSYLVANIA 15232, INDICATING
YOUR INTENTION TO WITHDRAW. SUCH LETTER OR TELEGRAM SHOULD BE
SENT AND POSTMARKED PRIOR TO THE END OF THE AFOREMENTIONED
SECOND DAY. IF YOU ARE SENDING A LETTER, IT IS PRUDENT TO SEND
IT BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE THAT
IT IS RECEIVED AND ALSO TO EVIDENCE THE TIME IT WAS MAILED.
SHOULD YOU MAKE THE REQUEST ORALLY, YOU SHOULD ASK FOR WRITTEN
CONFIRMATION THAT YOUR REQUEST HAS BEEN RECEIVED.
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5. Conditions to Investor's Obligations at Closing.
The obligations of the Investor under Section 1 of this Agreement are
subject to the fulfillment on or before Closing of each of the conditions
contained in Sections 5.1 through 5.13, any of which may be waived by the
Investor.
5.1 Representations and Warranties.
The representations and warranties of the Company and the
Principal Shareholders contained in this Agreement shall be true on and as of
Closing with the same force and effect as if they had been made on and as of the
date of Closing.
5.2 Performance.
The Company shall have performed and complied with all
agreements, conditions and covenants contained in this Agreement required to be
performed or complied with by it on or before Closing.
5.3 Qualifications.
All authorizations, approvals or permits, if any, of any
governmental authority or regulatory body of the United States or of any state
that are required in connection with the lawful issuance and sale of the
Securities pursuant to this Agreement shall have been duly obtained and shall be
effective on and as of Closing.
5.4 Compliance Certificate.
There shall have been delivered to the Investor a certificate,
dated as of the Closing, signed by the Company's President or a Vice President,
certifying that the conditions specified in this Section 5 as to Closing have
been fulfilled.
5.5 Shareholders' Agreement.
A Shareholders' Agreement in substantially the form attached
as Exhibit D (the "Shareholders' Agreement") shall have been duly executed and
delivered by all of the parties thereto.
5.6 No Litigation.
No action, suit, proceeding or investigation shall have been
instituted or threatened to set aside the transactions provided for herein or to
enjoin or prevent the consummation of the transactions contemplated hereby.
5.7 Terms of Preferred.
The terms of the Preferred Stock attached hereto as Exhibit A
shall have been duly authorized by all necessary director action, shall have
been filed with the Secretary of State
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of Colorado as an amendment to the Articles of Incorporation of the Company in
accordance with Section 7-106-102(4) of the Colorado Business Corporation Act
and shall be in full force and effect and shall not have been amended or
modified.
5.8 Stock Certificates and Warrant.
The Company shall have delivered to the Investor the Stock
Certificates and Warrant referred to in Section 1, all in form and substance
satisfactory to the Investor and sufficient to transfer to and vest in the
Investor good and marketable title to the Securities, free and clear of any
Lien.
5.9 Opinion of Counsel.
The Investor shall have received from Cabraja, Moravitz &
Silverberg, counsel for the Company, an opinion dated as of Closing, in form and
substance satisfactory to the Investor and its counsel. The opinion rendered in
connection with the Closing shall be to the effect that:
(a) The Company is a corporation duly organized, validly
existing, and in good standing under the laws of the State of Colorado. The
Company has the requisite corporate power and authority to own, lease, license,
use and operate its property and assets and to carry on its business as now
conducted and as proposed to be conducted, and it is qualified as a foreign
corporation and is in good standing in all other jurisdictions in which such
qualification is required.
(b) The authorized capital of the Company consists of:
(i) Preferred Stock: 40,000,000 shares of Preferred
Stock, of which 4,444,444 have been duly authorized, issued and
delivered, are validly issued and outstanding, fully paid and
nonassessable and were issued in compliance with, or pursuant to
transactions exempt from, the registration or qualification
requirements of all applicable federal and state securities laws. The
rights, privileges and preferences of the Preferred Stock are as stated
in Exhibit A to the Agreement.
(ii) Common Stock: 100,000,000 shares of Common
Stock, of which 25,291,899 shares have been duly authorized, issued and
delivered, are validly issued and outstanding, fully paid and
nonassessable, and were issued in compliance with, or pursuant to
transactions exempt from, the registration or qualification
requirements of all applicable federal and state securities laws.
(iii) Warrant: A Warrant to purchase up to 4,965,556
shares of Common Stock.
All of such issued and outstanding shares of Common Stock and such
Warrant have been duly authorized and validly issued and are fully paid and
nonassessable and free of any
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preemptive or similar rights, and are owned and held beneficially and of record,
by the persons and in the amounts set forth on Exhibit C.
The Company has reserved 4,444,444 shares of Common Stock for issuance
upon conversion of the Preferred Stock and 4,965,556 shares of Common Stock for
issuance upon exercise of the Warrant and 8,520,000 shares of Common Stock for
issuance pursuant to its Employee Stock Plans. To the best of such counsel's
knowledge, there are no other options, warrants, conversion privileges,
preemptive rights or other rights presently outstanding to purchase or receive
any of the capital stock of the Company, except for the rights created by this
Agreement.
(c) The Company has the requisite power and authority to enter
into, deliver and perform its obligations under the Agreement and the
Shareholders' Agreement and to issue and sell the Preferred Stock, the Warrant
and the Common Stock issuable upon conversion and exercise thereof. The
Agreement and the Shareholders' Agreement and all documents to be delivered by
the Company thereunder have been duly authorized by the Company and duly
executed and delivered by an authorized officer of the Company and each
constitutes a legal, valid and binding obligation of the Company enforceable in
accordance with its terms, except as may be limited by bankruptcy,
reorganization, insolvency and similar laws now or hereinafter in effect
relating to or affecting the enforcement of creditor's rights in general.
(d) The Agreement and the Shareholders' Agreement have been
duly executed and delivered by the Principal Shareholders and each constitutes a
legal, valid and binding obligation of the Principal Shareholders, enforceable
in accordance with its terms, except as may be limited by bankruptcy,
reorganization, insolvency and similar laws now or hereafter in effect relating
to or affecting the enforcement of creditor's rights in general.
(e) The execution, delivery and performance by the Company and
the Principal Shareholders of this Agreement and the Shareholders' Agreement do
not and will not violate, conflict with or constitute a breach of or default
under any provision of (i) the Company's Articles or By-laws, as amended, (ii)
any judgment, order, decree, statute, law, ordinance or regulation applicable to
the Company or a Principal Shareholder or (iii) any loan or credit agreement,
note, bond, mortgage, lease or material contract, instrument or agreement of
which such counsel is aware to which the Company or a Principal Shareholder is a
party or by which it, he or she, as the case may be, is bound.
(f) The sale and issuance of the Securities pursuant to this
Agreement (and the issuance of the Common Stock upon exercise or conversion
thereof) have been duly authorized by all necessary corporate action of the
Company, and upon issuance, sale and delivery for the consideration stated in
this Agreement, the Securities shall be duly and validly issued, fully paid and
nonassessable and free of any preemptive or similar rights. The Common Stock
issuable upon conversion of the Preferred Stock upon issuance in accordance with
the terms of the Articles and Exhibit A to the Agreement, and the Common Stock
issuable upon exercise of the Warrant upon issuance in accordance with the terms
of the Warrant, shall be duly and validly issued, fully paid and nonassessable
and free of any preemptive or similar rights.
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(g) All consents, approvals, orders or authorizations, if any,
of any governmental authority or regulatory body of the United States or of any
state required to be obtained by the Company or the Principal Shareholders prior
to the Closing in connection with the execution, delivery and performance of the
Agreement and the Shareholders' Agreement and the lawful issue and sale of the
Securities pursuant to the Agreement (and the Common Stock issuable upon
conversion or exercise thereof) have been duly obtained, and the Company and the
Principal Shareholders have complied with any and all applicable provisions of
law requiring any designation, declaration, filing, registration or
qualification with any federal or state governmental authority prior to the
Closing in connection with such execution, delivery, performance, issue and
sale.
(h) The offer and sale of the Securities under the
circumstances contemplated by the Agreement do not require registration under
Section 5 of the 1933 Act or under any state's securities laws.
(i) To the best of such counsel's knowledge, there is no
action, proceeding or investigation pending or threatened against the Company or
Principal Shareholders before any court or administrative agency that might
result, either individually or in the aggregate, in any material adverse change
in the assets, condition, affairs or prospects of the Company or any such
Principal Shareholder or that questions the validity of the Agreement or the
Shareholders' Agreement.
(j) To such counsel's knowledge, other than the rights granted
to the Investor under the Shareholders' Agreement and except as listed on
Exhibit C to the Agreement, there are no outstanding rights which permit the
holder thereof to cause the Company to file a registration statement under the
1933 Act or to permit the holder thereof to include securities of the Company in
a registration statement filed by the Company under the 1933 Act and there are
no outstanding agreements or other commitments which otherwise relate to the
registration of any securities of the Company under the 1933 Act.
5.10 Proceedings and Documents.
All corporate and other proceedings in connection with the
transactions contemplated hereby and all documents and instruments incident to
such transactions shall be in form and substance satisfactory to the Investor
and its counsel and the Investor shall have received all such counterpart
originals or certified or other copies of such documents as they may reasonably
request. The By-laws of the Company shall be amended as necessary, in form and
substance satisfactory to the Investor and its counsel, to conform to the terms
of this transaction as set forth in this Agreement and the Shareholders'
Agreement (including a provision that any two directors may call a meeting of
the Board of Directors).
5.11 Key-Man Insurance.
The Company shall have obtained and have in force term life
and total disability insurance in the amount of $1,000,000 each on the lives of
Richard Ekstrom and Jesse Jaynes, with proceeds payable to the Company.
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5.12 Closing Documents.
The Company shall have delivered the following documents to
the Investor:
(a) copies certified by the Secretary of the Company of the
resolutions duly adopted by the Company's board of directors authorizing and
approving: (i) the execution, delivery and performance of this Agreement, the
Shareholders' Agreement and each of the other agreements contemplated hereby,
(ii) the terms of the Preferred Stock as set forth on Exhibit A hereto, (iii)
the reservation for issuance upon conversion of the Preferred Stock and upon
exercise of the Warrant of an aggregate number of shares of Common Stock equal
to the total number of shares to be issued upon conversion and exercise, (iv)
the issuance and sale of the Preferred Stock and the Warrant, and (v) the
consummation of all other transactions contemplated by this Agreement and the
Shareholders' Agreement;
(b) copies of the Company's Articles of Incorporation (as
filed with the Colorado Secretary of State) and the Company's bylaws, each as in
effect at the Closing;
(c) copies certified by an executive officer of the Company of
any governmental consents, approvals and filings (if any) required in connection
with the consummation of the transactions hereunder (including, without
limitation, all blue sky law filings);
(d) duly completed and executed SBA Forms 480, 652 and 1031
(Parts A and B) together with a five-year business plan showing the Company's
financial projections (including balance sheets and income and cash flows
statements) for such five-year period, a written statement from the Company
regarding its intended use of proceeds from the issuance of the Preferred Stock
and Warrant at Closing and a list, after giving effect to the transactions
contemplated by this Agreement, of: (i) the name of each of the Company's
directors, (ii) the name and title of each of the Company's officers and (iii)
the name of each of the Company's shareholders and the number and class of
shares held by each shareholder; and
(e) such other documents relating to the transactions
contemplated by this Agreement as the Investor or its counsel may reasonably
request.
5.13 Proxy.
The Investor shall have been granted one or more irrevocable
proxies, in a form acceptable to the Investor, to vote 4,444,444 shares of the
currently issued and outstanding Common Stock (subject to adjustment for stock
splits, combinations and dividends) on all matters brought before a vote of the
shareholders of the Company (whether by meeting or written consent). The
certificate(s) for such Common Stock shall bear a legend reflecting the fact
that they are subject to the proxies granted hereby. The Investor shall vote
such shares in any manner that it deems appropriate in its sole discretion. Such
proxy will remain in effect until immediately following the annual or special
meeting to approve a new class of voting preferred stock in accordance with
Section 7.16 hereof.
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5.14 Additional Conditions.
The obligations of the Investor under Section 1 of this
Agreement are subject to the fulfillment on or before Closing of each of the
following conditions (in addition to the Conditions set forth in Sections 5.1
through 5.13 inclusive):
(a) The Company shall have in effect no employment agreements
providing for guaranteed employment, salaries or benefits, except as approved in
writing by the Investor or as set forth on Exhibit C.
(b) That any existing agreements of the existing shareholders
of the Company shall have been amended in form satisfactory to counsel to the
Investor to provide that (i) the rights of first refusal and co-sale provisions
contained therein are subordinated to the rights of the Investor herein, (ii)
all rights to elect directors are consistent with those provided herein, (iii)
any option to require the Company to purchase existing Common Stock shall be
terminated (except to the extent permitted by Paragraph 5D of Article VI of the
Restated Articles), and (iv) such other changes as are necessary so as to make
such agreements consistent with this Agreement.
(c) Each of the following persons shall have entered into a
non-competition and non-disclosure agreement in substantially the form attached
hereto as Exhibit E:
Richard Ekstrom
Jesse Jaynes
D. Thomas Roane
(d) Effective as of the Closing, the directors of the Company
shall be Alfonso Lovo-Cordero, Donald A. Guthrie, George N. Keeney III, Antonio
Maggioni, Richard Ekstrom and Jesse Jaynes (collectively, the "Original
Directors"), James Colker and Konrad Weis. The first two vacancies created by
the resignations of any of the Original Directors from the Board of Directors
shall not be filled and the size of the Board of Directors shall be reduced
accordingly. The Company and the Principal Shareholders agree to take such steps
as may be required to replace one of the other Original Directors with an
industry representative acceptable to the Investor.
(e) All existing promissory notes payable by the Company to
any shareholder of the Company shall be converted at or prior to Closing to
options to purchase, in the aggregate, 5,820,000 shares of Common Stock at an
exercise price of $.05 per share.
(f) All outstanding disputes with employees or former
employees of the Company shall have been resolved to the satisfaction of the
Investor.
6. Conditions to the Company's Obligations at Closing.
The obligations of the Company to the Investor under this Agreement are
subject to the fulfillment on or before Closing of each of the following
conditions:
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6.1 Representations and Warranties True on Closing.
The representations and warranties of the Investor contained
in Sections 3 and 4 shall be true on and as of Closing with the same force and
effect as if they had been made at Closing.
6.2 Qualifications.
All authorizations, approvals or permits, if any, of any
governmental authority or regulatory body of the United States or of any state
that are required in connection with the lawful issuance and sale of the
Securities pursuant to this Agreement shall have been duly obtained and shall be
effective on and as of Closing.
7. Covenants of the Company.
7.1 Annual and Quarterly Financial Statements.
The Company shall maintain a standard system of accounting in
accordance with GAAP and shall make and keep books, records and accounts that,
in reasonable detail, accurately and fairly reflect its transactions. Until such
time as the Company is required to file reports under Sections 13 and 14 of the
1934 Act and for so long as the Investor holds at least 2% of the total issued
and outstanding capital stock of the Company, or for so long as the Company is
required to deliver any of the following documents to any other shareholder of
the Company, the Company shall deliver to the Investor:
(a) As soon as available, and in any event within one hundred
twenty (120) days after the end of each fiscal year of the Company commencing
with the year ended September 30, 1998, a consolidated balance sheet, and
related statements of operations and cash flows of the Company as of the end of
such year, audited, without qualification as to scope of the examination, by
independent public accountants of recognized national standing selected by the
Company; and
(b) Within thirty (30) days after the end of each of the first
three (3) quarters of the fiscal year, an unaudited consolidated statement of
operations and cash flows for such fiscal quarter and an unaudited balance sheet
as of the end of such fiscal quarter, setting forth in comparative form the
figures for the corresponding periods of the previous fiscal year.
Such financial statements shall be accompanied by a
certificate of the chief financial officer of the Company certifying that the
financial statements are true and complete in all material respects and in
accordance with GAAP and stating whether the Company is in violation of this
Agreement, the Shareholders' Agreement or any other material agreements to which
the Company is a party.
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<PAGE> 22
7.2 Monthly Financial Statements and Budgets.
The Company shall deliver to the Investor, as long as the
Investor holds at least 5% of the total issued and outstanding capital stock of
the Company:
(a) Within twenty (20) days after the end of each month, an
unaudited consolidated statement of operations and cash flows for such month and
the current fiscal year to date and an unaudited consolidated balance sheet as
of the end of each such month, setting forth in comparative form the figures for
the corresponding periods of the previous fiscal year and the Company's
projected financial statements for the current fiscal year and showing
deviations from budget; and
(b) As soon as available, but in any event within forty-five
(45) days after commencement of each new fiscal year, a business plan and
projected financial statements for such fiscal year.
(c) Promptly upon receipt, copies of all management letters
from accountants and all certificates prepared by or for the Company as to
compliance, defaults, material adverse changes, material litigation or similar
matters.
(d) Upon written request the Company shall also furnish, with
reasonable promptness, such other information relating to the financial
condition, business prospects or corporate affairs of the Company as the
Investor may from time to time reasonably request.
7.3 Inspection.
The Company shall permit the Investor or its agents, at the
Investor's expense, to visit and inspect the Company's properties, to examine
the Company's books of account and records, and to discuss the Company's
affairs, finances and accounts with its officers, all at such reasonable times
as may be requested by the Investor; provided, however, that the Company shall
not be obligated pursuant to this Section 7.3 to provide any information that it
reasonably considers to be a trade secret or to contain confidential data.
Notwithstanding the foregoing, the Chief Financial Officer of the Investor will
visit the Company on a quarterly basis to review financial matters, and the
Company shall pay all out of pocket travel and other expenses of said Chief
Financial Officer in connection with such visits.
7.4 Employee Stock Purchase Agreements.
Each person who purchases any of the 3,000,000 shares of the
Company's Common Stock reserved for issuance to officers and employees of the
Company under the Company's employee stock option plans shall execute and
deliver to the Company an employee stock purchase agreement in such form as the
Investor reasonably approves in writing from time to time (provided that such
agreement shall not require an automatic buy-back provision upon termination of
employment except as provided in the Stockholders' Agreement).
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<PAGE> 23
7.5 Key-Man Insurance.
The Company shall obtain and keep in effect term life and
total disability insurance each in the amount of $1,000,000 on the lives of
Richard Ekstrom and Jesse Jaynes, with proceeds payable to the Company.
7.6 Use of Proceeds.
The proceeds from the sale of the Securities shall be used for
further product development, FDA testing, general working capital purposes,
payment of those trade payables listed on Schedule 7.6 hereto, capital
expenditures of up to $100,000 in the aggregate and such other purposes as the
Investor shall approve in advance in writing.
7.7 Restrictive Agreements Prohibited.
Neither the Company nor any of its subsidiaries shall become a
party to any agreement which by its terms restricts the Company's performance of
this Agreement.
7.8 Proprietary Information Agreements.
The Company shall use its best efforts to obtain, and shall
cause its subsidiaries, if any, to use their best efforts to obtain, a
Proprietary Information Agreement in substantially the form of Exhibit F from
all future officers, key employees and other employees who will have access to
confidential information of the Company or any of its Subsidiaries, upon their
employment by the Company or any of its Subsidiaries.
7.9 Transactions with Affiliates.
Except for the transactions contemplated by this Agreement or
as otherwise approved by a majority of directors, neither the Company nor any of
its subsidiaries shall enter into any transaction with any director, officer,
employee or holder of more than 5% of the outstanding capital stock of any class
of the Company or any of its subsidiaries, member of the family of such person,
or any corporation, partnership, trust or other entity in which any such person,
or member of the family or any such person, either alone or together with other
persons affiliated with the Company, is a director, officer, trustee, partner or
holder of more than 5% of the outstanding capital stock thereof (collectively,
"Affiliates"), except for transactions on customary terms negotiated on an
arms-length basis or related to such person's employment.
7.10 Additional Affirmative Covenants.
So long as any portion of the Securities (or an equivalent
amount of Common or Preferred Stock issued upon conversion or exercise thereof)
are still outstanding, the Company agrees as follows:
(a) The Company will promptly pay and discharge or cause to be
paid and discharged, when due and payable, all lawful taxes, assessments and
governmental charges or levies imposed upon the income, profits, property or
business of the Company; provided,
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<PAGE> 24
however, that any such tax, assessment, charge or levy need not be paid if the
validity thereof shall currently be contested in good faith by appropriate
proceedings and if the Company shall have set aside on its books adequate
reserves with respect thereto, and provided further, that the Company will pay
all such taxes, assessments, charges or levies forthwith upon the commencement
of proceedings to foreclose any lien that may have attached as security
therefor. The Company will promptly pay or cause to be paid when due, or in
conformance with customary trade terms, all other indebtedness incident to the
operations of the Company.
(b) The Company will keep its properties in good repair,
working order and condition, reasonable wear and tear excepted, and from time to
time make all needful and proper repairs, renewals, replacements, additions and
improvements thereto; and the Company will at all times comply with the
provisions of all material leases to which it is a party or under which it
occupies property so as to prevent any loss or forfeiture thereof or thereunder.
(c) The Company will keep its assets that are of an insurable
character insured by financially sound and reputable insurers against loss or
damage by fire, extended coverage and explosion insurance in amounts customary
for companies in similar businesses similarly situated; and the Company will
maintain, with financially sound and reputable insurers, insurance against other
hazards, risks and liabilities to persons and property to the extent and in the
manner customary for companies in similar businesses similarly situated.
(d) The Company will duly observe and conform to all valid
requirements of governmental authorities relating to the conduct of its
businesses or to its property or assets.
(e) The Company shall maintain in full force and effect its
corporate existence, rights and franchises and all licenses and other rights to
use patents, processes, licenses, trademarks, trade names or copyrights owned or
possessed by it and deemed by the Company to be necessary to the conduct of its
business.
7.11 SBIC Regulatory Provisions.
(a) For a period of one year following the Closing, the
Company shall not change its business activities if such change would render the
Company ineligible as a "Small Business" under the SBIC Act or a "qualified
small business" under Section 1202 of the IRC.
(b) Within 75 days after Closing, the Company shall deliver to
the Investor a written statement certified by the Company's president or chief
financial officer describing in reasonable detail the use of the proceeds of the
Financing (as defined below) hereunder by the Company and its subsidiaries. In
addition to any other rights granted hereunder, the Company shall grant (and
cause each subsidiary to grant) the Investor and the United States Small
Business Administration (the "SBA") access to the Company's and the
subsidiaries' records for the purpose of verifying the use of such proceeds.
(c) Upon the occurrence of a Regulatory Violation (as defined
below) or in the event that the Investor determines in its reasonable good faith
judgment that a Regulatory Violation has occurred, in addition to any other
rights and remedies to which it may be entitled
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<PAGE> 25
as a holder of Preferred Stock, Warrant or Common Stock (whether under this
Agreement, the Restated Articles, the Shareholders' Agreement or otherwise), the
Investor shall have the right to demand the immediate repurchase of the Warrant
and all of the outstanding shares of Preferred Stock and Common Stock owned by
the Investor at a price per share equal to the purchase price paid for such
Securities hereunder, plus all accrued dividends thereon, by delivering written
notice of such demand to the Company. The Company shall pay the purchase price
for such stock by a cashier's or certified check or by wire transfer of
immediately available funds to the Investor demanding repurchase within 30 days
after the Company's receipt of the demand notice, and upon such payment, the
Investor shall deliver the certificates evidencing the Securities and Common
Stock to be repurchased, duly endorsed for transfer or accompanied by duly
executed forms of assignment.
(d) Promptly after the end of each fiscal year (but in any
event prior to February 28 of the following year), the Company shall deliver to
the Investor a written assessment of the economic impact of the Investor's
investment in the Company, specifying the full-time equivalent jobs created or
retained in connection with the investment, the impact of the investment on the
businesses of the Company in terms of expanded revenue and taxes and other
economic benefits resulting from the investment (including, but not limited to,
technology development or commercialization, minority business development,
urban or rural business development and expansion of exports). Promptly after
the Investor so requests, the Company will provide to the Investor such
information concerning the Company or its Subsidiaries which the Investor may be
required to provide to the SBA from time to time.
(e) For purposes of this Agreement, (A) "Regulatory Violation"
means (1) a diversion of the proceeds of such Financing from the reported use
thereof on the use of proceeds statement delivered by the Company at Closing, if
such diversion was effected without obtaining the prior written consent of the
Investor (which may be withheld in its sole discretion), or (2) a change in the
principal business activity of the Company and its subsidiaries to an ineligible
business activity (within the meaning of the SBIC Regulations) if such change
occurs within one (1) year after the date of the Financing hereunder (B) "SBIC
Regulations" means the SBIC Act and the regulations issued thereunder as set
forth in 13 CFR Section 107 and Section 121, as amended; and (C) "Financing"
shall have the meaning set forth in the SBIC Regulations.
7.12 Regulatory Compliance Cooperation.
(a) In the event that the Investor determines that it has a
Regulatory Problem (as defined below), the Investor shall have the right to
transfer its Preferred Stock and Warrant (or any Common Stock into which such
Preferred Stock or Warrant may be converted) (together, the "SBIC-Held Stock")
without regard to any restrictions on transfer set forth in this Agreement or
the Shareholders Agreement other than the securities law restrictions set forth
in Section 4 hereof (provided that the transferee agrees to become a party to
this Agreement and the Shareholders Agreement), and the Company shall take all
such actions as are reasonably requested by the Investor in order to (A)
effectuate and facilitate any transfer by the Investor of any Securities of the
Company then held by the Investor to any person designated by the Investor, (B)
permit the Investor (or any of its Affiliates) to exchange all or any portion of
the
25
<PAGE> 26
SBIC-Held Stock then held by it on a share-for-share basis for shares of a class
of nonvoting preferred stock or common stock, respectively of the Company, which
nonvoting preferred stock or common stock shall be identical in all respects to
such Preferred Stock or Common Stock, respectively, except that any such
preferred stock shall be nonvoting and shall be convertible into such nonvoting
common stock or Common Stock on such terms as are requested by the Investor in
light of regulatory considerations then prevailing, and any such common stock
shall be nonvoting and shall be convertible into Common Stock on such terms as
are requested by the Investor in light of regulatory considerations then
prevailing, (C) continue and preserve the respective allocation of the voting
interests with respect to the Company arising out of the Investor's ownership of
voting securities and/or provided for in the Shareholders Agreement before the
transfers and amendments referred to above (including entering into such
additional agreements as are requested by the Investor) to permit any person(s)
designated by the Investor to exercise any voting power which is relinquished by
the Investor, and (D) amend this Agreement, the Certificate of Incorporation and
other related agreements to effectuate and reflect the foregoing. The parties to
this Agreement agree to vote their securities in favor of such amendments and
actions.
(b) For purposes of this Agreement, a "Regulatory Problem"
means any set of facts or circumstances wherein it has been asserted by any
governmental regulatory agency (or the Investor believes that there is a
substantial risk of such assertion) that the Investor and its Affiliates are not
entitled to hold, or exercise any significant right with respect to, the
Securities or the Common Stock.
7.13 Rule 144A.
The Company shall, upon written request of the Investor,
provide to the Investor and to any prospective qualified institutional buyer (as
defined in Rule 144A) designated by the Investor, such financial and other
information as the Investor may determine to be necessary to permit compliance
with the requirements of Rule 144A promulgated under the Securities Act of 1934,
as amended in connection with any resale of the Securities.
7.14 Termination of Covenants.
The covenants set forth in Sections 7.1 through 7.13 of this
Section 7 shall terminate and be of no further force or effect after the date of
the closing of the first underwritten public offering of the Company's Common
Stock amounting to not less than $8,000,000.
7.15 Relocation to Pittsburgh Area.
The Company agrees to move its headquarters, operations and
employees, including Richard Ekstrom and Jesse Jaynes, but excluding A. Lee
Caldwell and James Thornton to the Pittsburgh, Pennsylvania area within three
(3) months after Closing. Nothing herein shall prohibit the Company from having
facilities in other locations provided that its headquarters and principal place
of business remains in the Pittsburgh area.
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<PAGE> 27
7.16 Amended Articles.
The Board of Directors of the Company has approved and the
Company will, prior to the end of calendar year 1998, submit to the shareholders
of the Company for their approval, at a duly called annual or special meeting of
the shareholders, Articles of Amendment to the Articles of Incorporation in the
form attached as Exhibit G (the "Amended Articles"). The Company and the
Principal Shareholders will take all steps reasonably required to cause the
Amended Articles to be approved by the shareholders, including recommending a
vote in favor thereof and, in the case of the Principal Shareholders, voting
their shares in favor thereof. Upon approval, the Company shall cause the
Amended Articles to be filed with the Secretary of the State of Colorado.
8. Miscellaneous.
8.1 Entire Agreement.
This Agreement and the documents referred to herein constitute
the entire agreement among the parties and no party shall be liable or bound to
any other party in any manner by any warranties, representations or covenants
except as specifically set forth herein or therein. The terms and conditions of
this Agreement shall inure to the benefit of and be binding upon the respective
heirs, personal representatives, successors and assigns of the parties, except
to the extent assignability is limited herein.
8.2 Governing Law.
This Agreement shall be governed by and construed under the
laws of the Commonwealth of Pennsylvania, without regard to any jurisdiction's
conflicts of law provisions.
8.3 Counterparts.
This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
8.4 Titles and Subtitles.
The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.
8.5 Notices.
Any notice required or permitted under this Agreement shall be
given in writing and shall be deemed effectively given (i) upon personal
delivery, or (ii) upon the expiration of five days following deposit with the
United States Postal Service, by registered or certified mail, return receipt
requested, postage prepaid, or (iii) upon delivery by an overnight courier which
provides evidence of delivery addressed to the party as shown on the signature
page hereof, or at
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<PAGE> 28
such other address as any party may designate by ten (10) days' advance written
notice to the other parties hereto.
8.6 Finders' Fees.
Each party represents that it neither is, nor will be,
obligated for any finders' fee or commission in connection with this
transaction.
The Investor agrees to indemnify and to hold harmless the
Company from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which the Investor or any of its partners, employees or
representatives is responsible.
The Company and the Principal Shareholders, jointly and
severally, agree to indemnify and hold harmless the Investor from any liability
for any commission or compensation in the nature of a finders' fee (and the
costs and expenses of defending against such liability or asserted liability)
for which the Company or any of its officers, employees or representatives is
responsible.
8.7 Expenses.
The Company shall pay at the Closing all reasonable fees,
expenses and disbursements of legal counsel for the Investor and other
out-of-pocket expenses incurred by the Investor in connection with the
negotiation, execution, delivery and performance of this Agreement, the
Shareholders' Agreement and the transactions contemplated hereby and thereby, up
to a maximum of $50,000.
8.8 Survival.
The warranties, representations and covenants of the Company,
Principal Shareholders and the Investor contained in or made pursuant to this
Agreement shall survive the execution and delivery of this Agreement and the
Closing.
8.9 Indemnification.
The Company and, solely with respect to the representations in
Section 2.31 hereof, the Principal Shareholders, shall defend, indemnify and
hold the Investor harmless from and against any and all claims, liabilities,
damages, losses and expenses, including reasonable attorney's fees and expenses
and costs of suit, arising out of any and all inaccurate representations and
warranties and out of any and all breaches of covenants, warranties,
stipulations, agreements and certifications made by or on behalf of the Company
or the Principal Shareholders in this Agreement, the Shareholders' Agreement or
in any document delivered hereunder. The obligations of the Principal
Shareholders for breaches of the representations in Section 2.31 hereunder shall
be several and not joint and shall relate only to matters under Section 2.31 of
which such Principal Shareholder personally had knowledge. The foregoing
obligations of the Principal Shareholders shall not apply (i) until the
aggregate of all claims
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<PAGE> 29
against the Company and the Principal Shareholders which have not been paid in
full by the Company exceed $25,000, at which point the Principal Shareholders
shall only be liable for the amount in excess of $25,000, and (ii) with respect
to a Principal Shareholder if such Principal Shareholder's employment with the
Company has been terminated by the Company without cause. In no event shall the
aggregate liability of the Principal Shareholders hereunder exceed $250,000. The
foregoing limitations shall not apply with respect to claims for fraud or
willful misconduct by the Principal Shareholders.
8.10 Amendments and Waivers.
Any term of this Agreement may be amended and the observance
of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), with the written consent of
the Company and the holders of at least sixty-six and two-thirds percent
(66-2/3%) of the outstanding Securities (including any shares of Common or
Preferred Stock issued upon conversion or exercise thereof which have not been
sold to the public). Any amendment or waiver effected in accordance with this
Section shall be binding upon each holder of any Securities purchased under this
Agreement at the time outstanding (including securities into which such
Securities have been converted or for which they have been exercised), each
future holder of all such securities and the Company.
8.11 Rights of Investor.
Except as provided in another written document executed by
such holder, each holder of Securities (or Common Stock issued upon exercise or
conversion thereof) shall have the absolute right to exercise or refrain from
exercising any right or rights that such holder may have by reason of this
Agreement or ownership of any Securities, including without limitation the right
to consent to the waiver of any obligation of the Company under this Agreement
and to enter into an agreement with the Company for the purpose of modifying
this Agreement or any agreement effecting any such modification, and such holder
shall not incur any liability to any other holder or holders of Securities with
respect to exercising or refraining from exercising any such right or rights.
8.12 Assignment.
This Agreement may not be assigned by the Company or any
Principal Shareholder without the consent of the Investor.
8.13 No Presumption.
There shall be no presumption against any party on the ground
that such party or its counsel was responsible for preparing this Agreement or
any part hereof.
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<PAGE> 30
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
DEMETER BIOTECHNOLOGIES, LTD.
By: /s/ Richard D. Ekstrom
----------------------------------------
Address: 5049 Amberson Place
-----------------------------------
Pittsburgh, PA 15232
-------------------------------------------
INVESTOR:
CEO VENTURE FUND III
By: /s/ James Colker
----------------------------------------
Address: 2000 Technology Drive, Suite 160
-----------------------------------
Pittsburgh, PA 15219
-------------------------------------------
PRINCIPAL SHAREHOLDERS:
/s/ Richard D. Ekstrom
-------------------------------------------
Richard Ekstrom
5049 Amberson Place
Pittsburgh, PA 15232
/s/ Jesse Jaynes
-------------------------------------------
Jesse Jaynes
Address: 2417 High Ridge Drive
-----------------------------------
Raleigh, NC 27606
-------------------------------------------
30
<PAGE> 1
Exhibit 4.2.1
TERMS OF CONVERTIBLE PREFERRED STOCK
1. Number of Shares. The class of Preferred Stock designated and known
as "Convertible Preferred Stock" shall consist of 5,000,000 shares.
2. Dividends. The holders of the Convertible Preferred Stock shall be
entitled to receive, out of funds legally available therefor, (a) when and if
declared by the Board of Directors, and (b) upon failure or refusal of the
Company, for any reason or for no reason, to redeem on or after any Redemption
Date (as defined in paragraph 5) all of the shares of Convertible Preferred
Stock then eligible for redemption on or after such Redemption Date, in
accordance with the terms and provisions of paragraph 5, semi-annual dividends
at the rate per annum of $.036 per share (the "Accruing Dividends"). Accruing
Dividends shall in any event accrue from the date of issuance of the Convertible
Preferred Stock from day to day, whether or not earned or declared, and shall be
cumulative.
3. Liquidation. Upon any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, the holders of the shares of
Convertible Preferred Stock shall be entitled, before any distribution or
payment is made upon any stock ranking on liquidation junior to the Convertible
Preferred Stock, to be paid an amount equal to the greater of (a) $0.45 per
share plus, in the case of each share, an amount equal to all Accruing Dividends
unpaid thereon (whether or not declared) and any other dividends declared but
unpaid thereon, computed to the date payment thereof is made available, or (b)
the amount the holders of the shares of Convertible Preferred Stock would
otherwise be entitled had each such share of Convertible Preferred Stock been
converted to Common Stock pursuant to paragraph 4 immediately prior to such
liquidation, dissolution or winding up. The amount payable with respect to one
share of Convertible Preferred Stock pursuant to the preceding sentence is
sometimes referred to as the "Liquidation Payment" and with respect to all
shares of Convertible Preferred Stock is sometimes referred to as the
"Liquidation Payments." If upon such liquidation, dissolution or winding up of
the Company, whether voluntary or involuntary, the assets to be distributed
among the holders of Convertible Preferred Stock shall be insufficient to permit
payment to the holders of Convertible Preferred Stock of the amount
distributable pursuant to this paragraph 3, then the entire assets of the
Company to be so distributed shall be distributed ratably among the holders of
Convertible Preferred Stock. Written notice of such liquidation, dissolution or
winding up, stating a payment date, the amount of the Liquidation Payments and
the place where said Liquidation Payments shall be payable, shall be given by
mail, postage prepaid, or by telex to non-United States residents, not less than
20 days prior to the payment date stated therein, to the holders of record of
Convertible Preferred Stock, such notice to be addressed to each such holder at
its address as shown by the records of the Company. The consolidation or merger
of the Company into or with any other entity or entities which results in the
exchange of outstanding shares of the Company for securities or other
consideration issued or paid or caused to be issued or paid by any such entity
or affiliate thereof, and the sale or transfer by the Company of all or
substantially all its assets, shall be deemed to be a liquidation, dissolution
or winding up of the
<PAGE> 2
Company within the meaning of the provisions of this paragraph 3. For purposes
hereof, the Common Stock shall rank on liquidation junior to the Convertible
Preferred Stock.
4. Conversions. The holders of shares of Convertible Preferred Stock
shall have the following conversion rights:
4A. Right to Convert. Subject to the terms and conditions of
this paragraph 4, the holder of any share or shares of Convertible Preferred
Stock shall have the right, at its option at any time, to convert any such
shares of Convertible Preferred Stock into such number of fully paid and
nonassessable shares of Common Stock as is obtained by (i) multiplying the
number of shares of Convertible Preferred Stock so to be converted by $0.45 and
(ii) dividing the result by the conversion price of $0.45 per share or, in case
an adjustment of such price has taken place pursuant to the further provisions
of this paragraph 4, then by the conversion price as last adjusted and in effect
at the date any share or shares of Convertible Preferred Stock are surrendered
for conversion (such price, or such price as last adjusted, being referred to as
the "Conversion Price"). Such right of conversion shall be exercised by the
holder thereof by giving written notice that the holder elects to convert a
stated number of shares of Convertible Preferred Stock into Common Stock and by
surrender of a certificate or certificates for the shares so to be converted to
the Company at its principal office (or such other office or agency of the
Company as the Company may designate by notice in writing to the holders of the
Convertible Preferred Stock) at any time during its usual business hours on the
date set forth in such notice, together with a statement of the name or names
(with address) in which the certificate or certificates for shares of Common
Stock shall be issued.
4B. Issuance of Certificates; Time Conversion Effected.
Promptly after the receipt of the written notice referred to in subparagraph 4A
and surrender of the certificate or certificates for the share or shares of
Convertible Preferred Stock to be converted, the Company shall issue and
deliver, or cause to be issued and delivered, to the holder, registered in such
name or names as such holder may direct, a certificate or certificates for the
number of whole shares of Common Stock issuable upon the conversion of such
share or shares of Convertible Preferred Stock. To the extent permitted by law,
such conversion shall be deemed to have been effected and the Conversion Price
shall be determined as of the close of business on the date on which such
written notice shall have been received by the Company and the certificate or
certificates for such share or shares shall have been surrendered as aforesaid,
and at such time the rights of the holder of such share or shares of Convertible
Preferred Stock shall cease, and the person or persons in whose name or names
any certificate or certificates for shares of Common Stock shall be issuable
upon such conversion shall be deemed to have become the holder or holders of
record of the shares represented thereby.
4C. Fractional Shares; Dividends; Partial Conversion. No
fractional shares shall be issued upon conversion of Convertible Preferred Stock
into Common Stock and no payment or adjustment shall be made upon any conversion
on account of any cash dividends on the Common Stock issued upon such
conversion. At the time of each conversion, the Company shall pay in cash an
amount equal to all dividends, excluding Accruing Dividends, accrued and unpaid
on the shares of Convertible Preferred Stock surrendered for conversion to the
date upon
-2-
<PAGE> 3
which such conversion is deemed to take place as provided in subparagraph 4B. In
case the number of shares of Convertible Preferred Stock represented by the
certificate or certificates surrendered pursuant to subparagraph 4A exceeds the
number of shares converted, the Company shall, upon such conversion, execute and
deliver to the holder, at the expense of the Company, a new certificate or
certificates for the number of shares of Convertible Preferred Stock represented
by the certificate or certificates surrendered which are not to be converted. If
any fractional share of Common Stock would, except for the provisions of the
first sentence of this subparagraph 4C, be delivered upon such conversion, the
Company, in lieu of delivering such fractional share, shall pay to the holder
surrendering the Convertible Preferred Stock for conversion an amount in cash
equal to the current market price of such fractional share as determined in good
faith by the Board of Directors of the Company.
4D. Adjustment of Price Upon Issuance of Common Stock. Except
as provided in subparagraph 4E, if and whenever the Company shall issue or sell,
or is, in accordance with subparagraph 4D(1) through 4D(7), deemed to have
issued or sold, any shares of Common Stock for a consideration per share less
than the Conversion Price in effect immediately prior to the time of such issue
or sale, then, forthwith upon such issue or sale, the Conversion Price shall be
reduced to a price equal to the consideration per share received by the Company
upon such issue or sale.
For purposes of this subparagraph 4D, the following subparagraphs 4D(l)
to 4D(7) shall also be applicable:
4D(1) Issuance of Rights or Options. In case at any time the
Company shall in any manner grant (whether directly or by assumption in a merger
or otherwise) any warrants or other rights to subscribe for or to purchase, or
any options for the purchase of, Common Stock or any stock or security
convertible into or exchangeable for Common Stock (such warrants, rights or
options being called "Options" and such convertible or exchangeable stock or
securities being called "Convertible Securities") whether or not such Options or
the right to convert or exchange any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon the
exercise of such Options or upon the conversion or exchange of such Convertible
Securities (determined by dividing (i) the total amount, if any, received or
receivable by the Company as consideration for the granting of such Options,
plus the minimum aggregate amount of additional consideration payable to the
Company upon the exercise of all such Options, plus, in the case of such Options
which relate to Convertible Securities, the minimum aggregate amount of
additional consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof, by (ii) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options) shall be less than the
Conversion Price in effect immediately prior to the time of the granting of such
Options, then the total maximum number of shares of Common Stock issuable upon
the exercise of such Options or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the exercise of such Options
shall be deemed to have been issued for such price per share as of the date of
granting of such Options or the issuances of such Convertible Securities and
thereafter shall be deemed to be outstanding.
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<PAGE> 4
Except as otherwise provided in subparagraph 4D(3), no adjustment of the
Conversion Price shall be made upon the actual issue of such Common Stock or of
such Convertible Securities upon exercise of such Options or upon the actual
issue of such Common Stock upon conversion or exchange of such Convertible
Securities.
4D(2) Issuance of Convertible Securities. In case the Company
shall in any manner issue (whether directly or by assumption in a merger or
otherwise) or sell any Convertible Securities, whether or not the rights to
exchange or convert any such Convertible Securities are immediately exercisable,
and the price per share for which Common Stock is issuable upon such conversion
or exchange (determined by dividing (i) the total amount received or receivable
by the Company as consideration for the issue or sale of such Convertible
Securities, plus the minimum aggregate amount of additional consideration, if
any, payable to the Company upon the conversion or exchange thereof, by (ii) the
total maximum number of shares of Common Stock issuable upon the conversion or
exchange of all such Convertible Securities) shall be less than the Conversion
Price in effect immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
for such price per share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding, provided that (a)
except as otherwise provided in subparagraph 4D(3), no adjustment of the
Conversion Price shall be made upon the actual issue of such Common Stock upon
conversion or exchange of such Convertible Securities and (b) if any such issue
or sale of such Convertible Securities is made upon exercise of any Options to
purchase any such Convertible Securities for which adjustments of the Conversion
Price have been or are to be made pursuant to other provisions of this
subparagraph 4D, no further adjustment of the Conversion Price shall be made by
reason of such issue or sale.
4D(3) Change in Option Price or Conversion Rate. Upon the
happening of any of the following events, namely, if the purchase price provided
for in any Option referred to in subparagraph 4D(l), the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subparagraph 4D(1) or 4D(2), or the rate
at which Convertible Securities referred to in subparagraph 4D(1) or 4D(2) are
convertible into or exchangeable for Common Stock shall change at any time
(including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Conversion Price in effect at the
time of such event shall forthwith be readjusted to the Conversion Price which
would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold, but only if as a result of such adjustment
the Conversion Price then in effect hereunder is thereby reduced; and on the
expiration of any such Option or the termination of any such right to convert or
exchange such Convertible Securities, the Conversion Price then in effect
hereunder shall forthwith be increased to the Conversion Price which would have
been in effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued.
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4D(4) Stock Dividends. In case the Company shall declare a
dividend or make any other distribution upon any stock of the Company payable in
Common Stock (except for dividends or distributions upon the Common Stock),
Options or Convertible Securities, any Common Stock, Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.
4D(5) Consideration for Stock. In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the amount received by the
Company therefor, without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the corporation in
connection therewith. In case any shares of Common Stock, Options or Convertible
Securities shall be issued or sold for a consideration other than cash, the
amount of the consideration other than cash received by the Company shall be
deemed to be the fair value of such consideration as determined in good faith by
the Board of Directors of the Company, without deduction of any expenses
incurred or any underwriting commissions or concessions paid or allowed by the
Company in connection therewith. In case any Options shall be issued in
connection with the issue and sale of other securities of the Company, together
comprising one integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options shall be deemed
to have been issued for such consideration as determined in good faith by the
Board of Directors of the Company.
4D(6) Record Date. In case the Company shall take a record of
the holders of its Common Stock for the purpose of entitling them (i) to receive
a dividend or other distribution payable in Common Stock, Options or Convertible
Securities or (ii) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.
4D(7) Treasury Shares. The disposition of any shares of Common
Stock owned or held by or for the account of the Company shall be considered an
issue or sale of Common Stock for the purpose or this subparagraph 4D.
4E. Certain Issues of Common Stock Excepted. Anything herein
to the contrary notwithstanding, the Company shall not be required to make any
adjustment of the Conversion Price in the case of the issuance of (i) up to an
aggregate of 3,000,000 shares (appropriately adjusted to reflect the occurrence
of any event or transaction described in subparagraph 4F) of Common Stock to
directors, officers or employees of the Company in connection with their service
as directors of the Company or their employment by the Company, (ii) up to an
aggregate of 5,520,000 shares (appropriately adjusted to reflect the occurrence
of any event or transaction described in Subparagraph 4F) of Common Stock upon
exercise of options granted as of May 1, 1998, or (iii) up to an aggregate of
444,444 shares of Common Stock to trade creditors of the Company to settle up to
$200,000 of indebtedness of the Company existing as of March 31, 1998 provided
such issuances are at $.45 per share or more.
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<PAGE> 6
4F. Subdivision or Combination of Common Stock. In case the
Company shall at any time subdivide (by any stock split, stock dividend or
otherwise) its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such subdivision
shall be proportionately reduced, and, conversely, in case the outstanding
shares of Common Stock shall be combined into a smaller number of shares, the
Conversion Price in effect immediately prior to such combination shall be
proportionately increased.
4G. Reorganization or Reclassification. If any capital
reorganization or reclassification of the capital stock of the Company shall be
effected in such a way that holders of Common Stock shall be entitled to receive
stock, securities or assets with respect to or in exchange for Common Stock,
then, as a condition of such reorganization or reclassification, lawful and
adequate provisions shall be made whereby each holder of a share or shares of
Convertible Preferred Stock shall thereupon have the right to receive, upon the
basis and upon the terms and conditions specified herein and in lieu of the
shares of Common Stock immediately theretofore receivable upon the conversion of
such share or shares of Convertible Preferred Stock, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of such Common Stock equal to the number of
shares of such Common Stock immediately theretofore receivable upon such
conversion had such reorganization or reclassification not taken place, and in
any such case appropriate provisions shall be made with respect to the rights
and interests of such holder to the end that the provisions hereof (including
without limitation provisions for adjustments of the Conversion Price) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of such
conversion rights.
4H. Notice of Adjustment. Upon any adjustment of the
Conversion Price, then and in each such case the Company shall give written
notice thereof, by first class mail, postage prepaid, or by telex to non-United
States residents, addressed to each holder of shares of Convertible Preferred
Stock at the address of such holder as shown on the books of the Company, which
notice shall state the Conversion Price resulting from such adjustment, setting
forth in reasonable detail the method upon which such calculation is based.
4I. Other Notices. In case at any time:
(1) the Company shall declare any dividend upon its
Common Stock payable in cash or stock or make any other distribution to
the holders of its Common Stock;
(2) the Company shall offer for subscription pro rata
to the holders of its Common Stock any additional shares of stock of
any class or other rights;
(3) there shall be any capital reorganization or
reclassification of the capital stock of the Company, or a
consolidation or merger of the Company with or into, or a sale of all
or substantially all its assets to, another entity or entities; or
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(4) there shall be a voluntary or involuntary
dissolution, liquidation or winding up of the Company;
then, in any one or more of said cases, the Company shall give, by first class
mail, postage prepaid, or by telex to non-United States residents, addressed to
each holder of any shares of Convertible Preferred Stock at the address of such
holder as shown on the books of the Company, (a) at least 20 days' prior written
notice of the date on which the books of the Company shall close or a record
shall be taken for such dividend, distribution or subscription rights or for
determining rights to vote in respect of any such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up and (b) in the case of any such reorganization, reclassification
consolidation, merger, sale, dissolution, liquidation or winding up, at least 20
days' prior written notice of the date when the same shall take place. Such
notice in accordance with the foregoing clause (a) shall also specify, in the
case of any such dividend, distribution or subscription rights, the date on
which the holders of Common Stock shall be entitled thereto and such notice in
accordance with the foregoing clause (b) shall also specify the date on which
the holders of Common Stock shall be entitled to exchange their Common Stock for
securities or other property deliverable upon such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be.
4J. Stock to be Reserved. The Company will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issuance upon the conversion of Convertible Preferred Stock as herein
provided, such number of shares of Common Stock as shall then be issuable upon
the conversion of all outstanding shares of Convertible Preferred Stock. The
Company covenants that all shares of Common Stock which shall be so issued shall
be duly and validly issued and fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof, and, without
limiting the generality of the foregoing, the Company covenants that it will
from time to time take all such action as may be requisite to assure that the
par value per share of the Common Stock is at all times equal to or less than
the Conversion Price in effect at the time. The Company will take all such
action as may be necessary to assure that all such shares of Common Stock may be
so issued without violation of any applicable law or regulation, or of any
requirement of any national securities exchange upon which the Common Stock may
be listed. The Company will not take any action which results in any adjustment
of the Conversion Price if the total number of shares of Common Stock issued and
issuable after such action upon conversion of the Convertible Preferred Stock
would exceed the total number of shares of Common Stock then authorized by the
Articles of Incorporation.
4K. No Reissuance of Convertible Preferred Stock. Shares of
Convertible Preferred Stock which are converted into shares of Common Stock as
provided herein shall not be reissued.
4L. Issue Tax. The issuance of certificates for shares of
Common Stock upon conversion of Convertible Preferred Stock shall be made
without charge to the holders thereof for any issuance tax in respect thereof,
provided that the Company shall not be required to pay any tax which may be
payable in respect of any transfer involved in the issuance and delivery of
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<PAGE> 8
any certificate in a name other than that of the holder of the Convertible
Preferred Stock which is being converted.
4M. Closing of Books. The Company will at no time close its
transfer books against the transfer of any Convertible Preferred Stock or of any
shares of Common Stock issued or issuable upon the conversion of any shares of
Convertible Preferred Stock in any manner which interferes with the timely
conversion of such Convertible Preferred Stock, except as may otherwise be
required to comply with applicable securities laws.
4N. Definition of Common Stock. As used in this paragraph 4,
the term "Common Stock" shall mean and include the Company's authorized Common
Stock, par value $.001 per share, as constituted on the date of adoption hereof,
and shall also include any capital stock of any class of the Company thereafter
authorized which shall not be limited to a fixed sum or percentage of par value
in respect of the rights of the holders thereof to participate in dividends or
in the distribution of assets upon the voluntary or involuntary liquidation,
dissolution or winding up of the Company; provided that the shares of Common
Stock receivable upon conversion of shares of Convertible Preferred Stock shall
include only shares designated as Common Stock of the Company on the date of
adoption hereof, or in case of any reorganization or reclassification of the
outstanding shares thereof, the stock, securities or assets provided for in
subparagraph 4G.
4O. Mandatory Conversion. If at any time the Company shall
effect a firm commitment underwritten public offering of shares of Common Stock
in which the aggregate price paid for such shares by the public shall be at
least $8,000,000, then effective immediately before the closing of the sale of
such shares by the Company pursuant to such public offering, all outstanding
shares of Convertible Preferred Stock shall automatically convert to shares of
Common Stock.
5. Redemption. The shares of Convertible Preferred Stock shall be
redeemable as follows:
5A. Voluntary Redemption. At the election of any holder of
shares of Convertible Preferred Stock upon at least 90 days written notice to
the Company, the Company shall redeem from such holder on or at any time after
May 31, 2003, 2004 and 2005 (each a "Redemption Date") up to one-third of the
shares of Convertible Preferred Stock held by such holder, with the intent that,
should any holder so elect, at any time after May 31, 2005, the total number of
shares held by such holder would be subject to redemption pursuant to this
paragraph.
5B. Redemption Price and Payment. The Convertible Preferred
Stock to be redeemed on or after each Redemption Date pursuant to paragraph 5A
shall be redeemed by paying for each share in cash an amount equal to the
greater of (i) $0.45 per share plus, in the case of each share, an amount equal
to all Accruing Dividends unpaid thereon (whether or not declared) and any other
dividends declared but unpaid thereon, computed to the actual date of
redemption, or (ii) such amount per share as would have been payable had each
such share been converted to Common Stock pursuant to paragraph 4 immediately
prior to the actual date of redemption (such amount being referred to as the
"Redemption Price").
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<PAGE> 9
5C. Availability of Funds. If the funds of the Company legally
available for redemption of shares of Convertible Preferred Stock are
insufficient to redeem the total number of shares of Convertible Preferred Stock
eligible for redemption on such date, the holders of shares of Convertible
Preferred Stock shall, at their option, share ratably in any funds legally
available for redemption of such shares according to the respective amounts
which would be payable with respect to the full number of shares owned by them
if all such shares eligible for redemption on such date were redeemed in full.
The shares of Convertible Preferred Stock not redeemed shall remain outstanding
and entitled to all rights and preferences provided herein. At any time
thereafter when additional funds of the Company are legally available for the
redemption of such shares of Convertible Preferred Stock, such funds will be
used, at the option of the holders, to redeem the balance of such shares, or
such portion thereof for which funds are then legally available, on the basis
set forth above.
5D. Redeemed or Otherwise Acquired Shares to be Retired. Any
shares of Convertible Preferred Stock redeemed pursuant to this paragraph 5 or
otherwise acquired by the Company in any manner whatsoever shall be cancelled
and shall not under any circumstances be reissued; and the Company may from time
to time take such appropriate corporate action as may be necessary to reduce
accordingly the number of authorized shares of Convertible Preferred Stock.
6. Amendments. No provision of these terms of the Convertible Preferred
Stock may be amended, modified or waived without the written consent or
affirmative vote of the holders of at least two-thirds of the then outstanding
shares of Convertible Preferred Stock.
7. Exchange. In the event the Company shall, at any time in the future,
have a class of preferred stock having substantially equivalent terms to those
set forth herein and providing for voting rights for the holders thereof, then
the holders of the Convertible Preferred Stock shall have the right to convert
the shares of Convertible Preferred Stock for a like number of such new shares
of preferred stock and, for purposes of the accrual of dividends and related
matters, such new shares of preferred stock shall be deemed to have been issued
as of the date of the issuance of the shares of Convertible Preferred Stock for
which they are exchanged.
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<PAGE> 1
Exhibit 4.3
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED AND MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO THE SECURITIES
UNDER SUCH ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
NO. 1
WARRANT TO PURCHASE COMMON STOCK
OF
DEMETER BIOTECHNOLOGIES, LTD.
This certifies that, for value received, CEO Venture Fund III, or registered
assignees ("Holder"), is entitled, subject to the terms set forth below, to
purchase from Demeter Biotechnologies, Ltd. (the "Company"), a Colorado
corporation, 4,965,556 shares of Common Stock of the Company ("Common Stock"),
as constituted on the date hereof (the "Warrant Issue Date"), upon surrender
thereof, at the principal office of the Company, with the Notice of Exercise
attached hereto duly executed, and simultaneous payment therefor in lawful money
of the United States, at the Exercise Price as set forth in Section 2 below. The
number, character and Exercise Price of such shares of Common Stock are subject
to adjustment as provided below. The term "Warrant" as used herein, shall
include this Warrant and any warrants delivered in substitution or exchange
therefor as provided herein.
1. TERM OF WARRANT.
This Warrant shall be exercisable, in whole or in part, during
the term commencing on the Warrant Issue Date and ending at 5:00 p.m., Eastern
Standard Time on June 14, 2008 (the "Original Term"), and shall be void
thereafter.
2. EXERCISE PRICE AND NUMBER OF SHARES.
2.1 EXERCISE PRICE. The price at which this Warrant may be
exercised (the "Exercise Price") shall be $0.45 per share of Common Stock, as
adjusted from time to time pursuant to Section 11 hereof.
2.2 NUMBER OF SHARES. The number of shares of Common Stock
which may be purchased pursuant to this Warrant shall be 4,965,556 shares,
subject to adjustment as provided in Section 11 hereof.
2.3 CALL PROVISIONS.
<PAGE> 2
(a) At any time after December 31, 1998 and so long
as the Company's Common Stock is listed on the New York or American Stock
Exchanges or traded on NASDAQ (each an "Exchange"), the Company may deliver to
the Holder a Call Notice (as defined in paragraph (d) below) provided that the
closing price of the Company's common stock on an Exchange is $1.50 or more per
share (as adjusted for any stock splits or stock combinations) for each of the
forty (40) consecutive trading days immediately preceding the date of the Call
Notice.
(b) Upon receipt of a Call Notice complying with the
provisions of (a) above, the Holder shall have a period of sixty (60) calendar
days to elect to exercise all or a portion of this Warrant in accordance with
the terms of Section 3 hereof. Upon such exercise, in addition to receiving the
number of shares of Common Stock to which the Holder shall be entitled
hereunder, the Holder shall also receive a new warrant (the "Replacement
Warrant") having the terms as set forth herein. Following a Call Notice, any
purchase rights under this Warrant not exercised in accordance with this
paragraph shall expire and this Warrant shall be terminated.
(c) The Replacement Warrant shall be exercisable for
one (1) share of Common Stock for every two (2) shares of Common Stock purchased
pursuant to (b) above. The exercise price under the Replacement Warrant shall be
$1.50 per share subject to the same adjustment provisions as set forth in
Section 11 hereof. The term of the Replacement Warrant shall be the longer of
two (2) years from the date of issuance or the balance of the Original Term. In
all other respects, the Replacement Warrant shall have the same terms and
conditions as this Warrant except that the call terms of this Section 2 shall
not apply to the Replacement Warrant.
(d) A Call Notice shall be delivered by the Company
in writing to the Holder pursuant to the provisions of Section 9 hereof and
shall specify that it is being submitted pursuant to this Section 2 and shall
include evidence of the closing price of the Company's common stock for the
forty (40) consecutive trading days immediately prior to the date of such
notice.
3. EXERCISE OF WARRANT.
(a) The purchase rights represented by this Warrant
are exercisable by the Holder in whole or in part, at any time, or from time to
time, by the surrender of this Warrant and the Notice of Exercise annexed hereto
duly completed and executed on behalf of the Holder, at the principal office of
the Company (or such other office or agency of the Company as it may designate
by notice in writing to the Holder at the address of the Holder appearing on the
books of the Company), upon payment.
(b) This Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of its
surrender for exercise as provided above, and the person entitled to receive the
shares of Common Stock issuable upon such exercise shall be treated for all
purposes as the holder of record of such shares as of the close of business on
such date. As promptly as practicable on or after such date and in any event
within ten (10) days thereafter, the Company at its expense shall issue and
deliver to the person or persons entitled to
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<PAGE> 3
receive the same a certificate or certificates for the number of shares issuable
upon such exercise. In the event that this Warrant is exercised in part, the
Company at its expense will execute and deliver a new Warrant of like tenor
exercisable for the number of shares for which this Warrant may then be
exercised.
4. NO FRACTIONAL SHARES OR SCRIP.
No fractional shares or scrip representing fractional shares
shall be issued upon the exercise of this Warrant. In lieu of any fractional
share to which the Holder would otherwise be entitled, the Company shall make a
cash payment equal to the Exercise Price multiplied by such fraction.
5. REPLACEMENT OF WARRANT.
On receipt of evidence reasonably satisfactory to the Company
of the loss, theft, destruction or mutilation of this Warrant and, in the case
of loss, theft or destruction, on delivery of an indemnity agreement reasonably
satisfactory in form and substance to the Company or, in the case of mutilation,
on surrender and cancellation of this Warrant, the Company at its expense shall
execute and deliver, in lieu of this Warrant, a new warrant of like tenor and
amount.
6. RIGHTS OF STOCKHOLDERS.
Subject to Sections 9 and 11 of this Warrant and the
provisions of any other written agreement between the Company and the Holder,
the Holder shall not be entitled to vote or receive dividends or be deemed the
holder of Common Stock or any other securities of the Company that may at any
time be issuable on the exercise hereof for any purpose, nor shall anything
contained herein be construed to confer upon the Holder, as such, any of the
rights of a shareholder of the Company or any right to vote for the election of
directors or upon any matter submitted to shareholders at any meeting thereof,
or to give or withhold consent to any corporate action (whether upon any
recapitalization, issuance of stock, reclassification of stock, change of par
value, or change of stock to no par value, consolidation, merger, conveyance or
otherwise) or to receive notice of meetings, or to receive dividends or
subscription rights or otherwise until the Warrant shall have been exercised as
provided herein.
7. TRANSFER OF WARRANT.
7.1 EXCHANGE OF WARRANT UPON A TRANSFER. On surrender of this
Warrant for exchange, properly endorsed, the Company at its expense shall issue
to or on the order of the Holder a new warrant or warrants of like tenor, in the
name of the Holder or as the Holder (on payment by the Holder of any applicable
transfer taxes) may direct, of the number of shares issuable upon exercise
hereof.
7.2 COMPLIANCE WITH SECURITIES LAWS.
(a) The Holder of this Warrant, by acceptance hereof,
acknowledges that this Warrant and the shares of Common Stock to be issued upon
exercise hereof are being
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<PAGE> 4
acquired solely for the Holder's own account and not as a nominee for any other
party, and for investment, and that the Holder will not offer, sell or otherwise
dispose of this Warrant or any shares of Common Stock to be issued upon exercise
hereof except under circumstances that will not result in a violation of
applicable federal and state securities laws. Upon exercise of this Warrant, the
Holder shall, if requested by the Company, confirm in writing, in a form
satisfactory to the Company, that the shares of Common Stock so purchased are
being acquired solely for the Holder's own account and not as a nominee for any
other party, for investment, and not with a view toward distribution or resale.
(b) This Warrant and all shares of Common Stock
issued upon exercise hereof shall be stamped or imprinted with a legend in
substantially the following form (in addition to any legend required by state
securities laws):
THE SECURITIES REPRESENTED HEREBY HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED. SUCH SECURITIES AND ANY SECURITIES OR
SHARES ISSUED UPON EXERCISE OR CONVERSION THEREOF MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SAID ACT.
8. RESERVATION OF STOCK.
The Company covenants that during the term that this Warrant
is exercisable, the Company will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of Common Stock
upon the exercise of this Warrant and, from time to time, will take all steps
necessary to amend its Articles of Incorporation (the "Articles") to provide
sufficient reserves of shares of Common Stock issuable upon the exercise of the
Warrant. The Company further covenants that all shares that may be issued upon
the exercise of rights represented by this Warrant, upon exercise of the rights
represented by this Warrant and payment of the Exercise Price, all as set forth
herein, will be free from all taxes, liens and charges in respect of the issue
thereof (other than taxes in respect of any transfer occurring contemporaneously
or otherwise specified herein). The Company agrees that its issuance of this
Warrant shall constitute full authority to its officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for shares of Common Stock upon the exercise of this Warrant.
9. NOTICES.
(a) Whenever the Exercise Price or number of shares
purchasable hereunder shall be adjusted pursuant to Section 11 hereof, the
Company shall issue a certificate signed by its Chief Financial Officer setting
forth, in reasonable detail, the event requiring the adjustment, the amount of
the adjustment, the method by which such adjustment was calculated, and the
Exercise Price and number of shares purchasable hereunder after giving effect to
such
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<PAGE> 5
adjustment, and shall cause a copy of such certificate to be mailed (by
first-class mail, postage prepaid) or personally delivered to the Holder of this
Warrant.
(b) In case:
(i) the Company shall take a record of the
holders of its Common Stock (or other stock or securities at
the time receivable upon the exercise of this Warrant) for the
purpose of entitling them to receive any dividend or other
distribution, or any right to subscribe for or purchase any
shares of stock of any class or any other securities, or to
receive any other right, or
(ii) of any capital reorganization of the
Company, any reclassification of the capital stock of the
Company, any consolidation or merger of the Company with or
into another corporation, or any conveyance of all or
substantially all of the assets of the Company to another
corporation, or
(iii) of any voluntary dissolution,
liquidation or winding-up of the Company,
then, and in each such case, the Company will mail or cause to be mailed or
personally deliver to the Holder or Holders a notice specifying, as the case may
be, (A) the date on which a record is to be taken for the purpose of such
dividend, distribution or right and stating the amount and character of such
dividend, distribution or right, or (B) the date on which such reorganization,
reclassification, consolidation, merger, conveyance, dissolution, liquidation or
winding-up is to take place, and the time, if any is to be fixed, as of which
the holders of record of Common Stock (or such stock or securities at the time
receivable upon the exercise of this Warrant) shall be entitled to exchange
their shares of Common Stock (or such other stock or securities) for securities
or other property deliverable upon such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding-up. Such
notice shall be mailed at least 15 days prior to the date therein specified.
(c) All such notices, advices and communications
shall be deemed to have been received, (i) in the case of personal delivery, on
the date of such delivery and (ii) in the case of mailing, on the third business
day following the date of such mailing.
10. AMENDMENTS.
(a) Any term of this Warrant may be amended with the
written consent of the Company and the Holder.
(b) No waivers of, or exceptions to, any term,
condition or provision of this Warrant, in any one or more instances, shall be
deemed to be, or construed as, a further or continuing waiver of any such term,
condition or provision.
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<PAGE> 6
11. ADJUSTMENTS.
The Exercise Price and the number of shares purchasable
hereunder is subject to adjustment from time to time as follows:
11.1 REORGANIZATION, MERGER OR SALE OF ASSETS. If at any time
while this Warrant, or any portion thereof, is outstanding and unexpired there
shall be (i) a reorganization (other than a combination, reclassification,
exchange or subdivision of shares otherwise provided for herein), (ii) a merger
or consolidation of the Company with or into another corporation in which the
Company is not the surviving entity, or a reverse triangular merger in which the
Company is the surviving entity but the shares of the Company's capital stock
outstanding immediately prior to the merger are converted by virtue of the
merger into other property, whether in the form of securities, cash or
otherwise, or (iii) a sale or transfer of the Company's properties and assets
as, or substantially as, an entirety to any other person, then, as a part of
such reorganization, merger, consolidation, sale or transfer, lawful provision
shall be made so that the holder of this Warrant shall thereafter be entitled to
receive upon payment of the Exercise Price then in effect, the number of shares
of stock or other securities or property of the successor corporation resulting
from such reorganization, merger, consolidation, sale or transfer that a holder
of the shares deliverable upon exercise of this Warrant would have been entitled
to receive in such reorganization, consolidation, merger, sale or transfer if
this Warrant had been exercised immediately before such reorganization, merger,
consolidation, sale or transfer, all subject to further adjustment as provided
in this Section 11. The foregoing provisions of this Section 11.1 shall
similarly apply to successive reorganizations, consolidations, mergers, sales
and transfers and to the stock or securities of any other corporation that are
at the time receivable upon the exercise of this Warrant. If the per-share
consideration payable to the Holder hereof for shares in connection with any
such transaction is in a form other than cash or marketable securities, then the
value of such consideration shall be determined in good faith by the Company's
Board of Directors. In all events, appropriate adjustment (as determined in good
faith by the Company's Board of Directors) shall be made in the application of
the provisions of this Warrant with respect to the rights and interests of the
Holder after the transaction, to the end that the provisions of this Warrant
shall be applicable after that event, as near as reasonably may be, in relation
to any shares or other property deliverable after that event upon exercise of
this Warrant.
11.2 RECLASSIFICATION. If the Company, at any time while this
Warrant, or any portion thereof, remains outstanding and unexpired, by
reclassification of securities or otherwise, shall change any of the securities
as to which purchase rights under this Warrant exist into the same or a
different number of securities of any other class or classes, this Warrant shall
thereafter represent the right to acquire such number and kind of securities as
would have been issuable as the result of such change with respect to the
securities that were subject to the purchase rights under this Warrant
immediately prior to such reclassification or other change and the Exercise
Price therefor shall be appropriately adjusted, all subject to further
adjustment as provided in this Section 11.
11.3 SPLIT, SUBDIVISION OR COMBINATION OF SHARES. If the
Company at any time while this Warrant, or any portion thereof, remains
outstanding and unexpired shall split,
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<PAGE> 7
subdivide or combine the securities as to which purchase rights under this
Warrant exist, into a different number of securities of the same class, the
Exercise Price for such securities shall be proportionately decreased in the
case of a split or subdivision or proportionately increased in the case of a
combination.
11.4 ADJUSTMENTS FOR DIVIDENDS IN STOCK OR OTHER SECURITIES OR
PROPERTY. If while this Warrant, or any portion hereof, remains outstanding and
unexpired the holders of the securities as to which purchase rights under this
Warrant exist at the time shall have received, or, on or after the record date
fixed for the determination of eligible Shareholders, shall have become entitled
to receive, without payment therefor, other or additional stock or other
securities or property (other than cash) of the Company by way of dividend, then
and in each case, this Warrant shall represent the right to acquire, in addition
to the number of shares of the security receivable upon exercise of this
Warrant, and without payment of any additional consideration therefor, the
amount of such other or additional stock or other securities or property (other
than cash) of the Company that such holder would hold on the date of such
exercise had it been the holder of record of the security receivable upon
exercise of this Warrant on the date hereof and had thereafter, during the
period from the date hereof to and including the date of such exercise, retained
such shares and/or all other additional stock, other securities or property
available by this Warrant as aforesaid during such period, giving effect to all
adjustments called for during such period by the provisions of this Section 11.
11.5 ISSUANCE OF SHARES BELOW EXERCISE PRICE.
(a) If at any time or from time to time after the
Warrant Issue Date, the Company shall issue or sell Additional Shares of Common
Stock (as hereinafter defined) other than as a dividend or other distribution on
any class of stock and other than upon a subdivision or combination of shares of
Common Stock for a consideration for shares less than the Exercise Price, then
forthwith upon such issue or sale, the Exercise Price shall be reduced to a
price equal to the consideration per share received by the Company upon such
issue or sale.
(b) For the purpose of this Section 11.6, the
consideration received by the Company for any issue or sale of securities shall,
(i) to the extent it consists of cash, be computed at the net amount of cash
received by the Company after deduction of any underwriting or similar
commissions, concessions or compensation paid or allowed by the Company in
connection with such issue or sale, (ii) to the extent it consists of a service
or property other than cash, be computed at the fair value of that service or
property as determined in good faith by the Board; and (iii) if Additional
Shares of Common Stock, Convertible Securities (as hereinafter defined), or
rights or options to purchase either Additional Shares of Common Stock or
Convertible Securities are issued or sold together with other stock or
securities or other assets of the Company for a consideration that covers both,
be computed as the portion of the consideration so received that may be
reasonably determined in good faith by the Board to be allocable to such
Additional Shares of Common Stock, Convertible Securities or rights or options.
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<PAGE> 8
(c) For the purpose of the calculations provided in
this Section 11.5, if at any time or from time to time after the Warrant Issue
Date the Company shall issue any rights or options for the purchase of, or stock
or other securities convertible into, Additional Shares of Common Stock (such
Common stock or securities being hereinafter referred to as "Convertible
Securities"), then, and in each case, if the Effective Price (as hereinafter
defined) of such rights, options or Convertible Securities shall be less than
the Exercise Price the Company shall be deemed to have issued at the time of the
issuance of such rights or options or Convertible Securities the maximum number
of Additional Shares of Common Stock issuable upon exercise or conversion
thereof and to have received as consideration for the issuance of such shares an
amount equal to the total amount of the consideration, if any, payable to the
Company upon exercise or conversion of such options or rights. "Effective Price"
shall mean the quotient determined by dividing the total of all of such
consideration by such maximum number of Additional Shares of Common Stock. No
further adjustment shall be made as a result of the actual issuance of
Additional Shares of Common Stock on the exercise of any such rights or options
or the conversion of any such Convertible Securities.
If any such rights or options or the conversion privilege
represented by any such Convertible Securities shall expire without having been
exercised, the adjustment to the number of shares available hereunder upon the
issuance of such rights, options or Convertible Securities shall be readjusted
to the number of shares that would have been in effect had an adjustment been
made on the basis that the only Additional Shares of Common Stock so issued were
the Additional Shares of Common Stock, if any, actually issued or sold on the
exercise of such rights or options or rights of conversion of such Convertible
Securities, and such Additional Shares of Common Stock, if any, were issued or
sold for the consideration actually received by the Company for the granting of
all such rights or options, whether or not exercised, plus the consideration
received for issuing or selling the Convertible Securities actually converted
plus the consideration, if any, actually received by the Company on the
conversion of such Convertible Securities.
(d) For the purpose of the calculations provided for
in this Section 11.5, if at any time or from time to time after the Warrant
Issue Date the Company shall issue any rights or options for the purchase of
Convertible Securities, then, in each such case, if the Effective Price thereof
is less than the then Exercise Price, the Company shall be deemed to have issued
at the time of the issuance of such rights or options the maximum number of
Additional Shares of Common Stock issuable upon conversion of the total amount
of Convertible Securities covered by such rights or options and to have received
as consideration for the issuance of such Additional Shares of Common Stock an
amount equal to the amount of consideration, if any, received by the Company for
the issuance of such rights or options, plus the minimum amounts of
consideration, if any, payable to the Company upon the conversion of such
Convertible Securities. "Effective Price" shall mean the quotient determined by
dividing the total amount of such consideration by such maximum number of
Additional Shares of Common Stock. No further adjustment of such Exercise Price
adjusted upon the issuance of such rights or options shall be made as a result
of the actual issuance of the Convertible Securities upon the exercise of such
rights or options or upon the actual issuance of Additional Shares of Common
Stock upon the conversion of such Convertible Securities.
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<PAGE> 9
The provisions of subsection (c) above for readjustment upon
the expiration of rights or options or the rights of conversion of Convertible
Securities, shall apply mutatis mutandis to the rights, options and Convertible
Securities referred to in this subsection (d).
(e) The term "Additional Shares of Common Stock" as
used herein shall mean all shares of Common Stock issued or deemed issued by the
Company after the Warrant Issue Date whether or not subsequently reacquired or
retired by the Company, other than (i) securities issued pursuant to the terms
of the Stock Purchase Agreement dated as of June 15, 1998, by and among the
Company and various shareholders; (ii) shares of Common Stock issued upon
conversion of convertible securities or the exercise of warrants; (iii) up to an
aggregate of 3,000,000 shares of Common Stock issued to employees, officers or
directors pursuant to any stock offering, plan or arrangement approved by the
Board of Directors of the Company; (iv) up to an aggregate of 5,520,000 shares
of Common Stock upon exercise of options granted as of May 1, 1998; and (v) up
to an aggregate of 444,444 shares of Common Stock to trade creditors of the
Company to settle up to $200,000 of indebtedness of the Company existing as of
the date hereof provided such issuances are at $.45 per share or more.
11.6 CERTIFICATE AS TO ADJUSTMENTS. Upon the occurrence of
each adjustment or readjustment pursuant to this Section 11, the Company at its
expense shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and furnish to each Holder of this Warrant a certificate
setting forth such adjustment or readjustment and showing in detail the facts
upon which such adjustment or readjustment is based. The Company shall, upon the
written request, at any time, of any such Holder, furnish or cause to be
furnished to such Holder a like certificate setting forth: (i) such adjustments
and readjustments, (ii) the Exercise Price at the time in effect; and (iii) the
number of shares and the amount, if any, of other property that at the time
would be received upon the exercise of the Warrant.
11.7 NO IMPAIRMENT. The Company will not, by any voluntary
action, avoid or seek to avoid the observance or performance of any of the terms
to be observed or performed hereunder by the Company, but will at all times in
good faith assist in the carrying out of all the provisions of this Section 11
and in the taking of all such action as may be necessary or appropriate in order
to protect the rights of the Holders of this Warrant against impairment.
12. REGISTRATION RIGHTS.
Upon exercise of this Warrant, the Holder shall have and be
entitled to exercise, together with all other holders of Registrable Securities
possessing registration rights under that certain Shareholders Agreement, of
even date herewith, between the Company and the parties who have executed the
counterpart signature pages thereto or are otherwise bound thereby (the
"Shareholders Agreement"), the rights of registration granted under the
Shareholders Agreement to Registrable Securities. By its receipt of this
Warrant, Holder agrees to be bound by the Shareholders Agreement.
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<PAGE> 10
13. ASSIGNMENT.
This Warrant shall be assignable by the holder only to one or
more permitted assignees of the holder's Registrable Securities pursuant to the
terms of the Shareholder's Agreement and only in conjunction with one or more
assignments of such Registrable Securities.
GOVERNING LAW. This Warrant shall be governed by the internal
laws of the Commonwealth of Pennsylvania.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
executed by its officers thereunto duly authorized.
Dated: June 15, 1998
HOLDER:
CEO VENTURE FUND III DEMETER BIOTECHNOLOGIES, LTD.
By: /s/ James Colker By: /s/ Richard D. Ekstrom
------------------------- ---------------------------
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<PAGE> 11
NOTICE OF EXERCISE
TO: Demeter Biotechnologies, Ltd.
(1) The undersigned hereby elects to purchase _______ shares of Common
Stock of Demeter Biotechnologies, Ltd. pursuant to the terms of Section 3(a) of
the attached Warrant, and tenders herewith payment of the purchase price for
such shares in full.
(2) In exercising this Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock or the Common Stock to be issued
upon conversion thereof are being acquired solely for the account of the
undersigned and not as a nominee for any other party, and for investment, and
that the undersigned will not offer, sell or otherwise dispose of any such
shares of Common Stock or Common Stock except under circumstances that will not
result in a violation of the Securities Act of 1933, as amended, or any state
securities laws.
(3) Please issue a certificate or certificates representing said shares
of Common Stock in the name of the undersigned or in such other name as is
specified below:
______________________________
(Name)
______________________________
(Name)
(4) Please issue a new Warrant for the unexercised portion of the
attached Warrant in the name of the undersigned or in such other name as is
specified below:
______________________________
(Name)
______________________________ ______________________________
(Date) (Signature)
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<PAGE> 1
Exhibit 4.4
SHAREHOLDERS' AGREEMENT
This Shareholders' Agreement is entered into as of the 15th
day of June, 1998, by and among Demeter Biotechnologies, Ltd., a Colorado
corporation (the "Company"); Richard Ekstrom and Jesse Jaynes (the "Principal
Shareholders"); and those persons identified as Investors on the signature pages
hereof (referred to individually as the "Investor" and collectively as the
"Investors"). The Principal Shareholders and the Investors are sometimes
individually referred to herein as a "Shareholder" and collectively as the
"Shareholders".
WHEREAS, the Shareholders are parties to the Stock Purchase
Agreement dated as of the date of this Agreement (the "Purchase Agreement"), and
such Shareholders' rights and obligations under said Purchase Agreement are
conditioned upon the execution and delivery of this Agreement.
NOW, THEREFORE, in consideration of the mutual promises and
covenants set forth herein, and intending to be legally bound hereby, the
Shareholders agree as follows:
1. Definitions.
Except as otherwise provided herein, capitalized terms which
are used but not otherwise defined herein have the meanings ascribed to them in
the Purchase Agreement.
Additionally, for purposes of this Agreement:
(a) The term "Act" means the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and regulations
thereunder in effect from time to time.
(b) The terms "register," "registered" and "registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Act and the declaration or ordering of
effectiveness of such registration statement.
(c) The term "Preferred Shares" means the shares of Preferred
Stock held by the Investors from time to time, including without limitation,
those shares purchased pursuant to the Purchase Agreement and those shares
issued upon exercise of any Warrants issued pursuant thereto.
(d) The term "Preferred Stock" means the Convertible Preferred
Stock, par value $.001 per share, of the Company.
(e) The term "Registrable Securities" means (i) Common Stock
issuable or issued upon conversion of the Preferred Shares, and (ii) any
securities of the Company issued as a dividend or other distribution with
respect to, or in exchange or in replacement of, the Preferred
<PAGE> 2
Shares or such Common Stock. Registrable Securities, if transferred pursuant to
an exemption from registration under the Act, will remain Registrable
Securities.
(f) The term "Holder" means (i) any Investor holding
Registrable Securities originally acquired by such person pursuant to the
Purchase Agreement, and (ii) any other person holding Registrable Securities to
whom the registration rights conferred by this Agreement have been transferred
in compliance with paragraph 2.14 of this Agreement.
(g) The term "majority in interest" means the holders of a
majority of the shares of the class or classes of stock referenced.
(h) The term "SEC" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Act.
(i) The term "Common Stock" means the common stock, par value
$.001 per share, of the Company.
All other capitalized terms used but not otherwise defined in this Agreement
have the meanings ascribed to them in the Purchase Agreement.
2. Registration Rights.
2.1 Request for Registration. At any time after twelve (12)
months from the date hereof, if the Company shall receive a written request
(specifying that it is being made pursuant to this paragraph 2.1) from one or
more of the Holders that the Company file a registration statement or similar
document under the Act and effect the registration of not less than twenty
percent (20%) of the Registrable Securities held by all Investors, the expected
aggregate price to the public of which exceeds $3,000,000, net of underwriting
discounts and commissions, then the Company shall promptly (i) notify all other
Holders in writing of such request and (ii) shall use its best efforts to effect
such registration (including, without limitation, filing post-effective
amendments, appropriate qualifications under applicable blue sky or other state
securities laws and appropriate compliance with the Act) of all Registrable
Securities that Holders have requested be so registered to be registered under
the Act and of all Registrable Securities that any Holder joining in such
request shall specify in a written request received by the Company within twenty
(20) days following notice by the Company of the proposed registration.
Notwithstanding the foregoing, (a) the Company shall not be
obligated to effect a registration pursuant to this paragraph 2.1 during the
period starting with the date sixty (60) days prior to the Company's estimated
date of filing of, and ending on a date four (4) months following the effective
date of, a registration statement pertaining to an underwritten public offering
of securities for the account of the Company, provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective and that the Company's estimate of
the date of filing such registration statement is made in good faith; and (b) if
the Company shall furnish to such Holders a certificate signed by the President
of the Company stating that in the good faith judgment of the Board of Directors
it
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<PAGE> 3
would be seriously detrimental to the Company or its shareholders for a
registration statement to be filed in the near future, then the Company's
obligation to use its best efforts to file a registration statement shall be
deferred for a period not to exceed one-hundred twenty (120) days; provided,
however, that the Company shall not obtain such a deferral more than once in any
twelve (12) month period.
The Company shall be obligated to effect only three
registrations (counting for these purposes only registrations which have been
declared and ordered effective and pursuant to which securities have been sold)
pursuant to this paragraph 2.1 (other than on Form S-3). Any request for
registration under this paragraph 2.1 must be for an underwritten public
offering to be managed by an underwriter or underwriters of recognized national
standing reasonably acceptable to the Company.
2.2 Company Registration. Subject to paragraph 2.7, if at any
time or from time to time the Company proposes to register any of its equity
securities under the Act in connection with a secondary public offering of such
securities on a form that would also permit the registration of the Registrable
Securities (and other than registration on Forms S-8 and S-4), the Company
shall, each such time, promptly give each Holder written notice of such
determination. Upon the written request of any Holder given within twenty (20)
days following such notice by the Company, the Company shall use its best
efforts to cause to be registered under the Act (and any related qualification
or registration under blue sky laws) and included within any underwriting
involved therein, all of the Registrable Securities that each such Holder has
requested be registered. Such written request may specify all or a part of a
Holder's Registrable Securities.
2.3 Registrations on Form S-3. If (i) a Holder or Holders of
shares of Preferred Stock having a market value of at least five percent (5%) of
the Company's then outstanding capital stock shall request in writing
(specifying that it is being made pursuant to this paragraph 2.3) that the
Company file a registration statement on Form S-3 (or any successor form to Form
S-3 regardless of its designation) for a public offering of shares of the
Registrable Securities, and (ii) the Company is a registrant entitled to use
Form S-3 to register such shares, then the Company shall notify all other
Holders of such request and shall use its best efforts to cause to be registered
on Form S-3 (or any successor form to Form S-3) all of the Registrable
Securities that each Holder requests to be so registered. Rights to registration
under this paragraph are limited to three (3) requests and are in addition to,
and not in lieu of, rights to registration under paragraphs 2.2 and 2.3.
2.4 Obligations of the Company. Whenever required under
paragraphs 2.1, 2.2 or 2.3 to use its best efforts to effect the registration of
any Registrable Securities, the Company shall, as expeditiously as possible:
(a) Prepare and file with the SEC a registration statement
with respect to such Registrable Securities and use its best efforts to cause
such registration statement to become and remain effective until the Holder or
Holders have completed the distribution described in the registration statement
relating thereto; provided, however, that in connection with any proposed
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<PAGE> 4
registration intended to permit an offering of any securities from time to time
(i.e., a so-called "shelf registration"), the Company shall in no event be
obligated to cause any such registration to remain effective for more than
ninety (90) days; provided, however, that (i) such 90-day period shall be
extended for a period of time equal to the period the Holder refrains from
selling any securities included in such registration at the request of an
underwriter of Common Stock (or other securities) of the Company; and (ii) in
the case of any registration of Registrable Securities on Form S-3 which are
intended to be offered on a continuous or delayed basis, such 90-day period
shall be extended, if necessary, to keep the registration statement effective
until all such Registrable Securities are sold, provided that Rule 145, or any
successor rule under the Act, permits an offering on a continuous or delayed
basis, and provided further that applicable rules under the Act governing the
obligation to file a post-effective amendment permit, in lieu of filing a
post-effective amendment that (I) includes any prospectus required by Section
10(a)(3) of the Act or (II) reflects facts or events representing a material or
fundamental change in the information set forth in the registration statement,
the incorporation by reference of information required to be included in (I) and
(II) above to be contained in periodic reports filed pursuant to Section 13 or
15(d) of the Securities and Exchange Act of 1934, as amended (the "1934 Act") in
the registration statement.
(b) Prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Act with respect to the disposition of all securities covered
by such registration statement.
(c) Furnish to the Holders and deliver as directed such
numbers of copies of a prospectus, including a preliminary prospectus and any
amendment or supplement thereto, as such Holders may request in conformity with
the requirements of the Act, and such other documents as they may reasonably
request in order to facilitate the disposition of Registrable Securities owned
by them.
(d) Use its best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably appropriate for the
distribution of the securities covered by the registration statement, provided
that the Company shall not be required in connection therewith or as a condition
thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdictions, and further provided that (anything
in this Agreement to the contrary notwithstanding with respect to the bearing of
expenses) if any jurisdiction in which the securities shall be qualified shall
require that expenses incurred in connection with the qualification of the
securities in that jurisdiction be borne by selling shareholders, then such
expenses shall be payable by selling shareholders pro rata, to the extent
required by such jurisdiction.
(e) Notify each seller of Registrable Securities covered by
such registration statement at any time when a prospectus relating thereto is
required to be delivered under the Act of the happening of any event as a result
of which the prospectus included in such registration statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
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<PAGE> 5
material fact required to be stated therein or necessary to make the statements
therein not misleading or incomplete in the light of the circumstances then
existing, and at the request of any such seller, prepare and furnish to such
seller a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such shares, such prospectus shall not include an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading or incomplete
in the light of the circumstances then existing.
(f) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed.
(g) Provide a transfer agent and registrar for all Registrable
Securities registered pursuant to such registration statement and a CUSIP number
for all such Registrable Securities, in each case not later than the effective
date of such registration.
(h) Otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to
security holders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve months, but not more than eighteen
months, beginning with the first month after the effective date of the
Registration Statement, which earnings statement shall satisfy the provisions of
Section 11(a) of the Act.
(i) In connection with any underwritten offering pursuant to a
registration statement filed pursuant to paragraph 2.1 hereof, the Company will
enter into an underwriting agreement in form reasonably necessary to effect the
offer and sale of Common Stock, provided such underwriting agreement contains
customary underwriting provisions and provided further that if the underwriter
so requests the underwriting agreement will contain customary contribution
provisions.
2.5 Furnish Information. It shall be a condition precedent to
the obligations of the Company to take any action pursuant to Section 2 that the
Holders shall furnish to the Company such information regarding them, the
Registrable Securities held by them, and the intended method of disposition of
such securities as the Company shall reasonably request in writing and as shall
be reasonably required in connection with the action to be taken by the Company.
2.6 Expenses of Demand Registration. All expenses incurred in
connection with a registration pursuant to paragraph 2.1 (excluding
underwriters' discounts and commissions), including without limitation all
registration and qualification fees (including, without limitation expenses of
any regular or special audits incident to or required by any such registration),
printers' and accounting fees, fees and disbursements of counsel for the
Company, blue sky fees and expenses and the reasonable fees and disbursements of
one counsel for the selling Holders shall be borne by the Company.
2.7 Company Registration Expenses. In the case of any
registration effected pursuant to paragraphs 2.2 or 2.3, the Company shall bear
all registration and qualification fees
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<PAGE> 6
and expenses (excluding underwriters' discounts and commissions), including
printers' and accounting fees,(including, without limitation, expenses of any
regular or special audits incident to or required by any such registration) any
additional costs and disbursements of counsel for the Company that result from
the inclusion of securities held by the Holders in such registration and the
reasonable fees and disbursements of one counsel for the selling Holders;
provided, however, that each selling Holder shall bear the fees and costs of its
own counsel other than the one counsel for which the Company shall pay pursuant
to this paragraph 2.7.
2.8 Underwriting Requirements. In connection with any offering
involving an underwriting of shares being issued by the Company, the Company
shall not be required to include any of the Holders' Registrable Securities in
such underwriting unless they accept the terms of the underwriting as agreed
upon between the Company and the underwriters selected by it. If the total
amount of Registrable Securities that all Holders request to be included in an
offering pursuant to paragraphs 2.1 and 2.2 above exceeds the amount of
securities that the underwriters reasonably believe compatible with the success
of the offering, there shall be included in such registration that number of
Registrable Securities which in the opinion of the underwriters can be sold, and
the securities so included shall be apportioned pro rata among the selling
Holders according to the total amount of Registrable Securities owned by said
selling Holders, or in such other proportions as shall be agreed to by a
majority in interest of such selling Holders.
2.9 Delay of Registration. No Holder shall have any right to
take any action to restrain, enjoin, or otherwise delay any registration as the
result of any controversy that might arise with respect to the interpretation or
implementation of this Section 2.
2.10 Indemnification and Contribution. Subject to paragraph
2.7 in the event any Registrable Securities are included in a registration
statement under Section 2:
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each Holder requesting or joining in a registration, each of
its officers, directors, partners, legal counsel and accountants, any
underwriter (as defined in the Act) for it, and each person, if any, who
controls such Holder or underwriter within the meaning of the Act or the 1934
Act against any losses, claims, expenses, damages or liabilities or actions,
proceedings or settlements in respect thereof), joint or several, to which they
may become subject under the Act, the 1934 Act or otherwise, insofar as such
losses, claims, expenses, damages or liabilities (or actions in respect thereof)
arise out of or are based on any untrue or alleged untrue statement of any
material fact contained in such registration statement, including any
preliminary prospectus or final prospectus, offering circular or other document,
or any amendments or supplements thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be
stated therein, or necessary to make the statements therein not misleading or
arise out of any violation by the Company of any rule or regulation promulgated
under the Act or the 1934 Act applicable to the Company and relating to action
or inaction required of the Company in connection with any such registration;
and will reimburse each such Holder, each of its officers, directors, partners,
legal counsel and accountants, such underwriter, or such controlling person for
any legal or other expenses reasonably incurred by them in
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connection with investigating, defending or settling any such loss, claim,
expense, damage, liability or action or in enforcing its rights hereunder;
provided, however, that the indemnity agreement contained in this paragraph
2.10(a) shall not apply to amounts paid in settlement of any such loss, claim,
damage, liability or action if such settlement is effected without the consent
of the Company (which consent shall not be unreasonably withheld) nor shall the
Company be liable in any such case for any such loss, claim, damage, liability
or action to the extent that it arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
connection with such registration statement, preliminary prospectus, final
prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished expressly for use in connection
with such registration by any such Holder, underwriter or controlling person.
(b) To the extent permitted by law, each Holder requesting or
joining in a registration will severally indemnify and hold harmless the
Company, each of its directors, each of its officers who have signed the
registration statement, each person, if any, who controls the Company within the
meaning of the Act or the 1934 Act, and each agent and any underwriter for the
Company (within the meaning of the Act or the 1934 Act) against any losses,
claims, expenses, damages or liabilities, joint or several, to which the Company
or any such director, officer, controlling person, agent or underwriter may
become subject, under the Act or otherwise, insofar as such losses, claims,
expenses, damages or liabilities (or actions in respect thereto) arise out of or
are based upon any untrue statement or alleged untrue statement of any material
fact contained in such registration statement, including any preliminary
prospectus or final prospectus, or any amendments or supplements thereto, or
arise out of or are based upon the omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was made in such registration statement, preliminary or final
prospectus, or amendments or supplements thereto, in reliance upon and in
conformity with written information furnished by such Holder expressly for use
in connection with such registration; and each such Holder will reimburse any
legal or other expenses reasonably incurred by the Company or any such director,
officer, controlling person, agent or underwriter in connection with
investigating or defending any such loss, claim, damage, liability or action;
provided, however, that the indemnity agreement contained in this paragraph
2.10(b) shall not apply to amounts paid in settlement of any such loss, claim,
expense, damage, liability or action if such settlement is effected without the
consent of such Holder (which consent shall not be unreasonably withheld) and
provided that in no event shall the indemnity provided pursuant to this
paragraph 2.10(b) exceed the gross proceeds from the offering received by such
Holder.
(c) Promptly after receipt by an indemnified party under this
paragraph of notice of the commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against any indemnifying party
under this paragraph, notify the indemnifying party in writing of the
commencement thereof and (unless the interest of the indemnifying party
conflicts with that of the indemnified party) the indemnifying party shall have
the right to participate in, and, to the extent the indemnifying party so
desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel
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mutually satisfactory to the parties provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense. The failure to notify an indemnifying party
promptly of the commencement of any such action, if prejudicial to his ability
to defend such action, shall relieve such indemnifying party, but only to the
extent that he is prejudiced thereby, of any liability to the indemnified party
under this paragraph, but the omission so to notify the indemnifying party will
not relieve him of any liability that he may have to any indemnified party
otherwise than under this paragraph. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement that 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. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
(d) In order to provide for just and equitable contribution to
joint liability under the Act in any case in which either (i) any Holder or
other person entitled to exercise rights under this Agreement, or any
controlling person of any such Holder, makes a claim for indemnification
pursuant to this paragraph 2.10 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 paragraph 2.10 provides for indemnification in such case, or (ii)
contribution under the Act may be required on the part of any such selling
Holder or any such controlling person in circumstances for which indemnification
is provided under this paragraph 2.10; then, and in each such case, the Company
and such Holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that such Holder is responsible for the portion represented
by the percentage that the public offering price of its Registrable Securities
offered by the registration statement bears to the public offering price of all
securities offered by such registration statement, and the Company is
responsible for the remaining portion; provided, however, that, in any such
case, (A) no such Holder will be required to contribute any amount in excess of
the public offering price of or the gross proceeds received by such Holder for
all such Registrable Securities offered by it pursuant to such registration
statement; and (B) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
2.11 Reports Under the 1934 Act. With a view to making
available to the Holders the benefits of Rule 144 promulgated under the Act and
any other rule or regulation of the SEC that may at any time permit a Holder to
sell securities of the Company to the public without registration, the Company
agrees to use its best efforts to:
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(a) make and keep public information available, as those terms
are understood and defined in Rule 144, at all times;
(b) file with the SEC in a timely manner all reports and other
documents required of the Company under the Act and the 1934 Act at any time
after it has become subject to such reporting requirements; and
(c) furnish to any Holder so long as such Holder owns any of
the Registrable Securities forthwith upon request a written statement by the
Company that it has complied with the reporting requirements of Rule 144, and of
the Act and the 1934 Act (at any time after it has become subject to such
reporting requirements), a copy of the most recent annual or quarterly report of
the Company, and such other reports and documents so filed by the Company as may
be reasonably requested in availing any Holder of any rule or regulation of the
SEC permitting the selling of any such securities without registration.
