<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
May 14, 1996
AQUASEARCH, INC.
----------------
(Exact Name of Registrant as Specified in its Charter)
COLORADO
---------
(State or Other Jurisdiction of Incorporation)
33-23460-LA 33-003435
- ---------------------------- -------------------------------------
(Commission File No.) (IRS Employer Identification Number)
73-4460 Queen Ka'ahumanu Highway
Suite 110
Kailua-Kona, Hawaii 96740
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(Address of Principal Executive Offices)
(808) 326-9301
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(Registrant's Telephone Number, Including Area Code)
Not Applicable
---------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS
On May 14, 1996, Aquasearch, Inc. ("Aquasearch" or the "Company") entered
into a Distribution and Development Agreement (the "Distribution Agreement") and
a Stock Subscription Agreement (the "Subscription Agreement") with Cultor Ltd.
("Cultor"), a Finnish food conglomerate that is a leading worldwide producer of
animal feed and animal nutrition products as well as sweeteners and baking
products for human nutrition.
Under the Distribution Agreement, Cultor has agreed to act as the exclusive
distributor for the Company's natural astaxanthin product for animal feed and
animal nutrition applications for a period of three years. In addition,
Aquasearch and Cultor have agreed as to the terms and conditions pursuant to
which the two firms may mutually develop a new joint venture company to focus
exclusively on the production and sale of natural astaxanthin for use in the
field of animal feed and animal nutrition. The terms and conditions pursuant to
which the joint venture company may be formed are contained in a form of
Stockholders' Agreement (the "Stockholders' Agreement") which is an Exhibit to
the Distribution Agreement.
The Subscription Agreement requires Cultor to purchase 400,000 shares of
Aquasearch Common Stock for an aggregate purchase price of $200,000. Pursuant
to the Subscription Agreement, Aquasearch has granted certain registration
rights to Cultor with respect to the 400,000 shares being purchased by Cultor.
These registration rights are described in a Registration Rights Agreement (the
"Registration Rights Agreement") that is included as an Exhibit to the
Subscription Agreement.
The Distribution Agreement (including the Stockholders' Agreement) and the
Subscription Agreement (including the Registration Rights Agreement) are
attached as Exhibits 10.1 and 10.2 to this Form 8-K. The Distribution Agreement
and the Subsription Agreement are subject to the approval of the shareholders of
the Aquasearch at a Special Meeting of Shareholders to be held on September 24,
1996.
[SIGNATURE PAGE FOLLOWS]
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: May 14, 1996
AQUASEARCH, INC.
By: /s/ Mark E. Huntley
-------------------------------------
Mark E. Huntley, Ph.D.
President and Chief Executive Officer
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EXECUTION COPY
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DISTRIBUTION
AND
DEVELOPMENT
AGREEMENT
between
CULTOR LTD.
and
AQUASEARCH, INC.
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- -------------------------------------------------------------------------------
May 14, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Other Definitional Provisions. . . . . . . . . . . . . . . 2
ARTICLE II - SUBSCRIPTION FOR SHARES . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE III - DISTRIBUTION OF THE PRODUCT. . . . . . . . . . . . . . . . . . . 3
Section 3.1 Appointment as Exclusive Distributor . . . . . . . . . . . 3
Section 3.2 Responsibilities of the Parties during the Exclusive
Distributorship Period . . . . . . . . . . . . . . . . . 4
(a) Cultor Responsibilities . . . . . . . . . . . . . . . . . . . . 4
(b) Company Responsibilities. . . . . . . . . . . . . . . . . . . . 4
(c) Cultor and Company Responsibilities . . . . . . . . . . . . . . 4
Section 3.3 Minimum Sales and Production Capacity. . . . . . . . . . . 4
Section 3.4 Product Pricing. . . . . . . . . . . . . . . . . . . . . . 5
Section 3.5 Division of Product Sale Proceeds. . . . . . . . . . . . . 5
Section 3.6 Terms and Conditions of Sale . . . . . . . . . . . . . . . 5
Section 3.7 Deliveries . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.8 Force Majeure. . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.9 Defects. . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.10 Warranties . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.11 Indemnification. . . . . . . . . . . . . . . . . . . . . . 6
Section 3.12 License. . . . . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.13 Termination of Exclusive Distributorship Prior to End of
Period . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 3.14 Independent Contractor.. . . . . . . . . . . . . . . . . . 7
ARTICLE IV - FORMATION AND DEVELOPMENT OF JOINT VENTURE COMPANY. . . . . . . . 8
ARTICLE V - CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.2 Exceptions . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 5.3 Survival . . . . . . . . . . . . . . . . . . . . . . . . . 9
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TABLE OF CONTENTS
(CONTINUED)
PAGE
ARTICLE VI - REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 6.1 Corporate Existence and Power. . . . . . . . . . . . . . . 9
Section 6.2 Articles of Incorporation and By-Laws. . . . . . . . . . . 9
Section 6.3 Authority; Shareholders' Meeting; Noncontravention . . . . 9
ARTICLE VII - REPRESENTATIONS, WARRANTIES AND COVENANTS OF CULTOR. . . . . . .10
Section 7.1 Corporate Existence and Power. . . . . . . . . . . . . . .10
Section 7.2 Investment . . . . . . . . . . . . . . . . . . . . . . . .10
Section 7.3 Binding Effect . . . . . . . . . . . . . . . . . . . . . .10
ARTICLE VIII - CONDITIONS TO OBLIGATIONS . . . . . . . . . . . . . . . . . . .11
Section 8.1 Conditions to Obligations of the Company . . . . . . . . .11
(a) Truth and Performance . . . . . . . . . . . . . . . . . . . . .11
(b) No Prohibition. . . . . . . . . . . . . . . . . . . . . . . . .11
(c) Svenska Foder AB. . . . . . . . . . . . . . . . . . . . . . . .11
(d) Additional Conditions . . . . . . . . . . . . . . . . . . . . .11
Section 8.2 Conditions to Obligations of Cultor. . . . . . . . . . . .11
(a) Truth and Performance . . . . . . . . . . . . . . . . . . . . .11
(b) No Prohibition. . . . . . . . . . . . . . . . . . . . . . . . .11
(c) Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . .12
(d) Additional Conditions . . . . . . . . . . . . . . . . . . . . .12
ARTICLE IX - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 9.1 Period of Agreement and Termination. . . . . . . . . . . .12
Section 9.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 9.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . .13
Section 9.4 Amendments . . . . . . . . . . . . . . . . . . . . . . . .13
Section 9.5 Governing Law; Arbitration . . . . . . . . . . . . . . . .13
Section 9.6 Assignment . . . . . . . . . . . . . . . . . . . . . . . .14
Section 9.7 Binding Effect . . . . . . . . . . . . . . . . . . . . . .15
Section 9.8 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . .15
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<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
Section 9.9 Partial Invalidity . . . . . . . . . . . . . . . . . . . .15
Section 9.10 Severability . . . . . . . . . . . . . . . . . . . . . . .15
Section 9.11 Costs and Attorneys' Fees. . . . . . . . . . . . . . . . .15
Section 9.12 Public Announcements . . . . . . . . . . . . . . . . . . .15
Section 9.13 Indemnity as to Representations, Warranties and
Covenants . . . . . . . . . . . . . . . . . . . . . . . .16
Section 9.14 English Language . . . . . . . . . . . . . . . . . . . . .16
Section 9.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . .16
EXHIBITS
Exhibit A - Stockholders' Agreement
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<PAGE>
DISTRIBUTION AND DEVELOPMENT AGREEMENT
This Distribution and Development Agreement is dated as of May 14, 1996
between Cultor Ltd., a corporation organized under the laws of Finland
("Cultor") and Aquasearch, Inc., a Colorado corporation (the "Company").
RECITALS
The Company has designed and developed a system for the commercial
production of astaxanthin, a micro algae-based carotenoid (the "Product") for
use in animal feed (including fish, shrimp and other aquaculture animal
species) and animal nutrition applications (excluding any human food and human
nutrition applications) and desires to develop further the production,
distribution and marketing of the Product.
Cultor desires to participate in the distribution, marketing and
development of the Product through equity participation in the Company and as
the Company's exclusive distributor for the Product and the Company wishes to
accept Cultor's participation on such terms as are set forth in this Agreement.
Accordingly, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINED TERMS. Unless the context otherwise requires, in
this Agreement the following terms shall have the meanings defined below:
"Affiliate" with respect to any Person, any other Person that
directly or indirectly, through one or more
intermediaries, controls or is controlled by or is
under common control with the Person specified;
"Agreement" this Agreement and any modification, alternation,
addition or deletion hereto made in writing after
the date of execution of this Agreement;
"Application Scope" the application scope of the development and
distribution rights granted to Cultor by the
Company pursuant to Section 3.1(a) of this
Agreement;
"the Articles of the Articles of Association of Cultor and all
Association" amendments thereto, as in effect on the date
hereof;
<PAGE>
"the Articles of the Articles of Incorporation of the Company and
Incorporation" all amendments thereto, as in effect on the date
hereof;
"the By-Laws" the By-Laws of the Company, or Cultor, as the
context requires, and all amendments thereto, as
in effect on the date hereof;
"the Closing" or the date and time upon which the Shares shall be
"the Closing Date" issued to Cultor pursuant to the Stock
Subscription Agreement;
"the Company" Aquasearch, Inc., a Colorado corporation;
"GAAP" generally accepted accounting principles in the
United States;
"the Parties" or the parties to this Agreement or a party to this
"Party" Agreement;
"Person" any individual, corporation, partnership,
association, joint-stock company, trust,
unincorporated organization, joint venture,
governmental body, agency or authority;
"Product" the micro algae-based carotenoid, astaxanthin;
"Shares" the 400,000 shares of common stock in the
authorized capital of the Company, U.S.$0.0001 par
value per share, to be sold by the Company and
purchased by Cultor pursuant to the terms and
conditions of the Stock Subscription Agreement;
and
"the Stock Subscription the Stock Subscription Agreement to be entered
Agreement" into between the Company and Cultor simultaneously
with the execution of this Agreement with respect
to the sale by the Company and the purchase by
Cultor of the Shares.
Section 1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Where the context permits, the singular includes the plural and
vice versa and one gender includes any gender. Words importing the whole shall
be treated as including a reference to any part thereof.
(b) References to Sections are references to sections of this
Agreement.
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(c) Section headings are inserted in this Agreement for convenience
only and shall not affect the construction hereof in any way.
ARTICLE II
SUBSCRIPTION FOR SHARES
Concurrent with the execution of this Agreement, the parties shall execute
the Stock Subscription Agreement.
ARTICLE III
DISTRIBUTION OF THE PRODUCT
Section 3.1 APPOINTMENT AS EXCLUSIVE DISTRIBUTOR.
(a) The Company hereby appoints Cultor as its exclusive worldwide
distributor (the "Exclusive Distributorship") to solicit sales orders for the
Product and to purchase the Product (as such term is defined in the Recitals to
this Agreement) from the Company for resale of the Product to customers for all
animal feed (including fish, shrimp and other aquaculture animal species) and
animal nutrition applications (excluding any human food and human nutrition
applications) (collectively, the "Application Scope") for a period of three
years from the Closing Date (the "Exclusive Distributorship Period"). The
Company shall not itself compete with Cultor within the Application Scope or
appoint or permit any other Person to compete with Cultor in such capacity or in
any other capacity, as employee, agent, distributor or otherwise, within the
Application Scope. In acting as the Company's Exclusive Distributor, Cultor may
solicit sales directly or through one or more of its Affiliates, in which event
the Company will ship the Product directly to such Affiliate or, at Cultor's
direction, directly to the customer and shall invoice the relevant Cultor
Affiliate for the Transfer Price as calculated in accordance with Section 3.5 of
this Agreement.
(b) During the Exclusive Distributorship Period, Cultor agrees to
(a) not market or solicit sales orders for micro algae-based carotenoids
produced by any other party, and (b) use its best efforts to ensure that all
sales orders solicited by Cultor are intended for use in animal feed
applications (including fish, shrimp and other aquaculture animal species) or
animal nutrition applications (excluding any human food and human nutrition
applications). It is expressly understood that Cultor together with its
Affiliates is one of the largest users of carotenoids in the world and that this
Agreement shall not in any way limit the choice of carotenoids that Cultor or
its Affiliates decide to use as raw material in its production. Furthermore, it
is expressly agreed that this Agreement shall not limit Svenska Foder AB's right
to act in accordance with the agreement it has entered into with the Swedish
company AstaCarotene AB regarding carotenoids, as such agreement may be amended
from time to time. Inasmuch as the product provided from AstaCarotene AB to
Svenska Foder AB is used primarily by Svenska Foder AB in its own feed
production, Cultor shall use its reasonable efforts to provide that, so long as
Svenska Foder AB is an Affiliate of Cultor, no commercially
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<PAGE>
significant volumes of such product are sold by Svenska Foder AB to third
parties, except for animal feed and animal nutrition applications in Sweden,
Denmark, Norway and Finland for poultry, pigs, cattle and horses.
Section 3.2 RESPONSIBILITIES OF THE PARTIES DURING THE EXCLUSIVE
DISTRIBUTORSHIP PERIOD. During the Exclusive Distributorship Period the
responsibilities of the parties will be as follows:
(a) CULTOR RESPONSIBILITIES. Cultor shall use its reasonable efforts
to investigate, obtain governmental approvals for, promote and distribute the
Product, at its own expense, as soon as reasonably practicable after the
Closing, using generally the same channels and methods, exercising the same
diligence, and adhering to the same standards which it employs with respect to
its own products. Unless prohibited by local law, all such registrations and
approvals shall be in the name of the Company and Cultor. Cultor shall not
distribute or market any micro algae-based carotenoid directly competitive with
the Product during the term of this Agreement. Cultor shall not make any
changes, alterations, modifications or additions to the Product without prior
written approval of the Company.
(b) COMPANY RESPONSIBILITIES. The Company shall supply Cultor's
requirements for the Product consistent with Cultor's forecasts of its expected
requirements for the Product, and shall promptly notify Cultor of any expected
delay and the duration of any expected delay. The Company shall provide Cultor
with materials necessary to obtain health registrations, to the extent
practicable, and with information on marketing and promotional plans of the
Company, including copies of marketing, advertising, sales and promotional
literature concerning the Product produced by the Company, if any. The Company
shall provide Cultor with certificates of analysis of the Product, certificates
of free sale, trademark authorizations, and any other documents which Cultor may
require for registration purposes, at Cultor's request and expense, if
available.
(c) CULTOR AND COMPANY RESPONSIBILITIES. Cultor and the Company
shall have quarterly meetings regarding Product production and commercialization
and demonstrate to each other reasonable development of the Product within the
Application Scope. During these quarterly meetings, Cultor and the Company will
discuss the progress of the production and commercialization of the Product and
establish production schedules and purchase order forecasts for succeeding
quarters.
Section 3.3 MINIMUM SALES AND PRODUCTION CAPACITY. (a) Within one year
from the date of the Closing, Cultor shall submit minimum sales orders for the
Product of 40 kilograms per month and the Company shall have developed the
production capacity for a minimum of 40 kilograms of the Product per month, and
(b) within two years from the date of the Closing the corresponding volumes for
the Product shall have increased to 120 kilograms. Orders transmitted by Cultor
but which are unfilled by the Company during the two years following the Closing
shall be deemed filled for the sole purpose of determining whether Cultor has
met the annual sales targets in 1997 and 1998.
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<PAGE>
Section 3.4 PRODUCT PRICING. The Company and Cultor shall discuss the
pricing strategy for the Product, but all final decisions regarding the resale
pricing for the Product are at Cultor's sole discretion. The price for sales of
the Product to Affiliates of Cultor shall be decided on an arms length basis.
Section 3.5 DIVISION OF PRODUCT SALE PROCEEDS. During the Exclusive
Distributorship Period, the Company and Cultor shall share equally in the
margin (the "Transfer Price") between production costs, determined in accordance
with GAAP ("Aquasearch Production Costs"), and net sales price, which shall be
determined in accordance with Cultor's accounting system as in effect on the
date hereof ("Net Sales Price") as follows: Net Sales Price shall equal the
gross sales price invoiced to the customer less volume bonuses, freight, and
agents commissions The Transfer Price shall be adjusted forward every three
months based on the actual year-to-date Aquasearch Production Costs and Net
Sales Prices. Notwithstanding the foregoing, it is expressly understood and
agreed that in the event the exclusivity of Cultor's Exclusive Distributorship
terminates pursuant to Section 3.13 hereof, the Transfer Price shall not take
into account sales from customers for which Cultor did not transmit the
applicable order. For the avoidance of doubt, a sample calculation of Net Sales
Price shall be agreed to by the Parties as a condition to Closing pursuant to
Article VIII hereof.
Section 3.6 TERMS AND CONDITIONS OF SALE. All purchases of the Product
by Cultor from the Company during the term of this Agreement shall be subject to
the terms and conditions of this Agreement and to the Company's published
Standard Terms and Conditions of Sale (FOB production facility, net 30 days)
which shall be approved by Cultor as a condition to Closing pursuant to
Article VIII hereof, provided that in the event of any conflict between the
terms of this Agreement and such Standard Terms, this Agreement shall control.
All payments to the Company by Cultor shall be in U.S. currency.
Section 3.7 DELIVERIES. All deliveries shall be made by the Company as
directed by Cultor to Cultor, a Cultor Affiliate, or to the customer and shall
be invoiced by the Company to Cultor or a Cultor Affiliate as directed by
Cultor.
Section 3.8 FORCE MAJEURE. The Company shall not be liable by reason of
failure or delay in the delivery of the Product due to fire, flood, storm,
earthquake, hurricane, volcanic eruption or act of God, riot, civil commotion,
embargo, hostility, mobilization for war, interference by civil or military
authority, domestic or foreign governmental act, regulation or ruling, including
but not limited to priorities, allocation, freeze or rationing order, strike,
labor dispute, the inability of the Company to procure labor, machinery,
equipment, materials or supplies, or any other similar or dissimilar cause
beyond the control of the Company.
Section 3.9 DEFECTS. Cultor shall receive observations and complaints
made by customers in respect of alleged defects in Products delivered and shall
promptly inform the Company of any such case.
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<PAGE>
Section 3.10 WARRANTIES. The Company shall provide Cultor with Product
specifications reasonably acceptable to Cultor as a condition to Closing
pursuant to Article VIII hereof. The Company expressly warrants that the
Product shall meet such Product specifications and any other Product
specification as mutually agreed by the Parties from time to time (as amended
from time to time, the "Product Specifications") and shall promptly replace any
Product not meeting the Product Specification in all respects. It is understood
that microalgae is a plant and as such there will be natural variations from
production lot to production lot, and the Company shall standardize the content
of astaxanthin meaning that there will be variations in the level of other
defined ingredients. However, in no event shall the Product contain elements at
levels that Cultor determines in good faith (and then notifies the Company) to
be harmful for animals.
Section 3.11 INDEMNIFICATION. The Company shall indemnify Cultor from
any losses, damages, expenses (including interest, penalties, and reasonable
attorneys' fees and disbursements, which shall include attorneys' fees and
disbursements on appeal), or other liabilities which Cultor may suffer, if any,
arising with respect to third-party claims of Persons to which the Product is
sold by the Company alleging that the Product does not conform in all respects
with the Product Specifications, or third-party claims alleging that the
manufacture of the Product violates the intellectual property rights of any
Person, provided that such indemnification obligation shall be subject in any
event to the following conditions: (i) the Company shall have received prompt
notice of such claim by Cultor, (ii) the Company at its option shall have the
sole right and obligation to control at its expense any resulting litigation and
settlement negotiations, (iii) Cultor shall cooperate fully with all reasonable
requests made by the Company with respect to such claims, and (iv) Cultor shall
have made no representations or warranties with respect to the Product not made
by the Company or consistent with the specifications. Cultor shall indemnify the
Company from any loss, damages, expenses (including interest, penalties, and
reasonable attorneys' fees and disbursements, which shall include attorneys'
fees and disbursements on appeal) or other liabilities which the Company may
suffer, to the extent that such liabilities relate to pigment, animal feed or
nutrition claims regarding the Product made by Cultor or any Affiliate of
Cultor, or third-party claims alleging that the sale, distribution, or use of
the Product violates the intellectual property rights of any Person, provided
that such indemnification obligation shall be subject to the following
conditions: (i) Cultor shall have received prompt notice of such claim by the
Company, (ii) Cultor at its option shall have the sole right and obligation to
control at its expense any resulting litigation and settlement negotiations,
(iii) the Company shall cooperate fully with all reasonable requests made by
Cultor with respect to such claims, and (iv) the Company shall have made no
representations or warranties with respect to pigment, animal feed or nutrition
claims not made by Cultor.
Section 3.12 LICENSE; TRADEMARKS; PACKAGING. The Exclusive
Distributorship constitutes a worldwide, royalty free, irrevocable license from
the Company to Cultor to use the "Aquasearch" trade name, or any other of the
Company's trade names, trademarks, service marks, or any related
characterizations solely during the term of the Exclusive Distributorship Period
and solely in connection with the marketing, sale and distribution of the
Product. Cultor shall have the right to sell the Product under its own
trademarks and brand names, with the addition of the text: "Manufactured by
Aquasearch, Inc., Hawaii, USA," in which case these trademarks and brand names
shall be the
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<PAGE>
exclusive property of Cultor during and after the term of this Agreement. The
Company shall package the Product for sale to Cultor in accordance with Cultor's
instructions as to Product labeling, trademarks, brand names etc. during the
term of this Agreement.
Section 3.13 TERMINATION OF EXCLUSIVE DISTRIBUTORSHIP PRIOR TO END OF
PERIOD.
(a) If the minimum sales orders or production capacity volumes
described in sub-paragraphs (a) and (b) of Section 3.3 hereof are not achieved
by either Party, the other Party shall have the right to promptly terminate the
Exclusive Distributorship upon 30 days' prior written notice, and the provisions
of Article IV hereof shall not take effect.
(b) Without prejudice to any other rights it may have hereunder or at
law, either Party shall have the right to terminate the provisions of this
Article III without prior written notice upon the occurrence of any of the
following: (i) the other Party should violate any of the provisions or
conditions of this Agreement, and should fail to discontinue and correct such
violation within 120 days after receipt of notice in writing from the
complaining Party; or (ii) the other Party becomes insolvent or fails generally
to pay its debts as they come due.