2.12 Lockup Agreement. In consideration for the Company
agreeing to its obligations under this Section 2, each Holder agrees in
connection with any registration of the Company's Common Stock for sale to the
general public that, upon the request of the Company or the underwriters
managing any underwritten offering of the Company's securities, not to sell,
make short sale of, loan, grant any option for the purchase of, or otherwise
dispose of any Registrable Securities (other than those included in the
registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time (not to exceed one
hundred twenty (120) days) from the effective date of such registration as the
Company or the underwriters may specify; provided, however, that (i) the Company
may not discriminate among the Holders with respect to any lockup arrangements
pursuant to this paragraph 2.12, (ii) such agreement shall only apply to the
first such registration statement of the Company, including securities to be
sold on its behalf to the public in an underwritten offering; and, (iii) all
officers and directors of the Company and holders of at least one percent (1%)
of the Company's voting securities are bound by and have entered into similar
agreements. The obligations described in this paragraph 2.12 shall not apply to
a registration relating solely to employee benefit plans on Form S-1 or Form S-8
or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred twenty (120) day period.
2.13 Certain Limitations in Connection with Future Grants of
Registration Rights. From and after the date of this Agreement, the Company
shall not, without the prior written consent of a majority in interest of the
Holders, enter into any agreement with any holder or prospective holder of any
securities of the Company giving such holder or prospective holder any
registration rights the term of which are more favorable than the registration
rights granted to the Holders hereunder.
2.14 Transfer of Demand Registration Rights. The demand
registration rights of the Holders under paragraphs 2.1 and 2.3 may be
transferred to a transferee who acquires at
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least twenty percent (20%) of the Registrable Securities originally issued to
such Holder, or to a partner, shareholder or affiliated partnership of any
Investor without restriction as to minimum amount. The Company shall be given
written notice by the Holder at the time of such transfer stating the name and
address of the transferee and identifying the securities with respect to which
the rights under this Section 2 are being assigned and provided further, that
the transferee or assignee assumes in writing the obligations of a Holder under
Section 2.
3. General Restrictions on Transfer of Shares.
(a) During the term of this Agreement, none of the shares of
capital stock of the Company, or other securities convertible into or
exercisable or exchangeable for capital of the Company (collectively, "Capital
Stock") owned on the date hereof or thereafter acquired by a Principal
Shareholder may be transferred, assigned, pledged, encumbered or otherwise
hypothecated except in accordance with the provisions of this Agreement.
(b) Any attempted transfer of Capital Stock of the Company by
a Principal Shareholder or any transferee thereof other than in accordance with
this Agreement (other than an involuntary transfer by operation of law) shall be
null and void and the Company shall refuse to recognize any such transfer and
shall not reflect on its records any change in record ownership of Capital Stock
of the Company pursuant to any such transfer.
(c) Any attempted transfer of Capital Stock of the Company by
a Principal Shareholder or any transferee thereof pursuant to which the
transferee becomes a holder of more than five percent (5%) of the outstanding
Capital Stock of the Company (calculated on an as-converted to common stock
basis) shall be null and void and the Company shall refuse to recognize any such
transfer and shall not reflect on its records any change in record ownership of
Capital Stock of the Company pursuant to any such transfer unless and until such
transferee agrees in writing to be bound by the provisions of this Agreement as
a Principal Shareholder herein.
4. Right of Co-Sale.
Each Principal Shareholder agrees that it will not enter into
any transaction or series of transactions that would result in the sale by him
of more than 50% of the Common Stock of the Company held by him at any time (or
any securities convertible into such Common Stock), unless prior to such sale he
(the "Selling Shareholder") shall give at least ten (10) business days written
notice to each of the Investors. Such notice shall set forth (i) the amount and
types of securities to be sold, (ii) the principal terms of the sale, (iii) the
percentage such securities would constitute of the Common Stock of the Company
then held by the Selling Shareholder if all securities of the Selling
Shareholder exercisable for or convertible into Common Stock were so exercised
and converted (the "Sale Portion"), (iv) an offer to cause to be included in the
sale, on the same terms and conditions, that percentage of the shares of Common
Stock then held by each of the Investors (including shares of Common Stock into
which each of the Investors may convert other securities held by them) equal to
the Sale Portion, and (v) the date by which the Investor must respond, which
shall be no less than ten (10) business days following the date of notice (the
"Cutoff Date"). Each Investor electing to exercise its right of
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co-sale must notify the Selling Shareholder in writing before the close of
business on the Cutoff Date, stating its intention to participate in the sale
and the number of shares it desires to sell, if less than its Sale Portion.
Subject to the right of first refusal contained in Section 5 below, the Selling
Shareholder shall be free for a period of sixty (60) days after the Cutoff Date
to sell on the terms set forth in the offer the amount of securities described
in the offer, less the amount of securities sold by the Investors exercising
their co-sale rights. If Capital Stock of the Company is sold pursuant to this
Section 4 to any purchaser who is not a party to this Agreement, the purchaser
of such shares shall execute a counterpart to this Agreement as a precondition
of the purchase of such shares in the event such purchaser becomes a holder of
more than five percent (5%) of the outstanding Capital Stock as a result of such
purchase. In the event that Capital Stock covered by the Notice is not disposed
of within sixty (60) days following the lapse of the ten (10) business day offer
period set forth herein, then such Capital Stock shall once again be subject to
the co-sale rights set forth in this Section 3. The parties acknowledge that the
provisions of this Section 4 may prevent a Selling Shareholder from selling the
amount of securities it originally intended to sell. The provisions of this
Section 4 shall not apply to any sale by a Selling Shareholder in an
underwritten public offering under an effective registration statement under the
Act of 1933, as amended.
5. Right of First Refusal.
Each of the Principal Shareholders hereby grants to the
Investors a right of first refusal to purchase any securities of the Company
sought to be sold by him, and agrees that any such sale shall be for cash only.
Any Principal Shareholder desiring to sell any of such securities (the "Selling
Shareholder") shall notify the Investors in writing of his intention. Promptly
after the expiration of the Cut-off Date (to the extent applicable under Section
4 hereof), the Selling Shareholder shall inform the Investors in writing of the
type and number of securities available for sale (including those offered
pursuant to the provisions of Section 4), the identities of those desiring to
sell, the identity of the proposed purchaser, the proposed price and the terms
of the sale. The Investors shall thereupon have a right of first refusal to
purchase the securities offered at the price and on the terms offered by the
proposed purchaser. Unless the Investors agree unanimously upon a different
allocation, each Investor wishing to purchase securities shall have the right to
purchase that portion of the securities offered which is determined by a
fraction the numerator of which is the number of shares of Common Stock held by
such Investor and the denominator of which is the number of shares of Common
Shares held by all Investors who wish to purchase securities (assuming for
purposes of the calculation the exercise and conversion of all securities of the
Company held by such Investors). Each participating Investor shall have a
further pro rata right (a "right of over allotment") to purchase the securities
refused by any Investor who declines to fully exercise its right of first
refusal. Each Investor desiring to exercise its right of first refusal, shall
deliver a written notice to the Selling Shareholder (with a copy to the
Company), not later than ten (10) business days after receiving notice of the
offer from the Selling Shareholder, stating (i) its intent to purchase, (ii)
whether or not it intends to exercise its right of over allotment, and (iii) the
maximum amount of securities it is willing to purchase. The Selling Shareholder
shall be free for a period of sixty (60) days after the notice period has
expired to sell any securities not subscribed for by the Investors to the same
proposed purchaser, at the same price and on the same terms as set forth in the
Selling Shareholder's notice of
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intended sale. The Investors which notify the Selling Shareholder that they
intend to purchase the securities shall consummate such purchase not later than
thirty (30) business days after receiving notice from the Selling Shareholder.
The provisions of this Section shall not apply to any transfer of securities
from the CEO Venture Fund III to affiliated funds or to partners of CEO Venture
Fund III or affiliated funds.
6. Preemptive Rights.
The Company hereby grants to each Investor for so long as he
or it shall own, beneficially or of record, any Capital Stock, the preemptive
right to purchase from the Company his pro rata portion of an offering of any
equity security or any security which is or may become convertible or
exchangeable into an equity security of the Company whether now authorized or
not, and rights, options or warrants to purchase equity securities or capital
stock and securities of any type whatsoever that are, or may become convertible
into or exchangeable for equity securities or Capital Stock, when issued or sold
by the Company, on the best terms and conditions as said securities are offered
to other purchasers thereof; provided, however, that there will be no such
preemptive right in the case of (i) shares issued to employees, officers,
directors, consultants or other persons performing services for the Company
pursuant to any stock offering, plan or arrangement approved by the Board of
Directors of the Company and a majority-in-interest of the Investors, (ii) the
re-issuance to employees of shares of the Company's stock which have been
acquired from employees pursuant to restricted stock arrangements, (iii) shares
issued under the Purchase Agreement or pursuant to the exercise of outstanding
options or warrants, or the conversion of outstanding convertible securities or
the Preferred Shares, (iv) shares issued in the acquisition of another company,
(v) equity securities issued as a stock dividend to holders of Common Stock or
Preferred Stock or upon any stock split, subdivision or combination of shares of
Capital Stock, (vi) securities issued to the public pursuant to a registration
statement filed under the Act, or (vii) up to an aggregate of 444,444 shares of
Common Stock to trade creditors of the Company to settle up to $200,000 of
indebtedness of the Company existing as of March 31, 1998 hereof provided such
issuances are at $.45 per share or more. The Company shall give the Investors
thirty (30) days written notice (the "Notice Period") of any proposed security
issuance which would give rise to preemptive rights as contemplated in this
Section 6. Each Investor wishing to purchase securities shall have the right to
purchase that portion of the securities which is determined by a fraction the
numerator of which is the number of shares of Common Stock held by such Investor
and the denominator of which is the number of shares of Common Stock held by all
Investors who wish to purchase a portion of the securities (assuming for
purposes of the calculation the exercise and conversion of all securities of the
company held by the Investors). Each participating Investor shall have a further
pro rata right (a "right of over-allotment") to purchase the securities refused
by any Investor who declines to fully exercise its preemptive right. Each
Investor desiring to exercise its preemptive right must notify the Company in
writing prior to the close of business on the last day of Notice Period, stating
(i) its intent to purchase, (ii) whether or not it intends to exercise its right
of over-allotment, and (iii) the maximum amount of securities it is willing to
purchase. The foregoing preemptive rights shall terminate immediately upon the
completion of the Company's Initial Public Offering.
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In the event any Investor fails to exercise in full its
preemptive right (after giving effect to the over-allotment provisions hereof),
the Company shall have ninety (90) days thereafter to sell the securities with
respect to which the Investor's option was not exercised, at a price and upon
terms no more favorable to the purchasers thereof than specified in the
Company's notice. To the extent the Company does not sell all the securities so
offered within said ninety (90) day period, the Company shall not thereafter
issue or sell any such securities without first offering such securities to the
Investors in the manner provided herein.
7. Right of Company to Purchase Shares upon Termination of Employment.
If at any time following the date of this Agreement, any
Principal Shareholder employed by the Company shall be terminated for cause, as
hereinafter defined, or shall terminate his employment of his own volition, the
Company shall have the right but not the obligation, upon notice delivered
within thirty (30) days of the occurrence of any such event, to purchase up to
fifty percent (50%) of the Capital Stock held by that Principal Shareholder. The
purchase price for any securities acquired under this section shall be the fair
market value as of the date of such event as determined in good faith by the
Board of Directors of the Company. In the event the Company shall elect not to
exercise its option hereunder, the Capital Stock held by the Principal
Shareholder shall continue to be restricted by the terms of this Agreement. As
used herein, "cause" shall mean: (i) the Principal Shareholder's failure,
dereliction, or refusal to perform such duties as are reasonably assigned to him
by the Directors of the Company from time to time; or (ii) the conclusion of a
majority of the Board of Directors that the Principal Shareholder is unable to
satisfactorily perform the duties required by his position; or (iii) the
Principal Shareholder's fraud, dishonesty, or other deliberate injury to the
Company in the performance of his duties; or (iv) the Principal Shareholder's
conviction of a crime which constitutes a felony in the jurisdiction in which he
is employed, regardless of whether such crime involves the Company; or (v) a
material breach of any provision of the Principal Shareholder's employment
agreement with the Company, if any, or any rule or regulation of the Company;
provided that, in the case of clauses (i), (ii) and (v) above, the Principal
Shareholder shall be given written notice and a reasonable period of time (not
to exceed 30 days) to cure, in the reasonable determination of the Board, any
such failure, dereliction, refusal, inability or breach.
8. Board of Directors.
(a) The Board of Directors of the Company shall initially
consist of eight (8) members. The first two vacancies created by the retirement
of any of the Original Directors (as defined in the Purchase Agreement) from the
Board of Directors, shall not be filled and the size of the Board of Directors
reduced accordingly. The Principal Shareholders agree that, at the request of
the Investor, one additional Original Director shall be removed and replaced by
an independent individual with experience in the Company's industry and who is
acceptable to the Investors. The members of the Board of Directors who are not
employees of the Company will serve as the Compensation Committee of the
Company. The Compensation Committee will determine the compensation of all
senior employees and consultants of the Company (including salary, bonus, equity
participation and benefits). Grants of options under the Company's Employee
Stock Option Plan shall require the approval of the Investors. The compensation
of
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senior employees and consultants shall be reviewed by the Compensation Committee
on an annual basis, and the decision by a majority of the members of the
Compensation Committee will control the Committee's actions; provided, however,
that no member of the Compensation Committee shall be permitted to vote with
respect to matters concerning such member's compensation. The Board of Directors
of the Company will meet not less frequently than monthly.
(b) It shall be a condition to the obligations of the
Investors that the current make-up of the Board of Directors as of Closing be in
accordance with this Section 8. The Shareholders agree to vote their shares in
favor of (i) three (3) directors selected by the Principal Shareholders, (ii)
two (2) directors selected by a majority in interest of the Investors (unless
the provisions of paragraph (c) below are applicable, in which case the
Shareholders agree to vote their shares in favor of five (5) directors selected
by a majority in interest of the Investors), and (iii) one director who shall be
an independent individual with experience in the Company's industry acceptable
to the Investors. Notwithstanding the foregoing, in the event the shareholders
of the Company do not approve the Amended Articles pursuant to the terms of
Section 7.16 of the Purchase Agreement prior to December 31, 1998, then the
Shareholders agree to vote their shares in favor of (i) one (1) director
selected by the Principal Shareholders, (ii) four (4) directors selected by a
majority in interest of the Investors (unless the provisions of (c) below are
applicable, in which case the Shareholders agree to vote their shares in favor
of seven (7) directors selected by a majority in interest of the Investors), and
(iii) one (1) director who shall be an independent individual with experience in
the Company's industry acceptable to the Investors. Any of the foregoing groups
having the right to select a director may remove, at any time by the vote of a
majority in interest of such group, such director and select a replacement. The
parties hereto further agree to vote their shares so that the initial board
(subject to the terms of Section 8(a) above) shall consist of Alfonso
Lovo-Cordero, Donald A. Guthrie, George N. Keeney III, Antonio Maggioni, Richard
Ekstrom, Jessie Jaynes, James Colker and Konrad Weis.
(c) If the revenues of the Company are more than forty percent
(40%) below the revenues projected in the Company's business plan, for the
period through the year ending December 31, 2000, and thereafter as set forth in
the business plan as adopted from time to time by the Board of Directors as
measured by net revenues for any six (6) month period starting January 1, 1999,
then, in either such case, the Investors will have the right to appoint three
(3) more board members. For purposes of this Section 8(c), revenues will include
income from sales, non-recoverable grants, licenses, options, royalties,
research fees or technology support fees. Revenues will also include (i) grants
which support research on the Company's technology paid directly to other
organizations such as a Cap CURE grant to a university, and (ii) research done
by a third party funded by licensees, joint venture partners, or other alliances
which otherwise would be paid by the Company.
(d) The Bylaws of the Company shall provide that any two
directors may call a meeting of the Board of Directors.
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(e) The Company shall pay the reasonable out-of-pocket travel
and other expenses of those Directors who are not employees of the Company
incurred in connection with their service on the Board.
9. Covenants.
The Company covenants and agrees with the Investors that,
without the prior written consent of the Holders of at least a majority of the
then outstanding Preferred Shares, and as long as this Agreement is in force and
effect, the Company will not:
(i) Expand any current stock ownership plan,
agreement or arrangement or enter into any new employee stock ownership
plan, agreement or arrangement.
(ii) Make, or permit any Subsidiary to make, any loan
or advance to, or own any stock or other securities of, any Subsidiary
or other corporation, partnership or other entity unless it is wholly
owned by the Company or by any Subsidiary of the Company.
(iii) Permit any Subsidiary to authorize and issue
any capital stock, other than director's or incorporator's qualifying
shares, to any person other than the Company.
(iv) Make, or permit any Subsidiary to engage in any
transaction to make, any loan or advance to any employee, officer or
director of the Company or of any Subsidiary in excess of One Thousand
Dollars ($1,000.00) outside the normal course of business.
(v) Incur or guarantee, directly or indirectly, or
permit any Subsidiary to incur or guarantee, directly or indirectly,
any indebtedness other than (x) trade accounts of the Company or any
Subsidiary arising in the ordinary course of business or (y) other
financial lending institution transactions approved by the Board of
Directors.
(vi) Create or authorize the creation of, or
establish the preferences, rights and/or restrictions of, any
additional class or series of shares of stock unless the same ranks
junior to the Preferred Stock as to the distribution of assets on the
liquidation, dissolution or winding up of the Company, or increase the
authorized amount of the Preferred Stock or increase the authorized
amount of any additional class or series of shares of stock unless the
same ranks junior to the Preferred Stock as to the distribution of
assets on the liquidation, dissolution or winding up of the Company, or
create or authorize any obligation or security convertible into shares
of Preferred Stock or into shares of any other class or series of stock
unless the same ranks junior to the Preferred Stock as to the
distribution of assets on the liquidation, dissolution or winding up of
the Company, whether any such creation, authorization or increase shall
be by means of amendment to the Articles of Incorporation or by merger,
consolidation or otherwise;
(vii) Consent to any liquidation, dissolution or
winding up of the Company or consolidate or merge into or with any
other entity or entities or sell or transfer all or substantially all
its assets;
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<PAGE> 16
(viii) Amend, alter or repeal its Articles of
Incorporation or By-laws;
(ix) Purchase or set aside any sums for the purchase
of, or pay any dividend or make any distribution on, any shares of
stock other than the Preferred Stock, except for dividends or other
distributions payable on the Common Stock solely in the form of
additional shares of Common Stock and except for the purchase of up to
an aggregate of 3.5% of the outstanding stock of the Company from
former employees of the Company who acquired such shares directly from
the Company, if each such purchase is made pursuant to contractual
rights held by the Company relating to the termination of employment of
such former employees; or
(x) Redeem or otherwise acquire any shares of
Preferred Stock except as expressly authorized in the terms of the
Preferred Stock or pursuant to a purchase offer made pro rata to all
holders of the shares of Preferred Stock on the basis of the aggregate
number of outstanding shares of Preferred Stock then held by each such
holder.
(xi) Change the scope of business activity of the
Company other than in the ordinary course of business.
(xii) Change the size of the Board of Directors.
(xiii) Authorize a transfer of intellectual property
rights necessary to the operation of the business of the Corporation
other than any license or sublicense in furtherance of the Company's
business plan.
As used herein, the term "Subsidiary" shall mean any corporation, 51% or more of
the outstanding capital stock of which is owned by the Company or another
Subsidiary.
10. Failure to Deliver Shares.
If a Shareholder becomes obligated to sell any stock to an
Investor under this Agreement and fails to deliver such stock in accordance with
the terms of this Agreement, such Investor may, at its option, in addition to
all other remedies it may have, send to the Shareholder the purchase price for
such stock as is herein specified. Thereupon, the Company upon written notice to
the Shareholder, (a) shall cancel on its books the certificate or certificates
representing the stock to be sold and (b) shall issue, in lieu thereof, in the
name of such Investor or the Company, as the case may be, a new certificate or
certificates representing such stock, and thereupon all of the Shareholder's
rights in and to such stock shall terminate.
11. Specific Enforcement.
Each Shareholder and the Company expressly agree that the
other parties to this Agreement will be irreparably damaged if this Agreement is
not specifically enforced. Upon a breach or threatened breach of the terms,
covenants or conditions of this Agreement by the Shareholder or the Company, the
other Shareholders and the Company shall, in addition to all other remedies,
each be entitled to a temporary or permanent injunction, without showing any
-16-
<PAGE> 17
actual damage, or a decree for specific performance, or both, in accordance with
the provisions hereof.
12. Miscellaneous.
(a) All certificates for Preferred Shares and Common Stock
held by Shareholders now or hereafter issued by the Company shall be marked with
the following legend:
THIS CERTIFICATE OF STOCK AND THE SHARES REPRESENTED HEREBY
MAY NOT BE TRANSFERRED EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF A CERTAIN SHAREHOLDERS' AGREEMENT DATED AS OF
JUNE 15, 1998 AND ALL AMENDMENTS THERETO, A COPY OF WHICH
AGREEMENT AND ANY AMENDMENT THERETO IS ON FILE AT THE
PRINCIPAL OFFICE OF THE COMPANY.
(b) This Agreement shall be governed by the internal laws of
the Commonwealth of Pennsylvania.
(c) All notices and other communications required or permitted
hereunder shall be in writing and shall be mailed by United States first-class
mail, postage prepaid, sent by facsimile or delivered personally by hand or a
nationally recognized courier, addressed (a) if to a Holder, as indicated on the
list of Holders attached hereto as Exhibit A, or at such other address as such
Holder or permitted assignee shall have furnished to the Company in writing, or
(b) if to the Company (or a Principal Shareholder), as indicated on the
signature page hereof, or at such other address or facsimile number as the
Company or Principal Shareholder shall have furnished to each Holder in writing.
All such notices and other written communications shall be effective on the date
of mailing, facsimile transfer or delivery.
(d) This Agreement contains the entire agreement of the
parties with respect to the subject matter hereof.
(e) Any term of this Agreement may be amended, and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), with the written
consent of the Company and the holders of 66 2/3% of the Preferred Shares voting
together as a class (including for such purposes any shares of Common Stock into
which said Preferred Shares have been converted that have not been sold to the
public). Any amendment or waiver effected in accordance with this Section shall
be binding upon each party to this Agreement, any person who may become a party,
and the Company. Each party hereto acknowledges that by operation of this
Section the Company and the holders of 66 2/3% of the Preferred Shares will have
the right and power to diminish or eliminate certain rights of the parties under
this Agreement.
(f) This Agreement shall be binding upon and inure to the
benefit of the parties hereto, their heirs, legal representatives, successors
and assigns.
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<PAGE> 18
(g) This Agreement may be executed in counterparts, each of
which shall be an original, but all of which together shall constitute one and
the same agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
DEMETER BIOTECHNOLOGIES, LTD.
By: /s/ Richard D. Ekstrom
-------------------------------------
Address: 905 W. Main Street
-------------------------------
Durham, NC 27701
-------------------------------
INVESTORS:
CEO VENTURE FUND III
By: /s/ James Colker
------------------------------------
General Partner
4516 Henry Street
Pittsburgh, PA 15213
PRINCIPAL SHAREHOLDERS:
/s/ Richard D. Ekstrom
----------------------------------------
Richard Ekstrom
5049 Amberson Place
Pittsburgh, PA 15232
/s/ Jesse Jaynes
----------------------------------------
Jesse Jaynes
2417 High Ridge Drive
-----------------------
Raleigh, NC 27606
-----------------------
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<PAGE> 1
Exhibit 10.1
LICENSE AND ROYALTY AGREEMENT
The Board of Supervisors of Louisiana State University and Agricultural
and Mechanical College, a public constitutional corporation, organized and
existing under the laws of the State of Louisiana ("LSU"); and Demeter
BioTechnologies, Ltd., a North Carolina corporation having a principal place of
business at 905 West Main Street, Suite 19D Brightleaf Square, Durham, North
Carolina 27701 ("DEMETER" or "LICENSEE"); enter into the following Agreement
effective the 1st day of May, 1997 (the "EFFECTIVE DATE").
WHEREAS LSU owns certain patent rights in certain countries regarding
disease resistance in plants, as set forth in Article I, Paragraph (A) below;
WHEREAS Demeter is in the business of producing, licensing, and
sublicensing disease resistant plants and genetic constructs useful in producing
disease resistant plants;
WHEREAS Demeter affirmatively desires a license under each of the
components of "Licensed Patents" and "Supplemental Patent Rights" defined in
Article I, Paragraphs (A) and (B) below, respectively; and each of those
components has therefore been included in those definitions at Demeter's
request;
WHEREAS Demeter desires to fund certain research at LSU, as described
in greater detail below; and
WHEREAS LSU and Demeter have agreed to the following terms and
conditions, and desire to enter this License and Royalty Agreement (the
"AGREEMENT");
THEREFORE, in consideration of the mutual obligations set forth in this
Agreement, LSU and Demeter agree as follows:
ARTICLE I. DEFINITIONS
A. "LICENSED PATENTS" shall mean: (1) Jaynes and Derrick, "Method for
Introduction of Disease and Pest Resistance into Plants and Novel Genes
Incorporated into Plants which Code Therefor," United States patent number
5,597,946, issued January 28, 1997; (2) Jaynes and Derrick, "Plants Genetically
Enhanced for Disease Resistance," United States patent number 5,597,945, issued
January 28, 1997; (3) Jaynes and Derrick, European patent application
93113536.2; (4) Jaynes and Derrick, European patent application 89900103.6; (5)
Jaynes and Derrick, Japanese patent application SHO 62-504491; (6) Jaynes and
Derrick, "Method for Introduction of Disease and Pest Resistance into Plants and
Novel Genes Incorporated into Plants which Code Therefor," European patent 0 330
655, issued June 7, 1995, nationalized in United Kingdom, France, Germany, and
Italy; (7) Jaynes and Derrick, "Plants Genetically Enhanced for Disease
Resistance," Canadian patent number 1,321,157, issued August 10, 1993; (8)
Jaynes and Derrick, "Method for Introduction of Disease and Pest Resistance into
Plants and Novel Genes Incorporated into Plants which Code Therefor," Australian
patent number 611,859, sealed November 5, 1991; and (9) any United States or
non-United States patent, reissue patent, or reexamination certificate resulting
from the applications and patents of parts (1) through (8) of this Paragraph,
including any renewals or extensions of the term of any such patent.
B. "SUPPLEMENTAL PATENT RIGHTS" shall mean, subject to the limitations set forth
in this Paragraph, any United States divisional or continuation application (but
not a continuation-in-part application) either of United
<PAGE> 2
ARTICLE I
States patent application serial number 08/444,762, filed May 19, 1995, or of
United States patent application serial number 08/453,436, filed May 30, 1995;
and any United States patent, reissue patent, or reexamination certificate
resulting from such a divisional or continuation application. "SUPPLEMENTAL
PATENT RIGHTS" shall not include any patent rights outside the United States.
Furthermore, "SUPPLEMENTAL PATENT RIGHTS" shall not include any patent rights
concerning any invention or activity whose unlicensed practice would infringe
any of the following claims: (1) any claim of United States patent number
5,597,945 or 5,597,946, or (2) any claim in any reissue patent or reexamination
certificate resulting from United States patent number 5,597,945 or 5,597,946.
The "SUPPLEMENTAL PATENT RIGHTS" shall be treated as Licensed Patents for all
purposes under this Agreement, except as provided in Article III, Subparagraphs
(A)(3) and (B)(4), concerning patent prosecution and maintenance, and
sublicensing royalties, respectively.
C. "FUNDED TECHNOLOGY" shall mean all rights in any invention (whether or not
patentable) that satisfies both of the following conditions: (1) the invention
is owned by LSU, or is subject to an obligation of assignment to LSU; and (2)
the invention is first actually reduced to practice in the course of a research
project that is funded by Licensee under Article III, Paragraph (E), where the
first actual reduction to practice occurs at a time when Licensee's financial
obligations to LSU under this Agreement are current. "FUNDED TECHNOLOGY" shall
also include all rights in any computer software (whether or not patentable)
that satisfies both of the following conditions: (1) the software is owned by
LSU, or is subject to an obligation of assignment to LSU; and (2) the software
is first fixed in a tangible medium of expression in the course of a research
project that is funded by Licensee under Article III, Paragraph (E), at a time
when Licensee's financial obligations to LSU under this Agreement are current.
If LSU is a co-owner of rights in an invention or in certain software under
circumstances where LSU's part-interest in that invention or software, if
considered alone, would otherwise satisfy this definition of "FUNDED
TECHNOLOGY," then LSU's part-interest in that invention or software shall be
treated as "FUNDED TECHNOLOGY."
- 2 -
<PAGE> 3
ARTICLE II
ARTICLE II. LICENSE GRANT
A. SCOPE OF LICENSE. Subject to the terms and conditions of this Agreement, LSU
grants to Licensee, and Licensee accepts from LSU, an exclusive license under
Licensed Patents to make, use, offer to sell, sell, and import Licensed Products
in each Patent Country. At Licensee's request the license granted to Licensee
includes a license under Licensed Patents to create derivatives of Licensed
Products (to the extent that LSU has the right to grant a license to create
derivatives). Subject to the terms and conditions of this Agreement, LSU grants
and Licensee accepts an exclusive license of all LSU's rights in Licensed
Patents. If applicable, this license is subject to certain rights that the
United States Government may have in Licensed Patents pursuant to 35 U.S.C.
Sections 200- 212. Licensee shall have the right to grant sublicensees, as
provided in greater detail in Paragraphs 2.2 and 2.2.1 of the Supplemental
Terms.
B. TERM. The term of this Agreement shall be from the Effective Date until the
last to expire of any patent within Licensed Patents, unless earlier terminated
in accordance with applicable provisions of this Agreement. On a
country-by-country basis, following the expiration of the last patent in a
particular country covering a particular Licensed Product, Licensee shall
thereafter owe LSU no royalties solely on account of activities concerning that
particular Licensed Product in that particular country.
C. RIGHTS IN FUNDED TECHNOLOGY. The rights of the parties in Funded Technology
are as set forth in Paragraph 2.8 of the Supplemental Terms.
D. SUPPLEMENTAL LICENSING TERMS AND CONDITIONS. The "Supplemental Licensing
Terms and Conditions" attached to this Agreement as Appendix A are incorporated
into and made an integral part of this Agreement. All terms defined in the
Supplemental Licensing Terms and Conditions (the "SUPPLEMENTAL TERMS") shall
have the same meaning in this Agreement. The provisions of the main body of this
Agreement and of the Supplemental Licensing Terms and Conditions shall be
construed so as to give full effect to both. However, in the event of an
otherwise irresolvable inconsistency, the provisions of the main body of this
Agreement shall control.
ARTICLE III. ROYALTIES AND FEES
A. (1) INITIAL FEE. Upon execution of this Agreement, as a condition
precedent to this Agreement, Demeter shall irrevocably issue to LSU
700,000 shares of Demeter's common stock, adjusted for any stock
splits, stock dividends, mergers, consolidations, reorganizations,
recapitalizations, or the like occurring after August 1, 1996. This
stock shall be freely tradeable by LSU or its assignees without
restriction immediately upon receipt.
(2) PROSECUTION AND MAINTENANCE OF LICENSED PATENTS. While this
Agreement is in effect, Licensee shall timely pay all maintenance fees
on all United States patents within Licensed Patents. So long as
- 3 -
<PAGE> 4
ARTICLE III
Licensee fulfills its obligations under this Agreement, Licensee shall
also manage the prosecution and maintenance of all non-United States
patent applications and non-United States patents within Licensed
Patents as Licensee in its discretion sees fit, within the bounds
imposed by applicable law. Licensee shall promptly provide both to LSU
and to LSU's patent counsel copies of all non-United States issued
patents (including English translations, where available) within
Licensed Patents, and such other pertinent communications to or from
non-United States patent offices as LSU may request from time to time.
The address for LSU's patent counsel is Mr. John H. Runnels, Taylor,
Porter, Brooks & Phillips, L.L.P., P.O. Box 2471, Baton Rouge,
Louisiana 70821, or such other patent counsel as LSU may specify from
time to time. The address for LSU is as stated in Article VII. On
Licensee's request, LSU shall provide reasonable assistance to
Licensee's efforts in prosecuting non-United States applications within
Licensed Patents, at no out-of-pocket expense to LSU. Licensee may
abandon any non-United States patent application or non-United States
patent within Licensed Patents if, in Licensee's judgment, it is
prudent to do so, upon giving LSU reasonable notice of Licensee's
intention to abandon. In such a case, LSU shall have the right, but not
the obligation, to assume responsibility for future prosecution and
maintenance of affected non-United States applications or non-United
States patents. LSU shall at all times be the sole owner of Licensed
Patents in all countries.
(3) PROSECUTION AND MAINTENANCE OF SUPPLEMENTAL PATENT RIGHTS. So long
as Licensee fulfills its obligations under this Agreement, Licensee may
prepare, file, prosecute, and maintain such United States patent
applications and United States patents directed to the Supplemental
Patent Rights as Licensee in its discretion sees fit, at Licensee's
expense. The scope of the claims sought in any such patent application
may not exceed that defined in Article I, Paragraph (B) without LSU's
prior written consent, the granting or withholding of such consent to
be within LSU's sole discretion. Licensee understands that under 35
U.S.C. Section 154(a)(2) any patent issuing on the Supplemental Patent
Rights is expected to expire no later than July 25, 2006 or November 2,
2007 (except to the extent that some statutory extension of term might
apply). At the addresses provided in Subparagraph (A)(2) above,
Licensee shall promptly provide both to LSU and to LSU's patent counsel
copies of all communications to or from the United States Patent and
Trademark Office concerning the Supplemental Patent Rights. On
Licensee's request, LSU shall provide reasonable assistance to
Licensee's efforts in filing or prosecuting applications directed to
the Supplemental Patent Rights, at no out-of-pocket expense to LSU.
Licensee may abandon any patent application or patent within the
Supplemental Patent Rights if, in Licensee's judgment, it is prudent to
do so, upon giving LSU written notice of Licensee's intention to
abandon at least two months prior to the last date on which action may
be taken to prevent the abandonment. In such a case, LSU shall have the
right,
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<PAGE> 5
ARTICLE III
but not the obligation, to assume responsibility for future prosecution
and maintenance of the affected applications or patents. LSU shall at
all times be the sole owner of the Supplemental Patent Rights.
(The information marked by *** has been omitted by a request for
confidential treatment. The omitted portion will be separately filed
with the Commission.)
B. (1) ROYALTY ON SALES BY LICENSEE. On a quarterly basis, Licensee shall
pay to LSU a royalty equal to the greater of the following two amounts
for each Licensed Product that is made, used, sold, or imported by
Licensee: (a) *** of Net Sales Receipts, or (b) *** of Gross Value
Added. Except as provided in Subparagraph (B)(2), this rate of *** of
Net Sales Receipts, or *** of Gross Value Added, whichever is greater,
shall apply in all cases, and shall apply to any Licensed Product that
is made, used, sold, or imported in any Patent Country, regardless of
whether other acts concerning that Licensed Product occur outside the
Patent Countries. Any ambiguities in Licensee's records regarding the
location of any of these activities shall be construed so that the
affected Licensed Products are deemed to have been made, used, or sold
in a Patent Country. This royalty shall be paid quarterly, by January
31, April 30, July 31, and October 31, based on payments and non-cash
consideration received by Licensee during the prior three calendar
months. The royalty calculation for each calendar quarter shall be
determined independently, without carrying forward or carrying backward
amounts attributable to any other calendar quarter. Furthermore, the
royalty for different Licensed Products shall be determined separately
-- so that it is possible, for example, that the royalty for a first
Licensed Product could be *** of Net Sales Receipts, while the royalty
for a second Licensed Product during the same calendar quarter would be
*** of Gross Value Added.
(2) ROYALTIES ON SUBLICENSE PAYMENTS. Payments due to LSU on account of
a bona fide, arms-length sublicense shall be computed under this
Subparagraph (B)(2). On a quarterly basis, on the same schedule as
provided in Subparagraph (B)(1), Licensee shall pay to LSU the
Applicable Percentage (defined in Subparagraphs (3) and (4) below) of
Gross Sublicensing Receipts.
(3) APPLICABLE PERCENTAGE FOR SUBLICENSES -- GENERAL RULE. Except as
provided in Subparagraph (4) below, from the Effective Date until
December 31, 2000, the "APPLICABLE PERCENTAGE" shall be *** in all
cases. Except as provided in Subparagraph (4) below, on and after
January 1, 2001, the "APPLICABLE PERCENTAGE" shall be as follows in all
cases: *** if the Benchmark Share Price is below ***; *** if the
Benchmark Share Price is greater than or equal to ***, but less than
***; or *** if the Benchmark Share Price is greater than or equal to
***. Note that the "APPLICABLE PERCENTAGE" is redetermined a single
time only, and shall then remain constant after January 1, 2001,
regardless of the subsequent history of Demeter's stock price.
(4) APPLICABLE PERCENTAGE FOR SUBLICENSES -- SUPPLEMENTAL PATENT
RIGHTS. Notwithstanding Subparagraph (3) above, the "APPLICABLE
PERCENTAGE" shall be *** (regardless of date) in
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<PAGE> 6
ARTICLE III
the case of a bona fide, arms-length sublicense that conveys rights
under the Supplemental Patent Rights in the United States only, that
does not convey any rights under Licensed Patents other than under the
Supplemental Patent Rights in the United States, and that is not
directly or indirectly tied to a sublicense or other grant of rights
under any Licensed Patents other than the Supplemental Patent Rights in
the United States.
C. MINIMUM ROYALTIES. Beginning calendar year 2000, minimum royalty payments in
the following amounts shall be required to keep Licensee's license under this
Agreement in force:
<TABLE>
<CAPTION>
PERIOD MINIMUM ANNUAL ROYALTY PAYMENT
------ ------------------------------
<S> <C>
Calendar Year 2000 $25,000
Calendar Year 2001 $25,000
Calendar Year 2002 $25,000
Each Subsequent Calendar
Year, or Fraction
Thereof, During the Term
of this Agreement. $25,000
</TABLE>
The minimum royalty payment for a given calendar year shall be paid to LSU not
later than January 31 of the following year. For example, the minimum royalty
for calendar year 2000 is due by January 31, 2001. If Licensee fails to make any
royalty or minimum royalty payment timely, and if LSU has notified Licensee of
that failure, and if that failure has not been cured within thirty (30) days of
Licensee's receipt of that notice, then LSU shall have the option to terminate
this Agreement, or to make Licensee's license under this Agreement nonexclusive,
in either case upon giving Licensee thirty days written notice. If Licensee's
license becomes nonexclusive, it shall continue to be governed by all provisions
of this Agreement not inherently inconsistent with such nonexclusivity, except
that minimum royalty obligations (and only minimum royalty obligations) shall be
reduced by fifty percent (50%). All minimum royalty payments required under this
paragraph (C) of this Article III are subject to the inflation adjustment
defined in Article 12 of the Supplemental Terms. Royalty payments made under
Article III, Paragraph (B) attributable to a particular calendar year shall be
credited against the minimum royalty payments due under this paragraph for that
calendar year. However, no royalty or minimum royalty payment may be carried
forward or carried back as a credit against royalties or minimum royalties in
any other period.
D. QUARTERLY REPORTS. Licensee shall forward to LSU quarterly reports on or
before January 31, April 30, July 31, and October 31 of each year, for the
preceding three calendar months, containing the data, information,
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<PAGE> 7
ARTICLE III
and documentation necessary to determine fully the amounts owed by Licensee to
LSU under this Agreement, and containing quarterly reports on the status of
Licensee's marketing of Licensed Products. Such a report shall be made for each
quarter, whether or not any payment is due for that quarter.
E. RESEARCH GRANT. Once Cumulative Receipts reach a total of $1,000,000,
Licensee shall thereafter pay LSU a research grant equal to the sum of one
percent (1%) of Net Sales Receipts and two percent (2%) of Gross Sublicensing
Receipts in each calendar year, with total research grant amounts not to exceed
$25,000 per calendar year, subject to the inflation adjustment of Article 12 of
the Supplemental Terms. In making the calculations defined in the previous
sentence, there shall be no carry-forward or carry-backward of Net Sales
Receipts or Gross Sublicensing Receipts between calendar years. These research
grant amounts are not due on the first $1,000,000 in Cumulative Receipts. These
research grant amounts shall be paid on a quarterly basis, on the same schedule
as provided in Paragraph (B) of this Article III. These research grant amounts
shall be used for research at LSU primarily directed to lytic peptides, and
shall be conducted under the general direction of an LSU principal investigator
jointly approved by LSU and Licensee. Licensee's approval of a principal
investigator proposed by LSU shall not be unreasonably withheld.
ARTICLE IV. REPRESENTATIONS, WARRANTIES, AND DISCLAIMERS
A. NO WARRANTIES OR REPRESENTATIONS. LSU makes no warranty or representation
whatsoever as to the usefulness of Licensed Patents or Licensed Products, or
their fitness for the purpose for which intended or for any other purpose. LSU
makes no representations, and extends no warranties of any kind, either express
or implied, except as expressly provided in this Agreement.
B. DISCLAIMERS. Nothing in this Agreement shall be construed as:
1. A warranty or representation by LSU as to the validity,
enforceability, scope, or inventorship of any patent; or
2. A warranty or representation by LSU that anything licensed,
sublicensed, made, used, sold, imported, or otherwise disposed
of under any license granted in or sublicense permitted by
this Agreement is or will be free from infringement of patents
of third parties or other rights of third parties; or
3. An obligation that LSU bring or litigate actions against third
parties for infringement, except to the extent and in the
circumstances stated in Article 4 of the Supplemental Terms;
or
4. A requirement that LSU file or prosecute any patent
application, secure the issuance of any patent, or maintain
any patent; or
5. An establishment of a partnership, joint venture, agency, or
employer-employee relationship
- 7 -
<PAGE> 8
ARTICLE IV
between the parties; and neither party shall represent the
contrary to anyone else; or
6. A warranty or representation that LSU's rights in Licensed
Patents include a right to grant a license to "create
derivatives of Licensed Products."
C. DISCLAIMER OF RESPONSIBILITY. LSU assumes no responsibilities whatever for
any damages caused to Licensee, any Affiliate, any vendees, other transferees,
or sublicensees of or by any product or process incorporating or made by the use
of inventions licensed under this Agreement, or incorporating or made by the use
of any information furnished under this Agreement.
D. SMALL ENTITY STATUS. Licensee represents that, as of the Effective Date,
Licensee is a small entity within the contemplation of 37 C.F.R. Section 1.9(f)
with respect to Licensee's rights in Licensed Patents under this Agreement.
During the term of this Agreement, Licensee shall promptly notify LSU of any
event that changes, or that might change, Licensee's status as a small entity.
ARTICLE V. USE OF LSU'S NAME
Licensee will make no use whatsoever of LSU's name, marks, insignia, or
logos; or of the name of any LSU campus, department, center, or institute; or
the name of any then-current LSU employee; in news releases, advertisements,
promotional materials, or otherwise, without the prior written consent of LSU
for each such use.
ARTICLE VI. INSURANCE
A. LICENSEE. Prior to the first sale of any Licensed Product, Licensee shall
obtain liability insurance coverage on an "occurrence" basis for any and all
liability arising out of the sublicensing, manufacture, use, distribution,
marketing, importation, or sale of any Licensed Product, by Licensee, its
Affiliates, and its Sublicensees, in all countries. LSU shall be an additional
insured in any such liability insurance. This liability insurance must be issued
by a company having a current A. M. Best rating of A+ 8 or better. The limits of
this insurance coverage shall be not less than $3,000,000 per occurrence, with
aggregate limits not less than $5,000,000 per year. The maximum deductible may
not exceed $50,000. This liability insurance shall include contractual liability
coverage and products/completed operations coverage in at least the minimum
amounts required by this Paragraph. Licensee shall forward written evidence of
such liability insurance coverage, including the declarations page(s) describing
the coverage provided by the policy, and including the endorsement naming LSU as
additional insured, to LSU at least thirty days prior to the first use or sale
of any Licensed Product. The insurer shall be required to give at least thirty
days' notice of cancellation or modification of coverage to LSU. The obligation
to provide LSU the liability insurance required by this Article VI and written
evidence thereof shall continue until the earliest of the following three
events: (a) the expiration or termination of
- 8 -
<PAGE> 9
ARTICLE VI
this Agreement in accordance with its terms; (b) the time when Licensee
permanently ceases to make, use, import, sell, or offer to sell Licensed
Products, or to sublicense any rights under this Agreement; or (c) the
expiration or invalidation of all claims of Licensed Patents, with all
applicable appeals and appeal delays having run. In addition, Licensee shall
thereafter obtain and maintain a "tail" insurance policy otherwise satisfying
the requirements of this Paragraph, and insuring the same persons against the
same risks until the expiration of any remaining pertinent statute of
limitations period. The amount of liability insurance coverage required by this
Article is subject to the inflation adjustment defined in Article 12 of the
Supplemental Terms. At any time when Licensee obtains, renews, or replaces a
liability insurance policy, the aggregate limits for the liability insurance
coverage shall be at least equal to the sum of Net Sales Receipts and Gross
Sublicensing Receipts for the most recently completed Licensee fiscal year. The
alternative amount of liability insurance provided by the preceding sentence is
not subject to the inflation adjustment otherwise required by Article 12 of the
Supplemental Terms, and applies only if this alternative amount is greater than
the amount of insurance otherwise required by this Paragraph.
B. SUBLICENSEE OR ASSIGNEE. Each sublicensee, assignee, or transferee of any of
Licensee's rights under this Agreement shall obtain the type and amount of
liability insurance required by Paragraph (A) of this Article VI, except that in
calculating the alternative amount provided by the last two sentences of
Paragraph (A) of this Article VI, that sublicensee's, assignee's, or
transferee's Net Sales Receipts shall be used in place of the sum of Licensee's
Net Sales Receipts and Gross Sublicensing Receipts--substituting for "Licensee"
that sublicensee, assignee, or transferee in the definition of Net Sales
Receipts found in Paragraph 1.3 of the Supplemental Terms. A sublicensee's
obligation to obtain liability insurance may, if mutually agreeable to Licensee
and the sublicensee, be satisfied by a single insurance policy for both Licensee
and the sublicensee; provided that such a single policy satisfies all other
requirements of Paragraphs (A) and (B) of this Article VI; and further provided
that the amount of liability insurance provided by such a single policy is at
least equal to the sum of the amounts required by Paragraphs (A) and (B) of this
Article VI. A self-insured sublicensee may request that LSU accept the
sublicensee's self-insurance as satisfying the requirements of this Paragraph;
LSU shall not act unreasonably in approving such a request, provided that the
self-insurance is adequately capitalized and otherwise satisfies the
requirements of this Article VI.
ARTICLE VII. NOTICES
All written notices, payments, and other correspondence under this
Agreement shall be considered given when deposited in the United States Mail,
first class postage prepaid, to:
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<PAGE> 10
ARTICLE VII
DEMETER:
Mr. Richard D. Ekstrom, President
Demeter BioTechnologies, Ltd.
905 West Main Street
Suite 19D Brightleaf Square
Durham, North Carolina 27701
LSU: IF LSU, AN ADDITIONAL COPY TO:
Vice Chancellor for Research & Director Assistant Director
La. Agricultural Experiment Station La. Agricultural Experiment Station
LSU Agricultural Center LSU Agricultural Center
104 J. Norman Efferson Hall 104 J. Norman Efferson Hall
P. O. Box 25055 P. O. Box 25055
Baton Rouge, Louisiana 70894-5055 Baton Rouge, Louisiana 70894-5055
These names or addresses may be changed by giving notice as provided in this
Paragraph.
ARTICLE VIII. MISCELLANEOUS
A. ENTIRE UNDERSTANDING. This Agreement (including the Supplemental Terms)
constitutes the entire understanding between LSU and Licensee, and supersedes
any prior agreement or understanding on the same subject matter. Any
modification or amendment to this Agreement shall not be effective unless and
until reduced to writing and signed on behalf of both LSU and Licensee.
B. CONSTRUCTION. The parties acknowledge that this Agreement followed extended
and extensive negotiations by the parties, and that this Agreement incorporates
the negotiated suggestions of both parties, and that both parties have had the
benefit of the advice of counsel in the conduct of these negotiations. The
parties therefore agree that no presumptions shall arise favoring any party by
virtue of the authorship of any of the provisions of this Agreement (including
the Supplemental Terms).
- 10 -
<PAGE> 11
ARTICLE VIII
C. HEADINGS. The headings or captions appearing at the beginnings of the
Articles and Paragraphs of this Agreement (including the headings and captions
appearing in the Supplemental Terms) are provided for convenience of reference
only, and do not constitute part of this Agreement.
WITNESSES: BOARD OF SUPERVISORS OF LOUISIANA
STATE UNIVERSITY AND AGRICULTURAL
AND MECHANICAL COLLEGE
/s/ Barbara Rubinson BY: /s/ Allen A. Copping
- -------------------------------- ------------------------------------
ALLEN A. COPPING, PRESIDENT
DATE: May 19, 1997
- -------------------------------- ----------------------------------
DEMETER BIOTECHNOLOGIES, LTD.
/s/ Scott Gardner BY: /s/ Richard D. Ekstrom
- -------------------------------- ------------------------------------
RICHARD D. EKSTROM, PRESIDENT
DATE: April 18, 1997
- -------------------------------- ----------------------------------
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<PAGE> 12
RATIFICATIONS
RATIFICATION
I, Jesse M. Jaynes, a person of the full age of majority, domiciled in
Wake County, State of North Carolina, hereby ratify Paragraph 3.8 of the
Supplemental Licensing Terms and Conditions, attached to and made part of this
License and Royalty Agreement as Appendix A.
WITNESSES: JESSE M. JAYNES
D. Thomas Roane /s/ Jesse M. Jaynes
- --------------------------------- ----------------------------------
Bruce A. Guthrie DATE: April 21, 1997
- --------------------------------- -----------------------------
STATE OF NORTH CAROLINA
COUNTY OF DURHAM
On this 21 day of April, 1997, before me personally appeared Jesse M.
Jaynes, personally known to me, and known by me to be the person described in
and who executed the foregoing instrument, and acknowledged that he executed the
same as his free act and deed, on the day and year aforesaid.
/s/ Louise D. Miller
-----------------------------------
NOTARY PUBLIC
Louise D. Miller
---------------------------------------
(PRINTED NAME OF NOTARY)
MY COMMISSION EXPIRES 3-20-01 (SEAL)
----------------------------
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<PAGE> 13
RATIFICATIONS
RATIFICATION
I, Jeannette Jaynes, a person of the full age of majority, domiciled in
Wake County, State of North Carolina, and wife of Jesse M. Jaynes, hereby ratify
Paragraph 3.8 of the Supplemental Licensing Terms and Conditions, attached to
and made part of this License and Royalty Agreement as Appendix A.
WITNESSES: JEANNETTE JAYNES
D. Thomas Roane /s/ Jeanette Jaynes
- --------------------------------- ----------------------------------
Bruce A. Guthrie DATE: April 21, 1997
- --------------------------------- -----------------------------
STATE OF NORTH CAROLINA
COUNTY OF DURHAM
On this 21 day of April, 1997, before me personally appeared Jeannette
Jaynes, personally known to me, and known by me to be the person described in
and who executed the foregoing instrument, and acknowledged that she executed
the same as his free act and deed, on the day and year aforesaid.
/s/ Louise D. Miller
------------------------------
NOTARY PUBLIC
Louise D. Miller
---------------------------------------
(PRINTED NAME OF NOTARY)
MY COMMISSION EXPIRES 3-20-01 (SEAL)
-------------------------
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<PAGE> 14
APPENDIX A
SUPPLEMENTAL LICENSING TERMS AND CONDITIONS
FOR LSU/DEMETER LICENSE AND ROYALTY AGREEMENT OF MAY 1, 1997
1. DEFINITIONS
1.1 The "AGREEMENT" shall mean the License and Royalty Agreement between LSU and
Demeter of May 1, 1997, the agreement to which these Supplemental Licensing
Terms and Conditions are appended. The term "AGREEMENT" shall also be deemed to
include these incorporated Supplemental Licensing Terms and Conditions. All
terms defined in the main body of the Agreement shall have the same meaning in
these Supplemental Licensing Terms and Conditions (the "SUPPLEMENTAL TERMS").
1.2 "LICENSED PRODUCT" shall mean any product that is claimed by one or more
pending or issued claims of Licensed Patents; or that is produced by a process
claimed by one or more pending or issued claims of Licensed Patents; or that is
especially made or especially adapted for use in a process claimed by one or
more pending or issued claims of Licensed Patents, and that is not a staple
article or commodity of commerce suitable for a substantial use that does not
encompass such a process; or that is packaged or sold with instructions for
using the product in a process claimed by one or more pending or issued claims
of Licensed Patents.
1.3 "NET SALES RECEIPTS" shall mean, excluding only the amounts defined as
"Gross Sublicensing Receipts" in Paragraph 1.4 below, all revenue received or
accrued by Licensee during the term of the Agreement, arising out of or related
to the use, transfer, lease, or sale of any Licensed Product at the actual
amounts charged by Licensee or by any Affiliate. "NET SALES RECEIPTS" shall also
include consideration received by Licensee for a Licensed Product that is made
during the term of a Licensed Patent, but that is used, sold, or otherwise
transferred after that term. "NET SALES RECEIPTS" shall not include the
following amounts: (I) revenue attributable to Licensed Products that are
actually returned to Licensee for refund; (II) transportation charges or
allowances, if any, added to the price; (III) sales tariffs, duties, or taxes
for Licensed Products that Licensee is required to collect and remit to a
government as a matter of law; but in no circumstances shall any deduction or
exclusion from Net Sales Receipts be taken for any franchise tax or income tax;
and (IV) consideration received by Licensee under a bona fide research contract.
No other deductions of any kind shall be made, whether for agents' commissions
or otherwise. Where all or part of the consideration received by Licensee, an
Affiliate of Licensee, or a sublicensee as otherwise set forth in this Paragraph
1.3 for the use or transfer of any Licensed Product is not cash, or where the
final use of a Licensed Product is by a Special Party (as that term is defined
below), then the "NET SALES RECEIPTS" for that Licensed Product for purposes of
computing royalties or other amounts due under the Agreement shall be deemed to
be the fair market value for such Licensed Product. In determining fair market
value, appropriate weight shall be given to any arms-length transaction by
Licensee, an Affiliate of Licensee, or a sublicensee involving the same or a
similar Licensed Product. The time when "NET SALES RECEIPTS" for any Licensed
Product are deemed received for purposes of computing royalties or other amounts
due under the Agreement shall be (1) the date when a purchaser is billed by
Licensee, (2) the date when the purchaser actually uses or receives that
Licensed Product, (3) the date when Licensee bills for the use of that Licensed
Product, or (4) the date when Licensee receives payment for that Licensed
Product, whichever date is earliest; provided that Licensee must actually
receive payment for that Licensed Product before Licensee is obligated to pay
royalties or other amounts to LSU for that Licensed Product. Where the
consideration to Licensee for the right to use or receive any Licensed Product
is not cash, the date "NET SALES RECEIPTS" shall be deemed to be received shall
be the date that Licensed Product is first used or received. If any Licensed
Product is sold or otherwise transferred between any of the following persons
(collectively, "SPECIAL PARTIES"): Licensee, a Sublicensee, and Affiliates of
Licensee or of a Sublicensee--then "NET SALES RECEIPTS" shall be counted for
that Licensed Product only once, and shall be the consideration defined above
for the final sale or transfer of the Licensed Product to a third party, or the
final use of the Licensed Product by a Special Party.
1.4 "GROSS SUBLICENSING RECEIPTS" shall mean all revenue received by Licensee,
and arising out of the sublicensing of all or part of any item within Licensed
Patents. Without limitation, "GROSS SUBLICENSING RECEIPTS" shall include all
cash or other consideration received by Licensee from any sublicense or other
grant of any rights under all or any part of Licensed Patents; whether such
amounts are denominated "royalties," "license fees," "option payments," or
otherwise. No deductions of any kind shall be made in calculating "GROSS
SUBLICENSING RECEIPTS." If any consideration from a sublicensee is not cash, LSU
and Licensee shall negotiate in good faith to agree on the value of that
consideration for purposes of calculating Gross Sublicensing Receipts.
1.5 "AFFILIATE" shall mean a company or other person controlling, controlled by,
or under common control with Licensee, where "control" shall mean the direct or
indirect control by ownership or otherwise of more than fifty percent (50%) of
the
<PAGE> 15
ARTICLE 1
outstanding voting shares or voting rights, or other similar measure of control.
An "AFFILIATE" shall also include a party who has been approved by LSU to act as
Licensee's joint venture partner in performing one or more activities under this
Agreement. An "AFFILIATE" of a Sublicensee shall mean a company or other person
controlling, controlled by, or under common control with that Sublicensee, where
"control" shall mean the direct or indirect control by ownership or otherwise of
more than fifty percent (50%) of the outstanding voting shares or voting rights,
or other similar measure of control.
1.6 "PROSECUTION" or to "PROSECUTE" means to take action in the United States
Patent and Trademark Office (or, if appropriate in context, in a non-United
States patent office) respecting a patent application or patent, as provided
generally in title 37 of the Code of Federal Regulations (or, if appropriate in
context, as provided in analogous regulations of a nonUnited States patent
office).
1.7 "MAINTENANCE" or to "MAINTAIN" means to pay maintenance fees for a patent
under 35 U.S.C. Section 41(b) and (c) (or, if appropriate in context, to pay
taxes or annuities to keep a patent application pending, or patent in force in a
country other than the United States).
1.8 "PATENT COUNTRY" shall mean any country in which at least one patent
application within Licensed Patents is pending; or in which there is at least
one issued, unexpired patent within Licensed Patents.
1.9 "GROSS VALUE ADDED" for a particular Licensed Product shall mean the
difference between Net Sales Receipts for that Licensed Product, and the
arms-length, fair-market price to a substantially similar purchaser under
substantially similar circumstances (such substantially similar circumstances
including, but not being limited to, the transfer of substantially similar
quantities) of a product that is otherwise substantially identical in all
respects to the Licensed Product, except that it lacks the features that bring
the Licensed Product within the scope of one or more claims of Licensed Patents.
(Where a product "that is otherwise substantially similar in all respects . . ."
is not in fact commercially available, the above comparison shall be based on a
good-faith estimate of the price that would be charged for a hypothetical
product having such characteristics.)
(The information below marked by *** has been omitted by a request for
confidential treatment. The omitted portion will be separately filed with the
Commission.)
1.10 "BENCHMARK SHARE PRICE" shall mean the volume-weighted mean price per share
of publicly-reported sales of freely tradeable Demeter common stock during the
twelve-month period ***, subject to the following two adjustments: (1) The
"BENCHMARK SHARE PRICE" shall be adjusted to reflect any stock splits, stock
dividends, mergers, consolidations, reorganizations, recapitalizations, or the
like occurring after August 1, 1996; and (2) The "BENCHMARK SHARE PRICE," as
otherwise defined above, shall be divided by the Multiplier as of ***, as the
"Multiplier" is defined in Paragraph 12.1 of these Supplemental Terms,
regardless of whether LSU has given Licensee any notices under Paragraph 12.1.
1.11 "CUMULATIVE RECEIPTS" as of a particular date shall mean the sum of all Net
Sales Receipts and Gross Sublicensing Receipts from the Effective Date through
the date in question.
1.12 A "STANDARD-FORM SUBLICENSE" is a sublicense that fully complies with
Paragraph 2.2.1 of these Supplemental Terms. A "NON-STANDARD-FORM SUBLICENSE" is
a sublicense of any or all of Licensee's rights under this Agreement, that is
not in full compliance with Paragraph 2.2.1 of these Supplemental Terms, and
that therefore requires LSU's prior written consent under Paragraph 2.2.
- 2 -
<PAGE> 16
ARTICLE 2
2. LICENSE GRANT
2.1 RIGHTS OF AFFILIATES. The license granted to Licensee by the Agreement shall
extend to any Affiliate of Licensee as well, provided that prior to the exercise
by any Affiliate of any rights under the Agreement, LSU shall be given a written
notice, signed on behalf of both Licensee and each such Affiliate: (1) stating
that the Affiliate intends to exercise such rights, and (2) agreeing that the
Affiliate and Licensee shall be solidarily (i.e., jointly and severally) liable
for all obligations to LSU under the Agreement arising from the activities of
that Affiliate. The activities of the Affiliate under the Agreement shall be
deemed to be the activities of Licensee. The rights of any Affiliate under the
Agreement shall continue only so long as the Agreement continues in effect with
respect to Licensee; such rights shall terminate, for example, upon any
termination, assignment, or transfer of Licensee's rights under the Agreement.
Furthermore, an Affiliate's rights under the Agreement shall terminate on the
occurrence of an event (for example, a sale or other transfer of the Affiliate's
stock) that causes an entity that was once an Affiliate no longer to be an
Affiliate under the definition of Paragraph 1.5 of these Supplemental Terms. A
wholly-owned subsidiary of Licensee may assign, sublicense, or transfer rights
under this Agreement to the same extent that Licensee is permitted to do so
under Paragraphs 2.2 and 2.2.1 below. An Affiliate other than a wholly-owned
subsidiary of Licensee may not sublicense, assign, or otherwise transfer any
rights that Affiliate has acquired under the Agreement.
2.2 RESTRICTIONS ON ASSIGNMENT, SUBLICENSE, OR TRANSFER. Except as expressly
provided in Paragraph 2.2.1 below, Licensee shall not assign, transfer, or
sublicense any rights under the Agreement without the express prior written
approval of LSU, such approval not to be unreasonably withheld. Notwithstanding
the foregoing, neither a written sublicense nor prior approval from LSU is
required to sell Licensed Products to arms-length purchasers (e.g., distributors
or farmers), even where such a sale is accompanied (as a matter of law) by an
implied license or implied sublicense under one or more of Licensed Patents.
2.2.1 STANDARD-FORM SUBLICENSE. At any time during the term of this Agreement,
Licensee may request that LSU and Licensee negotiate in good faith to develop
one or more Standard-Form Sublicenses. Licensee shall prepare the first draft of
each proposed Standard-Form Sublicense, and thereafter the parties shall discuss
and negotiate modifications to the initial draft in good faith. Each party's
obligation in this respect is limited to an obligation to negotiate in good
faith; neither party is obligated to approve a proposed Standard-Form Sublicense
if mutually agreeable terms cannot be found.
By way of illustration and not limitation, the factors that LSU considers
important in reviewing proposed sublicenses include the following: adequate
liability insurance; adequate indemnity in favor of LSU; prohibitions against
further assignment, sub-sublicensing, or transfer; prohibitions against the use
of LSU's name; prohibitions against patent misuse; the right to audit; marking
of Licensed Products with appropriate patent numbers; and, if a particular
sublicense is intended to survive a possible termination of the present
Agreement before the expiration of all pertinent Licensed Patents, a clear and
acceptable demarcation of the respective rights and obligations of LSU and the
sublicensee in those circumstances.
Once LSU and Licensee have approved the form and substance of a particular
Standard-Form Sublicense, Licensee may thereafter enter into one or more
sublicenses with third parties using that approved Standard-Form Sublicense,
without further approval from LSU, provided that: (1) no modifications are made
to the approved Standard-Form Sublicense that would diminish in any respect the
protections afforded to LSU by the approved Standard-Form Sublicense (other
modifications being permissible if they do not diminish the protections afforded
to LSU in any manner); and (2) a complete copy of the fully-executed
Standard-Form Sublicense is delivered to LSU within thirty days of execution. A
proposed sublicense that does not satisfy these criteria may be submitted for
LSU's review and approval under Paragraph 2.2 above.
LSU may at any time, acting in good faith, withdraw its approval of a particular
Standard-Form Sublicense upon notice to Licensee. Such a withdrawal of approval
shall not affect the validity of any sublicense using that Standard-Form
Sublicense that was fully executed by all parties prior to LSU's withdrawal of
approval. Where reasonably feasible, LSU shall inform Licensee of the reason for
LSU's withdrawal of a previous approval, and shall propose modifications to the
Standard-Form Sublicense that would make it once again acceptable to LSU.
2.3 NO LICENSE BY ESTOPPEL. Except as the Agreement may expressly and
unambiguously provide otherwise, nothing in the Agreement shall be construed as
granting by implication, estoppel, or otherwise any licenses or rights under any
patents,
- 3 -
<PAGE> 17
ARTICLE 2
patent applications, or know how owned in whole or in part by LSU, other than
the express license under Licensed Patents provided in Paragraph (A) of Article
II of the Agreement, regardless of whether such patents, patent applications, or
know how are dominant of or subordinate to any patent within Licensed Patents.
2.4 EFFECT OF PATENT INVALIDITY. In a particular Patent Country, if no patent
within Licensed Patents ever issues, or if all such patents are judicially held
invalid or judicially held unenforceable and there are no longer any pending
applications within Licensed Patents in that country, and all applicable appeals
and appeal delays have expired, then thereafter this Agreement shall cease to
have effect in that country.
2.5 MARKETING OBLIGATIONS. Licensee shall: (1) act with commercially reasonable
judgment and diligence to develop commercially marketable Licensed Products, and
to develop competitive markets for those Licensed Products, in order to maximize
royalties payable to LSU; (2) act with commercially reasonable judgment and
diligence to obtain any state, federal, or other governmental licenses or
regulatory clearances necessary for Licensee's intended use of Licensed
Products; and (3) review Licensee's progress of the above performance
obligations with appropriate LSU personnel at intervals of twelve months to
assure a reasonable level of contact, communication, and compliance.
2.6 REGULATORY APPROVAL. Licensee will undertake all reasonable efforts required
to obtain any state, federal, or other governmental license or regulatory
clearance necessary for the use of Licensed Products, and all resulting expenses
of this undertaking shall be borne solely by Licensee. Any research necessary or
desirable for the commercialization or marketing of Licensed Products by
Licensee shall be the sole responsibility of Licensee. Licensee, at Licensee's
sole expense, will prepare and deliver all necessary and appropriate documents,
and take all reasonably necessary and appropriate actions, to seek to obtain any
such license or regulatory clearance.
2.7 RESERVED LSU RIGHTS. The license granted by the Agreement is subject to a
reserved, non-exclusive, worldwide right in LSU to make, have made, and use
Licensed Products for non-commercial purposes that are experimental or
educational in nature, in any field of use, throughout the term of the
Agreement, including any extensions of the term of the Agreement.
2.8 RIGHTS IN FUNDED TECHNOLOGY. LSU shall own all Funded Technology. LSU shall
promptly notify Licensee of the development of any invention within Funded
Technology that is reasonably believed by LSU to have commercial potential,
under reasonable confidentiality provisions to be negotiated. LSU may file such
patent applications directed to inventions within Funded Technology as LSU in
its sole discretion sees fit.
On Licensee's written request to LSU within 180 days after Licensee is given
written notice of the filing date of the first patent application directed to a
particular invention within Funded Technology and a copy of that patent
application, LSU and Licensee shall negotiate in good faith to try to reach
mutually agreeable terms for an exclusive or non-exclusive license to Licensee
under any such application or resulting patent. It is anticipated that the terms
of any such license agreement would include the following provisions: (1) a
reasonable licensing fee to be negotiated, due upon execution of the license;
(2) a reasonable royalty to be negotiated; (3) reasonable minimum royalties to
be negotiated; (4) payment of patent filing, prosecution, and maintenance costs
by Licensee; and (5) other standard LSU patent license provisions, including (by
way of example and not limitation) those provisions contained in the present
Agreement and Supplemental Terms concerning such matters as the use of LSU's
name, indemnity, insurance, inflation, and disclaimer of warranties. However,
neither party shall be obligated to enter into such a license agreement if
mutually agreeable terms cannot be found; the obligation imposed by this
Paragraph is an obligation only to negotiate in good faith.
If Licensee has not requested LSU to negotiate for a license respecting a
particular invention within Funded Technology within 180 days after the filing
date of the first patent application directed to that invention, then LSU shall
be free to dispose of LSU's rights in that invention as LSU in its sole
discretion sees fit, with no further obligation to Licensee with respect to that
invention.
If Licensee has requested LSU to negotiate for a license respecting a particular
invention within Funded Technology within 180 days after the filing date of the
first patent application directed to that invention, but no license agreement
respecting that
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<PAGE> 18
ARTICLE 2
invention has been entered into between LSU and Licensee within that 180-day
period, then for a period of one year following the expiration of that 180-day
period Licensee shall have a right of first refusal respecting any license of
that invention. During this one-year period, prior to entering into any patent
license agreement with a third party respecting an invention specified in the
previous sentence, LSU shall submit to Licensee a copy of the proposed patent
license agreement. If, no later than thirty days after this submission, LSU
receives written notice from Licensee of Licensee's exercise of its right of
first refusal, then LSU shall not enter into the proposed patent license
agreement with the proposed licensee. In such a case, LSU and Licensee shall
both be obligated promptly to enter a patent license agreement whose terms are
identical with those of the proposed patent license agreement, or are as nearly
similar as is reasonably possible under the circumstances. If Licensee does not
give this notice to LSU within this thirty-day period, then LSU may enter into
the proposed patent license agreement with the proposed licensee, with no
further obligation to Licensee concerning that invention. Following the
expiration of the one-year right of first refusal period respecting rights in a
particular invention, if the right of first refusal has not yet been exercised,
then thereafter LSU shall be free to dispose of LSU's rights in that invention
as LSU in its sole discretion sees fit, with no further obligation to Licensee
with respect to that invention.
2.9 FUTURE PATENTS. LSU may, from time to time, acquire patent rights that may
be improvements to the inventions of Licensed Patents, and the scope of whose
claims lies entirely within the scope of the claims of Licensed Patents.
Licensee may, or may not, desire to make, use, sell, or import improved Licensed
Products that are covered by any such future patent rights. Accordingly, at
Licensee's request LSU and Licensee shall, to the extent not inconsistent with
LSU's other contractual obligations (by way of example, contractual obligations
incurred by LSU consistent with paragraph 2.10 below), negotiate in good faith,
for a period of six months from the date LSU first notifies Licensee of the
existence of such patent rights, to attempt to seek a mutually satisfactory
solution to avoid any unauthorized infringement of such patent rights by
improved Licensed Products made, used, sold, or imported by Licensee. This
obligation is an obligation only to negotiate in good faith for a period of six
months, and does not require either Party to enter into any agreement respecting
such patent rights that is not mutually satisfactory to both parties.
2.10 RIGHT OF FIRST REFUSAL RESPECTING CERTAIN SPONSORED RESEARCH. While this
Agreement remains in effect, Licensee shall have a right of first refusal to
sponsor any research at LSU that satisfies both of the following conditions: (A)
the research is intended to produce Improvements, or may reasonably be expected
to result in Improvements; and (B) the research contract grants the sponsor of
the research any rights in patents or know how resulting from the research.
Prior to entering into any such research contract with any party other than
Licensee, LSU shall submit a copy of the proposed research contract to Licensee.
If the prospective sponsor so requests, LSU may mask those portions of the
proposed research contract that may reasonably be expected to reveal the
identity of the proposed sponsor. If, no later than thirty days after the
submission of the proposed contract to Licensee, LSU receives notice from
Licensee of Licensee's exercise of its first right to sponsor the research, then
LSU shall not enter into the proposed research contract with the proposed
sponsor, but instead LSU and Licensee shall both be obligated promptly to enter
into a contract whose terms are identical with those of the proposed research
contract, or are as nearly identical as is reasonably possible under the
circumstances. If Licensee does not give this notice to LSU within this
thirty-day period, then until a period ending ninety days after LSU's submission
of the proposed contract to Licensee LSU may enter into the proposed research
contract with the proposed sponsor, and the terms of the research contract
regarding rights in patents and know how shall supersede the provisions of this
Paragraph 2.10 and of Paragraph 2.9 above to the extent that there may exist any
conflict. If the proposed contract with the proposed sponsor has not been fully
executed within ninety days after LSU's submission of the proposed contract to
Licensee, then LSU may not enter into the proposed contract with the proposed
sponsor, unless LSU follows the procedures of this Paragraph 2.10 again, giving
Licensee a new thirty-day period of first refusal. The provisions of this
Paragraph 2.10 shall not apply where the proposed research sponsor is a state or
federal governmental agency. For purposes of this Paragraph 2.10, an
"IMPROVEMENT" is a new invention whose unlicensed practice would necessarily and
inherently infringe at least one claim of at least one United States patent
within Licensed Patents.
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<PAGE> 19
ARTICLE 3
3. FEES AND ROYALTIES
3.1 GENERAL. The various fees and royalties that are due from Licensee to LSU
under the Agreement are cumulative, and not exclusive. In other words, except as
expressly provided in Article III, Paragraph (C), each such amount is to be paid
without regard to any other amount that may be due. In the event any claim
within Licensed Patents is judicially held invalid or judicially held
unenforceable, and all applicable appeals and appeal delays have run, then
royalties and fees from that point forward (but not retroactively) shall be
computed as if that claim had never issued.
3.2 PATENT EXPIRATION. The obligation to pay royalties under any patent within
Licensed Patents shall terminate as to each such patent upon its expiration,
except that royalties accrued but not paid prior to such expiration shall be
payable with the next quarterly payment otherwise due under Paragraph (B) of
Article III of the Agreement. If a Licensed Product is covered by claims of more
than one patent within Licensed Patents, the obligation to pay royalties for
that Licensed Product shall continue so long as any such patent has not expired.
3.3 TERMINATION. Upon termination of the Agreement for any reason, Licensee
shall pay LSU within 60 days all royalties and other amounts that have accrued
on or before the termination, regardless of whether such royalties or other
amounts would otherwise be due at that time.
3.4 EFFECT OF INVALIDITY. In a particular Patent Country, in the event that: (1)
all issued claims within Licensed Patents are judicially held invalid or
judicially held unenforceable or that no patents within Licensed Patents ever
issue; and (2) no claims within Licensed Patents are still pending in any
application; and (3) all applicable appeals and appeal delays have run; then
from that point forward (but not retroactively) no further royalty payments
shall be due solely on account of activities occurring within that country.
3.5 CURRENCY. All dollar amounts defined in the Agreement refer to United States
dollars. All payments under the Agreement shall be in United States currency.
Where payments are received by Licensee in a given non-United States currency,
conversion to United States currency will be made as follows: All payments
received in that currency during each calendar month will be totalled. The total
payments for the calendar month will then be converted to United States currency
at the "mean exchange rate" for that month. The "mean exchange rate" for a month
is the arithmetic mean of the spot exchange rates reported in the Wall Street
Journal for the following two dates: (a) the first business day falling on or
after the 7th of the month, and (b) the first business day falling on or after
the 22nd of the month. The pertinent exchange rate for purposes of computing
this mean is the number of United States dollars (or fraction thereof)
equivalent to one unit of foreign currency.
3.6 LATE PAYMENTS. If any payment is made more than thirty days after the date
due under the Agreement, then Licensee shall also pay LSU interest at the prime
rate of interest announced from time to time by Citibank (New York), plus one
percent (1%) per annum, until paid. If this amount is higher than allowed by
applicable law, then the highest amount allowed by law shall apply.
3.7 PAYMENT PROCEDURE. All payments due under this agreement shall be payable to
"LOUISIANA STATE UNIVERSITY," and shall be made at the appropriate address given
for notices in Article VII of the Agreement. All payments due shall be made
without any deduction for taxes, assessments, or charges of any kind that may be
imposed on Licensee by any government or by any political subdivision of any
government. Any such taxes, assessments, or other charges shall be assumed
solely by Licensee.
3.8 WAIVER OF INVENTOR'S SHARE OF ROYALTIES. Demeter represents and warrants
that as of the Effective Date Jesse M. Jaynes, who is a principal in Demeter,
has or will have irrevocably relinquished all claim to, and has or will have
irrevocably assigned to Demeter his entire share of all royalties, fees, and
other consideration received, or to be received in the future, by LSU under this
Agreement (i.e., Dr. Jaynes' portion of the inventors' share of "DISTRIBUTABLE
ROYALTIES," as that term is defined in the August 1991 revision of Chapter 7 of
LSU's Bylaws and Regulations). Demeter hereby irrevocably relinquishes all claim
to, and hereby irrevocably assigns over to LSU the entire share of all such
Distributable Royalties under this Agreement to which Jesse M. Jaynes would
otherwise be entitled under LSU's Bylaws and Regulations. Licensee shall
indemnify LSU and hold LSU harmless against any claim brought by a spouse,
former spouse, heir, legatee, or assignee of
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<PAGE> 20
ARTICLE 3
Dr. Jaynes for alleged entitlement to any portion of such Distributable
Royalties, and shall assume the responsibility for defending LSU in any
resulting legal proceedings, at Licensee's sole expense. The portion of
Distributable Royalties under this Agreement that would otherwise have been paid
to Jesse M. Jaynes (in the absence of the above assignments) shall instead be
placed in a fund that is administered by LSU, and that is dedicated to be used
for one or more of the following purposes to support research at LSU, in the
sole discretion of LSU: directly supporting research at LSU; supporting research
at LSU by providing matching funds as may be required by an outside sponsor of
research at LSU; providing bridge funds to support research at LSU until funding
from an outside sponsor is secured; providing start-up funds for a laboratory at
LSU; providing funds for a seed grant for a new research effort at LSU;
providing funds to pay for research that has been conducted by LSU and for which
expenses have been incurred by LSU, but for which an outside sponsor has failed
to provide expected financial support; and maintaining laboratory equipment at
LSU. Licensee is not granted any rights under this Agreement in any inventions
that may result from research that is supported by this fund. Licensee
represents and warrants that, as of the Effective Date, Dr. Kenneth S. Derrick,
co-inventor of Licensed Patents, is neither an officer, nor a director, nor a
shareholder in Licensee; in reliance on this representation and warranty, LSU is
not requesting a similar relinquishment and assignment of Distributable
Royalties from Dr. Derrick. This relinquishment and assignment of certain
Distributable Royalties applies only to Dr. Jaynes' share of Distributable
Royalties that are attributable to the present Agreement. This relinquishment
and assignment has no effect (one way or the other) on the distribution of any
Distributable Royalties that may be attributable to other contracts or licenses
- -- by way of example, Distributable Royalties under licenses of other LSU-owned
inventions on which Dr. Jaynes may be an inventor; or a future license under
Licensed Patents from LSU to a third party should the present Agreement be
terminated; or Distributable Royalties received by LSU and attributable to a
sublicense that survives the termination of the present Agreement; in each case,
subject to the right of offset in the event Demeter has unpaid debts to LSU,
whether arising from the present Agreement or otherwise.
3.9 ESCROW. If LSU and Licensee in good faith disagree as to whether certain
payments are due to LSU, then the procedures of this Paragraph 3.9 shall be
followed. If these procedures are followed, then Licensee shall not be deemed to
be in default for failure to make the disputed payments timely. If these
procedures are not followed, however, then Licensee shall be deemed to be in
default for failure to make payments timely under the Agreement, regardless of
whether or not it is ultimately determined that the disputed amounts were
actually due under the Agreement.
1. Any undisputed amounts shall be paid to LSU as provided in the
Agreement.
2. All disputed amounts shall be paid to an escrow agent mutually
acceptable to LSU and Licensee. These amounts shall be paid by
the dates otherwise applicable under the Agreement. LSU shall
be given prompt confirmation of the date and amount of any
such payments made. At Licensee's option, Licensee may elect
to pay the disputed amount up to a maximum of $100,000 to the
escrow agent. The payment of $100,000 (at Licensee's election)
will be deemed to satisfy Licensee's obligations to pay
disputed amounts to the escrow agent under this Paragraph,
even if the amount that is subject to good faith dispute
exceeds that amount. However, Licensee's payment of these
limits to an escrow agent shall not relieve Licensee of any
underlying liability in excess of that amount, together with
any interest that may be due on such amounts under Paragraph
3.6 above. The $100,000 limit established by this provision is
subject to the inflation adjustment of Paragraph 12 of these
Supplemental Terms.
3. The escrow agent shall place the funds in a safe,
interest-bearing instrument or account jointly approved by LSU
and Licensee; or if LSU and Licensee are unable thus to agree,
in a safe, interest-bearing instrument or account chosen by
the escrow agent. Any interest thus received shall ultimately
be distributed by the escrow agent in the same proportions as
the distribution of the principal amount. A reasonable fee for
the escrow agent's services may first be deducted from the
interest.
4. The escrow agent shall release the funds in escrow only in
accordance with the joint, written instructions of both LSU
and Licensee; or in accordance with an order of the court or
an award of the arbitrator under Paragraph 13.3 below.
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<PAGE> 21
ARTICLE 4
4. ENFORCEMENT OF LICENSED PATENTS, AND RELATED MATTERS
4.1 INFRINGEMENT; SUIT BY LICENSEE. Licensee shall investigate and report any
infringements or possible infringements of Licensed Patents to LSU. At
Licensee's option Licensee may, in its own name (or jointly in the names of
Licensee and LSU if required by law), bring and litigate such suits for
infringement of Licensed Patents as Licensee in its discretion sees fit.
Licensee shall give LSU thirty days notice of Licensee's intention to bring such
a suit before Licensee files the suit. The expenses of such litigation shall be
borne solely by Licensee, except as expressly provided in the remainder of this
Paragraph. Licensee at its option may invite LSU to participate in the
litigation and contribute to the costs of litigation, in any proportion chosen
by LSU, except that the proportion of LSU's participation shall not exceed a
limit specified by Licensee in Licensee's invitation to LSU to participate.
Following such an invitation, LSU may elect to participate in the lawsuit in any
proportion chosen by LSU, not to exceed this limiting proportion. LSU shall have
not less than ninety days to respond to Licensee's invitation, and to notify
Licensee of the proportion in which LSU will participate, if any. If LSU thus
participates in the litigation, LSU will then share in any damages, profits,
awards, and settlements in the same proportion as its proportionate contribution
to litigation costs.
Should LSU not participate in the litigation, either because LSU elects not to
do so, or because Licensee does not invite LSU to participate, then Licensee
shall pay LSU a proportion of any recovery received by Licensee from the
litigation as follows: (1) A recovery attributable to a judgment (or arbitration
award) based on a "reasonable royalty" shall be pro rata and retroactively added
to Licensee's Gross Sublicensing Receipts for the calendar quarter(s)
corresponding to the infringer's sales, and Licensee shall then pay LSU the
amount otherwise provided on account of Gross Sublicensing Receipts in Article
III, Subparagraphs (B)(2), (B)(3), and (B)(4). (2) If a recovery attributable to
a judgment (or arbitration award) includes amounts based on "lost profits," then
a dollar amount equal to the infringer's underlying net sales receipts (applying
the definition of Paragraph 1.3 of these Supplemental Terms by analogy to the
infringer's sales) shall be added to Licensee's Net Sales Receipts for the
calendar quarter in which the lost profit award is received by Licensee, and
Licensee shall then pay LSU the amount otherwise provided on account of Net
Sales Receipts in Article III, Subparagraph (B)(1). (3) LSU shall receive no
portion of any costs or attorneys fees that may be awarded by a court or by
arbitration. (4) If prejudgment or postjudgment interest is received, the amount
paid by Licensee to LSU shall be increased proportionately. (5) If damages are
enhanced pursuant to 35 U.S.C. Section 284, second paragraph, second sentence,
the amount paid by Licensee to LSU shall be increased proportionately. (6) If
the dispute is resolved by settlement between Licensee and the accused
infringer, then LSU and Licensee shall negotiate in good faith to apportion the
settlement between them equitably, in accordance with the above principles,
based where possible upon the premises underlying the determination of the
amounts paid in settlement. Licensee may settle an infringement suit by granting
the accused infringer a sublicense or assignment only by compliance with all
applicable provisions of this Agreement concerning sublicenses or assignments.
4.2 INFRINGEMENT; SUIT BY LSU. If LSU gives Licensee written notice of an
infringement or possible infringement of Licensed Patents, including information
sufficient to identify the accused infringer, the accused product or method, and
the Licensed Patent said to be infringed, then within 90 days of receipt of that
notice Licensee must either make written demand on the purported infringer to
cease infringement, or notify LSU of Licensee's decision not to make such a
demand. If, within six months of Licensee's receipt of the original notice from
LSU, Licensee has neither secured cessation of the purported infringement nor
brought suit against the purported infringer, then LSU shall have the right to
sue the purported infringer for infringement of Licensed Patents. In such a case
LSU may, in its own name (or jointly in the names of LSU and Licensee if
required by law), bring and litigate such suits for infringement of Licensed
Patents as LSU in its discretion sees fit. LSU shall give Licensee thirty days
notice of LSU's intention to bring such a suit before LSU files the suit. The
expenses of such litigation shall be borne solely by LSU, except as expressly
provided in the remainder of this Paragraph. LSU at its option may invite
Licensee to participate in the litigation and contribute to the costs of
litigation, in any proportion chosen by Licensee, except that the proportion of
Licensee's participation shall not exceed a limit specified by LSU in LSU's
invitation to Licensee to participate. Following such an invitation, Licensee
may elect to participate in the lawsuit in any proportion chosen by Licensee,
not to exceed this limiting proportion. Licensee shall have not less than ninety
days to respond to LSU's invitation, and to notify LSU of the proportion in
which Licensee will participate, if any. If Licensee thus participates in the
litigation, Licensee will then share in any damages, profits, awards, and
settlements in the same proportion as its proportionate contribution to
litigation costs.
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<PAGE> 22
ARTICLE 4
Should Licensee not participate in the litigation, either because Licensee
elects not to do so, or because LSU does not invite Licensee to participate,
then Licensee shall receive no portion of any recovery received by LSU from the
litigation. LSU may settle an infringement suit by granting the accused
infringer a license or sublicense under Licensed Patents only with Licensee's
consent.
4.3 CERTAIN ASSIGNMENT OBLIGATIONS AND PARTICIPATION RIGHTS. In the event either
that Licensee brings suit pursuant to Paragraph 4.1 of these Supplemental Terms,
or that LSU brings suit pursuant to Paragraph 4.2, then the other party shall
assign to the plaintiff in such litigation any right that the other party may
have for an injunction against or damages resulting from the infringement;
subject to the provisions of Paragraphs 4.1 and 4.2 concerning distribution of
any amounts recovered. That other party shall also provide reasonable
cooperation to the plaintiff in the conduct of such suits, at the plaintiff's
expense.
4.4 LITIGATION DOES NOT AFFECT ROYALTIES. The pendency of a lawsuit for
infringement of Licensed Patents, or otherwise concerning the validity or
enforceability of Licensed Patents shall not affect in any way Licensee's
obligations to pay royalties or other amounts under the Agreement.
4.5 INTERFERENCE. Licensee shall pay all reasonable legal and other costs
associated with any interference proceedings involving any of Licensed Patents,
whether such proceedings be in court or in the Patent and Trademark Office.
Decisions regarding the initiation, prosecution, defense, appeal, or settlement
of any such interference proceedings shall be made jointly by LSU and Licensee.
Notwithstanding the foregoing, Licensee may elect in writing to irrevocably
waive all rights under this Agreement respecting all the claims of Licensed
Patents that are involved in an interference proceeding, thereafter avoiding the
obligation to pay future costs under the first sentence of this paragraph 4.5
and thereafter waiving the right to participate in further decisions under the
second sentence of this paragraph 4.5.
4.6 INDEMNIFICATION BY LICENSEE. If Licensee takes any action under the
Agreement or otherwise that leads to or results in litigation or other legal
proceedings (in any country) concerning or related to Licensed Patents or the
Agreement, including but not limited to a suit for declaratory judgment or claim
or counterclaim for infringement, noninfringement, validity, invalidity,
enforceability, unenforceabilty, ownership, or inventorship of Licensed Patents,
then Licensee shall assume the responsibility for such legal proceedings (at
both trial and appellate levels) at Licensee's sole expense. If LSU so requests,
Licensee's legal counsel shall represent LSU, at Licensee's expense, in any such
legal proceedings at both trial and appellate levels. If Licensee's legal
counsel is unable to represent LSU because of a conflict of interest or other
bona fide reason, LSU may engage other competent legal counsel, whose reasonable
fees and expenses shall be promptly paid or reimbursed by Licensee, to represent
LSU in any such suit or legal proceeding. If LSU does not wish to be represented
by Licensee's legal counsel, LSU may engage competent legal counsel of LSU's
choosing to represent LSU at LSU's own expense (except in the case of a conflict
of interest or other bona fide reason as described in the preceding sentence, in
which case reasonable expenses for such representation shall be borne by
Licensee). Licensee shall indemnify LSU and hold LSU harmless from any and all
claims, damages, or other obligations arising out of or resulting from any such
claim or legal proceedings. Any sublicense, transfer, or assignment of any of
Licensee's rights under the Agreement shall expressly impose the obligations of
this Paragraph on any sublicensee, transferee, or assignee.
4.7 FRAUDULENT OR WILLFUL MISCONDUCT. Notwithstanding Paragraph 4.6 above,
Licensee shall have no contractual obligation under this Agreement to indemnify
LSU to the extent that damages may be attributable to LSU's own fraudulent or
willful misconduct. In the event that a claim is brought against LSU or Licensee
that is otherwise within Licensee's indemnification obligations under Paragraph
4.6 above, except that allegations of fraudulent or willful misconduct are made
against LSU, then the provisions of this Paragraph 4.7 shall apply. LSU shall
defend both itself and Licensee, at LSU's expense, against any claim that is
based on an allegation or claim of fraudulent or willful misconduct by LSU. If
the final judgment or verdict respecting the fraudulent or willful misconduct
claim -- after all applicable appeals and appeal delays have expired -- is other
than liability against LSU resulting from a finding that LSU committed
fraudulent or willful misconduct, then Licensee shall promptly indemnify LSU as
otherwise provided in Paragraph 4.6 above, and Licensee shall also promptly
reimburse LSU's reasonable legal and other out-of-pocket expenses incurred in
defending the claim at both trial and appellate levels; provided that LSU shall
not settle any such claim without Licensee's prior, written consent, such
consent not to be unreasonably withheld. If the final resolution of the
fraudulent or willful misconduct claim -- after all applicable appeals and
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<PAGE> 23
ARTICLE 4
appeal delays have expired -- is a finding that LSU committed fraudulent or
willful misconduct, then LSU shall indemnify Licensee against that judgment or
award, and Licensee shall have no obligation to indemnify LSU with respect to
that claim under Paragraph 4.6 above. If the fraudulent or willful misconduct
claim is settled prior to a final judgment or verdict (including all applicable
appeals and appeal delays), then LSU and Licensee shall make good faith efforts
to resolve their respective obligations under Paragraphs 4.6 and 4.7, and if
unable to reach agreement, shall have recourse to the dispute resolution
mechanism of Paragraph 13.3. As otherwise provided in Paragraph 4.6 above,
Licensee shall defend, indemnify, and hold LSU harmless against any claim that
may be made against LSU in the same proceedings, and that is not based on an
allegation or claim of fraudulent or willful misconduct by LSU; and in such a
case LSU and Licensee shall cooperate in allocating those costs that are common
to the defense of both sets of claims, subject to LSU's contingent right to
later indemnification and reimbursement after final resolution, as otherwise
provided in this Paragraph 4.7.
Because a finding of "inequitable conduct" in the Patent and Trademark Office
can be based on a lesser showing than that required for "fraudulent or willful
misconduct," it is understood that a finding of "inequitable conduct" in the
Patent and Trademark Office would not necessarily constitute "fraudulent or
willful misconduct" within the contemplation of this Paragraph 4.7, depending on
the specific circumstances.
Because Dr. Jesse Jaynes, who was once an employee of LSU, is a principal of
Licensee and has been a principal of Licensee since its inception,
notwithstanding any provision of this Paragraph 4.7 to the contrary, LSU shall
have no obligation to defend or indemnify Licensee against any claim, judgment,
or award that is based on allegations of fraudulent or willful misconduct by Dr.
Jaynes.
5. AUDITING
5.1 LICENSEE'S RECORDS. Licensee (and any Affiliate exercising rights under the
Agreement) shall make and keep full and accurate books and records in accordance
with Generally Accepted Accounting Principles showing the sublicensing,
manufacture, use, distribution, importation, lease, and sale of any Licensed
Product by Licensee and by Licensee's Affiliates. Licensee shall require any
Sublicensees to keep similar books and records. Licensee agrees that LSU, LSU's
designee, or the Louisiana Legislative Auditor may inspect and audit the books
and records of Licensee (and of any Affiliate of Licensee exercising rights
under this Agreement) pertaining to Licensed Products during regular business
hours on ten days' written notice, and may make copies of those books and
records at Licensee's place of business to the extent necessary to verify the
payments due under the Agreement. Any such audit shall be at the expense of LSU,
of LSU's designee, or of the Louisiana Legislative Auditor, as applicable;
except that should such an audit indicate an underpayment of 10% or more for any
calendar quarter, then Licensee shall pay the cost of the audit within thirty
days of its completion.
5.2 CONFIDENTIALITY. LSU agrees that, except to the extent that LSU may be
required by applicable law to so disclose, LSU will not disclose, and will keep
confidential for a period of three years, any information about Licensee's
customers, prices, or other confidential information about the business affairs
of Licensee that LSU may discover in the course of any examination of books and
records permitted under this Article 5, provided that at the time of the audit
Licensee clearly identifies any such information that Licensee considers to be
confidential.
5.3 SUBLICENSE OR ASSIGNMENT. In the event that any right granted under the
Agreement is sublicensed, assigned, or otherwise transferred, any agreement
sublicensing, assigning, or otherwise transferring that right shall grant LSU
the same rights to audit the books and records of the sublicensee, assignee, or
other transferee as LSU has with respect to Licensee's books and records under
this Article 5.
5.4 TERM OF AUDIT RIGHTS. The right of LSU to inspect the books and records of
Licensee or of any Affiliate, sublicensee, assignee, or transferee shall
continue past the term or termination of the Agreement, until the later of the
date on which all payments due under the Agreement have been made, or until two
years after the expiration of the Agreement.
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<PAGE> 24
ARTICLE 6
6. INDEMNIFICATION
6.1 GENERAL. Licensee shall defend, indemnify, and hold harmless LSU and LSU's
agents, officers, board members, employees, and anyone for whom LSU may be
liable (collectively, "INDEMNITEES") from and against any and all claims,
damages, losses, and expenses, in any country, including reasonable attorney's
fees at both trial and appellate levels to or for an attorney of LSU's choosing,
for claims for damages to property, injury to persons, or death of persons, or
for any other damage arising out of or in any way relating to the sublicensing,
manufacture, use, distribution, marketing, importation, lease, or sale of
Licensed Products or Licensed Patents by Licensee or by anyone for whom Licensee
may be responsible, including but not limited to Licensee's associates,
Affiliates, directors, officers, employees, sublicensees, assignees, and
transferees. Licensee agrees to defend any Indemnitee against any such lawsuit
or arbitration proceeding at Licensee's expense, and to pay any judgment
rendered against any Indemnitee in any such lawsuit or arbitration proceeding,
together with all costs and reasonable attorney's fees at both trial and
appellate levels to or for an attorney of LSU's choosing incurred in preparing
for or defending any such lawsuit or arbitration proceeding. Any sublicense,
transfer, or assignment of any of Licensee's rights under the Agreement shall
expressly impose the obligations of this Paragraph on any sublicensee,
transferee, or assignee.
6.1.1 FRAUDULENT OR WILLFUL MISCONDUCT. Notwithstanding Paragraph 6.1 above,
Licensee shall have no contractual obligation under this Agreement to indemnify
LSU to the extent that damages may be attributable to LSU's own fraudulent or
willful misconduct. In the event that a claim is brought against LSU or Licensee
that is otherwise within Licensee's indemnification obligations under Paragraph
6.1 above, except that allegations of fraudulent or willful misconduct are made
against LSU, then the provisions of this Paragraph 6.1.1 shall apply. LSU shall
defend both itself and Licensee, at LSU's expense, against any claim that is
based on an allegation or claim of fraudulent or willful misconduct by LSU. If
the final judgment or verdict respecting the fraudulent or willful misconduct
claim -- after all applicable appeals and appeal delays have expired -- is other
than liability against LSU resulting from a finding that LSU committed
fraudulent or willful misconduct, then Licensee shall promptly indemnify LSU as
otherwise provided in Paragraph 6.1 above, and Licensee shall also promptly
reimburse LSU's reasonable legal and other out-of-pocket expenses incurred in
defending the claim at both trial and appellate levels; provided that LSU shall
not settle any such claim without Licensee's prior, written consent, such
consent not to be unreasonably withheld. If the final resolution of the
fraudulent or willful misconduct claim -- after all applicable appeals and
appeal delays have expired -- is a finding that LSU committed fraudulent or
willful misconduct, then LSU shall indemnify Licensee against that judgment or
award, and Licensee shall have no obligation to indemnify LSU with respect to
that claim under Paragraph 6.1 above. If the fraudulent or willful misconduct
claim is settled prior to a final judgment or verdict (including all applicable
appeals and appeal delays), then LSU and Licensee shall make good faith efforts
to resolve their respective obligations under Paragraphs 6.1 and 6.1.1, and if
unable to reach agreement, shall have recourse to the dispute resolution
mechanism of Paragraph 13.3. As otherwise provided in Paragraph 6.1 above,
Licensee shall defend, indemnify, and hold LSU harmless against any claim that
may be made against LSU in the same proceedings, and that is not based on an
allegation or claim of fraudulent or willful misconduct by LSU; and in such a
case LSU and Licensee shall cooperate in allocating those costs that are common
to the defense of both sets of claims, subject to LSU's contingent right to
later indemnification and reimbursement after final resolution, as otherwise
provided in this Paragraph 6.1.1.
Because a finding of "inequitable conduct" in the Patent and Trademark Office
can be based on a lesser showing than that required for "fraudulent or willful
misconduct," it is understood that a finding of "inequitable conduct" in the
Patent and Trademark Office would not necessarily constitute "fraudulent or
willful misconduct" within the contemplation of this Paragraph 6.1.1, depending
on the specific circumstances.