(c) Unless the Parties otherwise agree, the Exclusive Distributorship
shall cease if Cultor does not exercise the Ocean Color Option (as such term is
defined in Section 4.1 hereof) within the Exclusive Distributorship Period and
the Company shall thereafter have the exclusive worldwide right to sell the
Product to all customers and prospective customers, to perform all ancillary
sales and marketing activities and to appoint other agents and distributors and
any such rights that Cultor shall have enjoyed under this Agreement with respect
to these matters shall expire and be null and void. In such event, patents,
regulatory filings and know-how regarding carotenoids in general developed by
Cultor shall remain the property of Cultor and patents, regulatory filings and
know-how related to carotenoids specifically in Haematococcus Pluvialis or other
algae developed by the Company shall remain the property of the Company. In the
event separation of such patents and know-how as aforesaid proves impracticable,
the Parties will enter into appropriate cross-licensing or other agreed
arrangements with each other whereby each Party will grant to the other the non-
exclusive rights to the use of such patents and know-how; PROVIDED, HOWEVER,
that Cultor and the Company expressly agree that all patents and know-how of the
Company identified to Cultor in writing as a condition to Closing pursuant to
Article VIII hereof and any patent or continuation issuing therefrom,
constitutes highly proprietary technology developed by the Company prior to and
outside the scope of this Agreement and that, under no circumstances upon
termination of the Exclusive Distributorship shall Cultor claim or be entitled
to any license to such technology by virtue of the provisions of this Agreement.
Section 3.14 INDEPENDENT CONTRACTOR. Cultor shall be conclusively deemed
to be an independent contractor with respect to the provisions of this
Article III. Unless expressly provided to the contrary herein, all action taken
pursuant to the Exclusive Distributorship shall be at Cultor's own expense.
Nothing herein contained shall constitute Cultor the agent of the Company for
any
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purpose or authorize Cultor to assume or create any obligation or responsibility
on behalf of or in the name of the Company except as expressly set forth in this
Article III.
ARTICLE IV
FORMATION AND DEVELOPMENT OF JOINT VENTURE COMPANY
Provided the Exclusive Distributorship has not been terminated pursuant to
Section 3.13 hereof, it is contemplated by the Parties that they will form a
joint venture company during the Exclusive Distributorship Period on
substantially the terms and conditions set forth in the Stockholders' Agreement
attached hereto as Exhibit A (the "Stockholders' Agreement"). The Stockholders'
Agreement assumes that the entity to be used by the joint venture company will
be a Delaware corporation. The Parties acknowledge, however, that at the time
of formation, business, operational, management, legal, accounting, taxation,
intellectual property and other strategic considerations may indicate that a
different business organization, such as a limited liability company, would be a
more advantageous structure for the business. In the event that such a
determination is made by the Parties, then the agreement establishing the new
entity will contain substantially the same terms and conditions, protections,
rights and obligations as are set forth in the Stockholders' Agreement, with
such modifications and changes as may be required by the legal structure of the
new entity. Regardless of the form of business organization selected for the
joint venture company, it is contemplated by the Parties that the joint venture
company will be located in the Hawaii Ocean Science and Technology Park at
Keahole Point, Kailua-Kona, Hawaii.
ARTICLE V
CONFIDENTIALITY
Section 5.1 GENERAL. The Parties to this Agreement shall maintain in
strictest confidence and shall cause their directors, officers, employees,
agents, counsel and representatives to maintain in strictest confidence, all
proprietary and confidential information and materials (whether or not
patentable), including, without limitation, equipment, processes, methods, data,
software, reports, know-how, sources of supply, price information and
quotations, customer lists, patent positions and business plans which are
communicated to, learned of, developed or otherwise acquired by either Party,
directly or indirectly, pursuant to this Agreement and any other information
designated by the disclosing Party as confidential or proprietary in relation to
the subject matter of this Agreement, which information is provided by one Party
to the other either directly or indirectly ("Confidential Information"). All
such Confidential Information shall remain the property of the Company or Cultor
as the case may be and upon the expiration or termination of this Agreement
shall be returned to the Company or Cultor as applicable, or, at either Party's
election, destroyed.
Section 5.2 EXCEPTIONS. Confidential Information shall not include any
information that (a) becomes known to the general public without the fault or
breach (including simple negligence) of the receiving party; or (b) was already
known to the recipient as evidenced by prior written
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<PAGE>
documents in its possession; or (c) is disclosed to the recipient by a third
party who is not in default of any confidentiality obligation to the disclosing
party hereunder; or (iv) is developed by or on behalf of the receiving party,
without reliance on Confidential Information received hereunder. Each party
shall be entitled, in addition to any other right or remedy it may have, at law
or in equity, to an injunction, without the posting of any bond or other
security, enjoining or restraining the other party from any violation or
threatened violation of this Section 5.2.
Section 5.3 SURVIVAL. The obligations of this Article V shall survive
termination of this Agreement and each of the Parties hereto shall continue to
observe them regardless of whether its rights hereunder shall be terminated or
it shall cease to be a Party hereto.
ARTICLE VI
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
In order to induce Cultor to enter into this Agreement, the Company makes
the following representations, warranties and covenants to Cultor, intending
Cultor to rely upon each of said representations, warranties and covenants:
Section 6.1 CORPORATE EXISTENCE AND POWER. The Company is a public
company duly incorporated, validly existing and in good standing under the laws
of the State of Colorado. The Company has all requisite corporate power and
authority and all material governmental licenses, authorizations, consents and
approvals required to acquire and own, lease and operate its properties and to
carry on its business as currently conducted in all states and countries where
required except where the failure to have such licenses, authorizations,
consents and approvals, would not have, in the aggregate, a material adverse
effect on the business, assets, financial condition, or results of operations of
the Company.
Section 6.2 ARTICLES OF INCORPORATION AND BY-LAWS. The Company has
previously delivered to Cultor true and complete copies of its Articles of
Incorporation and By-Laws as in effect on the date hereof and will provide a
true and complete copy of its Articles of Incorporation and By-Laws as a
condition to Closing pursuant to Article VIII hereof.
Section 6.3 AUTHORITY; SHAREHOLDERS' MEETING; NONCONTRAVENTION. The
execution, delivery and performance by the Company of this Agreement and the
transactions contemplated hereby has been duly authorized by all necessary
corporate action and requires no action by or in respect of or consent or
approval of or filing by the Company with, any governmental body, agency or
authority, provided, however, that the Company has advised Cultor that the
transactions contemplated by this Agreement require the approval of the
shareholders of the Company, which the Company covenants to use its best efforts
to secure as promptly as practicable at a meeting of the shareholders of the
Company (the "Shareholders' Meeting") to be held following the execution of this
Agreement and in any event on or before August 31, 1996, or such other date as
the parties may agree. Subject only to such shareholders' approval, the
execution, delivery and performance by the Company of this
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Agreement and the transactions contemplated hereby does not and will not
contravene or constitute a default under (a) the Articles of Incorporation and
By-Laws of the Company, (b) the terms of any judgment, injunction, order or
decree applicable to the Company, (c) any provision of law or regulation
applicable to the Company as in effect on the date hereof, or (d) any material
agreement, contract or other instrument binding upon the Company. This Agreement
has been duly executed and delivered by the Company and constitutes a valid and
binding agreement of the Company, enforceable in accordance with its terms,
subject only to (i) bankruptcy, insolvency, reorganization, arrangement,
fraudulent conveyance, moratorium or other similar laws relating to or affecting
the rights of creditors, (ii) general principles of equity, including, without
limitation, specific performance and injunctive relief, regardless of whether
considered in a proceeding in equity or at law, and (iii) the approval of the
transactions contemplated hereby by the Company's shareholders at the
Shareholders' Meeting.
ARTICLE VII
REPRESENTATIONS, WARRANTIES AND COVENANTS OF CULTOR
In order to induce the Company to enter into this Agreement, Cultor makes
the following representations, warranties and covenants, intending that the
Company rely upon each of said representations, warranties and covenants:
Section 7.1 CORPORATE EXISTENCE AND POWER. Cultor is a company duly
incorporated, validly existing and in good standing under the laws of Finland.
Cultor has all requisite corporate power and authority and all material
governmental licenses, authorizations, consents and approvals required to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
Section 7.2 INVESTMENT. As of the date hereof, Cultor owns no equity
securities of the Company and covenants not to purchase any such securities of
the Company except as contemplated by the Stock Subscription Agreement, during
the term of this Agreement.
Section 7.3 BINDING EFFECT. Cultor has the full legal right and power
to execute and deliver this Agreement and to perform its obligations hereunder.
The execution, delivery and performance by Cultor of this Agreement and the
transactions contemplated hereby has been duly authorized by all necessary
action on Cultor's part, requires no action by or in respect of or consent or
approval of or filing by Cultor with, any governmental body, agency or
authority, and does not and will not contravene or constitute a default under
(a) Cultor's Articles of Association or By-Laws, (b) the terms of any judgment,
injunction, order or decree applicable to Cultor, (c) any provision of law or
regulation applicable to Cultor as in effect on the date hereof, or (d) any
material agreement, contract or other instrument binding upon Cultor. This
Agreement has been duly executed and delivered by Cultor and constitutes a valid
and binding agreement of Cultor, enforceable in accordance with its terms,
subject only to (i) bankruptcy, insolvency, reorganization, arrangement,
fraudulent conveyance, moratorium or other similar laws relating to or affecting
the rights of creditors, (ii) general principles
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of equity, including, without limitation, specific performance and injunctive
relief, regardless of whether considered in a proceeding in equity or at law,
and (iii) the approval of the transactions contemplated hereby by the Company's
shareholders at the Shareholders' Meeting.
ARTICLE VIII
CONDITIONS TO OBLIGATIONS
Section 8.1 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligation of
the Company to enter into this Agreement shall be subject to the fulfillment,
prior to or at the Closing, of all of the following conditions:
(a) TRUTH AND PERFORMANCE. The representations, warranties and
covenants of Cultor contained in this Agreement shall be true and correct in all
material respects at and as of the time of the Closing and Cultor shall have
performed and complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by Cultor
prior to or at the Closing.
(b) NO PROHIBITION. The issuance of the Shares pursuant to the Stock
Subscription Agreement shall not be prohibited by any applicable law, court
order or governmental regulation.
(c) SVENSKA FODER AB. Prior to executing this Agreement, Cultor
shall provide a letter from Svenska Foder AB to the Company dated the date of
this Agreement confirming that the execution, delivery and performance by the
Company and Cultor of this Agreement will not violate or constitute a breach of
or default under any agreement between the Company and Svenska Foder AB.
(d) ADDITIONAL CONDITIONS. The documentation required to be
delivered at the Closing pursuant to Sections 3.5, 3.6, 3.10, 3.13(c) and 6.2
hereof shall have been delivered.
Section 8.2 CONDITIONS TO OBLIGATIONS OF CULTOR. The obligation of
Cultor to enter into this Agreement shall be subject to the fulfillment, prior
to or at the Closing, of all of the following conditions:
(a) TRUTH AND PERFORMANCE. The representations, warranties and
covenants of the Company contained in this Agreement shall be true and correct
in all material respects at and as of the time of the Closing, and the Company
shall have performed and complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by the
Company prior to or at the Closing.
.
(b) NO PROHIBITION. The issuance of the Shares pursuant to the Stock
Subscription Agreement shall not be prohibited by any applicable law, court
order or governmental regulation.
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(c) OPINION OF COUNSEL. Cultor shall have received the opinion of
the Company's counsel dated the Closing Date in form and substance satisfactory
to counsel for Cultor.
(d) ADDITIONAL CONDITIONS. The documentation required to be
delivered at the Closing pursuant to Sections 3.5, 3.6, 3.10, 3.13(c) and 6.2
hereof shall have been delivered.
ARTICLE IX
MISCELLANEOUS
Section 9.1 PERIOD OF AGREEMENT AND TERMINATION. Subject only to the
approval of the shareholders of the Company contemplated by Section 6.3 of this
Agreement, this Agreement shall come into effect on the date hereof and shall
continue hereafter to bind the Company and Cultor for so long as Cultor shall
beneficially own any Shares, except as otherwise set forth in Article VII
hereof.
Section 9.2 NOTICES. Any notice, consent or approval required or
permitted to be given or sent hereunder shall be in writing and may be delivered
personally or sent by telecopied facsimile, or by first class mail, postage
prepaid (if to an address in the same country as the sender) or air mail or its
equivalent (if to an address outside the sender's country) to the Party on whom
it is to be served at the address of that Party set forth below:
(a) If to the Company, to:
Aquasearch, Inc.
73-4460 Queen Kaahumanu Highway
Suite 110
Kailua Kona HI 96740
Attention: General Manager
Fax: 808-326-9401
with a copy to:
Steven L. Berson, Esq.
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto
California 94304-1050
Fax: 415-493-6811
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(b) If to Cultor, to:
Cultor Ltd.
Kyllikkiportti 2
FIN-00240 Helsinki
Finland
Attention: General Counsel
Facsimile Transmission No.: 358-0-1344-1472
with a copy to:
Robert A. McTamaney, Esq.
Carter, Ledyard & Milburn
2 Wall Street
New York, New York 10005
Facsimile Transmission No.: 212-732-3232
(c) Any notice or other documents sent by post properly addressed as
aforesaid shall be deemed served seven days after the date of posting if sent
air mail and two days after the date of posting if sent by first class post and
any notice or other documents sent by telecopied facsimile shall be deemed
served on the day of transmission.
(d) Notices shall be served on the parties hereto at their addresses
set out herein or at such other addresses as may be substituted for the purpose
by a notice duly served in accordance with the provisions of this Section 9.2.
Section 9.3 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the Parties with respect to the matters dealt with herein and
supersedes any previous agreements or understandings between the Parties in
relation to such matters. Each of the Parties acknowledges that in entering
into this Agreement, it has not relied on any representation or warranty save as
expressly set out herein or in any document referred to herein. No variation of
this Agreement shall be valid or effective unless made by one or more
instruments in writing and signed by the Parties.
Section 9.4 AMENDMENTS. This Agreement may be amended, modified or
supplemented only by a written instrument that refers expressly to this
Agreement and that is executed by an authorized signatory of both of the Parties
hereto. Any modification or variation of this Agreement other than in accordance
with this Section 9.4 shall be null and void.
Section 9.5 GOVERNING LAW; ARBITRATION.
(a) Any dispute or claim arising out of or in relation to this
contract, or the interpretation, making, performance, breach, validity or
termination thereof, shall be finally settled by binding arbitration in New
York, New York under the International Arbitration Rules of the
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American Arbitration Association (the "Rules") by three arbitrators. All
arbitrators must be impartial, independent, and experienced in international
arbitration. Within thirty (30) days after commencement of the arbitral
proceedings, each Party shall select one arbitrator and, if possible, the
Parties will jointly agree on a third arbitrator who will be the chair of the
arbitral tribunal. If either Party fails to appoint an arbitrator, or if the
Parties do no jointly agree on a third arbitrator within such thirty (30) day
period, the AAA shall, within fifteen (15) days thereafter, appoint such
arbitrator(s) from the International Panel.
(b) This contract shall be governed, interpreted and construed
exclusively under the substantive laws of the State of New York. The
arbitrators shall apply New York law to the merits of any dispute or claim,
without referenced to rules of conflict of law. The arbitrators shall have the
power to decide all questions of arbitrability. The arbitration proceedings
shall be governed by federal arbitration law and by the Rules, without reference
to state arbitration law. At the request of either Party, the arbitrators will
enter an appropriate protective order to maintain the confidentiality of
information produced or exchanged in the course of the arbitration proceedings.
Judgment on the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof.
(c) The Parties may apply to any court of competent jurisdiction for
a temporary restraining order, preliminary injunction, or other interim or
conservatory relief, as necessary, without breach of this arbitration agreement
and without any abridgment of the powers of the arbitrators.
(d) The arbitrators will award to the prevailing party, if any, as
determined by the arbitrators, all of its costs and fees, including, without
limitation, AAA administrative fees, arbitrator fees, travel expenses, out-of-
pocket expenses (including, without limitation, such expenses as copying,
telephone, facsimile, postage, and courier fees), witness fees, and attorneys'
fees and disbursements.
Section 9.6 ASSIGNMENT. The rights and liabilities conferred by this
Agreement are personal to the Parties hereto and may not be assigned or
transferred in whole or in part by either Party hereto without the prior consent
in writing of the other Party; except that either may, with the consent of the
other not to be unreasonably withheld, assign its rights and obligations
hereunder to any of its Affiliates, provided that in such event the assigning
party shall not be relieved of its obligations hereunder. Notwithstanding
anything else in this Section 9.6 or this Agreement to the contrary, the Parties
each understand and agree that the Company desires to change the jurisdiction of
its incorporation from Colorado to Delaware, that a proposal to approve such
reincorporation in Delaware may be included in the proxy statement to be
distributed to the Company's shareholders in connection with the Shareholders'
Meeting (or at another meeting of the Company's shareholders held at a later
date), and that, if the reincorporation proposal is approved by the Company's
Shareholders at the Shareholders' Meeting, the Company will proceed to effect
the reincorporation as soon as possible thereafter. The Company and Cultor each
expressly approve of the reincorporation and agree that the Company may assign
all of its rights, duties, obligations, covenants and benefits under this
Agreement to the Delaware successor corporation, and that, upon consummation of
such assignment, all of the rights, obligations, covenants and benefits of
Cultor and
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such Delaware successor corporation shall be the same as if this Agreement had
been entered into between Cultor and such Delaware successor corporation on the
date hereof.
Section 9.7 BINDING EFFECT. This Agreement shall be binding upon, and
shall inure to the benefit of and be enforceable by, the Parties hereto and
their respective successors and permitted assigns. This Agreement is for the
sole benefit of the Parties hereto and nothing in this Agreement, expressed or
implied, is intended or shall be construed to confer upon any Person, other than
the Parties and successors and assigns permitted by Section 9.6, any right,
remedy or claim under or by reason of this Agreement.
Section 9.8 WAIVERS.
(a) No failure to exercise and no delay in exercising on the part of
any Party hereto any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof.
(b) In the event that any Party hereto shall expressly waive any
breach, default or omission hereunder, no such waiver shall apply to, or operate
as, a waiver of similar breaches, defaults or omissions or be deemed a waiver of
any other breach, default or omission hereunder.
(c) The rights and remedies of each of the Parties in connection
herewith are cumulative and are not exclusive of any rights or remedies provided
by law or equity.
Section 9.9 PARTIAL INVALIDITY. The respective restrictions on the
Parties herein contained are considered reasonable by the Parties but, if any
such restriction shall be found void but would be valid if some part thereof
were deleted or the period or area of application reduced, such restriction
shall apply with such modification as may be necessary to make it valid and
effective.
Section 9.10 SEVERABILITY. If at any time any provision of this
Agreement is or becomes invalid, illegal or unenforceable in any respect under
the law of any jurisdiction, neither the validity, legality or enforceability of
the remaining provisions shall in any way be affected or impaired thereby.
Section 9.11 COSTS AND ATTORNEYS' FEES. Each Party will pay its own
costs and attorneys' fees incident to this Agreement and the transactions
contemplated hereby (except as may be specifically provided for herein) whether
or not these transactions shall be consummated.
Section 9.12 PUBLIC ANNOUNCEMENTS. Neither of the Parties hereto shall
issue any press release or otherwise publicize this Agreement or the
transactions contemplated herein prior to the Closing without the approval of
the other Party, which approval shall not be unreasonably withheld. Cultor
recognizes that the Company is a public company subject to disclosure
requirements under applicable law. The approval of a specific press release or
other form of publicity shall not constitute approval of subsequent press
releases or publicity.
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Section 9.13 INDEMNITY AS TO REPRESENTATIONS, WARRANTIES AND COVENANTS.
The rights of the Parties to enforce the representations, warranties and
covenants contained in this Agreement shall survive the Closing. Cultor and the
Company agree to indemnify and hold each other harmless from any losses,
damages, expenses (including interest, penalties, and reasonable attorneys' fees
and disbursements, which shall include attorneys' fees and disbursements on
appeal), or other liabilities which either may suffer, directly or indirectly,
by reason of the inaccuracy of any warranty or representation, or breach of any
covenant, of the other Party hereto contained in this Agreement.
Section 9.14 ENGLISH LANGUAGE. This Agreement is in the English language
only, which language shall be controlling in all respects. All communications
and notices hereunder shall be in the English language
Section 9.15 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, and by ether Party on separate counterparts, each of which as
so executed and delivered shall be deemed an original but all of which together
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement as to any Party hereto to produce or account for
more than one such counterpart executed and delivered by such Party.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be signed by their authorized representatives as of the date first written
above.
Attest: CULTOR, LTD.
By: /s/ Juha Kurkinen By: /s/ Tom von Weyman
-------------------------- -----------------------------------
(Secretary) Name: Tom von Weyman
Title: Executive Vice President
By: /s/ Tommy Laakso
-----------------------------------
Name: Tommy Laakso
Title: Business Development
Director
Cultor Food Ingredients
Attest: AQUASEARCH, INC.
By: /s/ Steven L. Berson By: /s/ Mark E. Huntley
------------------------------ -----------------------------------
(Secretary) Name: Mark E. Huntley, Ph.D.
Title: President and Chief
Executive Officer
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EXHIBIT A
TO DISTRIBUTION AND DEVELOPMENT AGREEMENT
DATED AS OF MAY 14, 1996
BETWEEN AQUASEARCH, INC. AND CULTOR LTD.
NOTE: THE FOLLOWING STOCKHOLDERS' AGREEMENT ASSUMES THAT THE ENTITY TO BE
FORMED FOR A POTENTIAL JOINT VENTURE COMPANY BETWEEN AQUASEARCH, INC. AND CULTOR
LTD. WILL BE A DELAWARE CORPORATION. AT THE TIME OF FORMATION OF THE JOINT
VENTURE COMPANY, BUSINESS, OPERATIONAL, MANAGEMENT, LEGAL, ACCOUNTING, TAXATION,
INTELLECTUAL PROPERTY AND OTHER STRATEGIC CONSIDERATIONS MAY INDICATE THAT A
DIFFERENT BUSINESS ORGANIZATION, SUCH AS A LIMITED LIABILITY COMPANY, WOULD BE A
MORE ADVANTAGEOUS STRUCTURE FOR THE BUSINESS. IN THE EVENT THAT SUCH A
DETERMINATION IS MADE, THEN THE AGREEMENT ESTABLISHING THE NEW ENTITY WILL
CONTAIN SUBSTANTIALLY THE SAME TERMS AND CONDITIONS, PROTECTIONS, RIGHTS AND
OBLIGATIONS AS ARE SET FORTH IN THE FOLLOWING STOCKHOLDERS' AGREEMENT, WITH SUCH
MODIFICATIONS AND CHANGES AS MAY BE REQUIRED BY THE LEGAL STRUCTURE OF THE NEW
ENTITY. THE FORM OF BUSINESS ENTITY TO BE USED FOR THE JOINT VENTURE COMPANY
SHALL BE DETERMINED BY MUTUAL CONSENT OF AQUASEARCH AND CULTOR.
STOCKHOLDERS' AGREEMENT
Stockholders' Agreement, made as of the ____ day of _______, 199_, between
Cultor Ltd., a Finnish corporation ("CULTOR"), Aquasearch, Inc., ("AQUASEARCH"),
a Colorado corporation and _____________, a Delaware corporation (the
"CORPORATION").