Because Dr. Jesse Jaynes, who was once an employee of LSU, is a principal of
Licensee and has been a principal of Licensee since its inception,
notwithstanding any provision of this Paragraph 6.1.1 to the contrary, LSU shall
have no obligation to defend or indemnify Licensee against any claim, judgment,
or award that is based on allegations of fraudulent or willful misconduct by Dr.
Jaynes.
6.2 PRIOR LICENSE. The Licensed Patents were previously licensed to Helix
Phytonetix, Inc., a Louisiana corporation ("PHYTONETIX"), under a February 1,
1993 License Agreement (the "PRIOR LICENSE") between LSU and Phytonetix. The
Prior License was executed pursuant to a February 1, 1993 Agreement in
Settlement, Compromise, and Release (the "HELIX SETTLEMENT") among LSU,
Phytonetix, and the following private corporations: Helix International
Corporation (a Louisiana
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<PAGE> 25
ARTICLE 6
corporation), Helix BioMedix, Inc. (a Colorado corporation), Helix BioMedix,
Inc. (a Louisiana corporation), and University Research and Marketing, Inc. (a
Louisiana Corporation). (Phytonetix, each of the other private corporations
named in the preceding sentence, and each of their respective affiliates,
officers, directors, shareholders, assignees, and other persons or entities
claiming any right through any of the above may be referred to individually or
collectively as a "PRIOR PARTY" or the "PRIOR PARTIES.") LSU represents that LSU
has prior to the Effective Date neither granted nor authorized any licenses
under the Licensed Patents to any party other than: (1) to Phytonetix under the
Prior License on and after February 1, 1993; and (2) to one or more of the Prior
Parties before February 1, 1993. (The license rights in Licensed Patents held by
Prior Parties other than Phytonetix were extinguished under the terms of the
Helix Settlement.)
When Phytonetix failed to pay a minimum royalty timely under the Prior License,
LSU notified Phytonetix that the Prior License was terminated as of April 10,
1996. LSU has previously provided Licensee with copies of the Prior License, the
Helix Settlement (with all Exhibits), and the correspondence by which LSU
notified Phytonetix that the Prior License was terminated as of April 10, 1996.
Although LSU believes that the Prior License was properly terminated as of April
10, 1996, LSU can make no representations or warranties that the Prior License
was properly terminated. Licensee assumes the risk that a Prior Party may
challenge the April 10, 1996 termination of the Prior License, whether by
litigation, arbitration, or otherwise.
Licensee shall (subject to the limitation set forth below regarding the "Notes")
indemnify and hold harmless LSU and LSU's agents, officers, board members,
employees, and anyone for whom LSU may be liable (collectively, "INDEMNITEES")
from and against any and all claims, damages, losses, and expenses, in any
country, asserted by any Prior Party and arising out of or related to the Prior
License or the Helix Settlement -- excluding attorney's fees. Attorney's fees
are the responsibility of the respective Indemnitee or Indemnitees, who shall
therefore also have full control of the defense and settlement of any such
lawsuit or arbitration proceeding. Without Licensee's consent, such consent not
to be unreasonably withheld, a settlement of such a lawsuit or arbitration
proceeding shall not grant any rights under Licensed Patents.
Licensee's obligation to indemnify under this Paragraph 6.2 is limited to an
amount equal to the total principal, interest, and attorney's fees owed
(calculated at the time when the judgment, arbitration award, or settlement
becomes final and non-appealable) on the following two promissory notes, both of
which were executed by Phytonetix in connection with the Helix Settlement: (1)
"Negotiable Instrument" dated February 1, 1993 in the principal amount of
$168,899 by Phytonetix in favor of LSU; and (2) "Negotiable Instrument" dated
February 1, 1993 in the principal amount of $50,000 by Phytonetix in favor of
LSU (collectively, the "NOTES").
As of the Effective Date, Phytonetix is in default on both Notes; LSU has
received no payments on either of the Notes, and LSU has no reason to expect
that payment is forthcoming or collectable on either Note. LSU hereby assigns
each of the Notes to Licensee. LSU shall retain a security interest in both
Notes to assure the performance of Licensee's obligations under this Paragraph
6.2, and LSU shall retain possession of both Notes until their potential use to
offset or defend against a claim by a Prior Party becomes moot or has been
fulfilled. Licensee shall make the Notes available to offset or otherwise defend
against any claim that is made by a Prior Party, and that Licensee is obligated
to indemnify under this Paragraph 6.2. Licensee shall not assign, transfer,
mortgage, pledge, or otherwise encumber either Note without LSU's prior written
consent; and any such attempted assignment, transfer, mortgage, pledge, or other
encumbrance without LSU's prior written consent shall be null and of no effect.
Licensee shall be responsible for taking appropriate steps to prevent the Notes
from prescribing (i.e., to take appropriate steps to prevent the successful
assertion of a defense based on a pertinent statute of limitations), until their
potential use to offset or defend against a claim by a Prior Party becomes moot
or has been fulfilled. Once the potential use of the Notes to offset or defend
against a claim by a Prior Party becomes moot or has been fulfilled, LSU shall
release its security interest in the Notes, and shall deliver the Notes to
Licensee. Licensee's ownership of the Notes shall automatically revert to LSU
upon the termination of the present Agreement for any reason, without the
necessity of any formalities to accomplish this reversion. Should Licensee be in
possession of the Notes on the termination of the present Agreement, Licensee
shall promptly deliver the Notes to LSU without the necessity of any demand from
LSU to do so.
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<PAGE> 26
ARTICLE 7
7. DEFAULT
7.1 If Licensee is in breach or default of any term or condition of the
Agreement, or fails to perform any obligation under the Agreement, LSU may give
written notice to Licensee, specifying the reason why there is a default or
breach, after which notice Licensee shall have 30 days to cure the breach. If
the breach is not cured, or if efforts reasonably satisfactory to LSU are not
instituted within that 30 day period to cure the breach, the Agreement may be
terminated at the option of LSU, upon written notice of termination to Licensee,
and Licensee shall have no further rights to sublicense, make, use, import,
offer to sell, or sell Licensed Patents or Licensed Products. If the breach is
cured, or if efforts reasonably satisfactory to LSU are instituted within the 30
day period to cure the breach, the Agreement shall continue as if no breach had
occurred; provided, however, that upon the third default arising out of failure
to pay monies due to LSU under the Agreement, or upon default or rejection under
the provisions of Article 8 of these Supplemental Terms, no notice or period to
cure shall be necessary, and LSU may terminate the Agreement at its option
without further notice to Licensee and without allowing Licensee a period to
cure, and in such an event Licensee shall have no further right to sublicense,
make, use, import, offer to sell, or sell Licensed Patents or Licensed Products.
Following termination of the Agreement under this Paragraph 7.1, Licensee shall
have one hundred eighty days to sell any Licensed Products then in stock or then
under production, subject to the payment of royalties on those Licensed Products
as otherwise provided in Article III, Paragraph (B)(1).
8. BANKRUPTCY OF LICENSEE
8.1 ACCELERATED PROCEDURES. If bankruptcy proceedings under any Chapter of the
Bankruptcy Code, or other insolvency proceedings, voluntary or involuntary, are
filed by or against Licensee, then Licensee or its representative must assume
the Agreement within thirty days of that filing, and Licensee must cure all
defaults existing under the Agreement within that thirty day period, and
Licensee must provide such adequate assurance of future performance of its
obligations under the Agreement as may be required by the Bankruptcy or other
Court, and should Licensee fail to assume the Agreement within thirty days of
that filing, or should Licensee fail to cure all defaults existing under the
Agreement within that thirty day period, or should Licensee fail to provide
adequate assurance of its future performance of its obligations under the
Agreement as may be required by the Bankruptcy or other Court, then the
Agreement shall be deemed to be rejected.
9. ADDITIONAL RIGHTS AND OBLIGATIONS
9.1 COMPLIANCE WITH LAWS. In fulfilling its obligations under the Agreement,
Licensee shall comply with all applicable licensing, regulatory, and statutory
requirements. Licensee shall be responsible for paying any taxes or other
assessments, and for complying with all applicable laws and regulations of the
United States and other countries, including without limitation all applicable
laws and regulations relating to the environment, to agriculture, and to
foodstuffs.
9.2 TERMINATION TERMINATES NON-STANDARD-FORM SUBLICENSES. Any termination of the
Agreement shall terminate any non-Standard-Form Sublicense that Licensee has
entered under the Agreement, unless LSU has expressly and unambiguously agreed
to the contrary respecting a particular Sublicense. Following termination of
this Agreement, a Standard-Form Sublicense that fully complies with Paragraph
2.2.1 of these Supplemental Terms may continue in effect as a license directly
between LSU and the sublicensee if the Standard-Form Sublicense so provides,
subject to any modifications specified in the Standard-Form Sublicense governing
events occurring after termination of this Agreement. Where a sublicense does
not fully comply with Paragraph 2.2.1, and therefore requires LSU's prior
written approval, a sublicensee desiring different treatment may request a
different agreement regarding termination of sublicense rights directly from LSU
at the time that it negotiates with Licensee for a sublicense agreement, but LSU
shall have no obligation to consent to such a different agreement in the context
of a non-Standard-Form Sublicense.
9.3 MARKING. Licensee, any Affiliate of Licensee, and each sublicensee shall
mark any article or composition within the claims of any issued patent within
Licensed Patents, or any article or composition intended for a use within the
claims of any issued patent within Licensed Patents, with the word "Patent,"
"Patents," "For Use Under Patent," or "For Use Under Patents," and the number or
numbers of each such issued patent. When, from the character of the article or
composition, this marking cannot be made, the marking shall instead be placed on
a label attached to any packaging containing any such article or composition.
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<PAGE> 27
ARTICLE 9
9.4 PROHIBITION ON MISUSE. Licensee shall engage in no activity that would
constitute a misuse of any patent or patent application within Licensed Patents.
Each sublicense, assignment, or other transfer of any rights in Licensed Patents
shall contain a provision forbidding the sublicensee, assignee, or other
transferee from engaging in any activity that would constitute a misuse of any
item in Licensed Patents. As used in this Paragraph, "misuse" of a patent or
patent application means an action that, aside from issues of patent validity or
infringement, renders a patent wholly or partially unenforceable, whether
temporarily or permanently.
9.5 LICENSEE TRADEMARKS. Subject to Article V of the Agreement, Licensee may
acquire its own trademarks for use in connection with Licensed Products.
10. CONSULTING SERVICES
10.1 CONSULTING SERVICES. LSU will entertain requests by Licensee to allow
current LSU employees, acting independently of their employment at LSU, to serve
as consultants to Licensee. The terms and conditions of any such consulting
agreements shall be negotiated between Licensee and any prospective consultant,
and shall be consistent with the laws of the State of Louisiana and the rules,
regulations, and policies of LSU. It is understood that LSU employees who act as
consultants may not ordinarily grant rights in intellectual property to the
outside employer.
11. PUBLICATION
11.1 PUBLICATION. Whereas LSU is an academic institution, LSU shall be free to
make such publications as LSU sees fit concerning Licensed Patents; except to
the extent (if any) precluded by a separate confidentiality agreement between
LSU and Licensee.
11.2 SUPPLEMENTAL PATENT RIGHTS. Notwithstanding anything in Paragraph 11.1 to
the contrary, LSU and Licensee shall each maintain the confidentiality of the
status of the Supplemental Patent Rights, until the earlier of the following two
dates: (1) the earliest date when no patent application within the Supplemental
Patent Rights is pending, or (2) five years after the Effective Date of this
Agreement. No obligation of confidentiality shall exist as to such information
that: (1) is public knowledge, or becomes public knowledge through no act or
omission of LSU or Licensee; (2) is required to be disclosed by a court or
government agency, provided that the other party is given reasonable notice of
the required disclosure; or (3) is disclosed in any issued patent or published
patent application within Licensed Patents in any country. Because patents
within Licensed Patents have issued in several countries, it is understood that
the information subject to this confidentiality obligation is directed primarily
to that concerning the procedural status of the prosecution of the Supplemental
Patent Rights, and to the subject matter of the claims presented in the
Supplemental Patent Rights.
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ARTICLE 12
12. INFLATION ADJUSTMENT
12.1 INFLATION ADJUSTMENT. The dollar amounts of any items specifically stated
in the Agreement to be subject to adjustment for inflation under Paragraph 12 of
the Supplemental Terms are subject to adjustment as follows. (This inflation
adjustment does not apply to any item that does not specifically refer to the
inflation adjustment of this Paragraph 12 of these Supplemental Terms.) The
"MULTIPLIER" on any given date is defined to be the ratio of (a) the Consumer
Price Index for All Urban Consumers, All Items, U.S. City Average (the "INDEX")
most recently issued by the United States Government as of that date to (b) the
Index on the effective date of the Agreement. At any time when the Multiplier is
at least 1.10 times the value of the Multiplier on the date of the most recent
adjustment under this Paragraph (or is at least 1.10 if there has been no
previous adjustment under this Paragraph), then LSU may give Licensee written
notice that the effective amount of each of the dollar amounts that is subject
to inflation adjustment under the Agreement is adjusted to the original amount
as specified in the Agreement, multiplied by the Multiplier as of the date of
the written notice. The adjusted amounts are effective immediately following
this notice, and shall then remain constant until another notice of adjustment
under this Paragraph is given. Notwithstanding any other provision of this
Paragraph to the contrary, in the specific case of liability insurance required
by Article VI of the Agreement, an adjustment notice under this Paragraph is
effective as of the time when Licensee (or a sublicensee) next renews or
replaces its then-current liability insurance policy; and the amount of
liability insurance coverage required shall be the amount specified in Article
VI, multiplied by the Multiplier as of the date of issuance, renewal, or
replacement of the policy.
13. MISCELLANEOUS
13.1 EFFECT OF AN INVALID PROVISION. If any part of the Agreement (including the
Supplemental Terms) is finally adjudged to be invalid by a court of competent
jurisdiction, or by an arbitrator as provided in Paragraph 13.3 of these
Supplemental Terms, the remaining parts of the Agreement shall remain in full
force and effect. Furthermore, in lieu of that invalid part, there shall be
automatically added to the Agreement a provision as similar in terms to that
invalid part as may be possible, legal, valid, and enforceable.
13.2 GOVERNING LAW. This contract, its terms, and the enforcement of this
contract shall be governed by the substantive law of the State of Louisiana.
13.3 DISPUTE RESOLUTION. In the event of a controversy or claim arising out of
or relating to this Agreement, or the breach, validity, or termination of this
Agreement, the parties shall first negotiate in good faith for a period of sixty
days to try to resolve the controversy or claim. If the controversy or claim is
unresolved after this period of good-faith negotiations, the parties shall then
make good-faith efforts for a period of sixty days to mediate the controversy or
claim in Baton Rouge, Louisiana before a sole mediator selected by the Center
for Public Resources, Inc. (New York, New York), under the Center for Public
Resources' Model Mediation Procedure for Business Disputes in effect as of the
Effective Date. If the controversy or claim is unresolved after this period of
mediation, on the written demand of either party, any controversy arising out of
or relating to this Agreement or to the breach, termination, or validity of this
Agreement, shall be settled by binding arbitration in Baton Rouge, Louisiana in
accordance with the Center for Public Resources' Rules for Non-Administered
Arbitration of Patent and Trade Secret Disputes in effect as of the Effective
Date before three arbitrators, of whom each party shall appoint one. No
arbitrator may be a resident of, or have a place of business in, Louisiana,
North Carolina, Utah, or Montana. The arbitration shall be governed by the
United States Arbitration Act, 9 U.S.C. Sections 1-16, and judgment upon the
award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. All applicable statutes of limitation and defenses based
upon the passage of time shall be tolled while the procedures described above in
this Paragraph are pending. LSU and Licensee shall each take such action, if
any, required to effectuate this tolling. Each party is required to continue to
perform its obligations under this Agreement pending final resolution of any
dispute arising out of or relating to this Agreement. Otherwise, any controversy
arising under or relating to this Agreement, or the breach, termination, or
validity of this Agreement, may be adjudicated only in a court, state or
federal, having jurisdiction over the subject matter and including Baton Rouge,
Louisiana within its territorial district. Both parties consent to the
jurisdiction and venue of such a court. A party's right to demand arbitration of
a particular dispute arising under or related to this Agreement, or the breach,
termination, or validity of this Agreement, shall be waived if that party
either: (1) brings a lawsuit over that controversy or claim against the other
party in any state or federal court; or (2) does not make a written demand for
mediation, arbitration, or
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ARTICLE 13
both within 60 days of service of process on that party of a summons or
complaint from the other party instituting such a lawsuit in any state or
federal court.
13.4 ATTORNEY'S FEES. If it becomes necessary for one party to employ the
services of an attorney for the protection and enforcement of its rights under
the Agreement, or to compel performance of the other party's obligations under
the Agreement, upon final judgment or award by a court of competent jurisdiction
or an arbitrator against the other party, the court or arbitrator in its
discretion may order that other party to pay reasonable attorney's fees at both
trial and appellate levels to or for an attorney of the employing party's
choice.
13.5 NO WAIVER. The failure of either party to insist upon strict performance of
any provision of the Agreement, or to exercise any right under the Agreement,
shall not constitute a waiver of that provision or right.
14. TERMINATION
14.1 EFFECT OF TERMINATION. Upon termination of the Agreement for any reason,
each of the following provisions shall continue in effect indefinitely, until
its purpose can no longer be fulfilled, or is no longer meaningful: Main Body of
Agreement {Article I (all); II (par. (D) only); III (except that Licensee shall
have no obligation to pay patenting expenses accruing after termination of the
Agreement); IV (all); V; VI (ALL); VII; and VIII (ALL)}; Supplemental Terms
(Appendix A) {Article 1 (all), 2.8 (but only to the extent that an applicable
180-day period defined in paragraph 2.8 has not yet run, and only if the
Agreement is terminated for a reason other than Licensee's default), 3 (all),
4.6, 5 (all), 7.1 (final sentence of paragraph 7.1 only, respecting the sale of
Licensed Products then in stock or then under production), 6 (all), 9.1, 9.2,
11.1, 12, 13 (all), and 14}; and the ratifications by Jesse Jaynes and Jeannette
Jaynes. Following the termination of the Agreement, any provision of the
Agreement (or of the Supplemental Terms) not referred to in the preceding list
shall cease to have effect. By way of illustration and not limitation, following
the termination of the Agreement Licensee shall remain obligated to pay LSU all
licensing fees, royalties, minimum royalties, and other amounts that are due
under Article III and that accrued prior to the effective date of termination.
INITIALS OF SIGNATORIES TO MAIN BODY OF AGREEMENT:
/s/ AAC 5/19/97 /s/ RDE 4/18/97
- -------------------- ----------- ----------------------------- -----------
(Initialled for LSU) (Date) (Initialled for Licensee) (Date)
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<PAGE> 1
Exhibit 10.2
RESTATED
DEMETER-MYCOGEN
LICENSE AND ROYALTY AGREEMENT
Demeter BioTechnologies, Ltd., a Colorado corporation having a
principal place of business at 905 West Main Street, Suite 20B Brightleaf
Square, Durham, North Carolina 27701 ("DEMETER") and Mycogen Corporation
("LICENSEE"), having a place of business at 5501 Oberlin Drive, San Diego,
California 92121, enter into the following Agreement effective September 23,
1997 (the "EFFECTIVE DATE").
WHEREAS the Board of Supervisors of Louisiana State University and
Agricultural and Mechanical College, a public constitutional corporation,
organized and existing under the laws of the State of Louisiana ("LSU") owns
certain patent rights in certain countries regarding certain technology
involving disease resistance in plants;
WHEREAS Demeter is in the business of producing, licensing, and
sublicensing disease resistant plants and genetic constructs useful in producing
disease resistant plants or treating plants and has developed technology and
know-how and has obtained or filed patents of its own;
WHEREAS Demeter has obtained from LSU, effective May 1, 1997, a license
("LSU LICENSE") under each of the components of "LSU LICENSED PATENTS" and
"SUPPLEMENTAL PATENT RIGHTS" defined in Article I, Paragraphs (A) and (B) below,
respectively;
WHEREAS Licensee desires to obtain a license from Demeter of Demeter
Technology or a sublicense from Demeter of rights under Licensed Patents and
Supplemental Patent Rights, all for certain fields of use;
WHEREAS Demeter and Licensee have agreed to the following terms and
conditions, and desire to enter this License and Royalty Agreement (the
"AGREEMENT");
THEREFORE, in consideration of the mutual obligations set forth in this
Agreement, Demeter and Licensee agree as follows:
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<PAGE> 2
ARTICLE I. DEFINITIONS
A. "LSU LICENSED PATENTS" means: (1) Jaynes and Derrick, "Method for
Introduction of Disease and Pest Resistance into Plants and Novel Genes
Incorporated into Plants which Code Therefor," United States patent number
5,597,946, issued January 28, 1997; (2) Jaynes and Derrick, "Plants Genetically
Enhanced for Disease Resistance," United States patent number 5,597,945, issued
January 28, 1997; (3) Jaynes and Derrick, European patent application
93113536.2; (4) Jaynes and Derrick, European patent application 89900103.6; (5)
Jaynes and Derrick, Japanese patent application SHO 62-504491; (6) Jaynes and
Derrick, "Method for Introduction of Disease and Pest Resistance into Plants and
Novel Genes Incorporated into Plants which Code Therefor," European patent 0 330
655, issued June 7, 1995, nationalized in United Kingdom, France, Germany, and
Italy; (7) Jaynes and Derrick, "Plants Genetically Enhanced for Disease
Resistance," Canadian patent number 1,321,157, issued August 10, 1993; (8)
Jaynes and Derrick, "Method for Introduction of Disease and Pest Resistance into
Plants and Novel Genes Incorporated into Plants which Code Therefor," Australian
patent number 611,859, sealed November 5, 1991; and (9) any United States or
non-United States patent, reissue patent, or reexamination certificate resulting
from the applications and patents of parts (1) through (8) of this Paragraph,
including any renewals or extensions of the term of any such patent.
B. "SUPPLEMENTAL PATENT RIGHTS" means, subject to the limitations set forth in
this Paragraph, any United States divisional or continuation application (but
not a continuation-in-part application) either of United States patent
application serial number 08/444,762, filed May 19, 1995, or of United States
patent application serial number 08/453,436, filed May 30, 1995; and any United
States patent, reissue patent, or reexamination certificate resulting from such
a divisional or continuation application. "SUPPLEMENTAL PATENT RIGHTS" shall not
include any patent rights outside the United States. Furthermore,
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<PAGE> 3
"SUPPLEMENTAL PATENT RIGHTS" shall not include any patent rights concerning any
invention or activity whose unlicensed practice would infringe any of the
following claims: (1) any claim of United States patent number 5,597,945 or
5,597,946, or (2) any claim in any reissue patent or reexamination certificate
resulting from United States patent number 5,597,945 or 5,597,946. The
"SUPPLEMENTAL PATENT RIGHTS" will be treated as Licensed Patents for all
purposes under this Agreement.
C. "DEMETER PATENTS" means the U.S. patents and patent applications listed in
Sections A-1 and A-2 of Schedule A hereto, and all patents issuing from such
applications, together with all foreign counterparts of such patents and
applications, and all continuations, continuations-in-part, divisionals, and
reissues thereof.
D. "DEMETER TECHNOLOGY" means technology, know-how and materials, whether or not
patentable, (including the materials listed on Schedule B hereto and the
technology rights resulting from the current Demeter Agricultural Agreements
listed in Schedule C) covered by Demeter Patents, and/or related to the
development, manufacture or use of Biocontrol Peptides currently owned by or
available to Demeter or developed by Demeter during the term of this Agreement,
excluding Joint Technology.
E. "LICENSED TECHNOLOGY" means all Demeter Technology and Joint Technology.
F. "LICENSED PATENTS" means LSU Licensed Patents, Supplemental Patents, Demeter
Patents and Joint Patents.
G. "FIELD OF USE" means the use of Biocontrol Peptides for disease and/or pest
resistance purposes in transgenic plants of all plant species but not including
the use of plants as a production mechanism for producing Biocontrol Peptides
which are to be used for purposes not permitted under this Agreement.
H. "DOLLARS" means U.S. dollars.
I. "CROP" means a plant species designated by its formal binomal nomenclature
(e.g. Lycopersicon esculentum for tomato; Zea mays for corn, etc.).
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<PAGE> 4
J. "LICENSED PLANT PRODUCT(S)" means transgenic plant(s) containing a Biocontrol
Peptide the use of which either (i) involves the use of Demeter Technology
and/or Joint Technology licensed to Licensee under this Agreement; or (ii) would
otherwise infringe a valid claim of any applicable Licensed Patent absent the
licenses granted under this Agreement.
K. "LICENSED FORMULATED PRODUCT(S)" means any product, regardless of how
formulated, for application externally to a plant, or to any plant surface or
the growing media of any plant, containing one or more Biocontrol Peptides the
use of which either (i) involves the use of Demeter Technology or Joint
Technology licensed to Licensee under this Agreement; or (ii) would otherwise
infringe a valid claim of any applicable Licensed Patents absent the licenses
granted under this Agreement.
L. "NUTRITION PATENTS AND TECHNOLOGY" means all technology, materials and
patents or patent applications which relate to Demeter research on proteins with
improved nutritional quality including but not limited to the following patent
applications and applications in preparation listed in Section A3 of Schedule A
attached hereto, their foreign counterparts, and all continuations,
continuations-in-part, divisionals and reissues thereof.
M. "NET SALES" means all revenue received or accrued during the term of the
Agreement by Licensee, Licensee's Affiliates or their sublicensees,
respectively, arising out of or related to the use, transfer, lease, or sale of
any Licensed Product(s) at the actual amounts charged by Licensee or by any
Affiliate or their Sublicensee, excluding any Trait Marketing Revenue. "Net
Sales" also includes consideration received, at any time, by Licensee for a
Licensed Product that is made during the term of a Licensed Patent, but that is
used, sold, or otherwise transferred after that term. "Net Sales" shall not
include the following amounts: (i) revenue attributable to Licensed Products
that are actually returned to Licensee for refund; (ii) transportation charges
or allowances, if any, added to the price; and (iii) sales tariffs, duties, or
taxes for Licensed Products that
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<PAGE> 5
Licensee is required to collect and remit to a government as a matter of law;
but in no circumstances shall any deduction or exclusion from Net Sales receipts
be taken for any franchise tax or income tax. No other deductions of any kind
shall be made, whether for agents' commissions or otherwise. Where all or part
of the consideration received by Licensee, or an Affiliate of Licensee as
otherwise set forth in this Paragraph M for the use or transfer of any Licensed
Product is not cash, or where the final use of a Licensed Product is by Licensee
or an Affiliate of Licensee, then the "Net Sales" for that Licensed Product for
purposes of computing royalties or other amounts due under the Agreement shall
be deemed to be the fair market value for such Licensed Product. In determining
fair market value, appropriate weight shall be given to any arms-length
transaction by Licensee, an Affiliate of Licensee, or a sublicensee involving
the same or a similar Licensed Product. For Licensed Products which are Licensed
Plant Products, Net Sales will be determined in accordance with the above solely
on the basis of the revenue or value of such Licensed Plant Products as planting
materials (such as seeds, rootstocks, cutting and/or other plant parts) for
purposes of the production of a commercial crop and not on their end-use revenue
or value. The time when "Net Sales" for any Licensed Product are deemed received
for purposes of computing royalties or other amounts due under the Agreement
shall be (1) the date when a purchaser is billed by Licensee, (2) the date when
the purchaser actually uses or receives that Licensed Product, (3) the date when
Licensee bills for the use of that Licensed Product, or (4) the date when
Licensee receives payment for that Licensed Product, whichever date is earliest;
provided that Licensee must actually receive payment for that Licensed Product
before Licensee is obligated to pay royalties or other amounts to Demeter for
that Licensed Product. Where the consideration to Licensee for the right to use
or receive any Licensed Product is not cash, the date "Net Sales" shall be
deemed to be received shall be the date that Licensed Product is first used or
received. "Net Sales" will exclude any revenue
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<PAGE> 6
received or accrued by Licensee during the term of this Agreement from
sublicensing and Trait Marketing Revenue.
N. "TRAIT MARKETING REVENUE" means the net revenue received by Licensee or its
Affiliates, respectively from licenses to customers for the commercial use of
the pest or disease control traits in Licensed Plant Products to the extent
separately invoiced from the sale of Licensed Plant Products. Such fees would
include those based upon usage including, but not limited to, per acre charges,
box charges, or unit (e.g. volume or weight) charges. However, Trait Marketing
Revenue will not include any payments which are up-front license issuance fees,
technology milestone payments (e.g., for the achievement of sales thresholds),
or payments in the nature of license maintenance fees payable on a periodic
basis for continuation of a license.
O. "BIOCONTROL PEPTIDE(S)" means natural or synthetically derived peptide
compound(s) which express activity to control plant pests or plant diseases.
P. "GROSS VALUE ADDED" means the average difference between the sales price
charged customers for a Licensed Plant Product from the sales price charged
customers under substantially similar circumstances (including, but not limited
to, substantially similar quantities) for a plant product substantially
identical in every meaningful way to the Licensed Plant Product save for the
addition to the Licensed Plant Product of the technology subject to Licensed
Patents or Licensed Technology
Q. "LICENSED PRODUCT(S)" means Licensed Plant Product(s) or Licensed Formulated
Product(s), or both.
R. "FIRST COMMERCIAL SALE" means the receipt among the group consisting of
Licensee, Affiliate, and any sublicensee of the cumulative amount of fifty
thousand Dollars ($50,000) from the sale of Licensed Plant Products.
S. "CONFIDENTIAL INFORMATION" means any and all proprietary information
(including, without limitation, information related to technical, business and
intellectual property matters), know-how, data, trade secrets and biological and
other physical
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<PAGE> 7
materials owned and held by either party to this Agreement which such party
maintains as confidential.
T. "AFFILIATE" means any entity controlled by, controlling or under common
control with a party. For purposes of this definition, control will mean
ownership of fifty percent (50%) or more of the equity or voting control of such
party or entity.
U. "JOINT PATENTS" means patents and patent applications to the extent they
cover technology jointly invented by Demeter (or Demeter's agents) and Licensee
(or Licensee's agents) under the joint development program set forth in Article
VII of this Agreement.
V. "JOINT TECHNOLOGY" means technology, know-how and materials jointly developed
by Demeter (or Demeter's agents) and Licensee (or Licensee's agents) under the
joint development program set forth in Article VII of this Agreement, which are
not subject to Demeter Patents.
W. "JOINT INVENTIONS" means any invention, technology, know-how and materials
conceived jointly under the joint development program set forth in Article VII
of this Agreement by Demeter (or Demeter agents) on the one hand, and Mycogen
(or Mycogen agents) on the other hand, whether or not patentable, including any
Joint Patents and Joint Technology.
ARTICLE II. LICENSE GRANT
A. SCOPE OF LICENSE.
1. LICENSED PLANT PRODUCTS. Subject to the terms and conditions of this
Agreement, Demeter grants to Licensee, and Licensee accepts from
Demeter, an exclusive world-wide license to Licensed Technology and
Licensed Patents to make, have made, use, offer to sell, sell for use
and sublicense Licensed Plant Products in the Field of Use, subject to
the rights granted to Sanford Scientific Inc., Treetech Management,
Inc. d/b/a Dry Creek Laboratories, Rhone-Poulenc and Clause, S.A.
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<PAGE> 8
2. LICENSED FORMULATED PRODUCTS Subject to the terms and conditions of
this Agreement, Demeter grants to Licensee, and Licensee accepts from
Demeter, an exclusive world-wide license of Licensed Technology and
Licensed Patents to make, have made, use, offer to sell, sell for use
and sublicense Licensed Formulated Products, again subject to the
rights, if any, granted to Sanford Scientific Inc., Treetech
Management, Inc. d/b/a Dry Creek Laboratories, Rhone-Poulenc and
Clause, S.A.
3. SUBLICENSING RIGHTS AND RESTRICTIONS. Licensee will have the right to
sublicense any of the rights granted to Licensee hereunder, except that
Licensee will not have the right to assign, transfer or sublicense any
rights under the LSU Licensed Patents or the Supplemental Patent Rights
without the express prior approval of LSU, such approval not to be
unreasonably withheld. Notwithstanding the foregoing, no prior approval
from LSU will be required: (i) to sell Licensed Products to arms-length
purchasers (e.g. distributors or farmers), even where such a sale is
accompanied by an express or implied sublicense under one of more of
the LSU Licensed Patents or Supplemental Patent Rights regarding the
commercial use of such Licensed Product for non-developmental purposes
(ii) to sublicense an Affiliate of Licensee in accordance with
Paragraph 7 of this Article II; or (iii) to license a third party under
one or more LSU-approved standard-form sublicenses (the "Standard-Form
Sublicenses"). Attached as Schedule D is a Standard-Form Sublicense
which has been approved by LSU.
4. STANDARD-FORM SUBLICENSE. At any time during the term of this
Agreement, Licensee may request that LSU and Licensee negotiate in good
faith to develop one or more additional Standard-Form Sublicenses.
Licensee shall prepare the first draft of each proposed Standard-Form
Sublicense, and thereafter the parties shall discuss and negotiate
modifications to the initial draft in good
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<PAGE> 9
faith. Each party's obligation in this respect is limited to an
obligation to negotiate in good faith; neither party is obligated to
approve a proposed Standard-Form Sublicense if mutually agreeable terms
cannot be found.
By way of illustration and not limitation, the factors that LSU
considers important in reviewing proposed sublicenses include the
following: adequate liability insurance; adequate indemnity in favor of
LSU; prohibitions against further assignment, sub-sublicensing, or
transfer; prohibitions against the use of LSU's name; prohibitions
against patent misuse; the right to audit; marking of Licensed Products
with appropriate patent numbers; and, if a particular sublicense is
intended to survive a possible termination of the present Agreement
before the expiration of all pertinent Licensed Patents, a clear and
acceptable demarcation of the respective rights and obligations of LSU
and the sublicensee in those circumstances. Once LSU and Licensee have
approved the form and substance of a particular Standard-Form
Sublicense, Licensee may thereafter enter into one or more sublicenses
with third parties using that approved Standard-Form Sublicense,
without further approval from LSU, provided that: (1) no modifications
are made to the approved Standard-Form Sublicense that would diminish
in any respect the protections afforded to LSU by the approved
Standard-Form Sublicense (other modifications being permissible if they
do not diminish the protections afforded to LSU in any manner); and (2)
a complete copy of the fully-executed Standard-Form Sublicense is
delivered to LSU within thirty days of execution. A proposed sublicense
that does not satisfy these criteria may be submitted for LSU's review
and approval under Paragraph 3 above.
LSU may at any time, acting in good faith, withdraw its
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approval of a particular Standard-Form Sublicense upon notice to
Licensee. Such a withdrawal of approval shall not affect the validity
of any sublicense using that Standard-Form Sublicense that was fully
executed by all parties prior to LSU's withdrawal of approval. Where
reasonably feasible, LSU shall inform Licensee of the reason for LSU's
withdrawal of a previous approval, and shall propose modifications to
the Standard-Form Sublicense that would make it once against acceptable
to LSU.
5. U.S. GOVERNMENT RIGHTS. The licenses granted to Licensee under
paragraphs 1 and 2 above are subject to any rights that the United
States Government may have in Licensed Patents pursuant to 35 U.S.C.
Sections 200-212.
6. ASSIGNMENT OF CERTAIN CONTRACTS. In connection with the grant of the
above licenses, if Licensee requests in writing within one year of the
Effective Date, Demeter hereby agrees to assign to Licensee (to the
extent permitted under the applicable contract), under and subject to
all of the terms of this Agreement, including but not limited to the
royalty and payment obligations of Articles III and IV, technology
subject to Article II, of this Agreement developed under any university
or government contract (other than the LSU License) to which Demeter is
a party to the extent that such contract relates to the development,
manufacture, use or sale of Licensed Plant Products or Licensed
Formulated Products for Crop disease and/or pest control; provided that
Licensee agrees to assume the obligations of Demeter under such
contract. Demeter further agrees to execute any and all documents
necessary or desirable to implement these rights.
7. AFFILIATES. Licensee will have the right to extend the license rights
granted under this Agreement to Affiliates of Licensee, provided that
such Affiliates agree in
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<PAGE> 11
writing to be bound by all of the provisions of this Agreement.
8. ADDITIONAL LIMITATIONS. No right or license is granted by Demeter to
use or sell Biocontrol Peptides for human or animal health care
applications or to use plants to produce Biocontrol Peptides for such
or for other non-licensed uses, which human and animal healthcare
applications and production use of plants is retained by Demeter.
B.TERM. The term of this Agreement will be from the Effective Date until the
later of (i) expiration of the last to expire of any patent within Licensed
Patents; or (ii) the cessation of the sale or use of any Licensed Products by
Licensee or its Affiliates, or any of their sublicensee, unless earlier
terminated in accordance with applicable provisions of this Agreement. Should
the LSU License be terminated or converted into a non-exclusive license by LSU,
LSU has agreed that Licensee's rights under this Agreement regarding LSU
Licensed Patents and Supplemental Patent Rights will not be diminished for the
term of the LSU License, provided that; (i)Licensee pays to LSU, or to such
other person or entity which holds the rights granted by LSU to Demeter which
are sublicensed to Licensee under this Agreement, the royalties otherwise
payable under this Agreement; (ii) Licensee is not in breach of any other
material term of this Agreement; and (iii) in connection with the continuation
of this License following the termination of the LSU License, LSU will not incur
any obligation which it did not already have to Demeter under the LSU License,
or to Licensee under the terms of this Agreement. The parties acknowledge that
the term of the LSU License only extends until the last to expire of any patents
included within the definition of "Licensed Patents" as defined in said License
Agreement.
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<PAGE> 12
ARTICLE III. ROYALTIES AND FEES
A. LICENSE ISSUE FEES. Upon execution of this Agreement, and as a condition
precedent to this Agreement, Licensee shall pay Demeter the following three
amounts: (a) seven hundred thousand Dollars ($700,000) for the rights to
Licensed Patents and Demeter Technology for use in Licensed Plant Products in
the Field of Activity; (b) two hundred thousand Dollars ($200,000) for the
rights to Demeter Patents and Demeter Technology for use in Formulated Licensed
Products; and (c) an additional fifty thousand Dollars ($50,000) for a right of
first refusal through October 1, 1998 to obtain an exclusive license to Demeter
Nutrition Patents and Technology for applications involving nutrition in plants
in accordance with the provisions of Article VI.
(The information marked by *** has been omitted by a request for confidential
treatment. The omitted portions will be separately filed with the Commission.)
B. MINIMUM ANNUAL ROYALTIES. Licensee shall pay Demeter a minimum royalty of ***
per year for the licenses granted pursuant to this Agreement (the "Minimum
Annual Royalty"), such Minimum Annual Royalty will be first payable on January
1, 2003 and on January 1 of each subsequent year to and including January 1,
2014, which amount will be increased for each year after January 1, 2003 by an
amount equal to *** of the amount payable in the prior year. The amount of
Minimum Annual Royalty paid by Licensee in excess of actual earned royalties in
any year will be treated as a prepayment of future earned royalties. Such excess
will be accrued, and will then be creditable against fifty percent (50%) of any
future earned royalties which are in excess of Minimum Annual Royalty in
subsequent years until fully utilized.
C. EARNED ROYALTY ON SALES BY LICENSEE.
1. On a quarterly basis, Licensee shall pay to Demeter an earned royalty
for Licensed Plant Products in an amount equal to the greater of the
following two amounts [(a) or (b)] for each Licensed Plant Product that
is made, used, sold, or imported by Licensee: (a) the sum of *** of Net
Sales, if any, and *** of Trait Marketing
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Revenue, if any; or (b) the sum of *** of Gross Value Added, if any,
and *** of Trait Marketing Revenue, if any. Examples of the application
of the provisions of this paragraph are presented below:
EXAMPLE 1: Licensee sells a unit of a particular Licensed Plant Product
in exchange for Net Sales Revenue of $125 per unit. The Gross Value
Added with respect to such unit is $25.00. The earned royalty payable
to Demeter on the sale of such Licensed Plant Product on a per unit
basis is the greater of (a) ***% of $125 = $***, or (b) ***% of $25.00
= $***. Licensee pays $*** per unit in royalties to Demeter for such
Licensed Plant Product.
EXAMPLE 2: Licensee sells a unit of a particular Licensed Plant Product
in exchange for Net Sales Revenue of $100 per unit. The Gross Value
Added with respect to such unit is $0. (That is, there is no premium
charged for the Licensed Plant Product over substantially similar plant
products which do not have the traits licensed under this Agreement.)
In addition, Licensee also receives $25.00 in Trait Marketing Revenue
in connection with the sale of each such unit. (For example, in the
form of a per acre license fee for the use of the trait incorporated
into said unit.) The earned royalty payable to Demeter for the combined
sale and trait license on a per unit basis is the greater of (a) ***%
of $100 + ***% of $25 = $***, or (b) ***% of $25 = $***. Licensee pays
$*** per unit in royalties to Demeter for such Licensed Plant Product.
EXAMPLE 3: Licensee sells a unit of a particular Licensed Plant Product
in exchange for Net Sales Revenue of $110. The Gross Value Added with
respect to such unit is $10. In addition, Licensee receives $15.00 in
Trait Marketing Revenue in connection with the sale of each such unit
from a per acre license fee. The earned
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<PAGE> 14
royalty payable to Demeter for the combined sale and trait license on a
per unit basis is the greater of (a) ***% of $110 + ***% of $15 = $***,
or (b) ***% of ($10 + $15) = $***. Licensee pays $3.75 per unit in
royalties to Demeter for such Licensed Plant Product.
(Note: In connection with Examples 2 and 3 above, the per acre license
fee has been converted into an equivalent per unit Trait Marketing
Revenue for purposes of the royalty calculation. Thus, in Example 2, if
each unit of the Licensed Plant Product was utilized to produce two
acres of a Crop, then the purchaser of the seed would have paid a per
acre trait license fee of $12.50 per acre, which equates to the $25.00
in per unit Trait Marketing Revenue indicated in Example 2. Under the
same circumstances, the trait license fee in Example 3 would have been
$7.50 per acre.)
2. On a quarterly basis, Licensee shall pay to Demeter an earned royalty
for Licensed Formulated Products which are made, used, sold or imported
by Licensee in an amount equal to four percent (4%) of Net Sales.
3. Earned royalties on sales will be paid quarterly, by March 15, June 15,
September 15, and December 15 based on Net Sales receipts received by
Licensee during the prior three-month calendar quarter. The royalty
calculation for each calendar quarter will be determined independently,
without carrying forward or carrying backward amounts attributable to
any other calendar quarter. Furthermore, the royalty for each Licensed
Plant Product will be determined separately -- so that it is possible,
for example, that the royalty for a first such Licensed Plant Product
could be two percent (2%) of Net Sales, while the royalty for a second
Licensed Plant Product during the same calendar quarter could be
fifteen percent (15%) of Gross Value Added.
4. In the event that no plant product exists which is the suitable
standard of comparison for use in the
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<PAGE> 15
determination of Gross Value Added for a Licensed Plant Product,
Licensee and Demeter will meet, discuss and attempt to mutually agree
upon an appropriate standard plant product to be used for the purposes
of calculating the Gross Value Added. In the event the parties are
unable to agree upon this standard, the matter will be referred to
arbitration in accordance with Paragraph J of Article XVIII.
5. No royalty will be due on the sale, use, importation or transfer of any
Licensed Plant Product which is used for the production of additional
planting stock of such Licensed Plant Product under a contract for the
repurchase of such production by Licensee or its Affiliates. No royalty
will be due on the resale of planting stock of Licensed Plant products
purchased from a sublicensee in the case of crop failure, or on the use
of a crop of Licensed Plant Products purchased from a customer of such
planting stock (e.g., a grain crop used to produce oil), to the extent
that Demeter has already received royalties to which it was entitled
with respect to the planting stock of such Licensed Plant Products
under the terms of this Agreement calculated on the basis of a
bona-fide arms-length transaction at royalty rates offered to
purchasers not having the relationship of seller to or producer for
Licensee.
D. EARNED ROYALTIES FROM SUBLICENSEES. For payments received from sublicensees
for the use of the technology licensed to Licensee under this Agreement (other
than payments made for the purchase or use by a sublicensee of a Licensed
Product manufactured by Licensee or its Affiliates, which payments are subject
to the provisions of Paragraph C above), Licensee shall pay to Demeter earned
royalties on a quarterly basis in accordance with the provisions set forth
below:
1. For payments from sublicensees which are license issue fees, license
maintenance fees, or technology milestone payments, an amount equal to
*** of such
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<PAGE> 16
payments received by Licensee for all Crops with the exception of
peanut, potato, tomato, tobacco and grapes, for which an amount equal
to *** of such payments received by Licensee shall apply. Specifically
excluded from such payments are payments to Licensee attributed for
bona fide services rendered by Licensee to sublicensees for regulatory
support, product registration, and research and development funding,
and Trait Marketing Revenue.
2. For payments from sublicensees which are running royalties calculated
as a percentage of sublicensee's Net Sales, an amount equal to *** of
the first *** of such payments received by Licensee on a Licensed
Product-by-Licensed Product basis and *** of the amount in excess of
the first *** for each such Licensed Product.
3. For payments from sublicensees of Trait Marketing Revenue which are not
covered by the provisions of Paragraph C, an amount equal to *** of
such payments received by Licensee.
4. Earned royalties on payments received from sublicensees which are
covered by this Paragraph D will be paid quarterly, by March 15, July
15, September 15, and December 15 based on all such payments received
by Licensee during the prior calendar quarter.
E. QUARTERLY REPORTS. Licensee shall forward to Demeter quarterly reports on or
before March 15, July 15, September 15, and December 15 of each year, for the
preceding calendar quarter, containing the data, information, and documentation
necessary to determine fully the amounts owed by Licensee to Demeter under this
Agreement. The quarterly reports will also provide information on the status of
Licensee's marketing and/or sublicensing of Licensed Products. Such a report
shall be made for each quarter beginning after commercialization of the first
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<PAGE> 17
Licensed Product, whether or not any payment is due for that quarter.
F. PATENT COSTS. Without affecting Demeter's obligation to LSU for patent
prosecution under the License Agreement, Licensee will pay all reasonable
out-of-pocket costs, fees and attorneys' fees and expenses of maintenance and/or
further prosecution of (i) the LSU Licensed Patents, (ii) the Supplemental
Patent Rights and (iii) the Licensed Patents listed under Section A1 of Appendix
A, before the United States Patent and Trademark Office and before any other
office or entity concerning patents (related to Licensed Patents) in those
nations other than the United States of America which have been selected by
Licensee for foreign patent protection on a patent-by-patent basis. Licensee
will have a right to review any such patent applications and advise on the
coverage of protection sought to the extent within the scope of the license
rights granted under this Agreement. Demeter may elect to seek patent protection
for Licensed Patents in countries not selected by Licensee at Demeter's expense;
however, in such event, Licensee will forfeit its rights with respect to
affected patents in such countries. Licensee will be entitled to a credit of
fifty percent (50%) of the cumulative costs and fees paid by Licensee pursuant
to this Paragraph against any royalty or other payments that may be due to
Demeter under this Agreement. No credit may be taken prior to the third
anniversary of the effective date. Thereafter, no more than 50% of the amount
due Demeter under this Agreement in any given year may be offset by such credit.
Licensee will have no obligation to pay any costs or fees in connection with the
prosecution and/or maintenance of the Licensed Patents listed under Section A2
or A3 of Appendix A under this Agreement, except to the extent that Licensee
elects to make such payments with respect to the Section A3 patents as set forth
in Article VI.
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<PAGE> 18
ARTICLE IV - BENCHMARK PAYMENTS
(The information marked by *** has been omitted by a request for confidential
treatment. The omitted portions will be separately filed with the Commission.)
A. REGULATORY APPROVAL OR FIRST SALE OF ANY TYPE. A payment of *** shall be made
by Licensee to Demeter upon the earlier of (i) receipt of the first regulatory
approval for sale of a Licensed Plant Product in the United States; or (ii) if
no approval described in part (i) hereof is obtained prior thereto, the First
Commercial Sale of any Licensed Plant Product. Only one such payment will be
made. The payment made under this Paragraph A shall not discharge any of
Licensee's obligations to make payments under paragraphs B or C of this Article
or under the provisions of any other Article of this Agreement.
B. ADDITIONAL PAYMENT FOR FIRST COMMERCIAL SALE OF CERTAIN CROP(S). In addition
to the payment provided under subparagraph A hereof, payments of *** each shall
be made by Licensee to Demeter on the First Commercial Sale of Licensed Plant
Products within a ***, *** or ***, up to a total of *** if there is a First
Commercial Sale in each of said three crops.
C. ADDITIONAL PAYMENT FOR FIRST COMMERCIAL SALE OF ANY OTHER CROP WITHIN THE
FIELD OF ACTIVITY Licensee shall make a payment to Demeter upon the First
Commercial Sale of any Licensed Plant Products for any crop other than ***, ***
and *** an amount equal to *** for each Crop up to a maximum total of *** (***).
D. INFLATION AND ADJUSTMENT. To the extent that any of the specific dollar
amounts set forth in paragraph A, B, and C of this Article have not been paid by
January 1, 2006 such remaining amounts will be adjusted upward annually by any
increases in the United States Consumer Price Index For All Urban Consumers, All
Items U.S. City Average (the "Index") from its value in January,
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<PAGE> 19
1998, less one percent (1%) per year. No downward adjustments will be made. The
dollar figures shall first be adjusted beginning in January 2006.
ARTICLE V - AUDITING AND PAYMENT PROCEDURES
A. LATE PAYMENTS. If any payment is made more than thirty days after the date
due under the Agreement, then Licensee shall also pay interest at the prime rate
of interest announced from time to time by Citibank (New York), plus one percent
(1%) per annum, until paid. If this amount is higher than allowed by applicable
law, then the highest amount allowed by law shall apply.
B. PAYMENT PROCEDURE. All payments due under this agreement shall be payable to
"DEMETER BIOTECHNOLOGIES, LTD.," and shall be made at the appropriate address
given for notices in the Agreement. All payments due shall be made without any
deduction for taxes, assessments, or other charges that may be imposed on
Licensee by any government or by any political subdivision of any government.
Any such taxes, assessments or other charges shall be assumed solely by
Licensee.
C. LICENSEE'S RECORDS. Licensee (and any sublicensee exercising rights under the
Agreement) shall make and keep full and accurate books and records in accordance
with Generally Accepted Accounting Principles showing the sublicensing,
manufacture, use, distribution, importation, lease, and sale of any Licensed
Product by Licensee. Licensee agrees that Demeter, LSU, or the Louisiana
Legislative Auditor may require that the books and records of Licensee
pertaining to Licensed Products be inspected by a designee reasonably acceptable
to Licensee during regular business hours, on reasonable written notice, to the
extent necessary to verify the payments due under the Agreement; provided that
the inspection is conducted in a manner to (i) insure the confidentiality of
Licensee's books and records; and (ii) prevent any misuse of the information
contained therein. Any such audit shall be at the expense of Demeter, LSU, or
LSU's
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<PAGE> 20
designee, or of the Louisiana Legislative Auditor, as applicable; except that
should such an audit indicate an underpayment of ten percent (10%) or more for
any calendar quarter, then Licensee shall pay the cost of the audit within
thirty days of its completion.
D. TERM OF AUDIT RIGHTS. The right of Demeter and/or LSU to inspect the books
and records of Licensee shall continue past the term or termination of the
Agreement, until the later of the date on which all payments due under the
Agreement have been made, or until two years after the expiration of the
Agreement.
ARTICLE VI- AGREEMENT NOT TO LICENSE CONCERNING PLANT NUTRITIONAL APPLICATIONS
In order to provide Licensee with the opportunity to negotiate an
exclusive license for said applications, Demeter will not license, prior to
October 1, 1998, absent Licensee's consent, rights under the Nutrition Patents
and Technology to any third party for plant nutritional applications. In the
event Demeter and Licensee are unable to reach agreement on the terms of any
such license, and obtain LSU's consent thereto, to the extent that LSU Licensed
Patents or Supplemental Patent Rights are involved, on or before October 1,
1998, Demeter will thereafter be free to license said applications to others.
However, should Demeter offer a license to a third party on terms more favorable
than those offered to Licensee within one year from said date, Licensee will
have a right of first refusal to obtain such license on the terms so offered.
During the term of the option, and prior to Licensee's exercise of the option,
Licensee will have the right, but not the obligation, to designate and pay for
patent prosecution and maintenance of patents for plant nutritional
applications.
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ARTICLE VII - JOINT DEVELOPMENT PROGRAM REGARDING PEPTIDES FOR
DISEASE RESISTANCE IN PLANTS
Licensee and Demeter, without restricting any activities they may
desire to participate in with third parties, will engage in a joint development
program over a period of three years from the effective date of this Agreement
to screen and produce peptides for use in disease resistance in plants. Demeter
will provide the services of Dr. Jessie Jaynes, on a part-time basis, to design,
plan the synthesis of and interpret testing results regarding such peptides.
Licensee shall use diligent efforts to screen between one hundred fifty (150)
and three hundred (300) Biocontrol Peptides during said period, against a
battery of relevant plant diseases, and will make the results thereof available
to Demeter for Demeter's own business purposes. Biocontrol Peptides or other
technology invented solely by Demeter employees, consultants or other agents
shall be owned by Demeter and not jointly owned. Biocontrol Peptides or other
technology invented solely by Licensee's employees, consultants or other agent
shall be owned by Licensee and not jointly owned but in the event such
Biocontrol Peptides or other technology are subject to Licensed Patents or were
developed from or by use of Licensed Technology then they will be subject to the
terms of this Agreement, including but not limited to the royalty provisions set
forth in Article III and applicable payments in Article IV. Joint Inventions
will be jointly owned by Licensee and Demeter. Subject to the terms of this
Agreement, including but not limited to the royalty provisions set forth in
Article III and applicable payments in Article IV, Licensee will be granted a
world-wide, perpetual, exclusive license in Joint Inventions, with a right to
sublicense, for all applications in disease and pest control for plants.
Licensee hereby grants to Demeter a world-wide, royalty free, perpetual,
exclusive license, in Joint Inventions, with a right to sublicense, for all
applications other than applications for use in disease and pest control for
plants.
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ARTICLE VIII - DEMETER SUPPORT SERVICES
Upon execution of this Agreement, and as a condition precedent to this
Agreement, Licensee shall pay Demeter a total of three hundred thousand Dollars
($300,000) for technical assistance and support concerning Demeter Technology
and the joint development program of Article VII for a period of three years
from the Effective Date. In the event that Dr. Jaynes leaves the employ of
Demeter, Demeter will retain Dr. Jaynes as a consultant, if reasonably
practicable, to provide the same level of services to Demeter, under this joint
development program as provided prior to Dr. Jayne's departure.
ARTICLE IX- RETURN OF RIGHTS
If Licensee fails to begin to develop specific plans for applications
for particular Crops, uses or territories subject to this Agreement within three
years of the Effective Date of this Agreement, Demeter may propose a specific
plan for such and bring to Licensee a suitable party ready, willing and able to
implement such plan. If Licensee does not reach an agreement with such party for
the particular Crop(s) involved, or develop and initiate a suitable alternative
plan for development internally or with another party, then Demeter may request
that Licensee's rights to Licensed Patents and Demeter Technology in said
area(s) be returned to Demeter so as to permit Demeter to pursue said plan.
Licensee shall not unreasonably refuse to return said rights to Demeter,
provided, however, that Licensee will retain a non exclusive license to Licensed
Patents and Licensed Technology in said area(s) unless the parties negotiate
otherwise. As long as Licensee is not in breach of any material term of this
agreement, it will not be compelled under this Article IX to turn over to
Demeter any of Licensee's rights in Joint Inventions without compensation. If
the parties are unable to agree on the application of this provision with
respect to a particular Crop
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<PAGE> 23
application, or the terms of a license for such application, then the matter
will be submitted to arbitration in accordance with the provisions of Paragraph
J of Article XVIII.
ARTICLE X - DEVELOPMENT AND COMMERCIALIZATION
A. RESEARCH COMMITTEE. Licensee and Demeter will establish a research committee
consisting of four (4) members, two (2) of which will be appointed by each
party. The function of this research committee will be to recommend research
goals and activities and evaluate progress toward those goals. The research
committee will meet four (4) times per year.
B. MARKETING OBLIGATIONS. Licensee, at Licensee's sole expense, shall: (1) act
with commercially reasonable judgment and diligence to develop commercially
marketable Licensed Products, and to develop competitive markets for those
Licensed Products; (2) actively seek sublicensees or partners for Licensed
Products, uses of Licensed Products or in geographic areas Licensee is not
actively pursuing on its own; and (3) from time to time, at the request of a
party, but no less than semi-annually, Licensee and Demeter will meet to discuss
Licensee's marketing activities as set forth above.
C. REGULATORY APPROVAL. Licensee, at Licensee's expense, will undertake all
reasonable efforts required to file by the end of the year 2002 and subsequently
to obtain any state, federal, or other governmental license or regulatory
clearance necessary for the use of Licensed Products. Any research necessary or
desirable for the commercialization or marketing of Licensed Products by
Licensee shall be the sole responsibility of Licensee. Licensee, at Licensee's
sole expense, will prepare and deliver all necessary and appropriate documents,
and take all reasonably necessary and appropriate actions, to seek to obtain any
such license or regulatory clearance. All such registrations or clearances will
be held in Licensee's name and will be owned exclusively by Licensee.
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ARTICLE XI - REPRESENTATIONS, WARRANTIES, AND DISCLAIMERS
A. AUTHORITY. Each party represents and warrants to the other party that it has
the power and authority to enter into this Agreement and to perform its
obligations hereunder.
B. DEMETER WARRANTIES. Demeter further warrants that LSU has consented to this
Agreement under Paragraph 2.2 of the Supplemental Licensing Terms and Conditions
of the LSU License, and that as of the date of execution of this Agreement
Demeter has no knowledge of any intellectual property rights of third parties
other than those disclosed in this Agreement, to which the use of the technology
as licensed to Licensee under this Agreement would be subject.
C. EXCLUSIONS. Demeter and LSU make no warranty or representation whatsoever as
to the usefulness of Licensed Patents, Demeter Technology or Licensed Products,
or their fitness for the purpose for which they are intended or for any other
purpose. Demeter and LSU make no representations, and extend no warranties of
any kind, either express or implied, except as expressly provided in this
Agreement.
D. ADDITIONAL DISCLAIMERS. Nothing in this Agreement shall be construed as:
1. A warranty or representation by Demeter or LSU as to the
validity, enforceability, scope, or inventorship of any
patent; or
2. A warranty or representation by Demeter or LSU that anything
licensed, sublicensed, made, used, sold, imported, or
otherwise disposed of under any license granted in or
sublicense permitted by this Agreement is or will be free from
infringement of patents of third parties or other rights of
third parties; or
3. An obligation that Demeter or LSU bring or litigate actions
against third parties for infringement, except to the extent
and in the circumstances stated in Article XIV of this
Agreement ; or
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<PAGE> 25
4. A requirement that Demeter or LSU file or prosecute any patent
application, secure the issuance of any patent, or maintain
any patent; or
5. An establishment of a partnership, joint venture, agency, or
employer-employee relationship between the parties; and
neither party shall represent the contrary to anyone else.
E. DISCLAIMER OF RESPONSIBILITY. Neither Demeter nor LSU assume any
responsibilities whatever for any damages caused to Licensee, any Affiliate, any
vendees, other transferees, or sublicensees of Licensee or its Affiliates, or by
any product or process incorporating or made by the Licensed Patents or Licensed
Technology, or incorporating or made by the use of any information furnished
under this Agreement.
ARTICLE XII - CONFIDENTIALITY
For a period of five (5) years from the termination of this Agreement, each
party will keep confidential any and all Confidential Information (not otherwise
excluded from the confidentiality and non-use obligation of this Article XII as
set forth below) received from the other party in connection with the
performance of this Agreement and will not disclose it to third parties or use
it for any purpose other than pursuant to this Agreement, without the prior
written consent of the disclosing party.
The confidentiality and non-use obligation of this Article XII will not apply to
information and other items listed under the definition of Confidential
Information: (a) which is public knowledge at the time of disclosure, or which
after disclosure becomes public knowledge in any way except through the wrongful
act of the party so disclosing it;(b) which the receiving party is able to prove
was in its possession at the time of disclosure by the disclosing party and
which had not been obtained from the latter, either directly or indirectly; (c)
whose disclosure is
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<PAGE> 26
compelled by administrative or judicial order; or (d) which either party
received from a third party having the legal right to disclose such information.
The provisions of this Article XII will survive any termination of this
Agreement.
In the event that Licensee determines that Confidential Information received
from Demeter or any Demeter Affiliate needs to be disclosed to regulatory
authorities for the sale or use of any Licensed Plant Product or Licensed
Formulated Product or to a third party in connection with the grant of a
sublicense to such third party, then disclosure may be made to such third party
only upon Demeter's prior written consent, which may not be unreasonably
withheld, and only if such third party agrees to be bound by terms of
confidentiality equivalent to those specified with this Article XII.
ARTICLE XIII. NON-USE OF NAMES
Licensee and Demeter will make no use whatsoever of the other party's
name, marks, insignia or logos or the name of any then-current employee of the
other in news releases, advertisements, promotional materials, or otherwise,
without the prior written consent of the other party for each such use. Licensee
will make no use whatsoever of LSU's name, marks, insignia, or logos; or of the
name of any LSU campus, department, center, or institute; or the name of any
then-current LSU employee; in news releases, advertisements, promotional
materials, or otherwise, without the prior written consent of LSU for each such
use. However, the foregoing provision will not restrict either party from using
the other's name or LSU's name to the extent required under securities laws,
regulations or rules, or as required by law or the rules of any securities
exchange listing either party's securities.
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ARTICLE XIV - PATENT ENFORCEMENT
A. INFRINGEMENT OF LICENSED PATENTS. Licensee will investigate and report any
infringements or possible infringements of Licensed Patents to Demeter. Demeter
will have the right to enforce Licensed Patents at Demeter's expense. Licensee
will provide reasonable cooperation to Demeter or LSU in the conduct of such
suits. Such participation by Licensee will be at the expense of Demeter or LSU,
whichever entity has requested Licensee's participation. However, Licensee, at
Licensee's sole option and expense, may request to join in the enforcement of
Licensed Patents when the infringing activity is within the scope of any
licenses granted to Licensee under this Agreement. In the event neither Demeter
nor LSU brings suit to enforce Licensed Patents within ninety (90) days of
notification of a potential infringement, then Licensee will have the right to
request to enforce Licensed Patents on behalf of Demeter and LSU, at Licensee's
expense. If Demeter and LSU do not enforce Licensed Patents and do not permit
Licensee to enforce Licensed Patents regarding infringing activity occurring
within the scope of any license granted to Licensee under this Agreement on
their respective behalf where appropriate, then Licensee's royalty and other
payment obligations under this Agreement will be suspended until such
enforcement is instituted. Any damages recovered in connection with the
enforcement of Licensed Patents by Licensee will be retained by Licensee. Any
such recovery in excess of the expenses incurred by Licensee in pursuing said
enforcement will be subject to the royalty and other payment obligations of this
Agreement but only to the extent that it is attributable to sources of income
concerning which Licensee is obligated to make royalty or other payments under
this Agreement.
B. LITIGATION DOES NOT AFFECT ROYALTIES. For so long as Demeter and/or LSU
enforce or permit Licensee to enforce Licensed Patents, the pendency of a
lawsuit for infringement of Licensed Patents, or other action concerning the
validity or
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enforceability of Licensed Patents, will not affect Licensee's obligations to
pay royalties or other amounts under this Agreement.
C. INDEMNIFICATION BY LICENSEE. If Licensee or any Affiliate or any entity
acting in its capacity as a sublicensee under the Agreement takes any action
under the Agreement or otherwise (other than a proceeding by Licensee or such
Affiliate against LSU or Demeter on the validity or invalidity of the LSU
Licensed Patents or Demeter Patents) that leads to or results in litigation or
other legal proceedings (in any country) concerning or related to Licensed
Patents or the Agreement, including but not limited to a suit for declaratory
judgment or claim or counterclaim for infringement, non-infringement, validity,
invalidity, enforceability, unenforceability, ownership, or inventorship of
Licensed Patents, then Licensee will assume the responsibility for such legal
proceedings (at both trial and appellate levels) at Licensee's sole expense. If
Demeter or LSU so requests, Licensee's legal counsel shall represent Demeter
and/or LSU, at Licensee's expense, in any such legal proceedings at both trial
and appellate levels. If Licensee's legal counsel is unable to represent Demeter
and/or LSU because of a conflict of interest or other bona fide reason, Demeter
and/or LSU may engage other competent legal counsel, whose reasonable fees and
expenses will be promptly paid or reimbursed by Licensee, to represent Demeter
and/or LSU in any such suit or legal proceeding. If Demeter and/or LSU does not
wish to be represented by Licensee's legal counsel, Demeter and/or LSU may
engage competent legal counsel of Demeter's and/or LSU's choosing to represent
Demeter and/or LSU at Demeter's and/or LSU's own expense (except in the case of
a conflict of interest or other bona fide reason as described in the preceding
sentence, in which case reasonable expenses for such representation will be
borne by Licensee). Licensee will indemnify Demeter and/or LSU and hold Demeter
and/or LSU harmless from any and all claims, damages, or other obligations
arising out of or resulting from any such claim
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or legal proceedings; provided that Demeter and/or LSU will not settle any such
claim without Licensee's prior written consent, such consent not to be
unreasonably withheld. Any sublicense, transfer, or assignment of any of
Licensee's rights under the Agreement shall expressly impose the obligations of
this Paragraph on any sublicensee, transferee, or assignee.
D. FRAUDULENT OR WILLFUL MISCONDUCT. Notwithstanding Paragraph C above, Licensee
will have no contractual obligation under this Agreement to indemnify either:
(i) Demeter to the extent that damages may be attributable to Demeter's
fraudulent or willful misconduct; or (ii) LSU to the extent that damages may be
attributable to LSU's fraudulent or willful misconduct. In the event that a
claim is brought against any or all of Demeter, LSU and Licensee that is
otherwise within Licensee's indemnification obligations under Article XIV C
above, except that allegations of fraudulent or willful misconduct are made
against Demeter or LSU, or both, then the provisions of this Paragraph will
apply. Demeter or LSU or both, as the case may be, will defend both itself
(themselves) and Licensee, at Demeter's or LSU's expense (or both, as the case
may be) from and against any claim that is based on an allegation or claim of
fraudulent or willful misconduct by Demeter or LSU, respectively, or both if
both are allegedly culpable for such misconduct. If the final judgment or
verdict respecting the fraudulent or willful misconduct claim -- after all
applicable appeals and appeal delays have expired -- is other than a finding
that Demeter or LSU or both committed fraudulent or willful misconduct, then
Licensee shall promptly indemnify Demeter or LSU, or both (as the case may be)
as otherwise provided in Article XIV C above, and Licensee will also promptly
reimburse the reasonable legal and other out-of-pocket expenses incurred by
Demeter or LSU (or both, as the case may be) in defending the claim at both
trial and appellate levels; provided that neither Demeter nor LSU will be
entitled to settle any such claim without Licensee's prior, written consent,
such consent not to be
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<PAGE> 30
unreasonably withheld. If the final resolution of the fraudulent or willful
misconduct claim -- after all applicable appeals and appeal delays have expired
- -- is a finding that Demeter or LSU, or both committed fraudulent or willful
misconduct, then Demeter or LSU, respectively (or both if both parties are
culpable) will indemnify Licensee against that judgment or award, and Licensee
will have no obligation to indemnify Demeter or LSU, respectively, (or both, as
the case may be) with respect to that claim under Article XIV C above. If the
fraudulent or willful misconduct claim is settled prior to a final judgment or
verdict (including all applicable appeals and appeal delays), then Demeter, LSU
and Licensee will make good faith efforts to resolve their respective
obligations under Article XIV C and D, and if unable to reach agreement, will
have recourse to the dispute resolution mechanism of Paragraph J Article XVIII.
As otherwise provided in Article XIV C above, Licensee will defend, indemnify,
and hold Demeter and LSU harmless against any claim that may be made against
Demeter and/or LSU in the same proceedings to the extent that it is not based on
an allegation or claim of fraudulent or willful misconduct by such party; and in
such a case Demeter, LSU and Licensee shall cooperate in allocating those costs
that are common to the defense of both sets of claims (i.e., those alleging
fraudulent or willful misconduct against Demeter and LSU and those not so
alleging), subject to Demeter and LSU's contingent rights to later
indemnification and reimbursement after final resolution, as otherwise provided
in this Paragraph.
Because a finding of "inequitable conduct" in the Patent and Trademark Office
can be based on a lesser showing than that required for "fraudulent or willful
misconduct," it is understood that a finding of "inequitable conduct" in the
Patent and Trademark Office would not necessarily constitute "fraudulent or
willful misconduct" within the contemplation of this Paragraph depending on the
specific circumstances. Notwithstanding any provision of this Agreement to the
contrary, LSU shall have no obligation to defend or indemnify Licensee against
any claim,
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judgment or award that is based on allegations of fraudulent or willful
misconduct by Dr. Jesse Jaynes.
ARTICLE XV. INDEMNIFICATION
A. GENERAL. Except as otherwise set forth below, Licensee will defend,
indemnify, and hold harmless Demeter, LSU and their respective agents, officers,
board members, employees, and anyone for whom Demeter and/or LSU may be liable
(collectively, "INDEMNITEES") from and against any and all claims, damages,
losses, and expenses, in any country, including reasonable attorney's fees at
both trial and appellate levels to or for attorneys of Demeter's and /or LSU's
choosing, for claims for damages to property, injury to persons, or death of
persons, or for any other damage arising out of or in any way relating to
Licensee's or its Affiliates' sublicensing, manufacture, use, distribution,
marketing, importation, lease, sale or other conduct relating to Licensed
Products, Licensed Patents or Licensed Technology by Licensee or Licensee's
Affiliates and sublicensees and/or those manufacturing, marketing, selling, or
otherwise acting on behalf of Licensee and/or Licensee's Affiliates or
sublicensees. Licensee agrees to defend any Indemnitee against any such lawsuit,
administrative or arbitration proceeding at Licensee's expense, and to pay any
judgment rendered against any Indemnitee in any such lawsuit, administrative or
arbitration proceeding, together with all costs and reasonable attorney's fees
at both trial and appellate levels to or for attorneys of Demeter's and/or LSU's
choosing incurred in preparing for or defending any such lawsuit, administrative
or arbitration proceeding. Demeter and/or LSU will not settle any such claim
without Licensee's prior written consent, such consent not to be unreasonably
withheld. However, Licensee will not be required to indemnify Demeter for any
injury to persons or property arising solely from Demeter's employees'
activities causing injury to persons or property on premises where a Demeter
employee is physically located or solely from Demeter's improper
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<PAGE> 32
shipment of materials in connection with the conduct of joint development
programs set forth under Article VII. Any sublicense, transfer or assignment of
any of Licensee's rights under this Agreement shall expressly impose the
obligations of this Paragraph on any sublicensee, transferee, or assignee.
B. FRAUDULENT OR WILLFUL MISCONDUCT. Notwithstanding Paragraph A above, Licensee
will have no contractual obligation under this Agreement to indemnify either (i)
Demeter to the extent that damages may be attributable to Demeter's or LSU's
fraudulent or willful misconduct, or (ii) LSU to the extent that damages may be
attributable to LSU's fraudulent or willful misconduct. In the event that a
claim is brought against any or all of Demeter, LSU or Licensee that is
otherwise within Licensee's indemnification obligations under Paragraph A above,
except that allegations of negligence are made against Demeter or allegations of
fraudulent or willful misconduct are made against Demeter or LSU, or both, then
the provisions of this Paragraph will apply. Demeter or LSU or both, as the case
may be, will defend both itself (themselves) and Licensee, at Demeter's or LSU's
expense, (or both, as the case may be) from and against any claim that is based
on an allegation or claim of fraudulent or willful misconduct by Demeter or LSU,
respectively, or both if both are allegedly culpable for such misconduct. If the
final judgment or verdict respecting the fraudulent or willful misconduct claim
- -- after all applicable appeals and appeal delays have expired -- is other than
a finding that Demeter or LSU or both committed fraudulent or willful
misconduct, then Licensee will promptly indemnify Demeter or LSU or both (as the
case may be) as otherwise provided in Paragraph A above, and Licensee will also
promptly reimburse the reasonable legal and other out-of-pocket expenses
incurred by Demeter or LUS (or both, as the case may be) in defending the claim
at both trial and appellate levels; provided that neither Demeter nor LSU, will
be entitled to settle any such claim without Licensee's prior, written consent,
such consent not to be unreasonably withheld.
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<PAGE> 33
If the final resolution of the fraudulent or willful misconduct claim -- after
all applicable appeals and appeal delays have expired -- is a finding that
Demeter or LSU or both committed fraudulent or willful misconduct, then Demeter
or LSU, respectively (or both if both parties are culpable) will indemnify
Licensee against that judgment or award, and Licensee will have no obligation to
indemnify Demeter or LSU, respectively, (or both, as the case may be) with
respect to that claim under Paragraph A above. If the fraudulent or willful
misconduct claim is settled prior to a final judgment or verdict (including all
applicable appeals and appeal delays), then Demeter, LSU and Licensee will make
good faith efforts to resolve their respective obligations under this Article
XV, and if unable to reach agreement, shall have recourse to the dispute
resolution mechanism of Paragraph J, Article XVIII. As otherwise provided in
Paragraph A above, Licensee will defend, indemnify, and hold Demeter or LSU
harmless against any claim that may be made against Demeter or LSU in the same
proceedings, to the extent that it is not based on an allegation or claim of
fraudulent or willful misconduct by such party, or an allegation of negligence
by Demeter and in such a case Demeter, LSU and Licensee shall cooperate in
allocating those costs that are common to the defense of both sets of claims
(i.e., those alleging fraudulent or willful misconduct against Demeter and/or
LSU and/or negligence against Demeter and those not so alleging), subject to
Demeter's and/or LSU's contingent right to later indemnification and
reimbursement after final resolution, as otherwise provided in this Paragraph B.
Because a finding of "inequitable conduct" in the Patent and Trademark Office
can be based on a lesser showing than that required for "fraudulent or willful
misconduct," it is understood that a finding of "inequitable conduct" in the
Patent and Trademark Office would not necessarily constitute "fraudulent or
willful misconduct" within the contemplation of this Paragraph B., depending on
the specific circumstances. Notwithstanding any
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<PAGE> 34
provision of this Agreement to the contrary, LSU shall have no obligation to
defend or indemnify Licensee against any claim, judgment or award that is based
on allegations of fraudulent or willful misconduct by Dr. Jesse Jaynes.
C. PRIOR LICENSE. The LSU Licensed Patents and Supplemental Patent Rights were
previously licensed to Helix Phytonetix, Inc., a Louisiana corporation
("Phytonetix") under a February 1, 1993 License Agreement (the "Prior License")
between LSU and Phytonetix. The Prior License was executed pursuant to a
February 1, 1993 Agreement in Settlement, Compromise, and Release (the "Helix
Settlement") among LSU, Phytonetix, and the following private corporations:
Helix International Corporation (a Louisiana corporation), Helix BioMedix, Inc.
(a Colorado corporation), Helix BioMedix, Inc. (a Louisiana corporation), and
University Research and Marketing, Inc. (a Louisiana Corporation). (Phytonetix,
each of the other private corporations named in the preceding sentence, and each
of their respective affiliates, officers, directors, shareholders, assignees,
and other persons or entities claiming any right through any of the above may be
referred to individually or collectively as a "Prior Party" or the "Prior
Parties"). LSU has represented that other than the May 1, 1997 LSU License to
Demeter, LSU has neither granted nor authorized any licenses under the LSU
Licensed Patents and Supplemental Patents to any party other than: (1) to
Phytonetix under the Prior License on and after February 1, 1993; and (2) to one
or more of the Prior Parties before February 1, 1993. (The license rights in LSU
Licensed Patents and Supplemental Patents held by Prior Parties other than
Phytonetix were extinguished under the terms of the Helix Settlement).
When Phytonetix failed to pay a minimum royalty timely under the Prior License,
LSU notified Phytonetix that the Prior License was terminated as of April 10,
1996. LSU has previously provided Demeter and Demeter has provided Licensee with
copies of the
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Prior License, the Helix Settlement (with all Exhibits), and the correspondence
by which LSU notified Phytonetix that the Prior License was terminated as of
April 10, 1996. Although Demeter and LSU believe that the Prior License was
properly terminated as of April 10, 1996, Demeter and LSU can make no
representations or warranties that the Prior License was properly terminated.
Licensee assumes the risk that a Prior Party may challenge the April 10, 1996
termination of the Prior License, whether by litigation, arbitration, or
otherwise. Demeter shall Defend Licensee against any such claims.
D. PRIOR PARTY CLAIMS. Licensee will have no obligation to indemnify LSU or
Demeter against any claims by Helix Phytonetix Inc., Helix International
Corporation, Helix Biomedix Inc., or University Research and Marketing, Inc.
regarding any claim relating to their rights to LSU Licensed Patents under any
license to them by LSU. Demeter shall defend itself and Licensee against any
claim by Helix Phytonetix, Inc.; Helix International Corporation; Helix
BioMedix, Inc.; or University Research and Marketing, Inc. regarding any license
to them by LSU and will indemnify Licensee from any claims demands, damages or
liability arising therefrom.
ARTICLE XVI. INSURANCE
A. Prior to the first sale of any Licensed Product, Licensee shall maintain a
program of self-insurance reasonably acceptable to Demeter and LSU or shall
obtain liability insurance coverage on an "occurrence" basis for any and all
liability arising out of the sublicensing, manufacture, use, distribution,
marketing, importation, or sale of any Licensed Product, by Licensee, its
Affiliates, and their customers, in all countries. Demeter and LSU shall be
additional insureds in any such liability insurance. This liability insurance
must be issued by a company having a current A. M. Best rating of A+ 8 or
better. The limits of this insurance coverage shall be not less than three
million Dollars
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<PAGE> 36
($3,000,000) per occurrence, with aggregate limits not less than five million
Dollars ($5,000,000) per year. The amount of liability insurance coverage
required by this Paragraph A is subject to the inflation adjustment set forth in
Paragraph C, below. The maximum deductible may not exceed fifty thousand Dollars
($50,000) or such other amount as may be reasonably acceptable to Demeter and
LSU. This liability insurance shall include contractual liability coverage and
products/completed operations coverage in at least the minimum amounts required
by this Article. If applicable, Licensee shall forward written evidence of such
liability insurance coverage, including the declarations page(s) describing the
coverage provided by the policy, and including the endorsement naming Demeter
and LSU as additional insureds, to Demeter and LSU at least sixty days prior to
the first use or sale of any Licensed Product. The insurer shall be required to
give at least thirty days' notice of cancellation or modification of coverage to
Demeter and LSU. The obligation to provide Demeter and LSU the liability
insurance required by this Article and written evidence thereof shall continue
until the earliest of the following two events: (a) the expiration or
termination of this Agreement in accordance with its terms; or (b) the time when
Licensee permanently ceases to make, use, import, sell, or offer to sell
Licensed Products, or to sublicense any rights under this Agreement. In
addition, Licensee shall thereafter obtain and maintain a "tail" insurance
policy otherwise satisfying the requirements of this Paragraph, and insuring the
same persons against the same risks until the expiration of any remaining
pertinent statute of limitations period. At any time when Licensee obtains,
renews, or replaces a liability insurance policy, the aggregate limits for the
liability insurance coverage shall be at least equal to the sum of Net Sales,
Trait Marketing Revenue and gross payments to Licensee from sublicensees for the
most recently completed Licensee fiscal year. The alternative amount of
liability insurance provided by the preceding sentence is not subject to the
inflation adjustment otherwise required by this Article XVI,
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<PAGE> 37
and only applies if this alternative amount is greater than the amount of
insurance otherwise required by this Paragraph A.
B. Obligation of Sublicensees. Each sublicensee, assignee, or transferee of any
of Licensee's rights under this Agreement shall obtain the type and amount of
liability insurance required by Paragraph A of this Article XVII, except that in
calculating the alternative amount provided by the last two sentences of
Paragraph A. of this Article XVII, that sublicensee's, assignee's or
transferee's Net Sales and Trait Marketing Revenue shall be used in place of the
sum of Licensee's Net Sales, Trait Marketing Revenue and gross payments from
sublicensees, substituting for "Licensee" that sublicensee, assignee, or
transferee in the definitions of Net Sales and Trait Marketing Revenue found in
Article I, Paragraphs M and N. A sublicensee's obligation to obtain liability
insurance may, if mutually agreeable to Licensee and the sublicensee, be
satisfied by a single insurance policy for both Licensee and the sublicensee;
provided that such a single policy satisfies all other requirements of
Paragraphs A and B of this Article XVII; and further provided that the amount of
liability insurance provided by such a single policy is at least equal to the
sum of the amounts required by Paragraph A and B of this Article XVII. A
self-insured sublicensee may request that Demeter and LSU accept the
sublicensee's self-insurance as satisfying the requirements of this Paragraph;
Demeter and LSU shall not act unreasonably in deciding whether to approve such a
request, provided that the self-insurance is adequately capitalized and
otherwise satisfies the requirements of this Article XVII.
C. INFLATION ADJUSTMENT. The dollar amounts of insurance coverage stated in
Paragraph (A) above will be subject to inflation adjustment as follows: The
"Multiplier" on any given date is defined to be the ratio of (a) the Consumer
Price Index for All Urban Consumers, All Items, U.S. City Average (the "Index")
most recently issued by the United States Government as of that date to (b) the
Index on the effective date of this Agreement. At any time when the Multiplier
is at least 1.10
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<PAGE> 38
times the value of the Multiplier on the date of the most recent adjustment
under this Paragraph (or is at least 1.10 if there has been no previous
adjustment under this Paragraph), then Demeter or LSU may give Licensee written
notice that each of the dollar amounts defined in Paragraph A is adjusted to the
original amount of insurance required under this Agreement as specified above,
multiplied by the Multiplier. The adjustment notice under this Paragraph is
effective as of the time when Licensee (or a sublicensee) next renews or
replaces its then-current liability insurance policy; and the amount of
liability insurance coverage required shall be the amount specified in this
Article XVI, multiplied by the Multiplier as of the date of issuance, renewal,
or replacement of the policy. The required adjusted coverage shall then remain
constant until another notice of adjustment under this Paragraph is given.
ARTICLE XVII. NOTICES
All written notices, payments, and other correspondence under this
Agreement shall be considered given when deposited in the United States Mail,
first class postage prepaid, to:
DEMETER: LICENSEE:
Mr. Richard D. Ekstrom, President Mr. Andrew C. Barnes
Demeter BioTechnologies, Ltd. Executive Vice President
905 West Main Street Mycogen Corporation
Suite 20B Brightleaf Square 5501 Oberlin Drive
Durham, North Carolina 27701 San Diego, California 92121
LSU: IF LSU, AN ADDITIONAL
COPY TO:
Vice Chancellor for Research & Director Assistant Director
La. Agricultural Experiment Station La. Agricultural
LSU Agricultural Center Experiment Station
104 J. Norman Efferson Hall LSU Agricultural Center
P.O. Box 25055 104 J. Norman Efferson
Baton Rouge, Louisiana 70894-5055 Hall
P. O. Box 25055
Baton Rouge, Louisiana 70894-5055
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<PAGE> 39
These names or addresses may be changed by giving notice as provided in this
Paragraph.
ARTICLE XVIII. MISCELLANEOUS
A. ENTIRE UNDERSTANDING. This Agreement constitutes the entire understanding
between Demeter and Licensee, and supersedes any prior agreement or
understanding on the same subject matter. Any modification or amendment to this
Agreement shall not be effective unless and until reduced to writing and signed
on behalf of both Demeter and Licensee and, to the extent that it affects any of
the rights or obligations relating to the LSU Patent Rights or Supplemental
Patent rights, approved in writing by LSU, which approval will not be
unreasonably withheld.
B. CONSTRUCTION. The parties acknowledge that this Agreement followed
negotiations by the parties, and that this Agreement incorporates the negotiated
suggestions of both parties, and that both parties have had the benefit of the
advice of counsel in the conduct of these negotiations. The parties therefore
agree that no presumptions shall arise favoring any party by virtue of the
authorship of any of the provisions of this Agreement.
C. HEADINGS. The headings or captions appearing at the beginnings of the
Articles and Paragraphs of this Agreement are provided for convenience of
reference only, and do not constitute part of this Agreement.
D. COMPLIANCE WITH LAWS. In fulfilling its obligations under the Agreement,
Licensee shall comply with all applicable licensing, regulatory, and statutory
requirements. Licensee shall be responsible for paying any taxes or other
assessments, and for complying with all applicable laws and regulations of the
United States and other countries, including without limitation all applicable
laws and regulations relating to the environment, to agriculture, and to
foodstuffs.
E. MARKING. Licensee shall mark any article or composition within the claims of
any issued patent within Licensed Patents, or any article or composition
intended for a use within the
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<PAGE> 40
claims of any issued patent within Licensed Patents, with the word "Patent,"
"Patents," "For Use Under Patent," or "For Use Under Patents," and the number or
numbers of each such issued patent. When, from the character of the article or
composition, this marking cannot be made, the marking shall instead be placed on
a label attached to any packaging containing any such article or composition.
F. PROHIBITION ON MISUSE. Licensee shall engage in no activity that would
constitute a misuse of any patent or patent application within Licensed Patents.
As used in this Paragraph, "misuse" of a patent or patent application means an
action that, aside from issues of patent validity or infringement, renders a
patent wholly or partially unenforceable, whether temporarily or permanently.
G. LICENSEE TRADEMARKS. Subject to Article XIII of the Agreement, Licensee may
acquire its own trademarks for use in connection with Licensed Products.
H. EFFECT OF AN INVALID PROVISION. If any part of the Agreement is finally
adjudged to be invalid by a court of competent jurisdiction, or by an arbitrator
as provided in Article XVIII.J, the remaining parts of the Agreement shall
remain in full force and effect. Furthermore, in lieu of that invalid part,
there shall be automatically added to the Agreement a provision as similar in
terms to that invalid part as may be possible, legal, valid, and enforceable.
I. GOVERNING LAW. This contract, its terms, and the enforcement of this contract
shall be governed by the substantive law of the State of North Carolina for all
situations except where rights or obligations of LSU are being interpreted in
which instance Louisiana Law applies.
J. DISPUTE RESOLUTION. In the event of a controversy or claim arising out of or
relating to this Agreement, or the breach, validity, or termination of this
Agreement, the parties shall first negotiate in good faith for a period of sixty
days to try to resolve the controversy or claim. If the controversy or claim is
unresolved after this period of good-faith negotiations, the
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<PAGE> 41
parties shall then make good-faith efforts for a period of sixty days to mediate
the controversy or claim in Durham, North Carolina, before a sole mediator
selected by the Center for Public Resources, Inc. (New York, New York), under
the Center for Public Resources' Model Mediation Procedure for Business Disputes
in effect as of the Effective Date. If the controversy or claim is unresolved
after this period of mediation, on the written demand of either party, any
controversy arising out of or relating to this Agreement or to the breach,
termination, or validity of this Agreement, will be settled by binding
arbitration in Durham, North Carolina unless LSU is a party, in which case the
location will be Baton Rouge, Louisiana. The arbitration will be conducted in
accordance with the Center for Public Resources' Rules for Non-Administered
Arbitration of Patent and Trade Secret Disputes in effect as of the Effective
Date before one neutral arbitrator selected by the parties. If the parties are
unable to agree upon the appointment of a neutral arbitrator within 45 days then
the Center for Public Resources will appoint an arbitrator. The appointed
arbitrator will be neutral, impartial, and independent of the parties and others
having any known interest in the outcome, abide by the ABA and AAA Canons of
Ethics for neutral arbitrators, and have no ex parte communications about the
case with either party in the appointing process or during the pendency of the
arbitration. The arbitration shall be governed by the United States Arbitration
Act, 9 U.S.C. Sections 1-16, and judgment upon the award rendered by the
arbitrators may be entered in any court having jurisdiction thereof. All
applicable statutes of limitation and defenses based upon the passage of time
shall be tolled while the procedures described above in this Paragraph are
pending. Demeter and Licensee will each take such action, if any, required to
effectuate this tolling. Each party is required to continue to perform its
obligations under this Agreement pending final resolution of any dispute arising
out of or relating to this Agreement. Otherwise, any controversy arising under
or relating to this Agreement, or the breach, termination, or validity of
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this Agreement, may be adjudicated only in a court, state or federal, having
jurisdiction over the subject matter and including Durham, North Carolina within
its territorial district. Both parties consent to the jurisdiction and venue of
such a court unless LSU is a party in which case the location will be Baton
Rouge, Louisiana. A party's right to demand arbitration of a particular dispute
arising under or related to this Agreement, or the breach, termination, or
validity of this Agreement, shall be waived if that party either: (1) brings a
lawsuit over that controversy or claim against the other party in any state or
federal court; or (2) does not make a written demand for mediation, arbitration,
or both within 60 days of service of process on that party of a summons or
complaint from the other party instituting such a lawsuit in any state or
federal court. Notwithstanding the foregoing, except with respect to LSU, to
whom the following will not apply, either party may avail itself of any
appropriate tribunal to obtain injunctive or other equitable relief to protect
its rights in any technology covered by the terms of this Agreement, or to
prevent the unauthorized disclosure of any Confidential Information disclosed by
one party to the other under this Agreement.
K. NO WAIVER. The failure of either party to insist upon strict performance of
any provision of the Agreement, or to exercise any right under the Agreement
shall not constitute a waiver of that provision or right.
L. NO LICENSE BY ESTOPPEL. Except as the Agreement may expressly and
unambiguously provide otherwise, nothing in the Agreement shall be construed as
granting by implication, estoppel, or otherwise any licenses or rights under any
patents, patent applications, or know how owned in whole or in part by LSU,
other than the express license under LSU Licensed Patents and Supplemental
Patent Rights provided in Paragraph (A) of Article II of the Agreement,
regardless of whether such patents, patent applications, or know-how are
dominant of or subordinate to any patent within Licensed Patents.
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<PAGE> 43
M. RESERVED LSU RIGHTS. The license granted by the Agreement is subject to a
reserved, non-exclusive, worldwide right in LSU to use LSU Licensed Patents and
Supplemental Patent Rights for non-commercial purposes that are experimental or
educational in nature.
N. LIMITATIONS OF LSU'S OBLIGATION UNDER THIS AGREEMENT. LSU's obligations under
this Agreement will not be greater than LSU's obligations to Demeter under the
LSU License, except as expressly provided in this Agreement with respect to the
following matters (i) LSU's acceptance of the financial and other obligations of
Licensee under this Agreement including but not limited to, the escrow
provisions of Article XX; (ii) LSU's acceptance of the right of Licensee to
grant sublicenses of the LSU Licensed Patents and Supplemental Licensed patents
to Affiliates under Section A, Paragraph 7 of Article II; (iii) LSU's agreement
that this Agreement will survive termination of Demeter's license under the LSU
License, as provided under Section B of Article II of this Agreement; and (iv)
the obligations of confidentiality under Article XII to the extent that such
Article XII may become applicable to LSU (e.g., in the event that Demeter's
license under the LSU License terminates). Without limiting the applicability of
the foregoing, in no event will LSU have any obligation to Licensee with respect
to: any technology or patent rights other than the LSU Licensed Patents and
Supplemental Patent Rights; the conduct of the joint development program under
Article VII; the provision of support services under Article VIII; any
participation in the activities set forth in Article X; any of Demeter's
indemnification obligations to Licensee under Article XV; provided, however, in
the event that (i) Demeter's license under the LSU License has terminated; and
(ii) Licensee is paying royalties and fees under this Agreement to LSU which are
in excess of the amount which Demeter would have been paying to LSU under the
LSU License as a direct result of this Agreement; and (iii) Demeter is unable to
meet its obligations to licensee with respect to claims subject to
indemnification by Demeter under this Agreement; then Licensee will have the
right
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<PAGE> 44
to offset any unreimbursed damages suffered as a result of Demeter's inability
to provide said required indemnification against that portion of Licensee's
payment obligation to LSU which is in excess of the amount that LSU would have
received from Demeter under the LSU License as a direct result of this
Agreement.
ARTICLE XIX DEFAULT AND TERMINATION
A. EFFECT OF TERMINATION. Upon termination of the Agreement for any reason, each
of the following provisions shall continue in effect indefinitely, until its
purpose can no longer be fulfilled, or is no longer meaningful: Article I;III;
V; XI; XII; XIII; XIV; XV, XVI; XVII, XVIII, XIX, AND XX. Following the
termination of the Agreement, any provision of the Agreement not referred to in
the preceding list shall cease to have effect. By way of illustration and not
limitation, following the termination of the Agreement, Licensee shall remain
obligated to pay Demeter all licensing fees, royalties, minimum royalties, and
other amounts that were due under Article III or Article IV which were accrued
prior to termination, except for amounts subject to disposition under Article
XX, hereof.
B. Licensee will have the right to terminate this Agreement at any time on six
(6) months written notice to Demeter at any time after the second anniversary of
the Effective Date. In the event of any termination prior to the satisfaction of
all the conditions set forth in Article XX, the balance of the amount being held
in escrow at the time of such notice will be released to Licensee following
termination of the Agreement.
C. If Licensee is in breach or default of any term or condition of the
Agreement, or fails to perform any obligation under the Agreement, Demeter may
give written notice to Licensee, specifying the reason why there is a default or
breach, after which notice Licensee shall have thirty (30) days to cure the
breach. If the breach is not cured, or if efforts reasonably satisfactory to
Demeter are not instituted within that 30 day
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<PAGE> 45
period to cure the breach, the Agreement may be terminated at the option of
Demeter, upon written notice of termination to Licensee, and Licensee shall have
no further rights to sublicense Licensed Patents or make, use, import, offer to
sell, or sell Licensed Products. If the breach is cured, or if efforts
reasonably satisfactory to Demeter are instituted within the thirty (30) day
period to cure the breach, the Agreement shall continue as if no breach had
occurred; provided, however, that upon the third default arising out of failure
to pay monies due to Demeter under the Agreement or upon default or rejection
under paragraph E of this Article, no notice or period to cure shall be
necessary, and Demeter may terminate the Agreement at its option without further
notice to Licensee and without allowing Licensee a period to cure, and in such
an event Licensee shall have no further rights under this Agreement. A bona fide
dispute with respect to the amount of any payment required to be made by
Licensee under this Agreement will not constitute a default by Licensee under
this Agreement, if the payment in dispute is paid to an escrow agent, mutually
selected by Demeter and Licensee, for placement into an interest bearing
investment or account jointly approved by Demeter and Licensee.
D. Following termination of the Agreement under either Paragraph B or C,
Licensee shall have one hundred eighty days (180) to sell any Licensed Products
then in stock or then under production, subject to the payment of royalties,
fees, and payments on those Licensed Products as otherwise provided in Articles
III and IV
E. ACCELERATED PROCEDURES. If bankruptcy proceedings under any Chapter of the
Bankruptcy Code, or other insolvency proceedings, voluntary or involuntary, are
filed by or against Licensee, then Licensee or its representative must assume
the Agreement within thirty (30) days of that filing, and Licensee must cure all
defaults existing under the Agreement within that thirty day period, and
Licensee must provide such adequate assurance of future performance of its
obligations under the Agreement as may be required by the Bankruptcy or other
Court, and should Licensee fail to assume the Agreement within thirty (30) days
of that
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<PAGE> 46
filing, or should Licensee fail to cure all defaults existing under the
Agreement within that thirty (30) day period, or should Licensee fail to provide
adequate assurance of its future performance of its obligations under the
Agreement, as may be required by the Bankruptcy or other Court, then the
Agreement shall be deemed to be rejected.
ARTICLE XX ESCROW PROVISIONS
A. Upon the execution of the Agreement between Demeter and Licensee, Licensee
will pay the license issue fees set forth in Paragraph A of Article III and the
technical assistance and support amount set forth in Article VIII (totaling
$1,250,000) as follows: (i) the sum of Seventy-five Thousand Dollars ($75,000)
will be paid directly to Demeter (which amount relates to the amounts due under
Article IIIA(c) and a portion of the amount due under Article VIII) and (ii) the
sum of One Million, One Hundred Seventy-five Thousand Dollars ($1,175,000) will
be paid into a mutually agreeable interest bearing escrow account using an
escrow agent mutually acceptable to Demeter and Licensee; which payments will
satisfy Licensee's obligation under the indicated provisions set forth in this
Paragraph A.
B. Promptly upon LSU's signature to this Agreement, Two Hundred and Seventy-five
Thousand Dollars ($275,000) of the amount held in escrow (which amount relates
to the balance of the amount due under Article VIII) will be released to
Demeter. The balance of the amount held in escrow will be released to Demeter
upon the receipt by Demeter or LSU of a letter from Phytonetix releasing any
interest that the Prior Parties may have in the LSU Licensed Patents by virtue
of the Prior License; or, if such release cannot be obtained, such other
documentation as Licensee may, in its sole discretion, accept in lieu of such
release.
C. In the event that the conditions set forth in Paragraph B above cannot be
satisfied within six (6) months from the date of execution of this Agreement,
then the balance of the escrow account will be released to Licensee.
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<PAGE> 47
D. In the event Licensee is subsequently able to secure the Prior Parties'
release of any interest in the LSU Licensed Patents and Supplemental Patent
Rights by the Prior Parties, or in the event that the Prior Parties' right to
assert any such interest is barred by statute or adjudicated adversely to the
Prior Parties, then Licensee will pay to Demeter the amount of any funds
remaining from the previously escrowed balance released to Licensee to the
extent that such funds were not utilized by Licensee in obtaining such release ,
or otherwise used in securing Licensee's right to use the LSU Licensed Patents
and Supplemental Patent Rights.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed in duplicate counterparts, each of which shall be deemed to
constitute an original, effective as of the date first above written.