RECITALS:
WHEREAS, Cultor and Aquasearch are parties to that certain Distribution and
Development Agreement dated as of May 14, 1996 and as amended to the date hereof
(the "CULTOR/AQUASEARCH DISTRIBUTION AGREEMENT") and that certain Stock
Subscription Agreement dated as of May 14, 1996 and as amended to the date
hereof (the "CULTOR/AQUASEARCH STOCK SUBSCRIPTION AGREEMENT"); and
WHEREAS, Cultor and Aquasearch have formed the Corporation to make, use and
sell the Product (as hereinafter defined) within the Application Scope (as
hereinafter defined), as provided for herein; and
WHEREAS, Aquasearch desires to grant to the Corporation a license, subject
to the terms and conditions set forth in this Agreement, to use certain
Microalgae Technology (as hereinafter defined) developed or obtained by
Aquasearch to make, use and sell the Product within the Application Scope and
Cultor, Aquasearch and the Corporation desire to establish the terms and
conditions of such license; and
WHEREAS, the Corporation desires to grant to Aquasearch a license, subject
to the terms and conditions set forth in this Agreement, to use certain
Microalgae Technology developed or obtained by the Corporation to make, use and
sell (i) the Product outside the Application Scope and (ii) any and all
microalgae products other than the Product in any and all fields (including
within the
<PAGE>
Application Scope) and Cultor, Aquasearch and the Corporation desire to
establish the terms and conditions of such license; and
WHEREAS, Cultor, Aquasearch and the Corporation desire to establish the
policies and procedures pursuant to which the Corporation will be managed and
financed; and
WHEREAS, Cultor, Aquasearch and the Corporation desire to establish the
terms and conditions pursuant to which Cultor will have the option to purchase a
portion of Aquasearch's ownership interest in the Corporation; and
WHEREAS, Cultor, Aquasearch and the Corporation desire to establish the
terms and conditions of a marketing agreement among Cultor, Aquasearch and the
Corporation (to be entered into upon the exercise of Cultor's option to purchase
a portion of Aquasearch's ownership interest in the Corporation) pursuant to
which the Corporation will make the Product for use within the Application
Scope, Cultor will market and sell the Product within the Application Scope and
the Corporation will pay Aquasearch a royalty in connection therewith; and
WHEREAS, Aquasearch and the Corporation desire to establish their
respective rights upon termination of this Agreement in and to certain
Microalgae Technology developed or obtained by Aquasearch and the Corporation;
NOW, THEREFORE, in consideration of the mutual promises herein contained,
Cultor, Aquasearch and the Corporation agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINED TERMS. Unless the context otherwise requires, in this
Agreement the following terms shall have the meanings defined below:
"Additional Agreements" means the Aquasearch/Corporation License
Agreement, the Corporation/Aquasearch
License Agreement and the
Cultor/Corporation Marketing Agreement
(if applicable);
"Affiliate" with respect to any Person, any other
Person that directly or indirectly,
through one or more intermediaries,
controls or is controlled by or is under
common control with the Person
specified;
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"Agreement" this Agreement and any modification,
alternation, addition or deletion hereto
made in writing after the date of
execution of this Agreement;
"Application Scope" means the commercial production of
natural astaxanthin, a microalgae-based
carotenoid derived from HAEMATOCOCCUS
PLUVIALIS, a species of microalgae, for
use in animal feed (including fish,
shrimp and other aquaculture animal
species) and animal nutrition
applications (excluding any human food
and human nutrition applications);
"Aquasearch/Corporation
License Agreement" means that certain License Agreement
between Aquasearch and the Corporation
dated the date hereof and described in
Section 10.1 hereof;
"Aquasearch Production Costs" has the meaning set forth in the
Aquasearch/Cultor Distribution
Agreement;
"Astaxanthin Production-Related
Fixed Assets" shall mean the fixed assets (exclusive
of Technology and other intangible
assets) related to the dedicated
manufacturing facility constructed by
Aquasearch for the production of the
Product and located at Suite ___, Hawaii
Ocean Science and Technology Park at
Keahole Point, Kailua-Kona, Hawaii;
including all costs that according to
generally accepting accounting
principles in the United States shall be
capitalized and have been capitalized on
the books of Aquasearch associated with
the development of the facility, such as
design fees, construction costs and
costs of training personnel to make, use
and sell the Product and operate the
facility;
"Arbitration Rules" has the meaning set forth in
Section 12.4 hereof;
"Change in Control Date" has the meaning set forth in
Section 10.3 hereof;
"Change in Control
Assigned Technology" has the meaning set forth in
Section 10.3(b) hereof;
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"Closing" means the meeting (whether in person or
by phone and facsimile) of Cultor and
Aquasearch at which each will effect its
initial contribution to the capital of
the Corporation, as contemplated by
Section 2.2 hereof, and execute and
deliver, or cause the Corporation to
execute and deliver, the Additional
Agreements. The Closing will take place
on the Effective Date and, unless waived
by completing the Closing, the
occurrence on or before the Effective
Date of the events specified to occur as
of the Closing and the truth of the
representations and warranties set forth
herein as of the Closing shall be a
condition of each Party's obligations
hereunder;
"Commission" has the meaning set forth in Section 7.1
hereof;
"Confidential Information" has the meaning set forth in Section 8.1
hereof;
"Conversion Stock" the shares of Common Stock issued upon
conversion of the Series A Preferred
Stock;
"Corporation/Aquasearch
License Agreement" means that certain License Agreement
between the Corporation and Aquasearch
dated the date hereof and described in
Section 10.2 hereof;
"Cultor/Aquasearch Distribution
"Agreement" has the meaning set forth in the
Recitals to this Agreement;
"Cultor/Aquasearch Stock
Subscription Agreement" has the meaning set forth in the
Recitals to this Agreement;
"Cultor/Corporation
Marketing Agreement" has the meaning set forth in Section 4.3
hereof;
"Current Replacement Value" has the meaning set forth in Section 2.2
hereof;
"Deadlock Event" has the meaning set forth in
Section 3.1(i)(i) hereof;
"Deadlock Termination" has the meaning set forth in
Section 3.1(i)(ii) hereof;
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"Demand Registration
Buying Party" has the meaning set forth in
Section 7.2(c) hereof;
"Effective Date" means the day and year first above
written;
"Exchange Act" has the meaning set forth in Section 7.1
hereof;
"Holder" has the meaning set forth in Section 7.1
hereof;
"Initiating Holder" has the meaning set forth in Section 7.1
hereof;
"Material Breach" has the meaning set forth in Section 9.4
hereof;
"Microalgae Technology" means any and all rights in and to any
patents and patent applications
(including, without limitation, any
divisionals, continuations,
continuations-in-part, reissues and
foreign counterparts (whether or not
claiming priority therefrom)),
trademarks, copyrights, trade secrets,
regulatory filings, technical
information, know-how and other
intellectual property rights developed
or obtained relating to the production,
application and use of microalgae;
"Net Gearing" has the meaning set forth in
Section 2.4(e) hereof;
"the Parties" or "Party" means the parties to this Agreement or a
party to this Agreement;
"Person" any individual, corporation,
partnership, association, joint-stock
company, trust, unincorporated
organization, joint venture,
governmental body, agency or authority;
"Product" the microalgae-based carotenoid,
astaxanthin;
"Pro Rata Share" has the meaning set forth in
Section 2.4(b) hereof;
"Registrable Securities" has the meaning set forth in Section 7.1
hereof;
"Registration Expenses" has the meaning set forth in Section 7.1
hereof;
"Restricted Securities" has the meaning set forth in Section 7.1
hereof;
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"Rule 144" has the meaning set forth in
Section 6.2(e) hereof;
"Securities" means the equity or debt securities of
the Corporation;
"Securities Act" has the meaning set forth in Section 7.1
hereof;
"Selling Expenses" has the meaning set forth in Section 7.1
hereof;
"Shares" the Corporation's Series A Preferred
Stock and the Conversion Stock;
"Technology" means any and all rights in and to any
patents and patent applications
(including, without limitation, any
divisionals, continuations,
continuations-in-part, reissues and
foreign counterparts (whether or not
claiming priority therefrom)),
trademarks, copyrights, trade secrets,
regulatory filings, technical
information, know-how and other
intellectual property rights developed
or obtained;
"Terminating Event" has the meaning set forth in Section 9.2
hereof;
"Termination Date" has the meaning set forth in
Section 10.4(a) hereof; and
"Transfer Price" has the meaning set forth in the
Cultor/Aquasearch Distribution Agreement.
ARTICLE II
FORMATION OF THE CORPORATION AND FINANCING
Section 2.1 FORMATION OF THE CORPORATION. As of the Closing, (i) the
Certificate of Incorporation of the Corporation shall have been filed with the
Secretary of State of the State of Delaware in the form approved by Cultor,
Aquasearch and the Corporation, (ii) the Bylaws of the Corporation shall have
been duly adopted in the form approved by Cultor, Aquasearch and the Corporation
and (iii) all other corporate formalities required to effect the formation of
the Corporation and the appointment of its initial Board of Directors shall have
been completed.
Section 2.2 INITIAL CAPITAL CONTRIBUTIONS. At the Closing, Cultor and
Aquasearch will make their respective initial contributions to the capital of
the Corporation as follows: Aquasearch shall transfer to the Corporation its
Astaxanthin Production-Related Fixed Assets and Cultor shall match
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this contribution by contributing cash equal to the Current Replacement Value of
the Astaxanthin Production-Related Fixed Assets. The Current Replacement Value
of the Astaxanthin Production-Related Fixed Assets shall be determined by an
independent appraiser reasonably acceptable to Cultor, Aquasearch and the
Corporation. Upon receipt from Aquasearch and Cultor of their respective
contributions to the capital of the Corporation, the Corporation shall issue
1,000,000 shares of Series A Preferred Stock, par value $.0001 per share (the
"SERIES A PREFERRED STOCK"), to Aquasearch (the "AQUASEARCH INITIAL SHARES") and
1,000,000 shares of Series A Preferred Stock to Cultor (the "CULTOR INITIAL
SHARES"). The Aquasearch Initial Shares and the Cultor Initial Shares are
hereinafter referred to collectively as the "INITIAL SHARES".
Section 2.3 CULTOR OPTION TO ACQUIRE HALF OF AQUASEARCH INITIAL SHARES.
At any time prior to [the third anniversary of the date upon which the 400,000
shares of Aquasearch Common Stock are issued to Cultor pursuant to the
Cultor/Aquasearch Stock Subscription Agreement], Cultor shall have the option
(the "CULTOR OPTION") to purchase from Aquasearch half of the Aquasearch Initial
Shares at a purchase price equal to the highest of (i) U.S. $1 million, (ii) 50%
of the Current Replacement Value of the Astaxanthin Production-Related Fixed
Assets initially contributed to the Corporation by Aquasearch pursuant to
Section 2.2 hereof, or (iii) an amount equal to the product of X multiplied by
Y; where "X" equals the difference between the Transfer Price and the Aquasearch
Production Costs for the six-month period commencing on November 1, 1998 and
ending on April 30, 1999 and "Y" equals six. Cultor's option to acquire half of
the Aquasearch Initial Shares shall expire on prior to [insert date immediately
before the third anniversary of the date upon which the 400,000 shares of
Aquasearch Common Stock are issued to Cultor pursuant to the Cultor/Aquasearch
Stock Subscription Agreement].
Section 2.4 ADDITIONAL FINANCING. In the event that the Board of
Directors of the Corporation determines that the Corporation requires financing
in addition to the assets and cash initially contributed by Cultor and
Aquasearch pursuant to Section 2.2 hereof in order to carry out the purposes of
the Corporation, then the Board of Directors shall seek to obtain such
additional financing in the following priorities:
(a) COMMERCIAL FINANCING. The Corporation shall first attempt to
obtain debt or equipment lease financing to the extent available on terms
reasonably acceptable to the Board of Directors. Any such additional debt or
equipment lease financing may be provided by Cultor or Aquasearch and/or third
party lenders, as Cultor, Aquasearch and the Corporation may agree. Cultor and
Aquasearch shall provide the Corporation with the benefit of their respective
banking and financing relationships to make debt or lease financing more readily
available to the Corporation; PROVIDED, HOWEVER, that nothing contained herein
shall be construed to obligate Cultor or Aquasearch to provide guarantees or
other undertakings for such financing. From and after the time that Cultor
exercises the Cultor Option, if at all, Cultor shall use reasonable efforts to
assist in arranging third-party financing, on commercial terms normally
available for a 75%-owned Cultor subsidiary, for the growth of the Corporation;
PROVIDED, HOWEVER, that nothing contained herein shall be construed to obligate
Cultor to provide guarantees or other undertakings.
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(b) CULTOR AND AQUASEARCH. The Corporation shall then attempt to
obtain any further capital which it requires from Cultor and Aquasearch. The
type of Securities offered and the number or principal amount of Securities to
be issued shall be determined on the basis of the purchase price established by
the Board of Directors of the Corporation pursuant to Sections 3.1(g) or 3.2(f)
hereof. Each of Cultor and Aquasearch shall have the right to purchase its Pro
Rata Share of any new issue of Securities by the Corporation. To the extent
that Cultor or Aquasearch does not fully subscribe to its Pro Rata Share of such
new Securities, the other Party shall be entitled to purchase any of such
unsubscribed Securities. Each of Cultor and Aquasearch shall (i) advise the
Corporation of its intention to subscribe to its Pro Rata Share of any new
Securities at the earliest practicable date and in any event not less than 30
days after the date of the notice that the Board of Directors of the Corporation
has determined to obtain new capital and (ii) pay the purchase price in cash for
Securities it commits to purchase within 30 days after the date of such notice;
PROVIDED, HOWEVER, that the Parties acknowledge that situations may arise in
which either Cultor or Aquasearch determines that it would be in the best
interests of their respective stockholders to participate in a proposed offering
of new Securities by the Corporation, but that, in order to do so, it would be
necessary for them to raise additional capital through one or more public or
private offerings of their own debt or equity securities or by other means.
Accordingly, the Parties hereby agree that, in connection with any proposed
offering of new Securities of the Corporation in which either or both of Cultor
and Aquasearch must complete an offering of their own debt or equity securities
(or obtain capital by some other means) before they can deliver the purchase
price to the Corporation for their Pro Rata Share of the Corporation's new
Securities, they shall be permitted sufficient time to in order to raise the
additional funds; but in no event more than 120 days from the date of the notice
of the offering of the new Securities by the Corporation. Notwithstanding the
foregoing, the Corporation shall not be required to offer or sell such new
Securities to any Person who would cause the Corporation to be in violation of
applicable U.S. federal or state securities laws by virtue of such offer or
sale.
For purposes of this Section 2.4(b), the "PRO RATA SHARE" of Cultor and
Aquasearch with respect to any new Securities to be issued by the Corporation
shall mean a fraction, (i) the numerator of which shall be the number of shares
(counted on an as-converted-to-Common Stock basis) of (A) Series A Preferred
Stock, (B) Conversion Stock, (C) Common Stock and (D) any other voting
securities of the Corporation held by Cultor or Aquasearch, as the case may be,
immediately prior to the issuance of the new Securities by the Corporation and
(ii) the denominator of which is the total number of shares of the Corporation's
outstanding voting capital stock (counting all securities on an as-converted-to-
Common Stock basis).
(c) THIRD PARTY EQUITY; LIMITED TERMS. The Corporation shall then
attempt to obtain any further capital from one or more Persons other than Cultor
or Aquasearch on terms that are not less favorable to the Corporation than those
determined by the Board of Directors pursuant to Sections 3.1(g) or 3.2(f)
hereof.
(d) THIRD PARTY EQUITY; UNLIMITED TERMS. If the Corporation is
unable to obtain capital on the terms described in Section 2.4(c), then the
Corporation may seek further capital on other terms. Third party investors may
invest only after the Corporation notifies Cultor and
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Aquasearch of the terms on which such investors have indicated they would
proceed and Cultor and Aquasearch have declined to make an investment on those
terms.
(e) NET GEARING REQUIREMENT. Notwithstanding anything to the
contrary in this Section 2.4, from and after the time that Cultor exercises the
Cultor Option, if at all, Cultor shall have the right to request that the share
capital of the Corporation be increased when the net gearing of the Corporation
("NET GEARING") is greater than 150% for a period of at least three months or
the Corporation's Financial Plan (as described in Section 3.3(a) hereof) or any
Annual Plan (as described in Section 3.1(e) hereof) that projects that the
Corporation will operate with a Net Gearing greater than 150% for a period of at
least three months during the fiscal year. The formula for determining Net
Gearing is equal to interest-bearing net debt divided by stockholders' equity;
where "interest-bearing net debt" is defined as interest-bearing liabilities
less the sum of interest-bearing deposits and receivables.
(f) EFFECT OF FAILURE TO RAISE ADDITIONAL SHARE CAPITAL. In the
event that Cultor and Aquasearch elect not to participate in any proposed
offering of new Securities of the Corporation and additional funds are not
obtainable from third parties on acceptable terms, then the Corporation shall be
dissolved and the provisions of Section 10.3 below shall govern the disposition
of Microalgae Technology among Aquasearch and the Corporation.
(g) TERMINATION OF RIGHTS OF FIRST REFUSAL. The rights of first
refusal granted to Cultor and Aquasearch in Sections 2.4(c) and (d) hereof to
purchase new Securities issued by the Corporation shall terminate upon the
closing of an underwritten public offering of Common Stock of the Corporation
made pursuant to an effective registration statement under the Securities Act
(as hereinafter defined).
(h) TRANSFER OF RIGHTS OF FIRST REFUSAL. The rights of first refusal
granted to Cultor and Aquasearch in Sections 2.4(c) and (d) hereof to purchase
new Securities issued by the Corporation may be transferred to (i) any Affiliate
of Cultor or Aquasearch, (ii) any successor in interest to all or substantially
all the assets of Cultor or Aquasearch or (iii) any transferee who acquires all
of the shares of Series A Preferred Stock or Conversion Stock held by Cultor or
Aquasearch.
(i) EXCLUDED SECURITIES. The rights of first refusal in favor of
Cultor and Aquasearch set forth in Sections 2.4(c) and (d) hereof shall have no
application to issuances by the Corporation of any of the following Securities:
(i) shares of Common Stock (and/or options, warrants or other
Common Stock purchase rights issued pursuant to such options, warrants or other
rights) issued or to be issued to employees, officers or directors of, or
consultants or advisors to the Corporation or any subsidiary, pursuant to stock
purchase or stock option plans or other arrangements that are approved by the
Board of Directors of the Corporation;
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(ii) any Securities issued for consideration other than cash
pursuant to a merger, consolidation, acquisition or similar business
combination;
(iii) any Securities that are issued by the Corporation as part
of an underwritten public offering referred to in Section 2.4(g) hereof;
(iv) shares of Common Stock issued in connection with any stock
split, stock dividend or recapitalization by the Corporation;
(v) shares of Common Stock issued upon conversion of the Series
A Preferred Stock; and
(vi) any Securities issued pursuant to any equipment leasing
arrangement or bank financing arrangement with any party unaffiliated with
Cultor or Aquasearch or any officer, director, employee or security holder of
the Corporation.
ARTICLE III
MANAGEMENT OF THE CORPORATION
Section 3.1 PROVISIONS RELATING TO MANAGEMENT OF THE CORPORATION PRIOR
TO THE EXERCISE OF THE CULTOR OPTION.
(a) SENIOR OFFICERS. The Corporation shall have a Chairman of the
Board who shall serve as its Chief Executive Officer. The Chairman of the Board
may serve on the Board of Directors but shall not be a voting member unless
elected to the Board of Directors. Prior to the exercise of the Cultor Option,
the Chairman of the Board may be nominated by either Party and mutually approved
by both Parties. The Chairman of the Board will be authorized to preside over
meetings of the Board of Directors and to act on behalf of the Corporation as
expressly authorized by the Board of Directors of the Corporation.
(b) BOARD COMPOSITION WHEN CULTOR AND AQUASEARCH EACH OWN 50%.
(a) During any period of time when Cultor and Aquasearch each own shares
representing 50% of the total voting power of the Corporation's issued and
outstanding capital stock, and for 60 days after the last day of any such
period, (i) the Board of Directors of the Corporation shall consist of four
directors, (ii) Cultor and Aquasearch will enjoy equal representation on the
Board of Directors of the Corporation and each of Cultor and Aquasearch shall
have the right to elect two directors, (ii) each of Cultor and Aquasearch will
vote all its shares of stock of the Corporation to elect as directors each of
the individuals designated by it and each of the individuals designated by the
other in accordance with clause (i), and (iii) in the event of the death,
resignation or removal of a director, Cultor and Aquasearch each agrees to vote
its shares of stock of the Corporation, or to cause the directors designated by
it to vote, to elect in replacement an individual designated by the Party which
had
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designated the director whose death, resignation or removal is the cause of the
vacancy. Directors will serve on a part-time basis without compensation. Each
director will be reimbursed for their reasonable out-of-pocket expenses incurred
to attend any meeting of the Board of Directors or any committee thereof, in
each case in accordance with the travel policy of the Corporation then in
effect.
(c) INCREASE IN NUMBER OF DIRECTORS. Prior to the exercise of the
Cultor Option, the Bylaws of the Corporation shall provide that the number of
authorized directors shall not be increased above four without the prior written
consent of both Cultor and Aquasearch.
(d) QUORUM OF THE BOARD OF DIRECTORS. Prior to the exercise of the
Cultor Option, the Bylaws of the Corporation shall provide that (i) a quorum of
the Board shall be deemed present at any duly noticed regular or special meeting
thereof if a minimum of three directors are present (PROVIDED, HOWEVER, that,
absent extraordinary circumstances certified in writing to the Board of
Directors of the Corporation, if none of the directors of one Party attend (in
person or by telephone) two consecutive meetings of the Board of Directors of
the Corporation (or any committee thereof, as the case may be) for which proper
notice has been given under the Corporation's Bylaws, then, upon the written
resolution of the remaining directors of the Corporation, a quorum for all
subsequent meetings of the Board of Directors (or any such committee thereof, as
the case may be) shall be two directors until the next meeting of the Board of
Directors (or any such committee, as the case may be) attended by a director of
such Party (in person or by telephone); PROVIDED, FURTHER, that in the event
that a director of one Party fails to attend (in person or by telephone) more
than half of the regularly scheduled meetings of the Corporation's Board of
Directors during any twelve month period, then, upon the written resolution of
the remaining directors, the Bylaws of the Corporation shall be amended to
provide that a quorum for all meetings of the Board of Directors thereafter
shall be two directors whether or not such Party's directors are in attendance)
and (ii) any action or determination by the Board shall require the affirmative
vote of three Board members approving or otherwise consenting to the matter
submitted for Board action; provided, however, if the Bylaws of the Corporation
have been amended pursuant to clause (i) of this Section 3.1(d) to reduce the
number of directors required for a quorum from three to two, then any action or
determination by the Board shall require the affirmative vote of two Board
members approving or otherwise consenting to the matter submitted for Board
action.