The Undersigned verify that they have the power to bind to this
Agreement the party on behalf of which they are executing below.
WITNESSES: MYCOGEN CORPORATION
/s/ Elaine Hartnett BY: /s/ Andrew C. Barnes
- ------------------------------ ---------------------------------
ANDREW C. BARNES
EXECUTIVE VICE PRESIDENT
/s/ Carol Meikey DATE: Dec. 1, 1997
- ------------------------------ -------------------------------
DEMETER BIOTECHNOLOGIES, LTD.
/s/ Jesse M. Jaynes BY: /s/ Richard D. Ekstrom
- ------------------------------ ---------------------------------
RICHARD D. EKSTROM,
PRESIDENT
/s/ D. Thomas Roane DATE: Dec. 4, 1997
- ------------------------------ -------------------------------
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<PAGE> 48
ACKNOWLEDGEMENT OF LICENSE AND ROYALTY AGREEMENT BY LSU
Approved and accepted by the Board of Supervisors of Louisiana State University
and Agricultural and Mechanical College pursuant to Paragraph 2.2 of the
Supplemental Terms of the May 1, 1997 License and Royalty Agreement between the
Board of Supervisors of Louisiana State University and Agricultural and
Mechanical College and Demeter Biotechnologies, Ltd.
WITNESSES: THE BOARD OF SUPERVISORS OF
LOUISIANA STATE UNIVERSITY AND
AGRICULTURAL AND MECHANICAL COLLEGE
BY: /s/ Allan A. Copping
- --------------------------- -------------------------------
ALLAN A. COPPING
TITLE: PRESIDENT
- ---------------------------
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<PAGE> 49
Schedule A.
Section A1
1. Methylated-lysine-rich lytic peptides and method of making same by
reductive alkylation. United States application number 08/474547 filed June
7, 1995 and all foreign filings such as: EP number 95901738.5; IL number
111516; WO number 9412550.
2. Modified arginine-containing lytic peptides and method of making same by
glyoxation. United States application number 08/148491 filed November 8,
1993 and all foreign filings such as: EP number 95000498.7; IL number
111515; WO number 9412553.
3. Ubiquitin-lytic peptide fusion gene constructs, protein products deriving
therefrom, and methods of making and using same. United States patent
application number 08/801028 filed February 19, 1997 and all foreign
filings such as: EP number 95928127.0; IL number 1146967; WO number
9509339.
4. Methods for the design of amphipathic peptides have enhanced biological
activities. US patent application number 60/027628 filed October 4, 1996
and all associated foreign filings.
5. Ubiquitin-lytic peptide fusion gene constructs, protein products deriving
therefrom, and method of making. United States application number 08/505486
filed July 21, 1995 and associated foreign filings such as: EP number
95928126.2; WO number 9509338.
6. Design of Non-Peptidyl Membrane Interactive Molecules (MIMs) to Enhance
Biological Activity. In Preparation.
7. Modified arginine containing lytic peptides and method of making the
same by glyoxylation. United States application number 08/475328 filed
June 7, 1995 and all associated foreign filings.
8. Methylated lysine-rich lytic peptides and method of making same by
reductive alkylation. United States application number 08/427001 filed
April 24, 1995 and all associated foreign filings.
Section A2
1. Method of treating pulmonary disease states with non-naturally occurring
amphipathic peptides. United States application number 08/457798 filed June
1, 1995 and all foreign filings such as: IL number 109897; KZ number
941795.1; WO number 9406176.
2. Method of combating mammalian neoplasias, and lytic peptides thereof.
United States patent application number 08/457171 filed June 1, 1995 and
all associated foreign filings such as: EP number 95916249.6; IL number
113244; WO number 9504335.
3. Method of enhancing wound healing by stimulating fibroblasts and
keratinocyte growth in vivo, utilizing amphipathic peptides. United States
issued patent number 5561107 allowed October 1, 1996 and all associated
foreign filings such as: CA number 2188391; EP number 95916435.1; IL number
113423; WO number 9504718.
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<PAGE> 50
4. Method of enhancing wound and healing by stimulating fibro-blast and
keratinocyte in vivo utilizing amphipathic peptides. United States patent
application number 08/689489 filed August 12, 1996 and all associated
foreign applications.
Section A3
1. Plants Genetically Enhanced for Disease Resistance. United States patent
application number 08/798963 filed January 24, 1997 and all associated
foreign applications. In preparation.
2. Design, Construction, and Expression of Genes Encoding Proteins High in
Essential Amino Acid Content for Food and Feeding for Humans and Animals.
In preparation.
3. Technique to Increase Overall Protein Content in Plants. In preparation.
- 50 -
<PAGE> 51
Schedule C
CURRENT DEMETER AGRICULTURAL AGREEMENTS
(As of August, 1997)
<TABLE>
<CAPTION>
TYPES OF PLANT(S) DEMETER COLLABORATOR TYPE OF AGREEMENT
- ----------------- -------------------- -----------------
<S> <C> <C>
1. Apples Cornell University To Be Developed (Post LSU)
2. Peanuts National Peanut Foundation/ Research & Development
North Carolina State University
University of Georgia
3. Tobacco North Carolina State University Research & Development
4. Rice Cornell University Research & Development
5. Cotton USDA/Univ. of S.W.LA CRADA
6. U.S. Potatoes USDA/WRRC CRADA
7. European Potatoes Austrian Research Center Research & Development
8. Sugarcane Texas A&M University Research & Development
9. Sweet potatoes Tuskegee University Research & Development
10. Trees Canadian Forest Service Research & Development
11. Bartlett Pear USDA CRADA
12. Walnuts USDA/Univ. of Calif. Davis CRADA
</TABLE>
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<PAGE> 52
SCHEDULE D
STANDARD FORM SUBLICENSE AGREEMENT(1)
Mycogen Corporation ("MYCOGEN"), having a place of business at 5501
Oberlin Drive, San Diego, California 92121, and
________________________________________, ("LICENSEE") enter into the following
Agreement effective __________________, 1997 (the "EFFECTIVE DATE").
WHEREAS Mycogen is the exclusive licensee or sublicensee, for certain
uses, of certain technology and patent rights from the Board of Supervisors of
Louisiana State University and Agricultural and Mechanical College, a public
constitutional corporation, organized and existing under the laws of the State
of Louisiana ("LSU") and Demeter BioTechnologies, Ltd., a Colorado corporation
("DEMETER") relative to disease and pest control for use with plant crop species
of all kinds;
WHEREAS Mycogen has developed or has rights in technology and know-how
useful in producing disease resistant plants or treating plants and has obtained
or filed patents of its own;
WHEREAS Licensee desires to obtain a license from Mycogen of
_______________ and a sublicense of certain rights under Licensed Patents and
Supplemental Patent Rights, all for certain fields of use;
- --------
1 The Standard Form Sublicense Agreement may include such other terms as
are agreed upon between Mycogen and Licensee without requiring separate
approval from LSU, provided that such additional terms, (i) do not
expand the scope of Mycogen's license from LSU; (ii) do not impose any
additional obligations on LSU beyond those set forth in the
Demeter-Mycogen License and Royalty Agreement; and (iii) do not
diminish in any respect the protections afforded to LSU by this
approved Standard Form Sublicense Agreement. In addition, solely with
respect to Demeter, the Standard Form Sublicense Agreement may not
include any provisions that are not in compliance with the provisions
of the Demeter-Mycogen License and Royalty Agreement without Demeter's
written consent.
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<PAGE> 53
WHEREAS Mycogen and Licensee have agreed to the following terms and
conditions, and desire to enter this License and Royalty Agreement (the
"AGREEMENT");
THEREFORE, in consideration of the mutual obligations set forth in this
Agreement, Mycogen and Licensee agree as follows:
ARTICLE I. DEFINITIONS
A. "LSU LICENSED PATENTS" means: (1) Jaynes and Derrick, "Method for
Introduction of Disease and Pest Resistance into Plants and Novel Genes
Incorporated into Plants which Code Therefor," United States patent number
5,597,946, issued January 28, 1997; (2) Jaynes and Derrick, "Plants Genetically
Enhanced for Disease Resistance," United States patent number 5,597,945, issued
January 28, 1997; (3) Jaynes and Derrick, European patent application
93113536.2; (4) Jaynes and Derrick, European patent application 89900103.6; (5)
Jaynes and Derrick, Japanese patent application SHO 62-504491; (6) Jaynes and
Derrick, "Method for Introduction of Disease and Pest Resistance into Plants and
Novel Genes Incorporated into Plants which Code Therefor," European patent 0 330
655, issued June 7, 1995, nationalized in United Kingdom, France, Germany, and
Italy; (7) Jaynes and Derrick, "Plants Genetically Enhanced for Disease
Resistance," Canadian patent number 1,321,157, issued August 10, 1993; (8)
Jaynes and Derrick, "Method for Introduction of Disease and Pest Resistance into
Plants and Novel Genes Incorporated into Plants which Code Therefor," Australian
patent number 611,859, sealed November 5, 1991; and (9) any United States or
non-United States patent, reissue patent, or reexamination certificate resulting
from the applications and patents of parts (1) through (8) of this Paragraph,
including any renewals or extensions of the term of any such patent.
B. "SUPPLEMENTAL PATENT RIGHTS" means, subject to the limitations set forth in
this Paragraph, any United States divisional or continuation application (but
not a continuation-in-part application) either of United States patent
application serial number 08/444,762, filed May 19, 1995, or of United States
- 2 -
<PAGE> 54
patent application serial number 08/453,436, filed May 30, 1995; and any United
States patent, reissue patent, or reexamination certificate resulting from such
a divisional or continuation application. "SUPPLEMENTAL PATENT RIGHTS" shall not
include any patent rights outside the United States. Furthermore, "SUPPLEMENTAL
PATENT RIGHTS" shall not include any patent rights concerning any invention or
activity whose unlicensed practice would infringe any of the following claims:
(1) any claim of United States patent number 5,597,945 or 5,597,946, or (2) any
claim in any reissue patent or reexamination certificate resulting from United
States patent number 5,597,945 or 5,597,946. The "SUPPLEMENTAL PATENT RIGHTS"
will be treated as Licensed Patents for all purposes under this Agreement.
C. "LICENSED TECHNOLOGY" means _____________________________.
D. "LICENSED PATENTS" means LSU Licensed Patents, Supplemental Patents, and
________________________________.
E. "FIELD OF USE" means the use of Biocontrol Peptides for [disease and/or pest
resistance purposes in transgenic plants of ________________________ but not
including the use of plants as a production mechanism for producing Biocontrol
Peptides which are to be used for purposes not permitted under this Agreement]
or [disease and/or pest control purposes for crops of ____________].
F. "DOLLARS" means U.S. dollars.
G. "BIOCONTROL PEPTIDE(S)" means natural or synthetically derived peptide
compound(s) which express activity to control plant pests or plant diseases.
H. "LICENSED PRODUCT(S)" means product containing a biocontrol peptide the use
of which would (i) infringe a valid claim of any applicable Licensed Patents
absent the license rights granted under this Agreement, or.(ii)
____________________________.
I. "CONFIDENTIAL INFORMATION" means any and all proprietary information
(including, without limitation, information related to technical, business and
intellectual property matters), know-how, data, trade secrets and biological and
other physical
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<PAGE> 55
materials owned and held by either party to this Agreement which such party
maintains as confidential.
J. "AFFILIATE" means any entity controlled by, controlling or under common
control with a party. For purposes of this definition, control will mean
ownership of fifty percent (50%) or more of the equity or voting control of such
party or entity.
ARTICLE II. LICENSE GRANT
A. SCOPE OF LICENSE.
1. LICENSED PRODUCTS. Subject to the terms and conditions of this
Agreement, Mycogen grants to Licensee, and Licensee accepts from
Mycogen, a license under Licensed Technology and Licensed Patents to
make, have made, use, offer to sell and sell for use Licensed Products
in the Field of Use.
2. SUBLICENSING RESTRICTION. Licensee will not have the right to
sublicense any of the rights granted to Licensee hereunder.
Notwithstanding the foregoing, Licensee may sell Licensed Products to
arms-length purchasers (e.g. distributors or farmers), even where such
a sale is accompanied by an express or implied sublicense under one of
more of the LSU Licensed Patents or Supplemental Patent Rights
regarding the commercial use of such Licensed Product for
non-developmental purposes.
3. U.S. GOVERNMENT RIGHTS. The license granted to Licensee under Paragraph
1 above is subject to any rights that the United States Government may
have in Licensed Patents pursuant to 35 USC Sections 200-212.
4. ADDITIONAL LIMITATIONS. No right or license is granted under this
Agreement by Mycogen to use or sell Licensed Products for human or
animal health care applications or to use plants to produce Biocontrol
Peptides for such or for other non-licensed uses.
B. TERM. The term of this Agreement will be from the Effective Date until the
later of (i) expiration of the last to expire of
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<PAGE> 56
any patent within Licensed Patents; or (ii) the cessation of the sale or use of
any Licensed Products by Licensee [and its Affiliates], or any purchasers of
Licensed Products from Licensee [and its Affiliates], unless earlier terminated
in accordance with applicable provisions of this Agreement. Should Mycogen's
rights under Licensed Patents be terminated, Licensee's rights under this
Agreement regarding Licensed Patents will continue, provided that; (i)Licensee
[and its Affiliates] pay to Demeter or to such other person or entity which
holds the Licensed Patents which are sublicensed to Licensee under this
Agreement, the royalties otherwise payable to Mycogen under this Agreement; and
(ii) Licensee [and its Affiliates] are not in breach of any other material term
of this Agreement. The parties acknowledge that the term of the LSU License only
extends until the last to expire of any patents included within the definition
of "Licensed Patents" as defined in said License Agreement.
ARTICLE III. ROYALTIES AND FEES
A. QUARTERLY REPORTS. Licensee shall forward to Mycogen quarterly reports on or
before March 15, July 15, September 15, and December 15 of each year, for the
preceding calendar quarter, containing the data, information, and documentation
necessary to determine fully the amounts owed by Licensee to Demeter under this
Agreement. The quarterly reports will also provide information on the status of
Licensee's marketing of Licensed Products. Such a report shall be made for each
quarter beginning after commercialization of the first Licensed Product, whether
or not any payment is due for that quarter.
ARTICLE IV - AUDITING AND PAYMENT PROCEDURES
A. LATE PAYMENTS. If any payment is made more than thirty days after the date
due under the Agreement, then Licensee shall also pay interest at the prime rate
of interest announced from time to time by Citibank (New York), plus one percent
(1%) per
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<PAGE> 57
annum, until paid. If this amount is higher than allowed by applicable law, then
the highest amount allowed by law shall apply.
B. PAYMENT PROCEDURE. All payments due under this agreement shall be payable to
Mycogen and shall be made at the appropriate address given for notices in the
Agreement. All payments due shall be made without any deduction for taxes,
assessments, or other charges that may be imposed on Licensee by any government
or by any political subdivision of any government. Any such taxes, assessments
or other charges shall be assumed solely by Licensee.
C. LICENSEE'S RECORDS. Licensee shall make and keep full and accurate books and
records in accordance with Generally Accepted Accounting Principles showing the
manufacture, use, distribution, importation, lease, and sale of any Licensed
Product by Licensee. Licensee agrees that Mycogen, LSU or the Louisiana
Legislative Auditor may require that the books and records of Licensee
pertaining to Licensed Products be inspected by a designee reasonably acceptable
to Licensee during regular business hours, on reasonable written notice, to the
extent necessary to verify the payments due under the Agreement; provided that
the inspection is conducted in a manner to (i) insure the confidentiality of
Licensee's books and records; and (ii) prevent any misuse of the information
contained therein. Any such audit shall be at the expense of the designee;
except that should such an audit indicate an underpayment of ten percent (10%)
or more for any calendar quarter, then Licensee shall pay the cost of the audit
within thirty days of its completion.
D. TERM OF AUDIT RIGHTS. The right of Mycogen or LSU to inspect the books and
records of Licensee shall continue past the term or termination of the
Agreement, until the later of the date on which all payments due under the
Agreement have been made, or until two years after the expiration of the
Agreement.
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<PAGE> 58
ARTICLE V - REPRESENTATIONS, WARRANTIES, AND DISCLAIMERS
A. AUTHORITY. Each party represents and warrants to the other party that it has
the power and authority to enter into this Agreement and to perform its
obligations hereunder.
B. MYCOGEN WARRANTIES. Mycogen further warrants that LSU has consented to the
form of this Agreement and that, as of the date of execution of this Agreement,
Mycogen has no knowledge of any intellectual property rights of third parties
other than those disclosed in this Agreement, to which the use of the technology
as licensed to Licensee under this Agreement would be subject.
C. DISCLAIMER OF RESPONSIBILITY. None of Mycogen, Demeter or LSU assume any
responsibilities whatever for any damages caused to Licensee, any Affiliate, any
vendees, or other transferees of Licensee or its Affiliates, or by any product
or process incorporating or made by the Licensed Patents or Licensed Technology,
or incorporating or made by the use of any information furnished under this
Agreement.
ARTICLE VI - CONFIDENTIALITY
For a period of five (5) years from the termination of this Agreement, each
party will keep confidential any and all Confidential Information (not otherwise
excluded from the confidentiality and non-use obligation of this Article VI as
set forth below) received from the other party in connection with the
performance of this Agreement and will not disclose it to third parties or use
it for any purpose other than pursuant to this Agreement, without the prior
written consent of the disclosing party.
The confidentiality and non-use obligation of this Article VI will not apply to
information and other items listed under the definition of Confidential
Information: (a) which is public knowledge at the time of disclosure, or which
after disclosure becomes public knowledge in any way except through the wrongful
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<PAGE> 59
act of the party so disclosing it; (b) which the receiving party is able to
prove was in its possession at the time of disclosure by the disclosing party
and which had not been obtained from the latter, either directly or indirectly;
(c) whose disclosure is compelled by administrative or judicial order; or (d)
which either party received from a third party having the legal right to
disclose such information.
The provisions of this Article XI will survive any termination of this
Agreement.
In the event that Licensee determines that Confidential Information received
from Mycogen or any Mycogen Affiliate needs to be disclosed to regulatory
authorities for the sale or use of any Licensed Product or to a third party in
connection with a sale of a Licensed Product to such third party, then
disclosure may be made to such third party only upon Mycogen's prior written
consent, which may not be unreasonably withheld, and only if such third party
agrees to be bound by terms of confidentiality equivalent to those specified
with this Article VI.
ARTICLE VII. NON-USE OF NAMES
Licensee and Mycogen will make no use whatsoever of the other party's name,
marks, insignia or logos or the name of any then-current employee of the other
in news releases, advertisements, promotional materials, or otherwise, without
the prior written consent of the other party for each such use. Licensee will
make no use whatsoever of Demeter or LSU's name, marks, insignia, or logos; or
of the name of any LSU campus, department, center, or institute; or the name of
any then-current LSU employee; in news releases, advertisements, promotional
materials, or otherwise, without the prior written consent of Demeter or LSU,
respectively, for each such use.
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<PAGE> 60
ARTICLE VIII - PATENT ENFORCEMENT
A. INFRINGEMENT OF LICENSED PATENTS. Licensee will investigate and report any
infringements or possible infringements of Licensed Patents to Mycogen. If
infringing activity is occurring within the scope of any license granted to
Licensee under this Agreement, then Licensee's royalty and other payment
obligations under this Agreement will be suspended until an action to enforce
the Licensed Patents against said infringement is instituted, unless Licensee is
granted permission to enforce Licensed Patents against said infringement. Any
damages recovered in connection with the enforcement of Licensed Patents in an
action maintained solely by Licensee will be retained by Licensee. Any such
recovery by Licensee in excess of the expenses incurred by Licensee in pursuing
said enforcement will be subject to the royalty and other payment obligations of
this Agreement. Licensee will provide reasonable cooperation to Mycogen, LSU and
or Demeter in the conduct of any enforcement action, provided that the entity
requesting such participation reimburses Licensee for any reasonable expenses
incurred by Licensee in connection therewith.
B. LITIGATION DOES NOT AFFECT ROYALTIES. For so long as a proceeding has been
initiated to enforce Licensed Patents, the pendency of a lawsuit for
infringement of Licensed Patents, or other action concerning the validity or
enforceability of Licensed Patents, will not affect Licensee's obligations to
pay royalties or other amounts under this Agreement.
C. INDEMNIFICATION BY LICENSEE. If Licensee or any Affiliate takes any action
under the Agreement or otherwise (other than a proceeding by Licensee or such
Affiliate against LSU or Demeter on the validity or invalidity of the LSU
Licensed Patents) that leads to or results in litigation or other legal
proceedings (in any country) concerning or related to Licensed Patents or the
Agreement, including but not limited to a suit for declaratory
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judgment or claim or counterclaim for infringement, non-infringement, validity,
invalidity, enforceability, unenforceability, ownership, or inventorship of
Licensed Patents, then Licensee will assume the responsibility for such legal
proceedings (at both trial and appellate levels) at Licensee's sole expense. If
Demeter or LSU so requests, Licensee's legal counsel shall represent Demeter
and/or LSU, at Licensee's expense, in any such legal proceedings at both trial
and appellate levels. If Licensee's legal counsel is unable to represent Demeter
and/or LSU because of a conflict of interest or other bona fide reason, Demeter
and/or LSU may engage other competent legal counsel, whose reasonable fees and
expenses will be promptly paid or reimbursed by Licensee, to represent Demeter
and/or LSU in any such suit or legal proceeding. If Demeter and/or LSU does not
wish to be represented by Licensee's legal counsel, Demeter and/or LSU may
engage competent legal counsel of Demeter's and/or LSU's choosing to represent
Demeter and/or LSU at Demeter's and/or LSU's own expense (except in the case of
a conflict of interest or other bona fide reason as described in the preceding
sentence, in which case reasonable expenses for such representation will be
borne by Licensee). Licensee will indemnify Demeter and/or LSU and hold Demeter
and/or LSU harmless from any and all claims, damages, or other obligations
arising out of or resulting from any such claim or legal proceedings; provided
that Demeter and/or LSU will not settle any such claim without Licensee's prior
written consent, such consent not to be unreasonably withheld.
ARTICLE IX. INDEMNIFICATION
A. GENERAL. Except as otherwise set forth below, Licensee will defend,
indemnify, and hold harmless Mycogen, Demeter, LSU and their respective agents,
officers, board members, employees, and anyone for whom Mycogen, Demeter and/or
LSU may be liable (each, individually, referred to as an "INDEMNITEE" hereafter)
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from and against any and all claims, damages, losses, and expenses, in any
country, including reasonable attorney's fees at both trial and appellate levels
to or for attorneys of an Indemnitee's choosing, for claims for damages to
property, injury to persons, or death of persons, or for any other damage
arising out of or in any way relating to Licensee's or its Affiliates'
manufacture, use, distribution, marketing, importation, lease, sale or other
conduct relating to Licensed Products, Licensed Patents or Licensed Technology
by Licensee or Licensee's Affiliates and/or those manufacturing, marketing,
selling, or otherwise acting on behalf of Licensee and/or Licensee's Affiliates.
Licensee agrees to defend any Indemnitee against any such lawsuit,
administrative or arbitration proceeding at Licensee's expense, and to pay any
judgment rendered against any Indemnitee in any such lawsuit, administrative or
arbitration proceeding, together with all costs and reasonable attorney's fees
at both trial and appellate levels to or for attorneys of Mycogen, Demeter's
and/or LSU's choosing incurred in preparing for or defending any such lawsuit,
administrative or arbitration proceeding. Mycogen, Demeter and/or LSU will not
settle any such claim without Licensee's prior written consent, such consent not
to be unreasonably withheld.
ARTICLE X. INSURANCE
A. Prior to the first sale of any Licensed Product, Licensee shall maintain a
program of self-insurance reasonably acceptable to Mycogen, Demeter and LSU or
shall obtain liability insurance coverage on an "occurrence" basis for any and
all liability arising out of the sublicensing, manufacture, use, distribution,
marketing, importation, or sale of any Licensed Product, by Licensee, its
Affiliates, and their customers, in all countries. Mycogen, Demeter and LSU
shall be additional insureds in any such liability insurance. This liability
insurance must be issued by a company having a current A. M. Best rating of A+ 8
or better.
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<PAGE> 63
The limits of this insurance coverage shall be not less than three million
Dollars ($3,000,000) per occurrence, with aggregate limits not less than five
million Dollars ($5,000,000) per year. The amount of liability insurance
coverage required by this Paragraph A is subject to the inflation adjustment set
forth in Paragraph B, below. The maximum deductible may not exceed fifty
thousand Dollars ($50,000) or such other amount as may be reasonably acceptable
to Mycogen, Demeter and LSU. This liability insurance shall include contractual
liability coverage and products/completed operations coverage in at least the
minimum amounts required by this Article. If applicable, Licensee shall forward
written evidence of such liability insurance coverage, including the
declarations page(s) describing the coverage provided by the policy, and
including the endorsement naming Mycogen, Demeter and LSU as additional
insureds, to Mycogen, Demeter and LSU at least sixty days prior to the first use
or sale of any Licensed Product. The insurer shall be required to give at least
thirty days' notice of cancellation or modification of coverage to Mycogen,
Demeter and LSU. The obligation to provide Mycogen, Demeter and LSU the
liability insurance required by this Article and written evidence thereof shall
continue until the earliest of the following two events: (a) the expiration or
termination of this Agreement in accordance with its terms; or (b) the time when
Licensee permanently ceases to make, use, import, sell, or offer to sell
Licensed Products. In addition, Licensee shall thereafter obtain and maintain a
"tail" insurance policy otherwise satisfying the requirements of this Paragraph,
and insuring the same persons against the same risks until the expiration of any
remaining pertinent statute of limitations period. At any time when Licensee
obtains, renews, or replaces a liability insurance policy, the aggregate limits
for the liability insurance coverage shall be at least equal to Net Sales for
the most recently completed Licensee fiscal year. The alternative amount of
liability insurance provided by the preceding sentence is not subject to the
inflation adjustment otherwise required by this
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<PAGE> 64
Article X, and only applies if this alternative amount is greater than the
amount of insurance otherwise required by this Paragraph A.
B. INFLATION ADJUSTMENT. The dollar amounts of insurance coverage stated in
Paragraph (A) above will be subject to inflation adjustment as follows: The
"Multiplier" on any given date is defined to be the ratio of (a) the Consumer
Price Index for All Urban Consumers, All Items, U.S. City Average (the "Index")
most recently issued by the United States Government as of that date to (b) the
Index on the effective date of this Agreement. At any time when the Multiplier
is at least 1.10 times the value of the Multiplier on the date of the most
recent adjustment under this Paragraph (or is at least 1.10 if there has been no
previous adjustment under this Paragraph), then Mycogen, Demeter or LSU may give
Licensee written notice that each of the dollar amounts defined in Paragraph A
is adjusted to the original amount of insurance required under this Agreement as
specified above, multiplied by the Multiplier. The adjustment notice under this
Paragraph is effective as of the time when Licensee (or a sublicensee) next
renews or replaces its then-current liability insurance policy; and the amount
of liability insurance coverage required shall be the amount specified in this
Article X, multiplied by the Multiplier as of the date of issuance, renewal, or
replacement of the policy. The required adjusted coverage shall then remain
constant until another notice of adjustment under this Paragraph is given.
ARTICLE XI. NOTICES
All written notices, payments, and other correspondence under this Agreement
shall be considered given when deposited in the United States Mail, first class
postage prepaid, to:
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LICENSEE: MYCOGEN:
Mr. Andrew C. Barnes
Executive Vice President
Mycogen Corporation
5501 Oberlin Drive
San Diego, California 92121
These names or addresses may be changed by giving notice as provided in this
Paragraph.
ARTICLE XII. MISCELLANEOUS
A. ENTIRE UNDERSTANDING. This Agreement constitutes the entire understanding
between Mycogen and Licensee, and supersedes any prior agreement or
understanding on the same subject matter. Any modification or amendment to this
Agreement shall not be effective unless and until reduced to writing and signed
on behalf of both Mycogen and Licensee and, to the extent that it affects any of
the rights or obligations relating to the LSU Patent Rights or Supplemental
Patent rights, approved in writing by LSU, which approval will not be
unreasonably withheld.
B. CONSTRUCTION. The parties acknowledge that this Agreement followed
negotiations by the parties, and that this Agreement incorporates the negotiated
suggestions of both parties, and that both parties have had the benefit of the
advice of counsel in the conduct of these negotiations. The parties therefore
agree that no presumptions shall arise favoring any party by virtue of the
authorship of any of the provisions of this Agreement.
C. HEADINGS. The headings or captions appearing at the beginnings of the
Articles and Paragraphs of this Agreement are provided for convenience of
reference only, and do not constitute part of this Agreement.
D. COMPLIANCE WITH LAWS. In fulfilling its obligations under the Agreement,
Licensee shall comply with all applicable licensing, regulatory, and statutory
requirements. Licensee shall be responsible for paying any taxes or other
assessments, and for complying with all applicable laws and regulations of the
United States and other countries, including without limitation
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all applicable laws and regulations relating to the environment, to agriculture,
and to foodstuffs.
E. MARKING. Licensee shall mark any article or composition within the claims of
any issued patent within Licensed Patents, or any article or composition
intended for a use within the claims of any issued patent within Licensed
Patents, with the word "Patent," "Patents," "For Use Under Patent," or "For Use
Under Patents," and the number or numbers of each such issued patent. When, from
the character of the article or composition, this marking cannot be made, the
marking shall instead be placed on a label attached to any packaging containing
any such article or composition.
F. PROHIBITION ON MISUSE. Licensee shall engage in no activity that would
constitute a misuse of any patent or patent application within Licensed Patents.
As used in this Paragraph, "misuse" of a patent or patent application means an
action that, aside from issues of patent validity or infringement, renders a
patent wholly or partially unenforceable, whether temporarily or permanently.
G. LICENSEE TRADEMARKS. Subject to Article VII of the Agreement, Licensee may
acquire its own trademarks for use in connection with Licensed Products.
H. EFFECT OF AN INVALID PROVISION. If any part of the Agreement is finally
adjudged to be invalid by a court of competent jurisdiction, or by an arbitrator
as provided in Article XII.J, the remaining parts of the Agreement shall remain
in full force and effect. Furthermore, in lieu of that invalid part, there shall
be automatically added to the Agreement a provision as similar in terms to that
invalid part as may be possible, legal, valid, and enforceable.
I. GOVERNING LAW. This contract, its terms, and the enforcement of this contract
shall be governed by the substantive law of the State of California for all
situations except where rights or obligations of LSU are being interpreted in
which instance Louisiana Law applies.
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<PAGE> 67
J. DISPUTE RESOLUTION. In the event of a controversy or claim arising out of or
relating to this Agreement, or the breach, validity, or termination of this
Agreement, the parties shall first negotiate in good faith for a period of sixty
days to try to resolve the controversy or claim. If the controversy or claim is
unresolved after this period of good-faith negotiations, the parties shall then
make good-faith efforts for a period of sixty days to mediate the controversy or
claim in ____________________, before a sole mediator selected by the Center for
Public Resources, Inc. (New York, New York), under the Center for Public
Resources' Model Mediation Procedure for Business Disputes in effect as of the
Effective Date. If the controversy or claim is unresolved after this period of
mediation, on the written demand of either party, any controversy arising out of
or relating to this Agreement or to the breach, termination, or validity of this
Agreement, will be settled by binding arbitration in ___________________, unless
LSU is a party, in which case the location will be Baton Rouge, Louisiana. The
arbitration will be conducted in accordance with the Center for Public
Resources' Rules for Non-Administered Arbitration of Patent and Trade Secret
Disputes in effect as of the Effective Date before one neutral arbitrator
selected by the parties. If the parties are unable to agree upon the appointment
of a neutral arbitrator within 45 days then the Center for Public Resources will
appoint an arbitrator. The appointed arbitrator will be neutral, impartial, and
independent of the parties and others having any known interest in the outcome,
abide by the ABA and AAA Canons of Ethics for neutral arbitrators, and have no
ex parte communications about the case with either party in the appointing
process or during the pendency of the arbitration. The arbitration shall be
governed by the United States Arbitration Act, 9 U.S.C. Sections 1-16, and
judgment upon the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof. All applicable statutes of limitation and defenses
based upon the passage of time shall be tolled while the procedures described
above in this Paragraph are pending. Mycogen and Licensee will each take such
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action, if any, required to effectuate this tolling. Each party is required to
continue to perform its obligations under this Agreement pending final
resolution of any dispute arising out of or relating to this Agreement.
Otherwise, any controversy arising under or relating to this Agreement, or the
breach, termination, or validity of this Agreement, may be adjudicated only in a
court, state or federal, having jurisdiction over the subject matter and
including ______________________________ within its territorial district. Both
parties consent to the jurisdiction and venue of such a court unless LSU is a
party in which case the location will be Baton Rouge, Louisiana. A party's right
to demand arbitration of a particular dispute arising under or related to this
Agreement, or the breach, termination, or validity of this Agreement, shall be
waived if that party either: (1) brings a lawsuit over that controversy or claim
against the other party in any state or federal court; or (2) does not make a
written demand for mediation, arbitration, or both within 60 days of service of
process on that party of a summons or complaint from the other party instituting
such a lawsuit in any state or federal court. Notwithstanding the foregoing,
except with respect to LSU, to whom the following will not apply, either party
may avail itself of any appropriate tribunal to obtain injunctive or other
equitable relief to protect its rights in any technology covered by the terms of
this Agreement, or to prevent the unauthorized disclosure of any Confidential
Information disclosed by one party to the other under this Agreement.
K. NO WAIVER. The failure of either party to insist upon strict performance of
any provision of the Agreement, or to exercise any right under the Agreement
shall not constitute a waiver of that provision or right.
L. NO LICENSE BY ESTOPPEL. Except as the Agreement may expressly and
unambiguously provide otherwise, nothing in the Agreement shall be construed as
granting by implication, estoppel, or otherwise any licenses or rights under any
patents, patent applications, or know how owned in whole or in part by Demeter,
Mycogen or LSU, other than the express license under Licensed
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<PAGE> 69
Patents provided in Paragraph (A) of Article II of the Agreement, regardless of
whether such patents, patent applications, or know-how are dominant of or
subordinate to any patent within Licensed Patents.
M. RESERVED LSU RIGHTS. The license granted by this Agreement is subject to a
reserved, non-exclusive, worldwide right in LSU to use LSU Licensed Patents and
Supplemental Patent Rights for non-commercial purposes that are experimental or
educational in nature.
ARTICLE XIII DEFAULT AND TERMINATION
A. EFFECT OF TERMINATION GENERALLY. Upon termination of the Agreement for any
reason, each of the following provisions shall continue in effect indefinitely,
until its purpose can no longer be fulfilled, or is no longer meaningful:
Article I;III; IV; V; VI; VII; VIII; IX; X; XI; XII; and XIII. Following the
termination of the Agreement, any provision of the Agreement not referred to in
the preceding list shall cease to have effect. By way of illustration and not
limitation, following the termination of the Agreement, Licensee shall remain
obligated to pay Mycogen all licensing fees, royalties, minimum royalties, and
other amounts that were due under Article III or Article IV which were accrued
prior to termination, except for amounts properly placed in escrow under
Paragraph B of this Article XIII.
B. EFFECT OF LICENSEE'S DEFAULT. If Licensee is in breach or default of any term
or condition of the Agreement, or fails to perform any obligation under the
Agreement, Mycogen may give written notice to Licensee, specifying the reason
why there is a default or breach, after which notice Licensee shall have thirty
(30) days to cure the breach. If the breach is not cured, or if efforts
reasonably satisfactory to Mycogen are not instituted within that 30 day period
to cure the breach, the Agreement may be terminated at the option of Mycogen,
upon written notice of termination to Licensee, and Licensee shall have no
further rights to make, use, import, offer to sell, or sell Licensed
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Products. If the breach is cured, or if efforts reasonably satisfactory to
Mycogen are instituted within the thirty (30) day period to cure the breach, the
Agreement shall continue as if no breach had occurred; provided, however, that
upon the third default arising out of failure to pay monies due to Mycogen under
the Agreement or upon default or rejection under paragraph D of this Article, no
notice or period to cure shall be necessary, and Mycogen may terminate the
Agreement at its option without further notice to Licensee and without allowing
Licensee a period to cure, and in such an event Licensee shall have no further
rights under this Agreement. A bona fide dispute with respect to the amount of
any payment required to be made by Licensee under this Agreement will not
constitute a default by Licensee under this Agreement, if the payment in dispute
is paid to an escrow agent, mutually selected by Mycogen and Licensee, for
placement into an interest bearing investment or account jointly approved by
Mycogen and Licensee.
C. SALE OF INVENTORY AND WORK-IN-PROCESS. Following termination of the Agreement
under either Paragraph A or B, Licensee shall have one hundred eighty days (180)
to sell any Licensed Products then in stock or then under production, subject to
the payment of royalties, fees, and payments on those Licensed Products as
otherwise provided in Article III.
D. ACCELERATED PROCEDURES. If bankruptcy proceedings under any Chapter of the
Bankruptcy Code, or other insolvency proceedings, voluntary or involuntary, are
filed by or against Licensee, then Licensee or its representative must assume
the Agreement within thirty (30) days of that filing, and Licensee must cure all
defaults existing under the Agreement within that thirty day period, and
Licensee must provide such adequate assurance of future performance of its
obligations under the Agreement as may be required by the Bankruptcy or other
Court, and should Licensee fail to assume the Agreement within thirty (30) days
of that filing, or should Licensee fail to cure all defaults existing under the
Agreement within that thirty (30) day period, or should Licensee fail to provide
adequate assurance of its future
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performance of its obligations under the Agreement, as may be required by the
Bankruptcy or other Court, then the Agreement shall be deemed to be rejected.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed in duplicate counterparts, each of which shall be deemed to
constitute an original, effective as of the date first above written.
The Undersigned verify that they have the power to bind to this
Agreement the party on behalf of which they are executing below.
WITNESSES: [NAME OF LICENSEE]
___________________________ BY: ________________________________
[NAME & TITLE]
___________________________ DATE: ______________________________
___________________________ BY: ________________________________
[NAME & TITLE]
___________________________ DATE: ______________________________
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<PAGE> 1
Exhibit 10.3
ADDENDUM TO RESTATED DEMEGEN-MYCOGEN
LICENSE AND ROYALTY AGREEMENT
This Addendum is made this 11th day of October, 1998 (the "Addendum
Effective Date"), by and between Demegen, Inc. ("Demegen") and Mycogen
Corporation ("Licensee").
WHEREAS, Demegen (formerly known as Demeter BioTechnologies, Ltd.) and
Mycogen are parties to that certain Restated Demegen-Mycogen License and Royalty
Agreement effective September 23, 1997, relating to an exclusive license of
certain biocontrol peptide technology by Demegen to Mycogen for disease control
in plants (the "Agreement"); and
WHEREAS, Mycogen was granted a first right of refusal under the
Agreement through October 1, 1998, to obtain an exclusive license to Demegen
Nutrition Patents and Technology (as defined therein); and
WHEREAS, Licensee desires to execute its right of first refusal and
obtain a license from Demegen for the Demegen Nutrition Patents and Technology
and Demegen desires to grant said license;
THEREFORE, in consideration of the mutual obligations set forth in this
Addendum, Demegen and Licensee agree as follows.
ARTICLE I. DEFINITIONS
A. All capitalized terms defined in the Agreement will have the same meanings as
set forth therein when used in this Addendum.
B. "Licensed Nutritional Plant Products" means transgenic plant(s) containing a
gene encoding for a nutritional protein the use of which either (i) involves the
use of technology included within Nutrition Patents and Technology; or (ii)
would otherwise infringe a valid claim of any applicable patent included within
Nutrition Patents and Technology absent the license granted under this Addendum.
The first sentence of this Paragraph B includes, but not limited to, plant(s)
which are induced to produce a nutritional protein (e.g., through the use of RNA
viral expression systems).
C. "Supplemental Nutrition Applications" means (i) the use of genes in plants to
produce amino acids or proteins for extraction and removal from all associated
plant material and subsequent sale of the purified amino acids or proteins for
nutrition purposes in animals, and (ii) the production of amino acids or
proteins in bacteria for extraction and inclusion for nutritional purposes in
animal feedstuff.
D. "Foundation" means the not-for-profit foundation being established by Dr.
Jesse Jaynes and/or Demegen for humanitarian purposes.
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<PAGE> 2
E. "Nutritional Field of Use" means the use of peptides to increase the protein
levels, or increase the levels of particular amino acids in transgenic plants or
the use of peptides to increase the bioavailability of proteins in plants when
these plants or plant parts are ingested by animals including, but not limited
to, humans and fish. This field of use does not include the field of
Supplemental Nutritional Applications.
F. "Cumulative Revenue Benchmark" means the actual receipt by Licensee and its
Affiliates of the sum of Twenty Million Dollars ($20,000,000) in the cumulative
aggregated Net Sales and Trait Marketing Income of a Crop species designated in
Paragraph E of Article IV.
G. "Addendum Effective Date" means the date on which this Addendum becomes
effective in accordance with Article XII.
H. The definition of Nutrition Patents and Technology is hereby amended to
exclude any technology, material and patents or patent applications acquired by
Demegen (other than by the development by Demegen) after the Addendum Effective
Date (the "After Acquired Nutritional Technology").
ARTICLE II. LICENSE AND OTHER GRANTS
A. SCOPE OF LICENSE TO LICENSEE
1. LICENSED NUTRITIONAL PLANT PRODUCTS. Subject to the terms and
conditions of this Addendum, Demegen grants to Licensee, and Licensee accepts
from Demegen, an exclusive world-wide license to Nutrition Patents and
Technology to make, have made, use, offer to sell, sell for use and sublicense
Licensed Nutritional Plant Products in the Nutritional Field of Use.
2. SUBLICENSING RIGHTS AND RESTRICTIONS. Licensee will have the right
to sublicense any of the rights granted to Licensee hereunder, except that
Licensee will not have the right to assign, transfer or sublicense any rights
under the LSU Licensed Patents or the Supplemental Patent Rights without the
express prior approval of LSU, such approval not to be unreasonably withheld.
Notwithstanding the foregoing, no prior approval from LSU will
be required: (i) to sell Licensed Nutritional Products to arms-length purchasers
(e.g. distributors or farmers), even where such a sale is accompanied by an
express or implied sublicense under one or more of the LSU Licensed Patents or
Supplemental Patent Rights regarding the commercial use of such Licensed
Nutritional Product for non-developmental purposes (ii) to sublicense an
Affiliate of Licensee in accordance with Paragraph 5 of this Article II; or
(iii) to license a third party under one or more LSU-approved standard-form
sublicenses (the "Standard-Form Sublicenses"). Attached as Schedule D is a
Standard-Form Sublicense which has been approved by LSU.
3. STANDARD-FORM SUBLICENSE. At any time during the term of this
Addendum, Licensee may request that LSU and Licensee negotiate in good faith to
develop one or more
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<PAGE> 3
additional Standard-Form Sublicenses. Licensee shall prepare the first draft of
each proposed Standard-Form Sublicense, and thereafter the parties shall discuss
and negotiate modifications to the initial draft in good faith. Each party's
obligation in this respect is limited to an obligation to negotiate in good
faith; neither party is obligated to approve a proposed Standard-Form Sublicense
if mutually agreeable terms cannot be found.
By way of illustration and not limitation, the factors that
LSU considers important in reviewing proposed sublicenses include the following:
adequate liability insurance; adequate indemnity in favor of LSU; prohibitions
against further assignment, sub-sublicensing, or transfer; prohibitions against
the use of LSU's name; prohibitions against patent misuse; the right to audit;
marking of Licensed Nutritional Products with appropriate patent numbers; and,
if a particular sublicense is intended to survive a possible termination of the
present Agreement before the expiration of all pertinent LSU patents, if any,
included within Nutrition Patents and Technology, a clear and acceptable
demarcation of the respective rights and obligations of LSU and the sublicensee
in those circumstances. Once LSU and Licensee have approved the form and
substance of a particular Standard-Form Sublicense, Licensee may thereafter
enter into one or more sublicenses with third parties using that approved
Standard-Form Sublicense, without further approval from LSU, provided that: (1)
no modifications are made to the approved Standard-Form Sublicense that would
diminish in any respect the protections afforded to LSU by the approved
Standard-Form Sublicense (other modifications being permissible if they do not
diminish the protections afforded to LSU in any manner); and (2) a complete copy
of the fully-executed Standard-Form Sublicense is delivered to LSU within thirty
days of execution. A proposed sublicense that does not satisfy these criteria
may be submitted for LSU's review and approval under Paragraph 2 above.
LSU may at any time, acting in good faith, withdraw its
approval of a particular Standard-Form Sublicense upon notice to Licensee. Such
a withdrawal of approval shall not affect the validity of any sublicense using
that Standard-Form Sublicense that was fully executed by all parties prior to
LSU's withdrawal of approval. Where reasonably feasible, LSU shall inform
Licensee of the reason for LSU's withdrawal of a previous approval, and shall
propose modifications to the Standard-Form Sublicense that would make it once
again acceptable to LSU.
4. U.S. GOVERNMENT RIGHTS. The licenses granted to Licensee under
Paragraphs 1 and 2 above are subject to any rights that the United States
Government may have in Nutritional Patents and Technology pursuant to 35 U.S.C.
Sections 200-212.
5. AFFILIATES. Licensee will have the right to extend the license
rights granted under this Addendum to Affiliates of Licensee, provided that such
Affiliates agree in writing to be bound by all of the provisions of this
Addendum.
B. TERM. The term of this Addendum will continue until the later of (i)
expiration of the last to expire of any patent within Nutritional Patents and
Technology; or (ii) the cessation of the sale or use of any Licensed Nutritional
Plant Products by Licensee or its Affiliates, or any of their sublicensee,
unless earlier terminated in accordance with applicable provisions of this
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<PAGE> 4
Addendum. Should the LSU License be terminated or converted into a non-exclusive
license by LSU, LSU has agreed that Licensee's rights under this Addendum
regarding the LSU Licensed Patents and Supplemental Patent Rights will not be
diminished for the term of the LSU License, provided that; (i) Licensee pays to
LSU, or to such other person or entity which holds the rights granted by LSU to
Demegen which are sublicensed to Licensee under this Addendum, the royalties
otherwise payable under this Addendum; (ii) Licensee is not in breach of any
other material term of the Agreement; and (iii) in connection with the
continuation of this License following the termination of the LSU License, LSU
will not incur any obligation which it did not already have to Demegen under the
LSU License, or to Licensee under the terms of this Addendum. The parties
acknowledge that the term of the LSU License only extends until the last to
expire of any patents included within the definition of "Licensed Patents" as
defined in said License Agreement.
C. RIGHT OF FIRST REFUSAL. Subject to the terms and conditions of this Addendum,
Demegen also grants to Licensee rights of first refusal to obtain exclusive
licenses to: (i) Nutrition Patents and Technology for Supplemental Nutrition
Applications; and (ii) After Acquired Nutritional Technology; in accordance with
the provisions of Article VI.
D. LIMITED RESERVATION OF RIGHTS. Licensee agrees to a limited reservation of
rights by Demegen in Nutritional Patents and Technology to permit Demegen to
grant to the Foundation a non-exclusive, royalty-free license to Nutrition
Patents and Technology solely for humanitarian purposes, subject to Licensee's
consent, which consent will not be unreasonably withheld. Licensee further
agrees, as additional consideration for the grant of the license under this
Addendum, to amend the Agreement to permit Demegen to grant a license to the
Foundation to Licensed Patents and Licensed Technology solely for humanitarian
purposes, subject to Licensee's consent, which consent will not be unreasonably
withheld.
ARTICLE III. ROYALTIES AND FEES
(The information marked by *** has been omitted by a request for confidential
treatment. The omitted portion will be filed separately with the Commission.)
A. MINIMUM ANNUAL ROYALTIES. Licensee shall pay Demegen a minimum royalty of ***
per year for the licenses granted pursuant to this Addendum (the "Minimum Annual
Royalty"), such Minimum Annual Royalty will be first payable upon the signing of
this Addendum and on the anniversary of said date in each subsequent year, which
amount will be increased for each year after the first year by $*** per year.
The Minimum Annual Royalty obligation will terminate upon: (i) the achievement
of both "Technical Feasibility Benchmarks" set forth in Section A of Article IV
and any one of the three "Animal Feeding Benchmarks" set forth in Section B of
Article IV; and (ii) the payment by Licensee of the amounts due to Demegen for
the achievement of said benchmarks.
B. EARNED ROYALTY ON SALES BY LICENSEE.
1. On a quarterly basis, Licensee shall pay to Demegen an earned
royalty for Licensed Nutritional Plant Products in an amount equal to the
greater of the following two amounts [(a) or (b)] for each Licensed Nutritional
Plant Product that is made, used, sold, or
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<PAGE> 5
imported by Licensee; (a) the sum of *** of Net Sales, if any, and *** of Trait
Marketing Revenue, if any; or (b) the sum of *** of Gross Value Added, if any,
and *** of Trait Marketing Revenue, if any.
2. Earned royalties on sales will be paid quarterly, by March 15, June
15, September 15 and December 15 based on Net Sales receipts received by
Licensee during the prior three-month calendar quarter. The royalty calculation
for each calendar quarter will be determined independently, without carrying
forward or carrying backward amounts attributable to any other calendar quarter.
Furthermore, the royalty for each Licensed Plant Product will be determined
separately - so that it is possible, for example, that the royalty for the first
such Licensed Plant Product could be *** of Net Sales, while the royalty for a
second Licensed Plant Product during the same calendar quarter could be *** of
Gross Value Added.
3. In the event that no plant product exists which is the suitable
standard of comparison for use in the determination of Gross Value Added for a
Licensed Plant Product, Licensee and Demegen will meet, discuss and attempt to
mutually agree upon an appropriate standard plant product to be used for the
purposes of calculating the Gross Value Added. In the event the parties are
unable to agree upon this standard, the matter will be referred to arbitration
in accordance with Paragraph J of Article XVIII.
4. No royalty will be due on the sale, use, importation or transfer of
any Licensed Nutritional Plant Product which is used for the production of
additional planting stock of such Licensed Nutritional Plant Product under a
contract for the repurchase of such production by Licensee or its Affiliates. No
royalty will be due on the resale of planting stock of Licensed Nutritional
Plant Products purchased from a sublicensee in the case of crop failure, or on
the use of a crop of Licensed Nutritional Plant Products purchased from a
customer of such planting stock (e.g., a grain crop used to produce oil), to the
extent that Demegen has already received royalties to which it was entitled with
respect to the planting stock of such Licensed Nutritional Plant Products under
the terms of this Addendum calculated on the basis of a bona-fide arms-length
transaction at royalty rates offered to purchasers not having the relationship
of seller to or producer for Licensee.
C. EARNED ROYALTIES FROM SUBLICENSEES. For payments received from sublicensees
for the use of the technology licensed to Licensee under this Addendum (other
than payments made for the purchase or use by a sublicensee of a Licensed
Nutritional Product manufactured by Licensee or its Affiliates, which payments
are subject to the provisions of Paragraph B above), Licensee shall pay to
Demegen earned royalties on a quarterly basis in accordance with the provisions
set forth below:
1. For payments from sublicensees which are license issue fees, license
maintenance fees, or technology milestone payments, an amount equal to *** of
such payments received by Licensee for all Crops. Specifically excluded from
such payments are payments to Licensee attributed for bona fide services
rendered by Licensee to sublicensees for regulatory support, product
registration, and research and development funding, and Trait Marketing Revenue.
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<PAGE> 6
2. For payments from sublicensees which are running royalties
calculated as a percentage of sublicensee's Net Sales, an amount equal to *** of
the *** of such payments received by Licensee on a Licensed Nutritional
Product-by-Licensed Nutritional Product basis and *** of the amount *** for each
such Licensed Nutritional Product; except that, for Licensed Nutritional
Products for fruit and vegetable crops (other than Solanum tuberosum (potato),
the amount to be paid to Demegen for said payments from sublicenses in *** for
each such Licensed Nutritional Product will be *** of such excess.
3. For payments from sublicensees of Trait Marketing Revenue which are
not covered by the provisions of Paragraph B, an amount equal to *** of such
payments received by Licensee. (That is, for Trait Licensing Revenue received in
connection with applicable sales by sublicensees under the Agreement, the earned
royalty due will be *** of the net amount of said revenue actually received by
Licensee and its Affiliates after all discounts, rebates, collection fees,
refunds and returns.)
4. Earned royalties on payments received from sublicensees which are
covered by this Paragraph C will be paid quarterly, by March 15, July 15,
September 15 and December 15 based on all such payments received by Licensee
during the prior calendar quarter.
D. QUARTERLY REPORTS. Licensee shall forward to Demegen quarterly reports on or
before March 15, July 15, September 15, and December 15 of each year, for the
preceding calendar quarter, containing the data, information, and documentation
necessary to determine fully the amounts owed by Licensee to Demegen under this
Addendum. The quarterly reports will also provide information on the status of
Licensee's marketing and/or sublicensing of Licensed Nutritional Plant Products.
Such a report shall be made for each quarter beginning after commercialization
of the first Licensed Product, whether or not any payment is due for that
quarter.
E. PATENT COSTS. Without affecting Demegen's obligation to LSU for patent
prosecution under the License Agreement, Licensee will pay all reasonable
out-of-pocket costs, fees and attorneys' fees and expenses of maintenance and/or
further prosecution of all patents included within the Nutritional Patent Rights
and Technology listed in section A3 of the Agreement on the same basis as set
forth in Section F of Article III of the Agreement.
ARTICLE IV. BENCHMARK PAYMENTS
A. TECHNICAL FEASIBILITY BENCHMARKS IN MONOCOTS AND DICOTS. A payment of ***
shall be made by Licensee to Demegen upon the achievement of the technical
feasibility benchmarks set forth on Addendum Schedule A in each of a monocot and
a dicot (other than sweet potato), up to a total of *** for the achievement of
said benchmarks in both a monocot and a dicot (other than sweet potato).
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<PAGE> 7
B. ANIMAL FEEDING BENCHMARKS. A payment of *** shall be made by Licensee to
Demegen upon the achievement of the animal feeding benchmarks set forth in
Addendum Schedule B in each of swine, poultry and rat feeding studies with plant
material, up to a total of *** for the achievement of the animal feeding
benchmarks for all three animals.
C. ADDITIONAL PAYMENT FOR FIRST COMMERCIAL SALE OF CERTAIN CROP(S). In addition
to the payment provided under subparagraph C hereof, payments of *** each shall
be made by Licensee to Demegen on the First Commercial Sale of Licensed Plant
Products within a Crop of ***, ***, ***, *** or ***, up to a total of *** if
there is a First Commercial Sale in each of four of said *** crops.
D. ADDITIONAL PAYMENT FOR FIRST COMMERCIAL SALE OF ANY OTHER CROP WITHIN THE
FIELD OF ACTIVITY. Licensee shall make a payment to Demegen upon the First
Commercial Sale of any Licensed Plant Products for any Crop, other than a Crop
for which a *** payment was made to Demegen under Section C of this Article IV,
of an amount equal to *** for each Crop up to a maximum total of *** (that is,
*** for each of the first *** such Crops.
E. ADDITIONAL PAYMENTS FOR ACHIEVEMENT OF CUMULATIVE GROSS MARGIN BENCHMARK FOR
SALE OF CERTAIN CROP(S). In addition to the payment set forth above, payments of
*** each shall be made by Licensee upon the achievement of Cumulative Gross
Margin Benchmark in each of a ***, ***, ***, ***, and ***, up to a total of ***
if a Cumulative Gross Margin Benchmark is achieved in each of ***.
F. PAYMENT. Each Benchmark payment will be due and payable in full on or before
the thirtieth (30th) day following the satisfaction of all conditions which give
rise to the payment obligation for such benchmark.
G. INFLATION ADJUSTMENT. To the extent that any of the specific dollar amounts
set forth in Paragraph A, B and C of this Article have not been paid by January
1, 2006 such remaining amounts will be adjusted upward annually by any increases
in the United States Consumer Price Index For All Urban Consumers, All Items
U.S. City Average (the "Index") from its value in January, 1999, less one
percent (1%) per year. No downward adjustments will be made. The dollar figures
shall first be adjusted beginning in January 2006.
ARTICLE V. AUDITING AND PAYMENT PROCEDURES
The Auditing and Payment Provisions of Article V of the Agreement will
apply to Licensees payments and recordkeeping under this Addendum.
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<PAGE> 8
ARTICLE VI. AGREEMENT NOT TO LICENSE CONCERNING
SUPPLEMENTAL NUTRITION APPLICATIONS
In order to provide Licensee with the opportunity to negotiate an
exclusive license for said applications, Demegen will not license rights under
the Nutrition Patents and Technology to any third party for Supplemental
Nutritional Applications or to After-Acquired Nutritional Technology for use in
the Nutritional Field of Use or in the field of Supplemental Nutritional
Applications without first offering Licensee an opportunity to negotiate for
said license. In the event Demegen and Licensee are unable to reach agreement on
the terms of any such license, and obtain LSU's consent thereto to the extent
that LSU Licensed Patents or Supplemental Patent Rights are involved, within 120
days after the commencement of said negotiations Demegen will thereafter be free
to license said applications to others. However, should Demegen offer a license
to said rights to a third party on terms more favorable than those offered to
Licensee within one year from said date, Licensee will have a right of first
refusal to obtain such license on the terms so offered. During the term of the
option, and prior to Licensee's exercise of the option, Licensee will have the
right, but not the obligation to designate and pay for patent prosecution and
maintenance of patents for Supplemental Nutritional Applications or
After-Acquired Nutritional Technology.
ARTICLE VII. JOINT DEVELOPMENT PROGRAM
REGARDING PEPTIDES FOR NUTRITIONAL
IMPROVEMENT OF PLANTS
A. JOINT DEVELOPMENT PROGRAM. Licensee and Demegen, without restricting any
activities they may desire to participate in with third parties, will engage in
a joint development program commencing on the effective date of this Addendum to
screen and produce peptides for use in nutritional improvements in plants.
B. RESEARCH COMMITTEE. The joint development program will be conducted under the
direction of a research committee composed of two members appointed by Demegen
and two members appointed by Licensee. The research committee will establish the
specific objectives of the program, determine the activities to be performed by
the parties, and measure progress against goals. All decisions of the research
committee will be made by unanimous consent. The research committee will meet
four (4) times per year. In the event the committee is unable to agree on any
issue, the matter will be decided by the Presidents of both Demegen and
Licensee.
C. SERVICES OF DR. JAYNES. Demegen will provide the services of Dr. Jessie
Jaynes, on a part-time basis, to design, plan the synthesis of and interpret
testing results regarding such peptides.
D. FUNDING BY LICENSEE. Licensee will fund Demegen's activities under the joint
development program in accordance with the following schedule for a total of Two
Million Dollars ($2,000,000) over 5 years, subject to Demegen's commitment of
providing personnel for such activities at or in excess of the minimum indicated
full-time equivalent (FTE) level indicated for said years. Payment by Licensee
to Demegen under this provision will be made in
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<PAGE> 9
equal semi-annually installments in advance for the duration of the joint
research program. Accordingly, for the first year of the joint research program,
$150,000 will be due promptly after the Addendum Effective Date, and $150,000
will be due on the date which is six months after the Addendum Effective Date.
Thereafter, one-half of the annual funding will be payable on the annual
anniversaries of said dates.
RESEARCH FUNDING SCHEDULE
<TABLE>
<CAPTION>
Program Year Licensee Funding of Demegen Min. FTE
Demegen Level
<S> <C> <C>
1998 - 1999 $300,000.00 2.0
1999 - 2000 $350,000.00 2.3
2000 - 2001 $400,000.00 2.6
2001 - 2002 $450,000.00 3.0
2002 - 2003 $500,000.00 3.0
</TABLE>
ARTICLE VIII. OWNERSHIP OF INTELLECTUAL PROPERTY
A. DEMEGEN INVENTIONS. Nutritional peptides or other technology for use within
the Nutritional Field of Use, invented solely by Demegen employees, consultants
or other agents shall be owned by Demegen and not jointly owned ("Demegen
Inventions").
B. LICENSEE INVENTIONS. Nutritional peptides or other technology for use within
the Nutritional Field of Use, invented solely by Licensee's employees,
consultants or other agents shall be owned by Licensee and not jointly owned but
in the event such Nutritional peptides or other technology are subject to, or
were developed from or by use of, Demegen Nutritional Patents and Technology,
then they will be subject to the terms of this Addendum, including but not
limited to the royalty provisions set forth in Article III and applicable
payments in Article IV.
C. JOINT INVENTIONS. Joint Inventions will be jointly owned by Licensee and
Demegen ("Joint Inventions").
D. LICENSE OF INVENTIONS.
1. Subject to the terms of this Addendum, including but not limited to
the royalty provisions set forth in Article III and applicable
payments in Article IV; Licensee will be granted a world-wide,
perpetual, exclusive license with a right to sublicense said
license, to use Demegen Inventions and Joint Inventions in the
Nutritional Field of Use. Licensee hereby grants to Demegen a
world-wide, royalty free, perpetual, exclusive license, in Joint
Inventions, with a right to sublicense, for all applications other
than to the extent that such applications have been exclusively
licensed to Licensee by Demegen; and
2. With respect to Licensee Inventions or Joint Inventions outside
both the Nutritional Field of Use and other uses authorized by this
Addendum and the Agreement which either (i) were developed using
non-public technology licensed or sublicensed by Demegen under this
Addendum and the Agreement or (ii) the development of which
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<PAGE> 10
was subject to one or more claims included within said technology,
then neither Licensee nor Demegen will have the right to
commercially exploit said Inventions until a mutually acceptable
written agreement is reached covering such commercialization.
However, nothing in this paragraph will restrict Licensee from
using any invention on a royalty-free basis to the extent that any
third party would be free to develop such and do so using publicly
available information without violating patents or trade secrets
owned by or licensed to Demegen.
10
<PAGE> 11
ARTICLE IX. RETURN OF RIGHTS
If Licensee fails to begin to develop specific plans for applications
for particular Crops, uses or territories subject to this Addendum within three
years of the Addendum Effective Date, Demegen may propose a specific plan for
such and bring to Licensee a suitable party ready, willing and able to implement
such plan. If Licensee does not reach an agreement with such party for the
particular Crop(s) involved, or develop and initiate a suitable alternative plan
for development internally or with another party, then Demegen may request that
Licensee's rights to Licensed Patents and Demegen Technology in said area(s) be
returned to Demegen so as to permit Demegen to pursue said plan. Licensee shall
not unreasonably refuse to return said rights to Demegen, provided, however,
that Licensee will retain a non exclusive license to Licensed Patents and
Licensed Technology in said area(s) unless the parties negotiate otherwise. As
long as Licensee is not in breach of any material term of this agreement, it
will not be compelled under this Article IX to turn over to Demegen any of
Licensee's rights in Joint Inventions without compensation. If the parties are
unable to agree on the application of this provision with respect to a
particular Crop application, or the terms of a license for such application,
then the matter will be submitted to arbitration in accordance with the
provisions of Paragraph J of Article XVIII of the Agreement.
ARTICLE X. COMMERCIALIZATION
A. MARKETING OBLIGATIONS. Licensee, at Licensee's sole expense, shall: (1) act
with commercially reasonable judgment and diligence to develop commercially
marketable Licensed Nutritional Plant Products, and to develop competitive
markets for those Licensed Nutritional Products; (2) actively seek sublicensees
or partners for Licensed Nutritional Products, uses of Licensed Nutritional
Plant Products or in geographic areas Licensee is not actively pursuing on its
own; and (3) from time to time, at the request of a party, but no less than
semi-annually, Licensee and Demegen will meet to discuss Licensee's marketing
activities as set forth above.
B. REGULATORY APPROVAL. Licensee, at Licensee's expense, will undertake all
reasonable efforts required to file and subsequently to obtain any state,
federal, or other governmental license or regulatory clearance necessary for the
use of Licensed Nutritional Plant Products. Any research necessary or desirable
for the commercialization or marketing of Licensed Nutritional Plant Products by
Licensee shall be the sole responsibility of Licensee. Licensee, at Licensee's
sole expense, will prepare and deliver all necessary and appropriate documents,
and take all reasonably necessary and appropriate actions, to seek to obtain any
such license or regulatory clearance. All such registrations or clearances will
be held in Licensee's name and will be owned exclusively by Licensee.
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<PAGE> 12
ARTICLE XI. REPRESENTATIONS, WARRANTIES AND DISCLAIMERS
A. AUTHORITY. Each party represents and warrants to the other party that it has
the power and authority to enter into this Addendum and to perform its
obligations hereunder.
B. DEMEGEN WARRANTIES. Demegen further warrants that LSU has consented to this
Addendum under Paragraph 2.2 of the Supplemental Licensing Terms and Conditions
of the LSU License, and that as of the date of execution of this Agreement
Demegen has no knowledge of any intellectual property rights of third parties
other than those disclosed in this Addendum, to which the use of the technology
as licensed to Licensee under this Addendum would be subject.
C. EXCLUSIONS. Demegen and LSU make no warranty or representation whatsoever as
to the usefulness of Demegen Nutritional Patents and Technology or Licensed
Nutritional Products, or their fitness for the purpose for which they are
intended or for any other purpose. Demegen and LSU make no representations, and
extend no warranties of any kind, either express or implied, except as expressly
provided in this Agreement.
D. ADDITIONAL DISCLAIMERS. Nothing in this Addendum shall be construed as:
1. A warranty or representation by Demegen or LSU as to the validity,
enforceability, scope, or inventorship of any patent; or
2. A warranty or representation by Demegen or LSU that anything
licensed, sublicensed, made, used, sold, imported, or otherwise disposed of
under any license granted in or sublicense permitted by this Addendum is or will
be free from infringement of patents of third parties or other rights of third
parties; or
3. An obligation that Demegen or LSU bring or litigate actions against
third parties for infringement, except to the extent and in the circumstances
stated in Article XIV of this Addendum; or
4. A requirement that Demegen or LSU file or prosecute any patent
application, secure the issuance of any patent, or maintain any patent; or
5. An establishment of a partnership, joint venture, agency, or
employer-employee relationship between the parties; and neither party shall
represent the contrary to anyone else.
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<PAGE> 13
E. DISCLAIMER OF RESPONSIBILITY. Neither Demegen nor LSU assume any
responsibilities whatever for any damages caused to Licensee, any Affiliate, any
vendees, other transferees, or sublicensees of Licensee or its Affiliates, or by
any product or process incorporating or made by the Nutrition Patents and
Technology, or incorporating or made by the use of any information furnished
under this Addendum.
ARTICLE XII. EFFECTIVE DATE
The provisions of this Addendum will become effective only upon the
separate approval of the terms and conditions set forth herein by the Board of
Directors of both Demegen and Licensee.
ARTICLE XIII. TERMINATION
A. This Addendum will terminate if the conditions set forth in Article XII are
not satisfied by November 15, 1998, or such later date as may be mutually agreed
upon by Demegen and Licensee.
B. Demegen may terminate this Addendum and the license granted hereunder upon
written notice to Licensee in the event that Licensee shall materially breach
its obligations under this Addendum and such default is not cured within thirty
(30) days of receipt of a written demand from Demegen to cure said default.
Termination of the Addendum under this provision will not operate to terminate
Licensee's other rights and obligations under the Agreement, provided that
Licensee is not also in material breach of its other obligations under the
Agreement.
C. Licensee shall have the right to terminate this Addendum on the first
anniversary of the Addendum Effective Date or anytime thereafter upon one
hundred thirty-five (135) days advance written notice to Demegen. Any such
termination of this Addendum will not affect any other rights or obligations of
Licensee under the Agreement not set forth in this Addendum.
D. Upon termination of this Addendum, Licensee's license and other rights under
the Addendum will terminate. However, the rights of sublicensees of Licensee
will continue following such termination provided that the sublicensees agree to
make all future royalty payments and license fees under their sublicense
agreements directly to Demegen. In addition, (i) Licensee shall have the right
to sell its existing inventory of Licensed Nutritional Plant Products until such
inventory is exhausted, provided that Licensee pays any earned royalties or
other amounts which may be due under this Addendum with respect to such sales;
and (ii) Licensee shall remain obligated to pay to Demegen any unpaid license
fees, minimum royalties, earned royalties and benchmark payments which had
accrued prior to termination; except that, if Licensee terminates this Agreement
under Paragraph C above, Licensee will not be required to make any minimum
royalty payment or benchmark payment which had accrued after the date of the
advance written notice of said termination to Demegen, or within thirty (30)
days prior to such notice.
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<PAGE> 14
ARTICLE XIV. OTHER PROVISIONS
A. To the extent applicable, the provisions of Article XII through XIX of the
Agreement will apply to the activities of the parties under this Addendum. In
this connection, for purposes of the Agreement, references to Licensed Products
in Articles XII through XIX shall also be deemed to include Licensed Nutritional
Products, and references to Licensed Patents will also be deemed to include the
patents included within Demegen Nutritional Patents and Technology.
B. In view of the change of the corporate name of Demegen, all references to
Demeter in the Agreement will now refer to Demegen, Inc. This Paragraph B will
survive any termination of this Addendum.
IN WITNESS WHEREOF, the parties hereto have caused this Addendum to be
duly executed in duplicate counterparts, each of which shall be deemed to
constitute an original, effective as of the date first above written.
The undersigned verify that they have the power to bind to this
Agreement the party on behalf of which they are executing below.
WITNESSES: MYCOGEN CORPORATION
/s/ Paul S. Zorner By: /s/Andrew C. Barnes
- ------------------- -------------------
Andrew C. Barnes
Executive Vice President
Date: 10/13/98
DEMEGEN, INC.
/s/ James E. Thornton By: /s/Richard D. Ekstrom
- --------------------- ---------------------
Richard D. Ekstrom
President
Date: 10/13/98
14
<PAGE> 15
ACKNOWLEDGEMENT OF ADDENDUM
TO LICENSE AND ROYALTY AGREEMENT BY LSU
Approved and accepted by the Board of Supervisors of Louisiana State
University and Agricultural and Mechanical College pursuant to Paragraph 2.2 of
the Supplemental Terms of May 1, 1997 License and Royalty Agreement between the
Board of Supervisors of Louisiana State University and Agricultural and
Mechanical College and Demegen, Inc.
WITNESS: THE BOARD OF SUPERVISORS OF
LOUISIANA STATE UNIVERSITY
__________________________________ AND AGRICULTURAL AND
MECHANICAL COLLEGE
__________________________________
By: __________________________
Allan A. Copping
Title: President
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<PAGE> 16
ADDENDUM SCHEDULE "A"
Technical Feasibility Benchmarks
The "Technical Benchmarks" for genetic expression of Demegen nutritional
proteins in recombinant monocot and dicot plants are as follows:
1. Genetically stable expression of a Demegen nutritional protein in a
recombinant monocot or dicot plant (with the exception of sweet potato) at
two percent (2%) or better of the total protein in that plant tissue that
serves as that portion fed to an animal, e.g., alfalfa foliage (leaves) or
rice grain (seeds).
2. Proof of genetic expression will be determined through the use of one or
several standard "Northern", "Western" and immunological plant tissue test
methods.
The specific design of experiments to determine the achievement of these
benchmarks must be agreed to beforehand by both Mycogen and Demegen.
<PAGE> 17
ADDENDUM SCHEDULE "B"
Animal Feeding Benchmarks
The animal feeding benchmark goals that must be met to prove the safety and
nutritional feeding benefits of Demegen nutritional proteins are as follows:
1. No adverse health effects to the animal such as toxicity or allergic
reactions that are directly attributable to the Demeter nutritional
protein(s).
2. Statistically significant (P(is less than)0.5) evidence that the Demegen
nutritional protein(s) is a more efficient protein source than the protein
normally found in a standard animal feed ration where efficient is defined
as achieving one or more of the following during the first quarter of the
animal's feeding cycle:
a) Improved animal gain per pound of ration fed
b) Lower ration cost for an equivalent pound of animal gain
c) Faster growth rate per dollar cost of ration
d) Acceptable substitute (in terms of comparable costs and
nutrition benefit) for a current feed ingredient that is
considered less desirable
The specific design of experiments to determine the achievement of these
benchmarks must be agreed to beforehand by both Mycogen and Demegen.
<PAGE> 1
Exhibit 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made this 15th day of
June, 1998, by and between Demeter BioTechnologies Ltd., a Colorado corporation
("Corporation"), and Richard D. Ekstrom, an individual residing in the
Commonwealth of Pennsylvania ("Employee").
PREAMBLE
A. The Corporation is engaged in the business of research and
development of lytic peptides and related substances for agricultural,
nutritional, medical and other possible commercial applications (the
"Corporation's Business"); and
B. The Employee is an employee, shareholder, director and officer of
the Company; and
C. The Corporation and the Employee desire to set forth in writing the
terms under which the Employee will continue his employment
relationship with the Corporation.
NOW THEREFORE, in consideration of the mutual covenants and
agreements set forth in this agreement and intending to be legally
bound, the Parties to this agreement agree as follows:
SECTION 1. EMPLOYMENT. The Corporation agrees to employ the Employee and the
Employee agrees to accept the employment in accordance with the terms and
conditions described in this Agreement.
SECTION 2. DUTIES. The Employee shall serve as President and Chief Executive
Officer of the Corporation and, in addition to accepting such employment, agrees
to perform such duties as may be set from time to time by the Board of Directors
of the Corporation or its designee. The Employee shall make available to the
Corporation his best efforts, knowledge, and experience. The Employee shall use
his full time, best efforts, skills and abilities to faithfully and diligently
perform and manage the day to day operations of the Corporation as directed by
its Board of Directors or its designee.
SECTION 3. EXTENT OF SERVICES. Except to the extent otherwise provided in this
Agreement, the Employee shall devote his full time, attention, and energies to
the performance of his duties and shall not be engaged in any other business
activity, whether or not pursued for gain, profit or other pecuniary advantage.
The Employee shall at all times faithfully and to the best of his ability
perform his duties under this Agreement. The duties shall be rendered at the
Corporation's offices in Pittsburgh, Pennsylvania, or at such other place or
places and at such times as the needs of the Corporation may from time-to-time
require.
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<PAGE> 2
SECTION 4. TERM. Unless earlier terminated in accordance with Section 6, the
initial term of this Agreement shall begin on June 1st, 1998 ("Effective Date"),
and shall continue for a one (1) year period (the "Initial Term"). After the
Initial Term, this Agreement will automatically renew on such terms and
conditions as are in effect at the time of renewal or as may be agreed between
the Parties unless either the Employee or the Corporation elects not to renew
this Agreement and notifies the other party in writing at least ninety (90) days
prior to the expiration date hereof.
SECTION 5. COMPENSATION.
5.1 Base Compensation. The Employee will receive a base salary of One Hundred
Twenty Thousand Dollars ($120,000.00) per year, payable in accordance with the
Corporation's standard payroll procedures and Federal, State, and local
employment tax regulations. The Employee's Base Compensation will be reviewed at
least annually by the Corporation's Compensation Committee of the Board of
Directors and increases, if any, will be made at the sole discretion of the
Board of Directors.
5.2 Bonuses and Profit Sharing. The Employee shall be eligible for
performance-based bonuses, but there is no assurance that bonuses will be paid.
Bonuses will be paid, if at all, in the sole discretion of the Corporation's
Board of Directors. The Employee shall be eligible for participation in any
Stock Option Plans established from time to time by the Corporation.
5.3 IND Bonuses. As an incentive to further the commercial applications of the
Corporation's peptide technology, the Corporation agrees that during the term of
this Agreement and any renewals or extensions thereof the Employee will receive
for each initial new drug application (an "IND") of the Corporation submitted to
the Federal Food and Drug Agency (the "FDA"), a IND Bonus of not less than Five
Thousand Dollars ($5,000.00) and not greater than Fifty Thousand Dollars
($50,000.00), such amount to be determined by the Board of Directors of the
Corporation (or its committee designee) in its sole discretion; provided,
however, that if an IND is submitted to the FDA on or before May 31, 1999, the
IND Bonus for such submission shall be no less than Twenty Five Thousand Dollars
($25,000).
5.4 Benefits. The Employee shall receive four weeks of vacation a year, and
comparable sick leave, group medical insurance and other fringe benefits as are
made available to full-time employees of the Corporation as may be from time to
time established by the Board of Directors of the Corporation.
5.5 Expenses. The Corporation shall reimburse the Employee for all reasonable
out-of-pocket expenses incurred by the Employee in fulfilling his duties under
this Agreement. The Employee shall provide the Corporation with written evidence
of such expenses as required for compliance with the Internal Revenue Code (as
amended), and the Employee shall fully comply with the Corporation's policies
regarding pre-authorization of expenditures as may be defined from time to time
by its Board of Directors. The Employee agrees to reimburse the Corporation
-2-
<PAGE> 3
immediately for any expense reimbursement to the Employee that is disallowed by
the Internal Revenue Service, which reimbursement may not be waived by the
Corporation.
SECTION 6. TERMINATION.
6.1 For Cause. The Corporation may terminate the Employee's employment at any
time "for cause" with immediate effect upon delivering written notice to the
Employee. For purposes of this Agreement, "for cause" shall include: (a)
embezzlement, theft, larceny, material fraud, or other acts of dishonesty; (b)
gross neglect or intentional disregard of Employee's duties under this Agreement
or any other material violation by the Employee of this Agreement which is not
cured with thirty (30) days after written warning from the Corporation; (c)
conviction of or entrance of a plea of guilty or nolo contendere to a felony;
(d) conviction of any crime involving moral turpitude; (e) gross insubordination
or repeated insubordination after written warning from the Corporation; (f)
unauthorized disclosure by the Employee of the confidences of the Corporation;
or (g) material and continuing failure by the Employee to perform the duties
described in Section 2 above in a quality and professional manner for thirty
(30) days after written warning from the Corporation. Upon termination for
cause, the Corporation's sole and exclusive obligation will be to pay the
Employee his compensation for a period of one (1) months after the date of
termination and the amount of any unused vacation or sick leave benefits earned
through the date of termination.
6.2 Upon Death. In the event of the Employee's death during the Term of the this
Agreement, the Corporation's sole and exclusive obligation will be to pay to the
Employee's spouse, if living, or to his estate, if his spouse is not then
living, the Employee's compensation for a period of six (6) months after the
date of death and the amount of any unused vacation or sick leave benefits
earned through the date of death.
6.3 Upon Disability. The Corporation may terminate the Employee's employment
upon the Employee's total disability. The Employee shall be deemed to be totally
disabled if he is unable to perform his duties under this Agreement by reason of
mental or physical illness or accident. Upon termination by reason of the
Employee's disability, the Corporation's sole and exclusive obligation will be
to continue to pay the Employee his salary for a period of six (6) months after
the date of termination, plus the amount of any unused vacation and sick leave
benefits earned through the date of termination.
6.4 Without Cause. During the Term of this Agreement and only by action of its
Board of Directors, the Corporation may terminate the Employee's employment
without cause upon ninety (90) days written notice and with a continuation of
payment to the Employee his salary after termination for (6) six months, plus
the amount of any unused vacation or sick leave benefits earned through the date
of termination.
6.5 By the Employee. The Employee may terminate this Agreement at any time upon
ninety (90) days written notice to the Corporation.
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<PAGE> 4
6.6 Termination by the Board of Directors. Any determination to terminate the
Employee's employment under this Section 6 shall be made only by the Board of
Directors of the Corporation.
SECTION 7. COVENANT NOT TO COMPETE.
7.1 Covenant. During the term of this Agreement the Employee will not directly
or indirectly:
7.1.1 enter into or attempt to enter into the "Restricted Business" (as
defined below);
7.1.2 induce or attempt to persuade any former, current or future
employee, agent, manager, consultant, director, or other participant in the
Corporation's Business to terminate such employment or other relationship in
order to enter into any relationship with the Employee, any business
organization in which the Employee is a participant in any capacity whatsoever,
or any other business organization in competition with the Corporation's
Business; or
7.1.3 use contracts, proprietary information, trade secrets,
confidential information, customer lists, mailing lists, goodwill, or other
intangible property used or useful in connection with the Corporation's
Business.
7.1.4 or, for a period of one year after the termination of this
Agreement directly or indirectly violate this agreement by conduct of any kind
or in any way in violation the covenants contained in paragraphs 7.1.1 or 7.1.2.
7.1.5 The violation of the terms of paragraph 7.1.4 at any time during
the term of this Agreement shall be grounds for dismissal for cause, and at any
time after the termination hereof shall be a breach of the Covenant
Confidentiality Agreement
7.2 Indirect Activity. The term "indirectly," as used in Section 7.1 above,
includes acting as a paid or unpaid director, officer, agent, representative,
employee of, or consultant to any enterprise, or acting as a proprietor of an
enterprise, or holding any direct or indirect participation in any enterprise as
an owner, partner, limited partner, member, joint or co-venture participant,
shareholder, or creditor.
7.3 Restricted Business. The term "Restricted Business" means any business which
is engaged in activities which are similar to the Corporation's Business.
Nevertheless, the Employee may own less than five percent of the outstanding
equity securities of a corporation that is engaged in the Restricted Business if
the equity securities of such corporation are listed for trading on a national
stock exchange or are registered under the Securities Exchange Act of 1934.
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<PAGE> 5
SECTION 8. SEVERABILITY. The covenants set forth in Section 7 above shall be
construed as a series of separate covenants, one for each county in each of the
states of the United States to which such restriction applies. If, in any
judicial proceeding, a court of competent jurisdiction shall refuse to enforce
any of the separate covenants deemed included in this Agreement, or shall find
that the term or geographic scope of one or more of the separate covenants is
unreasonably broad, the Parties shall use their best good faith efforts to
attempt to agree on a valid provision which shall be a reasonable substitute for
the invalid provision. The reasonableness of the substitute provision shall be
considered in light of the purpose of the covenants and the reasonable
protectable interests of the Corporation and the Employee. The substitute
provision shall be incorporated into this Agreement. If the Parties are unable
to agree on a substitute provision, then the invalid or unreasonably broad
provision shall be deemed deleted or modified to the minimum extent necessary to
permit enforcement.
SECTION 9. CONFIDENTIALITY. The Employee acknowledges that he will develop and
be exposed to information that is or will be confidential and proprietary to the
Corporation.
9.1 Information. The information includes but is not limited to research
techniques, funding sources, trade secrets and other patent worthy information,
marketing plans, pricing data, product plans, contracts, customer lists, mailing
lists, goodwill, miscellaneous confidential information, or other intangible
intellectual or otherwise propriety property used or useful in connection with
the Corporation's Business whether in written, photographic, digital, or in any
other form of storage or retention as may be used by the Corporation.
9.2 Authorized Use. All such information shall be deemed confidential to the
extent not publicly known. The Employee agrees to make use of such information
only in the performance of his duties under this Agreement, to maintain such
information in confidence and to disclose the information only in connection
with fully authorized activities pursuant to this agreement or lawful order of a
court, exchange or other governmental authority of competent jurisdiction, and
agrees that he shall not use such information for his own personal benefit or
for the benefit of third parties in any fashion.
9.3 Return of Confidential Information. Upon termination of his employment with
the Corporation, all documents, records, notebooks, computer files and similar
repositories containing confidential information of the Corporation, including
copies thereof, then in the Employee's possession, whether prepared by him or
others, shall be promptly returned to the Company. If at any time after the
termination of employment the Employee determines that he has any confidential
information in his possession or control, he shall immediately return to the
Company all such confidential information, including all copies and portions
thereof.
SECTION 10. INVENTIONS. If at any time or times during Employee's employment
with the Company, he shall (whether before or after the execution of this
Agreement and either alone or with others) make, discover or reduce to practice
any invention, modification, discovery, design,
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<PAGE> 6
development, improvement, process, software program, work of authorship,
documentation, formula, data, technique, know-how, secret or intellectual
property right whatsoever or any interest therein (whether or not patentable or
registrable under copyright or similar statutes or subject to analogous
protection)(herein called "Developments") that (a) relates to the then current
business of the Company or any of the products or services being developed,
manufactured or sold by the Company, (b) results from tasks assigned to him by
the Company or (c) results from the use of premises or personal property
(whether tangible or intangible) owned, leased, licensed or contracted for by
the Company, or (d) relates in any manner to the proprietary information of the
Company, such Developments and the benefits thereof shall immediately become the
sole and absolute property of the Company and its assigns, and he shall promptly
disclose to the Company (or any persons designated by it) each such Development
and hereby assign any rights he may have or acquire in the Developments and
benefits and/or rights resulting therefrom to the Company and its assigns
without further compensation and shall communicate, without cost or delay, and
without publishing the same, all available information relating thereto (with
all necessary plans and models) to the Company. Upon disclosure of each
Development to the Company, Employee shall, during his employment and at any
time thereafter, at the request and cost of the Company, sign, execute, make and
do all such deeds, documents, acts and things as the Company and its duly
authorized agents may reasonably require, including but not limited to the
following:
(i) to apply for, obtain and vest in the name of the Company alone
(unless the Company otherwise directs) letters patent, copyrights
or other analogous protection in any country throughout the world
and when so obtained or vested to renew and restore the same; and
(ii) to defend any opposition proceedings in respect of such
applications and any opposition proceedings or petitions or
applications for revocation of such letters patent, copyright or
other analogous protection; or
(ii) to, in any other manner requested by the Company, acknowledge
that such Developments are Proprietary Information of the
Company.
In the event the Company is unable, after all diligent effort, to secure
Employee's signature on any letters patent, copyright, acknowledgment or other
analogous protection relating to a Development, whether because of my physical
or mental incapacity or for any other reason whatsoever, Employee hereby
irrevocably designate and appoint the Company through its duly authorized
officers as Employee's agent and attorney-in-fact, to act for and in Employee's
behalf to execute and file any such application or applications and to do all
other lawfully permitted acts to further the prosecution and issuance of letters
patent, copyright or other analogous intellectual property protection thereon
with the same legal force and effect as if executed by the Employee.
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<PAGE> 7
SECTION 11. REMEDIES. The Employee acknowledges that monetary damages would be
inadequate to compensate the Corporation for any breach by the Employee of the
covenants set forth in Sections 7, 9 and 10 above. The Employee acknowledges
that the claim for the payment of any damages for breach of the provisions
herein contained shall not preclude the Company from seeking injunctive or such
other forms of relief as may be obtained in a court of law or equity, but that
the Company, in lieu of or in addition to the remedy of damages, may seek
injunctive relief prohibiting the Employee from breaching the provisions of this
Section 7 & 9 Agreement.
SECTION 12. NOTICES. Any notice under this Agreement shall be in writing and
shall be effective when actually delivered in person or upon receipted delivery
via courier, insured parcel delivery service, Federal Express, registered or
certified U.S. mail, all postage prepaid and addressed to the Party at the
address stated in this Agreement or such other address as either Party may
designate by written notice to the other. Notice by facsimile shall be effective
as of the date and time transmitted provided the sending Party maintains written
evidence that the transmission was initiated and completed during normal
business hours, was successfully received by the addressee, and was in a legible
format.
SECTION 13. NO RELEASE. The terms of Sections 7 and 9 shall survive the
termination or expiration of this Agreement and the termination of this
Agreement or the expiration of the term of this Agreement shall not release
either Party from any obligations under Sections 7 and 9 or remedies pursuant to
Section 10.
SECTION 14. WAIVER. The waiver by either party of the breach of any provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any subsequent breach.
SECTION 15. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
SECTION 16. ARBITRATION. If at any time during the term of this Agreement any
dispute, difference, or disagreement shall arise relating in any way to this
Agreement or the Employee's employment with the Corporation, including any
dispute as to the meaning and construction hereof, every such dispute,
difference, and disagreement shall be referred to a single arbiter agreed upon
by the Parties, or if no single arbiter can be agreed upon, an arbiter or
arbiters shall be selected in accordance with the rules of the American
Arbitration Association and such dispute, difference, or disagreement shall be
settled by arbitration in accordance with the then prevailing commercial rules
of the American Arbitration Association in Pittsburgh, Pennsylvania or any
location of the Corporation's headquarters at the time of the referral, and
judgment upon the award rendered by arbitration may be entered in any court
having competent jurisdiction thereof.
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<PAGE> 8
SECTION 17. AGREEMENT BINDING. This Agreement shall be binding upon the
respective heirs, executors, administrators, successors and assigns of the
Parties hereto.
SECTION 18. COUNTERPARTS. This Agreement may be executed in several counterparts
and all so executed shall constitute one Agreement, binding on all the Parties
hereto even though all the Parties are not signatories to the original or the
same counterpart.
IN WITNESS WHEREOF, the Parties to this Agreement have executed this
Agreement as of the date first written above.
ATTEST: DEMETER BIOTECHNOLOGIES LTD.
/s/ Donald A. Guthrie By: /s/ Donald A. Guthrie
- ------------------------ --------------------------------------
Title: Title: Secretary/Treasurer
WITNESSED BY: EMPLOYEE
/s/ Jesse Jaynes /s/ Richard D. Ekstrom
- ------------------------ ------------------------------------------
Richard D. Ekstrom
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<PAGE> 1
EXHIBIT 10.4-1
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into effective as of the 1st day of
November, 1995, by and between Demeter BioTechnologies, Ltd., a Colorado
corporation (hereinafter referred to as the "Company"), and Richard D. Ekstrom,
an individual (hereinafter referred to as the "Employee"). The Company and the
Employee are collectively referred to as the "Parties." This Agreement
supersedes any and all similar agreements between the Parties in existence
prior to this date.
W I T N E S S E T H:
WHEREAS, the Employee is considered by the Company to be a key person in
the success of the Company; and
WHEREAS, it is in the best interest of the Company to employ quality
personnel such as the Employee; and
WHEREAS, the Employee is willing to enter into an employment agreement
with the Company in accordance with the conditions hereinafter provided.
NOW, THEREFORE, for and in consideration of the terms and conditions
contained herein, the Parties agree as follows, to-wit:
1. Definitions. As used in this Agreement:
a. "Company" means Demeter BioTechnologies, Ltd., its successors and
assigns, whether through consolidation, merger, acquisition, sale or
otherwise, and any of its present or future subsidiaries, or organizations
controlled by, controlling, or under common control with it.
b. "Confidential Information" means any and all information disclosed
or made available to the Employee or known by the Employee as a direct or
indirect consequence of, or through, his employment by the Company and not
generally known in the industry in which the Company is, or may become,
engaged, or any information related to the Company's products, processes,
or services, including, but not limited to, information relating to
research, development, inventions, manufacture, purchasing, accounting,
engineering, marketing, merchandising, or selling.
<PAGE> 2
c. "Conflicting Organization" means any person or organization
engaged, directly or indirectly, in the research, development, production,
marketing or selling of a Conflicting Product.
d. "Conflicting Product" means any product, process, technology,
application, or service of any person or organization, other than the
Company, in existence or under development, which resembles, competes with
or is marketed or offered for sale or lease to the same or similar
potential customers as a product, process, technology, application, or
service which is the subject of research, development, production,
marketing or selling activities of the Company.
e. "Inventions" means discoveries, concepts and ideas, whether
patentable or not, relating to any present or prospective activities of the
Company, including, but not limited to, devices, processes, methods,
formulae, techniques, applications, technology and any improvements to the
foregoing.
2. Employment. The Company hereby employs the Employee and the Employee
hereby agrees to accept employment with the Company upon the terms and
conditions hereinafter set forth.
3. Term. The Company hereby employs the Employee for a period of three (3)
years beginning on the 1st day of November, 1994, and ending on the 30th day of
October, 1997, unless sooner terminated as provided in Section 13 (Disability),
Section 14 (Death During Employment) or Section 17 (Termination) of this
Agreement; provided, this Agreement may be extended for additional periods, or
its terms amended, upon the mutual written agreement of the Parties.
4. Duties of the Employee. The Employee shall be employed in the capacity
of with such duties as are prescribed, from time to time, by the Company.
5. Working Facilities. The Employee shall be furnished with, or reimbursed
for the actual cost of, such facilities, books, equipment and employees suitable
to his position and adequate for the performance of his duties and the conduct
of the Company's business. The Employee's principal office shall be located in
the Raleigh-Durham-Chapel Hill area of North Carolina or at such other location
as otherwise mutually agreed upon; provided, however, the Employee agrees to do
such traveling as is required to carry out the Employee's duties under this
Agreement.
6. Compensation. Beginning on the 1st day of November 1994, the Employee
shall be paid the sum of ten thousand dollars ($10,000) per month, which may be
adjusted upward, but not downward, in the discretion of the Company (the "Base
Salary"). The Base Salary shall be paid in equal monthly or other installments
in accordance with the Company's general practice. In the event that there is a
change in the ownership or effective control of the Company, or of a
substantial portion of its assets, and on that date, the Employee shall be paid
an amount equal to 200 percent of the Employee's average annual compensation
(Base Salary plus cash bonuses) for
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<PAGE> 3
the period that this Agreement has been in effect as a bonus. A change in
ownership shall be deemed to have occurred on the date that any person, or more
than one person acting as a group, acquires ownership of the stock of the
Company that, together with the stock held by the person or group, possesses
more than 50 percent of the total fair market value or total voting power of
the Company's stock. The Employee shall be entitled to any such additional
compensation as may be set forth elsewhere in this Agreement or in an exhibit
to this Agreement.
7. Stock Option. Upon execution of this Agreement, the Employee shall have
the option to purchase 200,000 shares of the Company's free trading common
stock at $.15 per share from the Company. On each of the next two annual dates
from the effective date of this Agreement, the Employee shall have the option
to purchase an additional 200,000 shares of the Company's free trading common
stock at $.15 per share from the Company, but only if the Employee is still
employed by the Company or has been terminated by the Company without cause.
These options shall expire five years from the effective date of this Agreement.
8. Relocation Expenses. The Company and the Employee shall negotiate
reimbursement of relocation when the Company, and the Employee agree that
Relocation is in the best interest of the Company.
9. Right to Participate. The Employee shall have the right to participate
in any employee health/dental, disability, life insurance, pension, profit
sharing, 401(k), stock option, deferred compensation or other benefit plans
adopted by the Company. If the Employee is or becomes a director or an officer
of the Company, the Employee shall be named a beneficiary under the Company's
Director and Officer Liability Policy.
10. Vacation. The Employee shall be entitled to twenty (20) working days
vacation each calendar year, with continuation of compensation during such
vacation period. For purposes hereunder, the term "working days" refers
to Monday through Friday, exclusive of weekends and holidays observed by the
Company. Vacations may be taken at such times and in such manner desired by the
Employee if the taking of such vacation does not interfere with the efficient
administration of the affairs of the Company. Unused vacation days may not be
carried over into the next calendar year nor will the Employee receive
compensation for unused vacation days.
11. Right to Inventions. With respect to all Inventions made or conceived
by the Employee, whether or not during the hours of his employment or with the
use of Company facilities, materials or personnel, either solely or jointly
with others, during the term of his employment by the Company and for a period
of two years after any termination of such employment, and without royalty or
any other consideration:
a. Reports. The Employee shall inform the Company promptly and fully
of such Inventions by a written report, setting forth in detail the
structures, procedures, and methodology employed and the results achieved.
A report shall also be submitted by the Employee upon completion of any
study or research project undertaken on the Company's behalf, whether or
not in the Employee's opinion a given study or project has resulted in an
Invention.
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<PAGE> 4
b. Assignment. The Employee hereby assigns and agrees to assign to the
Company all of his rights to such Inventions and to all proprietary rights
therein, based thereon or related thereto, including, but not limited to,
applications for United States and foreign letters patent and resulting
letters patent.
c. Patents. At the Company's request and expense, the Employee shall
execute such documents and provide such assistance as may be deemed
necessary by the Company to apply for, defend or enforce any United States
and foreign letters patent based on or related to such Inventions.
12. Disclosure of Confidential Information
a. Confidentiality. Except as required in the performance of his
duties during the term of his employment by the Company, the Employee shall
treat as confidential and shall not, directly or indirectly, use,
disseminate, disclose, publish, or otherwise make available any
Confidential Information or any portion thereof. This provision shall
remain in effect for a period of two (2) years after any termination of
such employment.
b. Return of Confidential Information. Upon termination of his
employment with the Company, all documents, records, notebooks, and similar
repositories containing Confidential Information, including copies thereof,
then in the Employee's possession, whether prepared by him or others, shall
be promptly returned to the Company. If at any time after the termination
of employment the Employee determines that he has any Confidential
Information in his possession or control, he shall immediately return to
the Company all such Confidential Information, including all copies and
portions thereof.
c. Waiver. The Employee waives any and all rights to claim that any
discoveries, concepts, ideas, structures, processes, methods, formulae,
technology, or techniques have been made, acquired, conceived or reduced to
practice by him prior to his employment with the Company and are not
subject to the terms and conditions of this Agreement.
d. Restrictive Covenants. For a period of two years after termination
of his employment with the Company, the Employee will not render services,
directly or indirectly, to a Conflicting Organization, except that the
Employee may accept employment with a Conflicting Organization if the
Company receives, prior to the Employee's accepting such employment,
separate written assurances, satisfactory to the Company, from such
Conflicting Organization and from the Employee that the Employee will not
render services directly or indirectly in connection with any Conflicting
Product.
13. Disability. To the extent not covered by the Company's disability
insurance, if any, if the Employee is unable to perform his services during the
term of this Agreement by reason of illness or incapacity, he shall receive his
full compensation during the first four (4) months of such disability, to the
extent not covered by the Company's disability insurance, if any. If such
disability should continue for longer than four (4) months, the compensation
otherwise payable to
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<PAGE> 5
the Employee during the continued period of disability shall be reduced by fifty
percent (50%) provided such continued period of disability lasts no longer than
six (6) months. The Employee's full compensation shall be reinstated upon his
return to employment and the discharge of his full duties hereunder. This
provision shall not be operative until all benefits under the Company's
long-term disability insurance plan, if any, have been calculated and shall not
be considered in determining the amount of benefits under any such insurance
plan.
14. Death During Employment. If the Employee dies during the term of this
Agreement, this Agreement shall be terminated; provided, however, the Company
shall pay to the estate of the Employee any salary which would have otherwise
been earned for the balance of the month in which the Employee's death
occurred, plus three (3) months additional salary, plus any deferred
compensation.
15. Travel or Accidental Policy Benefits. If the Company is the owner and
beneficiary of any disability, accidental death or travel accident insurance
policy covering the life or permanent disability of the Employee (other than
key man life insurance), one-half of any amounts actually collected under such
policy upon the death or permanent disability of the Employee shall be
distributed to the person or persons designated as beneficiary by the Employee,
or, in the absence thereof, to the Employee's estate (or to the Employee in the
event of permanent disability); the remaining one-half of any amounts so
collected shall be retained by the Company for its own beneficial use.
16. Non-Competition. During the term of this Agreement, the Employee shall
not engage in competition with the Company, either directly or indirectly, in
any manner or capacity, as advisor, consultant, principal, agent, partner,
officer, director, stockholder, employee, representative, spokesman or
otherwise, in any phase of the business carried on by the Company at any time.
For a period of one year after the termination of this Agreement, Employee
shall not solicit anyone who was an employee of the Company, when the Employee's
employment with the Company terminated or thereafter, to terminate or refrain
from renewing his employment with the Company.
17. Termination. The Employee may terminate this Agreement upon ninety
(90) days' notice to the Company, at which time the Employee's entitlement to
any salary or other benefits hereunder shall cease. The Company may terminate
this Agreement, at any time and for any reason, upon ninety (90) days written
notice to the Employee. If the Company terminates this Agreement other than for
Good Cause, upon the expiration of such 90-day period the Employee shall be
paid, in addition to any other compensation set forth in this Agreement,
severance pay as liquidated damages in an amount equal to (a) the balance of
the Base Salary the Employee would have been paid over the remaining term of
this Agreement, or (b) an amount equal to two times the Employee's highest Base
Salary, whichever is higher. If the Company terminates this Agreement for Good
Cause, upon the expiration of such 90-day period the Employee shall be paid, in
addition to any other compensation set forth in this Agreement, severance pay
as liquidated damages in an amount equal to not less than $50,000. In any
event, this aggregate severance pay shall be reduced by all amounts which the
Company is required by law to withhold.
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<PAGE> 6
"Good Cause" shall mean any of the following: an intentional act injurious to
the Company, the conviction of a felony, or the commission of an act of moral
turpitude.
18. Consolidation or Merger. In the event of any consolidation or merger of
the Company into or with another corporation or entity during the term of this
Agreement, such corporation shall assume this agreement and shall be obligated
to perform all of its terms and conditions and the Employee's obligations shall
continue in favor of such corporation or entity.
19. Certain Provisions to Survive Termination. Notwithstanding any
termination of his employment under this Agreement, the Employee, in
consideration of his employment hereunder to the date of such termination,
shall remain bound by the provisions of Sections 12 (Disclosure of Confidential
Information) and 16 (Non-Competition). It is acknowledged that the Company
would be irrevocably damaged if the Employee were to violate the provisions of
Sections 12 or 16, and consequently, in addition to all other remedies that may
be available to it, the Company shall be entitled to injunctive relief for any
actual or threatened violation of such Sections.
20. Notice. All notices herein shall be in writing and shall be deemed to
have been duly given at the time personally delivered or deposited in the
United States Mail, postage prepaid, to the address of the respective parties
set forth below their signatures hereto, subject to change upon notice to the
other party.
21. Waiver. Failure to insist upon a strict compliance with any of the
terms or conditions of this Agreement shall not be deemed a waiver of such
terms, or conditions, nor shall any waiver of any term, condition or right of
any party at any time be deemed a waiver of any other term, condition or right
of any party hereto, nor shall it preclude the party from subsequently
asserting or relying upon such term, condition or right.
22. Severability. The invalidity or enforceability of any provision hereof
shall in no way affect the validity or enforceability of any other provision.
23. Modification. There are no verbal understandings between the Parties.
This Agreement, including any special terms and conditions as may be set forth
any exhibit attached to this Agreement, contains the entire agreement of the
Parties and shall not be changed, modified, or terminated, except in writing
signed by the Parties.
24. Construction. This Agreement shall be construed in accordance with the
laws of the State of North Carolina.
25. Assignment. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of the Company. The Employee's rights, powers, privileges
and immunities under this Agreement shall not be assignable without the prior
written consent of the Company.
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<PAGE> 7
26. Binding Effect. This Agreement shall be binding upon and shall inure to
the benefit of the Parties and their respective heirs, legal representatives,
successors and assigns, whether due to consolidation, merger, acquisition, sale
or otherwise.
27. Arbitration. Any dispute or controversy arising from or relating to
this Agreement shall be decided by arbitration in the Raleigh-Durham-Chapel
Hill area of North Carolina by the American Arbitration Association, by a panel
of three arbitrators mutually acceptable to the Parties, and in accordance with
the procedural rules and regulations of that association. At the request of
either the Company or the Employee, arbitration proceedings will be conducted
in secrecy; in such case, all documents, testimony, and records shall be
received, heard and maintained by the arbitrators in secrecy, available for
inspection only by the Company, the Employee and their respective attorneys and
experts who shall agree, in advance and in writing, to receive all such
information confidentially and to maintain such information in secrecy until
such information becomes generally known or until such time as such information
becomes known by reason of judicial appeal from or enforcement of the decision
of the arbitration.
IN WITNESS WHEREOF, the Parties have hereunto set their hands on the day
and year first above written.
COMPANY: Demeter BioTechnologies, Ltd.
BY: /s/George N. Keeney /s/Jesse M. Jaynes
------------------- -------------------------------
George N. Keeney, III Jesse M. Jaynes, Vice President
Chairman, Compensation Committee Brightleaf Square, Suite 19D
905 West Main Street (#27)
Durham, North Carolina 27701
EMPLOYEE:
/s/Richard D. Ekstrom
---------------------
Richard D. Ekstrom
7
<PAGE> 8
EXHIBIT A
TO
EMPLOYMENT AGREEMENT DATED THE 1ST DAY OF
NOVEMBER, 1994 BETWEEN DEMETER
BIOTECHNOLOGIES, LTD. (THE "COMPANY") AND
RICHARD D. EKSTROM (THE "EMPLOYEE")
SPECIAL TERMS AND CONDITIONS
Until such time that Employee relocates to North Carolina, the Company will
reimburse the Employee for reasonable commuting expenses and the Employee shall
have the use of a Company paid apartment.
Reimbursement for commuting expenses will terminate when the employee's monthly
paid base salary is equal to or greater than $14,000.
Dated this 18 day of August, 1996.
DEMETER: By: /s/ George N. Keeney
--------------------------
By: /s/ Jesse M. Jaynes
--------------------------
EMPLOYEE: /s/ Richard D. Ekstrom
--------------------------
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Exhibit 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made this 15th day of
June, 1998, by and between Demeter BioTechnologies Ltd., a Colorado corporation
("Corporation"), and Dr. Jesse M. Jaynes ("Employee").
NOW THEREFORE, in consideration of the mutual covenants and agreements set
forth in this agreement and intending to be legally bound, the Parties
to this agreement agree as follows:
BACKGROUND
A. The Corporation is engaged in the business of research and development of
lytic peptides and related substances ("Corporation's Peptide Technology")
for agricultural, nutritional, medical and other possible commercial
applications (the "Corporation's Business").
B. The Employee is an employee, shareholder, director and officer of the
Corporation, and is a party to that certain Technology Transfer Agreement
dated July 1992 by and between Employee and the Corporation (the "Technology
Transfer Agreement").
C. The Corporation and the Employee desire to set forth in writing the terms
under which the Employee will continue his employment relationship with the
Corporation.
SECTION 1. EMPLOYMENT. The Corporation agrees to employ the Employee and the
Employee agrees to accept the employment in accordance with the terms and
conditions described in this Agreement.
SECTION 2. DUTIES. The Employee shall serve as Vice President of Technology
Development, Chief Scientific Officer of the Corporation and, in addition to
accepting such employment, agrees to perform such duties as may be set from time
to time by the President of the Corporation, subject however, to directions from
the Board of Directors of the Corporation,
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such duties to include (i) the generation and development of new molecular
compounds and substances related to the business of the Corporation,
documentation thereof and direct participation and assistance in the preparation
and pursuit of patent rights thereon, (ii) development of potential applications
utilizing such molecular compounds and substances as may be developed by the
Corporation or in conjunction with its authorized collaborators, (iii)
participation and assistance with the research efforts of the Corporation's
licensees, collaborators and research partners and (iv) such other duties and
services assigned to him from time to time by the Board of Directors of the
Corporation or its designee. The Employee shall make available to the
Corporation his best efforts, knowledge, and experience. The Employee shall use
his full time, best efforts, skills and abilities to faithfully and diligently
perform and manage the research functions of the Corporation as directed by the
President of the Corporation and its Board of Directors.
SECTION 3. EXTENT OF SERVICES.
3.1 Except to the extent otherwise provided in this Agreement, the Employee
shall devote his full time, attention, and energies to the performance of his
duties and shall not be engaged in any other business activity, whether or not
pursued for gain, profit or other pecuniary advantage. The Employee shall at all
times faithfully and to the best of his ability perform his duties under this
Agreement. The duties shall be rendered at the Corporation's offices in
Pittsburgh, Pennsylvania, or at such other place or places and at such times as
the needs of the Corporation may from time-to-time require.
3.2 The Corporation enthusiastically supports the Employee's interest in
creating a charitable foundation ("the Foundation") to foster certain research
for the benefit of underdeveloped and developing nations of the world and agrees
that, notwithstanding any other provision in this Agreement, the Employee may
spend up to two business days a month in furtherance of the Foundation and its
research activities. The Employee and the Corporation agree to attempt in good
faith to coordinate the incidence of such days and minimize any conflicts and
disruption resulting from such activities.
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3.3 In order to facilitate the establishment and operation of the Foundation,
the Corporation agrees to retain competent tax and legal advisors to advise the
Corporation and the Employee as to procedures required for the creation and
management of the Foundation. This advice shall include the requirements to
obtain and maintain a favorable tax exempt status ruling from the Internal
Revenue Service. This advice shall be sought as soon as is practicable, in light
of the Corporation's contemplated move of its offices to Pittsburgh,
Pennsylvania. Furthermore, the Corporation agrees to negotiate in good faith
with the Employee, subject to the rights of any third parties, the terms of a
license agreement pursuant to which the Foundation would be granted a
non-exclusive license to use certain of Corporation's Peptide Technology (the
"Licensed Technology") for certain to be agreed-upon applications within the
countries listed on Exhibit A attached to this Agreement. The Foundation may
seek funding and/or grants to further its research efforts related to the
Licensed Technology from third parties so long as no associated
commercialization rights are given to such third parties and such third parties
have agreed to appropriate non-disclosure or use restrictions with respect to
the Licensed Technology.
3.4. The Employee's work for or with the Foundation shall not be deemed to
violate Section 7 or Section 9 of this Agreement.
SECTION 4. TERM. Unless earlier terminated, the initial term of this Agreement
shall begin on June 1st, 1998 ("Effective Date"), and shall continue for a five
(5) year period (the "Initial Term"). After the Initial Term, this Agreement
will automatically renew on such terms and conditions as are in effect at the
time of renewal or as may be agreed between the Parties unless either the
Employee or the Corporation elects not to renew this Agreement and notifies the
other party in writing at least ninety (90) days prior to the expiration date
hereof.
SECTION 5. COMPENSATION.
5.1 Base Compensation. The Employee will receive a base salary of One Hundred
Twenty Thousand Dollars ($120,000.00) per year, payable in accordance with the
Corporation's standard payroll procedures and Federal, State, and local
employment tax regulations. The Employee's
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Base Compensation will be reviewed at least annually by the Corporation's
Compensation Committee of the Board of Directors and increases, if any, will be
made at the sole discretion of the Board of Directors.
5.2 Bonuses and Profit Sharing. The Employee shall be eligible for
performance-based bonuses, but there is no assurance that bonuses will be paid.
Bonuses will be paid, if at all, in the sole discretion of the Corporation's
Board of Directors. The Employee shall be eligible for participation in any
Stock Option Plans established from time to time by the Corporation.
5.3 Patent Registration Bonuses. As an incentive to further its research and the
development of patent worthy compounds, processes and/or methodology, the
Corporation agrees that during the term of this Agreement and any renewals or
extensions thereof the Employee will receive for each invention made (solely or
jointly) by him which results in issuance of one or more United States or
Foreign patents with potential commercial application a Patent Registration
Bonus. For patents applied for after June 1, 1998 and issuing on or after June
30, 1999, the amount of such Patent Registration Bonus shall be not less than
[Twenty-Five Thousand Dollars ($25,000.00)] and not greater than Fifty Thousand
Dollars ($50,000.00), such amount to be determined by the Board of Directors of
the Corporation (or its committee designee) in its sole discretion. For patents
applied for after June 1, 1998 and issuing before June 30, 1999, the amount of
such Patent Registration Bonus shall be not less than Five Thousand Dollars
($5,000.00) and not greater than Fifty Thousand Dollars ($50,000.00), such
amount to be determined by the Board of Directors of the Corporation (or its
committee designee) in its sole discretion. The parties recognize that there may
be a question regarding the number of inventions in any family of patents, and
the parties agree to negotiate this matter in good faith. The Employee's right
to a Patent Registration Bonus shall only be applicable (i) to patents that have
been assigned to the Corporation and (ii) if the Employee shall not have, prior
to the date of issuance of the patent, voluntarily resigned from his employment
with the Corporation.
5.4 Benefits. For 1998, the Employee shall receive 10 working days vacation, any
or all of which may be carried over into the subsequent year. For all other
years, the Employee shall
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receive 20 working days vacation a year, 10 days of which may be carried over
into the subsequent year. For purposes hereunder, "working days" refers to
Monday through Friday, exclusive of weekends and holidays observed by the
Corporation as determined by the Board of Directors. In addition the Employee
shall receive comparable sick leave, group medical insurance and other fringe
benefits as are made available to other full-time employees of the Corporation
as may be from time to time established by the Board of Directors of the
Corporation.
5.5 Life Insurance. The Corporation shall maintain a life insurance policy with
death benefits of One Million Dollars ($1,000,000.00) for the benefit of
Employee's wife and children. The Corporation, in its sole discretion, may
acquire multi-year fixed premium or annual premium term insurance in order to
meet this obligation to the Employee. In the event a multi-year fixed premium
policy is utilized, the Corporation is obligated only for such premiums as may
become due and payable during the term of this Agreement, and the Employee shall
have the absolute right to continue coverage under the policy at his own expense
upon the termination of the Employee's employment with the Corporation. The
Employee acknowledges the income tax effect of and the Corporation's reporting
requirements on the excess life insurance benefits over Fifty Thousand Dollars
($50,000.00) and accepts full responsibility for payment of the income tax
liability thereon.
5.6 Expenses. The Corporation shall reimburse the Employee for all reasonable
out-of-pocket expenses incurred by the Employee in fulfilling his duties under
this Agreement. The Employee shall provide the Corporation with written evidence
of such expenses as required for compliance with the Internal Revenue Code (as
amended), and the Employee shall fully comply with the Corporation's policies
regarding pre-authorization of expenditures as may be defined from time to time
by its Board of Directors. The Employee agrees to reimburse the Corporation
immediately for any expense reimbursement to the Employee that is disallowed by
the Internal Revenue Service, which reimbursement may not be waived by the
Corporation.
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5.7 Relocation and Temporary Living Expenses. The Corporation shall pay all
expenses reasonably incurred by the Employee in relocating his family to
Pittsburgh, Pennsylvania, including normal closing costs, normal and customary
real estate commissions on the sale of his house, moving expenses, the cost of
three (3) trips to Pittsburgh for his wife and other family members residing at
home to look for housing, plus Ten Thousand Dollars ($10,000.00) to cover
incidental moving expenses. In addition, for a period of up to twelve (12)
months, the Corporation shall reimburse the Employee for his properly reported
temporary housing expenses and travel expenses provided that such expenses shall
not exceed [Two Thousand Dollars ($2000) per month].
SECTION 6. TERMINATION.
6.1 For Cause. The Corporation may terminate the Employee's employment at any
time "for cause" with immediate effect upon delivering written notice to the
Employee. For purposes of this Agreement, "for cause" shall include: (a)
embezzlement, theft, larceny, material fraud, or other acts of dishonesty; (b)
gross neglect or intentional disregard of Employee's duties under this Agreement
or any other material violation by the Employee of this Agreement which is not
cured with thirty (30) days after written warning from the Corporation; (c)
conviction of or entrance of a plea of guilty or nolo contendere to a felony;
(d) conviction of any crime involving moral turpitude; (e) gross insubordination
or repeated insubordination after written warning from the Corporation; (f)
unauthorized disclosure by the Employee of the confidences of the Corporation;
or (g) material and continuing failure by the Employee to perform the duties
described in Section 2 above in a quality and professional manner for forty five
(45) days after written warning from the Corporation. Upon termination for
cause, the Corporation's sole and exclusive obligation will be to pay the
Employee his compensation for a period of one (1) month after the date of
termination and the amount of any unused vacation or sick leave benefits earned
through the date of termination.
6.2 Upon Death. In the event of the Employee's death during the term of the this
Agreement, the Corporation's sole and exclusive obligation will be to pay to the
Employee's spouse, if living,
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or to his estate, if his spouse is not then living, the Employee's compensation
for a period of two (2) months after the date of death and the amount of any
unused vacation or sick leave benefits earned through the date of death.
6.3 Upon Disability. The Corporation may terminate the Employee's employment
upon the Employee's total disability. The Employee shall be deemed to be totally
disabled if he/she is unable to perform his duties under this Agreement by
reason of mental or physical illness or accident. Upon termination by reason of
the Employee's disability, the Corporation's sole and exclusive obligation will
be to continue to pay the Employee his compensation for a period of six (6)
months after the date of disability, plus the amount of any vacation and sick
leave benefits earned through the date of termination disability.
6.4 Without Cause. During the Term of this Agreement and only by action of its
Board of Directors, the Corporation may terminate the Employee's employment
without cause upon sixty (60) days written notice and with a continuation of
payment to the Employee of his salary after termination for (i) twelve (12)
months salary if the Employee has previously relocated his family to Pittsburgh,
Pennsylvania or (ii) six (6) months if the Employee has not yet relocated his
family to Pittsburgh, Pennsylvania, plus the amount of any unused vacation or
sick leave benefits earned through the date of termination.
6.5 By the Employee. The Employee may terminate this Agreement at any time upon
sixty (60) days written notice to the Corporation.
6.6 Termination by the Board of Directors. Any determination to terminate the
Employee's employment under this Section 6 shall be made only by the Board of
Directors of the Corporation.
SECTION 7. COVENANT NOT TO COMPETE.
7.1 Covenant. During the term of this Agreement and for one year thereafter the
Employee will not directly or indirectly:
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7.1.1 enter into or attempt to enter into the "Restricted Business" (as
defined below);
7.1.2 induce or attempt to persuade any employee, agent, manager,
consultant, director, or other participant in the Corporation's Business to
terminate such employment or other relationship in order to enter into any
relationship with the Employee, any business organization in which the Employee
is a participant in any capacity whatsoever, or any other business organization
in competition with the Corporation's Business; or
7.2 Indirect Activity. The term "indirectly," as used in Section 7.1 above,
includes acting as a paid or unpaid director, officer, agent, representative,
employee of, or consultant to any enterprise, or acting as a proprietor of an
enterprise, or holding any direct or indirect participation in any enterprise as
an owner.
7.3 Restricted Business. The term "Restricted Business" means any business which
is engaged in selling products and rendering services which directly compete
with any product or service of the Corporation, or any prduct or service under
development by the Corporation or related to the Corporation's. Nevertheless,
the Employee may own less than five percent of the outstanding equity securities
of a corporation that is engaged in the Restricted Business if the equity
securities of such corporation are listed for trading on a national stock
exchange or are registered under the Securities Exchange Act of 1934.
SECTION 8. SEVERABILITY. The covenants set forth in Section 7 above shall be
construed as a series of separate covenants, one for each county in each of the
states of the United States to which such restriction applies. If, in any
judicial proceeding, a court of competent jurisdiction shall refuse to enforce
any of the separate covenants deemed included in this Agreement, or shall find
that the term or geographic scope of one or more of the separate covenants is
unreasonably broad, the Parties shall use their best good faith efforts to
attempt to agree on a valid provision which shall be a reasonable substitute for
the invalid provision. The reasonableness of the substitute provision shall be
considered in light of the purpose of the covenants and the reasonable
protectable interests of the Corporation and the Employee. The substitute
provision
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shall be incorporated into this Agreement. If the Parties are unable to agree on
a substitute provision, then the invalid or unreasonably broad provision shall
be deemed deleted or modified to the minimum extent necessary to permit
enforcement.
SECTION 9. CONFIDENTIALITY. The Employee acknowledges that he will develop and
be exposed to information that is or will be confidential and proprietary to the
Corporation.
9.1 Information. The information includes but is not limited to research
techniques, funding sources, trade secrets and other patent worthy information,
marketing plans, pricing data, product plans, contracts, customer lists, mailing
lists, goodwill, miscellaneous confidential information, or other intangible
intellectual or otherwise propriety property used or useful in connection with
the Corporation's Business whether in written, photographic, digital, or in any
other form of storage or retention as may be used by the Corporation.
9.2 Authorized Use. All such information shall be deemed confidential to the
extent not publicly known. The Employee agrees to make use of such information
only in the performance of his duties under this Agreement, to maintain such
information in confidence and to disclose the information only in connection
with fully authorized activities pursuant to this agreement or lawful order of a
court, exchange or other governmental authority of competent jurisdiction, and
agrees that he shall not use such information for his own personal benefit or
for the benefit of third Parties in any fashion.
SECTION 10. REMEDIES. The Employee acknowledges that monetary damages would be
inadequate to compensate the Corporation for any breach by the Employee of the
covenants set forth in Sections 7 and 9 above. The Employee acknowledges that
the claim for the payment of any damages for breach of the provisions contained
shall not preclude the Corporation from seeking injunctive relief or other forms
of relief as may be obtained in a court of law or equity, but that the
Corporation, in lieu of or in addition to the remedy of damages, may seek
injunctive relief prohibiting the Employee from breaching provisions in Sections
7 and 9 of this Agreement.
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SECTION 11 NOTICES. Any notice under this Agreement shall be in writing and
shall be effective when actually delivered in person or upon receipted delivery
via courier, insured parcel delivery service, Federal Express, registered or
certified U.S. mail, all postage prepaid and addressed to the Party at the
address stated in this Agreement or such other address as either Party may
designate by written notice to the other. Notice by facsimile shall be effective
as of the date and time transmitted provided the sending Party maintains written
evidence that the transmission was initiated and completed during normal
business hours, was successfully received by the addressee, and was in a legible
format.
SECTION 12 NO RELEASE. The terms of Sections 7 and 9 shall survive the
termination or expiration of this Agreement and the termination of this
Agreement or the expiration of the term of this Agreement shall not release
either Party from any obligations under Sections 7 and 9 or remedies pursuant to
Section 10.
SECTION13 WAIVER. The waiver by either party of the breach of any provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any subsequent breach.
SECTION 14 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
SECTION 15 DISPUTE RESOLUTION.
15.1 Mandatory Mediation. Except for any controversy or claim relating to a
threatened or actual unauthorized use or disclosure of proprietary information,
the parties shall attempt in good faith to resolve by mediation any dispute
arising out of or relating to this Agreement. Either party may initiate a
mediation proceeding by a request in writing to the other party. Thereupon, both
parties will be obligated to engage in a mediation. The proceeding will be
conducted in
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accordance with the then current Model Procedure for Mediation of Business
Disputes of the Center for Public Resources ("CPR"), with the following
exceptions:
(i) If the parties have not agreed within 30 days of the request for
mediation on the selection of a mediator willing to serve, the
Center for Public Resources, upon request of either party, shall
appoint a member of the CPR Panels of Neutrals as the mediator;
and
(ii) efforts to reach a settlement will continue until the conclusion
of the proceeding, which is deemed to occur when: (a) a written
settlement is reached, or (b) the mediator concludes and informs
the parties in writing that further efforts would not be useful,
or (c) the parties agree in writing that in impasse has been
reached.
Neither party may withdraw before the conclusion of the proceeding. The
parties regard the obligation to mediate an essential provision of this
Agreement and one that is legally binding on them. In case of a violation of
such obligation by either party, the other party may bring an action to seek
enforcement of the obligation in any court of law having jurisdiction.
15.2 Arbitration. Except for any controversy or claim relating to a threatened
or actual unauthorized use or disclosure of proprietary information, any and all
claims, disputes or controversies arising under, out of, or in connection with
this Agreement, which have not been
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resolved by mandatory mediation between the parties, shall be resolved by final
and binding arbitration under the rules of the American Arbitration Association
then obtaining; provided, however, that any request for arbitration is filed
within 90 days after the mediation procedures of Section 15.1 have been
concluded. The matter shall be settled by a panel of three (3) to be designated
by the parties who possess business experience, provided however if the matter
involves the Corporation's Peptide Technology, such panel shall be comprised of
individuals who are also knowledgable as to technology issues. The judgment of
the panel may be entered in any court having jurisdiction of the matter. Any
decision of the panel shall be final and binding, and except in cases of fraud
or gross misconduct of the arbitrator, the decision rendered shall not be
appealable. The prevailing party in the arbitration shall be entitled to recover
attorney's fees, all reasonable out-of-pocket costs and disbursements, as well
as any and all charges which may be made for the arbitration's cost and the fees
of the panel. The arbitrators shall have no power to add to, subtract from or
modify any of the terms or conditions of this Agreement.
SECTION 16 AGREEMENT BINDING. This Agreement shall be binding upon the
respective heirs, executors, administrators, successors and assigns of the
Parties hereto.
SECTION 17 COUNTERPARTS. This Agreement may be executed in several counterparts
and all so executed shall constitute one Agreement, binding on all the Parties
hereto even though all the Parties are not signatories to the original or the
same counterpart.
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SECTION 18 EXISTING AGREEMENTS. Nothing in this Agreement is intended to modify
or otherwise affect the obligations of the Parties to this Agreement under the
terms of the Technology Transfer Agreement between the Corporation and the
Employee.
IN WITNESS WHEREOF, the Parties to this Agreement have executed this Agreement
as of the date first written above.
ATTEST: DEMETER BIOTECHNOLOGIES LTD.
/s/ Richard D. Ekstrom By: /s/ Richard D. Ekstrom
- ---------------------- -------------------------
Title: President President
WITNESSED BY: EMPLOYEE
/s/ Donald A. Guthrie /s/ Jesse M. Jaynes
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Exhibit 10.6
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made this 1st day of
August, 1998, by and between Demeter BioTechnologies Ltd., a Colorado
corporation ("Corporation"), and James E. Thornton, an individual residing in
the State of Maryland ("Employee").
PREAMBLE
A. The Corporation is engaged in the business of research and
development of lytic peptides and related substances for agricultural,
nutritional, medical and other possible commercial applications (the
"Corporation's Business"); and
B. The Employee is an employee, shareholder, and officer of the
Company; and
C. The Corporation and the Employee desire to set forth in writing the
terms under which the Employee will continue his employment
relationship with the Corporation.
NOW THEREFORE, in consideration of the mutual covenants and
agreements set forth in this agreement and intending to be legally
bound, the Parties to this agreement agree as follows:
SECTION 1. EMPLOYMENT. The Corporation agrees to employ the Employee and the
Employee agrees to accept the employment in accordance with the terms and
conditions described in this Agreement.
SECTION 2. DUTIES. The Employee shall serve as Vice President--Agriculture of
the Corporation and, in addition to accepting such employment, agrees to perform
such duties as may be set from time to time by the President of the Corporation
or his designee. The Employee shall make available to the Corporation his best
efforts, knowledge, and experience. The Employee shall use his full time, best
efforts, skills and abilities to faithfully and diligently perform his duties to
the Corporation as directed by its President or his designee.
SECTION 3. EXTENT OF SERVICES. Except to the extent otherwise provided in this
Agreement, the Employee shall devote his full time, attention, and energies to
the performance of his duties and shall not be engaged in any other business
activity, whether or not pursued for gain, profit or other pecuniary advantage.
The Employee shall at all times faithfully and to the best of his ability
perform his duties under this Agreement. The duties shall be rendered primarily
from the Employee's home office and at such place or places and at such times as
the needs of the Corporation may from time-to-time require.
SECTION 4. TERM. Unless earlier terminated in accordance with Section 6, the
initial of this Agreement shall begin as of the date hereof ("Effective Date"),
and shall continue until August 31, 2000.
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SECTION 5. COMPENSATION.
5.1 Base Compensation. The Employee will receive a base salary of Sixty Thousand
Dollars ($60,000.00) per year ("Base Compensation"), payable in accordance with
the Corporation's standard payroll procedures and Federal, State, and local
employment tax regulations.
5.2 Deferred Compensation. In addition to Base Compensation, the Employee shall
also be entitled to receive as deferred compensation an aggregate amount equal
(x) Five Thousand Dollars ($5,000) times (y) the number of months that have
elapsed from the date of this Agreement until the date of termination of his
employment for any reason, including a termination by the Corporation (i) for
cause or (ii) without cause (such aggregate amount, the "Deferred Compensation
Amount") The Deferred Compensation Amount, plus interest on the unpaid balance
thereof until paid at the rate of six percent (6%) per annum, shall be payable
in equal monthly installments of Three Thousand Five Hundred Dollars ($3,500),
beginning on the last day of the next month after the final payment has been
made by the Corporation to the Employee under the terms of the Compensation
Release Agreement between the Corporation and the Employee dated September,
1997, and continuing on the last day of each month thereafter until paid in
full. The Company shall have the right to pre-pay the unpaid portion of the
Deferred Compensation Amount in whole or part at any time after August 31, 2000.
5.3 Benefits. The Employee shall receive four weeks of vacation a year, and
comparable sick leave and other fringe benefits as are made available to
full-time employees of the Corporation as may be from time to time established
by the Board of Directors of the Corporation. The Corporation shall reimburse
Employee the cost of his Medicare supplemental insurance premiums so long as he
is an employee of the Corporation, provided that such reimbursement shall not
exceed $200 per month.
5.4 Expenses. The Corporation shall reimburse the Employee for all reasonable
out-of-pocket expenses incurred by the Employee in fulfilling his duties under
this Agreement. The Employee shall provide the Corporation with written evidence
of such expenses as required for compliance with the Internal Revenue Code (as
amended), and the Employee shall fully comply with the Corporation's policies
regarding pre-authorization of expenditures as may be defined from time to time
by its Board of Directors. The Employee agrees to reimburse the Corporation
immediately for any expense reimbursement to the Employee that is disallowed by
the Internal Revenue Service, which reimbursement may not be waived by the
Corporation. All requests for reimbursement of expenses shall be made within
sixty (60) days after such expenses are incurred by the Employee.
SECTION 6. TERMINATION.
6.1 For Cause. The Corporation may terminate the Employee's employment at any
time "for cause" with immediate effect upon delivering written notice to the
Employee. For purposes of this Agreement, "for cause" shall include: (a)
embezzlement, theft, larceny, material fraud, or other acts
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of dishonesty; (b) gross neglect or intentional disregard of Employee's duties
under this Agreement or any other material violation by the Employee of this
Agreement which is not cured with thirty (30) days after written warning from
the Corporation; (c) conviction of or entrance of a plea of guilty or nolo
contendere to a felony; (d) conviction of any crime involving moral turpitude;
(e) gross insubordination or repeated insubordination after written warning from
the Corporation; (f) unauthorized disclosure by the Employee of the confidences
of the Corporation; or (g) material and continuing failure by the Employee to
perform the duties described in Section 2 above in a quality and professional
manner for thirty (30) days after written warning from the President or the
Board of Directors of the Corporation. Upon termination for cause, the
Corporation's sole and exclusive obligation will be to pay the Employee his
Deferred Compensation Amount in accordance with Section 5.2 and the amount of
any unused vacation or sick leave benefits earned through the date of
termination.
6.2 Upon Death. In the event of the Employee's death during the Term of the this
Agreement, the Employee?s employment with the Corporation shall terminate as of
the date of his death and the Corporation's sole and exclusive obligation will
be to pay to the Employee's spouse, if living, or to his estate, if his spouse
is not then living, Five Thousand Dollars ($5000) a month for a period of two
(2) months after the date of death, his Deferred Compensation Amount in
accordance with Section 5.2, and the amount of any unused vacation or sick leave
benefits earned through the date of death.
6.3 Upon Disability. The Corporation may terminate the Employee's employment
upon the Employee's total disability. The Employee shall be deemed to be totally
disabled if he is unable to perform his duties under this Agreement by reason of
mental or physical illness or accident. Upon termination by reason of the
Employee's disability, the Corporation's sole and exclusive obligation will be
to continue to pay the Employee his salary for a period of two (2) months after
the date of termination, his Deferred Compensation Amount in accordance with
Section 5.2, and the amount of any unused vacation and sick leave benefits
earned through the date of termination.
6.4 Without Cause. During the Term of this Agreement, the Corporation may
terminate the Employee's employment "without cause" upon one hundred twenty
(120) days written notice. Upon termination without cause, the Corporation's
sole and exclusive obligation will be to continue to pay the Employee his salary
for a period of two (2) months after the date of termination, his Deferred
Compensation Amount in accordance with Section 5.2, and the amount of any sick
leave benefits earned through the date of termination.
6.5 By the Employee. The Employee may terminate this Agreement at any time upon
sixty (60) days written notice to the Corporation.
SECTION 7. COVENANT NOT TO COMPETE.
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7.1 Covenant. During the term of this Agreement the Employee will not directly
or indirectly:
7.1.1 enter into or attempt to enter into the "Restricted Business" (as
defined below);
7.1.2 induce or attempt to persuade any former, current or future
employee, agent, manager, consultant, director, or other participant in the
Corporation's Business to terminate such employment or other relationship in
order to enter into any relationship with the Employee, any business
organization in which the Employee is a participant in any capacity whatsoever,
or any other business organization in competition with the Corporation's
Business; or
7.1.3 use contracts, proprietary information, trade secrets,
confidential information, customer lists, mailing lists, goodwill, or other
intangible property used or useful in connection with the Corporation's
Business.
7.1.4 or, for a period of one year after the termination of this
Agreement directly or indirectly violate this agreement by conduct of any kind
or in any way in violation the covenants contained in paragraphs 7.1.1 or 7.1.2.
7.1.5 The violation of the terms of paragraph 7.1.4 at any time during
the term of this Agreement shall be grounds for dismissal for cause.
7.2 Indirect Activity. The term "indirectly," as used in Section 7.1 above,
includes acting as a paid or unpaid director, officer, agent, representative,
employee of, or consultant to any enterprise, or acting as a proprietor of an
enterprise, or holding any direct or indirect participation in any enterprise as
an owner, partner, limited partner, member, joint or co-venture participant,
shareholder, or creditor.
7.3 Restricted Business. The term "Restricted Business" means any business which
is engaged in activities which are similar to the Corporation's Business.
Nevertheless, the Employee may own less than five percent of the outstanding
equity securities of a corporation that is engaged in the Restricted Business if
the equity securities of such corporation are listed for trading on a national
stock exchange or are registered under the Securities Exchange Act of 1934.
SECTION 8. SEVERABILITY. The covenants set forth in Section 7 above shall be
construed as a series of separate covenants, one for each county in each of the
states of the United States to which such restriction applies. If, in any
judicial proceeding, a court of competent jurisdiction shall refuse to enforce
any of the separate covenants deemed included in this Agreement, or shall find
that the term or geographic scope of one or more of the separate covenants is
unreasonably broad, the Parties shall use their best good faith efforts to
attempt to agree on a valid provision which shall be a reasonable substitute for
the invalid provision. The reasonableness of the substitute provision shall be
considered in light of the purpose of the covenants and the reasonable
protectable interests of the Corporation and the Employee. The substitute
provision shall be incorporated into this Agreement. If the Parties are unable
to agree on a substitute provision, then the invalid or
-4-
<PAGE> 5
unreasonably broad provision shall be deemed deleted or modified to the minimum
extent necessary to permit enforcement.
SECTION 9. CONFIDENTIALITY. The Employee acknowledges that he will develop and
be exposed to information that is or will be confidential and proprietary to the
Corporation.
9.1 Information. The information includes but is not limited to research
techniques, funding sources, trade secrets and other patent worthy information,
marketing plans, pricing data, product plans, contracts, customer lists, mailing
lists, goodwill, miscellaneous confidential information, or other intangible
intellectual or otherwise propriety property used or useful in connection with
the Corporation's Business whether in written, photographic, digital, or in any
other form of storage or retention as may be used by the Corporation.
9.2 Authorized Use. All such information shall be deemed confidential to the
extent not publicly known. The Employee agrees to make use of such information
only in the performance of his duties under this Agreement, to maintain such
information in confidence and to disclose the information only in connection
with fully authorized activities pursuant to this agreement or lawful order of a
court, exchange or other governmental authority of competent jurisdiction, and
agrees that he shall not use such information for his own personal benefit or
for the benefit of third parties in any fashion.
9.3 Return of Confidential Information. Upon termination of his employment with
the Corporation, all documents, records, notebooks, computer files and similar
repositories containing confidential information of the Corporation, including
copies thereof, then in the Employee's possession, whether prepared by him or
others, shall be promptly returned to the Company. If at any time after the
termination of employment the Employee determines that he has any confidential
information in his possession or control, he shall immediately return to the
Company all such confidential information, including all copies and portions
thereof.
SECTION 10. REMEDIES. The Employee acknowledges that monetary damages would be
inadequate to compensate the Corporation for any breach by the Employee of the
covenants set forth in Sections 7 and 9 above. The Employee acknowledges that
the claim for the payment of any damages for breach of the provisions herein
contained shall not preclude the Company from seeking injunctive or such other
forms of relief as may be obtained in a court of law or equity, but that the
Company, in lieu of or in addition to the remedy of damages, may seek injunctive
relief prohibiting the Employee from breaching the provisions of this Section 7
& 9 of this Agreement.
SECTION 11 NOTICES. Any notice under this Agreement shall be in writing and
shall be effective when actually delivered in person or upon receipted delivery
via courier, insured parcel delivery service, Federal Express, registered or
certified U.S. mail, all postage prepaid and addressed to the Party at the
address stated in this Agreement or such other address as either Party may
designate by written notice to the other. Notice by facsimile shall be effective
as of the date and time transmitted provided the sending Party maintains written
evidence that the transmission was initiated and
-5-
<PAGE> 6
completed during normal business hours, was successfully received by the
addressee, and was in a legible format.
SECTION 12 NO RELEASE. The terms of Sections 7 and 9 shall survive the
termination or expiration of this Agreement and the termination of this
Agreement or the expiration of the term of this Agreement shall not release
either Party from any obligations under Sections 5.2, 7 and 9 or remedies
pursuant to Section 10.
SECTION 13 WAIVER. The waiver by either party of the breach of any provision of
this Agreement by the other party shall not operate or be construed as a waiver
of any subsequent breach.
SECTION 14 GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Pennsylvania.
SECTION 15 ARBITRATION. If at any time during the term of this Agreement any
dispute, difference, or disagreement shall arise relating in any way to this
Agreement or the Employee's employment with the Corporation, including any
dispute as to the meaning and construction hereof, every such dispute,
difference, and disagreement shall be referred to a single arbiter agreed upon
by the Parties, or if no single arbiter can be agreed upon, an arbiter or
arbiters shall be selected in accordance with the rules of the American
Arbitration Association and such dispute, difference, or disagreement shall be
settled by arbitration in accordance with the then prevailing commercial rules
of the American Arbitration Association in Pittsburgh, Pennsylvania or any
location of the Corporation's headquarters at the time of the referral, and
judgment upon the award rendered by arbitration may be entered in any court
having competent jurisdiction thereof.
SECTION 16 AGREEMENT BINDING. This Agreement shall be binding upon the
respective heirs, executors, administrators, successors and assigns of the
Parties hereto.
SECTION 17 COUNTERPARTS. This Agreement may be executed in several counterparts
and all so executed shall constitute one Agreement, binding on all the Parties
hereto even though all the Parties are not signatories to the original or the
same counterpart.
IN WITNESS WHEREOF, the Parties to this Agreement have executed this
Agreement as of the date first written above.
ATTEST: DEMETER BIOTECHNOLOGIES LTD.
/s/ Todd B. Fortier By: /s/ Richard D. Ekstrom
- --------------------- -------------------------
President
-6-
<PAGE> 7
WITNESSED BY: EMPLOYEE
/s/ Jesse M. Jaynes /s/ James E. Thornton
- --------------------- -------------------------
James E. Thornton
-7-
<PAGE> 1
Exhibit 10.7(a)
COMPENSATION RELEASE AGREEMENT
THIS COMPENSATION RELEASE AGREEMENT (the "Agreement") is made as of this
nineteenth day of September, 1997 by and between Demeter BioTechnologies, Ltd.,
a Colorado corporation ("Demeter") and the undersigned employee of Demeter (the
"Employee")
Preamble
As of August 31, 1997, the Employee has claims against Demeter for certain
amounts relating to (i) compensation for past services, (ii) amounts expended on
behalf of Demeter, (iii) loans and notes made to Demeter by the Employee, and
(iv) interests on the foregoing amounts (collectively, the "Claims"). Demeter
and the Employee have reached an agreement pursuant to which Demeter will, among
other things, pay certain amounts to the Employee in exchange for a complete
waiver and release of the Claims. Now, therefore, intending to be legally bound,
and based upon the mutual covenants and agreements set forth in this Agreement,
Demeter and the Employee agree as follows:
1. Release. In consideration of Demeter's obligations set forth in this
Agreement and in full and final settlement of the Claims, the Employee, for
himself, his representatives, successors and assigns, hereby agrees to release
Demeter, including its officers and directors, from any and all liabilities
relating in any way to the Claims.
2. Consideration to Employee. In consideration of the Employee's release of
Claims set forth in Section 1, Demeter hereby agrees as follows:
A. Promptly after Demeter shall receive an aggregate amount of cash
payments from Mycogen Corporation of at least One Million Dollars, Demeter shall
make a cash payment to the Employee of $200,000.
B. On January 15 of the year following the fiscal year in which
Demeter shall have received an aggregate amount of at least Three Million
Dollars in the form of license and/or royalty fees, Demeter shall make a cash
payment to the Employee of $50,000 (the "Fee Related Payment"). Demeter agrees
that the Employee shall have the right to convert all or any portion of the Fee
Related Payment to restricted shares of Demeter's common stock at a conversion
rate of $1.00 per share.
<PAGE> 2
C. Employee will receive 225,000 restricted shares of Demeter's common
stock in exchange for $75,000 of the debt owed to Employee for loans or amounts
expended on behalf of Demeter.
D. Employee agrees that $25,000 of the debt owed to Employee for loans
or amounts expended on behalf of Demeter will be used by Employee to exercise
any stock options which have been granted or may be granted by Demeter to
Employee. Employee agrees that no interest will be paid on the amount reserved
for exercise of stock options. Employee agrees that if options are not
exercised, Demeter will not be required to make any payment to Employee with
regard to the amount in this Section D.
E. Employee agrees to accept 145,000 additional restricted shares of
Demeter's common stock in lieu of Demeter repurchasing 55,000 shares of Demeter
stock from Employee's IRA at $1.20 per share. Shares will be paid to Employee's
IRA, if possible.
3. Board Approval. This Agreement is subject to, and conditioned upon,
approval by Demeter's Board of Directors.
4. Miscellaneous. This Agreement is binding upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, personal
representatives, successors and assigns. This Agreement shall be construed and
interpreted by the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
DEMETER BIOTECHNOLOGIES LTD
By: /s/ George N. Keeney
---------------------
George N. Keeney
Chairman
Compensation Committee
EMPLOYEE
/s/ Richard D. Ekstrom
----------------------
Richard D. Ekstrom
<PAGE> 1
Exhibit 10.7(b)
COMPENSATION RELEASE AGREEMENT
THIS COMPENSATION RELEASE AGREEMENT (the "Agreement") is made as of this
nineteenth day of September, 1997 by and between Demeter BioTechnologies, Ltd.,
a Colorado corporation ("Demeter") and the undersigned employee of Demeter (the
"Employee").
Preamble
As of August 31, 1997, the Employee has claims against Demeter for certain
amounts relating to (i) compensation for past services, (ii) amounts expended
on behalf of Demeter, (iii) loans and notes made to Demeter by the Employee,
and (iv) interests on the foregoing amounts (collectively, the "Claims").
Demeter and the Employee have reached an agreement pursuant to which Demeter
will, among other things, pay certain amounts to the Employee in exchange for a
complete waiver and release of the Claims. Now, therefore, intending to be
legally bound, and based upon the mutual covenants and agreements set forth in
this Agreement, Demeter and the Employee agree as follows:
1. Release. In consideration of Demeter's obligations set forth in this
Agreement and in full and final settlement of the Claims, the Employee, for
himself, his representatives, successors and assigns, hereby agrees to release
Demeter, including its officers and directors,from any and all liabilities
relating in any way to the Claims.
2. Consideration to Employee. In consideration of the Employee's release
of Claims set forth in Section 1, Demeter hereby agrees as follows:
A. Promptly after Demeter shall receive an aggregate amount of cash
payments from Mycogen Corporation of at least One Million Dollars, Demeter shall
make a cash payment to the Employee of $15,000 for loans or amounts expended on
behalf of Demeter. Employee has the option to defer this payment to a time in
the future of the Employee's choosing. No interest will be paid on the amount
deferred.
<PAGE> 2
B. On January 15 of the year following the fiscal year in which
Demeter shall have received an aggregate amount of at least Three Million
Dollars in the form of license and/or royalty fees, Demeter shall make a cash
payment to the Employee of $25,000 (the "Fee Related Payment"). Demeter agrees
that the Employee shall have the right to convert all or any portion of the Fee
Related Payment to restricted shares of Demeter's common stock at a conversion
rate of $1.00 per share.
C. Employee will receive 225,000 restricted shares of Demeter's common
stock in exchange for $75,000 of the debt owed to Employee for loans or amounts
expended on behalf of Demeter.
3. Board Approval. This Agreement is subject to, and conditioned upon,
approval by Demeter's Board of Directors.
4. Miscellaneous. This Agreement is binding upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, personal
representatives, successors and assigns. This Agreement shall be construed and
interpreted by the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
DEMETER BIOTECHNOLOGIES LTD.
BY: /s/ Richard D. Ekstrom
-------------------------
President
EMPLOYEE
/s/ Bruce A. Guthrie
----------------------------
Bruce A. Guthrie
<PAGE> 1
Exhibit 10.7(c)
COMPENSATION RELEASE AGREEMENT
THIS COMPENSATION RELEASE AGREEMENT (the "Agreement") is made as of this
nineteenth day of September, 1997 by and between Demeter BioTechnologies, Ltd.,
a Colorado corporation ("Demeter") and the undersigned former employee of
Demeter (the "Employee").
Preamble
As of August 31, 1997, the Employee has claims against Demeter for certain
amounts relating to (i) compensation for past services, (ii) amounts expended
on behalf of Demeter, (iii) loans and notes made to Demeter by the Employee,
and (iv) interests on the foregoing amounts (collectively, the "Claims").
Demeter and the Employee have reached an agreement pursuant to which Demeter
will, among other things, pay certain amounts to the Employee in exchange for a
complete waiver and release of the Claims. Now, therefore, intending to be
legally bound, and based upon the mutual covenants and agreements set forth in
this Agreement, Demeter and the Employee agree as follows:
1. Release. In consideration of Demeter's obligations set forth in this
Agreement and in full and final settlement of the Claims, the Employee, for
himself, his representatives, successors and assigns, hereby agrees to release
Demeter, including its officers and directors, from any and all liabilities
relating in any way to the Claims.
2. Consideration to Employee. In consideration of the Employee's release
of Claims set forth in Section 1, Demeter hereby agrees as follows:
A. Promptly after Demeter shall receive an aggregate amount of cash
payments from Mycogen Corporation of at least One Million Dollars, Demeter shall
make a cash payment to the Employee of $25,000.
B. On January 15 of the year following the fiscal year in which
Demeter shall have received an aggregate amount of at least Three Million
Dollars in the form of license and/or royalty fees, Demeter shall make a cash
payment to the Employee of $10,000 (the "Fee Related Payment"). Demeter agrees
that the Employee shall have the right to convert all or any portion of the Fee
Related Payment to restricted shares of Demeter's common stock at a conversion
rate of $1.00 per share.
<PAGE> 2
3. Board Approval. This Agreement is subject to, and conditioned upon,
approval by Demeter's Board of Directors.
4. Miscellaneous. This Agreement is binding upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, personal
representatives, successors and assigns. This Agreement shall be construed and
interpreted by the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
DEMETER BIOTECHNOLOGIES LTD.
BY: /s/ Richard D. Ekstrom
-------------------------
President
EMPLOYEE
/s/ Donald A. Guthrie
------------------------------
Donald A. Guthrie
<PAGE> 1
Exhibit 10.7(d)
COMPENSATION RELEASE AGREEMENT
THIS COMPENSATION RELEASE AGREEMENT (the "Agreement") is made as of this
nineteenth day of September, 1997 by and between Demeter BioTechnologies, Ltd.,
a Colorado corporation ("Demeter") and the undersigned employee of Demeter (the
"Employee").
Preamble
As of August 31, 1997, the Employee has claims against Demeter for certain
amounts relating to (i) compensation for past services, (ii) amounts expended on
behalf of Demeter, (iii) loans and notes made to Demeter by the Employee, and
(iv) interests on the foregoing amounts (collectively, the "Claims"). Demeter
and the Employee have reached an agreement pursuant to which Demeter will, among
other things, pay certain amounts to the Employee in exchange for a complete
waiver and release of the Claims. Now, therefore, intending to be legally bound,
and based upon the mutual covenants and agreements set forth in this Agreement,
Demeter and the Employee agree as follows:
1. Release. In consideration of Demeter's obligations set forth in this
Agreement and in full and final settlement of the Claims, the Employee, for
himself, his representatives, successors and assigns, hereby agrees to release
Demeter, including its officers and directors, from any and all liabilities
relating in any way to the Claims.
2. Consideration to Employee. In consideration of the Employee's release
of Claims set forth in Section 1, Demeter hereby agrees as follows:
A. Promptly after Demeter shall receive an aggregate amount of cash
payments from Mycogen Corporation of at least One Million Dollars, Demeter shall
make a cash payment to the Employee of $75,000.
B. On January 15 of the year following the fiscal year in which
Demeter shall have received an aggregate amount of at least Three Million
Dollars in the form of license and/or royalty fees, Demeter shall make a cash
payment to the Employee of $25,000 (the "Fee Related Payment"). Demeter agrees
that the Employee shall have the right to convert all or any portion of the Fee
Related Payment to restricted shares of Demeter's common stock at a conversion
rate of $1.00 per share.
<PAGE> 2
3. Board Approval. This Agreement is subject to, and conditioned upon,
approval by Demeter's Board of Directors.
4. Miscellaneous. This Agreement is binding upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, personal
representatives, successors and assigns. This Agreement shall be construed and
interpreted by the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
DEMETER BIOTECHNOLOGIES LTD.
By: /s/ Richard D. Ekstrom
-------------------------
President
EMPLOYEE
/s/ Jesse M. Jaynes
-----------------------------
Jesse M. Jaynes
<PAGE> 1
Exhibit 10.7(e)
COMPENSATION RELEASE AGREEMENT
THIS COMPENSATION RELEASE AGREEMENT (this "Agreement") is made as of this
nineteenth day of September, 1997 by and between Demeter BioTechnologies, Ltd.,
a Colorado corporation ("Demeter") and the undersigned employee of Demeter (the
"Employee").
Preamble
As of August 31, 1997, the Employee has claims against Demeter for certain
amounts relating to (i) compensation for past services, (ii) amounts expended
on behalf of Demeter, (iii) loans and notes made to Demeter by the Employee,
and (iv) interests on the foregoing amounts (collectively, the "Claims").
Demeter and the Employee have reached an agreement pursuant to which Demeter
will, among other things, pay certain amounts to the Employee in exchange for a
complete waiver and release of the Claims. Now, therefore, intending to be
legally bound, and based upon the mutual covenants and agreements set forth in
this Agreement, Demeter and the Employee agree as follows:
1. Release. In consideration of Demeter's obligations set forth in this
Agreement and in full and final settlement of the Claims, the Employee, for
himself, his representatives, successors and assigns, hereby agrees to release
Demeter, including its officers and directors, from any and all liabilities
relating in any way to the Claims.
2. Consideration to Employee. In consideration of the Employee's release
of Claims set forth in Section 1, Demeter hereby agrees as follows:
A. Promptly after Demeter shall receive an aggregate amount of cash
payments from Mycogen Corporation of at least One Million Dollars, Demeter shall
make a cash payment to the Employee of $5,000.
B. On January 15 of the year following the fiscal year in which
Demeter shall have received an aggregate amount of at least Three Million
Dollars in the form of license and/or royalty fees, Demeter shall make a cash
payment to the Employee of $25,000 (the "Fee Related Payment"). Demeter agrees
that the Employee shall have the right to convert all or any portion of the Fee
Related Payment to restricted shares of Demeter's common stock at a conversion
rate of $1.00 per share.
<PAGE> 2
3. Board Approval. This Agreement is subject to, and conditioned upon,
approval by Demeter's Board of Directors.
4. Miscellaneous. This Agreement is binding upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, personal
representatives, successors and assigns. This Agreement shall be construed and
interpreted by the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
DEMETER BIOTECHNOLOGIES LTD.
By: /s/ Richard D. Ekstrom
-------------------------
President
EMPLOYEE
/s/ D. Thomas Roane
----------------------------
D. Thomas Roane
<PAGE> 1
Exhibit 10.7(f)
COMPENSATION RELEASE AGREEMENT
THIS COMPENSATION RELEASE AGREEMENT (this "Agreement") is made as of this
nineteenth day of September, 1997 by and between Demeter BioTechnologies, Ltd.,
a Colorado corporation ("Demeter") and the undersigned employee of Demeter (the
"Employee").
Preamble
As of August 31, 1997, the Employee has claims against Demeter for certain
amounts relating to (i) compensation for past services, (ii) amounts expended
on behalf of Demeter, (iii) loans and notes made to Demeter by the Employee,
and (iv) interests on the foregoing amounts (collectively, the "Claims").
Demeter and the Employee have reached an agreement pursuant to which Demeter
will, among other things, pay certain amounts to the Employee in exchange for a
complete waiver and release of the Claims. Now, therefore, intending to be
legally bound, and based upon the mutual covenants and agreements set forth in
this Agreement, Demeter and the Employee agree as follows:
1. Release. In consideration of Demeter's obligations set forth in this
Agreement and in full and final settlement of the Claims, the Employee, for
himself, his representatives, successors and assigns,hereby agrees to release
Demeter, including its officers and directors, from any and all liabilities
relating in any way to the Claims.
2. Consideration to Employee. In consideration of the Employee's release
of Claims set forth in Section 1, Demeter hereby agrees as follows:
A. Promptly after Demeter shall receive an aggregate amount of cash
payments from Mycogen Corporation of at least One Million Dollars, Demeter shall
make a cash payment to the Employee of $10,000. Employee has the option to defer
this payment to a time in the future of the Employee's choosing. No interest
will be paid on the amount deferred.
B. On January 15 of the year following the fiscal year in which
Demeter shall have received an aggregate amount of at least Three Million
Dollars in the form of license and/or royalty fees, Demeter shall make a cash
payment to the Employee of $25,000 (the "Fee Related Payment"). Demeter agrees
that the Employee shall have the right to convert all or any portion of the Fee
Related Payment to restricted shares of Demeter's common stock at a conversion
rate of $1.00 per share.
<PAGE> 2
3. Board Approval. This Agreement is subject to, and conditioned upon,
approval by Demeter's Board of Directors.
4. Miscellaneous. This Agreement is binding upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, personal
representatives, successors and assigns. This Agreement shall be construed and
interpreted by the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
DEMETER BIOTECHNOLOGIES LTD.
By: /s/ Richard D. Ekstrom
-------------------------
President
EMPLOYEE
/s/ A. Lee Caldwell
----------------------------
A. Lee Caldwell, Jr.
<PAGE> 1
Exhibit 10.7(g)
COMPENSATION RELEASE AGREEMENT
THIS COMPENSATION RELEASE AGREEMENT (this "Agreement") is made as of this
nineteenth day of September, 1997 by and between Demeter BioTechnologies, Ltd.,
a Colorado corporation ("Demeter") and the undersigned employee of Demeter (the
"Employee").
Preamble
As of August 31, 1997, the Employee has claims against Demeter for certain
amounts relating to (i) compensation for past services, (ii) amounts expended
on behalf of Demeter, (iii) loans and notes made to Demeter by the Employee,
and (iv) interests on the foregoing amounts (collectively, the "Claims").
Demeter and the Employee have reached an agreement pursuant to which Demeter
will, among other things, pay certain amounts to the Employee in exchange for a
complete waiver and release of the Claims. Now, therefore, intending to be
legally bound, and based upon the mutual covenants and agreements set forth in
this Agreement, Demeter and the Employee agree as follows:
1. Release. In consideration of Demeter's obligations set forth in this
Agreement and in full and final settlement of the Claims, the Employee, for
himself, his representatives, successors and assigns, hereby agrees to release
Demeter, including its officers and directors, from any and all liabilities
relating in any way to the Claims.
2. Consideration to Employee. In consideration of the Employee's release
of Claims set forth in Section 1, Demeter hereby agrees as follows:
A. Promptly after Demeter shall receive an aggregate amount of cash
payments from Mycogen Corporation of at least One Million Dollars, Demeter shall
make a cash payment to the Employee of $75,000.
B. On January 15 of the year following the fiscal year in which
Demeter shall have received an aggregate amount of at least Three Million
Dollars in the form of license and/or royalty fees, Demeter shall make a cash
payment to the Employee of $25,000 (the "Fee Related Payment"). Demeter agrees
that the Employee shall have the right to convert all or any portion of the Fee
Related Payment to restricted shares of Demeter's common stock at a conversion
rate of $1.00 per share.
<PAGE> 2
C. Demeter agrees to pay Employee $3,500 per month for 48 months,
beginning 30 days after Employee is no longer a full time employee of Demeter.
Employee has option to convert any unpaid amounts to restricted shares of
Demeter's common stock at a conversion rate of $1.00 per share.
D. Any deferred salary which occurs after August 31, 1997 will be paid
on the same basis as in Section 2.C. above and will begin when Section 2.C. has
been completed. Employee has option to convert any unpaid deferred salary
amounts to restricted shares of Demeter's common stock at a conversion rate of
$1.00 per share.
3. Board Approval. This Agreement is subject to, and conditioned upon,
approval by Demeter's Board of Directors.
4. Miscellaneous. This Agreement is binding upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, personal
representatives, successors and assigns. This Agreement shall be construed and
interpreted by the laws of the State of North Carolina.
5. Death of Employee. In the event of Employee's death before all portions
of amounts described in Section 2 are paid, any balances will be paid to
Employee's spouse or heirs on the same basis as described in Section 2.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
DEMETER BIOTECHNOLOGIES LTD.
By: /s/ Richard D. Ekstrom
--------------------------
President
EMPLOYEE
/s/ James E. Thornton
-----------------------------
James E. Thornton
<PAGE> 1
Exhibit 10.8
[BUTTERFLY LOGO]
Mr. Michael Derrick
Progressive Media Group, Inc.
200 East Robinson St. Suite 450
Orlando, Florida 32801
February 12, 1998
Dear Mike,
This letter acknowledges that Progressive Media Group, Inc. will continue to
provide investor relations services to Demeter BioTechnologies, Ltd. from
January 1, 1998 through the end of 1998 at the same general level as in 1997.
In return for the service provided, Progressive will be issued, as promptly as
possible, seventy-five thousand (75,000) Demeter shares. These shares are non
refundable.
Demeter will also pay Progressive $1,000 per month for each month this
agreement is in effect. Demeter has the right to terminate this agreement and
discontinue the monthly cash payments with thirty days notice to Progressive.
Sincerely,
/s/ Richard D. Ekstrom
- -------------------------
Richard D. Ekstrom
President
Agreed: /s/ Michael Derrick
------------------------------
Michael Derrick
Progressive Media Group, Inc.
<PAGE> 1
Exhibit 10.9
SETTLEMENT AGREEMENT
This Settlement Agreement (this "Agreement") is entered into as of
January 23rd, 1998 (the "Effective Date") by and between Demeter
BioTechnologies, Ltd., a Colorado corporation (the "Company") and Philip Sears,
an individual residing in the State of Oklahoma ("Sears" and collectively with
the Company, the "Parties").
PREAMBLE
A. In December 1996, Sears filed a complaint against the Company and
Richard Ekstrom, an individual residing in the Commonwealth of Pennsylvania
("Ekstrom") in the United States District Court of the Western District of
Oklahoma (the "District Court"), Docket No. Civ-96-2056-A (the "Litigation").
B. The Litigation was stayed by the District Court pending resolution
of certain issues between the Company, Ekstrom and Sears through an American
Arbitration Association proceeding which had been commenced by the Company in
the State of North Carolina (the "Arbitration Proceeding") pursuant to a Demand
for Arbitration requesting, among other things, for a determination that Sears
had breached the terms of the Employment Agreement, and awarding damages to the
Company.
C. Each of the Company and Ekstrom denies that either of them has any
liability to Sears, and Sears denies that he has any liability to the Company or
to Ekstrom.
D. In order to avoid the time, expense and distraction of the
Litigation and the Arbitration Proceeding, the Parties now wish to resolve each
and every dispute on the terms and conditions set forth in this Agreement.
THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and intending to be legally bound by this Agreement,
each of the Parties agrees as follows:
1. CASH CONSIDERATION. The Company shall pay Sears the sum of $35,000
(the "Cash Consideration") at the Closing (as defined in Section 5).
2. STOCK. The Company shall deliver to Sears at Closing (a) a
certificate for 1,675,000 shares of the Company's restricted (Rule 144) common
stock (the "Restricted Stock"), and (b) a certificate for 300,000 shares of the
Company's free trading common stock (the "Free Trading Stock" and collectively
with the Restricted Stock, the "Stock").
3. RESTRICTED STOCK LEGEND. The certificate evidencing the Restricted
Stock shall bear substantially the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND ARE "RESTRICTED SECURITIES" AS THAT TERM
IS DEFINED IN RULE 144 UNDER THE ACT. THE SHARES REPRESENTED BY THIS CERTIFICATE
HAVE BEEN ISSUED UPON RELIANCE OF
<PAGE> 2
AN EXEMPTION FROM REGISTRATION UNDER SECTION 4(2) OF THE ACT AND UPON RELIANCE
OF AN EXEMPTION FROM REGISTRATION UNDER SECTION 401(b)(10) OF THE OKLAHOMA
SECURITIES ACT (THE "OKLAHOMA ACT"). THE SHARES MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT AND/OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE ACT AND THE OKLAHOMA ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED BY
DELIVERY OF AN OPINION OF COUNSEL WHICH IS SATISFACTORY TO THE COMPANY AND ITS
COUNSEL.
4. PIGGY BACK REGISTRATION RIGHTS. If within three years of the
Effective Date, the Company elects to file one or more Registration Statements
with the Securities and Exchange Commission to register its common stock (each
such registration, a "Registration"), Sears shall have the right to request that
the Restricted Stock be included in each such Registration, and the Company
shall use its best efforts to cause the Restricted Stock to be included each
such Registration. Notwithstanding the foregoing, if any such Registration is an
underwritten registration on behalf of the Company or any other shareholders of
the Company who have been granted "demand" registration rights (collectively the
"Registration Rights Holders"), and the managing underwriters advise the Company
in writing that in their opinion all or a number of the shares of Restricted
Stock requested to be included in the Registration by Sears exceeds the number
which can be sold in an orderly manner in such offering within a price range
acceptable to the Company and/or the Registration Rights Holders, the Company
shall include in the Registration (i) first, the securities the Company and/or
the Registration Rights Holders propose to sell and (ii) second, any shares
requested to be included in the Registration by Sears. The Company shall bear
all the costs and expense of the registration of the Restricted Stock; provided,
however, Sears shall pay his proportionate share of all transfer taxes and
brokerage commissions which are incurred as a result of the sale of any of the
Restricted Stock.
5. THE CLOSING. This transaction shall close on or before February 16,
1998 (the "Closing" or "Closing Date"), and shall be held in the offices of the
Company's Oklahoma City legal counsel.
A. COMPANY OBLIGATIONS. On the Closing Date, the Company shall
deliver to Sears' counsel the following: (a) the Cash Consideration in the form
of a cashier's check, (b) the Stock, and (c) an original letter to Nancy Snyder,
J.D. of the American Arbitration Association ("AAA") in Charlotte, North
Carolina dismissing the Arbitration Proceeding with prejudice signed by the
Company and Mr. Ekstrom for actual delivery by Sears to the AAA. In addition the
Company shall on or before the Closing Date obtain and deliver at Closing an
executed original copy of the Mutual Release in the form of Exhibit A to this
Agreement (the "Mutual Release") signed by Ekstrom.
B. SEARS OBLIGATIONS. On the Closing Date, Sears shall deliver
to the Company's Oklahoma City legal counsel the following: (a) three Company
Promissory Notes made in his favor dated September 30, 1995 marked "Paid," and
(b) all of the files (including all Company files formerly in the possession of
Zrenda Dunn and Swann, the Company's former counsel which are now in his
possession), letterhead, furniture, equipment, and other records and documents
which belong to the Company that are in his possession; provided, however, the
Parties agree that Mr. George Keeney, III, a director of the Company, or his
designee, shall pick up all materials to be delivered under this paragraph B at
Sears' residence on, or promptly after,
<PAGE> 3
the Closing Date.
C. JOINT OBLIGATIONS. At the Closing, the Parties shall
deliver to each other in duplicate originals the following: (a) the Mutual
Release executed by the parties thereto, and (b) a Stipulation of Dismissal with
Prejudice signed by the Parties and Ekstrom pursuant to Rule 41(a) of the
F.R.C.P. dismissing the Litigation for filing with the District Court.
6. REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION.
A. The Company represents and warrants to Sears that the execution and
performance of this Agreement and the issuance and delivery by the Company of
the Stock to Sears has been duly authorized and all necessary corporate action
has been taken.
B. Sears represents and warrants to the Company as follows:
1. He is an "accredited investor" as defined by Rule 501(a) promulgated
by the Securities and Exchange Commission ("SEC"), and that he has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that he is capable of
evaluating the merits and risks of the his investment in the Company and has the
capacity to protect his own interests.
2. He is acquiring the Restricted Stock for investment for his own
account, not as a nominee or agent, and not with the view to, or for resale in
connection with, any distribution thereof. He understands that the Restricted
Stock has not been, and will not be, registered under the Securities Act or the
securities laws of any state by reason of a specific exemption from the
registration provisions of the Act and the applicable state securities laws, the
availability of which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of his representations as expressed
herein.
3. He acknowledges that the Restricted Stock must be held indefinitely
unless subsequently registered under the Act or unless an exemption from such
registration is available. He is aware of the current provisions of Rule 144
promulgated under the Act which permit limited resale of shares acquired in a
private placement subject to the satisfaction of certain conditions, including,
among other things, the existence of a public market for the shares, the
availability of certain current public information about the Company, the resale
occurring not less than one year after a party has purchased and paid for the
security to be sold, the sale being effected through a "broker's transaction" or
in transactions directly with a "market maker" and the number of shares being
sold during any three-month period not exceeding specified limitations. He
acknowledges that, except as specifically set forth in this Agreement, he is not
relying on the Company in any way to satisfy the conditions precedent for
limited resale of shares pursuant to Rule 144 under the Act.
4. He understands that no public market now exists for any of the
Restricted Stock to be issued by the Company and that the Company has made no
assurances that a public market will ever exist for the Restricted Stock.
5. He has had an opportunity to discuss the Company's business,
management and
<PAGE> 4
financial affairs with one or more of the directors and officers of the Company,
and any questions he has asked were answered to his satisfaction.
C. The Company and Sears (the "Indemnifying Party") agree to indemnify
and hold the other Party (the "Indemnified Party") harmless from and against any
and claims, losses, costs or other expenses (including reasonable attorneys'
fees) incurred by the Indemnified Party in the event the representations and
warranties of the Indemnifying Party set forth above are not true.
7. ADVICE OF COUNSEL; NO PRESUMPTIONS. The Parties acknowledge that
they have had the benefit of the advice of separate counsel in the negotiation
of this Agreement. The Parties therefore agree that no presumptions shall arise
favoring either party by virtue of the authorship of any of the provisions of
this Agreement.
8. CONSTRUCTION AND VENUE. The Parties agree (i) that this Agreement
will be construed and governed by the laws of the State of North Carolina and
(ii) that any and all disputes between them relating in any way to this
Agreement shall be resolved by an arbitration proceeding conducted by, and in
accordance with the Commercial Rules of Arbitration of the American Arbitration
Association in Charlotte, North Carolina, which resolution shall be final and
binding upon the Parties.
9. ENTIRE AGREEMENT; AMENDMENT; ACKNOWLEDGEMENT. This Agreement
contains the entire agreement between the Parties, supersedes all previous
agreements, whether oral or written, between the Parties, and cannot be changed,
modified, amended or supplemented except by a written agreement signed by both
Parties.
IN WITNESS WHEREOF, the Parties have duly signed this Settlement
Agreement as of the Effective Date.
Demeter BioTechnologies, Ltd.
/s/ Philip Sears By: /s/ Richard D. Ekstrom
- ---------------------- --------------------------
Philip Sears President
<PAGE> 5
EXHIBIT A TO
SETTLEMENT AGREEMENT
BETWEEN DEMETER BIOTECHNOLOGIES, LTD., RICHARD EKSTROM AND PHILIP SEARS
DATED FEBRUARY 16, 1998
MUTUAL RELEASE
COME NOW Demeter BioTechnologies, Ltd., a Colorado corporation with its
principal executive offices at Brightleaf Square, 905 West Main Street, Durham,
North Carolina, 27701 (the "Company"), Philip Sears, who address is 4711
Tamarisk Drive, Oklahoma City, Oklahoma, 73142 ("Sears"), and Richard Ekstrom,
whose address is 5049 Amberson Place, Pittsburgh, Pennsylvania, 15232
("Ekstrom"), and for good and valuable consideration, the receipt of which is
hereby acknowledged and intending to be legally bound, do hereby release each
other from any and all obligations, claims or causes of action which they might
have against one other arising out or relating in any way to (i) any and all
Promissory Notes given by the Company to Sears (collectively, the "Notes"); (ii)
the Employment Agreement between the Company and Sears dated January 1, 1995
(the "Employment Agreement"); (iii) any amendments to the Notes or the
Employment Agreement; (iv) any claims that were or could have been brought by
any of them in the Litigation and/or the Arbitration Proceeding (as such terms
are defined in the Settlement Agreement dated January 23, 1998 among the Company
and Sears (the "Settlement Agreement")); (v) any other understandings,
agreements, letter agreements or arrangements between the Company and Sears,
whether written or oral; (vi) the Litigation and/or the Arbitration Proceeding;
and (vii) any and all other transactions, matters and relationships of whatever
nature between the Company and Sears, all from the beginning of time to the date
of this Mutual Release (collectively, the "Transactions"). For purposes of this
Mutual Release, Sears acknowledges this the release given by him to the Company
herein includes a release not only of the Company, but also of its directors,
officers, employees and agents in any way arising out of or related to the
Transactions.
Dated this 16 day of February, 1998.
Demeter BioTechnologies, Ltd.
/s/ Philip Sears By: /s/ Richard D. Ekstrom
- ------------------------------ --------------------------
Philip Sears President
/s/ Richard D. Ekstrom
- ------------------------------
Richard Ekstrom, individually
<PAGE> 1
Exhibit 10.10
SETTLEMENT AGREEMENT
This Settlement Agreement (the "Agreement") is entered into this 11th
day of September, 1996 (the "Effective Date") by and between Demeter
BioTechnologies, Ltd., a Colorado corporation with its principal executive
offices at Brightleaf Square, Suite 19D, 905 West Main Street, Durham, North
Carolina 27701 ("Demeter"), and Gordon Julian ("Julian") and Sirius
Enterprises, Inc. ("Sirius"), both of whose current address is 3369 Bear Canyon
Road, Bozeman, MT 59715. Demeter, Julian and Sirius are collectively referred to
herein as the "Parties."
WHEREAS, in 1992 and as independent contractors the Parties entered
into an oral consulting agreement and have made various oral amendments and
modifications to the consulting agreement (collectively,the "Consulting
Agreement"), and
WHEREAS, the Parties desire to resolve and settle any and all
outstanding obligations and issues between them, whether arising out of the
Consulting Agreement, or otherwise.
THEREFORE, for good and valuable consideration, the Parties agree as
follows:
1. CLOSING DATE. This transaction will close on or before
September 30, 1996 (the "Closing Date") in Durham, North Carolina or at such
other location as may be mutually agreed upon by the Parties.
2. DELIVERY OF STOCK. On or before the Closing Date, Demeter will
cause to be issued and delivered to Julian and Sirius (in the name of Julian as
requested by Julian and Sirius) Sixty Thousand (60,000) shares of restricted
(Rule 144) Demeter common stock (the "Stock").
3. DELIVERY OF DOCUMENTS. On or before the Closing Date, Julian and
Sirius will cause to be delivered to Demeter the following documents: (a) the
original (endorsed and Medallion Guaranteed) Proxy Certificate for 200,000
shares dated August 3, 1992 as issued to Julian by a company known as Demeter
Biotechnologies Limited on August 3, 1992, and (b) a written narrative of
Julian and Sirius' recommended processes and procedures for the separation and
purification of Demeter peptides produced in a fermentation system, and (c) the
Demeter notebook 001 and any other notebooks describing the development of the
recommended processes and procedures.
4. ASSIGNMENT OF PROPRIETARY RIGHTS.
A. CURRENTLY ASSIGNED PROPRIETARY RIGHTS. Julian acknowledges, agrees
and reaffirms that as of the Effective Date of this Agreement and for good and
valuable consideration already paid to him by Demeter he has irrevocably sold,
assigned and transferred to Demeter his entire right, title and interest in and
to several inventions and patent applications, including all priority rights
arising therefrom, all inventions disclosed in such patent applications, and
any and all Letters Patent of the United States and of all other countries,
together with the right to apply for such Letters Patent, which may be granted
for said inventions, or any of them, to have, hold and enjoy by Demeter, its
successors and assigns, to its and their own use and benefit to the full end of
the term or terms for
<PAGE> 2
which said Letters Patent may be granted as fully and entirely as the same
would have been held and enjoyed by Julian had the assignments not been made.
These inventions and other proprietary rights include, but are not limited to,
those listed in Exhibit A to this Agreement. Julian reaffirms the validity,
legitimacy and enforceability of these assignments. The Parties acknowledge and
agree that neither this Agreement nor the Mutual Release attached to this
Agreement as Exhibit B shall void, diminish, or in any manner whatsoever
otherwise affect the validity, legitimacy and enforceability of the assignments
which shall remain and continue in full force and effect to the full end of
their term or terms. Julian further agrees to be bound by the terms and
conditions of the assignments.
B. CURRENTLY UNASSIGNED PROPRIETARY RIGHTS. In consideration of the
issuance by Demeter to Julian of the Stock, Julian and Sirius agree (i) to
irrevocably transfer, assign and convey to Demeter their entire right, title and
interest in and to any inventions and patent applications, including all
priority rights arising therefrom, all inventions disclosed in said applications
and any and all Letters Patent of the United States and of all other countries,
together with the right to apply for such Letters Patent, which may be granted
for said invention, inventions, related to, or arising from, their work
involving the manufacture, purification and stabilizing of peptides through May
1, 1996, (ii) to execute and sign without further consideration and without
delay any assignments or other legal documents, and any other assignments and
any divisional, continuing, renewal, reissue or other applications in and for
such patents that may be appropriate and may be deemed necessary by Demeter or
its successors and assigns, (iii) to at any time upon the request of Demeter or
its successors and assigns communicate to Demeter or its successors and assigns
or other legal representatives, any facts known by Julian and/or Sirius relating
to said inventions and applications and any patents that may be granted thereon,
and to testify as to the same in any interference or litigation when requested
to do so.
5. REPRESENTATIONS AND WARRANTIES OF THE PARTIES. Demeter represents
and warrants to Julian and Sirius that this Agreement has been duly authorized
by all requisite corporate action, and when executed by two officers of Demeter
and delivered to, and signed by, Julian and Sirius, will be valid and binding on
Demeter and enforceable with its terms. Sirius and Julian represent and warrant
to Demeter that this Agreement has been duly authorized by all requisite
corporate action, and when executed by Gordon Julian, as its President, and
delivered to Demeter will be valid and binding on Sirius and enforceable with
its terms.
6. MUTUAL RELEASE. On or before the Closing Date, the Parties shall
execute in counterparts and deliver to each other the Mutual Release attached
to this Agreement as Exhibit B. The Mutual Release will not affect the rights
and obligations of Demeter, Julian and Sirius as provided in this Settlement
Agreement and shall not affect the assignments of inventions and other
proprietary rights made by Julian to Demeter as of the date of this Agreement
and as more specifically set forth in Section 4 of this Agreement.
7. AFFIDAVIT. on or before the Closing Date, Julian shall execute and
deliver to Demeter the Affidavit attached to this Agreement as Exhibit C.
2
<PAGE> 3
8. CONSTRUCTION. This Agreement will be construed and governed by the
laws of the State of North Carolina. The prevailing party in any dispute to
enforce this Agreement will be entitled to recover its costs and a reasonable
attorney's fee.
9. ADVICE OF COUNSEL; NO PRESUMPTIONS. The Parties acknowledge that
this Agreement has undergone several drafts with the negotiated suggestions of
all Parties, and that all Parties have had the benefit of the advice of counsel
in the conduct of these negotiations, and the Parties therefore agree that no
presumptions shall arise favoring any party by virtue of the authorship of any
of the provisions of this Agreement.
10. FACSIMILE COPIES. The Parties agree that facsimile copies of this
Agreement and any Exhibits and any signatures on this Agreement or any Exhibits
will be as legally binding and enforceable as the original or a copy of this
Agreement and any Exhibits.
11. ENTIRE AGREEMENT; AMENDMENT. There are no verbal understanding
between or among the Parties. This Agreement contains the entire agreement
between and among the Parties, supersedes all previous agreements, whether oral
or written, between and among the Parties (except for any assignments of
inventions and other proprietary rights made by Julian to Demeter as of the
date of this Agreement and as more specifically set forth in Section 4 of this
Agreement which shall remain in full force and effect), and may not be changed,
modified, amended or supplemented except be a written agreement signed by all
Parties.
12. FURTHER ACTIONS. The parties agree to execute and deliver such
certificates, agreements and other documents and to take such other action as
may be reasonably required by the another party in order to record, effectuate,
consummate or implement the transaction contemplated by this Agreement and, in
the case of Julian and Sirius, as required pursuant to the terms of any and all
assignments related to patents and proprietary rights they have made, or will
make, to Demeter.
13. CONFIDENTIALITY. Notwithstanding anything to the contrary in this
Agreement and Exhibit B, Julian and Sirius agree to maintain in strict
confidence the existence and terms of this Agreement and any and all other
non-public information concerning Demeter in their possession, or of which
they, or either of them, has knowledge, for a period of three (3) years from
the Closing Date.
IN WITNESS WHEREOF, the Parties have duly signed this Settlement
Agreement consisting of four pages and Exhibits A, B and C as of the Effective
Date.
Gordon Julian Demeter BioTechnologies, Ltd.
/s/ GORDON JULIAN By: /s/ RICHARD D. EKSTROM
- ----------------- -----------------------------
Gordon Julian Richard D. Ekstrom, President
3
<PAGE> 4
Sirius Enterprises, Inc. Demeter BioTechnologies, Ltd.
/s/ GORDON JULIAN By: /s/ JESSE M. JAYNES
- ------------------------ -------------------------------
Gordon Julian, President Jesse M. Jaynes, Vice President
4
<PAGE> 5
Exhibit A to
Settlement Agreement
Among Demeter BioTechnologies, Ltd., Gordon Julian and Sirius Enterprises, Inc.
Dated August 19, 1996
CURRENT ASSIGNMENTS OF PROPRIETARY RIGHTS(1)
<TABLE>
<CAPTION>
PATENT APPLICATION SERIAL NO. TITLE
- ----------------------------- -----------------------------------------------
<S> <C>
08/427,001 Methylated Lysine Rich Lytic Peptides and
08/474,547 Method of Making Same by Reductive
08/148,889 Alkylation
08/148,891
08/148,491 Modified Arginine Containing Lytic Peptides
08/475,328 and Method of Making the Same by Glyoxylation
08/039,620 Method of Treating Pulmonary Disease States
08/457,798 With Non-Naturally Occurring Amphiphatic Peptides
08/457,171 Method of Combating Mammalian Neoplasias,
08/225,476 and Lytic Peptides Therefor
08/231,730 Method of Enhancing Wound Healing by
Stimulating Fibroblast and Keratinocyte Growth
In Vivo, Utilizing Amphipathic Peptides
</TABLE>
CURRENT UNASSIGNED PROPRIETARY RIGHTS(1)
<TABLE>
<CAPTION>
PATENT APPLICATION SERIAL NO. TITLE
- ----------------------------- ------------------------------------------------
<S> <C>
N/A Synthesis of Protease-Resistant Peptides Using
Irreversibly-Derivatized Amino Acid Constituents
N/A Synthesis of Protease-Resistant Peptide Analogs
Using Amino Acid Aldehydes as Constituent Residues
N/A Trimethylation of the Free Amino Acid Groups
on a Lysine-Rich Lytic Peptide
</TABLE>
- ----------------
(1) Not intended by the Parties to be all inclusive
<PAGE> 6
Exhibit B to
Settlement Agreement
Among Demeter BioTechnologies, Ltd., Gordon Julian and Sirius Enterprises, Inc.
Dated August 19, 1996
MUTUAL RELEASE
COME NOW Demeter BioTechnologies, Ltd., a Colorado corporation with its
principal executive offices at Brightleaf Square, Suite 19D, 905 West Main
Street, Durham, North Carolina, 27701 ("Demeter"), and Gordon Julian ("Julian")
and Sirius Enterprises, Inc. ("Sirius"), both of whose current address is 3369
Bear Canyon Road, Bozeman, MT 59715, and for good and valuable consideration,
the receipt of which is hereby acknowledged, do hereby release each other, and
each other's officers, directors, and employees (in all cases excluding James R.
Ladd) from any all obligations, claims or causes of action which they might
have against each other, and each other's officers, directors, and employees (in
all cases excluding James R. Ladd) arising out of the current oral Consulting
Agreement between and/or among Demeter, Julian and Sirius and any amendments to
the Consulting Agreement, arising out of any other understandings, agreements,
letter agreements or arrangements between and/or among Demeter, Julian and
Sirius, whether written or oral, and arising out of any and all other
relationships of whatever nature between and/or among Demeter, Julian and
Sirius, all from the beginning of time to the date of this Mutual Release.
Notwithstanding anything in this Mutual Release to the contrary, this
Mutual Release shall not void, diminish, release Julian from, or in any manner
whatsoever otherwise affect the validity, legitimacy and enforceability of the
assignments of inventions, patents, applications and other proprietary rights
made by Julian to Demeter prior to the date of this Mutual Release, all of which
assignments shall remain and continue in full force and effect to the full end
of their tern or terms. This Mutual Release shall also not release Demeter,
Julian and Sirius from any obligations contained in the Settlement Agreement to
which this Mutual Release is annexed as Exhibit B.
Facsimile copies of this Mutual Release and any signatures thereon shall be
as legally binding and enforceable as the original or copy original of this
Mutual Release and any signatures thereon.
Dated this 13 day of September, 1996.
Demeter BioTechnologies, Ltd.
/s/ GORDON JULIAN By: /s/ RICHARD D. EKSTROM
- ---------------------------- --------------------------------
Gordon Julian Richard D. Ekstrom, President
Sirius Enterprises, Inc.
By: /s/ GORDON JULIAN By: /s/ JESSE M. JAYNES
------------------------- --------------------------------
Gordon Julian, President Jesse M. Jaynes, Vice President
<PAGE> 7
ACKNOWLEDGMENT-DEMETER BIOTECHNOLOGIES, LTD.
State of North Carolina )
) ss:
County of Durham )
On this 13 day of September, 1996, before me, the undersigned, a Notary
Public in and for the State and County aforesaid, personally appeared Richard D.
Ekstrom and Jesse M. Jaynes, to me known to be the same persons whose names are
signed to the foregoing Mutual Release of Gordon Julian and Sirius Enterprises,
Inc. and who acknowledged to me that they executed the Mutual Release as their
free and voluntary act and deed as President and Vice President, respectively,
on behalf of Demeter BioTechnologies, Ltd. and for the uses and purpose set
forth in the Mutual Release.
Given under my hand and seal the day and year last above written.
[SEAL]
/s/ LOUISE D. MILLER
-----------------------
Notary Public
My Commission Expires
3-20-01
- ---------------------
ACKNOWLEDGMENT-GORDON JULIAN
State of MONTANA )
----------------
) ss:
County of GALLATIN )
----------------
On this 24th day of SEPTEMBER, 1996, before me, the undersigned, a Notary
Public in and for the State and County aforesaid, personally appeared Gordon
Julian, to me know to be the same person whose name is signed to the foregoing
Mutual Release of Demeter BioTechnologies, Ltd. and Sirius Enterprises, Inc.
and who acknowledged to me that he executed the Mutual Release as his free and
voluntary act and deed for the uses and purposes set forth in the Mutual
Release.
Given under my hand and seal the day and year last above written.
[SEAL]
/s/ ????????????
---------------------------
Notary Public
My Commission Expires:
10/24/99
- ----------------------
<PAGE> 8
ACKNOWLEDGMENT-SIRUS ENTERPRISES, INC.
State of MONTANA )
----------------
) ss:
County of GALLATIN )
---------------
On this 24th day of SEPTEMBER, 1996, before me, the undersigned, a Notary
Public in and for the State and County aforesaid, personally appeared Gordon
Julian, to me known to be the same person whose name is signed to the foregoing
Mutual Release of Demeter BioTechnologies, Ltd. and Gordon Julian and who
acknowledged to me that he executed the Mutual Release as his free and voluntary
act and deed as President on behalf of Sirius Enterprises, Inc. and for the uses
and purpose set forth in the Mutual Release.
Given under my hand and seal the day and year last above written.
[SEAL]
/s/ ????????????????
------------------------
Notary Public
My Commission Expires:
10/24/99
- ---------------------
<PAGE> 9
Exhibit C to Settlement Agreement
Among Demeter BioTechnologies, Ltd., Gordon Julian and Sirius Enterprises, Inc.
Dated August 19, 1996
AFFIDAVIT OF GORDON JULIAN
COMES NOW, Gordon Julian (the "Affiant") and, having been duly sworn,
states under oath to Demeter BioTechnologies, Ltd. (the "Company") as follows:
1. I reside at 3369 Bear Canyon Road, Bozeman, Montana 59715
2. I am the President and sole shareholder of Sirius Enterprises, Inc.
3. On or about August 3, 1992 and although unsolicited by me, the Proxy
Certificate dated August 3, 1992 for 200,000 shares of common stock in Demeter
BioTechnologies Limited attached to this Affidavit as Exhibit C-1 was given to
me by James R. Lad and Jesse M. Jaynes as an inducement for me to enter into an
oral consulting agreement with the Company as an independent contractor.
This Affidavit, consisting of one page with attached Exhibit C-1, is dated
and signed this 24th day of September, 1996.
/s/ GORDON JULIAN
-------------------------
Gordon Julian
ACKNOWLEDGEMENT
State of MONTANA )
-----------------
) ss:
County of GALLATIN )
----------------
On this 24th day of September 1996, before me, the undersigned, a Notary
Public in and for the State and County aforesaid,personally appeared Gordon
Julian, to me known to be the same person whose name is signed to the forgoing
Affidavit and who, after having been duly sworn executed the Affidavit and
acknowledged to me that he executed the Affidavit as his free and voluntary act
and deed.
Given under my hand and seal the day and year last above written.
[SEAL]
/s/ ????????????
------------------------
Notary Public
My Commission Expires: 10/24/99
------------
<PAGE> 10
Exhibit C-1 to Settlement Agreement
Among Demeter BioTechnologies, Ltd., Gordon Julian and Sirius Enterprises, Inc.
Dated August 19, 1996
PROXY CERTIFICATE
<PAGE> 11
DEMETER BIOTECHNOLOGIES LIMITED
Research Triangle Park, North Carolina
This Certifies that Gordon Julian is the holder
---------------------------------------
of a proxy certificate of Two Hundred Thousand (200,000) Shares of
--------------------------------------
Common Stock, No Par Value
transferable only on the books of the Corporation by the holder hereof in
person or by Attorney upon surrender of this Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its owner, and I, Jesse M. Jaynes, do so willingly this Third day of
August A.D. 1992
/s/ Jesse M. Jaynes
- ------------------------
Vice President
The shares represented by this certificate have not been registered under the
Securities Act of 1933, as amended (the "Act"), have been taken as a gift, and
may not be sold or offered for sale unless a registration statement under the
Act, with respect to such Stock is then in effect or the Company has received
an opinion of counsel satisfactory to the Company that an exemption from the
registration requirements of such Act is then in fact applicable to such offer
or sale.
<PAGE> 1
Exhibit 10.11
TECHNOLOGY TRANSFER, SUPPORT AND
ROYALTY ASSIGNMENT AGREEMENT
THIS TECHNOLOGY TRANSFER AND SUPPORT AGREEMENT (the "Agreement") is made
and entered into as of this 19th day of February, 1992 by and between THE
DEMETER CORPORATION, a North Carolina corporation ("Demeter"), and JESSE M.
JAYNES, PH.D., an individual residing in Baton Rouge, Louisiana ("Jaynes");
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Demeter has been organized to engage in the biotechnology
industry;
WHEREAS, Jaynes is the developer of certain synthetic protein
technologies, processes and expertise; and
WHEREAS, Demeter and Jaynes believe it would be mutually beneficial if
Jaynes would transfer all of his rights and royalty interests in the technology
that he owns in exchange for an ownership interest in Demeter and for Demeter
to develop and commercialize such technologies with the help and support of
Jaynes;
WHEREAS, the parties hereto desire to enter into a mutually satisfactory
arrangement with respect to the ownership and development of such technologies,
processes and expertise;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
terms, covenants and conditions contained herein, and intending to be legally
bound hereby, the parties agree as follows:
ARTICLE I
Definitions
-----------
The following terms, when initially capitalized, shall have the following
respective meanings:
"Affiliate", with respect to a party hereto, shall mean and refer to
any entity in which a party or any of its officers, agents, employees, or
spouses thereof, have a direct or indirect ownership interest of fifty
percent (50%) or more, or any person or entity which directly or
indirectly, or through one or more intermediaries, controls, is controlled
by, or is under common control with such party or any of its officers,
agents,
<PAGE> 2
employees, or the spouses thereof. For purposes of this definition,
"control" shall mean the power to direct or cause the direction of the
management and policies of such entity, whether through the ownership of
voting securities, by contract or otherwise. Jaynes shall not be deemed to
be an Affiliate of Demeter, and Demeter shall not be deemed to be an
Affiliate of Jaynes.
"Agreement" means this Technology Transfer, Support and Royalty
Assignment Agreement.
"Demeter's Business" means the business of developing and
commercializing the Technology and Improvements on a worldwide basis.
"Improvements" shall mean all modifications, variations, revisions,
refinements, inventions and new improvements of the Technology or any
preceding Improvements, and, without limiting the foregoing, all processes,
machines, manufacturers or compositions of matter, applications,
discoveries, show-how, know-now, techniques, methods of use, skills,
knowledge, compounds, equipment design and instrumentations, formulations
and other data related to the Technology or any preceding Improvements
which Jaynes may conceive, discover, develop, acquire, or to which Jaynes
may otherwise obtain rights during the terms of this Agreement.
"Growth-Promoting Peptide" shall mean and refer to a peptide that
spurs the development of cells.
"Lysis" means the destruction of cells disrupting the cell membranes.
"Lytic Peptide" shall mean and refer to a peptide which can cause
lysis.
"Peptide" shall mean and refer to bio-engineered synthetic proteins
designed to perform specific organic functions.
"Royalty Rights" means any right to payment to which Jaynes is
entitled relating to Third-Party Rights in the Technology and Improvements.
"Technology" shall mean and refer to any technologies, processes,
expertise, trade secrets, know-how, confidential information, laboratory
and other testing methods and results, samples, business plans, inventions,
patents, patent applications, continuations in process and foreign
counterparts, show-how techniques, procedures, formulations, methods of
use, skills, processes, materials, machines,
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<PAGE> 3
manufacturers, compositions of matter, applications, discoveries, methods,
diagrams, flow-charts, manuals, models, concepts, ideas, computer programs,
object code, source code, designs, or graphic representations and other
technical and non-technical data developed by, owned by, controlled by or
used by Jaynes that are related to Peptides, including without limitation
Lytic Peptides and Growth-Producing Peptides, any other synthetic proteins,
and other genetic engineering or bio-engineering technologies and future
applications of Peptide technology in the fields of human or animal
therapies, treatments or related uses, commercial biocides, and genetic
transformation to improve plants. A description of potential applications
of the Technology is set forth on Exhibit A, but such description shall not
limit the foregoing definition of Technology.
"Third-Party Rights in the Technology and Improvements" means any
rights of third parties in the patents described on Exhibit B acquired
prior to the execution of this Agreement.
ARTICLE II
Transfer Of Technology, Improvements and Royalty Rights
-------------------------------------------------------
2.1. Transfer of Technology, etc. In consideration of the obligations and
commitments of Demeter set forth herein and of the issuance of stock described
in Section 2.2 below, Jaynes hereby irrevocably transfers, assigns and conveys
to Demeter the exclusive worldwide rights in the Technology and Improvements;
subject, however, to Third-Party Rights in the Technology and Improvements. In
addition, with respect to Third Party Rights in the Technology and
Improvements, Jaynes hereby irrevocably transfers, assigns and conveys to
Demeter his Royalty Rights.
2.2. Issuance of Stock. In consideration of the transfer of the
Technology, Improvements and Royalty Rights and of the obligations and
commitments of Jaynes set forth herein, Demeter agrees to issue to Jaynes One
Hundred Fifty (150) shares of the no par value common stock of Demeter.
2.3. Delivery of Technology and Improvements. From time to time and as
soon as practicable, Jaynes shall furnish to Demeter copies of all reports,
studies, data, analyses, documents, testing procedures, laboratory methods,
manuals, samples, test results, drawings, designs, software, firmware,
prototypes, specifications, diagrams, flow-charts, patents, patent
applications, and other written material related to the Technology and
Improvements that are within the possession of Jaynes and that are necessary
for Demeter to commercialize the Technology and Improvements and to carry out
the purposes of this Agreement. As other such written material comes into the
possession and control of Jaynes, Jaynes shall promptly furnish to Demeter
copies thereof.
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<PAGE> 4
2.4. Improvements. Jaynes shall promptly inform Demeter of and, subject to
any obligations of Demeter pursuant to Sections 3.2 and 3.3 hereof, transfer
and make available to Demeter any ideas, concepts, or Improvements made or
discovered by Jaynes which relate to the Technology or which may enhance or may
have potential for enhancing the commercialization of the Technology.
2.5. Non-Use. Jaynes acknowledges that the transfer of Technology and
Improvements hereunder is irrevocable and Jaynes agrees not to use any part of
the Technology or Improvements; subject, however, to Third-Party Rights in the
Technology and Improvements. In addition, in the event Jaynes desires in the
future to transfer to a third party any part of Technology, engage in the joint
development of the Technology with any third party, or use the Technology in
any employment or consulting arrangement with any third party, Jaynes shall
require such third-party to execute, in form and substance satisfactory to
Demeter, an appropriate confidentiality and non-use agreement to ensure that
such third-party does not use the Technology unless rights thereto are first
obtained from Demeter.
ARTICLE III
Support, Research and Development
---------------------------------
3.1. Support. At no cost to Demeter, Jaynes shall advise Demeter of any
changes in the Technology and Improvements, including but not limited to, any
discoveries or inventions that may effect the Technology or Improvements,
whether developed by Jaynes or third parties, and any publicly available
technologies used or which could be used in connection with the development or
commercialization of the Technology or Improvements. In addition, during
reasonable business hours and upon reasonable notice, Jaynes shall make himself
available, for telephonic and in person support and consultation regarding all
aspects of the Technology and Improvements.
3.2. Requested Research and Development. Until such time as Jaynes becomes
a full-time employee of Demeter, at Demeter's request, Jaynes will perform
contract research and development to develop Improvements to the Technology.
Such research and development will be based on prices agreed upon in advance of
the work and documented in a written agreement between the parties. Any and all
Technology and Improvements developed from such contracted research shall
belong to Demeter and Jaynes shall transfer to Demeter any written materials
related to the Improvements so developed in accordance with Section 2.3 hereof.
Any such time, as Jaynes becomes a full-time employee of Demeter, his
performance of services for Demeter will be governed by his employment contract.