(e) FINANCIAL PLAN; ANNUAL PLAN. (i) Prior to the Closing, Cultor
and Aquasearch shall determine a Financial Plan for the Corporation, including a
projected balance sheet, income statement and cash flow statement for the
Corporation for the three year period following the Effective Date. The
Financial Plan shall represent the Party's mutual best estimates. Prior to the
exercise of the Cultor Option, the Financial Plan may be amended only by mutual
agreement of Cultor, Aquasearch and the Board of Directors of the Corporation.
(ii) Prior to the exercise of the Cultor Option, before the
beginning of each fiscal year of the Corporation, the Board of Directors shall
approve an Annual Plan for the next twelve months of the Corporation's
operations. The Annual Plan shall detail the Corporation's anticipated
activities concerning the matters listed in Section 3.1(f) and shall contain
information on
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such other matters as the Board of Directors determines. The Board of Directors
shall review and may revise the Annual Plan at its quarterly meetings.
(f) BOARD APPROVAL OF ISSUANCE OF ADDITIONAL SHARES. Prior to the
exercise of the Cultor Option, any determination by the Board of Directors
pursuant to Section 2.4 hereof to raise additional capital shall also require a
determination by the Board of Directors as to the purchase price and other terms
upon which any new Securities would be issued by the Corporation.; PROVIDED,
HOWEVER, that nothing in this Section 3.1(f) shall be construed to impair the
right of Cultor, after the exercise of the Cultor Option, to demand an increase
in share capital in the event that the Net Gearing of the Corporation is above
150% as provided in Section 2.4(e) hereof. The Board of Directors shall
determine in good faith the purchase price for any newly issued Securities in an
amount equal to the then fair market value thereof and the relative dilution
which may occur upon the raising of such additional capital.
(g) RESPONSIBILITIES OF THE BOARD; MATTERS REQUIRING GENERAL BOARD
APPROVAL. The Board of Directors shall manage the Corporation in accordance
with the Certificate of Incorporation and the Bylaws of the Corporation. Prior
to the exercise of the Cultor Option, the Corporation shall not be authorized or
empowered to do any of the following acts, and each of Cultor and Aquasearch
shall vote its voting Securities and cause directors nominated by it to cause
the Corporation not to do any of the following acts, without first obtaining the
approval of a majority of the Board of Directors:
(i) The adoption, amendment or repeal of any provision of the
Certificate of Incorporation or Bylaws of the Corporation;
(ii) Any guarantee of any obligation of any Person, including
Cultor or Aquasearch or any of their Affiliates;
(iii) The declaration or payment of any dividend or other
distribution of any kind on the Corporation's capital stock;
(iv) The investment or allocation of surplus funds;
(v) The transfer of any amount to reserves in any year out of
earnings, after taxes;
(vi) The organization of, or the acquisition or disposition of
any interest in the legal or beneficial ownership of, any other company or
business organization (including, but not limited to, partnerships and joint
ventures);
(vii) Except as specifically provided in Article X of this
Agreement, any license, assignment, sale, transfer or other disposition of any
Technology;
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(viii) Any agreement or transaction with Cultor or Aquasearch or
any Affiliate of Cultor or Aquasearch (including, among other things, accepting
from, or making to Cultor or Aquasearch, any loan or other debt requiring
payments to or from the Corporation, in excess of $10,000 in aggregate amount),
other than licenses, assignments or purchases or sales of products specifically
authorized herein,
(ix) The issuance of any Securities of the Corporation;
(x) The adoption or revision of the Financial Plan or any Annual
Plan for the Corporation;
(xi) The employment, termination or change of compensation of
any officer or any individual referred to in the Annual Plan as a key employee;
(xii) Any material change in the Corporation's organization
(including reorganizations of departments or reallocation of responsibilities of
officers or key employees);
(xiii) Approval of any financial statements of the Corporation;
(xiv) Appointment and any change in the Corporation's
independent public accounting firm;
(xv) Any material change in accounting principles or procedures
to be applied to the Corporation;
(xvi) Any merger, consolidation or sale of all or a substantial
portion of the assets of the Corporation;
(xvii) Any acquisition, sale or lease of the Corporation's
assets or business exceeding U.S. $100,000 in book value or selling price, or
any capital improvement or set of related capital improvements aggregating more
than U.S. $200,000 per project or in the aggregate more than U.S. $1,000,000 per
year that are not contemplated by the then current Annual Plan;
(xviii) Any purchase or sale of real property;
(xvix) Except as specifically provided in Article X of this
Agreement, the acquisition or license of any Technology;
(xx) Any establishment or material revisions of plans to develop
or commercialize new products or services, of project priorities or of
allocation of resources to projects other than as specified in the Annual Plan;
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(xxi) Any transaction with a customer other than Cultor, a
Cultor Affiliate or Aquasearch;
(xxii) Any borrowing of any funds or entry into any capital
lease in excess of an aggregate of $100,000 (as measured in original equipment
cost) in total lease commitments, not contemplated by the then current Annual
Plan;
(xxiii) Any consolidation or subdivision of shares, creation of
any new class of shares, alteration in any rights attached to any of the
Corporation's issued shares, or any other reorganization or grant of any rights
in respect of the Corporation's share capital;
(xxiv) Any subscription for, purchase or acquisition of any
share or promissory note, bond, debenture, mortgage or other indebtedness or any
interest therein save in respect of a wholly-owned subsidiary of the
Corporation; or
(xxv) Any creation or issuance or allowance to come into being
of any mortgage, charge, guarantee or other security (other than liens arising
by operation of law in the ordinary course of business) upon any part of the
Corporation's present or future business, property or assets, or the issuance of
any notes, bonds, debentures or other debt securities.
(h) MATTERS REQUIRING UNANIMOUS BOARD APPROVAL. Prior to the
exercise of the Cultor Option, the following matters will require unanimous
approval of the Board of Directors in order to become the actions of the
Corporation:
(i) The adoption, amendment or repeal of any provision of the
Certificate of Incorporation or Bylaws of the Corporation;
(ii) Except as specifically provided in Article X of this
Agreement, any license, assignment, sale, transfer or other disposition of any
Technology;
(iii) Except as specifically provided in Article X of this
Agreement, the acquisition or license of any Technology;
(iv) The organization of, or the acquisition or disposition of
any interest in the legal or beneficial ownership of, any other company or
business organization (including, but not limited to, partnerships and joint
ventures);
(v) Any merger, consolidation or sale of all or a substantial
portion of the assets of the Corporation; and
(vi) Any acquisition, sale or lease of the Corporation's assets
or business exceeding U.S. $100,000 in book value or selling price, or any
capital improvement or set of related
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capital improvements aggregating more than U.S. $200,000 per project or in the
aggregate more than U.S. $1,000,000 per year that are not contemplated by the
then current Annual Plan.
(i) DEADLOCK.
(i) DEADLOCK EVENTS. If one of the Parties (A) does not agree
to a proposal or matter requiring unanimous approval of the Board of Directors
pursuant to Sections 3.1(h) or 3.2(g) hereof or (b) fails to attend two
consecutive meetings in which the notice for the meetings specifies that matters
requiring unanimous approval of the Board of Director pursuant to Sections
3.1(h) or 3.2(g) hereof are to be decided, then, unless such proposal or matter
is mutually resolved by Cultor and Aquasearch, a "DEADLOCK EVENT" may be
declared by the other Party.
(ii) MUTUAL CONSULTATION. If a Deadlock Event occurs, then
(i) Cultor and Aquasearch shall negotiate in good faith to resolve the deadlock
matter for 60 days; (ii) if no resolution results, the Chief Executive Officer
of the Corporation and a representative of each of Cultor and Aquasearch shall
meet personally and negotiate in good faith to resolve the deadlock matter
within 60 days after the initial 60-day period. If such mutual consultation
does not resolve the deadlock matter, then a "DEADLOCK TERMINATION" shall be
deemed to have occurred and Section 3.1(i)(iii) shall apply.
(iii) PURCHASE. Within 30 days after a Deadlock Termination
occurs, each of Cultor and Aquasearch shall submit to a United States public
accounting firm approved by Cultor and Aquasearch (which approval shall not be
unreasonably withheld) a sealed written unconditional offer denominated in
United States dollars to purchase all Securities held by the other. The
recipient of the highest offer shall be bound to sell its Securities to the
other, and, during the ten day period following receipt of such offer, elect to
either accept the offer in writing or request a valuation of the Corporation and
its Securities.
The valuation shall be made within 60 days thereafter by an
investment banking firm of national reputation mutually acceptable to both
Cultor and Aquasearch, or, if it is not possible or appropriate to retain such
an investment banking firm, then on the basis of the following appraisal
procedure. Cultor and Aquasearch shall each appoint an appraiser, and the two
appraisers appointed shall in turn appoint a third appraiser. Each such
appraiser shall be independent of and not affiliated with any of the Parties to
this Agreement and shall be qualified to appraise the fair market value of the
Corporation's Securities. Any such appraisal shall be based on the value of the
business of the Corporation as an ongoing, operational business entity. The
three appraisers shall each promptly render a good faith appraisal of the fair
market value of the Corporation's Securities. The average of the three
appraisals shall be deemed to be the fair market value of the Corporation's
Securities. Any such determination of fair market value pursuant to this
Section 3.1(i) shall be conclusive and binding on the Parties hereto. Each of
Cultor, Aquasearch and the Corporation shall be responsible for one-third of the
combined fees and disbursements of the appraisers.
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The Securities owned by the Party requesting valuation shall be
purchased by the other Party at the higher of the per-share price specified in
the valuation or in the original sealed offer. The purchase price shall be paid
by delivery to the seller within 60 days after acceptance of an offer to sell
Securities of, at the buyer's option, either (i) cash or (ii) cash for one-third
of the purchase price and a promissory note, secured by all Securities then held
by the purchasing Party, payable in twelve equal quarterly installments of
principal plus simple interest at the rate of LIBOR plus one percent on the date
of closing, and providing for a prepayment right, acceleration upon default and
payment of attorneys' fees if litigation is instituted to collect upon the note
or foreclose upon such Securities.
(iv) POST-PURCHASE EVENTS. If one Party purchases the other
Party's Securities under this Section 3.1(i), then:
(A) The Corporation shall continue its business in the
ordinary course;
(B) If Aquasearch purchases all of Cultor's Securities
pursuant to this Section 3.1(i), then, unless Cultor and Aquasearch shall
otherwise agree, all Microalgae Technology developed or obtained by Aquasearch
or the Corporation prior to the date of such purchase, shall be disposed of
pursuant to Section 10.3(b) hereof;
(C) If Cultor purchases all of Aquasearch's Securities
pursuant to this Section 3.1(i), then, unless Cultor and Aquasearch shall
otherwise agree, all Microalgae Technology developed or obtained by Aquasearch
or the Corporation prior to the date of such purchase, shall be disposed of
pursuant to Section 10.4(c) hereof; and
(D) Cultor and Aquasearch shall negotiate in good faith an
agreement providing that employees of such selling Party then working full time
for the Corporation, if any, shall be made available full time to the
Corporation for such period as is reasonably required up to six months to effect
an orderly transition to sole ownership by one Party, and each Party shall use
its best efforts to make all such employees available on this basis.