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<PAGE> 5
ARTICLE IV
Intellectual Property Rights
----------------------------
4.1. Filing and Maintenance of Patents. Demeter shall have the exclusive
worldwide right but not the obligation, at its own cost and expense, to file
for any patents encompassing all or a part of the Technology and Improvements;
subject, however, to any Third-Party Rights in the Technology and Improvements.
In the event Demeter elects to file for any such patents, Jaynes agrees to
cooperate with and provide all reasonable assistance to Demeter in filing for
such patents, including using its best efforts to obtain the consent of, and
assignment to Demeter of any persons who have Third-Party Rights in the
Technology and Improvements.
4.2. Defense of the Technology Rights. Upon receipt of notice of any
threatened or pending claim, suit, or cause of action whatsoever, alleging that
the practice or use of the Technology or any Improvement infringes upon any
valid patent or copyright or is otherwise invalid, the party hereto receiving
said notice shall so inform the other party. Demeter shall have the right but
not the obligation to investigate and defend the claim at its own cost and
expense. Jaynes shall provide Demeter with all necessary support and assistance
reasonably required in investigating, protecting, and defending any claim with
respect to the practice or use of the Technology or any Improvement and
Demeter agrees to pay Jaynes fair compensation plus out-of-pocket expenses
incurred in connection with providing such support and assistance.
4.3. Protection Against Infringement. Upon receipt of any information
supporting a claim that any third-party in infringing on any protectable aspect
of the Technology or any Improvement, the party hereto receiving such notice
shall so inform the other party. Demeter shall have the right but not the
obligation to take any necessary or appropriate actions, at its own expense, to
prevent the infringement of any protectable aspect of the Technology or any
Improvement. Jaynes agrees to provide Demeter with all necessary support and
assistance reasonably required in investigating and precluding infringement of
the Technology or any Improvement and Demeter agrees to pay Jaynes fair
compensation plus out-of-pocket expenses incurred in connection with providing
such support and assistance.
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<PAGE> 6
ARTICLE V
Confidentiality and Non-Competition
-----------------------------------
5.1. Confidential Information. (a) It is contemplated that during the
course of performance of this Agreement, the parties hereto may from time to
time disclose their confidential or proprietary information (as defined in
subsection (b) below) to the other. Each party agrees that any confidential or
proprietary information received from another party will not be disclosed to
third parties without the prior written consent of such other party, and that
each party shall take all reasonable steps to prevent disclosure to
third-parties of the other party's confidential or proprietary information.
Each party also agrees not to use such information except for purposes related
to its obligations hereunder without first obtaining the prior written consent
of the other party.
(b) As used herein the term "confidential or proprietary information"
shall include, but not be limited to, all information concerning the Technology
or any Improvement disclosed by one party to the other party pursuant to this
Agreement, and all other information which is disclosed in writing and
identified as being confidential, or if disclosed orally, which is reduced to
writing within 30 days of oral disclosure and identified as being confidential.
Confidential or proprietary information shall not include information which:
(i) was known to the recipient prior to the date of the disclosure
thereof unless covered by a prior confidentiality agreement;
(ii) was known to the public or generally available to the public
prior to the date of the disclosure to the recipient;
(iii) becomes available to the public or generally available to the
public subsequent to the date it was received through no act or failure on
the part of the recipient;
(iv) materially corresponds in substance to information disclosed or
made available to the recipient any time by a third party having a bona
fide right to disclose or make available the same;
(v) is required to be disclosed to a governmental agency for the
purpose of securing essential or desirable authorizations, privileges or
rights from governmental agencies, provided that the agency is itself not
required to maintain the information as confidential by contract or
operation of law;
(vi) is subsequently and independently developed by employees of the
receiving party who had no access to the confidential information and who
had no knowledge of the confidential information disclosed; or
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<PAGE> 7
(vii) is required to be disclosed for the purpose of filing or
prosecuting patent or copyright applications, or carrying out any
litigation concerning the Technology or any Improvements, but this
information shall not be considered a waiver of confidentiality with
respect to any information which is subject to the attorney-client
privilege.
5.2. Non-Competition of Jaynes. Jaynes agrees that he shall not, directly
or indirectly, either in his own capacity or as an agent, partner, shareholder,
investor or in any other capacity, participate or engage in, or assist others
in participating or engaging in a business which competes with Demeter's
Business.
5.3. Remedies. In the event of a breach or threatened breach of this
Agreement, the damaged or threatened party shall have and may exercise any and
all of the rights and remedies available at law or otherwise, including, but
not limited to, obtaining an injunction from a court of competent jurisdiction
enjoining or restraining the disclosure of confidential or proprietary
information from committing any such violation, and each of the parties hereto
hereby consents to the issuance of such injunction.
ARTICLE VI
Representations and Warranties of Transferors
---------------------------------------------
6.1. Capacity. Jaynes has all requisite power and capacity necessary to
enter into this Agreement.
6.2. Authority Relative to this Agreement. The execution, delivery and
performance of this Agreement by Jaynes and consummation of the transactions
contemplated hereby will not violate any law or judicial or administrative
order to which Jaynes is subject or any contractual obligation binding upon
Jaynes, and to the best of Jayne's knowledge, the execution, delivery and
performance of this Agreement by Jaynes and the consummation of the
transactions contemplated hereby do not require the consent or approval of any
person or public authority not already obtained.
6.3. Non-Interference. Jaynes represents and warrants that, to the best of
his knowledge, Demeter's entering into and enforcing of this Agreement does not
and will not constitute any interference with the advantageous contractual
relationship that any third-party has with Jaynes.
6.4. Non-Infringement. Except with respect to Third Party Rights in
Technology and Improvements, Jaynes represents and warrants that he is not
aware of any rights in any third parties that would be violated by Demeter's
use and practice of the Technology and Improvements transferred hereunder or
that such use and practice will infringe any valid U.S. or foreign patent.
7
<PAGE> 8
6.5. Ownership. Jaynes represents and warrants that, except as set forth
in Exhibit B hereto, he has the rights to transfer to Demeter the Technology as
set forth herein, and that such rights are not the subject of any encumbrance,
lien or claim of ownership by any third party. In addition, except as set forth
in Exhibit B hereto, Jaynes has not previously transferred or licensed the
Technology or any part thereof and all of the patent and other intellectual
property rights with respect to the Technology and Improvements which Jaynes
owns or has rights to as of the date of this Agreement have been validly
transferred to Demeter under this Agreement. In executing and carrying out this
Agreement, Jaynes is not making unauthorized use of any confidential
information or trade secrets of any person, including without limitation, any
present or former employer of Jaynes.
6.6. Litigation. Jaynes has not received any notice of any claim from any
person asserting that any of the Technology infringes or may infringe any
patent or other proprietary rights of any person. Jaynes is not aware of any
infringement by others of any of the Technology or any violation of the
confidentiality of any of their proprietary information. There are not any
actions, suits or proceedings pending or, to the knowledge of Jaynes,
threatened, against Jaynes before a court, arbiter, or any other governmental
or non-governmental department, commission, board, bureau, agency or
instrumentality which could affect the Technology or Improvements or Jaynes'
interest in either of them or the ability of Jaynes to perform his obligations
under this Agreement.
6.7. Disclosure. To the best of his knowledge, no representation or
warranty by Jaynes in this Agreement, nor any statement made or documents
provided to Demeter by or on the behalf of Jaynes in the course of Demeter's
investigation process of deciding to enter this Agreement, contains any untrue
statement of material fact, or omits or will omit to state a material fact
necessary to make the statements not misleading. Jaynes does not know of any
act that has not been disclosed to Demeter that materially or adversely affects
or, so far as Jaynes can reasonably foresee, may materially or adversely affect
the Technology.
ARTICLE VII
Representations and Warranties of Transferee
--------------------------------------------
7.1. Due Incorporation, Existence. Demeter is a corporation duly organized
and validly existing under the laws of the State of North Carolina with all
requisite power necessary to enter into this Agreement.
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<PAGE> 9
7.2. Authority Relative to this Agreement. The execution, delivery and
performance of this Agreement by Demeter and consummation of the transactions
contemplated hereby have been duly and effectively authorized by all necessary
corporate action. To the best of Demeter's knowledge, the execution, delivery
and performance of this Agreement by Demeter and the consummation of the
transactions contemplated hereby do not require the consent or approval of any
person or public authority not already obtained.
7.3. Issuance of Stock. Demeter represents and warrants that upon the
issuance to Jaynes of the 150 shares of common stock of Demeter pursuant to
Section 2.2. hereof, such shares will be duly authorized, validly issued, fully
paid and nonassessable.
ARTICLE VI
General
-------
8.1. Term. The term of this Agreement shall begin on the date hereof and,
unless earlier terminated by a writing signed by each of the parties hereto,
shall continue in effect until February 18, 2002; provided, however, that in any
event Sections 2.1, 2.2, 2.3, 2.4, 2.5, 3.1, and 5.1 shall survive termination
of this Agreement.
8.2. Further Assurances. Each party when requested to do so by the other
party, shall execute, acknowledge, and deliver all such instruments or
assignment, transfer and conveyance, and any such further instruments and
documents as may be necessary and desirable to carry out the purposes of this
Agreement.
8.3. No Agency or Partnership. It is understood that in giving effect to
this Agreement, Demeter shall not be an agent or partner of Jaynes for any
purpose and that its relationship to Jaynes shall be that of an independent
contractor. Demeter shall not have the right to enter into contracts, nor incur
expenses or liabilities, on behalf of Jaynes. Similarly, it is understood that
in giving effect to this Agreement, Jaynes shall not be an agent or partner of
Demeter for any purpose and that his relationship to Demeter shall be that of an
independent contractor. Jaynes shall not have the right to enter into contracts
or incur expenses or liabilities on behalf of Demeter.
8.4. Assignment. This Agreement will be binding upon and inure to the
benefit of the respective successors and assigns of the parties hereto but none
of the parties may assign its or his rights in this Agreement without the prior
written consent of the other parties; provided, however, that Demeter may,
without obtaining the prior written consent of Jaynes, assign its rights in this
Agreement to any Affiliate or to any corporation with which it may merge or
consolidate or to any corporation to which it may transfer all or substantially
all of its assets, if such entity assumes all of the obligations and liabilities
of Demeter under this Agreement. Upon any such assignment or transfer, Demeter
shall be relieved of liability hereunder.
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<PAGE> 10
8.5. Severance. In the event any term or provision of this Agreement shall
for any reason be held to be invalid, illegal, or unenforceable in any respect,
then, unless such term or provision goes to the root of this Agreement, this
Agreement shall continue in full force and effect except that the term or
provision shall be deemed to be excised herefrom and this Agreement shall be
interpreted and construed as if such term or provision, to the extent the same
shall have been held to be invalid, illegal, or unenforceable, had never been
contained herein.
8.6. Compliance with Law. The rights and obligations set forth in this
Agreement shall be subject to all laws, both present and future, of any
governmental body having jurisdiction over either of the parties hereto or the
subject matter hereof, and to orders, regulations, directions or the like of
such governmental body or any department, agency or corporation thereof. If
such laws or regulations necessitate the amending of any terms of this
Agreement with respect to any country in order to maintain the validity of this
Agreement in that country, the parties hereto agree to meet promptly and
negotiate in good faith concerning the terms which require amendment to bring
the Agreement into compliance with the laws of such country.
8.7. Arbitration. Except as to issues relating to the validity,
construction or effect of any patent licensed hereunder, any and all claims,
disputes or controversies arising under, out of, or in connection with this
Agreement, which have not been resolved by good faith negotiations between the
parties, shall be resolved by final and binding arbitration under the rules of
the American Arbitration Association then obtaining; provided, however, that
any request for arbitration is filed within 180 days from the date that the
party seeking relief knew or through the exercise of due diligence should have
known of the facts giving rise to the dispute. The arbitrators shall have no
power to add to, subtract from or modify any of the terms or conditions of this
Agreement. Any award rendered in such arbitration may be enforced by either
party in any court of competent jurisdiction.
8.8. Indemnification. Demeter, on the one hand, and Jaynes, on the other
hand, shall at all times during the term of this Agreement and thereafter
indemnify, defend and hold the other harmless against all damages, losses,
claims and expenses, including legal expenses and reasonable attorneys' fees,
incurred as a result of the failure of any representation or warranty contained
in this Agreement or as a result of the breach of any term or condition
hereunder.
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<PAGE> 11
8.9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.
8.10. Notice. Notice hereunder shall be in writing and shall be deemed to
have been duly given (i) when personally delivered to a party; (ii) when sent
via facsimile to a party but only if a written or facsimile acknowledgment of
receipt is received by the sending party; or (iii) when delivered Federal
Express, Airborne Express or an other commercial courier which maintains
delivery information or five (5) days following the date when placed in the
United States mails and forwarded by registered or certified mail, in each such
case, duly addressed as follows:
if to Demeter: The Demeter Corporation
6916 Turkey Farm Road
Chapel Hill, North Carolina 27514
Attention: James R. Ladd, President
with copies to: Daniels & Daniels, P.A.
1000 Park Forty Plaza, Suite 280
Durham, North Carolina 27713
Attention: Walter E. Daniels
or if to Jaynes: Jesse M. Jaynes
1332 Beckenham Drive
Baton Rouge, Louisiana 70808
or in either case, to such other address as either party shall previously have
designated by written communication to and actual receipt by the other party.
8.11. Waiver. The failure of a party to assert a right hereunder or to
insist upon compliance with any term or condition of this Agreement shall not
constitute a waiver of that right or excuse a similar subsequent failure to
perform any such term or condition by the other party.
8.12. Captions. The captions used in this Agreement are for convenience
only and shall not be construed as being part of this Agreement.
8.13. Merger and Amendment. This Agreement represents the entire
understanding between the parties, and supersedes all previous agreements,
express or implied, between the parties concerning the Technology or any other
subject matter of this Agreement. This Agreement may not be amended or modified
except pursuant to a writing executed by both parties.
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8.14. Multiple Counterparts. This Agreement may be executed in one or more
counterparts each of which shall be deemed to be and have the force and effect
of an original.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement or
have caused this Agreement to be executed by their duly authorized officers
effective as of the day and year first written above.
ATTEST: THE DEMETER CORPORATION
/s/ D. C. GUTHRIE By: /s/ JAMES R. LADD
- ------------------------ --------------------------
Secretary James R. Ladd,
President
(Corporate Seal)
WITNESS:
/s/ D. C. GUTHRIE /s/ JESSE M. JAYNES (SEAL)
- ------------------------ --------------------------
Jesse M. Jaynes
12
<PAGE> 13
APPENDIX B
<PAGE> 14
APPENDIX B
PATENT APPLICATIONS
1. Jaynes and Derrick, "Method for Introduction of Disease and Pest Resistance
Into Plants and Novel Genes Incorporated Into Plants Which Code Therefor,"
United States patent application S.W. 07/373,623, filed June 29, 1989
(Continuation of U.S. Serial No. 889,225 filed July 25, 1986).
2. Jaynes and Derrick, "Plants Genetically Enhanced for Disease Resistance,"
United States patent application S.W., 07/646,449, filed January 25, 1991
(Continuation of U.S. Serial No. 115,941 filed November 2, 1987).
3. Jaynes, Enright and White, "Therapeutic Antimicrobial Polypeptides, Their
Use and Methods for Preparation," United States patent application S.W.
07/049,683 filed July 6, 1987.
4. Jaynes, Enright, White and Jeffers, "Inhibition of Eucaryotic Pathogens and
Neoplasms and Stimulation of Fibroblasts and Lymphocytes with Lytic Peptides,"
United States patent application S.W. 07/102,175 filed September 29, 1987.
5. Jaynes, "Lytic Peptides: Their Use in the Treatment of Microbial Infection,
Cancer and in the Prevention of Drymouth," United States patent application S.W.
07/336,181, filed April 10, 1989 (Continuation -in-part of U.S. Serial No.
102,175, filed September 29, 1987 and of U.S. Serial No. 069,653, filed July 6,
1987).
Patent applications also include foreign patent filings entitled to
priority based on any of the patent applications defined above.
<PAGE> 1
Exhibit 10.12
[BUTTERFLY LOGO]
Via U.S. Mail and Fax: 206-575-8554
Dr. Donald G. Tarver November 13, 1996
Administrator
Pacific West Cancer Fund
320 Andover Park East, Suite #250
Seattle, Washington 98188
Dear Dr. Tarver:
It is with great pride and admiration that Demeter Bio Technologies has been
associated with you and the Pacific West Cancer Fund. Your mission to lend
support for peptide therapeutics has been instrumental to Demeter and our
university and government collaborators as we seek to develop improved cancer
drugs.
Demeter appreciates the financial support that Pacific West Cancer Fund has
committed to Demeter since 1993. In recognition of your generosity toward our
research and development, Demeter proposes to support the mission of the
Pacific West Cancer Fund as explained below.
Demeter plans to out-license the Peptidyl MIMS(TM) for cancer therapy to a large
pharmaceutical company. We anticipate that cancer license fees would generally
be earmarked for additional research and development. Demeter agrees to
contribute five percent (5%) of all cancer license fees to Pacific West Cancer
Fund until an amount of One Hundred Thousand ($100,000) dollars is granted to
Pacific West Cancer Fund. In addition, Demeter agrees to contribute seventy-five
percent (75%) of all loyalties from sales of its cancer therapeutic products to
Pacific West Cancer Fund until an amount of Two Hundred Thousand ($200,000)
dollars is granted to Pacific West Cancer Fund.
Demeter and Pacific West Cancer Fund agree that this Agreement supersedes any
prior written or verbal Agreements and contains the entire Agreement between the
parties and may not be changed, modified, amended or supplemented except by a
written instrument signed by both parties.
Demeter and Pacific West Cancer Fund agree that no press releases will be made
by either party without the prior written consent of the other party.
Very truly yours,
By: /s/ Richard D. Ekstrom
--------------------------------------------
Richard D. Ekstrom, President Date
Demeter BioTechnologies, Ltd.
Accepted Pacific West Cancer Fund
By: /s/ Donald G. Tarver 11-13-96
- -------------------------------------------
Donald G. Tarver, Administrator Date
[DEMETER LOGO]
<PAGE> 1
Exhibit 10.13(a)
STOCK OPTION AGREEMENT
On March 6, 1998, the Board of Directors of Demeter
BioTechnologies, Ltd., a Colorado corporation (the "Company"), determined to
grant you, Richard Ekstrom (the "Optionee"), as an employee of the Company,
subject to certain terms and conditions, an option to purchase (the "Option")
that number of shares of common stock of the Company (the "Shares") set forth
below. The Company and the Optionee now desire to formalize the grant of the
Option and the terms and conditions relating to such Option.
1. Grant of Option; Number of Shares; Exercise Price. In recognition of
the Optionee's commitment to the continued growth of the Company, as a matter of
separate inducement and not in lieu of any salary or other compensation for the
Optionee's services to the Company, the Company hereby grants to the Optionee
this Option to purchase One Million Six Hundred Thousand (1,600,000) Shares (the
"Option Shares"). The exercise price shall be five cents ($0.05) per Option
Share. The Optionee shall not have any of the rights or obligations of a
stockholder with respect to the Option Shares unless and until one or more stock
certificates representing Option Shares are delivered to him upon the valid
exercise of this Option.
2. Exercise Period; Conditions of Exercise.
(a) This Option shall be exercisable in whole or in part prior
to March 5, 2008 (the "Expiration Date"). After the Expiration Date, all rights
granted to the Optionee hereunder shall cease, without any further action by the
Company or the Optionee. The right of the Optionee to exercise this Option is
limited in accordance with the following exercise schedule:
<TABLE>
<CAPTION>
DATE PERCENTAGE OF OPTION SHARES
---- ---------------------------
<S> <C>
After March 6, 1998 until Expiration Date Fifty Percent (50%)
After April 6, 1998 until Expiration Date An additional ten percent (10%)
After May 6, 1998 until Expiration Date An additional ten percent (10%)
After June 6, 1998 until Expiration Date An additional ten percent (10%)
After July 6, 1998 until Expiration Date An additional ten percent (10%)
After August 6, 1998 until Expiration Date An additional ten percent (10%)
</TABLE>
(b) This Option may be exercised only to purchase whole
Shares, and in no case may a fraction of a Share be purchased.
3. Non-Transferability of Option. This Option may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of in any
way, shall not be assignable by operation of law and shall not be subject to
execution, attachment or similar process. Any attempted sale, assignment,
transfer, pledge, hypothecation or other disposition of this Option
<PAGE> 2
contrary to the provisions hereof shall be null and void and without effect.
Notwithstanding the foregoing, if the Optionee shall die prior to the Expiration
Date, the Optionee's estate or conservator, as the case may be, shall (to the
extent not previously exercised by the Optionee) be permitted to exercise this
Option before the Expiration Date.
4. Procedures for Exercise of Option. This Option shall be exercisable
in accordance with the following procedures. Upon the election of the Optionee
to exercise this Option (in whole or in part) on prior to the Expiration Date,
the Optionee (or his estate) shall deliver to the Company written notice
specifying the number of Option Shares which he is electing to purchase and a
date, not less than 5 nor more than 15 days after the date of such notice (an
"Exercise Date"), upon which such Shares shall be purchased and payment therefor
shall be made. A stock certificate(s) representing the number of Option Shares
the Optionee has so elected to purchase shall be delivered to him by the Company
on the Exercise Date against delivery (on the Exercise Date) to the Company of
cash or certified or bank cashier's check payable to the order of the Company,
in an amount equal to (A) the number of Option Shares specified in such notice
multiplied by (B) five cents ($0.05), together with payment, by cash or
certified or bank cashier's check payable to the order of the Company, of such
amount as the Company deems necessary to satisfy its liability (if any) to
withhold federal, state or local income or other taxes incurred by reason of the
exercise or the transfer of Shares thereupon.
5. Representations and Warranties of Optionee. The Optionee hereby
represents and warrants to the Company as follows:
(a) The Optionee has the legal right and capacity to enter
into this Agreement and he fully understands the terms of this Agreement.
(b) The Optionee will acquire the Option Shares, if the Option
is exercised, for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the Securities Act of
1933 (the "Act").
(c) The Optionee will not, directly or indirectly, offer,
sell, assign, transfer, pledge, hypothecate or otherwise dispose of in any way,
this Option other than in accordance with the terms of this Agreement.
(d) The Optionee acknowledges and agrees that the Option
Shares, when issued and delivered to him pursuant to an exercise of this Option,
will be "restricted" Shares, and may only be sold or otherwise transferred by
him in accordance with the provisions of the Act.
6. Adjustment of Option Shares and Option Price. If, prior to the full
exercise of the Option, any of the events described below shall occur, the
Option Shares and the exercise price thereof shall, in each instance, be
adjusted as follows:
(a) Stock Dividends or Stock Splits. If an increase has been
effected in the number of outstanding Shares by reason of a subdivision or
split-up of such Shares, there shall be added to the number of Option Shares
which may thereafter be purchased under this Option, the number of additional
Shares which would have been received by the Optionee on
<PAGE> 3
such stock dividend, subdivision or split-up had the Optionee been the holder of
record of the Option Shares immediately prior to such stock dividend,
subdivision or split-up. In such event, the exercise price per Option Share
shall be proportionately reduced.
(b) Combination. If a decrease has been effected in the number
outstanding Shares by reason of a combination or reclassification of Shares, the
number of Option Shares which may thereafter be purchased under this Option
shall be the number of Shares which the Optionee would have been deemed to hold
as a result of such combination or reclassification had the Optionee been the
holder of record of the Option Shares immediately prior to such combination or
reclassification. In such event, the exercise price per Option Share shall be
proportionately increased.
(c) Reclassification; Merger. In the event of (i) a
reclassification of or change in (other than those referred to in clauses (a)
and (b) of this Section 6) the outstanding Shares, (ii) a consolidation or
merger of the Company with or into another corporation where the Company is not
the surviving corporation, or (iii) any sale or conveyance of all or
substantially all the properties or assets of the Company, the Optionee shall
have the right, upon any subsequent exercise of this Option, to receive the kind
and amount of Shares or other securities and property (other than cash
dividends) receivable upon and after such reclassification, change,
consolidation, merger, sale or conveyance as if the Optionee had been the holder
of record of the Option Shares immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and, in such event, the Board
of Directors shall make such adjustment in the exercise price per Option Share
as is just and equitable in the circumstances.
8. Notices. Any notice required or permitted hereunder shall be deemed
given only when delivered personally or when deposited in a United States Post
Office as certified mail, postage prepaid, addressed, as appropriate, if to the
Optionee, at such address as he may designate in writing to the Company, and, if
to the Company, at its principal offices.
9. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Option shall in no way be construed to
be a waiver of such provision or of any other provision hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without giving effect to the
provisions, policies or principles thereof regarding conflict or choice of laws.
IN WITNESS WHEREOF, the Company has duly executed this Agreement as of
March 6, 1998.
DEMETER BIOTECHNOLOGIES, LTD.
By: /s/ Donald A. Guthrie
-----------------------------
Secretary
<PAGE> 4
IN WITNESS WHEREOF, the undersigned, the Optionee named herein, hereby
accepts and agrees to all of the terms and provisions of this Agreement as of
the day and year written below.
Richard D. Ekstrom
<PAGE> 1
Exhibit 10.13(b)
STOCK OPTION AGREEMENT
On March 6, 1998, the Board of Directors of Demeter
BioTechnologies, Ltd., a Colorado corporation (the "Company"), determined to
grant you, Bruce A. Guthrie (the "Optionee"), as an employee of the Company,
subject to certain terms and conditions, an option to purchase (the "Option")
that number of shares of common stock of the Company (the "Shares") set forth
below. The Company and the Optionee now desire to formalize the grant of the
Option and the terms and conditions relating to such Option.
1. Grant of Option; Number of Shares; Exercise Price. In recognition of
the Optionee's commitment to the continued growth of the Company, as a matter of
separate inducement and not in lieu of any salary or other compensation for the
Optionee's services to the Company, the Company hereby grants to the Optionee
this Option to purchase Five Hundred Fifty Thousand (550,000) Shares (the
"Option Shares"). The exercise price shall be five cents ($0.05) per Option
Share. The Optionee shall not have any of the rights or obligations of a
stockholder with respect to the Option Shares unless and until one or more stock
certificates representing Option Shares are delivered to him upon the valid
exercise of this Option.
2. Exercise Period; Conditions of Exercise.
(a) This Option shall be exercisable in whole or in part prior
to March 5, 2008 (the "Expiration Date"). After the Expiration Date, all rights
granted to the Optionee hereunder shall cease, without any further action by the
Company or the Optionee. The right of the Optionee to exercise this Option is
limited in accordance with the following exercise schedule:
<TABLE>
<CAPTION>
DATE PERCENTAGE OF OPTION SHARES
---- ---------------------------
<S> <C>
After March 6, 1998 until Expiration Date Fifty Percent (50%)
After April 6, 1998 until Expiration Date An additional ten percent (10%)
After May 6, 1998 until Expiration Date An additional ten percent (10%)
After June 6, 1998 until Expiration Date An additional ten percent (10%)
After July 6, 1998 until Expiration Date An additional ten percent (10%)
After August 6, 1998 until Expiration Date An additional ten percent (10%)
</TABLE>
(b) This Option may be exercised only to purchase whole
Shares, and in no case may a fraction of a Share be purchased.
3. Non-Transferability of Option. This Option may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of in any
way, shall not be assignable by operation of law and shall not be subject to
execution, attachment or similar process. Any attempted sale, assignment,
transfer, pledge, hypothecation or other disposition of this Option
<PAGE> 2
contrary to the provisions hereof shall be null and void and without effect.
Notwithstanding the foregoing, if the Optionee shall die prior to the Expiration
Date, the Optionee's estate or conservator, as the case may be, shall (to the
extent not previously exercised by the Optionee) be permitted to exercise this
Option before the Expiration Date.
4. Procedures for Exercise of Option. This Option shall be exercisable
in accordance with the following procedures. Upon the election of the Optionee
to exercise this Option (in whole or in part) on prior to the Expiration Date,
the Optionee (or his estate) shall deliver to the Company written notice
specifying the number of Option Shares which he is electing to purchase and a
date, not less than 5 nor more than 15 days after the date of such notice (an
"Exercise Date"), upon which such Shares shall be purchased and payment therefor
shall be made. A stock certificate(s) representing the number of Option Shares
the Optionee has so elected to purchase shall be delivered to him by the Company
on the Exercise Date against delivery (on the Exercise Date) to the Company of
cash or certified or bank cashier's check payable to the order of the Company,
in an amount equal to (A) the number of Option Shares specified in such notice
multiplied by (B) five cents ($0.05), together with payment, by cash or
certified or bank cashier's check payable to the order of the Company, of such
amount as the Company deems necessary to satisfy its liability (if any) to
withhold federal, state or local income or other taxes incurred by reason of the
exercise or the transfer of Shares thereupon.
5. Representations and Warranties of Optionee. The Optionee hereby
represents and warrants to the Company as follows:
(a) The Optionee has the legal right and capacity to enter
into this Agreement and he fully understands the terms of this Agreement.
(b) The Optionee will acquire the Option Shares, if the Option
is exercised, for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the Securities Act of
1933 (the "Act").
(c) The Optionee will not, directly or indirectly, offer,
sell, assign, transfer, pledge, hypothecate or otherwise dispose of in any way,
this Option other than in accordance with the terms of this Agreement.
(d) The Optionee acknowledges and agrees that the Option
Shares, when issued and delivered to him pursuant to an exercise of this Option,
will be "restricted" Shares, and may only be sold or otherwise transferred by
him in accordance with the provisions of the Act.
6. Adjustment of Option Shares and Option Price. If, prior to the full
exercise of the Option, any of the events described below shall occur, the
Option Shares and the exercise price thereof shall, in each instance, be
adjusted as follows:
(a) Stock Dividends or Stock Splits. If an increase has been
effected in the number of outstanding Shares by reason of a subdivision or
split-up of such Shares, there shall be added to the number of Option Shares
which may thereafter be purchased under this Option, the number of additional
Shares which would have been received by the Optionee on
<PAGE> 3
such stock dividend, subdivision or split-up had the Optionee been the holder of
record of the Option Shares immediately prior to such stock dividend,
subdivision or split-up. In such event, the exercise price per Option Share
shall be proportionately reduced.
(b) Combination. If a decrease has been effected in the number
outstanding Shares by reason of a combination or reclassification of Shares, the
number of Option Shares which may thereafter be purchased under this Option
shall be the number of Shares which the Optionee would have been deemed to hold
as a result of such combination or reclassification had the Optionee been the
holder of record of the Option Shares immediately prior to such combination or
reclassification. In such event, the exercise price per Option Share shall be
proportionately increased.
(c) Reclassification; Merger. In the event of (i) a
reclassification of or change in (other than those referred to in clauses (a)
and (b) of this Section 6) the outstanding Shares, (ii) a consolidation or
merger of the Company with or into another corporation where the Company is not
the surviving corporation, or (iii) any sale or conveyance of all or
substantially all the properties or assets of the Company, the Optionee shall
have the right, upon any subsequent exercise of this Option, to receive the kind
and amount of Shares or other securities and property (other than cash
dividends) receivable upon and after such reclassification, change,
consolidation, merger, sale or conveyance as if the Optionee had been the holder
of record of the Option Shares immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and, in such event, the Board
of Directors shall make such adjustment in the exercise price per Option Share
as is just and equitable in the circumstances.
8. Notices. Any notice required or permitted hereunder shall be deemed
given only when delivered personally or when deposited in a United States Post
Office as certified mail, postage prepaid, addressed, as appropriate, if to the
Optionee, at such address as he may designate in writing to the Company, and, if
to the Company, at its principal offices.
9. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Option shall in no way be construed to
be a waiver of such provision or of any other provision hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without giving effect to the
provisions, policies or principles thereof regarding conflict or choice of laws.
IN WITNESS WHEREOF, the Company has duly executed this Agreement as of
March 6, 1998.
DEMETER BIOTECHNOLOGIES, LTD.
By: /s/ Richard D. Ekstrom
---------------------------
President
<PAGE> 4
IN WITNESS WHEREOF, the undersigned, the Optionee named herein, hereby
accepts and agrees to all of the terms and provisions of this Agreement as of
the day and year written below.
Bruce A. Guthrie
<PAGE> 1
Exhibit 10.13(c)
STOCK OPTION AGREEMENT
On March 6, 1998, the Board of Directors of Demeter BioTechnologies,
Ltd., a Colorado corporation (the "Company"), determined to grant you, Donald A.
Guthrie (the "Optionee"), as a director of the Company, subject to certain terms
and conditions, an option to purchase (the "Option") that number of shares of
common stock of the Company (the "Shares") set forth below. The Company and the
Optionee now desire to formalize the grant of the Option and the terms and
conditions relating to such Option.
1. Grant of Option; Number of Shares; Exercise Price. In recognition of
the Optionee's commitment to the continued growth of the Company, as a matter of
separate inducement and not in lieu of any salary or other compensation for the
Optionee's services to the Company, the Company hereby grants to the Optionee
this Option to purchase Five Hundred Fifty Thousand (550,000) Shares (the
"Option Shares"). The exercise price shall be five cents ($0.05) per Option
Share. The Optionee shall not have any of the rights or obligations of a
stockholder with respect to the Option Shares unless and until one or more stock
certificates representing Option Shares are delivered to him upon the valid
exercise of this Option.
2. Exercise Period; Conditions of Exercise.
(a) This Option shall be exercisable in whole or in part prior
to March 5, 2008 (the "Expiration Date"). After the Expiration Date, all rights
granted to the Optionee hereunder shall cease, without any further action by the
Company or the Optionee.
(b) This Option may be exercised only to purchase whole
Shares, and in no case may a fraction of a Share be purchased.
3. Non-Transferability of Option. This Option may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of in any
way, shall not be assignable by operation of law and shall not be subject to
execution, attachment or similar process. Any attempted sale, assignment,
transfer, pledge, hypothecation or other disposition of this Option contrary to
the provisions hereof shall be null and void and without effect. Notwithstanding
the foregoing, if the Optionee shall die prior to the Expiration Date, the
Optionee's estate or conservator, as the case may be, shall (to the extent not
previously exercised by the Optionee) be permitted to exercise this Option
before the Expiration Date.
4. Procedures for Exercise of Option. This Option shall be exercisable
in accordance with the following procedures. Upon the election of the Optionee
to exercise this Option (in whole or in part) on prior to the Expiration Date,
the Optionee (or his estate) shall deliver to the Company written notice
specifying the number of Option Shares which he is electing to purchase and a
date, not less than 5 nor more than 15 days after the date of such notice (an
"Exercise Date"), upon which such Shares shall be purchased and payment therefor
<PAGE> 2
shall be made. A stock certificate(s) representing the number of Option Shares
the Optionee has so elected to purchase shall be delivered to him by the Company
on the Exercise Date against delivery (on the Exercise Date) to the Company of
cash or certified or bank cashier's check payable to the order of the Company,
in an amount equal to (A) the number of Option Shares specified in such notice
multiplied by (B) five cents ($0.05), together with payment, by cash or
certified or bank cashier's check payable to the order of the Company, of such
amount as the Company deems necessary to satisfy its liability (if any) to
withhold federal, state or local income or other taxes incurred by reason of the
exercise or the transfer of Shares thereupon.
5. Representations and Warranties of Optionee. The Optionee hereby
represents and warrants to the Company as follows:
(a) The Optionee has the legal right and capacity to enter
into this Agreement and he fully understands the terms of this Agreement.
(b) The Optionee will acquire the Option Shares, if the Option
is exercised, for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the Securities Act of
1933 (the "Act").
(c) The Optionee will not, directly or indirectly, offer,
sell, assign, transfer, pledge, hypothecate or otherwise dispose of in any way,
this Option other than in accordance with the terms of this Agreement.
(d) The Optionee acknowledges and agrees that the Option
Shares, when issued and delivered to him pursuant to an exercise of this Option,
will be "restricted" Shares, and may only be sold or otherwise transferred by
him in accordance with the provisions of the Act.
6. Adjustment of Option Shares and Option Price. If, prior to the full
exercise of the Option, any of the events described below shall occur, the
Option Shares and the exercise price thereof shall, in each instance, be
adjusted as follows:
(a) Stock Dividends or Stock Splits. If an increase has been
effected in the number of outstanding Shares by reason of a subdivision or
split-up of such Shares, there shall be added to the number of Option Shares
which may thereafter be purchased under this Option, the number of additional
Shares which would have been received by the Optionee on such stock dividend,
subdivision or split-up had the Optionee been the holder of record of the Option
Shares immediately prior to such stock dividend, subdivision or split-up. In
such event, the exercise price per Option Share shall be proportionately
reduced.
(b) Combination. If a decrease has been effected in the number
outstanding Shares by reason of a combination or reclassification of Shares, the
number of Option Shares which may thereafter be purchased under this Option
shall be the number of Shares which the Optionee would have been deemed to hold
as a result of such combination or reclassification had the Optionee been the
holder of record of the Option Shares immediately prior to such combination or
reclassification. In such event, the exercise price per Option Share shall be
proportionately increased.
<PAGE> 3
(c) Reclassification; Merger. In the event of (i) a
reclassification of or change in (other than those referred to in clauses (a)
and (b) of this Section 6) the outstanding Shares, (ii) a consolidation or
merger of the Company with or into another corporation where the Company is not
the surviving corporation, or (iii) any sale or conveyance of all or
substantially all the properties or assets of the Company, the Optionee shall
have the right, upon any subsequent exercise of this Option, to receive the kind
and amount of Shares or other securities and property (other than cash
dividends) receivable upon and after such reclassification, change,
consolidation, merger, sale or conveyance as if the Optionee had been the holder
of record of the Option Shares immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and, in such event, the Board
of Directors shall make such adjustment in the exercise price per Option Share
as is just and equitable in the circumstances.
8. Notices. Any notice required or permitted hereunder shall be deemed
given only when delivered personally or when deposited in a United States Post
Office as certified mail, postage prepaid, addressed, as appropriate, if to the
Optionee, at such address as he may designate in writing to the Company, and, if
to the Company, at its principal offices.
9. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Option shall in no way be construed to
be a waiver of such provision or of any other provision hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without giving effect to the
provisions, policies or principles thereof regarding conflict or choice of laws.
IN WITNESS WHEREOF, the Company has duly executed this Agreement as of
March 6, 1998.
DEMETER BIOTECHNOLOGIES, LTD.
By: /s/ Richard D. Ekstrom
-------------------------
President
IN WITNESS WHEREOF, the undersigned, the Optionee named herein, hereby
accepts and agrees to all of the terms and provisions of this Agreement as of
the day and year written below.
Donald A. Guthrie
<PAGE> 1
Exhibit 10.13(d)
STOCK OPTION AGREEMENT
On March 6, 1998, the Board of Directors of Demeter BioTechnologies,
Ltd., a Colorado corporation (the "Company"), determined to grant you, Jesse M.
Jaynes (the "Optionee"), as an employee of the Company, subject to certain terms
and conditions, an option to purchase (the "Option") that number of shares of
common stock of the Company (the "Shares") set forth below. The Company and the
Optionee now desire to formalize the grant of the Option and the terms and
conditions relating to such Option.
1. Grant of Option; Number of Shares; Exercise Price. In recognition of
the Optionee's commitment to the continued growth of the Company, as a matter of
separate inducement and not in lieu of any salary or other compensation for the
Optionee's services to the Company, the Company hereby grants to the Optionee
this Option to purchase One Million Six Hundred Thousand (1,600,000) Shares (the
"Option Shares"). The exercise price shall be five cents ($0.05) per Option
Share. The Optionee shall not have any of the rights or obligations of a
stockholder with respect to the Option Shares unless and until one or more stock
certificates representing Option Shares are delivered to him upon the valid
exercise of this Option.
2. Exercise Period; Conditions of Exercise.
(a) This Option shall be exercisable in whole or in part prior
to March 5, 2008 (the "Expiration Date"). After the Expiration Date, all rights
granted to the Optionee hereunder shall cease, without any further action by the
Company or the Optionee. The right of the Optionee to exercise this Option is
limited in accordance with the following exercise schedule:
<TABLE>
<CAPTION>
DATE PERCENTAGE OF OPTION SHARES
---- ---------------------------
<S> <C>
After March 6, 1998 until Expiration Date Fifty Percent (50%)
After April 6, 1998 until Expiration Date An additional ten percent (10%)
After May 6, 1998 until Expiration Date An additional ten percent (10%)
After June 6, 1998 until Expiration Date An additional ten percent (10%)
After July 6, 1998 until Expiration Date An additional ten percent (10%)
After August 6, 1998 until Expiration Date An additional ten percent (10%)
</TABLE>
(b) This Option may be exercised only to purchase whole
Shares, and in no case may a fraction of a Share be purchased.
3. Non-Transferability of Option. This Option may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of in any
way, shall not be assignable by operation of law and shall not be subject to
execution, attachment or similar process. Any attempted sale, assignment,
transfer, pledge, hypothecation or other disposition of this Option
<PAGE> 2
contrary to the provisions hereof shall be null and void and without effect.
Notwithstanding the foregoing, if the Optionee shall die prior to the Expiration
Date, the Optionee's estate or conservator, as the case may be, shall (to the
extent not previously exercised by the Optionee) be permitted to exercise this
Option before the Expiration Date.
4. Procedures for Exercise of Option. This Option shall be exercisable
in accordance with the following procedures. Upon the election of the Optionee
to exercise this Option (in whole or in part) on prior to the Expiration Date,
the Optionee (or his estate) shall deliver to the Company written notice
specifying the number of Option Shares which he is electing to purchase and a
date, not less than 5 nor more than 15 days after the date of such notice (an
"Exercise Date"), upon which such Shares shall be purchased and payment therefor
shall be made. A stock certificate(s) representing the number of Option Shares
the Optionee has so elected to purchase shall be delivered to him by the Company
on the Exercise Date against delivery (on the Exercise Date) to the Company of
cash or certified or bank cashier's check payable to the order of the Company,
in an amount equal to (A) the number of Option Shares specified in such notice
multiplied by (B) five cents ($0.05), together with payment, by cash or
certified or bank cashier's check payable to the order of the Company, of such
amount as the Company deems necessary to satisfy its liability (if any) to
withhold federal, state or local income or other taxes incurred by reason of the
exercise or the transfer of Shares thereupon.
5. Representations and Warranties of Optionee. The Optionee hereby
represents and warrants to the Company as follows:
(a) The Optionee has the legal right and capacity to enter
into this Agreement and he fully understands the terms of this Agreement.
(b) The Optionee will acquire the Option Shares, if the Option
is exercised, for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the Securities Act of
1933 (the "Act").
(c) The Optionee will not, directly or indirectly, offer,
sell, assign, transfer, pledge, hypothecate or otherwise dispose of in any way,
this Option other than in accordance with the terms of this Agreement.
(d) The Optionee acknowledges and agrees that the Option
Shares, when issued and delivered to him pursuant to an exercise of this Option,
will be "restricted" Shares, and may only be sold or otherwise transferred by
him in accordance with the provisions of the Act.
6. Adjustment of Option Shares and Option Price. If, prior to the full
exercise of the Option, any of the events described below shall occur, the
Option Shares and the exercise price thereof shall, in each instance, be
adjusted as follows:
(a) Stock Dividends or Stock Splits. If an increase has been
effected in the number of outstanding Shares by reason of a subdivision or
split-up of such Shares, there shall be added to the number of Option Shares
which may thereafter be purchased under this Option, the number of additional
Shares which would have been received by the Optionee on
<PAGE> 3
such stock dividend, subdivision or split-up had the Optionee been the holder of
record of the Option Shares immediately prior to such stock dividend,
subdivision or split-up. In such event, the exercise price per Option Share
shall be proportionately reduced.
(b) Combination. If a decrease has been effected in the number
outstanding Shares by reason of a combination or reclassification of Shares, the
number of Option Shares which may thereafter be purchased under this Option
shall be the number of Shares which the Optionee would have been deemed to hold
as a result of such combination or reclassification had the Optionee been the
holder of record of the Option Shares immediately prior to such combination or
reclassification. In such event, the exercise price per Option Share shall be
proportionately increased.
(c) Reclassification; Merger. In the event of (i) a
reclassification of or change in (other than those referred to in clauses (a)
and (b) of this Section 6) the outstanding Shares, (ii) a consolidation or
merger of the Company with or into another corporation where the Company is not
the surviving corporation, or (iii) any sale or conveyance of all or
substantially all the properties or assets of the Company, the Optionee shall
have the right, upon any subsequent exercise of this Option, to receive the kind
and amount of Shares or other securities and property (other than cash
dividends) receivable upon and after such reclassification, change,
consolidation, merger, sale or conveyance as if the Optionee had been the holder
of record of the Option Shares immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and, in such event, the Board
of Directors shall make such adjustment in the exercise price per Option Share
as is just and equitable in the circumstances.
8. Notices. Any notice required or permitted hereunder shall be deemed
given only when delivered personally or when deposited in a United States Post
Office as certified mail, postage prepaid, addressed, as appropriate, if to the
Optionee, at such address as he may designate in writing to the Company, and, if
to the Company, at its principal offices.
9. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Option shall in no way be construed to
be a waiver of such provision or of any other provision hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without giving effect to the
provisions, policies or principles thereof regarding conflict or choice of laws.
IN WITNESS WHEREOF, the Company has duly executed this Agreement as of
March 6, 1998.
DEMETER BIOTECHNOLOGIES, LTD.
By: /s/ Richard D. Ekstrom
----------------------------
President
<PAGE> 4
IN WITNESS WHEREOF, the undersigned, the Optionee named herein, hereby
accepts and agrees to all of the terms and provisions of this Agreement as of
the day and year written below.
Jesse M. Jaynes
<PAGE> 1
Exhibit 10.13(e)
STOCK OPTION AGREEMENT
On March 6, 1998, the Board of Directors of Demeter BioTechnologies,
Ltd., a Colorado corporation (the "Company"), determined to grant you, D. T.
Roane (the "Optionee"), as an employee of the Company, subject to certain terms
and conditions, an option to purchase (the "Option") that number of shares of
common stock of the Company (the "Shares") set forth below. The Company and the
Optionee now desire to formalize the grant of the Option and the terms and
conditions relating to such Option.
1. Grant of Option; Number of Shares; Exercise Price. In recognition of
the Optionee's commitment to the continued growth of the Company, as a matter of
separate inducement and not in lieu of any salary or other compensation for the
Optionee's services to the Company, the Company hereby grants to the Optionee
this Option to purchase Five Hundred Thousand (500,000) Shares (the "Option
Shares"). The exercise price shall be five cents ($0.05) per Option Share. The
Optionee shall not have any of the rights or obligations of a stockholder with
respect to the Option Shares unless and until one or more stock certificates
representing Option Shares are delivered to him upon the valid exercise of this
Option.
2. Exercise Period; Conditions of Exercise.
(a) This Option shall be exercisable in whole or in part prior
to March 5, 2008 (the "Expiration Date"). After the Expiration Date, all rights
granted to the Optionee hereunder shall cease, without any further action by the
Company or the Optionee. The right of the Optionee to exercise this Option is
limited in accordance with the following exercise schedule:
<TABLE>
<CAPTION>
DATE PERCENTAGE OF OPTION SHARES
---- ---------------------------
<S> <C>
After March 6, 1998 until Expiration Date Fifty Percent (50%)
After April 6, 1998 until Expiration Date An additional ten percent (10%)
After May 6, 1998 until Expiration Date An additional ten percent (10%)
After June 6, 1998 until Expiration Date An additional ten percent (10%)
After July 6, 1998 until Expiration Date An additional ten percent (10%)
After August 6, 1998 until Expiration Date An additional ten percent (10%)
</TABLE>
(b) This Option may be exercised only to purchase whole
Shares, and in no case may a fraction of a Share be purchased.
3. Non-Transferability of Option. This Option may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of in any
way, shall not be assignable by operation of law and shall not be subject to
execution, attachment or similar process. Any attempted sale, assignment,
transfer, pledge, hypothecation or other disposition of this Option contrary to
the provisions hereof shall be null and void and without effect. Notwithstanding
<PAGE> 2
the foregoing, if the Optionee shall die prior to the Expiration Date, the
Optionee's estate or conservator, as the case may be, shall (to the extent not
previously exercised by the Optionee) be permitted to exercise this Option
before the Expiration Date.
4. Procedures for Exercise of Option. This Option shall be exercisable
in accordance with the following procedures. Upon the election of the Optionee
to exercise this Option (in whole or in part) on prior to the Expiration Date,
the Optionee (or his estate) shall deliver to the Company written notice
specifying the number of Option Shares which he is electing to purchase and a
date, not less than 5 nor more than 15 days after the date of such notice (an
"Exercise Date"), upon which such Shares shall be purchased and payment therefor
shall be made. A stock certificate(s) representing the number of Option Shares
the Optionee has so elected to purchase shall be delivered to him by the Company
on the Exercise Date against delivery (on the Exercise Date) to the Company of
cash or certified or bank cashier's check payable to the order of the Company,
in an amount equal to (A) the number of Option Shares specified in such notice
multiplied by (B) five cents ($0.05), together with payment, by cash or
certified or bank cashier's check payable to the order of the Company, of such
amount as the Company deems necessary to satisfy its liability (if any) to
withhold federal, state or local income or other taxes incurred by reason of the
exercise or the transfer of Shares thereupon.
5. Representations and Warranties of Optionee. The Optionee hereby
represents and warrants to the Company as follows:
(a) The Optionee has the legal right and capacity to enter
into this Agreement and he fully understands the terms of this Agreement.
(b) The Optionee will acquire the Option Shares, if the Option
is exercised, for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the Securities Act of
1933 (the "Act").
(c) The Optionee will not, directly or indirectly, offer,
sell, assign, transfer, pledge, hypothecate or otherwise dispose of in any way,
this Option other than in accordance with the terms of this Agreement.
(d) The Optionee acknowledges and agrees that the Option
Shares, when issued and delivered to him pursuant to an exercise of this Option,
will be "restricted" Shares, and may only be sold or otherwise transferred by
him in accordance with the provisions of the Act.
6. Adjustment of Option Shares and Option Price. If, prior to the full
exercise of the Option, any of the events described below shall occur, the
Option Shares and the exercise price thereof shall, in each instance, be
adjusted as follows:
(a) Stock Dividends or Stock Splits. If an increase has been
effected in the number of outstanding Shares by reason of a subdivision or
split-up of such Shares, there shall be added to the number of Option Shares
which may thereafter be purchased under this Option, the number of additional
Shares which would have been received by the Optionee on such stock dividend,
subdivision or split-up had the Optionee been the holder of record of the
<PAGE> 3
Option Shares immediately prior to such stock dividend, subdivision or split-up.
In such event, the exercise price per Option Share shall be proportionately
reduced.
(b) Combination. If a decrease has been effected in the number
outstanding Shares by reason of a combination or reclassification of Shares, the
number of Option Shares which may thereafter be purchased under this Option
shall be the number of Shares which the Optionee would have been deemed to hold
as a result of such combination or reclassification had the Optionee been the
holder of record of the Option Shares immediately prior to such combination or
reclassification. In such event, the exercise price per Option Share shall be
proportionately increased.
(c) Reclassification; Merger. In the event of (i) a
reclassification of or change in (other than those referred to in clauses (a)
and (b) of this Section 6) the outstanding Shares, (ii) a consolidation or
merger of the Company with or into another corporation where the Company is not
the surviving corporation, or (iii) any sale or conveyance of all or
substantially all the properties or assets of the Company, the Optionee shall
have the right, upon any subsequent exercise of this Option, to receive the kind
and amount of Shares or other securities and property (other than cash
dividends) receivable upon and after such reclassification, change,
consolidation, merger, sale or conveyance as if the Optionee had been the holder
of record of the Option Shares immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and, in such event, the Board
of Directors shall make such adjustment in the exercise price per Option Share
as is just and equitable in the circumstances.
8. Notices. Any notice required or permitted hereunder shall be deemed
given only when delivered personally or when deposited in a United States Post
Office as certified mail, postage prepaid, addressed, as appropriate, if to the
Optionee, at such address as he may designate in writing to the Company, and, if
to the Company, at its principal offices.
9. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Option shall in no way be construed to
be a waiver of such provision or of any other provision hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without giving effect to the
provisions, policies or principles thereof regarding conflict or choice of laws.
IN WITNESS WHEREOF, the Company has duly executed this Agreement as of
March 6, 1998.
DEMETER BIOTECHNOLOGIES, LTD.
By: /s/ Richard D. Ekstrom
---------------------------
President
<PAGE> 4
IN WITNESS WHEREOF, the undersigned, the Optionee named herein, hereby
accepts and agrees to all of the terms and provisions of this Agreement as of
the day and year written below.
D. T. Roane
<PAGE> 1
Exhibit 10.13(f)
STOCK OPTION AGREEMENT
On March 6, 1998, the Board of Directors of Demeter BioTechnologies,
Ltd., a Colorado corporation (the "Company"), determined to grant you, A. L.
Caldwell (the "Optionee"), as an employee of the Company, subject to certain
terms and conditions, an option to purchase (the "Option") that number of shares
of common stock of the Company (the "Shares") set forth below. The Company and
the Optionee now desire to formalize the grant of the Option and the terms and
conditions relating to such Option.
1. Grant of Option; Number of Shares; Exercise Price. In recognition of
the Optionee's commitment to the continued growth of the Company, as a matter of
separate inducement and not in lieu of any salary or other compensation for the
Optionee's services to the Company, the Company hereby grants to the Optionee
this Option to purchase Two Hundred Fifty Thousand (250,000) Shares (the "Option
Shares"). The exercise price shall be five cents ($0.05) per Option Share. The
Optionee shall not have any of the rights or obligations of a stockholder with
respect to the Option Shares unless and until one or more stock certificates
representing Option Shares are delivered to him upon the valid exercise of this
Option.
2. Exercise Period; Conditions of Exercise.
(a) This Option shall be exercisable in whole or in part prior
to March 5, 2008 (the "Expiration Date"). After the Expiration Date, all rights
granted to the Optionee hereunder shall cease, without any further action by the
Company or the Optionee. The right of the Optionee to exercise this Option is
limited in accordance with the following exercise schedule:
<TABLE>
<CAPTION>
DATE PERCENTAGE OF OPTION SHARES
---- ---------------------------
<S> <C>
After March 6, 1998 until Expiration Date Fifty Percent (50%)
After April 6, 1998 until Expiration Date An additional ten percent (10%)
After May 6, 1998 until Expiration Date An additional ten percent (10%)
After June 6, 1998 until Expiration Date An additional ten percent (10%)
After July 6, 1998 until Expiration Date An additional ten percent (10%)
After August 6, 1998 until Expiration Date An additional ten percent (10%)
</TABLE>
(b) This Option may be exercised only to purchase whole
Shares, and in no case may a fraction of a Share be purchased.
3. Non-Transferability of Option. This Option may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of in any
way, shall not be assignable by operation of law and shall not be subject to
execution, attachment or similar process. Any attempted sale, assignment,
transfer, pledge, hypothecation or other disposition of this Option
<PAGE> 2
contrary to the provisions hereof shall be null and void and without effect.
Notwithstanding the foregoing, if the Optionee shall die prior to the Expiration
Date, the Optionee's estate or conservator, as the case may be, shall (to the
extent not previously exercised by the Optionee) be permitted to exercise this
Option before the Expiration Date.
4. Procedures for Exercise of Option. This Option shall be exercisable
in accordance with the following procedures. Upon the election of the Optionee
to exercise this Option (in whole or in part) on prior to the Expiration Date,
the Optionee (or his estate) shall deliver to the Company written notice
specifying the number of Option Shares which he is electing to purchase and a
date, not less than 5 nor more than 15 days after the date of such notice (an
"Exercise Date"), upon which such Shares shall be purchased and payment therefor
shall be made. A stock certificate(s) representing the number of Option Shares
the Optionee has so elected to purchase shall be delivered to him by the Company
on the Exercise Date against delivery (on the Exercise Date) to the Company of
cash or certified or bank cashier's check payable to the order of the Company,
in an amount equal to (A) the number of Option Shares specified in such notice
multiplied by (B) five cents ($0.05), together with payment, by cash or
certified or bank cashier's check payable to the order of the Company, of such
amount as the Company deems necessary to satisfy its liability (if any) to
withhold federal, state or local income or other taxes incurred by reason of the
exercise or the transfer of Shares thereupon.
5. Representations and Warranties of Optionee. The Optionee hereby
represents and warrants to the Company as follows:
(a) The Optionee has the legal right and capacity to enter
into this Agreement and he fully understands the terms of this Agreement.
(b) The Optionee will acquire the Option Shares, if the Option
is exercised, for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the Securities Act of
1933 (the "Act").
(c) The Optionee will not, directly or indirectly, offer,
sell, assign, transfer, pledge, hypothecate or otherwise dispose of in any way,
this Option other than in accordance with the terms of this Agreement.
(d) The Optionee acknowledges and agrees that the Option
Shares, when issued and delivered to him pursuant to an exercise of this Option,
will be "restricted" Shares, and may only be sold or otherwise transferred by
him in accordance with the provisions of the Act.
6. Adjustment of Option Shares and Option Price. If, prior to the full
exercise of the Option, any of the events described below shall occur, the
Option Shares and the exercise price thereof shall, in each instance, be
adjusted as follows:
(a) Stock Dividends or Stock Splits. If an increase has been
effected in the number of outstanding Shares by reason of a subdivision or
split-up of such Shares, there shall be added to the number of Option Shares
which may thereafter be purchased under this Option, the number of additional
Shares which would have been received by the Optionee on
<PAGE> 3
such stock dividend, subdivision or split-up had the Optionee been the holder of
record of the Option Shares immediately prior to such stock dividend,
subdivision or split-up. In such event, the exercise price per Option Share
shall be proportionately reduced.
(b) Combination. If a decrease has been effected in the number
outstanding Shares by reason of a combination or reclassification of Shares, the
number of Option Shares which may thereafter be purchased under this Option
shall be the number of Shares which the Optionee would have been deemed to hold
as a result of such combination or reclassification had the Optionee been the
holder of record of the Option Shares immediately prior to such combination or
reclassification. In such event, the exercise price per Option Share shall be
proportionately increased.
(c) Reclassification; Merger. In the event of (i) a
reclassification of or change in (other than those referred to in clauses (a)
and (b) of this Section 6) the outstanding Shares, (ii) a consolidation or
merger of the Company with or into another corporation where the Company is not
the surviving corporation, or (iii) any sale or conveyance of all or
substantially all the properties or assets of the Company, the Optionee shall
have the right, upon any subsequent exercise of this Option, to receive the kind
and amount of Shares or other securities and property (other than cash
dividends) receivable upon and after such reclassification, change,
consolidation, merger, sale or conveyance as if the Optionee had been the holder
of record of the Option Shares immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and, in such event, the Board
of Directors shall make such adjustment in the exercise price per Option Share
as is just and equitable in the circumstances.
8. Notices. Any notice required or permitted hereunder shall be deemed
given only when delivered personally or when deposited in a United States Post
Office as certified mail, postage prepaid, addressed, as appropriate, if to the
Optionee, at such address as he may designate in writing to the Company, and, if
to the Company, at its principal offices.
9. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Option shall in no way be construed to
be a waiver of such provision or of any other provision hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without giving effect to the
provisions, policies or principles thereof regarding conflict or choice of laws.
IN WITNESS WHEREOF, the Company has duly executed this Agreement as of
March 6, 1998.
DEMETER BIOTECHNOLOGIES, LTD.
By: /s/ Richard D. Ekstrom
------------------------------
President
<PAGE> 4
IN WITNESS WHEREOF, the undersigned, the Optionee named herein, hereby
accepts and agrees to all of the terms and provisions of this Agreement as of
the day and year written below.
A. L. Caldwell
<PAGE> 1
Exhibit 10.13(g)
STOCK OPTION AGREEMENT
On March 6, 1998, the Board of Directors of Demeter BioTechnologies,
Ltd., a Colorado corporation (the "Company"), determined to grant you, Alfonzo
Lovo (the "Optionee"), as an outside director of the Company, subject to certain
terms and conditions, an option to purchase (the "Option") that number of shares
of common stock of the Company (the "Shares") set forth below. The Company and
the Optionee now desire to formalize the grant of the Option and the terms and
conditions relating to such Option.
1. Grant of Option; Number of Shares; Exercise Price. In recognition of
the Optionee's commitment to the continued growth of the Company, as a matter of
separate inducement and not in lieu of any salary or other compensation for the
Optionee's services to the Company, the Company hereby grants to the Optionee
this Option to purchase One Hundred Fifty Thousand (150,000) Shares (the "Option
Shares"). The exercise price shall be five cents ($0.05) per Option Share. The
Optionee shall not have any of the rights or obligations of a stockholder with
respect to the Option Shares unless and until one or more stock certificates
representing Option Shares are delivered to him upon the valid exercise of this
Option.
2. Exercise Period; Conditions of Exercise.
(a) This Option shall be exercisable in whole or in part prior
to March 5, 2008 (the "Expiration Date"). After the Expiration Date, all rights
granted to the Optionee hereunder shall cease, without any further action by the
Company or the Optionee.
(b) This Option may be exercised only to purchase whole
Shares, and in no case may a fraction of a Share be purchased.
3. Non-Transferability of Option. This Option may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of in any
way, shall not be assignable by operation of law and shall not be subject to
execution, attachment or similar process. Any attempted sale, assignment,
transfer, pledge, hypothecation or other disposition of this Option contrary to
the provisions hereof shall be null and void and without effect. Notwithstanding
the foregoing, if the Optionee shall die prior to the Expiration Date, the
Optionee's estate or conservator, as the case may be, shall (to the extent not
previously exercised by the Optionee) be permitted to exercise this Option
before the Expiration Date.
4. Procedures for Exercise of Option. This Option shall be exercisable
in accordance with the following procedures. Upon the election of the Optionee
to exercise this Option (in whole or in part) on prior to the Expiration Date,
the Optionee (or his estate) shall deliver to the Company written notice
specifying the number of Option Shares which he is electing to purchase and a
date, not less than 5 nor more than 15 days after the date of such notice (an
"Exercise Date"), upon which such Shares shall be purchased and payment therefor
<PAGE> 2
shall be made. A stock certificate(s) representing the number of Option Shares
the Optionee has so elected to purchase shall be delivered to him by the Company
on the Exercise Date against delivery (on the Exercise Date) to the Company of
cash or certified or bank cashier's check payable to the order of the Company,
in an amount equal to (A) the number of Option Shares specified in such notice
multiplied by (B) five cents ($0.05), together with payment, by cash or
certified or bank cashier's check payable to the order of the Company, of such
amount as the Company deems necessary to satisfy its liability (if any) to
withhold federal, state or local income or other taxes incurred by reason of the
exercise or the transfer of Shares thereupon.
5. Representations and Warranties of Optionee. The Optionee hereby
represents and warrants to the Company as follows:
(a) The Optionee has the legal right and capacity to enter
into this Agreement and he fully understands the terms of this Agreement.
(b) The Optionee will acquire the Option Shares, if the Option
is exercised, for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the Securities Act of
1933 (the "Act").
(c) The Optionee will not, directly or indirectly, offer,
sell, assign, transfer, pledge, hypothecate or otherwise dispose of in any way,
this Option other than in accordance with the terms of this Agreement.
(d) The Optionee acknowledges and agrees that the Option
Shares, when issued and delivered to him pursuant to an exercise of this Option,
will be "restricted" Shares, and may only be sold or otherwise transferred by
him in accordance with the provisions of the Act.
6. Adjustment of Option Shares and Option Price. If, prior to the full
exercise of the Option, any of the events described below shall occur, the
Option Shares and the exercise price thereof shall, in each instance, be
adjusted as follows:
(a) Stock Dividends or Stock Splits. If an increase has been
effected in the number of outstanding Shares by reason of a subdivision or
split-up of such Shares, there shall be added to the number of Option Shares
which may thereafter be purchased under this Option, the number of additional
Shares which would have been received by the Optionee on such stock dividend,
subdivision or split-up had the Optionee been the holder of record of the Option
Shares immediately prior to such stock dividend, subdivision or split-up. In
such event, the exercise price per Option Share shall be proportionately
reduced.
(b) Combination. If a decrease has been effected in the number
outstanding Shares by reason of a combination or reclassification of Shares, the
number of Option Shares which may thereafter be purchased under this Option
shall be the number of Shares which the Optionee would have been deemed to hold
as a result of such combination or reclassification had the Optionee been the
holder of record of the Option Shares immediately prior to such combination or
reclassification. In such event, the exercise price per Option Share shall be
proportionately increased.
<PAGE> 3
(c) Reclassification; Merger. In the event of (i) a
reclassification of or change in (other than those referred to in clauses (a)
and (b) of this Section 6) the outstanding Shares, (ii) a consolidation or
merger of the Company with or into another corporation where the Company is not
the surviving corporation, or (iii) any sale or conveyance of all or
substantially all the properties or assets of the Company, the Optionee shall
have the right, upon any subsequent exercise of this Option, to receive the kind
and amount of Shares or other securities and property (other than cash
dividends) receivable upon and after such reclassification, change,
consolidation, merger, sale or conveyance as if the Optionee had been the holder
of record of the Option Shares immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and, in such event, the Board
of Directors shall make such adjustment in the exercise price per Option Share
as is just and equitable in the circumstances.
8. Notices. Any notice required or permitted hereunder shall be deemed
given only when delivered personally or when deposited in a United States Post
Office as certified mail, postage prepaid, addressed, as appropriate, if to the
Optionee, at such address as he may designate in writing to the Company, and, if
to the Company, at its principal offices.
9. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Option shall in no way be construed to
be a waiver of such provision or of any other provision hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without giving effect to the
provisions, policies or principles thereof regarding conflict or choice of laws.
IN WITNESS WHEREOF, the Company has duly executed this Agreement as of
March 6, 1998.
DEMETER BIOTECHNOLOGIES, LTD.
By: /s/ Richard D. Ekstrom
---------------------------
President
IN WITNESS WHEREOF, the undersigned, the Optionee named herein, hereby
accepts and agrees to all of the terms and provisions of this Agreement as of
the day and year written below.
Alfonzo Lovo
<PAGE> 1
Exhibit 10.13(h)
STOCK OPTION AGREEMENT
On March 6, 1998, the Board of Directors of Demeter BioTechnologies,
Ltd., a Colorado corporation (the "Company"), determined to grant you, Antonio
Maggioni (the "Optionee"), as an outside director of the Company, subject to
certain terms and conditions, an option to purchase (the "Option") that number
of shares of common stock of the Company (the "Shares") set forth below. The
Company and the Optionee now desire to formalize the grant of the Option and the
terms and conditions relating to such Option.
1. Grant of Option; Number of Shares; Exercise Price. In recognition of
the Optionee's commitment to the continued growth of the Company, as a matter of
separate inducement and not in lieu of any salary or other compensation for the
Optionee's services to the Company, the Company hereby grants to the Optionee
this Option to purchase One Hundred Fifty Thousand (150,000) Shares (the "Option
Shares"). The exercise price shall be five cents ($0.05) per Option Share. The
Optionee shall not have any of the rights or obligations of a stockholder with
respect to the Option Shares unless and until one or more stock certificates
representing Option Shares are delivered to him upon the valid exercise of this
Option.
2. Exercise Period; Conditions of Exercise.
(a) This Option shall be exercisable in whole or in part prior
to March 5, 2008 (the "Expiration Date"). After the Expiration Date, all rights
granted to the Optionee hereunder shall cease, without any further action by the
Company or the Optionee.
(b) This Option may be exercised only to purchase whole
Shares, and in no case may a fraction of a Share be purchased.
3. Non-Transferability of Option. This Option may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of in any
way, shall not be assignable by operation of law and shall not be subject to
execution, attachment or similar process. Any attempted sale, assignment,
transfer, pledge, hypothecation or other disposition of this Option contrary to
the provisions hereof shall be null and void and without effect. Notwithstanding
the foregoing, if the Optionee shall die prior to the Expiration Date, the
Optionee's estate or conservator, as the case may be, shall (to the extent not
previously exercised by the Optionee) be permitted to exercise this Option
before the Expiration Date.
4. Procedures for Exercise of Option. This Option shall be exercisable
in accordance with the following procedures. Upon the election of the Optionee
to exercise this Option (in whole or in part) on prior to the Expiration Date,
the Optionee (or his estate) shall deliver to the Company written notice
specifying the number of Option Shares which he is electing to purchase and a
date, not less than 5 nor more than 15 days after the date of such notice (an
"Exercise Date"), upon which such Shares shall be purchased and payment therefor
<PAGE> 2
shall be made. A stock certificate(s) representing the number of Option Shares
the Optionee has so elected to purchase shall be delivered to him by the Company
on the Exercise Date against delivery (on the Exercise Date) to the Company of
cash or certified or bank cashier's check payable to the order of the Company,
in an amount equal to (A) the number of Option Shares specified in such notice
multiplied by (B) five cents ($0.05), together with payment, by cash or
certified or bank cashier's check payable to the order of the Company, of such
amount as the Company deems necessary to satisfy its liability (if any) to
withhold federal, state or local income or other taxes incurred by reason of the
exercise or the transfer of Shares thereupon.
5. Representations and Warranties of Optionee. The Optionee hereby
represents and warrants to the Company as follows:
(a) The Optionee has the legal right and capacity to enter
into this Agreement and he fully understands the terms of this Agreement.
(b) The Optionee will acquire the Option Shares, if the Option
is exercised, for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the Securities Act of
1933 (the "Act").
(c) The Optionee will not, directly or indirectly, offer,
sell, assign, transfer, pledge, hypothecate or otherwise dispose of in any way,
this Option other than in accordance with the terms of this Agreement.
(d) The Optionee acknowledges and agrees that the Option
Shares, when issued and delivered to him pursuant to an exercise of this Option,
will be "restricted" Shares, and may only be sold or otherwise transferred by
him in accordance with the provisions of the Act.
6. Adjustment of Option Shares and Option Price. If, prior to the full
exercise of the Option, any of the events described below shall occur, the
Option Shares and the exercise price thereof shall, in each instance, be
adjusted as follows:
(a) Stock Dividends or Stock Splits. If an increase has been
effected in the number of outstanding Shares by reason of a subdivision or
split-up of such Shares, there shall be added to the number of Option Shares
which may thereafter be purchased under this Option, the number of additional
Shares which would have been received by the Optionee on such stock dividend,
subdivision or split-up had the Optionee been the holder of record of the Option
Shares immediately prior to such stock dividend, subdivision or split-up. In
such event, the exercise price per Option Share shall be proportionately
reduced.
(b) Combination. If a decrease has been effected in the number
outstanding Shares by reason of a combination or reclassification of Shares, the
number of Option Shares which may thereafter be purchased under this Option
shall be the number of Shares which the Optionee would have been deemed to hold
as a result of such combination or reclassification had the Optionee been the
holder of record of the Option Shares immediately prior to such combination or
reclassification. In such event, the exercise price per Option Share shall be
proportionately increased.
<PAGE> 3
(c) Reclassification; Merger. In the event of (i) a
reclassification of or change in (other than those referred to in clauses (a)
and (b) of this Section 6) the outstanding Shares, (ii) a consolidation or
merger of the Company with or into another corporation where the Company is not
the surviving corporation, or (iii) any sale or conveyance of all or
substantially all the properties or assets of the Company, the Optionee shall
have the right, upon any subsequent exercise of this Option, to receive the kind
and amount of Shares or other securities and property (other than cash
dividends) receivable upon and after such reclassification, change,
consolidation, merger, sale or conveyance as if the Optionee had been the holder
of record of the Option Shares immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and, in such event, the Board
of Directors shall make such adjustment in the exercise price per Option Share
as is just and equitable in the circumstances.
8. Notices. Any notice required or permitted hereunder shall be deemed
given only when delivered personally or when deposited in a United States Post
Office as certified mail, postage prepaid, addressed, as appropriate, if to the
Optionee, at such address as he may designate in writing to the Company, and, if
to the Company, at its principal offices.
9. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Option shall in no way be construed to
be a waiver of such provision or of any other provision hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without giving effect to the
provisions, policies or principles thereof regarding conflict or choice of laws.
IN WITNESS WHEREOF, the Company has duly executed this Agreement as of
March 6, 1998.
DEMETER BIOTECHNOLOGIES, LTD.
By: /s/ Richard D. Ekstrom
--------------------------
President
IN WITNESS WHEREOF, the undersigned, the Optionee named herein, hereby
accepts and agrees to all of the terms and provisions of this Agreement as of
the day and year written below.
Antonio Maggioni
<PAGE> 1
Exhibit 10.13(i)
STOCK OPTION AGREEMENT
On March 6, 1998, the Board of Directors of Demeter BioTechnologies,
Ltd., a Colorado corporation (the "Company"), determined to grant you, George N.
Keeney (the "Optionee"), as an outside director of the Company, subject to
certain terms and conditions, an option to purchase (the "Option") that number
of shares of common stock of the Company (the "Shares") set forth below. The
Company and the Optionee now desire to formalize the grant of the Option and the
terms and conditions relating to such Option.
1. Grant of Option; Number of Shares; Exercise Price. In recognition of
the Optionee's commitment to the continued growth of the Company, as a matter of
separate inducement and not in lieu of any salary or other compensation for the
Optionee's services to the Company, the Company hereby grants to the Optionee
this Option to purchase One Hundred Fifty Thousand (150,000) Shares (the "Option
Shares"). The exercise price shall be five cents ($0.05) per Option Share. The
Optionee shall not have any of the rights or obligations of a stockholder with
respect to the Option Shares unless and until one or more stock certificates
representing Option Shares are delivered to him upon the valid exercise of this
Option.
2. Exercise Period; Conditions of Exercise.
(a) This Option shall be exercisable in whole or in part prior
to March 5, 2008 (the "Expiration Date"). After the Expiration Date, all rights
granted to the Optionee hereunder shall cease, without any further action by the
Company or the Optionee.
(b) This Option may be exercised only to purchase whole
Shares, and in no case may a fraction of a Share be purchased.
3. Non-Transferability of Option. This Option may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of in any
way, shall not be assignable by operation of law and shall not be subject to
execution, attachment or similar process. Any attempted sale, assignment,
transfer, pledge, hypothecation or other disposition of this Option contrary to
the provisions hereof shall be null and void and without effect. Notwithstanding
the foregoing, if the Optionee shall die prior to the Expiration Date, the
Optionee's estate or conservator, as the case may be, shall (to the extent not
previously exercised by the Optionee) be permitted to exercise this Option
before the Expiration Date.
4. Procedures for Exercise of Option. This Option shall be exercisable
in accordance with the following procedures. Upon the election of the Optionee
to exercise this Option (in whole or in part) on prior to the Expiration Date,
the Optionee (or his estate) shall deliver to the Company written notice
specifying the number of Option Shares which he is electing to purchase and a
date, not less than 5 nor more than 15 days after the date of such notice (an
"Exercise Date"), upon which such Shares shall be purchased and payment therefor
<PAGE> 2
shall be made. A stock certificate(s) representing the number of Option Shares
the Optionee has so elected to purchase shall be delivered to him by the Company
on the Exercise Date against delivery (on the Exercise Date) to the Company of
cash or certified or bank cashier's check payable to the order of the Company,
in an amount equal to (A) the number of Option Shares specified in such notice
multiplied by (B) five cents ($0.05), together with payment, by cash or
certified or bank cashier's check payable to the order of the Company, of such
amount as the Company deems necessary to satisfy its liability (if any) to
withhold federal, state or local income or other taxes incurred by reason of the
exercise or the transfer of Shares thereupon.
5. Representations and Warranties of Optionee. The Optionee hereby
represents and warrants to the Company as follows:
(a) The Optionee has the legal right and capacity to enter
into this Agreement and he fully understands the terms of this Agreement.
(b) The Optionee will acquire the Option Shares, if the Option
is exercised, for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the Securities Act of
1933 (the "Act").
(c) The Optionee will not, directly or indirectly, offer,
sell, assign, transfer, pledge, hypothecate or otherwise dispose of in any way,
this Option other than in accordance with the terms of this Agreement.
(d) The Optionee acknowledges and agrees that the Option
Shares, when issued and delivered to him pursuant to an exercise of this Option,
will be "restricted" Shares, and may only be sold or otherwise transferred by
him in accordance with the provisions of the Act.
6. Adjustment of Option Shares and Option Price. If, prior to the full
exercise of the Option, any of the events described below shall occur, the
Option Shares and the exercise price thereof shall, in each instance, be
adjusted as follows:
(a) Stock Dividends or Stock Splits. If an increase has been
effected in the number of outstanding Shares by reason of a subdivision or
split-up of such Shares, there shall be added to the number of Option Shares
which may thereafter be purchased under this Option, the number of additional
Shares which would have been received by the Optionee on such stock dividend,
subdivision or split-up had the Optionee been the holder of record of the Option
Shares immediately prior to such stock dividend, subdivision or split-up. In
such event, the exercise price per Option Share shall be proportionately
reduced.
(b) Combination. If a decrease has been effected in the number
outstanding Shares by reason of a combination or reclassification of Shares, the
number of Option Shares which may thereafter be purchased under this Option
shall be the number of Shares which the Optionee would have been deemed to hold
as a result of such combination or reclassification had the Optionee been the
holder of record of the Option Shares immediately prior to such combination or
reclassification. In such event, the exercise price per Option Share shall be
proportionately increased.
<PAGE> 3
(c) Reclassification; Merger. In the event of (i) a
reclassification of or change in (other than those referred to in clauses (a)
and (b) of this Section 6) the outstanding Shares, (ii) a consolidation or
merger of the Company with or into another corporation where the Company is not
the surviving corporation, or (iii) any sale or conveyance of all or
substantially all the properties or assets of the Company, the Optionee shall
have the right, upon any subsequent exercise of this Option, to receive the kind
and amount of Shares or other securities and property (other than cash
dividends) receivable upon and after such reclassification, change,
consolidation, merger, sale or conveyance as if the Optionee had been the holder
of record of the Option Shares immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and, in such event, the Board
of Directors shall make such adjustment in the exercise price per Option Share
as is just and equitable in the circumstances.
8. Notices. Any notice required or permitted hereunder shall be deemed
given only when delivered personally or when deposited in a United States Post
Office as certified mail, postage prepaid, addressed, as appropriate, if to the
Optionee, at such address as he may designate in writing to the Company, and, if
to the Company, at its principal offices.
9. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Option shall in no way be construed to
be a waiver of such provision or of any other provision hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without giving effect to the
provisions, policies or principles thereof regarding conflict or choice of laws.
IN WITNESS WHEREOF, the Company has duly executed this Agreement as of
March 6, 1998.
DEMETER BIOTECHNOLOGIES, LTD.
By: /s/ Richard D. Ekstrom
--------------------------
President
IN WITNESS WHEREOF, the undersigned, the Optionee named herein, hereby
accepts and agrees to all of the terms and provisions of this Agreement as of
the day and year written below.
George N. Keeney
<PAGE> 1
Exhibit 10.13(j)
STOCK OPTION AGREEMENT
On March 6, 1998, the Board of Directors of Demeter BioTechnologies,
Ltd., a Colorado corporation (the "Company"), determined to grant you (the
"Optionee"), as an employee of the Company, subject to certain terms and
conditions, an option to purchase (the "Option") that number of shares of common
stock of the Company (the "Shares") set forth below. The Company and the
Optionee now desire to formalize the grant of the Option and the terms and
conditions relating to such Option.
1. Grant of Option; Number of Shares; Exercise Price. In recognition of
the Optionee's commitment to the continued growth of the Company, as a matter of
separate inducement and not in lieu of any salary or other compensation for the
Optionee's services to the Company, the Company hereby grants to the Optionee
this Option to purchase Three Hundred Thousand (300,000) Shares (the "Option
Shares"). The exercise price shall be five cents ($0.05) per Option Share. The
Optionee shall not have any of the rights or obligations of a stockholder with
respect to the Option Shares unless and until one or more stock certificates
representing Option Shares are delivered to him upon the valid exercise of this
Option.
2. Exercise Period; Conditions of Exercise.
(a) This Option shall be exercisable in whole or in part prior
to March 5, 2008 (the "Expiration Date"). After the Expiration Date, all rights
granted to the Optionee hereunder shall cease, without any further action by the
Company or the Optionee. The right of the Optionee to exercise this Option is
limited in accordance with the following exercise schedule:
<TABLE>
<CAPTION>
DATE PERCENTAGE OF OPTION SHARES
---- ---------------------------
<S> <C>
After March 6, 1998 until Expiration Date Fifty Percent (50%)
After April 6, 1998 until Expiration Date An additional ten percent (10%)
After May 6, 1998 until Expiration Date An additional ten percent (10%)
After June 6, 1998 until Expiration Date An additional ten percent (10%)
After July 6, 1998 until Expiration Date An additional ten percent (10%)
After August 6, 1998 until Expiration Date An additional ten percent (10%)
</TABLE>
(b) This Option may be exercised only to purchase whole
Shares, and in no case may a fraction of a Share be purchased.
3. Non-Transferability of Option. This Option may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of in any
way, shall not be assignable by operation of law and shall not be subject to
execution, attachment or similar process. Any attempted sale, assignment,
transfer, pledge, hypothecation or other disposition
<PAGE> 2
of this Option contrary to the provisions hereof shall be null and void and
without effect. Notwithstanding the foregoing, if the Optionee shall die prior
to the Expiration Date, the Optionee's estate or conservator, as the case may
be, shall (to the extent not previously exercised by the Optionee) be permitted
to exercise this Option before the Expiration Date.
4. Procedures for Exercise of Option. This Option shall be exercisable
in accordance with the following procedures. Upon the election of the Optionee
to exercise this Option (in whole or in part) on prior to the Expiration Date,
the Optionee (or his estate) shall deliver to the Company written notice
specifying the number of Option Shares which he is electing to purchase and a
date, not less than 5 nor more than 15 days after the date of such notice (an
"Exercise Date"), upon which such Shares shall be purchased and payment therefor
shall be made. A stock certificate(s) representing the number of Option Shares
the Optionee has so elected to purchase shall be delivered to him by the Company
on the Exercise Date against delivery (on the Exercise Date) to the Company of
cash or certified or bank cashier's check payable to the order of the Company,
in an amount equal to (A) the number of Option Shares specified in such notice
multiplied by (B) five cents ($0.05), together with payment, by cash or
certified or bank cashier's check payable to the order of the Company, of such
amount as the Company deems necessary to satisfy its liability (if any) to
withhold federal, state or local income or other taxes incurred by reason of the
exercise or the transfer of Shares thereupon.
5. Representations and Warranties of Optionee. The Optionee hereby
represents and warrants to the Company as follows:
(a) The Optionee has the legal right and capacity to enter
into this Agreement and he fully understands the terms of this Agreement.
(b) The Optionee will acquire the Option Shares, if the Option
is exercised, for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the Securities Act of
1933 (the "Act").
(c) The Optionee will not, directly or indirectly, offer,
sell, assign, transfer, pledge, hypothecate or otherwise dispose of in any way,
this Option other than in accordance with the terms of this Agreement.
(d) The Optionee acknowledges and agrees that the Option
Shares, when issued and delivered to him pursuant to an exercise of this Option,
will be "restricted" Shares, and may only be sold or otherwise transferred by
him in accordance with the provisions of the Act.
6. Adjustment of Option Shares and Option Price. If, prior to the full
exercise of the Option, any of the events described below shall occur, the
Option Shares and the exercise price thereof shall, in each instance, be
adjusted as follows:
(a) Stock Dividends or Stock Splits. If an increase has been
effected in the number of outstanding Shares by reason of a subdivision or
split-up of such Shares, there shall be added to the number of Option Shares
which may thereafter be purchased under this Option, the number of additional
Shares which would have been received
<PAGE> 3
by the Optionee on such stock dividend, subdivision or split-up had the Optionee
been the holder of record of the Option Shares immediately prior to such stock
dividend, subdivision or split-up. In such event, the exercise price per Option
Share shall be proportionately reduced.
(b) Combination. If a decrease has been effected in the number
outstanding Shares by reason of a combination or reclassification of Shares, the
number of Option Shares which may thereafter be purchased under this Option
shall be the number of Shares which the Optionee would have been deemed to hold
as a result of such combination or reclassification had the Optionee been the
holder of record of the Option Shares immediately prior to such combination or
reclassification. In such event, the exercise price per Option Share shall be
proportionately increased.
(c) Reclassification; Merger. In the event of (i) a
reclassification of or change in (other than those referred to in clauses (a)
and (b) of this Section 6) the outstanding Shares, (ii) a consolidation or
merger of the Company with or into another corporation where the Company is not
the surviving corporation, or (iii) any sale or conveyance of all or
substantially all the properties or assets of the Company, the Optionee shall
have the right, upon any subsequent exercise of this Option, to receive the kind
and amount of Shares or other securities and property (other than cash
dividends) receivable upon and after such reclassification, change,
consolidation, merger, sale or conveyance as if the Optionee had been the holder
of record of the Option Shares immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and, in such event, the Board
of Directors shall make such adjustment in the exercise price per Option Share
as is just and equitable in the circumstances.
8. Notices. Any notice required or permitted hereunder shall be deemed
given only when delivered personally or when deposited in a United States Post
Office as certified mail, postage prepaid, addressed, as appropriate, if to the
Optionee, at such address as he may designate in writing to the Company, and, if
to the Company, at its principal offices.
9. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Option shall in no way be construed to
be a waiver of such provision or of any other provision hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without giving effect to the
provisions, policies or principles thereof regarding conflict or choice of laws.
IN WITNESS WHEREOF, the Company has duly executed this Agreement as of
March 6, 1998.
DEMETER BIOTECHNOLOGIES, LTD.
By: /s/ Richard D. Ekstrom
---------------------------
President
<PAGE> 4
IN WITNESS WHEREOF, the undersigned, the Optionee named herein, hereby
accepts and agrees to all of the terms and provisions of this Agreement as of
the day and year written below.
J. E. Thornton
<PAGE> 1
Exhibit 10.13(k)
STOCK OPTION AGREEMENT
On March 6, 1998, the Board of Directors of Demeter BioTechnologies,
Ltd., a Colorado corporation (the "Company"), determined to grant you, Uta
Schwab (the "Optionee"), as an employee of the Company, subject to certain terms
and conditions, an option to purchase (the "Option") that number of shares of
common stock of the Company (the "Shares") set forth below. The Company and the
Optionee now desire to formalize the grant of the Option and the terms and
conditions relating to such Option.
1. Grant of Option; Number of Shares; Exercise Price. In recognition of
the Optionee's commitment to the continued growth of the Company, as a matter of
separate inducement and not in lieu of any salary or other compensation for the
Optionee's services to the Company, the Company hereby grants to the Optionee
this Option to purchase Forty Thousand (40,000) Shares (the "Option Shares").
The exercise price shall be five cents ($0.05) per Option Share. The Optionee
shall not have any of the rights or obligations of a stockholder with respect to
the Option Shares unless and until one or more stock certificates representing
Option Shares are delivered to him upon the valid exercise of this Option.
2. Exercise Period; Conditions of Exercise.
(a) This Option shall be exercisable in whole or in part prior
to March 5, 2008 (the "Expiration Date"). After the Expiration Date, all rights
granted to the Optionee hereunder shall cease, without any further action by the
Company or the Optionee. The right of the Optionee to exercise this Option is
limited in accordance with the following exercise schedule:
<TABLE>
<CAPTION>
DATE PERCENTAGE OF OPTION SHARES
---- ---------------------------
<S> <C>
After March 6, 1998 until Expiration Date Fifty Percent (50%)
After April 6, 1998 until Expiration Date An additional ten percent (10%)
After May 6, 1998 until Expiration Date An additional ten percent (10%)
After June 6, 1998 until Expiration Date An additional ten percent (10%)
After July 6, 1998 until Expiration Date An additional ten percent (10%)
After August 6, 1998 until Expiration Date An additional ten percent (10%)
</TABLE>
(b) This Option may be exercised only to purchase whole
Shares, and in no case may a fraction of a Share be purchased.
3. Non-Transferability of Option. This Option may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of in any
way, shall not be assignable by operation of law and shall not be subject to
execution, attachment or similar process. Any attempted sale, assignment,
transfer, pledge, hypothecation or other disposition of this Option contrary to
the provisions hereof shall be null and void and without effect. Notwithstanding
<PAGE> 2
the foregoing, if the Optionee shall die prior to the Expiration Date, the
Optionee's estate or conservator, as the case may be, shall (to the extent not
previously exercised by the Optionee) be permitted to exercise this Option
before the Expiration Date.
4. Procedures for Exercise of Option. This Option shall be exercisable
in accordance with the following procedures. Upon the election of the Optionee
to exercise this Option (in whole or in part) on prior to the Expiration Date,
the Optionee (or his estate) shall deliver to the Company written notice
specifying the number of Option Shares which he is electing to purchase and a
date, not less than 5 nor more than 15 days after the date of such notice (an
"Exercise Date"), upon which such Shares shall be purchased and payment therefor
shall be made. A stock certificate(s) representing the number of Option Shares
the Optionee has so elected to purchase shall be delivered to him by the Company
on the Exercise Date against delivery (on the Exercise Date) to the Company of
cash or certified or bank cashier's check payable to the order of the Company,
in an amount equal to (A) the number of Option Shares specified in such notice
multiplied by (B) five cents ($0.05), together with payment, by cash or
certified or bank cashier's check payable to the order of the Company, of such
amount as the Company deems necessary to satisfy its liability (if any) to
withhold federal, state or local income or other taxes incurred by reason of the
exercise or the transfer of Shares thereupon.
5. Representations and Warranties of Optionee. The Optionee hereby
represents and warrants to the Company as follows:
(a) The Optionee has the legal right and capacity to enter
into this Agreement and he fully understands the terms of this Agreement.
(b) The Optionee will acquire the Option Shares, if the Option
is exercised, for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the Securities Act of
1933 (the "Act").
(c) The Optionee will not, directly or indirectly, offer,
sell, assign, transfer, pledge, hypothecate or otherwise dispose of in any way,
this Option other than in accordance with the terms of this Agreement.
(d) The Optionee acknowledges and agrees that the Option
Shares, when issued and delivered to him pursuant to an exercise of this Option,
will be "restricted" Shares, and may only be sold or otherwise transferred by
him in accordance with the provisions of the Act.
6. Adjustment of Option Shares and Option Price. If, prior to the full
exercise of the Option, any of the events described below shall occur, the
Option Shares and the exercise price thereof shall, in each instance, be
adjusted as follows:
(a) Stock Dividends or Stock Splits. If an increase has been
effected in the number of outstanding Shares by reason of a subdivision or
split-up of such Shares, there shall be added to the number of Option Shares
which may thereafter be purchased under this Option, the number of additional
Shares which would have been received by the Optionee on such stock dividend,
subdivision or split-up had the Optionee been the holder of record of the
<PAGE> 3
Option Shares immediately prior to such stock dividend, subdivision or split-up.
In such event, the exercise price per Option Share shall be proportionately
reduced.
(b) Combination. If a decrease has been effected in the number
outstanding Shares by reason of a combination or reclassification of Shares, the
number of Option Shares which may thereafter be purchased under this Option
shall be the number of Shares which the Optionee would have been deemed to hold
as a result of such combination or reclassification had the Optionee been the
holder of record of the Option Shares immediately prior to such combination or
reclassification. In such event, the exercise price per Option Share shall be
proportionately increased.
(c) Reclassification; Merger. In the event of (i) a
reclassification of or change in (other than those referred to in clauses (a)
and (b) of this Section 6) the outstanding Shares, (ii) a consolidation or
merger of the Company with or into another corporation where the Company is not
the surviving corporation, or (iii) any sale or conveyance of all or
substantially all the properties or assets of the Company, the Optionee shall
have the right, upon any subsequent exercise of this Option, to receive the kind
and amount of Shares or other securities and property (other than cash
dividends) receivable upon and after such reclassification, change,
consolidation, merger, sale or conveyance as if the Optionee had been the holder
of record of the Option Shares immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and, in such event, the Board
of Directors shall make such adjustment in the exercise price per Option Share
as is just and equitable in the circumstances.
8. Notices. Any notice required or permitted hereunder shall be deemed
given only when delivered personally or when deposited in a United States Post
Office as certified mail, postage prepaid, addressed, as appropriate, if to the
Optionee, at such address as he may designate in writing to the Company, and, if
to the Company, at its principal offices.
9. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Option shall in no way be construed to
be a waiver of such provision or of any other provision hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without giving effect to the
provisions, policies or principles thereof regarding conflict or choice of laws.
IN WITNESS WHEREOF, the Company has duly executed this Agreement as of
March 6, 1998.
DEMETER BIOTECHNOLOGIES, LTD.
By: /s/ Richard D. Ekstrom
--------------------------
President
<PAGE> 4
IN WITNESS WHEREOF, the undersigned, the Optionee named herein, hereby
accepts and agrees to all of the terms and provisions of this Agreement as of
the day and year written below.
Uta Schwab
<PAGE> 1
Exhibit 10.14(a)
STOCK OPTION AGREEMENT
In November of 1996, the Board of Directors of Demeter BioTechnologies,
Ltd., a Colorado corporation (the "Company"), determined to grant you (the
"Optionee"), as an outside director of the Company, subject to certain terms and
conditions, an option to purchase (the "Option") that number of shares of common
stock of the Company (the "Shares") set forth below. The Company and the
Optionee now desire to formalize the grant of the Option and the terms and
conditions relating to such Option.
1. Grant of Option; Number of Shares; Exercise Price. In recognition of
the Optionee's commitment to the continued growth of the Company, as a matter of
separate inducement and not in lieu of any salary or other compensation for the
Optionee's services to the Company, the Company hereby grants to the Optionee
this Option to purchase Fifty Thousand (50,000) Shares (the "Option Shares").
The exercise price shall be Eighty Seven and one half cents ($0.875) per Option
Share. The Optionee shall not have any of the rights or obligations of a
stockholder with respect to the Option Shares unless and until one or more stock
certificates representing Option Shares are delivered to him upon the valid
exercise of this Option.
2. Exercise Period; Conditions of Exercise.
(a) This Option shall be exercisable in whole or in part prior
to October 1, 2001 (the "Expiration Date"). After the Expiration Date, all
rights granted to the Optionee hereunder shall cease, without any further action
by the Company or the Optionee.
(b) This Option may be exercised only to purchase whole
Shares, and in no case may a fraction of a Share be purchased.
3. Non-Transferability of Option. This Option may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of in any
way, shall not be assignable by operation of law and shall not be subject to
execution, attachment or similar process. Any attempted sale, assignment,
transfer, pledge, hypothecation or other disposition of this Option contrary to
the provisions hereof shall be null and void and without effect. Notwithstanding
the foregoing, if the Optionee shall die prior to the Expiration Date, the
Optionee's estate or conservator, as the case may be, shall (to the extent not
previously exercised by the Optionee) be permitted to exercise this Option
before the Expiration Date.
4. Procedures for Exercise of Option. This Option shall be exercisable
in accordance with the following procedures. Upon the election of the Optionee
to exercise this Option (in whole or in part) on prior to the Expiration Date,
the Optionee (or his estate) shall deliver to the Company written notice
specifying the number of Option Shares which he is electing to purchase and a
date, not less than 5 nor more than 15 days after the date of such notice (an
"Exercise Date"), upon which such Shares shall be purchased and payment therefor
shall be made. A stock certificate(s) representing the number of Option Shares
the Optionee
<PAGE> 2
has so elected to purchase shall be delivered to him by the Company on the
Exercise Date against delivery (on the Exercise Date) to the Company of cash or
certified or bank cashier's check payable to the order of the Company, in an
amount equal to (A) the number of Option Shares specified in such notice
multiplied by (B) Eighty Seven and one half cents ($0.875), together with
payment, by cash or certified or bank cashier's check payable to the order of
the Company, of such amount as the Company deems necessary to satisfy its
liability (if any) to withhold federal, state or local income or other taxes
incurred by reason of the exercise or the transfer of Shares thereupon.
5. Representations and Warranties of Optionee. The Optionee hereby
represents and warrants to the Company as follows:
(a) The Optionee has the legal right and capacity to enter
into this Agreement and he fully understands the terms of this Agreement.
(b) The Optionee will acquire the Option Shares, if the Option
is exercised, for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the Securities Act of
1933 (the "Act").
(c) The Optionee will not, directly or indirectly, offer,
sell, assign, transfer, pledge, hypothecate or otherwise dispose of in any way,
this Option other than in accordance with the terms of this Agreement.
(d) The Optionee acknowledges and agrees that the Option
Shares, when issued and delivered to him pursuant to an exercise of this Option,
will be "restricted" Shares, and may only be sold or otherwise transferred by
him in accordance with the provisions of the Act.
6. Adjustment of Option Shares and Option Price. If, prior to the full
exercise of the Option, any of the events described below shall occur, the
Option Shares and the exercise price thereof shall, in each instance, be
adjusted as follows:
(a) Stock Dividends or Stock Splits. If an increase has been
effected in the number of outstanding Shares by reason of a subdivision or
split-up of such Shares, there shall be added to the number of Option Shares
which may thereafter be purchased under this Option, the number of additional
Shares which would have been received by the Optionee on such stock dividend,
subdivision or split-up had the Optionee been the holder of record of the Option
Shares immediately prior to such stock dividend, subdivision or split-up. In
such event, the exercise price per Option Share shall be proportionately
reduced.
(b) Combination. If a decrease has been effected in the number
outstanding Shares by reason of a combination or reclassification of Shares, the
number of Option Shares which may thereafter be purchased under this Option
shall be the number of Shares which the Optionee would have been deemed to hold
as a result of such combination or reclassification had the Optionee been the
holder of record of the Option Shares immediately prior to such combination or
reclassification. In such event, the exercise price per Option Share shall be
proportionately increased.
<PAGE> 3
(c) Reclassification; Merger. In the event of (i) a
reclassification of or change in (other than those referred to in clauses (a)
and (b) of this Section 6) the outstanding Shares, (ii) a consolidation or
merger of the Company with or into another corporation where the Company is not
the surviving corporation, or (iii) any sale or conveyance of all or
substantially all the properties or assets of the Company, the Optionee shall
have the right, upon any subsequent exercise of this Option, to receive the kind
and amount of Shares or other securities and property (other than cash
dividends) receivable upon and after such reclassification, change,
consolidation, merger, sale or conveyance as if the Optionee had been the holder
of record of the Option Shares immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and, in such event, the Board
of Directors shall make such adjustment in the exercise price per Option Share
as is just and equitable in the circumstances.
8. Notices. Any notice required or permitted hereunder shall be deemed
given only when delivered personally or when deposited in a United States Post
Office as certified mail, postage prepaid, addressed, as appropriate, if to the
Optionee, at such address as he may designate in writing to the Company, and, if
to the Company, at its principal offices.
9. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Option shall in no way be construed to
be a waiver of such provision or of any other provision hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without giving effect to the
provisions, policies or principles thereof regarding conflict or choice of laws.
IN WITNESS WHEREOF, the Company has duly executed this Agreement as of
October 1, 1996 the day and year first above written.
DEMETER BIOTECHNOLOGIES, LTD.
By: /s/ Richard D. Ekstrom
--------------------------
President
IN WITNESS WHEREOF, the undersigned, the Optionee named herein, hereby
accepts and agrees to all of the terms and provisions of this Agreement as of
the day and year written below.
/s/ Bruce Guthrie
-------------------------
Bruce Guthrie
<PAGE> 1
Exhibit 10.14(b)
STOCK OPTION AGREEMENT
In November of 1996, the Board of Directors of Demeter BioTechnologies,
Ltd., a Colorado corporation (the "Company"), determined to grant you (the
"Optionee"), as an outside director of the Company, subject to certain terms and
conditions, an option to purchase (the "Option") that number of shares of common
stock of the Company (the "Shares") set forth below. The Company and the
Optionee now desire to formalize the grant of the Option and the terms and
conditions relating to such Option.
1. Grant of Option; Number of Shares; Exercise Price. In recognition of
the Optionee's commitment to the continued growth of the Company, as a matter of
separate inducement and not in lieu of any salary or other compensation for the
Optionee's services to the Company, the Company hereby grants to the Optionee
this Option to purchase Thirty Thousand (30,000) Shares (the "Option Shares").
The exercise price shall be Eighty Seven and one half cents ($0.875) per Option
Share. The Optionee shall not have any of the rights or obligations of a
stockholder with respect to the Option Shares unless and until one or more stock
certificates representing Option Shares are delivered to him upon the valid
exercise of this Option.
2. Exercise Period; Conditions of Exercise.
(a) This Option shall be exercisable in whole or in part prior
to October 1, 2001 (the "Expiration Date"). After the Expiration Date, all
rights granted to the Optionee hereunder shall cease, without any further action
by the Company or the Optionee.
(b) This Option may be exercised only to purchase whole
Shares, and in no case may a fraction of a Share be purchased.
3. Non-Transferability of Option. This Option may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of in any
way, shall not be assignable by operation of law and shall not be subject to
execution, attachment or similar process. Any attempted sale, assignment,
transfer, pledge, hypothecation or other disposition of this Option contrary to
the provisions hereof shall be null and void and without effect. Notwithstanding
the foregoing, if the Optionee shall die prior to the Expiration Date, the
Optionee's estate or conservator, as the case may be, shall (to the extent not
previously exercised by the Optionee) be permitted to exercise this Option
before the Expiration Date.
4. Procedures for Exercise of Option. This Option shall be exercisable
in accordance with the following procedures. Upon the election of the Optionee
to exercise this Option (in whole or in part) on prior to the Expiration Date,
the Optionee (or his estate) shall deliver to the Company written notice
specifying the number of Option Shares which he is electing to purchase and a
date, not less than 5 nor more than 15 days after the date of such notice (an
"Exercise Date"), upon which such Shares shall be purchased and payment therefor
shall be made. A stock certificate(s) representing the number of Option Shares
the Optionee
<PAGE> 2
has so elected to purchase shall be delivered to him by the Company on the
Exercise Date against delivery (on the Exercise Date) to the Company of cash or
certified or bank cashier's check payable to the order of the Company, in an
amount equal to (A) the number of Option Shares specified in such notice
multiplied by (B) Eighty Seven and one half cents ($0.875), together with
payment, by cash or certified or bank cashier's check payable to the order of
the Company, of such amount as the Company deems necessary to satisfy its
liability (if any) to withhold federal, state or local income or other taxes
incurred by reason of the exercise or the transfer of Shares thereupon.
5. Representations and Warranties of Optionee. The Optionee hereby
represents and warrants to the Company as follows:
(a) The Optionee has the legal right and capacity to enter
into this Agreement and he fully understands the terms of this Agreement.
(b) The Optionee will acquire the Option Shares, if the Option
is exercised, for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the Securities Act of
1933 (the "Act").
(c) The Optionee will not, directly or indirectly, offer,
sell, assign, transfer, pledge, hypothecate or otherwise dispose of in any way,
this Option other than in accordance with the terms of this Agreement.
(d) The Optionee acknowledges and agrees that the Option
Shares, when issued and delivered to him pursuant to an exercise of this Option,
will be "restricted" Shares, and may only be sold or otherwise transferred by
him in accordance with the provisions of the Act.
6. Adjustment of Option Shares and Option Price. If, prior to the full
exercise of the Option, any of the events described below shall occur, the
Option Shares and the exercise price thereof shall, in each instance, be
adjusted as follows:
(a) Stock Dividends or Stock Splits. If an increase has been
effected in the number of outstanding Shares by reason of a subdivision or
split-up of such Shares, there shall be added to the number of Option Shares
which may thereafter be purchased under this Option, the number of additional
Shares which would have been received by the Optionee on such stock dividend,
subdivision or split-up had the Optionee been the holder of record of the Option
Shares immediately prior to such stock dividend, subdivision or split-up. In
such event, the exercise price per Option Share shall be proportionately
reduced.
(b) Combination. If a decrease has been effected in the number
outstanding Shares by reason of a combination or reclassification of Shares, the
number of Option Shares which may thereafter be purchased under this Option
shall be the number of Shares which the Optionee would have been deemed to hold
as a result of such combination or reclassification had the Optionee been the
holder of record of the Option Shares immediately prior to such combination or
reclassification. In such event, the exercise price per Option Share shall be
proportionately increased.
<PAGE> 3
(c) Reclassification; Merger. In the event of (i) a
reclassification of or change in (other than those referred to in clauses (a)
and (b) of this Section 6) the outstanding Shares, (ii) a consolidation or
merger of the Company with or into another corporation where the Company is not
the surviving corporation, or (iii) any sale or conveyance of all or
substantially all the properties or assets of the Company, the Optionee shall
have the right, upon any subsequent exercise of this Option, to receive the kind
and amount of Shares or other securities and property (other than cash
dividends) receivable upon and after such reclassification, change,
consolidation, merger, sale or conveyance as if the Optionee had been the holder
of record of the Option Shares immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and, in such event, the Board
of Directors shall make such adjustment in the exercise price per Option Share
as is just and equitable in the circumstances.
8. Notices. Any notice required or permitted hereunder shall be deemed
given only when delivered personally or when deposited in a United States Post
Office as certified mail, postage prepaid, addressed, as appropriate, if to the
Optionee, at such address as he may designate in writing to the Company, and, if
to the Company, at its principal offices.
9. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Option shall in no way be construed to
be a waiver of such provision or of any other provision hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without giving effect to the
provisions, policies or principles thereof regarding conflict or choice of laws.
IN WITNESS WHEREOF, the Company has duly executed this Agreement as of
October 1, 1996 the day and year first above written.
DEMETER BIOTECHNOLOGIES, LTD.
By: /s/ Richard D. Ekstrom
--------------------------
President
IN WITNESS WHEREOF, the undersigned, the Optionee named herein, hereby
accepts and agrees to all of the terms and provisions of this Agreement as of
the day and year written below.
/s/ Thomas Roane
--------------------------
T. Roane
<PAGE> 1
Exhibit 10.14(c)
STOCK OPTION AGREEMENT
In November of 1996, the Board of Directors of Demeter BioTechnologies,
Ltd., a Colorado corporation (the "Company"), determined to grant you (the
"Optionee"), as an outside director of the Company, subject to certain terms and
conditions, an option to purchase (the "Option") that number of shares of common
stock of the Company (the "Shares") set forth below. The Company and the
Optionee now desire to formalize the grant of the Option and the terms and
conditions relating to such Option.
1. Grant of Option; Number of Shares; Exercise Price. In recognition of
the Optionee's commitment to the continued growth of the Company, as a matter of
separate inducement and not in lieu of any salary or other compensation for the
Optionee's services to the Company, the Company hereby grants to the Optionee
this Option to purchase Fifteen Thousand (15,000) Shares (the "Option Shares").
The exercise price shall be Eighty Seven and one half cents ($0.875) per Option
Share. The Optionee shall not have any of the rights or obligations of a
stockholder with respect to the Option Shares unless and until one or more stock
certificates representing Option Shares are delivered to him upon the valid
exercise of this Option.
2. Exercise Period; Conditions of Exercise.
(a) This Option shall be exercisable in whole or in part prior
to October 1, 2001 (the "Expiration Date"). After the Expiration Date, all
rights granted to the Optionee hereunder shall cease, without any further action
by the Company or the Optionee.
(b) This Option may be exercised only to purchase whole
Shares, and in no case may a fraction of a Share be purchased.
3. Non-Transferability of Option. This Option may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of in any
way, shall not be assignable by operation of law and shall not be subject to
execution, attachment or similar process. Any attempted sale, assignment,
transfer, pledge, hypothecation or other disposition of this Option contrary to
the provisions hereof shall be null and void and without effect. Notwithstanding
the foregoing, if the Optionee shall die prior to the Expiration Date, the
Optionee's estate or conservator, as the case may be, shall (to the extent not
previously exercised by the Optionee) be permitted to exercise this Option
before the Expiration Date.
4. Procedures for Exercise of Option. This Option shall be exercisable
in accordance with the following procedures. Upon the election of the Optionee
to exercise this Option (in whole or in part) on prior to the Expiration Date,
the Optionee (or his estate) shall deliver to the Company written notice
specifying the number of Option Shares which he is electing to purchase and a
date, not less than 5 nor more than 15 days after the date of such notice (an
"Exercise Date"), upon which such Shares shall be purchased and payment therefor
shall be made. A stock certificate(s) representing the number of Option Shares
the Optionee
<PAGE> 2
has so elected to purchase shall be delivered to him by the Company on the
Exercise Date against delivery (on the Exercise Date) to the Company of cash or
certified or bank cashier's check payable to the order of the Company, in an
amount equal to (A) the number of Option Shares specified in such notice
multiplied by (B) Eighty Seven and one half cents ($0.875), together with
payment, by cash or certified or bank cashier's check payable to the order of
the Company, of such amount as the Company deems necessary to satisfy its
liability (if any) to withhold federal, state or local income or other taxes
incurred by reason of the exercise or the transfer of Shares thereupon.
5. Representations and Warranties of Optionee. The Optionee hereby
represents and warrants to the Company as follows:
(a) The Optionee has the legal right and capacity to enter
into this Agreement and he fully understands the terms of this Agreement.
(b) The Optionee will acquire the Option Shares, if the Option
is exercised, for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the Securities Act of
1933 (the "Act").
(c) The Optionee will not, directly or indirectly, offer,
sell, assign, transfer, pledge, hypothecate or otherwise dispose of in any way,
this Option other than in accordance with the terms of this Agreement.
(d) The Optionee acknowledges and agrees that the Option
Shares, when issued and delivered to him pursuant to an exercise of this Option,
will be "restricted" Shares, and may only be sold or otherwise transferred by
him in accordance with the provisions of the Act.
6. Adjustment of Option Shares and Option Price. If, prior to the full
exercise of the Option, any of the events described below shall occur, the
Option Shares and the exercise price thereof shall, in each instance, be
adjusted as follows:
(a) Stock Dividends or Stock Splits. If an increase has been
effected in the number of outstanding Shares by reason of a subdivision or
split-up of such Shares, there shall be added to the number of Option Shares
which may thereafter be purchased under this Option, the number of additional
Shares which would have been received by the Optionee on such stock dividend,
subdivision or split-up had the Optionee been the holder of record of the Option
Shares immediately prior to such stock dividend, subdivision or split-up. In
such event, the exercise price per Option Share shall be proportionately
reduced.
(b) Combination. If a decrease has been effected in the number
outstanding Shares by reason of a combination or reclassification of Shares, the
number of Option Shares which may thereafter be purchased under this Option
shall be the number of Shares which the Optionee would have been deemed to hold
as a result of such combination or reclassification had the Optionee been the
holder of record of the Option Shares immediately prior to such combination or
reclassification. In such event, the exercise price per Option Share shall be
proportionately increased.
<PAGE> 3
(c) Reclassification; Merger. In the event of (i) a
reclassification of or change in (other than those referred to in clauses (a)
and (b) of this Section 6) the outstanding Shares, (ii) a consolidation or
merger of the Company with or into another corporation where the Company is not
the surviving corporation, or (iii) any sale or conveyance of all or
substantially all the properties or assets of the Company, the Optionee shall
have the right, upon any subsequent exercise of this Option, to receive the kind
and amount of Shares or other securities and property (other than cash
dividends) receivable upon and after such reclassification, change,
consolidation, merger, sale or conveyance as if the Optionee had been the holder
of record of the Option Shares immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and, in such event, the Board
of Directors shall make such adjustment in the exercise price per Option Share
as is just and equitable in the circumstances.
8. Notices. Any notice required or permitted hereunder shall be deemed
given only when delivered personally or when deposited in a United States Post
Office as certified mail, postage prepaid, addressed, as appropriate, if to the
Optionee, at such address as he may designate in writing to the Company, and, if
to the Company, at its principal offices.
9. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Option shall in no way be construed to
be a waiver of such provision or of any other provision hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without giving effect to the
provisions, policies or principles thereof regarding conflict or choice of laws.
IN WITNESS WHEREOF, the Company has duly executed this Agreement as of
October 1, 1997.
DEMETER BIOTECHNOLOGIES, LTD.
By: /s/ Richard D. Ekstrom
--------------------------
President
IN WITNESS WHEREOF, the undersigned, the Optionee named herein, hereby
accepts and agrees to all of the terms and provisions of this Agreement as of
the day and year written below.
/s/ Alfonzo Lovo
--------------------------
Alfonzo Lovo
<PAGE> 1
Exhibit 10.14(d)
STOCK OPTION AGREEMENT
In November of 1996, the Board of Directors of Demeter BioTechnologies,
Ltd., a Colorado corporation (the "Company"), determined to grant you (the
"Optionee"), as an outside director of the Company, subject to certain terms and
conditions, an option to purchase (the "Option") that number of shares of common
stock of the Company (the "Shares") set forth below. The Company and the
Optionee now desire to formalize the grant of the Option and the terms and
conditions relating to such Option.
1. Grant of Option; Number of Shares; Exercise Price. In recognition of
the Optionee's commitment to the continued growth of the Company, as a matter of
separate inducement and not in lieu of any salary or other compensation for the
Optionee's services to the Company, the Company hereby grants to the Optionee
this Option to purchase Fifteen Thousand (15,000) Shares (the "Option Shares").
The exercise price shall be Eighty Seven and one half cents ($0.875) per Option
Share. The Optionee shall not have any of the rights or obligations of a
stockholder with respect to the Option Shares unless and until one or more stock
certificates representing Option Shares are delivered to him upon the valid
exercise of this Option.
2. Exercise Period; Conditions of Exercise.
(a) This Option shall be exercisable in whole or in part prior
to October 1, 2001 (the "Expiration Date"). After the Expiration Date, all
rights granted to the Optionee hereunder shall cease, without any further action
by the Company or the Optionee.
(b) This Option may be exercised only to purchase whole
Shares, and in no case may a fraction of a Share be purchased.
3. Non-Transferability of Option. This Option may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of in any
way, shall not be assignable by operation of law and shall not be subject to
execution, attachment or similar process. Any attempted sale, assignment,
transfer, pledge, hypothecation or other disposition of this Option contrary to
the provisions hereof shall be null and void and without effect. Notwithstanding
the foregoing, if the Optionee shall die prior to the Expiration Date, the
Optionee's estate or conservator, as the case may be, shall (to the extent not
previously exercised by the Optionee) be permitted to exercise this Option
before the Expiration Date.
4. Procedures for Exercise of Option. This Option shall be exercisable
in accordance with the following procedures. Upon the election of the Optionee
to exercise this Option (in whole or in part) on prior to the Expiration Date,
the Optionee (or his estate) shall deliver to the Company written notice
specifying the number of Option Shares which he is electing to purchase and a
date, not less than 5 nor more than 15 days after the date of such notice (an
"Exercise Date"), upon which such Shares shall be purchased and payment therefor
shall be made. A stock certificate(s) representing the number of Option Shares
the Optionee
<PAGE> 2
has so elected to purchase shall be delivered to him by the Company on the
Exercise Date against delivery (on the Exercise Date) to the Company of cash or
certified or bank cashier's check payable to the order of the Company, in an
amount equal to (A) the number of Option Shares specified in such notice
multiplied by (B) Eighty Seven and one half cents ($0.875), together with
payment, by cash or certified or bank cashier's check payable to the order of
the Company, of such amount as the Company deems necessary to satisfy its
liability (if any) to withhold federal, state or local income or other taxes
incurred by reason of the exercise or the transfer of Shares thereupon.
5. Representations and Warranties of Optionee. The Optionee hereby
represents and warrants to the Company as follows:
(a) The Optionee has the legal right and capacity to enter
into this Agreement and he fully understands the terms of this Agreement.
(b) The Optionee will acquire the Option Shares, if the Option
is exercised, for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the Securities Act of
1933 (the "Act").
(c) The Optionee will not, directly or indirectly, offer,
sell, assign, transfer, pledge, hypothecate or otherwise dispose of in any way,
this Option other than in accordance with the terms of this Agreement.
(d) The Optionee acknowledges and agrees that the Option
Shares, when issued and delivered to him pursuant to an exercise of this Option,
will be "restricted" Shares, and may only be sold or otherwise transferred by
him in accordance with the provisions of the Act.
6. Adjustment of Option Shares and Option Price. If, prior to the full
exercise of the Option, any of the events described below shall occur, the
Option Shares and the exercise price thereof shall, in each instance, be
adjusted as follows:
(a) Stock Dividends or Stock Splits. If an increase has been
effected in the number of outstanding Shares by reason of a subdivision or
split-up of such Shares, there shall be added to the number of Option Shares
which may thereafter be purchased under this Option, the number of additional
Shares which would have been received by the Optionee on such stock dividend,
subdivision or split-up had the Optionee been the holder of record of the Option
Shares immediately prior to such stock dividend, subdivision or split-up. In
such event, the exercise price per Option Share shall be proportionately
reduced.
(b) Combination. If a decrease has been effected in the number
outstanding Shares by reason of a combination or reclassification of Shares, the
number of Option Shares which may thereafter be purchased under this Option
shall be the number of Shares which the Optionee would have been deemed to hold
as a result of such combination or reclassification had the Optionee been the
holder of record of the Option Shares immediately prior to such combination or
reclassification. In such event, the exercise price per Option Share shall be
proportionately increased.
<PAGE> 3
(c) Reclassification; Merger. In the event of (i) a
reclassification of or change in (other than those referred to in clauses (a)
and (b) of this Section 6) the outstanding Shares, (ii) a consolidation or
merger of the Company with or into another corporation where the Company is not
the surviving corporation, or (iii) any sale or conveyance of all or
substantially all the properties or assets of the Company, the Optionee shall
have the right, upon any subsequent exercise of this Option, to receive the kind
and amount of Shares or other securities and property (other than cash
dividends) receivable upon and after such reclassification, change,
consolidation, merger, sale or conveyance as if the Optionee had been the holder
of record of the Option Shares immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and, in such event, the Board
of Directors shall make such adjustment in the exercise price per Option Share
as is just and equitable in the circumstances.
8. Notices. Any notice required or permitted hereunder shall be deemed
given only when delivered personally or when deposited in a United States Post
Office as certified mail, postage prepaid, addressed, as appropriate, if to the
Optionee, at such address as he may designate in writing to the Company, and, if
to the Company, at its principal offices.
9. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Option shall in no way be construed to
be a waiver of such provision or of any other provision hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without giving effect to the
provisions, policies or principles thereof regarding conflict or choice of laws.
IN WITNESS WHEREOF, the Company has duly executed this Agreement as of
October 1, 1996 the day and year first above written.
DEMETER BIOTECHNOLOGIES, LTD.
By: /s/ Richard D. Ekstrom
--------------------------
President
IN WITNESS WHEREOF, the undersigned, the Optionee named herein, hereby
accepts and agrees to all of the terms and provisions of this Agreement as of
the day and year written below.
/s/ Antonio Maggioni
--------------------------
Antonio Maggioni
<PAGE> 1
Exhibit 10.14(e)
STOCK OPTION AGREEMENT
In [November] of 1996, the Board of Directors of Demeter
BioTechnologies, Ltd., a Colorado corporation (the "Company"), determined to
grant you (the "Optionee"), as [Title] of the Company, subject to certain terms
and conditions, an option to purchase (the "Option") that number of shares of
common stock of the Company (the "Shares") set forth below. The Company and the
Optionee now desire to formalize the grant of the Option and the terms and
conditions relating to such Option.
1. Grant of Option; Number of Shares; Exercise Price. In recognition of
the Optionee's commitment to the continued growth of the Company, as a matter of
separate inducement and not in lieu of any salary or other compensation for the
Optionee's services to the Company, the Company hereby grants to the Optionee
this Option to purchase Two Hundred Thousand (200,000) Shares (the "Option
Shares"). The exercise price shall be Eighty Seven and one half cents ($0.875)
per Option Share. The Optionee shall not have any of the rights or obligations
of a stockholder with respect to the Option Shares unless and until one or more
stock certificates representing Option Shares are delivered to him upon the
valid exercise of this Option.
2. Exercise Period; Conditions of Exercise.
(a) This Option shall be exercisable in whole or in part prior
to September 30, 2001 (the "Expiration Date"). After the Expiration Date, all
rights granted to the Optionee hereunder shall cease, without any further action
by the Company or the Optionee.
(b) This Option may be exercised only to purchase whole
Shares, and in no case may a fraction of a Share be purchased.
3. Non-Transferability of Option. This Option may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of in any
way, shall not be assignable by operation of law and shall not be subject to
execution, attachment or similar process. Any attempted sale, assignment,
transfer, pledge, hypothecation or other disposition of this Option contrary to
the provisions hereof shall be null and void and without effect. Notwithstanding
the foregoing, if the Optionee shall die prior to the Expiration Date, the
Optionee's estate or conservator, as the case may be, shall (to the extent not
previously exercised by the Optionee) be permitted to exercise this Option
before the Expiration Date.
4. Procedures for Exercise of Option. This Option shall be exercisable
in accordance with the following procedures. Upon the election of the Optionee
to exercise this Option (in whole or in part) on prior to the Expiration Date,
the Optionee (or his estate) shall deliver to the Company written notice
specifying the number of Option Shares which he is electing to purchase and a
date, not less than 5 nor more than 15 days after the date of such notice (an
"Exercise Date"), upon which such Shares shall be purchased and payment therefor
shall be made. A stock certificate(s) representing the number of Option Shares
the Optionee has so elected to
<PAGE> 2
purchase shall be delivered to him by the Company on the Exercise Date against
delivery (on the Exercise Date) to the Company of cash or certified or bank
cashier's check payable to the order of the Company, in an amount equal to (A)
the number of Option Shares specified in such notice multiplied by (B) Eighty
Seven and one half cents ($0.875), together with payment, by cash or certified
or bank cashier's check payable to the order of the Company, of such amount as
the Company deems necessary to satisfy its liability (if any) to withhold
federal, state or local income or other taxes incurred by reason of the exercise
or the transfer of Shares thereupon.
5. Representations and Warranties of Optionee. The Optionee hereby
represents and warrants to the Company as follows:
(a) The Optionee has the legal right and capacity to enter
into this Agreement and he fully understands the terms of this Agreement.
(b) The Optionee will acquire the Option Shares, if the Option
is exercised, for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the Securities Act of
1933 (the "Act").
(c) The Optionee will not, directly or indirectly, offer,
sell, assign, transfer, pledge, hypothecate or otherwise dispose of in any way,
this Option other than in accordance with the terms of this Agreement.
(d) The Optionee acknowledges and agrees that the Option
Shares, when issued and delivered to him pursuant to an exercise of this Option,
will be "restricted" Shares, and may only be sold or otherwise transferred by
him in accordance with the provisions of the Act.
6. Adjustment of Option Shares and Option Price. If, prior to the full
exercise of the Option, any of the events described below shall occur, the
Option Shares and the exercise price thereof shall, in each instance, be
adjusted as follows:
(a) Stock Dividends or Stock Splits. If an increase has been
effected in the number of outstanding Shares by reason of a subdivision or
split-up of such Shares, there shall be added to the number of Option Shares
which may thereafter be purchased under this Option, the number of additional
Shares which would have been received by the Optionee on such stock dividend,
subdivision or split-up had the Optionee been the holder of record of the Option
Shares immediately prior to such stock dividend, subdivision or split-up. In
such event, the exercise price per Option Share shall be proportionately
reduced.
(b) Combination. If a decrease has been effected in the number
outstanding Shares by reason of a combination or reclassification of Shares, the
number of Option Shares which may thereafter be purchased under this Option
shall be the number of Shares which the Optionee would have been deemed to hold
as a result of such combination or reclassification
2
<PAGE> 3
had the Optionee been the holder of record of the Option Shares immediately
prior to such combination or reclassification. In such event, the exercise price
per Option Share shall be proportionately increased.
(c) Reclassification; Merger. In the event of (i) a
reclassification of or change in (other than those referred to in clauses (a)
and (b) of this Section 6) the outstanding Shares, (ii) a consolidation or
merger of the Company with or into another corporation where the Company is not
the surviving corporation, or (iii) any sale or conveyance of all or
substantially all the properties or assets of the Company, the Optionee shall
have the right, upon any subsequent exercise of this Option, to receive the kind
and amount of Shares or other securities and property (other than cash
dividends) receivable upon and after such reclassification, change,
consolidation, merger, sale or conveyance as if the Optionee had been the holder
of record of the Option Shares immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and, in such event, the Board
of Directors shall make such adjustment in the exercise price per Option Share
as is just and equitable in the circumstances.
8. Notices. Any notice required or permitted hereunder shall be deemed
given only when delivered personally or when deposited in a United States Post
Office as certified mail, postage prepaid, addressed, as appropriate, if to the
Optionee, at his address set forth on the first page hereof or such other
address as he may designate in writing to the Company, and, if to the Company,
at its address set forth on the first page hereof or such other address as the
Company may designate in writing to the Optionee.
9. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Option shall in no way be construed to
be a waiver of such provision or of any other provision hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without giving effect to the
provisions, policies or principles thereof regarding conflict or choice of laws.
IN WITNESS WHEREOF, the Company has duly executed this Agreement as of
October 1, 1996 the day and year first above written.
DEMETER BIOTECHNOLOGIES, LTD.
By: /s/ Richard D. Ekstrom
--------------------------
President
3
<PAGE> 4
IN WITNESS WHEREOF, the undersigned, the Optionee named herein, hereby
accepts and agrees to all of the terms and provisions of this Agreement as of
the day and year written below.
Dated: November 6, 1996 /s/ George N. Keeney
--------------------- ---------------------------
4
<PAGE> 1
Exhibit 10.14(f)
STOCK OPTION AGREEMENT
In November of 1996, the Board of Directors of Demeter BioTechnologies,
Ltd., a Colorado corporation (the "Company"), determined to grant you (the
"Optionee"), as an employee of the Company, subject to certain terms and
conditions, an option to purchase (the "Option") that number of shares of common
stock of the Company (the "Shares") set forth below. The Company and the
Optionee now desire to formalize the grant of the Option and the terms and
conditions relating to such Option.
1. Grant of Option; Number of Shares; Exercise Price. In recognition of
the Optionee's commitment to the continued growth of the Company, as a matter of
separate inducement and not in lieu of any salary or other compensation for the
Optionee's services to the Company, the Company hereby grants to the Optionee
this Option to purchase Two Hundred Thousand (200,000) Shares (the "Option
Shares"). The exercise price shall be Eighty Seven and one half cents ($0.875)
per Option Share. The Optionee shall not have any of the rights or obligations
of a stockholder with respect to the Option Shares unless and until one or more
stock certificates representing Option Shares are delivered to him upon the
valid exercise of this Option.
2. Exercise Period; Conditions of Exercise.
(a) This Option shall be exercisable in whole or in part prior
to October 1, 2001 (the "Expiration Date"). After the Expiration Date, all
rights granted to the Optionee hereunder shall cease, without any further action
by the Company or the Optionee.
(b) This Option may be exercised only to purchase whole
Shares, and in no case may a fraction of a Share be purchased.
3. Non-Transferability of Option. This Option may not be sold,
assigned, transferred, pledged, hypothecated or otherwise disposed of in any
way, shall not be assignable by operation of law and shall not be subject to
execution, attachment or similar process. Any attempted sale, assignment,
transfer, pledge, hypothecation or other disposition of this Option contrary to
the provisions hereof shall be null and void and without effect. Notwithstanding
the foregoing, if the Optionee shall die prior to the Expiration Date, the
Optionee's estate or conservator, as the case may be, shall (to the extent not
previously exercised by the Optionee) be permitted to exercise this Option
before the Expiration Date.
4. Procedures for Exercise of Option. This Option shall be exercisable
in accordance with the following procedures. Upon the election of the Optionee
to exercise this Option (in whole or in part) on prior to the Expiration Date,
the Optionee (or his estate) shall deliver to the Company written notice
specifying the number of Option Shares which he is electing to purchase and a
date, not less than 5 nor more than 15 days after the date of such notice (an
"Exercise Date"), upon which such Shares shall be purchased and payment therefor
shall be made. A stock certificate(s) representing the number of Option Shares
the Optionee
<PAGE> 2
has so elected to purchase shall be delivered to him by the Company on the
Exercise Date against delivery (on the Exercise Date) to the Company of cash or
certified or bank cashier's check payable to the order of the Company, in an
amount equal to (A) the number of Option Shares specified in such notice
multiplied by (B) Eighty Seven and one half cents ($0.875), together with
payment, by cash or certified or bank cashier's check payable to the order of
the Company, of such amount as the Company deems necessary to satisfy its
liability (if any) to withhold federal, state or local income or other taxes
incurred by reason of the exercise or the transfer of Shares thereupon.
5. Representations and Warranties of Optionee. The Optionee hereby
represents and warrants to the Company as follows:
(a) The Optionee has the legal right and capacity to enter
into this Agreement and he fully understands the terms of this Agreement.
(b) The Optionee will acquire the Option Shares, if the Option
is exercised, for investment purposes only and not with a view to resale or
other distribution thereof to the public in violation of the Securities Act of
1933 (the "Act").
(c) The Optionee will not, directly or indirectly, offer,
sell, assign, transfer, pledge, hypothecate or otherwise dispose of in any way,
this Option other than in accordance with the terms of this Agreement.
(d) The Optionee acknowledges and agrees that the Option
Shares, when issued and delivered to him pursuant to an exercise of this Option,
will be "restricted" Shares, and may only be sold or otherwise transferred by
him in accordance with the provisions of the Act.
6. Adjustment of Option Shares and Option Price. If, prior to the full
exercise of the Option, any of the events described below shall occur, the
Option Shares and the exercise price thereof shall, in each instance, be
adjusted as follows:
(a) Stock Dividends or Stock Splits. If an increase has been
effected in the number of outstanding Shares by reason of a subdivision or
split-up of such Shares, there shall be added to the number of Option Shares
which may thereafter be purchased under this Option, the number of additional
Shares which would have been received by the Optionee on such stock dividend,
subdivision or split-up had the Optionee been the holder of record of the Option
Shares immediately prior to such stock dividend, subdivision or split-up. In
such event, the exercise price per Option Share shall be proportionately
reduced.
(b) Combination. If a decrease has been effected in the number
outstanding Shares by reason of a combination or reclassification of Shares, the
number of Option Shares which may thereafter be purchased under this Option
shall be the number of Shares which the Optionee would have been deemed to hold
as a result of such combination or reclassification had the Optionee been the
holder of record of the Option Shares immediately prior to such combination or
reclassification. In such event, the exercise price per Option Share shall be
proportionately increased.
<PAGE> 3
(c) Reclassification; Merger. In the event of (i) a
reclassification of or change in (other than those referred to in clauses (a)
and (b) of this Section 6) the outstanding Shares, (ii) a consolidation or
merger of the Company with or into another corporation where the Company is not
the surviving corporation, or (iii) any sale or conveyance of all or
substantially all the properties or assets of the Company, the Optionee shall
have the right, upon any subsequent exercise of this Option, to receive the kind
and amount of Shares or other securities and property (other than cash
dividends) receivable upon and after such reclassification, change,
consolidation, merger, sale or conveyance as if the Optionee had been the holder
of record of the Option Shares immediately prior to such reclassification,
change, consolidation, merger, sale or conveyance and, in such event, the Board
of Directors shall make such adjustment in the exercise price per Option Share
as is just and equitable in the circumstances.
8. Notices. Any notice required or permitted hereunder shall be deemed
given only when delivered personally or when deposited in a United States Post
Office as certified mail, postage prepaid, addressed, as appropriate, if to the
Optionee, at such address as he may designate in writing to the Company, and, if
to the Company, at its principal offices.
9. Failure to Enforce Not a Waiver. The failure of the Company to
enforce at any time any provision of this Option shall in no way be construed to
be a waiver of such provision or of any other provision hereof.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Colorado without giving effect to the
provisions, policies or principles thereof regarding conflict or choice of laws.
IN WITNESS WHEREOF, the Company has duly executed this Agreement as of
October 1, 1996 the day and year first above written.
DEMETER BIOTECHNOLOGIES, LTD.
By: /s/ Richard D. Ekstrom
---------------------------
President
IN WITNESS WHEREOF, the undersigned, the Optionee named herein, hereby
accepts and agrees to all of the terms and provisions of this Agreement as of
the day and year written below.
/s/ James E. Thornton
---------------------------
James E. Thornton
<PAGE> 1
Exhibit 10.16(a)
EXHIBIT A
STANDARD FORM OF
DEMEGEN, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
<PAGE> 2
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
DEMEGEN, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
Demegen, Inc. (the "Company") granted to the individual named below an
option to purchase certain shares of Common Stock of the Company, in the manner
and subject to the provisions of this Option Agreement.
1. Definitions:
(a) "Optionee" shall mean Roger A. Laine, Ph.D.
(b) "Date of Option Grant" shall mean September 18, 1998.
(c) "Number of Option Shares" shall mean 5,000 shares of
Common Stock of the Company as adjusted from time to time pursuant to paragraph
10 below.
(d) "Exercise Price" shall mean $0.45 per share as adjusted
from time to time pursuant to paragraph 10 below.
(e) "Vesting Schedule" Except as provided in paragraph 9
below, the "Vesting Schedule shall be determined as follows:
<TABLE>
<CAPTION>
Vested
------
<S> <C>
On Date of Option Grant All
On each subsequent N/A
</TABLE>
(f) "Option Term Date" shall mean the date five (5) years
after the Date of Option Grant.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Demegen, Inc., a Colorado
corporation, and any successor corporation thereto.
(i) "Plan" shall mean the Demegen, Inc.. 1998 Stock Option
Plan.
2. Incorporation of Plan by Reference. This Option is granted under the
terms of the Plan, the terms of which are incorporated herein by reference and
are to be considered to be part of this Option Agreement as though set forth
herein.
<PAGE> 3
3. Status of the Option. This Option is intended to be a nonqualified
stock option and shall not be treated as an incentive stock option as described
in Section 422 of the Code.
4. Administration. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to terminate or amend the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law. All determinations by the Board shall be final and binding upon all persons
having an interest in the Option.
5. Exercise of the Option.
(a) Right to Exercise. The Option shall first become
exercisable in accordance with the Vesting Schedule set forth in Section 1
above. In no event shall the Option be exercisable for more shares than the
Number of Option Shares.
(b) Method of Exercise. The Option may be exercised by written
notice to the Company which must state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares and other administrative matters as may be required
pursuant to the provisions of this Option Agreement and the exercise form used
by the Company. The written notice must be signed by the Optionee and is not
effective until it is delivered in person or by certified or registered mail,
return receipt requested, to the President of the Company prior to the
termination of the Option as set forth in paragraph 7 below, accompanied by full
payment of the exercise price for the number of shares being purchased.
(c) Form of Payment of Exercise Price. Such payment shall be
made in cash, by check, cash equivalent, or pursuant to a "cashless exercise" in
which the appropriate number of shares being purchased are retained by the
Company in satisfaction of such payment obligations.
(d) Withholding. At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee
hereby agrees to make adequate provision for foreign, federal and state tax
withholding obligations of the Company, if any, which arise in connection with
the Option. The Optionee is cautioned that the Option is not exercisable unless
the Company's withholding obligations are satisfied. Accordingly, the Optionee
may not be able to exercise the Option when desired even though the Option is
vested and the Company shall have no obligation to issue a certificate for such
shares.
(e) Certificate Registration. The certificate or certificates
for the shares as to which the Option shall be exercised shall be registered in
the name of the Optionee, or, if applicable, the heirs of the Optionee.
(f) Restrictions on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of the shares upon exercise of
the Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares upon such exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other
law or regulations. In addition, the Option may not be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. The Optionee is
cautioned that the Option may not be exercisable unless the foregoing conditions
are satisfied. Accordingly, the Optionee may not be able to
-2-
<PAGE> 4
exercise the Option when desired even though the Option is vested. Questions
concerning this restriction should be directed to the President of the Company.
As a condition to the exercise of the Option, the Company may require the
Optionee to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the
Company.
(g) Fractional Shares. The Company at its discretion shall
determine whether to issue fractional shares upon the exercise of the Option.
6. Non-Transferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee or the Optionee's
guardian or legal representative and may not be assigned or transferred in any
manner except by will or by the laws of descent and distribution. Following the
death of the Optionee, the Option, to the extent unexercised and exercisable by
the Optionee on the date of death, may be exercised by the Optionee's legal
representative or by any person empowered to do so under the deceased Optionee's
will or under the then applicable laws of descent and distribution.
7. Termination of the Option. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
membership on Scientific Advisory Board ("Scientific Board") as described in
paragraph 8 below, or (c) upon a Transfer of Control to the extent provided in
paragraph 9 below.
8. Termination of Membership on Scientific Advisory Board
(a) Termination of the Option.
(i) Termination for Cause. If the Optionee ceases to
be a member of the Scientific Board of the Company by reason of "termination for
cause," as defined below, the Option, to the extent unexercised and exercisable
by the Optionee on the date on which the Optionee ceased to be an employee,
shall terminate on the date on which the Optionee's membership on the Scientific
Board terminated. For the purposes of this paragraph 8(a)(i), "termination for
cause" shall mean an involuntary termination by the Company or a voluntary
termination by the Optionee as a result of or in connection with the following
events:
(1) the Optionee's intentional, persistent
failure, dereliction, or refusal to perform such duties as are reasonably
assigned to him or her by the officers and directors of the Company from time to
time; or
(2) the Optionee's fraud, dishonesty, or
other deliberate injury to the Company in the performance of his or her duties;
or
(3) the Optionee's conviction of a crime
which constitutes a felony involving moral turpitude, fraud or deceit in the
jurisdiction in which the Optionee is employed, regardless of whether such crime
involves the Company; or
(4) the Optionee's willful, improper
disclosure of confidential information relating to the Company.
(ii) Death or Disability. If the Optionee ceases to
be a member of the Scientific Board of the Company by reason of the death or
disability of the Optionee within the meaning of Section 422(c) of the Code, the
Option, to the extent unexercised by the Optionee, may be exercised by the
Optionee (or the Optionee's legal representative) at any time prior to the
expiration of one (1) year from the date on which the Optionee's membership on
the Board terminated, but in any event no later than the Option Term Date.
-3-
<PAGE> 5
(iii) Other Termination. If the Optionee ceases to be
a member of the Scientific Board of the Company for any reason, except death or
disability within the meaning of Section 422(c) of the Code or "termination for
cause," as defined in paragraph 8(a)(i) above, the Option, to the extent
unexercised and exercisable by the Optionee on the date on which the Optionee
ceased to be a member of the Board, may be exercised by the Optionee within
thirty (30) days after the date on which the Optionee's membership on the
Scientific Board is terminated, but in any event no later than the Option Term
Date.
Except as provided in this paragraph 8(a), the Option shall terminate
and may not be exercised after the Optionee ceases to be an member of the
Scientific Board of the Company.
(b) Extension if Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth above is prevented by the provisions of paragraph 5(f) above, the
Option shall remain exercisable until thirty (30) days after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Term Date.
9. Ownership Change and Transfer of Control. An "Ownership Change"
shall be deemed to have occurred in the event any of the following occurs with
respect to the Company:
(a) the direct or indirect sale or exchange by the
shareholders of the Company of all or substantially all of the stock of the
Company where shareholders of the Company before such sale or exchange do not
retain, directly or indirectly, at least a majority of the beneficial interest
in the voting stock of the Company after such sale or exchange;
(b) a merger or consolidation involving the Company in which
the Company is not the surviving entity;
(c) the sale, exchange, or transfer of all or substantially
all of the assets of the Company (other than a sale, exchange, or transfer to
one or more parent or subsidiary corporations of the Company); or
(d) A liquidation or dissolution of the Company.
In the event of an Ownership Change, the Option shall (i) become fully
vested to the extent it is not otherwise fully vested and (ii) terminate and
cease to be outstanding effective as of the date of the Ownership Change to the
extent that the Option is neither assumed or substituted for in connection with
the Ownership Change nor exercised as of the date of the Ownership Change.
10. Effect of Change in Stock Subject to the Option. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, recapitalization, combination, reclassification, or like
change in the capital structure of the Company. In the event a majority of the
shares which are of the same class as the shares that are subject to the Option
are exchanged for, converted into, or otherwise become shares of another
corporation (the "New Shares"), the Company may unilaterally amend the Option to
provide that the Option is exercisable for New Shares. In the event of any such
amendment, the number of shares and the exercise price shall be adjusted in a
fair and equitable manner.
11. Rights as a Shareholder or Board Member. The Optionee shall have no
rights as a shareholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 10
above. Nothing in the Option shall confer upon the Optionee any right to
continue to be a member of the Board of the Company or
-4-
<PAGE> 6
interfere in any way with any right of the Company to terminate the Optionee's
membership on that Board at any time.
12. Stock Dividends Subject to Option Agreement. If, from time to time,
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this Option Agreement, then in such event any and
all new substituted or additional securities to which the Optionee is entitled
by reason of the Optionee's ownership of the shares acquired upon exercise of
the Option shall be immediately subject to the Right of First Refusal with the
same force and effect as the shares subject to the Right of First Refusal
immediately before such event.
13. Legends. The Company may at any time place legends referencing any
applicable federal or state securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option Agreement.
The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to the
Option in the possession of the Optionee in order to effectuate the provisions
of this paragraph 13. Unless otherwise specified by the Company, legends placed
on such certificates may include, but shall not be limited to, the following:
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE
IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
(b) Any legend required to be placed thereon by applicable
law.
14. Initial Public Offerings. The Optionee hereby agrees that in the
event of any underwritten public offering of stock, including an initial public
offering of stock, made by the Company pursuant to an effective registration
statement filed under the Securities Act, the Optionee shall not offer, sell,
contract to sell, pledge, hypothecate, grant any option to purchase or make any
short sale of, or otherwise dispose of any shares of stock of the Company or any
rights to acquire stock of the Company for such period of time from and after
the effective date of such registration statement as may be established by the
underwriter for such public offering; provided, however, that such period of
time shall not exceed one hundred eighty (180) days from the effective date of
the registration statement to be filed in connection with such public offering.
The foregoing limitation shall not apply to shares registered in the initial
public offering under the Securities Act. The Optionee shall be subject to this
paragraph provided and only if the officers and directors of the Company are
also subject to similar arrangements.
15. Binding Effect. This Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
16. Termination or Amendment. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such action shall deprive any person, without
such person's consent, of any rights previously granted pursuant to this Option
Agreement.
-5-
<PAGE> 7
17. Integrated Agreement. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Company with respect to the
subject matter contained herein, and there are no agreements, understandings,
restrictions, representations, or warranties among the Optionee and the Company
other than those as set forth or provided for herein. To the extent contemplated
herein, the provisions of this Option Agreement shall survive any exercise of
the Option and shall remain in full force and effect.
-6-
<PAGE> 8
18. Applicable Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of Pennsylvania without
regard to its choice of law provisions.
DEMEGEN, INC.
By: /s/ Richard D. Ekstrom
----------------------
Title: President
-------------------
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement, including, without limitation, the
terms of the Demegen, Inc. 1998 Stock Option Plan, the terms of which are
incorporated therein, and hereby accepts the Option subject to all of the terms
and provisions thereof.
Date: January 12, 1999 /s/ Roger A. Laine
------------------- -----------------------------
-7-
<PAGE> 1
Exhibit 10.16(b)
EXHIBIT A
STANDARD FORM OF
DEMEGEN, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
<PAGE> 2
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
DEMEGEN, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
Demegen, Inc. (the "Company") granted to the individual named below an
option to purchase certain shares of Common Stock of the Company, in the manner
and subject to the provisions of this Option Agreement.
1. Definitions:
(a) "Optionee" shall mean Wayne F. Tompkins, Ph.D.
(b) "Date of Option Grant" shall mean September 18, 1998.
(c) "Number of Option Shares" shall mean 5,000 shares of
Common Stock of the Company as adjusted from time to time pursuant to paragraph
10 below.
(d) "Exercise Price" shall mean $0.45 per share as adjusted
from time to time pursuant to paragraph 10 below.
(e) "Vesting Schedule" Except as provided in paragraph 9
below, the "Vesting Schedule shall be determined as follows:
<TABLE>
<CAPTION>
Vested
------
<S> <C>
On Date of Option Grant All
On each subsequent N/A
</TABLE>
(f) "Option Term Date" shall mean the date five (5) years
after the Date of Option Grant.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Demegen, Inc., a Colorado
corporation, and any successor corporation thereto.
(i) "Plan" shall mean the Demegen, Inc.. 1998 Stock Option
Plan.
2. Incorporation of Plan by Reference. This Option is granted under the
terms of the Plan, the terms of which are incorporated herein by reference and
are to be considered to be part of this Option Agreement as though set forth
herein.
<PAGE> 3
3. Status of the Option. This Option is intended to be a nonqualified
stock option and shall not be treated as an incentive stock option as described
in Section 422 of the Code.
4. Administration. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to terminate or amend the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law. All determinations by the Board shall be final and binding upon all persons
having an interest in the Option.
5. Exercise of the Option.
(a) Right to Exercise. The Option shall first become
exercisable in accordance with the Vesting Schedule set forth in Section 1
above. In no event shall the Option be exercisable for more shares than the
Number of Option Shares.
(b) Method of Exercise. The Option may be exercised by written
notice to the Company which must state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares and other administrative matters as may be required
pursuant to the provisions of this Option Agreement and the exercise form used
by the Company. The written notice must be signed by the Optionee and is not
effective until it is delivered in person or by certified or registered mail,
return receipt requested, to the President of the Company prior to the
termination of the Option as set forth in paragraph 7 below, accompanied by full
payment of the exercise price for the number of shares being purchased.
(c) Form of Payment of Exercise Price. Such payment shall be
made in cash, by check, cash equivalent, or pursuant to a "cashless exercise" in
which the appropriate number of shares being purchased are retained by the
Company in satisfaction of such payment obligations.
(d) Withholding. At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee
hereby agrees to make adequate provision for foreign, federal and state tax
withholding obligations of the Company, if any, which arise in connection with
the Option. The Optionee is cautioned that the Option is not exercisable unless
the Company's withholding obligations are satisfied. Accordingly, the Optionee
may not be able to exercise the Option when desired even though the Option is
vested and the Company shall have no obligation to issue a certificate for such
shares.
(e) Certificate Registration. The certificate or certificates
for the shares as to which the Option shall be exercised shall be registered in
the name of the Optionee, or, if applicable, the heirs of the Optionee.
(f) Restrictions on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of the shares upon exercise of
the Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares upon such exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other
law or regulations. In addition, the Option may not be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. The Optionee is
cautioned that the Option may not be exercisable unless the foregoing conditions
are satisfied. Accordingly, the Optionee may not be able to
-2-
<PAGE> 4
exercise the Option when desired even though the Option is vested. Questions
concerning this restriction should be directed to the President of the Company.
As a condition to the exercise of the Option, the Company may require the
Optionee to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the
Company.
(g) Fractional Shares. The Company at its discretion shall
determine whether to issue fractional shares upon the exercise of the Option.
6. Non-Transferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee or the Optionee's
guardian or legal representative and may not be assigned or transferred in any
manner except by will or by the laws of descent and distribution. Following the
death of the Optionee, the Option, to the extent unexercised and exercisable by
the Optionee on the date of death, may be exercised by the Optionee's legal
representative or by any person empowered to do so under the deceased Optionee's
will or under the then applicable laws of descent and distribution.
7. Termination of the Option. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
membership on Scientific Advisory Board ("Scientific Board") as described in
paragraph 8 below, or (c) upon a Transfer of Control to the extent provided in
paragraph 9 below.
8. Termination of Membership on Scientific Advisory Board
(a) Termination of the Option.
(i) Termination for Cause. If the Optionee ceases to
be a member of the Scientific Board of the Company by reason of "termination for
cause," as defined below, the Option, to the extent unexercised and exercisable
by the Optionee on the date on which the Optionee ceased to be an employee,
shall terminate on the date on which the Optionee's membership on the Scientific
Board terminated. For the purposes of this paragraph 8(a)(i), "termination for
cause" shall mean an involuntary termination by the Company or a voluntary
termination by the Optionee as a result of or in connection with the following
events:
(1) the Optionee's intentional, persistent
failure, dereliction, or refusal to perform such duties as are reasonably
assigned to him or her by the officers and directors of the Company from time to
time; or
(2) the Optionee's fraud, dishonesty, or
other deliberate injury to the Company in the performance of his or her duties;
or
(3) the Optionee's conviction of a crime
which constitutes a felony involving moral turpitude, fraud or deceit in the
jurisdiction in which the Optionee is employed, regardless of whether such crime
involves the Company; or
(4) the Optionee's willful, improper
disclosure of confidential information relating to the Company.
(ii) Death or Disability. If the Optionee ceases to
be a member of the Scientific Board of the Company by reason of the death or
disability of the Optionee within the meaning of Section 422(c) of the Code, the
Option, to the extent unexercised by the Optionee, may be exercised by the
Optionee (or the Optionee's legal representative) at any time prior to the
expiration of one (1) year from the date on which the Optionee's membership on
the Board terminated, but in any event no later than the Option Term Date.
-3-
<PAGE> 5
(iii) Other Termination. If the Optionee ceases to be
a member of the Scientific Board of the Company for any reason, except death or
disability within the meaning of Section 422(c) of the Code or "termination for
cause," as defined in paragraph 8(a)(i) above, the Option, to the extent
unexercised and exercisable by the Optionee on the date on which the Optionee
ceased to be a member of the Board, may be exercised by the Optionee within
thirty (30) days after the date on which the Optionee's membership on the
Scientific Board is terminated, but in any event no later than the Option Term
Date.
Except as provided in this paragraph 8(a), the Option shall terminate
and may not be exercised after the Optionee ceases to be an member of the
Scientific Board of the Company.
(b) Extension if Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth above is prevented by the provisions of paragraph 5(f) above, the
Option shall remain exercisable until thirty (30) days after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Term Date.
9. Ownership Change and Transfer of Control. An "Ownership Change"
shall be deemed to have occurred in the event any of the following occurs with
respect to the Company:
(a) the direct or indirect sale or exchange by the
shareholders of the Company of all or substantially all of the stock of the
Company where shareholders of the Company before such sale or exchange do not
retain, directly or indirectly, at least a majority of the beneficial interest
in the voting stock of the Company after such sale or exchange;
(b) a merger or consolidation involving the Company in which
the Company is not the surviving entity;
(c) the sale, exchange, or transfer of all or substantially
all of the assets of the Company (other than a sale, exchange, or transfer to
one or more parent or subsidiary corporations of the Company); or
(d) A liquidation or dissolution of the Company.
In the event of an Ownership Change, the Option shall (i) become fully
vested to the extent it is not otherwise fully vested and (ii) terminate and
cease to be outstanding effective as of the date of the Ownership Change to the
extent that the Option is neither assumed or substituted for in connection with
the Ownership Change nor exercised as of the date of the Ownership Change.
10. Effect of Change in Stock Subject to the Option. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, recapitalization, combination, reclassification, or like
change in the capital structure of the Company. In the event a majority of the
shares which are of the same class as the shares that are subject to the Option
are exchanged for, converted into, or otherwise become shares of another
corporation (the "New Shares"), the Company may unilaterally amend the Option to
provide that the Option is exercisable for New Shares. In the event of any such
amendment, the number of shares and the exercise price shall be adjusted in a
fair and equitable manner.
11. Rights as a Shareholder or Board Member. The Optionee shall have no
rights as a shareholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 10
above. Nothing in the Option shall confer upon the Optionee any right to
continue to be a member of the Board of the Company or
-4-
<PAGE> 6
interfere in any way with any right of the Company to terminate the Optionee's
membership on that Board at any time.
12. Stock Dividends Subject to Option Agreement. If, from time to time,
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this Option Agreement, then in such event any and
all new substituted or additional securities to which the Optionee is entitled
by reason of the Optionee's ownership of the shares acquired upon exercise of
the Option shall be immediately subject to the Right of First Refusal with the
same force and effect as the shares subject to the Right of First Refusal
immediately before such event.
13. Legends. The Company may at any time place legends referencing any
applicable federal or state securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option Agreement.
The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to the
Option in the possession of the Optionee in order to effectuate the provisions
of this paragraph 13. Unless otherwise specified by the Company, legends placed
on such certificates may include, but shall not be limited to, the following:
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE
IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
(b) Any legend required to be placed thereon by applicable
law.
14. Initial Public Offerings. The Optionee hereby agrees that in the
event of any underwritten public offering of stock, including an initial public
offering of stock, made by the Company pursuant to an effective registration
statement filed under the Securities Act, the Optionee shall not offer, sell,
contract to sell, pledge, hypothecate, grant any option to purchase or make any
short sale of, or otherwise dispose of any shares of stock of the Company or any
rights to acquire stock of the Company for such period of time from and after
the effective date of such registration statement as may be established by the
underwriter for such public offering; provided, however, that such period of
time shall not exceed one hundred eighty (180) days from the effective date of
the registration statement to be filed in connection with such public offering.
The foregoing limitation shall not apply to shares registered in the initial
public offering under the Securities Act. The Optionee shall be subject to this
paragraph provided and only if the officers and directors of the Company are
also subject to similar arrangements.
15. Binding Effect. This Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
16. Termination or Amendment. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such action shall deprive any person, without
such person's consent, of any rights previously granted pursuant to this Option
Agreement.
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<PAGE> 7
17. Integrated Agreement. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Company with respect to the
subject matter contained herein, and there are no agreements, understandings,
restrictions, representations, or warranties among the Optionee and the Company
other than those as set forth or provided for herein. To the extent contemplated
herein, the provisions of this Option Agreement shall survive any exercise of
the Option and shall remain in full force and effect.
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<PAGE> 8
18. Applicable Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of Pennsylvania without
regard to its choice of law provisions.
DEMEGEN, INC.
By: /s/ Richard D. Ekstrom
----------------------
Title: President
-------------------
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement, including, without limitation, the
terms of the Demegen, Inc. 1998 Stock Option Plan, the terms of which are
incorporated therein, and hereby accepts the Option subject to all of the terms
and provisions thereof.
Date: 1/11/99 /s/ Wayne Tomkins
----------------- -----------------
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<PAGE> 1
Exhibit 10.16(c)
EXHIBIT A
STANDARD FORM OF
DEMEGEN, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
<PAGE> 2
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
DEMEGEN, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
Demegen, Inc. (the "Company") granted to the individual named below an
option to purchase certain shares of Common Stock of the Company, in the manner
and subject to the provisions of this Option Agreement.
1. Definitions:
(a) "Optionee" shall mean Paul Zorner, Ph.D.
(b) "Date of Option Grant" shall mean September 18, 1998.
(c) "Number of Option Shares" shall mean 5,000 shares of
Common Stock of the Company as adjusted from time to time pursuant to paragraph
10 below.
(d) "Exercise Price" shall mean $0.45 per share as adjusted
from time to time pursuant to paragraph 10 below.
(e) "Vesting Schedule" Except as provided in paragraph 9
below, the "Vesting Schedule shall be determined as follows:
<TABLE>
<CAPTION>
Vested
------
<S> <C>
On Date of Option Grant All
On each subsequent N/A
</TABLE>
(f) "Option Term Date" shall mean the date five (5) years
after the Date of Option Grant.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Demegen, Inc., a Colorado
corporation, and any successor corporation thereto.
(i) "Plan" shall mean the Demegen, Inc.. 1998 Stock Option
Plan.
2. Incorporation of Plan by Reference. This Option is granted under the
terms of the Plan, the terms of which are incorporated herein by reference and
are to be considered to be part of this Option Agreement as though set forth
herein.
<PAGE> 3
3. Status of the Option. This Option is intended to be a nonqualified
stock option and shall not be treated as an incentive stock option as described
in Section 422 of the Code.
4. Administration. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to terminate or amend the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law. All determinations by the Board shall be final and binding upon all persons
having an interest in the Option.
5. Exercise of the Option.
(a) Right to Exercise. The Option shall first become
exercisable in accordance with the Vesting Schedule set forth in Section 1
above. In no event shall the Option be exercisable for more shares than the
Number of Option Shares.
(b) Method of Exercise. The Option may be exercised by written
notice to the Company which must state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares and other administrative matters as may be required
pursuant to the provisions of this Option Agreement and the exercise form used
by the Company. The written notice must be signed by the Optionee and is not
effective until it is delivered in person or by certified or registered mail,
return receipt requested, to the President of the Company prior to the
termination of the Option as set forth in paragraph 7 below, accompanied by full
payment of the exercise price for the number of shares being purchased.
(c) Form of Payment of Exercise Price. Such payment shall be
made in cash, by check, cash equivalent, or pursuant to a "cashless exercise" in
which the appropriate number of shares being purchased are retained by the
Company in satisfaction of such payment obligations.
(d) Withholding. At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee
hereby agrees to make adequate provision for foreign, federal and state tax
withholding obligations of the Company, if any, which arise in connection with
the Option. The Optionee is cautioned that the Option is not exercisable unless
the Company's withholding obligations are satisfied. Accordingly, the Optionee
may not be able to exercise the Option when desired even though the Option is
vested and the Company shall have no obligation to issue a certificate for such
shares.
(e) Certificate Registration. The certificate or certificates
for the shares as to which the Option shall be exercised shall be registered in
the name of the Optionee, or, if applicable, the heirs of the Optionee.
(f) Restrictions on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of the shares upon exercise of
the Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares upon such exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other
law or regulations. In addition, the Option may not be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. The Optionee is
cautioned that the Option may not be exercisable unless the foregoing conditions
are satisfied. Accordingly, the Optionee may not be able to
-2-
<PAGE> 4
exercise the Option when desired even though the Option is vested. Questions
concerning this restriction should be directed to the President of the Company.
As a condition to the exercise of the Option, the Company may require the
Optionee to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the
Company.
(g) Fractional Shares. The Company at its discretion shall
determine whether to issue fractional shares upon the exercise of the Option.
6. Non-Transferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee or the Optionee's
guardian or legal representative and may not be assigned or transferred in any
manner except by will or by the laws of descent and distribution. Following the
death of the Optionee, the Option, to the extent unexercised and exercisable by
the Optionee on the date of death, may be exercised by the Optionee's legal
representative or by any person empowered to do so under the deceased Optionee's
will or under the then applicable laws of descent and distribution.
7. Termination of the Option. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
membership on Scientific Advisory Board ("Scientific Board") as described in
paragraph 8 below, or (c) upon a Transfer of Control to the extent provided in
paragraph 9 below.
8. Termination of Membership on Scientific Advisory Board
(a) Termination of the Option.
(i) Termination for Cause. If the Optionee ceases to
be a member of the Scientific Board of the Company by reason of "termination for
cause," as defined below, the Option, to the extent unexercised and exercisable
by the Optionee on the date on which the Optionee ceased to be an employee,
shall terminate on the date on which the Optionee's membership on the Scientific
Board terminated. For the purposes of this paragraph 8(a)(i), "termination for
cause" shall mean an involuntary termination by the Company or a voluntary
termination by the Optionee as a result of or in connection with the following
events:
(1) the Optionee's intentional, persistent
failure, dereliction, or refusal to perform such duties as are reasonably
assigned to him or her by the officers and directors of the Company from time to
time; or
(2) the Optionee's fraud, dishonesty, or
other deliberate injury to the Company in the performance of his or her duties;
or
(3) the Optionee's conviction of a crime
which constitutes a felony involving moral turpitude, fraud or deceit in the
jurisdiction in which the Optionee is employed, regardless of whether such crime
involves the Company; or
(4) the Optionee's willful, improper
disclosure of confidential information relating to the Company.
(ii) Death or Disability. If the Optionee ceases to
be a member of the Scientific Board of the Company by reason of the death or
disability of the Optionee within the meaning of Section 422(c) of the Code, the
Option, to the extent unexercised by the Optionee, may be exercised by the
Optionee (or the Optionee's legal representative) at any time prior to the
expiration of one (1) year from the date on which the Optionee's membership on
the Board terminated, but in any event no later than the Option Term Date.
-3-
<PAGE> 5
(iii) Other Termination. If the Optionee ceases to be
a member of the Scientific Board of the Company for any reason, except death or
disability within the meaning of Section 422(c) of the Code or "termination for
cause," as defined in paragraph 8(a)(i) above, the Option, to the extent
unexercised and exercisable by the Optionee on the date on which the Optionee
ceased to be a member of the Board, may be exercised by the Optionee within
thirty (30) days after the date on which the Optionee's membership on the
Scientific Board is terminated, but in any event no later than the Option Term
Date.
Except as provided in this paragraph 8(a), the Option shall terminate
and may not be exercised after the Optionee ceases to be an member of the
Scientific Board of the Company.
(b) Extension if Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth above is prevented by the provisions of paragraph 5(f) above, the
Option shall remain exercisable until thirty (30) days after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Term Date.
9. Ownership Change and Transfer of Control. An "Ownership Change"
shall be deemed to have occurred in the event any of the following occurs with
respect to the Company:
(a) the direct or indirect sale or exchange by the
shareholders of the Company of all or substantially all of the stock of the
Company where shareholders of the Company before such sale or exchange do not
retain, directly or indirectly, at least a majority of the beneficial interest
in the voting stock of the Company after such sale or exchange;
(b) a merger or consolidation involving the Company in which
the Company is not the surviving entity;
(c) the sale, exchange, or transfer of all or substantially
all of the assets of the Company (other than a sale, exchange, or transfer to
one or more parent or subsidiary corporations of the Company); or
(d) A liquidation or dissolution of the Company.
In the event of an Ownership Change, the Option shall (i) become fully
vested to the extent it is not otherwise fully vested and (ii) terminate and
cease to be outstanding effective as of the date of the Ownership Change to the
extent that the Option is neither assumed or substituted for in connection with
the Ownership Change nor exercised as of the date of the Ownership Change.
10. Effect of Change in Stock Subject to the Option. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, recapitalization, combination, reclassification, or like
change in the capital structure of the Company. In the event a majority of the
shares which are of the same class as the shares that are subject to the Option
are exchanged for, converted into, or otherwise become shares of another
corporation (the "New Shares"), the Company may unilaterally amend the Option to
provide that the Option is exercisable for New Shares. In the event of any such
amendment, the number of shares and the exercise price shall be adjusted in a
fair and equitable manner.
11. Rights as a Shareholder or Board Member. The Optionee shall have no
rights as a shareholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 10
above. Nothing in the Option shall confer upon the Optionee any right to
continue to be a member of the Board of the Company or
-4-
<PAGE> 6
interfere in any way with any right of the Company to terminate the Optionee's
membership on that Board at any time.
12. Stock Dividends Subject to Option Agreement. If, from time to time,
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this Option Agreement, then in such event any and
all new substituted or additional securities to which the Optionee is entitled
by reason of the Optionee's ownership of the shares acquired upon exercise of
the Option shall be immediately subject to the Right of First Refusal with the
same force and effect as the shares subject to the Right of First Refusal
immediately before such event.
13. Legends. The Company may at any time place legends referencing any
applicable federal or state securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option Agreement.
The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to the
Option in the possession of the Optionee in order to effectuate the provisions
of this paragraph 13. Unless otherwise specified by the Company, legends placed
on such certificates may include, but shall not be limited to, the following:
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE
IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
(b) Any legend required to be placed thereon by applicable
law.
14. Initial Public Offerings. The Optionee hereby agrees that in the
event of any underwritten public offering of stock, including an initial public
offering of stock, made by the Company pursuant to an effective registration
statement filed under the Securities Act, the Optionee shall not offer, sell,
contract to sell, pledge, hypothecate, grant any option to purchase or make any
short sale of, or otherwise dispose of any shares of stock of the Company or any
rights to acquire stock of the Company for such period of time from and after
the effective date of such registration statement as may be established by the
underwriter for such public offering; provided, however, that such period of
time shall not exceed one hundred eighty (180) days from the effective date of
the registration statement to be filed in connection with such public offering.
The foregoing limitation shall not apply to shares registered in the initial
public offering under the Securities Act. The Optionee shall be subject to this
paragraph provided and only if the officers and directors of the Company are
also subject to similar arrangements.
15. Binding Effect. This Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
16. Termination or Amendment. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such action shall deprive any person, without
such person's consent, of any rights previously granted pursuant to this Option
Agreement.
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<PAGE> 7
17. Integrated Agreement. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Company with respect to the
subject matter contained herein, and there are no agreements, understandings,
restrictions, representations, or warranties among the Optionee and the Company
other than those as set forth or provided for herein. To the extent contemplated
herein, the provisions of this Option Agreement shall survive any exercise of
the Option and shall remain in full force and effect.
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<PAGE> 8
18. Applicable Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of Pennsylvania without
regard to its choice of law provisions.
DEMEGEN, INC.
By: /s/ Richard D. Ekstrom
----------------------
Title: President
--------------------
The Optionee represents that the Optionee is familiar with the terms
and provisions of this Option Agreement, including, without limitation, the
terms of the Demegen, Inc. 1998 Stock Option Plan, the terms of which are
incorporated therein, and hereby accepts the Option subject to all of the terms
and provisions thereof.
Date: ______________________ ______________________
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<PAGE> 1
Exhibit 10.16(d)
EXHIBIT A
STANDARD FORM OF
DEMEGEN, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
<PAGE> 2
THE SECURITY REPRESENTED BY THIS CERTIFICATE HAS BEEN ACQUIRED FOR INVESTMENT
AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF.
NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933.
DEMEGEN, INC.
NONQUALIFIED STOCK OPTION AGREEMENT
Demegen, Inc. (the "Company") granted to the individual named below an
option to purchase certain shares of Common Stock of the Company, in the manner
and subject to the provisions of this Option Agreement.
1. Definitions:
(a) "Optionee" shall mean Paul L. Kornblith, M.D.
(b) "Date of Option Grant" shall mean September 18, 1998.
(c) "Number of Option Shares" shall mean 5,000 shares of
Common Stock of the Company as adjusted from time to time pursuant to paragraph
10 below.
(d) "Exercise Price" shall mean $0.45 per share as adjusted
from time to time pursuant to paragraph 10 below.
(e) "Vesting Schedule" Except as provided in paragraph 9
below, the "Vesting Schedule shall be determined as follows:
<TABLE>
<CAPTION>
Vested
------
<S> <C>
On Date of Option Grant All
On each subsequent N/A
</TABLE>
(f) "Option Term Date" shall mean the date five (5) years
after the Date of Option Grant.
(g) "Code" shall mean the Internal Revenue Code of 1986, as
amended.
(h) "Company" shall mean Demegen, Inc., a Colorado
corporation, and any successor corporation thereto.
(i) "Plan" shall mean the Demegen, Inc.. 1998 Stock Option
Plan.
2. Incorporation of Plan by Reference. This Option is granted under the
terms of the Plan, the terms of which are incorporated herein by reference and
are to be considered to be part of this Option Agreement as though set forth
herein.
<PAGE> 3
3. Status of the Option. This Option is intended to be a nonqualified
stock option and shall not be treated as an incentive stock option as described
in Section 422 of the Code.
4. Administration. All questions of interpretation concerning this
Option Agreement shall be determined by the Board of Directors of the Company
(the "Board") and/or by a duly appointed committee of the Board having such
powers as shall be specified by the Board. Any subsequent references herein to
the Board shall also mean the committee if such committee has been appointed
and, unless the powers of the committee have been specifically limited, the
committee shall have all of the powers of the Board granted in the Plan,
including, without limitation, the power to terminate or amend the Plan at any
time, subject to the terms of the Plan and any applicable limitations imposed by
law. All determinations by the Board shall be final and binding upon all persons
having an interest in the Option.
5. Exercise of the Option.
(a) Right to Exercise. The Option shall first become
exercisable in accordance with the Vesting Schedule set forth in Section 1
above. In no event shall the Option be exercisable for more shares than the
Number of Option Shares.
(b) Method of Exercise. The Option may be exercised by written
notice to the Company which must state the election to exercise the Option, the
number of shares for which the Option is being exercised and such other
representations and agreements as to the Optionee's investment intent with
respect to such shares and other administrative matters as may be required
pursuant to the provisions of this Option Agreement and the exercise form used
by the Company. The written notice must be signed by the Optionee and is not
effective until it is delivered in person or by certified or registered mail,
return receipt requested, to the President of the Company prior to the
termination of the Option as set forth in paragraph 7 below, accompanied by full
payment of the exercise price for the number of shares being purchased.
(c) Form of Payment of Exercise Price. Such payment shall be
made in cash, by check, cash equivalent, or pursuant to a "cashless exercise" in
which the appropriate number of shares being purchased are retained by the
Company in satisfaction of such payment obligations.
(d) Withholding. At the time the Option is exercised, in whole
or in part, or at any time thereafter as requested by the Company, the Optionee
hereby agrees to make adequate provision for foreign, federal and state tax
withholding obligations of the Company, if any, which arise in connection with
the Option. The Optionee is cautioned that the Option is not exercisable unless
the Company's withholding obligations are satisfied. Accordingly, the Optionee
may not be able to exercise the Option when desired even though the Option is
vested and the Company shall have no obligation to issue a certificate for such
shares.
(e) Certificate Registration. The certificate or certificates
for the shares as to which the Option shall be exercised shall be registered in
the name of the Optionee, or, if applicable, the heirs of the Optionee.
(f) Restrictions on Grant of the Option and Issuance of
Shares. The grant of the Option and the issuance of the shares upon exercise of
the Option shall be subject to compliance with all applicable requirements of
federal, state or foreign law with respect to such securities. The Option may
not be exercised if the issuance of shares upon such exercise would constitute a
violation of any applicable federal, state or foreign securities laws or other
law or regulations. In addition, the Option may not be exercised unless (i) a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), shall at the time of exercise of the Option be in effect with
respect to the shares issuable upon exercise of the Option or (ii) in the
opinion of legal counsel to the Company, the shares issuable upon exercise of
the Option may be issued in accordance with the terms of an applicable exemption
from the registration requirements of the Securities Act. The Optionee is
cautioned that the Option may not be exercisable unless the foregoing conditions
are satisfied. Accordingly, the Optionee may not be able to
-2-
<PAGE> 4
exercise the Option when desired even though the Option is vested. Questions
concerning this restriction should be directed to the President of the Company.
As a condition to the exercise of the Option, the Company may require the
Optionee to satisfy any qualifications that may be necessary or appropriate, to
evidence compliance with any applicable law or regulation and to make any
representation or warranty with respect thereto as may be requested by the
Company.
(g) Fractional Shares. The Company at its discretion shall
determine whether to issue fractional shares upon the exercise of the Option.
6. Non-Transferability of the Option. The Option may be exercised
during the lifetime of the Optionee only by the Optionee or the Optionee's
guardian or legal representative and may not be assigned or transferred in any
manner except by will or by the laws of descent and distribution. Following the
death of the Optionee, the Option, to the extent unexercised and exercisable by
the Optionee on the date of death, may be exercised by the Optionee's legal
representative or by any person empowered to do so under the deceased Optionee's
will or under the then applicable laws of descent and distribution.
7. Termination of the Option. The Option shall terminate and may no
longer be exercised on the first to occur of (a) the Option Term Date as defined
above, (b) the last date for exercising the Option following termination of
membership on Scientific Advisory Board ("Scientific Board") as described in
paragraph 8 below, or (c) upon a Transfer of Control to the extent provided in
paragraph 9 below.
8. Termination of Membership on Scientific Advisory Board
(a) Termination of the Option.
(i) Termination for Cause. If the Optionee ceases to
be a member of the Scientific Board of the Company by reason of "termination for
cause," as defined below, the Option, to the extent unexercised and exercisable
by the Optionee on the date on which the Optionee ceased to be an employee,
shall terminate on the date on which the Optionee's membership on the Scientific
Board terminated. For the purposes of this paragraph 8(a)(i), "termination for
cause" shall mean an involuntary termination by the Company or a voluntary
termination by the Optionee as a result of or in connection with the following
events:
(1) the Optionee's intentional, persistent
failure, dereliction, or refusal to perform such duties as are reasonably
assigned to him or her by the officers and directors of the Company from time to
time; or
(2) the Optionee's fraud, dishonesty, or
other deliberate injury to the Company in the performance of his or her duties;
or
(3) the Optionee's conviction of a crime
which constitutes a felony involving moral turpitude, fraud or deceit in the
jurisdiction in which the Optionee is employed, regardless of whether such crime
involves the Company; or
(4) the Optionee's willful, improper
disclosure of confidential information relating to the Company.
(ii) Death or Disability. If the Optionee ceases to
be a member of the Scientific Board of the Company by reason of the death or
disability of the Optionee within the meaning of Section 422(c) of the Code, the
Option, to the extent unexercised by the Optionee, may be exercised by the
Optionee (or the Optionee's legal representative) at any time prior to the
expiration of one (1) year from the date on which the Optionee's membership on
the Board terminated, but in any event no later than the Option Term Date.
-3-
<PAGE> 5
(iii) Other Termination. If the Optionee ceases to be
a member of the Scientific Board of the Company for any reason, except death or
disability within the meaning of Section 422(c) of the Code or "termination for
cause," as defined in paragraph 8(a)(i) above, the Option, to the extent
unexercised and exercisable by the Optionee on the date on which the Optionee
ceased to be a member of the Board, may be exercised by the Optionee within
thirty (30) days after the date on which the Optionee's membership on the
Scientific Board is terminated, but in any event no later than the Option Term
Date.
Except as provided in this paragraph 8(a), the Option shall terminate
and may not be exercised after the Optionee ceases to be an member of the
Scientific Board of the Company.
(b) Extension if Exercise Prevented by Law. Notwithstanding
the foregoing, if the exercise of the Option within the applicable time periods
set forth above is prevented by the provisions of paragraph 5(f) above, the
Option shall remain exercisable until thirty (30) days after the date the
Optionee is notified by the Company that the Option is exercisable, but in any
event no later than the Option Term Date.
9. Ownership Change and Transfer of Control. An "Ownership Change"
shall be deemed to have occurred in the event any of the following occurs with
respect to the Company:
(a) the direct or indirect sale or exchange by the
shareholders of the Company of all or substantially all of the stock of the
Company where shareholders of the Company before such sale or exchange do not
retain, directly or indirectly, at least a majority of the beneficial interest
in the voting stock of the Company after such sale or exchange;
(b) a merger or consolidation involving the Company in which
the Company is not the surviving entity;
(c) the sale, exchange, or transfer of all or substantially
all of the assets of the Company (other than a sale, exchange, or transfer to
one or more parent or subsidiary corporations of the Company); or
(d) A liquidation or dissolution of the Company.
In the event of an Ownership Change, the Option shall (i) become fully
vested to the extent it is not otherwise fully vested and (ii) terminate and
cease to be outstanding effective as of the date of the Ownership Change to the
extent that the Option is neither assumed or substituted for in connection with
the Ownership Change nor exercised as of the date of the Ownership Change.
10. Effect of Change in Stock Subject to the Option. Appropriate
adjustments shall be made in the number, exercise price and class of shares of
stock subject to the Option in the event of a stock dividend, stock split,
reverse stock split, recapitalization, combination, reclassification, or like
change in the capital structure of the Company. In the event a majority of the
shares which are of the same class as the shares that are subject to the Option
are exchanged for, converted into, or otherwise become shares of another
corporation (the "New Shares"), the Company may unilaterally amend the Option to
provide that the Option is exercisable for New Shares. In the event of any such
amendment, the number of shares and the exercise price shall be adjusted in a
fair and equitable manner.
11. Rights as a Shareholder or Board Member. The Optionee shall have no
rights as a shareholder with respect to any shares covered by the Option until
the date of the issuance of a certificate or certificates for the shares for
which the Option has been exercised. No adjustment shall be made for dividends
or distributions or other rights for which the record date is prior to the date
such certificate or certificates are issued, except as provided in paragraph 10
above. Nothing in the Option shall confer upon the Optionee any right to
continue to be a member of the Board of the Company or
-4-
<PAGE> 6
interfere in any way with any right of the Company to terminate the Optionee's
membership on that Board at any time.
12. Stock Dividends Subject to Option Agreement. If, from time to time,
there is any stock dividend, stock split, or other change in the character or
amount of any of the outstanding stock of the corporation the stock of which is
subject to the provisions of this Option Agreement, then in such event any and
all new substituted or additional securities to which the Optionee is entitled
by reason of the Optionee's ownership of the shares acquired upon exercise of
the Option shall be immediately subject to the Right of First Refusal with the
same force and effect as the shares subject to the Right of First Refusal
immediately before such event.
13. Legends. The Company may at any time place legends referencing any
applicable federal or state securities law restrictions on all certificates
representing shares of stock subject to the provisions of this Option Agreement.
The Optionee shall, at the request of the Company, promptly present to the
Company any and all certificates representing shares acquired pursuant to the
Option in the possession of the Optionee in order to effectuate the provisions
of this paragraph 13. Unless otherwise specified by the Company, legends placed
on such certificates may include, but shall not be limited to, the following:
(a) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE
IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES
AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY
TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS
EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT."
(b) Any legend required to be placed thereon by applicable
law.
14. Initial Public Offerings. The Optionee hereby agrees that in the
event of any underwritten public offering of stock, including an initial public
offering of stock, made by the Company pursuant to an effective registration
statement filed under the Securities Act, the Optionee shall not offer, sell,
contract to sell, pledge, hypothecate, grant any option to purchase or make any
short sale of, or otherwise dispose of any shares of stock of the Company or any
rights to acquire stock of the Company for such period of time from and after
the effective date of such registration statement as may be established by the
underwriter for such public offering; provided, however, that such period of
time shall not exceed one hundred eighty (180) days from the effective date of
the registration statement to be filed in connection with such public offering.
The foregoing limitation shall not apply to shares registered in the initial
public offering under the Securities Act. The Optionee shall be subject to this
paragraph provided and only if the officers and directors of the Company are
also subject to similar arrangements.
15. Binding Effect. This Option Agreement shall inure to the benefit of
and be binding upon the parties hereto and their respective heirs, executors,
administrators, successors and assigns.
16. Termination or Amendment. The Board, including any duly appointed
committee of the Board, may terminate or amend the Plan and/or the Option at any
time; provided, however, that no such action shall deprive any person, without
such person's consent, of any rights previously granted pursuant to this Option
Agreement.
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<PAGE> 7
17. Integrated Agreement. This Option Agreement constitutes the entire
understanding and agreement of the Optionee and the Company with respect to the
subject matter contained herein, and there are no agreements, understandings,
restrictions, representations, or warranties among the Optionee and the Company
other than those as set forth or provided for herein. To the extent contemplated
herein, the provisions of this Option Agreement shall survive any exercise of
the Option and shall remain in full force and effect.
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<PAGE> 8
18. Applicable Law. This Option Agreement shall be governed by and
construed in accordance with the laws of the State of Pennsylvania without
regard to its choice of law provisions.
DEMEGEN, INC.
By: /s/ Richard D. Ekstrom
----------------------
Title: President
-------------------
The Optionee represents that the Optionee is familiar with the
terms and provisions of this Option Agreement, including, without limitation,
the terms of the Demegen, Inc. 1998 Stock Option Plan, the terms of which are
incorporated therein, and hereby accepts the Option subject to all of the terms
and provisions thereof.
Date: January 21, 1999 /s/ Paul L. Kornblith
--------------------- ---------------------------
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<PAGE> 1
Exhibit 10.17
SETTLEMENT AGREEMENT
This Settlement Agreement (the "Agreement") is entered into this 25th day
of September, 1996 (the "Effective Date") by and between Demeter
BioTechnologies, Ltd., a Colorado corporation with its principal executive
offices at Brightleaf Square, Suite 19D, 905 West Main Street, Durham, North
Carolina 27701 (the "Company"), and The Peregrine Group, an Oklahoma General
Partnership whose address is 6404 Avalon, Oklahoma City, OK 73116 ("Peregrine").
The Company and Peregrine are collectively referred to herein as the "Parties."
WHEREAS, on May 18, 1993, September 15, 1993 and February 7, 1994 the
Parties executed separate Promissory Notes and Loan Agreements wherein Peregrine
loaned the Company the aggregate principal amount of $850,000 (collectively, the
"Notes and Loan Agreements"), and
WHEREAS, as of the Effective Date the Company is indebted to Peregrine in
the aggregate principal amount of $850,000 plus accrued interest of $33,320, and
WHEREAS, pursuant to the terms of the Notes and Loan Agreements the Company
has issued to Peregrine an aggregate of 1,667,750 warrants (the "Warrants"), and
WHEREAS, the Parties desire to resolve and settle any and all outstanding
obligations and issues between them, whether arising out of the Notes and Loan
Agreements, the Warrants, or otherwise.
THEREFORE, for good and valuable consideration, the receipt of which is
acknowledged, the Parties agree as follows:
1. CLOSING DATE. This transaction will close on or before September 30,
1996 (the "Closing Date") in Oklahoma City, Oklahoma.
2. DELIVERY OF STOCK. The Company agrees that on or before the Closing
Date it will deliver to Peregrine a certificate for Two Million Eight Hundred
Twenty-Five Thousand (2,825,000) shares of the Company's restricted (Rule 144)
common stock (the "Common Stock").
3. RESTRICTED STOCK, LEGEND REQUIREMENT. Peregrine acknowledges and
understands that the Common Stock will be restricted, that it is being issued
to it in a private transaction, and that it has not been registered under the
Securities Act of 1933 (the "Act"), or the securities laws of any states in
reliance on exemptions from the registration requirements of the Act and such
state securities laws. The Common Stock is subject to restrictions on
transferability and may not be transferred or resold except as permitted under
the Act and such laws pursuant to registration or exemption therefrom. The
Common Stock has not been approved or disapproved by the Securities and
Exchange Commission or any other regulatory authority. The certificate
evidencing the Common Stock will bear substantially the following legend:
<PAGE> 2
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND ARE "RESTRICTED SECURITIES" AS THAT TERM
IS DEFINED IN RULE 144 UNDER THE ACT. THE SHARES MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF
THE COMPANY.
4. REGISTRATION RIGHTS. The Company will prepare and file with the
Securities and Exchange Commission (the "SEC"), as soon as practicable but in
any event by the earlier of (a) ten (10) days after the date the Company closes
its Regulation D private placement offering through Seawoulfe Partners, Ltd., or
(b) December 31, 1996, a registration statement for an offering to be made on a
delayed or continuous basis pursuant to Rule 415 of the Securities Act of 1933
(the "Act") registering the resale from time to time by the holder(s) of the
Common Stock (the "Registration Statement"). The Registration Statement will be
on Form S-1 or another appropriate form permitting registration of the Common
Stock for resale by the holder(s) in the manner or manners designated by them.
The Company will cause the Registration Statement to become effective under the
Act within ninety (90) days of the date of filing and will keep the Registration
Statement continuously effective under the Act until the earlier of (a) the sale
of the Common Stock pursuant to the Registration Statement or Rule 144 under the
Act, or (b) the expiration of the holding period applicable to sales of the
Common Stock under Rule 144(k) under the Act, or any successor provision.
The Company will prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep the Registration Statement continually effective for the applicable period
specified above, it will cause the related prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the Act, and it will
comply with the provisions of the Act with respect to the disposition of all
securities covered by the Registration Statement during the applicable period
in accordance with the intended methods of disposition of the sellers thereof
set forth in the Registration Statement as amended or the prospectus as so
supplemented.
The Company will pay all expenses of the Registration Statement, it will
provide each registered holder copies of the prospectus, and it will notify each
registered holder when the Registration Statement has become effective.
5. LOCK-UP OF THE COMMON STOCK AFTER REGISTRATION. Peregrine agrees that
beginning on the date it receives a certificate for the Common Stock in
registered form and for a period of six months thereafter neither it nor its
assigns shall be permitted to sell, in the aggregate, more than 10% of the
Common Stock per month without the prior written consent of the Company which
may be withheld.
2
<PAGE> 3
6. DELIVERY OF PROMISSORY NOTES, WARRANTS AND MUTUAL RELEASES. Peregrine
agrees that on or before the Closing Date it will deliver the Promissory Notes
marked "Paid," dated and signed and the Warrants marked "Canceled," dated and
signed to the Company. The Parties agree that on or before the Closing Date
they will deliver to each other, in binding counterparts if necessary, the
Mutual Release attached to this Agreement as Exhibit A.
7. PRIVATE PLACEMENT MEMORANDUM. Peregrine acknowledges that prior to
its execution of this Agreement it received and read the copy of the Private
Placement Memorandum dated September 12, 1996 attached the this Agreement as
Exhibit B.
8. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to Peregrine as follows:
A. DULY ORGANIZED, VALIDLY EXISTING, GOOD STANDING. The Company is a
duly organized and validly existing corporation in good standing under the laws
of the State of Colorado, is qualified to do business and is in good standing
under the laws of the State of North Carolina, and has the corporate power and
authority to own its properties, to transact the business in which it is
engaged, and to perform its obligations under this Agreement.
B. STOCK DULY AUTHORIZED. The issuance and delivery by the Company of the
Common Stock to Peregrine has been duly authorized and all necessary corporate
action has been taken, and such issuance and delivery will not contravene or
conflict with the Company's Articles of Incorporation or Bylaws, or any
applicable law of which the Company is aware, or any agreement of which the
Company is a party.
C. ABSENCE OF ENCUMBRANCES. The Company is the owner, beneficially and of
record, of the Common Stock and owns the Common Stock free and clear of any
lien, mortgage, adverse claim, charge, security interest, encumbrance,
restriction, limitation, contract, agreement, arrangement, understanding,
instrument, obligation, defect or irregularity ("Liens"). Upon delivery of the
Common Stock to Peregrine, Peregrine will acquire good and marketable title to
the Common Stock free and clear of any Liens, including restrictions and
limitations that may arise under community property or similar laws, subject,
however, to such restrictions on resale as may exist under Rule 144 or other
applicable laws until such time as the Common Stock is registered or exempt from
registration.
D. REGISTRATION RIGHTS. The Company will register the Common Stock as
set forth in Section 4 of this Agreement.
9. REPRESENTATIONS AND WARRANTIES OF PEREGRINE. Peregrine represents and
warrants to the Company as follows:
A. DULY ORGANIZED, VALIDLY EXISTING, GOOD STANDING. Peregrine is a duly
organized and validly existing general partnership in good standing under the
laws of the State of Oklahoma and has the power and authority to own its
properties, to transact the business in which it is engaged, and to perform its
obligations under this Agreement.
3
<PAGE> 4
B. AUTHORITY. As evidenced by the Agreement for Dissolution, Ratification
and Release attached to this Agreement as Exhibit C, (i) this Agreement and the
Mutual Release have been duly authorized and all necessary partnership action
has been taken, and such issuance and delivery will not contravene or conflict
with Peregrine's partnership agreement or any applicable law of which Peregrine
is aware, or any agreement of which Peregrine is a party, and (ii) Randal W.
Colton and Robert Mosely are the duly elected and authorized Managing General
Partners of Peregrine and, as such, have full power and authority to bind
Peregrine and its partners (the "Peregrine Group Members") to this Agreement
and the Mutual Release.
C. OPPORTUNITY ASK QUESTIONS. Peregrine has had the opportunity to ask
questions of the Company related to the Common Stock and the Company and has
received from the Company copies of all information related to the Common Stock
and the Company which Peregrine deems material in order to enter into this
Agreement.
10. ADVICE OF COUNSEL; NO PRESUMPTIONS. The Parties acknowledge that this
Agreement has undergone several drafts with the negotiated suggestions of both
Parties, and that both Parties have had the benefit of the advice of counsel in
the conduct of these negotiations; and the Parties therefore agree that no
presumptions shall arise favoring either party by virtue of the authorship of
any of the provisions of this Agreement.
11. TERM. The term of this Agreement will begin on the Effective Date and
will expire on the earlier of (a) the sale of the Common Stock pursuant to the
Registration Statement or Rule 144 under the Act, (b) the expiration of the
holding period applicable to sales of the Common Stock under Rule 144(k) under
the Act, or (b) December 31, 2000, whichever occurs first.
12. CONSTRUCTION. This Agreement will be construed and governed by the
laws of the State of Oklahoma. The prevailing party in any dispute to enforce
this Agreement will be entitled to recover its costs and a reasonable
attorney's fee.
13. FACSIMILE AND COUNTERPART COPIES. The Parties agree that facsimile
copies and counterparts of this Agreement and any Exhibits and any signatures
on this Agreement or any Exhibits will be as legally binding and enforceable as
the single original or a copy of this Agreement and any Exhibits.
14. ENTIRE AGREEMENT; AMENDMENT. There are no verbal understandings
between the Parties. This Agreement contains the entire agreement between the
Parties, supersedes all previous agreements, whether oral or written, between
the Parties, and cannot be changed, modified, amended or supplemented except by
a written agreement signed by both Parties.
4
<PAGE> 5
15. FURTHER ACTIONS. The Parties agree to execute and deliver such
certificates, agreements and other documents and to take such other action as
may be reasonably required by the other party in order to record, effectuate,
consummate or implement the transaction contemplated by this Agreement.
IN WITNESS WHEREOF, the Parties have duly signed this Settlement Agreement
dated September 25, 1996 between Demeter BioTechnologies, Ltd. and The
Peregrine Group, an Oklahoma General Partnership, consisting of five pages and
Exhibits A, B and C as of the Effective Date.
The Peregrine Group Demeter BioTechnologies, Ltd.
By: /s/ RANDAL W. COLTON By: /s/ RICHARD D. EKSTROM
- ------------------------- -------------------------------
Randal W. Colton, Richard D. Ekstrom, President
Managing General Partner
By: /s/ ROBERT MOSELY By: /s/ JESSE M. JAYNES
- ------------------------- -------------------------------
Robert Mosely, Jesse M. Jaynes, Vice President
Managing General Partner
<PAGE> 6
EXHIBIT A TO
SETTLEMENT AGREEMENT
BETWEEN DEMETER BIOTECHNOLOGIES, LTD., AND THE PEREGRINE GROUP
DATED SEPTEMBER 25, 1996
MUTUAL RELEASE
COME NOW Demeter BioTechnologies, Ltd., a Colorado corporation with its
principal executive offices at Brightleaf Square, Suite 19D, 905 West Main
Street, Durham, North Carolina, 27701 (the "Company"), and The Peregrine Group,
an Oklahoma General Partnership, whose address is 6404 Avalon, Oklahoma City, OK
73116 ("Peregrine"), for itself and on behalf of all its partners (the
"Peregrine Group Members"), and for good and valuable consideration, the receipt
of which is hereby acknowledged, do hereby release each other, and each other's
officers, directors, partners and employees from any and all obligations, claims
or causes of action which they might have against each other, and each other's
officers, directors, partners and employees arising out of the Promissory Notes
and Loan Agreements between the Company and Peregrine dated May 18, 1993,
September 15, 1993 and February 7, 1994 (collectively, the "Notes and Loan
Agreements"), arising out of any amendments to the Notes and Loan Agreements,
any warrants issued or issuable pursuant to the terms of the Notes and Loan
Agreements, or arising out of any other understandings, agreements, letter
agreements or arrangements between the Company and Peregrine, whether written or
oral, and arising out of any and all other relationships of whatever nature
between the Company and Peregrine, all from the beginning of time to the date of
this Mutual Release.
This Mutual Release shall note release the Company and Peregrine from any
obligations contained in the Settlement Agreement to which this Mutual Release
is annexed as Exhibit A.
Facsimile copies and counterparts of this Mutual Release and any
signatures thereon shall be as legally binding and enforceable as the single
original or a copy of this Mutual Release and any signatures thereon.
Dated this 25 day of September, 1996.
The Peregrine Group and The Peregrine Demeter BioTechnologies, Ltd.
Group Members
By: /s/ RANDAL W. COLTON By: /s/ RICHARD D. EKSTROM
------------------------- -------------------------------
Randal W. Colton, Richard D. Ekstrom, President
Managing General Partner
By: /s/ ROBERT MOSELY By: /s/ JESSE M. JAYNES
------------------------- -------------------------------
Robert Mosely, Jesse M. Jaynes, Vice President
Managing General Partner
<PAGE> 7
ACKNOWLEDGMENT-DEMETER BIOTECHNOLOGIES, LTD.
State of North Carolina )
) ss:
County of Durham )
On this 25th day of September, 1996, before me, the undersigned, a Notary
Public in and for the State and County aforesaid, personally appeared Richard
D. Ekstrom and Jesse M. Jaynes, to me known to be the same persons whose names
are signed to the foregoing Mutual Release of The Peregrine Group and the
Peregrine Group Members who acknowledged to me that they executed the Mutual
Release as their free and voluntary act and deed as President and Vice
President, respectively, on behalf of Demeter BioTechnologies, Ltd. and for the
uses and purposes set forth in the Mutual Release.
Given under my hand and seal the day and year last above written.
[SEAL] Angela S. Elliott
---------------------
Notary Public
My Commission Expires:
3-7-99
- ----------------------
ACKNOWLEDGMENT-THE PEREGRINE GROUP
State of Oklahoma )
) ss:
County of Oklahoma )
On this 27th day of September, 1996, before me, the undersigned, a Notary
Public in and for the State and County aforesaid, personally appeared Randal W.
Colton and Robert Mosely, to me known to be the same persons whose names
are signed to the foregoing Mutual Release of Demeter BioTechnologies, Ltd. and
who acknowledged to me that they executed the Mutual Release as their free and
voluntary act and deed as Managing General Partners on behalf of The Peregrine
Group, an Oklahoma General Partnership,and the Peregrine Group Members and for
the uses and purposes set forth in the Mutual Release.
Given under my hand and seal the day and year last above written.
[SEAL] Janet M. Davis
---------------------
Notary Public
My Commission Expires:
June 6th 2000
- ----------------------
<PAGE> 8
EXHIBIT B TO
SETTLEMENT AGREEMENT
BETWEEN DEMETER BIOTECHNOLOGIES, LTD., AND THE PEREGRINE GROUP
DATED SEPTEMBER 25, 1996
PRIVATE PLACEMENT MEMORANDUM DATED SEPTEMBER 12, 1996
DEMETER BIOTECHNOLOGIES, LTD. 1996 EXCHANGE OFFER
<PAGE> 9
EXHIBIT C TO
SETTLEMENT AGREEMENT
BETWEEN DEMETER BIOTECHNOLOGIES, LTD., AND THE PEREGRINE GROUP
DATED SEPTEMBER 25, 1996
AGREEMENT FOR DISSOLUTION, RATIFICATION AND RELEASE
<PAGE> 1
Exhibit 10.18
COMPENSATION RELEASE AGREEMENT
THIS COMPENSATION RELEASE AGREEMENT (this "Agreement") is made as of this
nineteenth day of September, 1997 by and between Demeter BioTechnologies, Ltd.,
a Colorado corporation (Demeter") and the undersigned employee of Demeter (the
"Employee").
Preamble
As of August 31, 1997, the Employee has claims against Demeter for certain
amounts relating to (i) compensation for past services, (ii) amounts expended
on behalf of Demeter, (iii) loans and notes made to Demeter by the Employee,
and (iv) interests on the foregoing amounts (collectively, the "Claims").
Demeter and the Employee have reached an agreement pursuant to which Demeter
will, among other things, pay certain amounts to the Employee in exchange for a
complete waiver and release of the Claims. Now, therefore, intending to be
legally bound, and based upon the mutual covenants and agreements set forth in
this Agreement, Demeter and the Employee agree as follows:
1. Release. In consideration of Demeter's obligations set forth in this
Agreement and in full and final settlement of the Claims, the Employee, for
himself, his representatives, successors and assigns, hereby agrees to release
Demeter, including its officers and directors, from any and all liabilities
relating in any way to the Claims.
2. Consideration to Employee. In consideration of the Employee's release
of Claims set forth in Section 1, Demeter hereby agrees as follows:
A. Promptly after Demeter shall receive an aggregate amount of cash
payments from Mycogen Corporation of at least One Million Dollars, Demeter shall
make a cash payment to the Employee of $200,000.
B. On January 15 of the year following the fiscal year in which
Demeter shall have received an aggregate amount of at least Three Million
Dollars in the form of license and/or royalty fees, Demeter shall make a cash
payment to the Employee of $50,000 (the "Fee Related Payment"). Demeter agrees
that the Employee shall have the right to convert all or any portion of the Fee
Related Payment to restricted shares of Demeter's common stock at a conversion
rate of $1.00 per share.
<PAGE> 2
C. Employee will receive 225,000 restricted shares of Demeter's common
stock in exchange for $75,000 of the debt owed to Employee for loans or amounts
expended on behalf of Demeter.
D. Employee agrees that $25,000 of the debt owed to Employee for loans
or amounts expended on behalf of Demeter will be used by Employee to exercise
any stock options which have been granted or may be granted by Demeter to
Employee. Employee agrees that no interest will be paid on the amount reserved
for exercise of stock options. Employee agrees that if options are not
exercised, Demeter will not be required to make any payment to Employee with
regard to the amount in this Section D.
E. Employee agrees to accept 145,000 additional restricted shares of
Demeter's common stock in lieu of Demeter repurchasing 55,000 shares of Demeter
stock from Employee's IRA at $1.20 per share. Shares will be paid to Employee's
IRA, if possible.
3. Board Approval. This Agreement is subject to, and conditioned upon,
approval by Demeter's Board of Directors.
4. Miscellaneous. This Agreement is binding upon, and shall inure to the
benefit of, the parties hereto and their respective heirs, personal
representatives, successors and assigns. This Agreement shall be construed and
interpreted by the laws of the State of North Carolina.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
DEMETER BIOTECHNOLOGIES LTD.
By: /s/ George N. Keeney
-------------------------
George N. Keeney
Chairman
Compensation Committee
EMPLOYEE
/s/ Richard D. Ekstrom
-----------------------------
Richard D. Ekstrom
<PAGE> 1
Exhibit 10.19
JAMES R. LADD
December 31, 1997
Richard D. Ekstrom
Demeter BioTechnologies, Ltd.
Post Office Drawer 14388
Research Triangle Park, NC 27709
Dear Rich:
The following is in response to your letter proposal of November 13, 1997
concerning Michael Alfonso. I hereby agree to the following amendments to the
December 31, 1996 Settlement Agreement between Demeter and me. If you agree,
please sign below and return one copy to me via Joshua Ladd.
Amendments:
1. Ladd releases Demeter of any obligations to pay cash specified in Section
6 of the Agreement.
2. Demeter agrees to deliver the stock certificates specified in Section 3 of
the Agreement to Joshua Ladd at the Demeter offices in Durham, NC on or before
Friday, January 16, 1998.
3. Demeter will not register the above shares as specified in Section 5 of
the Agreement. However, on or before January 16, 1998, Demeter will notify
American Securities Transfer, Inc. (AST) in writing or facsimile as required by
AST that these shares are to become free trading upon Ladd's written request.
4. Demeter will also notify AST on or before January 16, 1998 that, upon
Ladd's written request, the shares represented by Certificate 9303-147 shall
also become free trading.
5. Demeter acknowledges that it has no further issue with Ladd regarding
matters with Michael Alfonso.
/s/ James R. Ladd Agreed: /s/ Richard D. Ekstrom
- ----------------- -----------------------------
James R. Ladd Demeter BioTechnologies, Ltd.
Richard D. Ekstrom
President
<PAGE> 2
SETTLEMENT AGREEMENT AND MUTUAL RELEASE
This Settlement Agreement and Mutual Release (the "Agreement") is entered
into effective the 31st day of December, 1996 (the "Effective Date") by and
between Demeter Biotechnologies, Ltd., a Colorado corporation, with its
principal executive offices at 905 West Main Street, Durham, North Carolina
27701 ("Demeter"), and James R. Ladd, a person of the age of majority, whose
address is _______________________________ ("Ladd"). Demeter and Ladd are
collectively referred to herein as the "Parties."
WHEREAS, Ladd, in his business relationship with Demeter, served as
President of Demeter for a period from its inception until December, 1995, and
as Chairman of the Board of Demeter from June, 1992 until January, 1996; and
WHEREAS, as a result of certain agreements made between Ladd and others
during the above mentioned term of Ladd's relationship with Demeter, Demeter has
become unduly liable to others and thereby asserts claims against Ladd for
damages; and
WHEREAS, Ladd asserts claims against Demeter for the payment of
compensation an reimbursement arising out of the above mentioned relationship
with Demeter; and
WHEREAS, Demeter is indebted to Ladd in the aggregate amount of
approximately Three hundred thousand ($300,000) Dollars in connection with the
aforementioned Promissory Notes, Loan Agreements and business relationship; and
WHEREAS, as a result of the foregoing circumstances, bona fide disputes and
controversies exist between the Parties to this agreement; and
WHEREAS, the Parties hereto desire to compromise and settle any and all
claims, causes of actions, issues or obligations of any kind whatsoever that the
Parties have or may have in the future against each other arising out of or by
reason of any relationship or agreement which exists and/or did exist between
the Parties.
THEREFORE, for good and valuable consideration, the Parties agree as
follows:
1. DEFINITIONS. As used herein and in any other written agreements
incorporated herein, the following terms are defined as indicated:
"AGREEMENT" means this document, the terms and conditions recited
therein, and the documents, instruments and certificates delivered pursuant to
this agreement and which are incorporated herein.
"CLAIMS" means all past, present or future claims debts, demands,
actions, causes of action, suits, losses, sums of money, contracts, agreements,
judgments, remedies and liabilities of whatsoever kind and nature, both in law
and equity, in contract or tort, that the releasing party had, now has, or may
ever have against the released party by reason of any matter, cause, event, or
thing whatsoever, whether known or unknown, suspected or unsuspected, for all
existing, future, known and unknown damages (whether compensatory or otherwise,
foreseen or
<PAGE> 3
unforeseen matured or unmatured or accrued or not accrued) arising out of or
connected with:
a. any legal claims, causes of action or legal theories of
liabilities that could be asserted in any court, tribunal or
forum any where in the world and based on the transactions,
facts, events, agreements or circumstances, involved in any
and all relationships Ladd had, now has or may in the future
have as employee, director, shareholder, associate or
partner with Demeter;
b. any of the contracts, licenses and agreements by and
between the Parties as concerns and relates to the other;
c. ANY LEGAL CLAIMS, CAUSES OF ACTION OR LEGAL THEORIES OF
LIABILITY ARISING OR THAT MAY HAVE ARISEN BETWEEN THE
PARTIES FROM THE BEGINNING OF TIME TO THE EFFECTIVE DATE OF
THIS AGREEMENT BY VIRTUE OF ANY ACT OR OMISSION WHATSOEVER.
"CLOSING DATE" means December 31, 1996 and furthermore the closing
shall occur in Durham, North Carolina or at such other location as may be
mutually agreed upon by the Parties.
"CONSIDERATION" means the making and performance of the promises,
covenants and warranties stated in this Agreement; the occurrence of the events
sated in this Agreement; and the making and the truthfulness of the Parties'
representations made in this Agreement and any agreement that is to be
incorporated herein.
"DEMETER" means Demeter BioTechnologies, Ltd., a corporation chartered
under the laws of the State of Colorado, and all of its respective officers,
directors, employees, subsidiaries, affiliates, owners, shareholders,
successors, assigns, servants, and all other related persons, firms and
corporations, with the sole exception of James R. Ladd as to any of the
immediately foregoing descriptions, designations and/or capacities.
"EFFECTIVE DATE" means the date this Agreement has been executed in
full by all Parties.
"LADD" means James R. Ladd and all of his respective representatives,
agents, employees, affiliates, successors, assigns, heirs, executors,
administrators, and all other related persons, firms, and corporations.
"LAWS" means all statutes, laws, ordinances, regulations, policies,
orders, writs, injunctions or decrees of the United States, any state or
commonwealth, any municipality, any foreign country, any territory or possession
or any tribunal.
"PARTIES" means Demeter BioTechnologies, Ltd. and Lames R. Ladd.
"RELEASE" means to release, acquit and forever discharge the released
party and his or its past and present directors, officers, parent and subsidiary
entities, partners,
2
<PAGE> 4
representatives, executors, administrators, predecessors, successors, agents,
servants, assignees, employees, attorneys, and all other persons in privity with
them (with the sole exception of James R. Ladd as to any of the immediately
foregoing descriptions, designations, and/or capacities) of and from any and all
claims (herein defined).
2. ADEQUACY OF CONSIDERATION. Each of the Parties acknowledges the
adequacy of the Consideration by signing this Agreement.
3. DELIVERY OF STOCK. Within sixty (60) days of the Effective Date,
Demeter will cause to be issued and delivered to Ladd a certificate(s) for Six
hundred thousand (600,000) shares of restricted (Rule 144) Demeter common stock
("Demeter Stock") to replace stock Ladd has contributed to the benefit of
Demeter and for cash loans made to Demeter.
4. RESTRICTED STOCK; LEGEND REQUIREMENT. Ladd acknowledges and
understands that the Demeter Stock will be restricted, that it is being issued
to him in a private transaction, and that it has not been registered under the
Securities Act of 1933 (the "Act"), or the securities laws of any states in
reliance on exceptions from the registration requirements of the act and such
state securities laws. The Demeter stock is subject to restrictions on
transferability and may not be transferred or resold except as permitted under
the Act and such laws pursuant to registration or exemption therefrom. The
Demeter stock has not been approved or disapproved by the Securities and
Exchange Commission or any other regulatory authority. The certificate(s)
evidencing the Demeter Stock will bear a legend substantially resembling the
following:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND ARE "RESTRICTED SECURITIES" AS THAT TERM
IS DEFINED IN RULE 144 UNDER THE ACT. THE SHARES MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE
ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE
COMPANY.
5. REGISTRATION RIGHTS. The six hundred thousand (600,000) shares of
Demeter Stock to be issued pursuant to paragraph 3 of this Agreement will be
registered by Demeter under the "Act" on or before March 31, 1998.
6. DELIVERY OF CASH. Subsequent to the Effective Date, Demeter will pay
Ladd, either in lump sum or in partial payments as funds become available, at
the sole option of Demeter, the sum of Fifty Thousand ($50,000) Dollars, such
payments to consist of cash received by Demeter in the form of new capital,
royalties or license fees after the Effective Date. No such lump sum or partial
payment shall constitute an amount in excess of one (1) percent of new capital,
royalties or license fees received by Demeter in excess of Five Hundred Thousand
($500,000) Dollars after the effective date of this agreement. Ladd will provide
instructions to Demeter concerning where the payment(s) called for hereunder
shall be sent. In consideration for this $50,000 payment, Ladd forgives Demeter
any other loans, notes or debt.
7. KAZAKH-PARACURE CLAIM DISPOSITION. Ladd will work diligently to
obtain, in an expeditious manner, the satisfaction, release and settlement of
any and all claims, demands and causes of action asserted against Demeter by
Kazakh-Paracure as a result of or in any way arising
3
<PAGE> 5
out of any act or omission on the part of Ladd whether while President, Chairman
or in any other capacity on behalf of Demeter, and deliver to Demeter any and
all documentation concerning a settlement of these claims. The settlement of the
Kazakh-Paracure claims is contemplated by the parties to be a condition
precedent to this agreement and this agreement shall be of no force or effect if
said settlement is not reached before or concurrently with the effective date of
this agreement.
8. LIMITATION ON SALES OF EARLIER OWNED STOCK.
a. Ladd covenants and agrees not to transfer or sell in
public and private markets each month up to and including March 31, 1998 more
than ten thousand (10,000) shares of Demeter stock owned by him prior to the
effective date of this Agreement (the "Earlier Owned Stock"). Ladd further
agrees and covenants that he will not transfer or sell more than five thousand
(5,000) shares of the ten thousand (10,000) shares of such Earlier Owned Stock
permitted for sale each month in public markets.
b. As a further condition regarding the transfer or sale
of the Earlier Owned Stock, Ladd and Demeter agree that Ladd may transfer
Demeter Stock to others to whom he personally has promised such stock, as he
deems appropriate, without violating the provisions in paragraph 8.a.
c. All of the Earlier Owned Stock as defined in paragraph
8.a. shall be allowed by Demeter to become free trading shares upon Ladd's
request to the transfer agent, subject to the terms and conditions delineated in
this Agreement.
9. FULFILLMENT OF PROMISES TO OTHERS. Ladd agrees and covenants that
within sixty (60) days of the effective date of this agreement, he will transfer
Earlier Owned Stock (as defined in paragraph 8 above) to those individuals
listed on the attached addendum marked as Attachment A, in the amount designated
thereon for each such person.
10. STOCK TRANSFER TO RELATIVES. Demeter agrees to allow Ladd to make
transfers of shares of stock he holds in Demeter by reason of this agreement or
otherwise in any amount to his two children, Joshua Wingate Ladd and McGinnes
Lee Ladd, and to his ex-wife, Marcia Lee Mullinix Ladd.
11. ASSISTANCE WITH RESOLUTION OF SEARS DISPUTE. Ladd covenants and
agrees to assist Demeter in reconciling any and all outstanding differences and
disputes involved with the agreements between Demeter and Philip B. Sears (Sears
Agreements), including, and only as an example, providing an affidavit or other
written or oral evidence concerning the Sears Agreements. Demeter agrees that it
will not attempt to take or allow others within its control to attempt to take
any action adverse to Ladd in return for his cooperation in this regard. It is
understood and agreed that Ladd will be afforded the right to indemnification,
if any, afforded officers and/or directors under the articles of incorporation
and/or bylaws of Demeter as to all claims by Sears asserted against him and
growing out of any action Ladd undertook or failed to undertake as an officer
and/or director of Demeter.
12. RELEASES.
a. Subject to the terms of this Agreement, each Party
releases the other Party from all Claims.
b. Ladd hereby fully and completely releases, waives,
renounces, and compromises any and all claims,
demands, and/or causes of action
4
<PAGE> 6
that he may have, possess or could assert, whether
known or unknown, and which exist or could exist as of
the effective date hereof, against Demeter and/or any
and all of its employees, officers, directors,
shareholders, attorneys, independent contractors,
consultants, accountants, and any and all affiliated
and/or predecessor corporations, each individually and
collectively.
c. Demeter hereby fully and completely releases, waives,
renounces, and compromises any and all claims, demands,
and/or causes of action that it may have, possess or
could assert, whether known or unknown, and which exist
or could exist as of the effective date hereof, against
Ladd, and/or any and all of his executors,
administrators, heirs, agents, representatives,
successors or assigns.
d. The Parties expressly acknowledge that each intends
this Release to be as broad and comprehensive as
possible so that the released person shall never be
liable, directly or indirectly, to the other party or
their beneficiaries, heirs, successors or assigns, or
any person, firm or corporation, claiming by, through,
under or on behalf of any of the undersigned, for any
claims, demands, actions or causes of action of
whatsoever nature or character, arising out of or
related in any way to the Claims; it being the express
intention of the Parties that the consideration stated
herein fully and completely compensates and satisfies
the undersigned for any and all claims or causes of
action against the party so released, whether such
claim or cause of action is asserted or unasserted.
e. It is expressly contracted, understood and acknowledged
that these releases may, at the election of the party
released, be asserted by the released person as an
absolute and final bar to any claim, dispute or cause
of action now pending or arising hereafter where such
claims dispute or cause of action is asserted by, or on
behalf of, the releasing party or relates in any manner
to any act taken or failed to be taken by the party so
released hereby. Each Party contracts, warrants and
represents that he or it will execute any and all
documents deemed reasonably necessary by the Party
released to effectuate such bar.
f. Ladd released Demeter from any and all obligations,
claims or causes of action which he has or may have
against Demeter arising out of any and all Promissory
Notes or amendments thereof executed by Demeter in
Ladd's favor regardless of payment terms and/or due
date thereof, and any and all Loan Agreements and any
other claims thereunder, and any and all warrants,
understandings, agreements, letter agreements or
arrangements between Ladd and Demeter, whether written
or oral, and arising out of any and all relationships
of whatever nature between Ladd and Demeter, all from
the beginning of time to the Effective Date of this
Agreement.
g. Notwithstanding anything to the contrary herein, the
Parties hereto do not intend to affect or release any
rights created in favor of either Party as a result of
this Agreement.
5
<PAGE> 7
13. PERSONAL ITEMS BELONGING TO LADD. As further consideration herein,
Demeter agrees all personal items and documents belonging to Ladd remaining in
the principal executive offices of Demeter at the departure from employment by
Ladd shall be returned to Ladd or his designee.
14. REPRESENTATIONS AND WARRANTIES OF THE PARTIES. The Parties make the
following representations and warranties to each other:
b. ?????????? in this Agreement, each is the sole owner of all
the rights, interests, claims or causes of action released herein, and has not
transferred, conveyed or assigned any such rights or interest to any person or
entity not a party to this Agreement;
c. as of the effective date, no legal, equitable or
administrative proceeding or investigation of any nature has been instituted
or threatened by or against any Party which questions or could effect
adversely the validity or enforceability of this agreement, any of the
transactions contemplated hereby, or the ability of the Parties to perform
their respective obligations under this Agreement;
d. ?????? and is legally competent to enter into and
execute this Agreement;
e. before executing this Agreement, the signatories for the
corporate party hereto obtained the approval of the Board of Directors to the
terms, contents, conditions and effect of the Agreement;
f. each is authorized to make this Agreement as required by
law, bylaws or agreements to which he or it may be a party;
g. before executing this Agreement, each became fully informed
of the terms, contents, conditions and effect of this Agreement;
h. in entering into this agreement, each has had the benefit
and advice of counsel of his or its own choosing in connection with the making
of this Agreement;
i. each has made this Agreement as his or its free and
voluntary act and without any threat, force, duress, fraud, undue influence or
representation, understanding or promise of any kind by any person whomsoever,
except for the representations expressly stated in this Agreement;
j. at the time of making this Agreement, the Parties and each
of the authorized agents making and signing this Agreement on behalf of Demeter
was completely sober, sane and capable of understanding the character of the
acts being done and was in complete charge of all of his faculties and capable
of understanding the significance of his act;
k. this Agreement is a valid, binding and enforceable
obligation of each Party; and
l. each Party has the necessary capacity and authority to
execute and bind himself or itself to this Agreement.
15. DELIVERY OF PROMISSORY NOTES. Ladd agrees that he will deliver to
Demeter the
6
<PAGE> 8
16. REMEDIES FOR FAILURE TO COMPLY. In the event that a Party fails to
comply with any material obligation under this Agreement, the Parties agree
that the aggrieved Party's sole and exclusive remedy shall be specific
enforcement of the obligation. If specific performance is impossible, the
aggrieved Party shall have an action for damages. The Parties waive their
rights to rescind this Agreement.
17. ADMISSION OF LIABILITY DENIED. This Agreement is the product of
informed and extensive negotiations between the Parties, assisted by counsel.
It is a compromise and resolution of disputed claims and legal positions and is
being made to avoid litigation and its attendant expenses, and to buy peace and
certainty. Nothing contained in this Agreement shall constitute, be construed
as, and does not constitute an admission of liability by any party of any
claim, theory or factual allegation against any party, each of whom expressly
denies liability to the other.
18. BINDING AGREEMENT. This Agreement constitutes, and each of the
documents to be executed and delivered by a party pursuant to this Agreement
constitutes a valid and binding obligation of such party which is enforceable
against him or it in accordance with its terms. Neither the execution and
delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will either (A) violate any Laws binding upon any party
or upon any of his or its properties, or (B) result in the creation of any
lien or security interest against or in any of his or its properties.
19. PARTIES BOUND. This Agreement shall be binding upon and inure to the
benefit of the Parties and their respective affiliates, associates, successors,
heirs, executors, legal representatives and administrators.
20. ASSIGNMENT PROHIBITED. Neither party shall assign this Agreement
without first obtaining the written consent of the other party hereto. This
prohibition shall not prohibit any assignment by a party hereto by merger,
consolidation, operation of law or to a party which succeeds to all or
substantially all of such party's assets. Subject to the foregoing, this
Agreement shall extend to and be binding upon the successors and assigns of
the Parties.
21. FURTHER ASSURANCES AND ACTIONS. Each party agrees to promptly
cooperate and to take such further action and to deliver such additional
instruments and documents as may be necessary or desirable in good faith
to consummate and accomplish fully and effectively the purposes of and
transactions contemplated by this Agreement, as may be reasonably requested
in writing by either party hereto.
22. ARMS-LENGTH RELATIONSHIP. Nothing in this Agreement nor the Parties'
actions done under or connected with this Agreement shall be deemed or
construed by the Parties, nor by any third party, as creating the relationship
of principal and agent or of partnership or joint venture, of a confidential
relationship or a special relationship that would impose on either party a duty
to act in good faith or deal fairly with each other, it being understood and
agreed that the Parties have dealt with each other at arms-length and intend to
continue to treat each other at arms-length.
23. JOINT AND SEVERAL OBLIGATIONS. Each obligation, representation and
warranty of a party hereunder or under any document or instrument delivered
pursuant hereto shall be enforceable severally against each person or entity
making the same.
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<PAGE> 9
24. TIME OF ESSENCE. It is understood and agreed that time is of the
essence with respect to the performance by each party hereto of his or its
respective covenants and agreements under this Agreement.
25. SURVIVAL. Each provision of this Agreement which contemplates the
performance by the Parties in whole or in part after the Closing Date, and all
of the covenants, representations and warranties of the Parties set forth
herein, shall survive the Closing.
26. COST OF PERFORMANCE. Unless otherwise expressly stated to the
contrary, all obligations of either party hereunder shall be performed and
satisfied by or on behalf of such party at such party's sole expense.
27. EXHIBITS AND SCHEDULES. All of the exhibits, schedules and the like
referenced in this Agreement are integrally related to this Agreement and are
hereby made a part of this Agreement for all purposes necessary to give same
its desired effect.
28. HEADINGS. Section headings used in this Agreement are for
convenience only and shall not effect the construction of this Agreement.
29. CONSTRUCTION AND CHOICE OF LAW. This Agreement will be construed and
governed by the laws of the State of North Carolina, exclusively, and the
Parties further agree that application of this section shall be made without
regard to conflicts of law principles. The prevailing party in any dispute to
enforce this Agreement will be entitled to recover its costs and a reasonable
attorney's fee.
30. ADVICE OF COUNSEL; NO PRESUMPTIONS. The Parties acknowledge that
this Agreement is the product of informed negotiations among and between the
Parties, with both parties having the benefit of advice of legal counsel in
the conduct of such negotiations; and the Parties therefore agree that no
presumptions shall arise favoring any party by virtue of the authorship of
any of the provisions of this Agreement
31. FACSIMILE AND COUNTERPART COPIES. The Parties agree that facsimile
and counterpart copies of this Agreement and any signatures on this Agreement
will be as legally binding and enforceable as the original or a copy of this
Agreement.
32. ENTIRE AGREEMENT; AMENDMENT. There are no verbal understandings
between the Parties. This Agreement contains the entire agreement between the
Parties, merges and supersedes all previous agreements between the Parties,
whether written or oral and of whatsoever nature, and may not be changed,
modified, amended or supplemented except by a written agreement signed by both
parties. Other than this Agreement, the exhibits, schedules and other written
agreements which are incorporated herein by reference, all contractual
agreements, whether written or otherwise, between or among the Parties are
extinguished and of no further force or effect.
32. FURTHER ACTIONS. The Parties agree to execute and deliver such
certificates, agreements and other documents and to take such other action as
may reasonably be required by the other party in order to record, effectuate,
consummate, or implement the transaction contemplated by this Agreement.
8
<PAGE> 10
34. SEVERABILITY. Whenever possible, each provision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement shall be prohibited by
or invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Agreement.
35. EXECUTION BY REPRESENTATIVES. Any person executing this Agreement
in a representative capacity, acknowledges, warrants and represents that he
or she is an official representative of the entity or person in whose name he
is executing this Agreement and that he possesses full and complete authority
to bind the entity to the full and faithful performance of all conditions,
terms, provisions, covenants, warranties and representations contained in this
Agreement.
IN WITNESS WHEREOF, the Parties have duly signed this Settlement Agreement
and Mutual Release consisting of nine (9) pages as of the Effective Date.
DEMETER BIOTECHNOLOGIES, LTD.
/s/ JAMES R. LADD BY: /s/ RICHARD D. EKSTROM
- ------------------- ------------------------------
James R. Ladd Richard D. Ekstrom, President
9
<PAGE> 11
Exhibit A
RELEASE
This release is dated December __, 1996, and given by Demeter BioTechnologies,
Ltd., its subsidiaries, divisions and affiliated companies ("Demeter") to
Kazakh-Paraoure, Inc. ("KP").
For valuable consideration, the receipt of which is hereby acknowledged, and in
order to resolve all claims by and between KP and Demeter, Demeter completely
releases and forever discharges KP, its officers, directors, shareholders and
representatives, from any and all part, present or future claims, demands,
obligations, actions, causes of action, rights, damages or any other theory of
recovery which Demeter now has or which may hereafter accrue or otherwise be
acquired, on account of or in any way growing out of the prior dealings between
the two parties, and in particular, any contractual agreements that may have
existed between the two parties, to include contracts for financing, joint
ventures, shared ownership of rights and technologies, and all other related
matters set forth in correspondence or contractual documents between the parties
dated on or before the date of this Release. Demeter specifically waives and
releases any right or claim of ownership it may have had in any substance,
formula, chemical or other product of KP, and makes no further claim to
ownership thereof or rights therein.
DEMETER BIOTECHNOLOGIES, LTD.
BY: /s/ RICHARD D. EKSTROM
--------------------------
Name: Richard D. Ekstrom
-------------------
Title: President
-------------------
<PAGE> 1
Exhibit 10.20
DEMETER BIOTECHNOLOGIES, LTD.
1998 STOCK OPTION PLAN
1. Purpose. The Demeter Biotechnologies, Ltd. 1998 Stock Option Plan
(the "Plan) is established to attract, retain and reward persons providing
services to Demeter Biotechnologies, Ltd. and any successor corporation thereto
(the "Company") and to motivate such persons to contribute to the growth and
profits of the Company in the future.
2. Administration.
(a) General. The Plan shall be administered by the Board of
Directors of the Company (the "Board") and/or by a duly appointed committee of
the Board having such powers as shall be specified by the Board. All questions
of interpretation of the Plan or of any options granted under the Plan (an
"Option") shall be determined by the Board, and such determinations shall be
final and binding upon everyone having an interest in the Plan and/or any
Option.
(b) Options Authorized. Options may be either incentive stock
options as defined in section 422 of the Code ("Incentive Stock Options") or
nonqualified stock options ("Nonqualified Stock Options").
3. Eligibility.
(a) Eligible Persons. Options may be granted only to employees
(including officers and directors who are also employees) and directors of the
Company or to individuals who are rendering services as consultants, advisors,
or other independent contractors to the Company. The Board shall, in its sole
discretion, determine which persons shall be granted Options (an "Optionee").
Eligible persons may be granted more than one Option.
(b) Type of Option Which May Be Granted. Employees may be
granted Incentive Stock Options and/or Nonqualified Stock Options; provided,
however, that (i) a prospective employee may only be granted a Nonqualified
Stock Option; (ii) only key employees may be granted an Incentive Stock Option.
A director of the Company may only be granted a Nonqualified Stock Option unless
the director is also an employee of the Company. An individual who is rendering
services as a consultant, advisor, or other independent contractor, or who is a
prospective consultant or advisor, may only be granted a Nonqualified Stock
Option.
4. Shares Subject to Option. Options shall be for the purchase of
shares of the authorized but unissued Common Stock or treasury shares of Common
Stock of the Company (the "Stock"), subject to adjustment as provided in
paragraph 9 below. The maximum number of shares of Stock which may be issued
under the Plan shall be ______ shares. In the event that any outstanding Option
for any reason expires or is terminated or canceled and/or shares of Stock
subject to repurchase are repurchased by the Company, the shares allocable to
the
<PAGE> 2
unexercised portion of such Options, or such repurchased shares, may again be
subject to an Option grant.
5. Time for Granting Options. All Options shall be granted, if at all,
within ten (10) years from the earlier of the date the Plan is adopted by the
Board or the date the Plan is duly approved by the shareholders of the Company.
6. Terms, Conditions and Form of Options. Subject to the provisions of
the Plan, the Board shall determine for each Option (which need not be
identical) the number of shares of Stock for which the Option shall be granted,
the exercise price of the Option, the timing and terms of exercisability and
vesting of the Option, whether the Option is to be treated as an incentive Stock
Option or as a Nonqualified Stock Option and all other terms and conditions of
the Option not inconsistent with the Plan. Options granted pursuant to the Plan
shall be evidenced by written agreements specifying the number of shares of
Stock covered thereby, in such form as the Board shall from time to time
establish, which agreements may incorporate all or any of the terms of the Plan
by reference and shall comply with and be subject to the following terms and
conditions:
(a) Exercise Price. The exercise price for each Option shall
be established in the sole discretion of the Board; provided, however, that (i)
the exercise price per share for an Incentive Stock Option shall be not less
than the fair market value, as determined by the Board, of a share of Stock on
the date of the granting of the Option, (ii) the exercise price per share for a
Nonqualified Stock Option shall not be less than eighty-five percent (85%) of
the fair value, as determined by the Board, of a share of Stock on the date of
the granting of the Option and (iii) no incentive Stock Option granted to an
Optionee who at the time the Incentive Stock Option is granted owns stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of the Company within the meaning of section 422(b)(6) of the
Code (a "Ten Percent Owner Optionee") shall have an exercise price per share
less than one hundred ten percent (110%) of the fair value, as determined by the
Board, of a share of Stock on the date of the granting of the Option.
Notwithstanding the foregoing, an Option (whether an Incentive Stock Option or a
Nonqualified Stock Option) may be granted with an exercise price lower than the
minimum exercise price set forth above if such Option is granted pursuant to an
assumption or substitution for another option in a manner qualifying with the
provisions of section 424(a) of the Code.
(b) Exercise Period of Options. The Board shall have the power
to set the time or times within which each Option shall be exercisable or the
event or events upon the occurrence of which all or a portion of each Option
shall be exercisable and the term of each Option; provided, however, that (i) no
Option shall be exercisable after the expiration of ten (10) years after the
date such Option is granted, and (ii) no Incentive Stock Option granted to a Ten
Percent Owner Optionee shall be exercisable after the expiration of five (5)
years after the date such Option is granted.
(c) Payment of Exercise Price. Payment of the exercise price
for the number of shares of Stock being purchased pursuant to any Option shall
be made in cash, by
-2-
<PAGE> 3
check, cash equivalent, pursuant to a "cashless exercise," or such other means
as may be specified.
7. Standard Forms of Stock Option Agreement.
(a) Nonqualified Stock Options. Unless otherwise provided for
by the Board at the time an Option is granted, an Option designated as a
Nonqualified Stock Option shall comply with and be subject to the terms and
conditions set forth in the form of Nonqualified Stock Option agreement attached
hereto as Exhibit A and incorporated herein by reference.
(b) Incentive Stock Options. Unless otherwise provided for by
the Board at the time an Option is granted, an Option designated as an Incentive
Stock Option shall comply with and be subject to the terms and conditions set
forth in a form of Incentive Stock Option agreement attached hereto as Exhibit B
and incorporated herein by reference.
8. Fair Market Value Limitation. To the extent that the aggregate fair
market value (determined at the time the Option is granted) of stock with
respect to which Incentive Stock Options are exercisable by an Optionee for the
first time during any calendar year (under all stock option plans of the
Company, including the Plan) exceeds One Hundred Thousand Dollars ($100,000),
such options shall be treated as Nonqualified Stock Options. This paragraph
shall be applied by taking Incentive Stock Options into account in the order in
which they were granted.
9. Effect of Change in Stock Subject to Plan. Appropriate adjustments
shall be made in the number and class of shares of Stock subject to the Plan and
to any outstanding Options and in the exercise price of any outstanding Options
in the event of a stock dividend, stock split, reverse stock split,
recapitalization, combination, reclassification, or like change in the capital
structure of the Company.
10. Transfer of Control. An "Ownership Change" shall be deemed to have
occurred in the event any of the following or any similar transaction occurs
with respect to the Company:
(a) The direct or indirect sale or exchange by the
shareholders of the Company of all or substantially all of the stock of the
Company;
(b) A merger or consolidation involving the Company in which
the Company is not the surviving entity;
(c) The sale, exchange, or transfer of all or substantially
all of the assets of the Company (other than a sale, exchange, or transfer to
one (1) or more subsidiary corporations of the Company); or
(d) A liquidation or dissolution of the Company.
-3-
<PAGE> 4
In the event of an Ownership Change, any Options which are neither
assumed or substituted for in connection with the Ownership Change nor exercised
as of the date of the Ownership Change shall terminate and cease to be
outstanding effective as of the date of the Ownership Change.
11. Options Non-Transferable. During the lifetime of the Optionee, the
Option shall be exercisable only by the Optionee. No Option shall be assignable
or transferable by the Optionee, except by will or by the laws of descent and
distribution.
12. Termination or Amendment of Plan or Options. The Board, including
any duly appointed committee of the Board, may terminate or amend the Plan or
any Option at any time; provided, however, that (a) without the approval of the
Company's shareholders, there shall be (i) no increase in the total number of
shares of Stock covered by the Plan (except by operation of the provisions of
paragraph 9 above) and (ii) no change in the class eligible to receive Incentive
Stock Options and (b) no such action shall deprive any person, without such
person's consent, of any rights previously granted pursuant to the Plan.
IN WITNESS WHEREOF, the undersigned Secretary of the Company certifies
that the foregoing Demeter Biotechnologies, Ltd. 1998 Stock Option Plan was duly
adopted by the Board of Directors of the Company on the 12th day of May, 1998.
/s/ Donald A. Guthrie
------------------------------
Secretary
-4-
<PAGE> 5
PLAN HISTORY
------------
______________, 1998 Board of Directors adopts Plan with a share
reserve of __________ shares
______________, 1998 Shareholders approve Plan with a share
reserve of ___________ shares
-5-
<PAGE> 1
Exhibit 10.21
NONCOMPETITION AND NONDISCLOSURE AGREEMENT
Intending to be legally bound, I hereby agree with Demeter Biotechnologies, Ltd.
(the "Company"), as follows:
1. I will not at any time, whether during or after the termination of
my employment, reveal to any person or entity any of the trade secrets or
confidential information concerning the technology, intellectual property or
licensed information owned by, used by or licensed to the Company (hereinafter,
"Proprietary Information") or of any third party which the Company is under
obligation to keep confidential (including, without limitation, trade secrets or
confidential information respecting inventions, products, designs, methods,
know-how, techniques, business plans, systems, processes, software programs,
works of authorship, customer lists, projects, plans and proposals), except as
may be required in the ordinary course of performing my duties as an employee of
the Company, and I shall keep secret all such Proprietary Information entrusted
to me and shall not use or attempt to use any such Proprietary Information in
any manner which may injure or cause loss, whether directly or indirectly, to
the Company.
Furthermore, I agree that during my employment I shall not
make, use or permit to be used for my own benefit or for the benefit of any
third party any notes, memoranda, reports, lists, records, drawings, sketches,
specifications, software programs, data, documentation or other materials of any
nature relating to the Proprietary Information, whether now possessed by the
Company or hereafter developed during my employment with the Company. I further
agree that I shall not, after the termination of my employment, use or permit to
be used any such notes, memoranda, reports, lists, records, drawings, sketches,
specifications, software programs, data, documentation or other materials
related to or concerning the Proprietary Information, it being agreed that all
of the foregoing shall be and remain the sole and exclusive property of the
Company and that immediately upon the termination of my employment I shall
deliver all of the foregoing, and all copies thereof, to the Company, at its
main office.
My obligations limiting disclosure of the Company's
Proprietary Information and use of the Company's materials as contemplated in
this Section 1 shall not apply to any such information or materials which:
(i) is now or hereafter becomes, through no act or failure to
act on my part, generally known in the Company's industry;
(ii) is information which the Company and I mutually agree to
release from the terms of this Agreement; or
(iii) is disclosed pursuant to judicial order or government
regulation; provided, however, that I shall, at least thirty days prior
to any disclosure pursuant to this subsection (iii), notify the Company
of the contents of such disclosure, and upon the
<PAGE> 2
request of the Company, shall consult with the Company to use best
efforts to limit and restrict access to such disclosure.
2. If at any time or times during my employment, I shall (whether
before or after the execution of this agreement and either alone or with others)
make, discover or reduce to practice any invention, modification, discovery,
design, development, improvement, process, software program, work of authorship,
documentation, formula, data, technique, know-how, secret or intellectual
property right whatsoever or any interest therein (whether or not patentable or
registrable under copyright or similar statutes or subject to analogous
protection) (herein called "Developments") that (a) relates to the then current
business of the Company or any of the products or services being developed,
manufactured or sold by the Company, (b) results from tasks assigned me by the
Company or (c) results from the use of premises or personal property (whether
tangible or intangible) owned, leased, licensed or contracted for by the
Company, or (d) relates in any manner to the Proprietary Information, such
Developments and the benefits thereof shall immediately become the sole and
absolute property of the Company and its assigns, and I shall promptly disclose
to the Company (or any persons designated by it) each such Development and
hereby assign any rights I may have or acquire in the Developments and benefits
and/or rights resulting therefrom to the Company and its assigns without further
compensation and shall communicate, without cost or delay, and without
publishing the same, all available information relating thereto (with all
necessary plans and models) to the Company.
Upon disclosure of each Development to the Company, I will,
during my employment and at any time thereafter, at the request and cost of the
Company, sign, execute, make and do all such deeds, documents, acts and things
as the Company and its duly authorized agents may reasonably require:
(i) to apply for, obtain and vest in the name of the Company
alone (unless the Company otherwise directs) letters patent, copyrights
or other analogous protection in any country throughout the world and
when so obtained or vested to renew and restore the same; and
(ii) to defend any opposition proceedings in respect of such
applications and any opposition proceedings or petitions or
applications for revocation of such letters patent, copyright or other
analogous protection; or
(iii) to, in any other manner requested by the Company,
acknowledge that such Developments are Proprietary Information of the
Company.
3. In the event the Company is unable, after all diligent effort, to
secure my signature on any letters patent, copyright, acknowledgment or other
analogous protection relating to a Development, whether because of my physical
or mental incapacity or for any other reason whatsoever, I hereby irrevocably
designate and appoint the Company through its duly authorized president as my
agent and attorney-in-fact, to act for and in my behalf to execute and file any
such application or applications and to do all other lawfully permitted acts to
further the prosecution and issuance of letters patent, copyright or other
analogous intellectual property protection thereon with the same legal force and
effect as if executed.
-2-
<PAGE> 3
4. For a period of one (1) year immediately following the voluntary or
involuntary termination of my employment with the Company for any reason
whatsoever, I will not within the United States:
(a) solicit any customers or prospects of the Company for
products or services that compete with those of the Company;
(b) solicit or recruit any employees or ex-employees of the
Company unless they have ceased to be employed for at least six (6) months; or
(c) directly or indirectly engage, whether as an employee,
consultant, partner, owner, agent, stockholder, officer, director, or other
representative, in any business which competes with the Company's business;
provided however, I will be allowed to purchase or own stock in a publicly held
corporation if my holdings do not exceed one percent (1%) of the outstanding
capital stock of such corporation.
5. I agree that any breach of this Agreement by me will cause
irreparable damage to the Company and that in the event of such breach the
Company shall have, in addition to any and all remedies at law, the right to an
injunction, specific performance or other equitable relief to prevent the
violation of my obligations hereunder.
6. I understand that this Agreement does not create an obligation on
the Company or any other person or entity to continue my employment.
7. I represent that my performance of all of the terms of this
Agreement and as an employee of the Company does not and will not breach any
agreement to keep in confidence Proprietary Information acquired by me in
confidence or in trust prior to my employment by the Company. I have not entered
into, and I agree I will not enter into, any agreement either written or oral in
conflict herewith.
8. Any waiver by the Company of a breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent breach
of such provision or any other provision hereof.
9. I hereby agree that each provision herein shall be treated as a
separate and independent clause, and the unenforceability of any one clause
shall in no way impair the enforceability of any of the other clauses herein.
Moreover, if one or more of the provisions contained in this Agreement shall for
any reason be held to be excessively broad as to scope, activity, subject or
otherwise so as to be unenforceable at law, such provision or provisions shall
be construed by the appropriate judicial body by limiting or reducing it or them
so as to be enforceable to the maximum extent compatible with the applicable law
as it shall then appear.
10. My obligations under this Agreement shall survive the termination
of my employment regardless of the manner of such termination and shall be
binding upon my heirs, executors, administrators and legal representatives.
-3-
<PAGE> 4
11. The Company shall have the right to assign this Agreement to its
successors and assigns, and all covenants and agreements hereunder shall inure
to the benefit of and be enforceable by said successors or assigns.
12. This Agreement shall be governed by and construed in accordance
with the laws of the Commonwealth of Pennsylvania.
Dated:________________________ ________________________
________________________
-4-
<PAGE> 1
Exhibit 10.22(a)
UNITED STATES PATENT [19] [11] PATENT NUMBER: 5,561,107
JAYNES ET AL. [45] DATE OF PATENT: OCT. 1, 1996
- --------------------------------------------------------------------------------
[54] METHOD OF ENHANCING WOUND HEALING BY STIMULATING FIBROBLAST AND
KERATINOCYTE GROWTH IN VIVO, UTILIZING AMPHIPATHIC PEPTIDES
[75] Inventors: JESSE M. JAYNES, Raleigh; GORDON R. JULIAN, Cary, both of N.C.
[73] Assignee: DEMETER BIOTECHNOLOGIES, LTD, Durham, N.C.
[21] Appl. No.: 231,730
[22] Filed: APR. 20, 1994
RELATED U.S. APPLICATION DATA
[63] Continuation-in-part of Ser. No. 225,476, Apr. 8, 1994, abandoned, which
is a continuation-in-part of Ser. No. 39,620, Jun. 4, 1993, abandoned, and
a continuation-in-part of Ser. No. 148,889, Nov. 8, 1993, abandoned, and a
continuation-in-part of Ser. No. 148,491, Nov. 8, 1993, abandoned.
[51] Int. Cl.(6) ................. A61K 38/10; A61K 38/16; C07K 7/08; C07K 14/00
[52] U.S. Cl. ............ 514/12; 514/13; 530/324; 530/326; 530/345; 435/240.31
[58] FIELD OF SEARCH ...... 530/324, 325, 530/326, 327, 345; 514/12, 13, 14, 21;
435/1. 240.30, 240.31, 240, 243; 930/290
[56] REFERENCES CITED
U.S. PATENT DOCUMENTS
4,355,104 10/1982 Hultmark et al. ............................ 435/70
4,520,016 5/1985 Hultmark et al. ............................ 514/12
4,810,777 3/1989 Zasloff ................................... 530/326
4,940,666 7/1990 Boyce et al. ............................ 435/240.2
5,045,531 9/1991 Berkowitz et al. ........................... 514/12
5,070,188 12/1991 Njieha et al. ............................. 530/399
5,186,166 2/1993 Riggs et al. ........................... 128/203.15
5,242,902 9/1993 Murphy et al. ............................. 530/324
5,294,605 3/1994 Houghten et al. ............................ 514/13
5,411,942 5/1995 Widmer et al. .............................. 514/11
5,424,290 5/1995 Maloy et al. ............................... 514/12
FOREIGN PATENT DOCUMENTS
2047317 1/1992 Canada
12866 11/1990 WIPO
OTHER PUBLICATIONS
Biochemistry, vol. 7, No. 6, issued Jun. 1968, Means et al, "Reductive
Alkylation of Amino Groups in Proteins", pp. 2191-2201.
Cell, vol. 23, issued Mar. 1981, Rozengurt et al, "Melittin Stimulates Na
Entry"..., pp. 781-788.
J. Biol. Chem., vol, 243, No. 23, issued 10 Dec. 1968, Takahashi, "The Reaction
of Phenylglyoxal with Argininc...", pp. 6171-6179.
Jaynes, J. M., et al. "In Vitro Cytocidal Effect Of Lytic Peptides On Several
Transformed Mammalian Cell Line", Peptide Research, 2:157-160 (1989).
Jaynes, J. M. "Lytic Peptides Portend An Innovation Age In The Management And
Treatment Of Human Disease", Drug News and Perspective, 3:69-78 (1990).
Akerfeldt, et al. "Synthetic Peptides As Models For Ion Channel Proteins", Acc.
Chem. Res., 26:191-197 (1993).
Reed, W. A., et al. "Enhanced In Vitro Growth Of Murine Fibroblast Cells And
Preimplantation Embryos Cultured in Medium Supplemented With An Amphipathic
Peptide," Molecular Reproduction and Development 31:106-113 (1992).
Arrowood, M. J., et al. "Hemolytic Properties Of Lytic Peptides Active Against
The Sporozites Of Cryptosporidium Parvum," J. Protozool. 38:161s-163s (1991).
Jaynes, J. M. et al. "In Vitro Effect Of Novel Lytic Peptides On Plasmodium
Falciparum And Trypanosoma Cruzi," Faseb J. 2:2878-2883 (1988).
Graham, M. L. et al. "Cytotoxic Effect Of Amphipathic Cationic Lytic Peptides
On Human And Murine Cancer Cell Lines", Proceedings of the American Association
for Cancer Research 35:410 (1994).
"Preliminary Experimental Anti-Cancer Activity Of Cecropin B," Proceedings of
the American Association for Cancer Research 35:410 (1994).
Primary Examiner--Jeffrey E. Russel
Attorney, Agent, or Firm--Rothwell, Figg, Ernst & Kurz
[57] ABSTRACT
A method of treating a wound of a mammalian subject in need of such treatment,
to promote healing thereof, comprising administering to the subject, e.g., to
the wound locus, a composition comprising a fibroblast and keratinocyte
proliferatingly effective amount of an amphipathic peptide, preferably an
amphipathic peptide which is antimicrobially effective at such locus. A method
is also disclosed of stimulating the accelerated growth of dermal tissue in a
tissue culture containing same, comprising applying to the tissue culture a
fibroblast and keratinocyte proliferatingly effective amount of an amphipathic
peptide, by which the dermal tissue may be grown to produce skin for skin
grafting purposes, utilizing a dermal tissue culture containing dermal tissue
material of a skin graft recipient of such skin. Novel amphipathic peptide
suitable for use in such methods are disclosed.
13 CLAIMS, NO DRAWINGS
<PAGE> 1
Exhibit 10.22(b)
UNITED STATES PATENT [19] [11] PATENT NUMBER: 5,597,945
JAYNES ET AL. [45] DATE OF PATENT: JAN. 28, 1997
- --------------------------------------------------------------------------------
[54] PLANTS GENETICALLY ENHANCED FOR DISEASE RESISTANCE
[75] Inventors: JESSE M. JAYNES, Baton Rouge, La.; KENNETH S. DERRICK, Lake
Alfred, Fla.
[73] Assignee: BOARD OF SUPERVISORS OF LOUISIANA STATE UNIVERSITY AND
AGRICULTURAL AND MECHANICAL COLLEGE, Baton Rouge, La.
[21] Appl. No.: 453,436
[22] Filed: MAY 30, 1995
RELATED U.S. APPLICATION DATA
[63] Continuation of Ser. No. 152,933, Nov. 15, 1993, abandoned, which is a
continuation of Ser. No. 994,085, Dec. 16, 1992, abandoned, which is a
continuation of Ser. No. 817,950, Jan. 3, 1992, abandoned, which is a
continuation of Ser. No. 646,449, Jan. 25, 1991, abandoned, which is a
continuation of Ser. No. 115, 941, Nov. 2 1987, abandoned, which is a
continuation-in-part of Ser. No. 889,225, Jul. 25, 1986, abandoned.
[51] Int. Cl.(6) ................. A01H 5/00; C12N 15/56; C12N 15/82; C12N 15/12
[52] U.S. Cl. .................. 800/205; 800/DIG. 14; 800/DIG. 29; 800/DIG. 31;
800/DIG. 36; 800/DIG. 40; 800/DIG. 42; 800/DIG. 43;
800/DIG. 46; 800/DIG. 55; 800/DIG. 56; 800/DIG. 57;
800/DIG. 58; 800/DIG. 61; 800/DIG. 62; 435/69.1;
435/70.1; 435/172.3; 435/195; 435/206; 536/23.5
[58] FIELD OF SEARCH ...................... 435/69.1, 70.1, 435.172.3, 195, 206;
800/205, DIG. 14, 29, 31, 36, 40, 42, 43, 46,
55-58, 61, 62; 536.23.5
[56] REFERENCES CITED
U.S. PATENT DOCUMENTS
3,911,110 10/1975 Smirnoff ................................... 424/93
4,109,018 8/1978 Thompson ................................... 426/62
4,355,104 10/1982 Hultmark et al. ............................ 435/70
4,520,016 5/1985 Hultmark et al. ............................ 514/12
4,579,821 4/1986 Palmiter et al. ......................... 435/172.3
4,643,988 2/1987 Segrest et al. ............................. 514/12
4,704,362 11/1987 Itakura et al. ............................ 435/253
4,784,861 11/1988 Gori ....................................... 426/74
4,844,924 7/1989 Stanley ................................... 426/258
4,962,028 10/1990 Bedbrook et al. ......................... 435/172.3
FOREIGN PATENT DOCUMENTS
0043075 6/1982 Germany
0157351 10/1985 Germany
0182278 5/1986 Germany
1311375 3/1973 United Kingdom
063949 11/1982 United Kingdom
117600 9/1984 United Kingdom
0142924 5/1985 United Kingdom
140556 5/1985 United Kingdom
145338 6/1985 United Kingdom
0184288 6/1986 United Kingdom
WO86/04356 7/1986 WIPO
WO88/00976 2/1988 WIPO
OTHER PUBLICATIONS
Abel, Patricia, Science, "Delay of Disease Development in Transgenic Plants
That Express the Tobacco Mosaic Virus Coat Protein Gene", 1986, 232:738-743.
Anderson, Lucy, J. Cell Sci., "Protein Synthesis and Uptake by Isolated
Cecropia Oocytes", 1971, 8:735-750.
Andreau, D., et al., Proc. Natl. Acad. Sci., "Solid-Phase synthesis of Cecropin
A and Related Peptides", 1983, 80:6475-6479.
Andreu, D., et al., Biochemistry, "N-Terminal Analogues of Cecropin A:
Synthesis, Antibacterial Activity, and Conformational Properties", 1985,
24:1683-1688.
Barton, K. A., Science, "Prospectus in Plant Genetic Engineering", Feb. 1983,
219:671-676.
Beachy, R. Genetic Tech News, "Virus Genes Might Protect Plants From Disease",
1985, 8:4-5.
Bernheimer, A. W., et al., Biochimica et Biophysica Acta, "Interactions between
Membranes and Cytolytic Peptides", 1986, 86:123-141.
Bessler, W. G., Biochemical and Biophysical Research Communications,
"Interaction of Membrane Modifying Peptide Antibiotics from Trichoderma viride
with Leukocytes", 1979, 87:99-105.
Blasi, Udo, Gen. Virol., "Influence of C-terminal Modifications of oX174 Lysis
Gene E on its Lysis-inducing Properties", 1985, 66:1209-1213.
Boller, Thomas, UCLA Symp. Mol. Cell. Biol., Newser, "Induction of Hydrolases
as a Defense Reaction Against Pathogens", 1985 (Cell. Mol. Biol. Plant Stress).
Boman, H. G., Development and Comparative Immunology, "On the Primary
Structures of Lysozyme, Cecropins and Attacins from Hyalophora cecropia", 1985,
9:551-558.
Boman, H. G., Ann. Rev. Microbiol., "Cell-Free Immunity in Insects", 1987
41:103-26.
Bowman, John E., American Potato Journal, "Resistance to Pseudomonas
solancearum in Potato: Infectivity Titrations in Relation to Multiplication and
Spread of the Pathogen", 1982, 59:155-164.
Brillinger, G. U., Arch Microbiol, "Metabolic Products of Microorganisms 181*.
Chitin Synthase from Fungi, a Test Model for Substances with Insecticidal
Properties", 1979, 121:71-74.
(List continued on next page.)
Primary Examiner - David T. Fox
[57] ABSTRACT
Plant transformants having an expressible heterologous gene for an
antimicrobial agent for disease resistance and/or a protein high in limiting
essential amino acid content for enhanced nutritional quality. Monocots, dicots
and gymnosperms are genetically enhanced for disease resistance to express a
lytic peptide such as cecropin, attacin or lysozyme, or an antiviral antisense
micRNA. The nutritional quality of plants cultivated for food is enhanced by a
gene expressing a protein containing 25-60 weight percent of methionine,
lysine, tryptophan, threonine and isoleucine. Methods for obtaining such
transformants, novel expressing vectors, novel proteins high in essential amino
acids, and novel lytic peptides are also disclosed.
15 CLAIMS, 5 DRAWING SHEETS
<PAGE> 1
Exhibit 10.22(c)
UNITED STATES PATENT [19] [11] PATENT NUMBER: 5,597,946
JAYNES ET AL. [45] DATE OF PATENT: JAN. 28, 1997
- --------------------------------------------------------------------------------
[54] METHOD FOR INTRODUCTION OF DISEASE AND PEST RESISTANCE INTO PLANTS AND
NOVEL GENES INCORPORATED INTO PLANTS WHICH CODE THEREFOR
[75] Inventors: JESSE M. JAYNES; KENNETH S. DERRICK, both of Baton Rouge, La.
[73] Assignee: BOARD OF SUPERVISORS OF LOUISIANA STATE UNIVERSITY AND
AGRICULTURAL AND MECHANICAL COLLEGE, Baton Rouge, La.
[21] Appl. No.: 444,762
[22] Filed: MAY 19, 1995
RELATED U.S. APPLICATION DATA
[63] Continuation of Ser. No. 152,939, Nov. 15, 1993, abandoned, which is a
continuation of Ser. No. 993,448, Dec. 16, 1992, abandoned, which is a
continuation of Ser. No. 845,348, Mar. 4, 1992, abandoned, which is a
continuation of Ser. No. 373,623, Jun. 29, 1989, abandoned, which is a
continuation of Ser. No. 889,225, Jul. 25, 1986, abandoned.
[51] INT. CL.(6) ............................ A01H 5/00; C12N 15/56; C12N 15/82;
C12N 15/84; C12N 15/12
[52] U.S. CL. ................. 800/205; 435/69.1; 435/70.1; 435/172.3; 435/200;
435/252.2; 435/320.1; 536/23.5
[58] FIELD OF SEARCH ........................... 435/69.1, 70.1, 435.172.3, 200,
252.2, 320.1; 800/205, 536.23.5
[56] REFERENCES CITED
U.S. PATENT DOCUMENTS
3,911,110 10/1975 Smirnoff ................................... 424/93
4,109,018 8/1978 Thompson ................................... 426/62
4,355,104 10/1982 Hultmark et al. ............................ 435/70
4,520,016 5/1985 Hultmark et al. ............................ 514/12
4,579,821 4/1986 Palmiter et al. ......................... 435/172.3
4,643,988 2/1987 Segrest et al. ............................. 514/12
4,704,362 11/1987 Itakura et al. ............................ 435/253
4,962,028 10/1990 Bedbrook et al. ......................... 435/172.3
FOREIGN PATENT DOCUMENTS
0142924 5/1985 European Pat. Off.
0043075 6/1982 Germany
0157351 10/1985 Germany
0182278 5/1986 Germany
1311375 3/1973 United Kingdom
063949 11/1982 United Kingdom
117600 9/1984 United Kingdom
140556 5/1985 United Kingdom
145338 6/1985 United Kingdom
0184288 6/1986 United Kingdom
WO86/04356 7/1986 WIPO
WO88/00976 2/1988 WIPO
WO89/00199 1/1989 WIPO
OTHER PUBLICATIONS
Anderson, Lucy, J. Cell Sci., "Protein Synthesis and Uptake by Isolated
Cecropia Oocytes", 1971, 8:735-750.
Andreau, D., et al., Proc. Natl. Acad. Sci., "Solid-Phase synthesis of Cecropin
A and Related Peptides", 1983, 80:6475-6479.
Andreu, D., et al., Biochemistry, "N-Terminal Analogues of Cecropin A:
Synthesis, Antibacterial Activity, and Conformational Properties", 1985,
24:1683-1688.
Barton, K. A., Science, "Prospectus in Plant Genetic Engineering", vol. 219, 11
Feb. 1983, pp. 671-676.
Beachy, R. Genetic Tech News, "Virus Genes Might Protect Plants From Disease",
1985, 8:4-5.
Bernheimer, A. W., et al., Biochimica et Biophysica Acta, "Interactions between
Membranes and Cytolytic Peptides", 1986, 86:123-141.
Bessler, W. G., Biochemical and Biophysical Research Communications,
"Interaction of Membrane Modifying Peptide Antibiotics from Trichoderma viride
with Leukocytes", 1979, 87:99-105.
Blasi, Udo, Gen. Virol., "Influence of C-terminal Modifications of oX174 Lysis
Gene E on its Lysis-inducing Properties", 1985, 66:1209-1213.
Boller, Thomas, UCLA Symp. Mol. Cell. Biol., Newser, "Induction of Hydrolases
as a Defense Reaction Against Pathogens", 1985 (Cell. Mol. Biol. Plant Stress).
Boman, H. G., Development and Comparative Immunology, "On the Primary
Structures of Lysozyme, Cecropins and Attacins from Hyalophora cecropia", 1985,
9:551-558.
Bowman, John E., American Potato Journal, "Resistance to Pseudomonas
solancearum in Potato: Infectivity Titrations in Relation to Multiplication and
Spread of the Pathogen", 1982, 59:155-164.
Brillinger, G. U., Arch Microbiol, "Metabolic Products of Microorganisms 181*.
Chitin Synthase from Fungi, a Test Model for Substances with Insecticidal
Properties", 1979, 121:71-74.
Buckley, K. J., Mol. Gen. Genet, "Lytic Activity Localized to Membranespanning
Region of oX174 E. Protein", 1986, 204:120-125.
Central Patents Index, Basic Abstracts Journal, Section C, AGDOC, Dec. 1977,
abstract 91378, Derwent Publications Ltd., (Japan) Plywood Techn. 29-11-1977
"Making Lumber Insect Repellent by Permeating with Aqueaus Solution Containing
Amylase, and Rinsing with Water.
Central Patents Index, Basic Abstracts Journal, Section C, AGDOC, Jul. 1979,
abstract 53721, Derwent Publications (Mitsui Petrochem Ind. K.K.) 12-06-1979
"Antimicrobial Enyme prepared by Culturing Bacillus Bacteria".
Chilton, Mary-Dell, Scientific American, "A Vector for Introducing New Genes
into Plants", 1983, 248:50-59.
(List continued on next page.)
Primary Examiner - David T. Fox
[57] ABSTRACT
A method of inhibiting pathogenic conditions of plants including viral,
bacterial, and fungal infections and insert infestations by expressing into the
plant genome genes encoding for a polypeptide inhibitor or inhibitor precursor
of the pathogenic condition which inhibitor or precursor is selected from
complementary oligonucleotides for blocking viral transcription or translation
produced in vivo, one or more proteins derived from the humoral response to
bacterial infection of the Hyalophora, an antifungal plasmid or a chitin
integument disruption chitinase enzyme. Novel microbes, polypetides, and
compositions containing amino acid sequences are disclosed.
7 CLAIMS, NO DRAWINGS
<PAGE> 1
Exhibit 10.22(d)
UNITED STATES PATENT [19] [11] PATENT NUMBER: 5,717,064
JULIAN ET AL. [45] DATE OF PATENT: FEB. 10, 1998
- --------------------------------------------------------------------------------
[54] METHYLATED LYSINE-RICH LYTIC PEPTIDES AND METHOD OF MAKING SAME BY
REDUCTIVE ALKYLATION
[75] Inventors: GORDON R. JULIAN, Bozeman, Mont,;
JESSE M. JAYNES, Raleigh, N.C.
[73] Assignee: DEMETER BIOTECHNOLOGIES, LTD., Durham, N.C.
[21] Appl. No.: 427,001
[22] Filed: APR. 24, 1995
RELATED U.S. APPLICATION DATA
[63] Continuation-in-part of Ser. No. 148,889, Nov. 18, 1993, abandoned.
[51] Int. Cl.(6) ................. C07K 5/00; C07K 7/00; C07K 17/00; A61K 38/00
[52] U.S. Cl. .................... 530/324; 514/12
[58] FIELD OF SEARCH ............. 514/12; 530/324
[56] REFERENCES CITED
U.S. PATENT DOCUMENTS
4,355,104 10/1982 Hultmark et al. ............................ 435/70
4,520,016 5/1985 Hultmark et al. ............................ 514/12
4,810,777 3/1989 Zasloff ................................... 530/326
5,045,531 9/1991 Berkowitz et al. ........................... 514/12
5,059,653 10/1991 Coy et al.
5,114,921 5/1992 Zasloff .................................... 514/12
5,217,956 6/1993 Zasloff et al. ............................. 514/13
FOREIGN PATENT DOCUMENTS
9012866 11/1990 WIPO.
OTHER PUBLICATIONS
Jaynes. "Lytic Peptides Portend an Innovative Age in the Management and
Treatment of Human Disease", Drug News and Perspectives, 3 (1990).
Arrowood et al., "Hemolytic Properties of Lytic Peptides Active Against the
Sporozoites of Cryptosporidium parvum", J. Protozool, 38 (1991).
Jaynes et al., "In Vitro Cytocidal Effect of Lytic Peptides on Several
Transformed Mammalian Cell Lines", Peptide Research 2 (1989) pp. 157-160.
Jaynes et al., "In Vitro Effect of Novel Lytic Peptides on Plasmodium falciparum
and Trypanosoma cruzi", FASEB J. 2 (1988) pp. 2878-2883.
Reed et al., "Enhanced in vitro Growth of Murine Fibroblast Cells and
Preimplantation Embryos Cultured in Medium Supplemented with an Amphipathic
Peptide", Molecular Reproduction and Development 31 (1992) pp. 106-113.
Akerfeldt et al., "Synthetic Peptides as Models for Ion Channel Proteins", Acc.
Chem. Res. 26 (1993) pp. 191-197.
Wong et al., "Pyridine Boranc as a Reducing Agent for Proteins", Anal. Biochem.
139 (1984) pp. 58-67.
Means et al., "Reductive Alkylation of Amino Groups in Proteins", Biochemistry 7
(1968) pp. 2192-2201.
Lilova et al., "Reductive Alkylation of Lysine Residues in Subtilisin DY", Biol.
Chem. Hoppe-Seyler. 368 (1987) pp. 1479-1487.
Boarder et al., "Synthetic N-Dimethyl Beta-Endorphin, A Stabilized Opioid
Peptide", Biochemical Pharmacology. 30 (1981) pp. 1289-1293.
Habeeb, "Determination of Free Amino Groups in Proteins by
Trinitrobenzene-sulfonic Acid", Anal. Biochem. 14 (1966) pp. 328-336.
Gorecki et al., "Non Cationic Substrates of Trypsin", Biochem and Biophys. Res.
Comm. 29 (1967) pp. 189-193.
Primary Examiner - Toni R. Scheiner
Assistant Examiner - Sheela J. Huff
Attorney, Agent, or Firm - Rothwell, Figg, Ernst & Kurz
[57] ABSTRACT
A tryptic digestion-resistant, non-naturally occurring lytic peptide comprising
a sequence of amino acid residues containing mainly alanine, valine and lysine
amino acid residues, wherein the (e-)amino groups of the lysine residues and the
(0l-)amino group of the N-terminal amino acid are sufficiently methylated to
impart enhanced tryptic, chymotryptic, and aminopeptidase digestion resistance
to the peptide. The secondary conformation of the peptide is an ordered
periodic structure such as an amphipathic (a-)helix or a (B-)pleated sheet. The
compositions of the invention are suitable for in vivo administration.
A method of making the same, to impart enhanced tryptic digestion-resistance
thereto, comprising reductively alkylating the (e-)amino groups of the lysine
residues and the (a-)amino group of the N-terminal amino acid with a
methyl-providing reagent in the presence of an heterocyclic amino-borane
reducing agent for sufficient time and at sufficient conditions to methylate the
(a-) and (e-)amino groups to sufficient extent to confer enhanced proteolytic
digestion-resistance to the peptide.
8 CLAIMS, 3 DRAWING SHEETS
<PAGE> 1
Exhibit 10.22(e)
UNITED STATES PATENT [19] [11] PATENT NUMBER: 5,744,445
JAYNES ET AL. [45] DATE OF PATENT: APR. 28, 1998
- --------------------------------------------------------------------------------
[54] METHOD OF TREATING PULMONARY DISEASE STATES WITH NON-NATURALLY OCCURRING
AMPHIPATHIC PEPTIDES
[75] Inventors: JESSE M. JAYNES, Baton Rouge, La; GORDON R. JULIAN, Cary, N.C.
[73] Assignee: DEMETER BIOTECHNOLOGIES, LTD., Durham, N.C.
[21] Appl. No.: 457,798
[22] Filed: JUN. 1, 1995
RELATED U.S. APPLICATION DATA
[63] Continuation of Ser. No. 39,620, Jun. 4, 1993, abandoned.
[51] INT. CL.(6) ............................ A61K 38/00; A61K 38/10; A61K 38/16
[52] U.S. CL. ........................................... 514/12; 514/13; 514/14
[58] FIELD OF SEARCH ............................................ 514/12, 13, 14
[56] REFERENCES CITED
U.S. PATENT DOCUMENTS
4,355,104 10/1982 Hultmark et al. ............................ 435/70
4,520,015 5/1985 Hultmark et al. ............................ 514/12
4,810,777 3/1989 Zasloff ................................... 530/326
5,186,166 2/1993 Riggs et al. ........................... 128/203.15
5,254,535 10/1993 Zasloff et al. ............................. 514/12
OTHER PUBLICATIONS
MP Search Abstracts of WO 901 2826, Jaywes (Nov. 1990). Jaynes, J.M., et al,
"In Vitro Cytocidal Effect of Lytic Peptides on Several Transformed Mammalian
Cell Lines," Peptide Research, 2: 157-160 (1989).
Jaynes, J.M., "Lytic Peptides Portned an Innovative Age in the Management and
Treatment of Human Disease", Drug News and Perspectives, 3: 69-78 (1990).
Akerfeldt, et al., "Synthetic Peptides as Models for Ion Channel Proteins,"
Acc. Chem. Res., 26: 191-197 (1993).
Collins, F.S., "Cystic Fibrosis: Molecular Biology and Therapeutic
Implications," Science 256: 774-779 (1992).
Jaynes, J.M., et al. "In Vitro Effect of Novel Lytic Peptides on Plasmodium
Falciparium and Trypanosoma Cruzi," Faseb J. 2: 2878-2883 (1988).
Gorecki, M. et al, "Non Cationic Substrates of Trypsin," Biochem. and Biophys.
Res. Comm. 29 (2): 189-193 (1967).
Higgins, C.F., et al, Nature 262; 250-255 (1993).
Wong, W.S.D., et al "Pyridine Borane as a Reducing Agent for Proteins," Anal.
Biochem. 139: 58-67 (1984).
Reed, W. A., et al, "Enhanced In Vitro Growth Of Murine Fibroblast Cells and
Preimplantation Embroyos Cultured in Medium Supplemented with an Amphipathic
Peptide," Molecular Reproduction and Development 31: 106-113 (1992).
Arrowood, M. J., et al. "Hemolytic Properties of Lytic Peptides Active Against
the Sporozites of Cryptosporidium Parvium," J. Protozool. 38: 161s-163s (1991).
Primary Examiner - Cecilia J. Tsang
Assistant Examiner - Bennett Celsa
Attorney, Agent, or Firm - Rothwell, Figg, Ernst & Kurz
[57] ABSTRACT
A method of treating pulmonary disease states, e.g., a disease state selected
from the group consisting of: cystic fibrosis, neoplasias, bronchogenic cancers,
pneumonia, bronchitis, bronchopulmonary viral infections, and bronchopulmonary
microbial infections, comprising delivery of an amphipathic non-naturally
occurring peptide to an appropriate corporeal site, e.g., pulmonary and/or
gastrointestinal loci, to effectively treat such diseases. In a further specific
aspect, the invention contemplates a method of treating cystic fibrosis by
delivery of lytic, amphipathic non-naturally occurring peptides to pulmonary
loci, thereby effecting treatment of bronchopulmonary microbial infections
associated with cystic fibrosis through lysis of pathogenic bacteria. Peptides
delivered to a gastrointestinal locus preferably are non-lytic, so as not to
affect normal gastrointestinal flora, and preferably are chemically modified to
confer enhanced proteolytic resistance for an oral method of delivery. Peptides
delivered to a pulmonary locus advantageously exhibit lytic activity and do not
require chemical modification for proteolytic resistance. The delivery of the
peptide to a pulmonary locus may for example be effected by use of a nebulizer
device.
20 CLAIMS, NO DRAWINGS
<PAGE> 1
Exhibit 10.22(f)
UNITED STATES PATENT [19] [11] PATENT NUMBER: 5,773,413
JAYNES ET AL. [45] DATE OF PATENT: *JUN. 30, 1998
- --------------------------------------------------------------------------------
[54] METHOD OF COMBATING MAMMALIAN NEOPLASIAS, AND LYTIC PEPTIDES THEREFOR
[75] Inventors: JESSE M. JAYNES, Raleigh; GORDON R. JULIAN, Cary, both of N.C.
[73] Assignee: DEMETER BIOTECHNOLOGIES, LTD., Durham, N.C.
[*] Notice: The term of this patent shall not extend beyond the
expiration date of Pat. No. 5,717,064.
[21] Appl. No.: 457,171
[22] Filed: JUN. 1, 1995
RELATED U.S. APPLICATION DATA
[63] Continuation of Ser. No. 225,476, Apr. 8, 1994, abandoned, which is a
continuation-in-part of Ser. No. 39,620, Jun. 4, 1993, abandoned, Ser. No.
148,889, Nov. 8, 1993, abandoned, and Ser. No. 148,491, Nov. 8, 1993,
abandoned.
[51] INT. CL.(6) ............................. A61K 38/16; C07K 7/08; C07K 14/00
[52] U.S. CL. ................ 514/12; 514/13; 514/14; 530/324; 530/326; 530/327
[58] FIELD OF SEARCH ............ 514/12, 13, 14, 514/21; 530/324, 325, 326, 327
[56] REFERENCES CITED
U.S. PATENT DOCUMENTS
4,355,104 10/1982 Hultmark et al. ............................ 435/70
4,520,016 5/1985 Hultmark et al. ............................ 514/12
4,810,777 3/1989 Zasloff ................................... 530/326
5,070,188 12/1991 Njieha ae al. ............................. 530/324
5,114,921 5/1992 Zasloff ................................... 530/324
5,186,166 2/1993 Riggs et al. ........................... 128/203.15
5,217,956 6/1993 Zasloff et al. ............................. 514/21
5,221,664 6/1993 Berkowitz et al. ........................... 514/21
5,411,942 5/1995 Widmer et al. .............................. 514/17
5,424,290 6/1995 Maloy et al. ............................... 514/13
FOREIGN PATENT DOCUMENTS
2047317 1/1992 Canada.
12866 11/1990 WIPO.
00869 1/1991 WIPO.
OTHER PUBLICATIONS
Science, vol. 256, issued 08 May 1992, Collins, "Cystic Fibrosis: Molecular
Biology and Therapeutic Implications", pp. 774-779.
Biochemistry, vol. 7. No. 6, issued Jun. 1968, Means et al, "Reductive
Alkylation of Amino Groups in Proteins", pp. 2192-2201.
J. Biol. Chem., vol. 213, No. 23, issued 10 Dec. 1968, Takahashi, "The Reaction
of Phenylglyoxal with Arginine Residues in Proteins", pp. 6171-6179.
Jaynes, J.M., et al. "In Vitro Cytocidal Effect of Lytic Peptides on Several
Transformed Mammalian Cell Lines," Peptide Research, 2: 157-160 (1989).
Jaynes, J.M. "Lytic Peptides Portend an Innovative Age in the Management and
Treatment of Human Disease", Drug News and Perspectives, 3: 69-78 (1990).
(List continued on next page.)
Primary Examiner - Jeffrey E. Russel
Attorney, Agent, or Firm - Rothwell, Figg, Ernst & Kurz
[57] ABSTRACT
A method of treating neoplasias, including female mammalian neoplasias such as a
breast, cervical, uterine, and ovarian neoplasias, as well as other neoplasias
including prostatic, dermal, and bronchogenic cancers, comprising delivery of an
effective non-naturally occurring, non-cytologically proliferative lytic peptide
to an appropriate corporeal site to effectively treat such disease state.
Particularly preferred lytic peptide agents include small (23-29 amino acids)
amphipathic cationic lytic peptides from the classes of synthetic analog
derivatives of mellittin, cecropin, magainin, and defensin peptides, most
preferably melittic and defensin peptides from the class of synthetic analogs of
melittin, cecropin, maganin, and defensin peptides, most preferably synthetic
analogs of melittic and defensin peptides.
7 CLAIMS, 1 DRAWING SHEET
[DAYS POST - TUMOR INDUCTION CHART]
<PAGE> 1
Exhibit 10.22(g)
UNITED STATES PATENT [19] [11] PATENT NUMBER: 5,811,654
JAYNES ET AL. [45] DATE OF PATENT: SEP. 22, 1998
- --------------------------------------------------------------------------------
[54] PLANTS GENETICALLY ENHANCED FOR NUTRITIONAL QUALITY
[75] Inventors: JESSE M. JAYNES, Baton Rouge, La.;
KENNETH S. DERRICK, Lake Alfred, Fla.
[73] Assignee: LOUISIANA STATE UNIVERSITY, Baton Rouge, La.
[21] Appl. No.: 788,963
[22] Filed: JAN. 24, 1997
RELATED U.S. APPLICATION DATA
[63] Continuation of Ser. No. 453,436, May 30, 1995, Pat. No. 5,597,945 which
is a continuation of Ser. No. 152,933, Nov. 15, 1993, abandoned, which is a
continuation of Ser. No. 994,085, Dec. 16, 1992, abandoned, which is a
continuation of Ser. No. 817,950, Jan. 3, 1992, abandoned, which is a
continuation of Ser. No. 646,449, Jan. 25, 1991, abandoned, which is a
continuation of Ser. No. 115,941, Nov. 2, 1987, abandoned, which is a
continuation-in-part of Ser. No. 889,225, Jul. 25, 1986, abandoned.
[51] INT. CL.(6) ................. A01H 5/00; C12N 15/29; C12N 15/82
[52] U.S. CL. ............ 800/205; 435/69.1; 435/172.3; 435/419
[58] FIELD OF SEARCH ...... 800/205; 435/69.1; 435/172.3, 419
[56] REFERENCES CITED
U.S. PATENT DOCUMENTS
3,911,110 10/1975 Smirnoff ................................... 424/93
4,109,018 8/1978 Thompson ................................... 426/62
4,355,104 10/1982 Hultmark et al. ............................ 435/70
4,520,016 5/1985 Hultmark et al. ............................ 514/12
4,579,821 4/1986 Palmiter et al. ......................... 435/172.3
4,643,988 2/1987 Segrest et al. ............................. 514/12
4,704,362 11/1987 Itakura et al. ............................ 435/253
4,784,861 11/1988 Gori ....................................... 426/74
4,844,924 7/1989 Stanley ................................... 426/258
4,962,028 10/1990 Bedbrook et al. ......................... 435/172.3
5,003,045 3/1991 Hoffman ................................... 530/378
FOREIGN PATENT DOCUMENTS
0157351 10/1985 Germany.
0182278 5/1986 Germany.
0043075 6/1992 Germany.
1311375 3/1973 United Kingdom.
063949 11/1982 United Kingdom.
117600 9/1984 United Kingdom.
0142924 5/1985 United Kingdom.
145338 6/1985 United Kingdom.
0184288 6/1986 United Kingdom.
140556 5/1995 United Kingdom.
8604356 7/1986 WIPO.
8800976 2/1988 WIPO.
OTHER PUBLICATIONS
Abel, Patricia, Science, "Delay of Disease Development in Transgenic Plants That
Express the Tobacco Mosaic Virus Coat Protein Gene", 1986. 232:738-743.
Anderson, Lucy. J. Cell Sci., "Protein Synthesis and Uptake by Isolated Cecropia
Oocytes", 1971. 8:735-750.
Andreau, D., et al. Biochemistry, "N-Terminal Analogues of Cecropin A:
Synthesis, Antibacterial Activity, and Conformational Properties", 1985.
24:1683-1688.
Barton, K.A., Science, "Prospects in Plant Genetic Engineering", Feb. 1983.
219:671-676.
Beachy, R. Genetic Tech News. "Virus Genes Might Protect Plants From Disease",
1985. 8:4-5.
Bernheimer, A.W., et al., Biochimica et Biophysica Acta, "Interactions between
Membranes and Cytolytic Peptides", 1986. 86:123-141.
Bessler, W.G., Biochemical and Biophysical Research Communications, "Interaction
of Membrane Modifying Peptide Antibiotics from Trichoderma viride with
Leukocytes", 1979. 87:99-105.
Blasi, Undo, Gen Virol., "Influence of C-terminal Modifications of o X174 Lysis
Gene E on its Lysis-inducing Properties", 1985. 66:1209-1213.
Boller, Thomas, UCLA Symp. Mol. Cell. Biol., Newser. "Induction of Hydrolases as
a Defense Reaction Against Pathogens", 1985 (Cell. Mol. Biol. Plant Stress).
Boman, H.G., Development and Comparative Immunology, On the Primary Structures
of Lysozyme. Ceropins and Attacins from Hyalophora cecropia, 1985. 9:551-558.
Boman, H.G., Ann. Rev. Microbiol., "Cell-Free Immunity in Insects", 1987
41:103-26.
Bowman, John E., American Potato Journal, "Resistance to Pseudomonas
solancearum in Potato: Infectivity Titrations in Relation to Multiplication and
Spread of the Pathogen", 1982, 59:155-164.
Brillinger, G.U., Arch Microbiol, "Metabolic Products of Microorganisms 181*.
Chitin Synthase from Fungi, a Test Model for Substances with Insecticidal
Properties", 1979. 121:71-74.
Buckley, K.J., Mol. Gen. Genet, "Lytic Activity Localized to Membrane-spanning
Region of oX174 E Protein", 1986. 204:120-125.
Central Patents Index, Basic Abstracts Journal. Section C. AGDOC, Dec. 1977,
abstract 91378, Derwent Publications Ltd., (Japan) Plywood Techn. Nov. 29, 1977
"Making Lumber Insect Repellent by Permeating with Aqueous Solution Containing
Amylase, and Rinsing with Water".
(List continued on next page.)
Primary Examiner - David T. Fox
Attorney, Agent, or Firm - Rothwell, Figg, Ernst & Kurz, p.c.
[57] ABSTRACT
Plant transformants having an expressible heterologous gene for an antimicrobial
agent for disease resistance and/or a protein high in limiting essential amino
acid content for enhanced nutritional quality. Monocots, dicots and gymnosperms
are genetically enhanced for disease resistance to express a lytic peptide such
as cecropin, attacin or lysozyme, or an antiviral antisense micRNA. The
nutritional quality of plants cultivated for food is enhanced by a gene
expressing a protein containing 25-60 weight percent of methionine, lysine,
tryptophan, threonine and isoleucine. Methods for obtaining such transformants,
novel expressing vectors, novel proteins high in essential amino acids, and
novel lytic peptides are also disclosed.
6 CLAIMS, 9 DRAWING SHEETS
<PAGE> 1
Exhibit 10.23
SETTLEMENT AGREEMENT
This Settlement Agreement (the "Agreement") is entered into this 17th day
of September, 1996 (the "Effective Date") by and between Demeter
BioTechnologies, Ltd., a Colorado corporation with its principal executive
offices at Brightleaf Square, Suite 19D, 905 West Main Street, Durham, North
Carolina 27701 (the "Company"), and John Bridwell, whose address is 4501 East
2nd, Edmond,OK 73034 ("Bridwell"). The Company and Bridwell are collectively
referred to herein as the "Parties."
WHEREAS, on May 10, 1993, July 10, 1993, August 16, 1993, January 11,
1994, April 13, 1995, September 18, 1995, and other occasions, the Parties
executed a Promissory Note and Loan Agreement wherein Bridwell loaned the
Company the aggregate principal unpaid amount of $82,500 (collectively, the
"Notes and Loan Agreements"), and
WHEREAS, as of the Effective Date the Company is indebted to Bridwell in
the aggregate amount of $109,516 ($82,500 principal), and
WHEREAS, pursuant to the terms of the Notes and Loan Agreements the
Company has issued, or is obligated to issue, to Bridwell an aggregate of
59,722 warrants (the "Warrants") and 141,719 shares of restricted common stock
(the "Stock"), and
WHEREAS, the Parties desire to resolve and settle any and all outstanding
obligations and issues between them, whether arising out of the Notes and Loan
Agreements, the Warrants, the Stock, or otherwise.
THEREFORE, for good and valuable consideration, the receipt of which is
acknowledged, the Parties agree as follows:
1. CLOSING DATE. This transaction will close on or before September 30,
1996 (the "Closing Date") in Oklahoma City, Oklahoma.
2. DELIVERY OF STOCK. The Company agrees that on or before the Closing
Date it will deliver to Bridwell a certificate for 365,715 shares of the
Company's restricted (Rule 144) common stock (the "Common Stock").
3. RESTRICTED STOCK, LEGEND REQUIREMENT. Bridwell acknowledges and
understands that the Common Stock will be restricted, that it is being issued
to it in a private transaction, and that it has not been registered under the
Securities Act of 1933 (the "Act"), or the securities laws of any states in
reliance on exemptions from the registration requirements of the Act and such
state securities laws. The Common Stock is subject to restrictions on
transferability and may not be transferred or resold except as permitted under
the Act and such laws pursuant to registration or exemption therefrom. The
Common Stock has not been approved or disapproved by the Securities and
Exchange Commission or any other regulatory authority. The certificate
evidencing the Common Stock will bear substantially the following legend:
<PAGE> 2
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 (THE "ACT") AND ARE "RESTRICTED SECURITIES" AS THAT TERM
IS DEFINED IN RULE 144 UNDER THE ACT. THE SHARES MAY NOT BE OFFERED FOR SALE,
SOLD OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER
THE ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF
THE COMPANY.
4. REGISTRATION RIGHTS. The Company will prepare and file with the
Securities and Exchange Commission (the "SEC"), as soon as practicable but in
any event by December 31, 1996, a registration statement for an offering to be
made on a delayed or continuous basis pursuant to Rule 415 of the Securities
Act of 1933 (the "Act") registering the resale from time to time by the
holder(s) of the Common Stock (the "Registration Statement"). The Registration
Statement will be on Form S-1 or another appropriate form permitting
registration of the Common Stock for resale by the holder(s) in the manner or
manners designated by them. The Company will cause the Registration Statement
to become effective under the Act within ninety (90) days of the date of filing
and will keep the Registration Statement continuously effective under the Act
until the earlier of (a) the sale of the Common Stock pursuant to the
Registration Statement or Rule 144 under the Act, or (b) the expiration of the
holding period applicable to sales of the Common Stock under Rule 144(k) under
the Act, or any successor provision.
The Company will prepare and file with the SEC such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep the Registration Statement continually effective for the applicable period
specified above, it will cause the related prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) under the Act, and it will
comply with the provisions of the Act with respect to the disposition of all
securities covered by the Registration Statement during the applicable period
in accordance with the intended methods of disposition of the sellers thereof
set forth in the Registration Statement as amended or the prospectus as so
supplemented.
The Company will pay all expenses of the Registration Statement, it will
provide each registered holder copies of the prospectus, and it will notify
each registered holder when the Registration Statement has become effective.
5. DELIVERY OF PROMISSORY NOTES, WARRANTS AND MUTUAL RELEASES. Bridwell
agrees that on or before the Closing Date he will deliver the Promissory Notes,
marked "Paid," dated and signed, and the Warrants, marked "Canceled," dated and
signed, to the Company. The Parties agree that on or before the Closing Date
they will deliver to each other, in binding counterparts if necessary, the
Mutual Release attached to this Agreement as Exhibit A.
6. PRIVATE PLACEMENT MEMORANDUM. Bridwell acknowledges that prior to
his execution of this Agreement he received and read the copy of the Private
Placement Memorandum dated September 12, 1996 attached to this Agreement as
Exhibit B.
2
<PAGE> 3
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to Bridwell as follows:
A. DULY ORGANIZED, VALIDLY EXISTING, GOOD STANDING. The Company is a
duly organized and validly existing corporation in good standing under the laws
of the State of Colorado, is qualified to do business and is in good standing
under the laws of the State of North Carolina, and has the corporate power and
authority to own its properties, to transact the business in which it is
engaged, and to perform its obligations under this Agreement.
B. STOCK DULY AUTHORIZED. The issuance and delivery by the Company of
the Common Stock to has been duly authorized and all necessary corporate action
has been taken, and such issuance and delivery will not contravene or conflict
with the Company's Articles of Incorporation or Bylaws, or any applicable law
of which the Company is aware, or any agreement of which the Company is a party.
C. ABSENCE OF ENCUMBRANCES. The Company is the owner, beneficially and
of record, of the Common Stock and owns the Common Stock free and clear of any
lien, mortgage, adverse claim, charge, security interest, encumbrance,
restriction, limitation, contract, agreement, arrangement, understanding,
instrument, obligation, defect or irregularity ("Liens"). Upon delivery of the
Common Stock, Bridwell will acquire good and marketable title to the Common
Stock free and clear of any Liens, including restrictions and limitations that
may arise under community property or similar laws, subject, however, to such
restrictions on resale as may exist under Rule 144 or other applicable laws
until such time as the Common Stock is registered or exempt from registration.
D. REGISTRATION RIGHTS. The Company will register the Common Stock as
set forth in Section 4 of this Agreement.
8. REPRESENTATIONS AND WARRANTIES OF BRIDWELL. Bridwell represents and
warrants to the Company as follows:
A. OPPORTUNITY ASK QUESTIONS. He has had the opportunity to ask questions
of the Company related to the Common Stock and the Company and has received from
the Company copies of all information related to the Common Stock and the
Company which he deems material in order to enter into this Agreement.
B. ACCREDITED INVESTOR. If so required, he meets the definition of an
"Accredited Investor," as that term is defined in Regulation D under the
Securities Act of 1933, that being an individual with a net worth of at least
$1,000,000, or an annual income in each of the last two years of at least
$200,000 with the reasonable expectation of reaching the same income level
in 1996.
9. TERM. The term of this Agreement will begin on the Effective Date and
will expire on the earlier of (a) the sale of the Common Stock pursuant to the
Registration Statement or Rule 144 under the Act, (b) the expiration of the
holding period applicable to sales of the Common Stock
3
<PAGE> 4
under Rule 144(k) under the Act, or (b) December 31, 2000, whichever occurs
first.
10. CONSTRUCTION. This Agreement will be construed and governed by the
laws of the State of Oklahoma. The prevailing party in any dispute to enforce
this Agreement will be entitled to recover its costs and a reasonable
attorney's fee.
11. FACSIMILE AND COUNTERPART COPIES. The Parties agree that facsimile
copies and counterparts of this Agreement and any Exhibits and any signatures
on this Agreement or any Exhibits will be as legally binding and enforceable
as the single original or a copy of this Agreement and any Exhibits.
12. ENTIRE AGREEMENT; AMENDMENT. There are no verbal understandings
between the Parties. This Agreement contains the entire agreement between the
Parties, supersedes all previous agreements, whether oral or written, between
the Parties, and cannot be changed, modified, amended or supplemented except
by written agreement signed by both Parties.
13. FURTHER ACTIONS. The Parties agree to execute and deliver such
certificates, agreements and other documents and to take such other action as
may be reasonably required by the other party in order to record, effectuate,
consummate or implement the transaction contemplated by this Agreement.
IN WITNESS WHEREOF, the Parties have duly signed this Settlement Agreement
consisting of four pages and Exhibits A and B as of the Effective Date.
John Bridwell Demeter BioTechnologies, Ltd.
/s/ JOHN BRIDWELL By: /s/ RICHARD D. EKSTROM
- ------------------- -------------------------------
John Bridwell Richard D. Ekstrom, President
By: /s/ JESSE M. JAYNES
-------------------------------
Jesse M. Jaynes, Vice President
4
<PAGE> 5
EXHIBIT A TO
SETTLEMENT AGREEMENT
BETWEEN DEMETER BIOTECHNOLOGIES, LTD., AND JOHN BRIDWELL
DATED SEPTEMBER 17, 1996
MUTUAL RELEASE
COME NOW Demeter BioTechnologies, Ltd., a Colorado corporation with its
principal executive offices at Brightleaf Square, Suite 19D, 905 West Main
Street, Durham, North Carolina, 27701 (the "Company"), and John Bridwell, whose
address is 4501 East 2nd, Edmond 73034 ("Bridwell") and for good and valuable
consideration, the receipt of which is hereby acknowledged, do hereby release
each other, and each other's officers, directors, and employees from any and
all obligations, claims or causes of action which they might have against each
other, and each other's officers, directors, partners and employees arising out
of the Promissory Notes and Loan Agreements between the Company and Bridwell
dated May 10, 1993, July 10, 1993, August 16, 1993, January 11, 1994, April 13,
1995 and September 18, 1995 (collectively, the "Notes and Loan Agreements"),
arising out of any amendments to the Notes and Loan Agreements, any warrants
and stock issued or issuable pursuant to the terms of the Notes and Loan
Agreements, or arising out of any other promissory notes, warrants,
understandings, agreements, letter agreements or arrangements between the
Company and Bridwell, whether written or oral, and arising out of any and all
other relationships of whatever nature between the Company and Bridwell, all
from the beginning of time to the date of the Mutual Release.
This Mutual Release shall not release the Company and Bridwell from any
obligations contained in the Settlement Agreement to which this Mutual Release
is annexed as Exhibit A.
Facsimile copies and counterparts of this Mutual Release and any
signatures thereon shall be as legally binding and enforceable as the single
original copy of this Mutual Release and any signatures thereon.
Dated this 23 day of September, 1996.
John Bridwell Demeter BioTechnologies, Ltd.
/s/ JOHN BRIDWELL By: /s/ RICHARD D. EKSTROM
- ------------------- -------------------------------
John Bridwell Richard D. Ekstrom, President
By: /s/ JESSE M. JAYNES
-------------------------------
Jesse M. Jaynes, Vice President
<PAGE> 6
EXHIBIT B TO
SETTLEMENT AGREEMENT
BETWEEN DEMETER BIOTECHNOLOGIES, LTD., AND JOHN BRIDWELL
DATED SEPTEMBER 17, 1996
PRIVATE PLACEMENT MEMORANDUM DATED SEPTEMBER 12, 1996
DEMETER BIOTECHNOLOGIES, LTD. 1996 EXCHANGE OFFER
<PAGE> 1
Exhibit 24
POWER OF ATTORNEY
-----------------
KNOW BY ALL MEN BY THESE PRESENTS, that the undersigned director of
Demegen, Inc., a Colorado Corporation, does make, constitute and appoint
RICHARD D. EKSTROM, with full power and authority his true and lawful
attorney-in-fact and agent, for him and his name, place and stead in any
and all capacities, to sign the Initial Report of Demegen, Inc. on Form
10 for the period ended September 30, 1998, and to file such Initial
Report, so signed, with all exhibits thereto, with the Securities and
Exchange Commission, hereby further granting unto said attorney-in-fact
full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to
all intents and purposes as he might or could do in person; the
undersigned hereby ratifies and confirms all that said attorney and
agent, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, THE UNDERSIGNED HAS HEREUNTO SET HIS HAND AND SEAL
THIS 22nd day of January, 1999.
/s/ Jesse M. Jaynes (SEAL)
--------------------------------------
Jesse M. Jaynes, Ph.D., Director
<PAGE> 2
POWER OF ATTORNEY
-----------------
KNOW BY ALL MEN BY THESE PRESENTS, that the undersigned director of
Demegen, Inc., a Colorado Corporation, does make, constitute and appoint
RICHARD D. EKSTROM, with full power and authority his true and lawful
attorney-in-fact and agent, for him and his name, place and stead in any
and all capacities, to sign the Initial Report of Demegen, Inc. on Form
10 for the period ended September 30, 1998, and to file such Initial
Report, so signed, with all exhibits thereto, with the Securities and
Exchange Commission, hereby further granting unto said attorney-in-fact
full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to
all intents and purposes as he might or could do in person; the
undersigned hereby ratifies and confirms all that said attorney and
agent, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, THE UNDERSIGNED HAS HEREUNTO SET HIS HAND AND SEAL
THIS 22nd day of January, 1999.
/s/ James Colker (SEAL)
--------------------------------------
James Colker, Director
<PAGE> 3
POWER OF ATTORNEY
-----------------
KNOW BY ALL MEN BY THESE PRESENTS, that the undersigned director of
Demegen, Inc., a Colorado Corporation, does make, constitute and appoint
RICHARD D. EKSTROM, with full power and authority his true and lawful
attorney-in-fact and agent, for him and his name, place and stead in any
and all capacities, to sign the Initial Report of Demegen, Inc. on Form
10 for the period ended September 30, 1998, and to file such Initial
Report, so signed, with all exhibits thereto, with the Securities and
Exchange Commission, hereby further granting unto said attorney-in-fact
full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to
all intents and purposes as he might or could do in person; the
undersigned hereby ratifies and confirms all that said attorney and
agent, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, THE UNDERSIGNED HAS HEREUNTO SET HIS HAND AND SEAL
THIS 22nd day of January, 1999.
/s/ Donald A. Guthrie (SEAL)
--------------------------------------
Donald A. Guthrie, Ph.D., Director
<PAGE> 4
POWER OF ATTORNEY
-----------------
KNOW BY ALL MEN BY THESE PRESENTS, that the undersigned director of
Demegen, Inc., a Colorado Corporation, does make, constitute and appoint
RICHARD D. EKSTROM, with full power and authority his true and lawful
attorney-in-fact and agent, for him and his name, place and stead in any
and all capacities, to sign the Initial Report of Demegen, Inc. on Form
10 for the period ended September 30, 1998, and to file such Initial
Report, so signed, with all exhibits thereto, with the Securities and
Exchange Commission, hereby further granting unto said attorney-in-fact
full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to
all intents and purposes as he might or could do in person; the
undersigned hereby ratifies and confirms all that said attorney and
agent, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, THE UNDERSIGNED HAS HEREUNTO SET HIS HAND AND SEAL
THIS 22nd day of January, 1999.
/s/ John Bridwell (SEAL)
--------------------------------------
John Bridwell, Director
<PAGE> 5
POWER OF ATTORNEY
-----------------
KNOW BY ALL MEN BY THESE PRESENTS, that the undersigned director of
Demegen, Inc., a Colorado Corporation, does make, constitute and appoint
RICHARD D. EKSTROM, with full power and authority his true and lawful
attorney-in-fact and agent, for him and his name, place and stead in any
and all capacities, to sign the Initial Report of Demegen, Inc. on Form
10 for the period ended September 30, 1998, and to file such Initial
Report, so signed, with all exhibits thereto, with the Securities and
Exchange Commission, hereby further granting unto said attorney-in-fact
full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to
all intents and purposes as he might or could do in person; the
undersigned hereby ratifies and confirms all that said attorney and
agent, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, THE UNDERSIGNED HAS HEREUNTO SET HIS HAND AND SEAL
THIS 22nd day of January, 1999.
/s/ Alfonso Lovo-Cordero (SEAL)
--------------------------------------
Alfonso Lovo-Cordero, LL.D, Director
<PAGE> 6
POWER OF ATTORNEY
-----------------
KNOW BY ALL MEN BY THESE PRESENTS, that the undersigned director of
Demegen, Inc., a Colorado Corporation, does make, constitute and appoint
RICHARD D. EKSTROM, with full power and authority his true and lawful
attorney-in-fact and agent, for him and his name, place and stead in any
and all capacities, to sign the Initial Report of Demegen, Inc. on Form
10 for the period ended September 30, 1998, and to file such Initial
Report, so signed, with all exhibits thereto, with the Securities and
Exchange Commission, hereby further granting unto said attorney-in-fact
full power and authority to do and perform any and all acts and things
requisite and necessary to be done in and about the premises as fully to
all intents and purposes as he might or could do in person; the
undersigned hereby ratifies and confirms all that said attorney and
agent, shall do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, THE UNDERSIGNED HAS HEREUNTO SET HIS HAND AND SEAL
THIS 22nd day of January, 1999.
/s/ Konrad M. Weis (SEAL)
--------------------------------------
Konrad M. Weis, Ph.D., Director
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
BALANCE SHEETS AT SEPTEMBER 30, 1998 AND STATEMENT OF OPERATIONS FOR THE YEAR
ENDED SEPTEMBER 30, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> SEP-30-1998
<CASH> 1,686,658
<SECURITIES> 0
<RECEIVABLES> 59,929
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,758,446
<PP&E> 151,856
<DEPRECIATION> 94,271
<TOTAL-ASSETS> 2,114,750
<CURRENT-LIABILITIES> 428,905
<BONDS> 0
1,983,873
0
<COMMON> 25,867
<OTHER-SE> (621,386)
<TOTAL-LIABILITY-AND-EQUITY> 2,114,750
<SALES> 0
<TOTAL-REVENUES> 1,376,918
<CGS> 0
<TOTAL-COSTS> 3,370,671
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,993,753)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,993,753)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,993,753)
<EPS-PRIMARY> (0.09)
<EPS-DILUTED> (0.09)
</TABLE>