(v) EFFECT OF FAILURE OF EITHER PARTY TO PURCHASE. In the event
that neither Party elects to purchase the other Party's Securities under this
Section 3.1(i), then the Corporation shall be dissolved and the rights in and to
any Microalgae Technology developed or obtained by Aquasearch or the Corporation
shall be governed by Section 10.3 hereof.
Section 3.2 PROVISIONS RELATING TO MANAGEMENT OF THE CORPORATION AFTER
EXERCISE OF THE CULTOR OPTION.
(a) SENIOR OFFICERS. The Chairman of the Board shall be designated
by Cultor, subject to the approval of Aquasearch, which shall not be
unreasonably withheld. Aquasearch shall have the opportunity to interview any
candidate proposed by Cultor prior to approval.
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(b) BOARD COMPOSITION AFTER CULTOR ACQUIRES AQUASEARCH INITIAL
SHARES. During any period of time after Cultor shall have exercised the Cultor
Option, (i) the Board of Directors of the Corporation shall consist of five
directors, (ii) Cultor will be entitled to elect one director for each 20% of
the total voting power of the Corporation's capital stock then held by Cultor
(i.e., if Cultor holds 75% of the outstanding shares, it can elect three
directors; if it holds 59%, it can elect two directors), (iii) Aquasearch will
be entitled to elect (A) two directors for so long as it continues to hold all
of the Aquasearch Initial Shares not purchased by Cultor pursuant to the
exercise of the Cultor Option and (B) one director for so long as it continues
to hold at least 20% of the Aquasearch Initial Shares, (iv) each of Cultor and
Aquasearch will vote all its shares of stock of the Corporation to elect as
directors each of the individuals designated by it and each of the individuals
designated by the other in accordance with clauses (ii) and (iii) of this
Section 3.2(b), and (v) in the event of the death, resignation or removal of a
director, Cultor and Aquasearch each agrees to vote its shares of stock of the
Corporation, or to cause the directors designated by it to vote, to elect in
replacement an individual designated by the Party which had designated the
director whose death, resignation or removal is the cause of the vacancy.
Directors will serve on a part-time basis without compensation. Each director
will be reimbursed for their reasonable out-of-pocket expenses incurred to
attend any meeting of the Board of Directors or any committee thereof, in each
case in accordance with the travel policy of the Corporation then in effect.
(c) NUMBER OF DIRECTORS. After the exercise of the Cultor Option,
the Bylaws of the Corporation shall be amended to provide that the number of
authorized directors shall be five and shall not be increased without the prior
written consent of both Cultor and Aquasearch. The requirement not to increase
the number of directors to more than five without the prior written consent of
both Aquasearch and Cultor shall lapse at such time as either (i) Aquasearch
sells any of the Aquasearch Initial Shares not purchased by Cultor pursuant to
the exercise of the Cultor Option or (ii) Aquasearch fails to purchase its Pro
Rata Share of any new Securities issued by the Corporation in accordance with
Section 2.4 hereof.
(d) QUORUM OF THE BOARD OF DIRECTORS. After the exercise of the
Cultor Option, the Bylaws of the Corporation shall be amended to provide that
(i) a quorum of the Board of Directors of the Corporation shall be deemed
present at any duly noticed regular or special meeting thereof if a minimum of
four directors are present (PROVIDED, HOWEVER, that, absent extraordinary
circumstances certified in writing to the Board of Directors by Aquasearch, if
none of the Aquasearch directors attends (in person or by telephone) two
consecutive meetings of the Board of Directors of the Corporation (or any
committee thereof, as the case may be) for which proper notice has been given
under the Corporation's Bylaws, then, upon the written resolution of the
remaining directors of the Corporation, a quorum for all subsequent meetings of
the Board of Directors (or any such committee thereof, as the case may be) shall
be three directors until the next meeting of the Board of Directors (or any such
committee, as the case may be) attended by an Aquasearch director (in person or
by telephone); PROVIDED, FURTHER, that in the event that the Aquasearch
directors fail to attend (in person or by telephone) more than half of the
regularly scheduled meetings of the Corporation's Board of Directors during any
twelve month period, then, upon the written resolution of the remaining
directors, the Bylaws of the Corporation shall be amended to provide that a
quorum for all meetings
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of the Board of Directors shall be three directors whether or not the Aquasearch
directors are in attendance) and (ii) any action or determination by the Board
of Directors shall require the affirmative vote of three Board members approving
or otherwise consenting to the matter submitted for Board action; PROVIDED,
HOWEVER, that any matter requiring unanimous approval of the Board of Directors
pursuant to Section 3.3(g) hereof shall require the approval of all five
directors.
(e) BOARD APPROVAL OF ISSUANCE OF ADDITIONAL SHARES. After the
exercise of the Cultor Option, any determination by the Board of Directors
pursuant to Section 2.4 hereof to raise additional capital shall also require a
determination by the Board of Directors as to the purchase price and other terms
upon which any new Securities would be issued by the Corporation.; PROVIDED,
HOWEVER, that nothing in this Section 3.2(e) shall be construed to impair the
right of Cultor, after the exercise of the Cultor Option, to demand an increase
in share capital in the event that the Net Gearing of the Corporation is above
150% as provided in Section 2.4(e) hereof. The Board of Directors shall
determine in good faith the purchase price for any newly issued Securities in an
amount equal to the then fair market value thereof and the relative dilution
which may occur upon the raising of such additional capital.
(f) RESPONSIBILITIES OF THE BOARD; MATTERS REQUIRING GENERAL BOARD
APPROVAL. The Board of Directors shall manage the Corporation in accordance
with the Certificate of Incorporation and the Bylaws of the Corporation. After
the exercise of the Cultor Option, the Corporation shall not be authorized or
empowered to do any of the following acts, and each of Cultor and Aquasearch
shall vote its voting Securities and cause directors nominated by it to cause
the Corporation not to do any of the following acts, without first obtaining
approval from the Board of Directors:
(i) The adoption, amendment or repeal of any provision of the
Certificate of Incorporation or Bylaws of the Corporation;
(ii) Any guarantee of any obligation of any Person, including
Cultor or Aquasearch or any of their Affiliates;
(iii) The declaration or payment of any dividend or other
distribution of any kind on the Corporation's capital stock;
(iv) The investment or allocation of surplus funds;
(v) The transfer of any amount to reserves in any year out of
earnings, after taxes;
(vi) The organization of, or the acquisition or disposition of
any interest in the legal or beneficial ownership of, any other company or
business organization (including, but not limited to, partnerships and joint
ventures);
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(vii) Except as specifically provided in Article X of this
Agreement, any license, assignment, sale, transfer or other disposition of any
Technology;
(viii) Any agreement or transaction with Cultor or Aquasearch or
any Affiliate of Cultor or Aquasearch (including, among other things, accepting
from, or making to Cultor or Aquasearch, any loan or other debt requiring
payments to or from the Corporation, in excess of $10,000 in aggregate amount),
other than licenses, assignments or purchases or sales of products specifically
authorized herein,
(ix) The issuance of any Securities of the Corporation;
(x) The adoption or revision of the Financial Plan or any Annual
Plan for the Corporation;
(xi) The employment, termination or change of compensation of
any officer or any individual referred to in the Annual Plan as a key employee;
(xii) Any material change in the Corporation's organization
(including reorganizations of departments or reallocation of responsibilities of
officers or key employees);
(xiii) Approval of any financial statements of the Corporation;
(xiv) Appointment and any change in the Corporation's
independent public accounting firm;
(xv) Any material change in accounting principles or procedures
to be applied to the Corporation;
(xvi) Any merger, consolidation or sale of all or a substantial
portion of the assets of the Corporation;
(xvii) Any acquisition, sale or lease of the Corporation's
assets or business exceeding U.S. $100,000 in book value or selling price, or
any capital improvement or set of related capital improvements aggregating more
than U.S. $200,000 per project or in the aggregate more than U.S. $1,000,000 per
year that are not contemplated by the then current Annual Plan;
(xviii) Any purchase or sale of real property;
(xvix) Except as specifically provided in Article X of this
Agreement, the acquisition or license of any Technology;
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(xx) Any establishment or material revisions of plans to develop
or commercialize new products or services, of project priorities or of
allocation of resources to projects other than as specified in the Annual Plan;
(xxi) Any transaction with a customer other than Cultor, a
Cultor Affiliate or Aquasearch;
(xxii) Any borrowing of any funds or entry into any capital
lease in excess of an aggregate of $100,000 (as measured in original equipment
cost) in total lease commitments, not contemplated by the then current Annual
Plan;
(xxiii) Any consolidation or subdivision of shares, creation of
any new class of shares, alteration in any rights attached to any of the
Corporation's issued shares, or any other reorganization or grant of any rights
in respect of the Corporation's share capital;
(xxiv) Any subscription for, purchase or acquisition of any
share or promissory note, bond, debenture, mortgage or other indebtedness or any
interest therein save in respect of a wholly-owned subsidiary of the
Corporation; or
(xxv) Any creation or issuance or allowance to come into being
of any mortgage, charge, guarantee or other security (other than liens arising
by operation of law in the ordinary course of business) upon any part of the
Corporation's present or future business, property or assets, or the issuance of
any notes, bonds, debentures or other debt securities.
(g) MATTERS REQUIRING UNANIMOUS BOARD APPROVAL. After the exercise
of the Cultor Option, the following matters will require unanimous approval of
the Board of Directors in order to become the actions of the Corporation:
(i) The adoption, amendment or repeal of any provision of the
Certificate of Incorporation or Bylaws of the Corporation adversely affecting
the voting or other rights of Aquasearch or Cultor under this Agreement, the
Certificate of Incorporation or the Bylaws;
(ii) Except as specifically provided in Article X of this
Agreement, any license, assignment, sale, transfer or other disposition of any
Technology;
(iii) Except as specifically provided in Article X of this
Agreement, the acquisition or license of any Technology that will cost more than
U.S.$200,000 per year and/or more than a total of U.S. $1 million;
(iv) The organization of, or the acquisition or disposition of
any interest in the legal or beneficial ownership of, any other company or
business organization (including, but not limited to, partnerships and joint
ventures);
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(v) Any merger, consolidation or sale of all or a substantial
portion of the assets of the Corporation; and
(vi) Any acquisition, sale or lease of the Corporation's assets
or business exceeding U.S. $100,000 in book value or selling price, or any
capital improvement or set of related capital improvements aggregating more than
U.S. $200,000 per project or in the aggregate more than U.S. $1,000,000 per year
that are not contemplated by the then current Annual Plan;
Section 3.3 PROVISIONS APPLICABLE TO THE MANAGEMENT OF THE CORPORATION
AT ALL TIMES.
(a) FREQUENCY AND LOCATION OF BOARD MEETINGS. Board meetings shall
be held at least quarterly; (ii) notice of such meetings shall be given not less
than 20 days in advance (which 20-day period may be shortened by written waiver
by directors or actual attendance at a special Board meeting) and (iii) unless
Cultor and Aquasearch otherwise agree, at least two Board meetings each year
shall be held in person, alternately in Europe and in the United States, at
times and places to be determined by the Board of Directors.
(b) INDEPENDENT AUDITORS. The Corporation will retain a firm of
independent certified public accountants, at the Corporation's expense, to audit
its financial statements annually.
(c) FINANCIAL STATEMENTS AND ACCOUNTING RECORDS. For so long as
Cultor or Aquasearch holds shares representing at least 10% of the total voting
power of the Corporation's outstanding capital stock, each shall be entitled to
receive financial statements of the Corporation, including, without limitation,
a balance sheet and income statement, within 45 days after the end of each
fiscal quarter for such quarter and within 75 days after the end of the fiscal
year for such year. Each of the statements for the entire fiscal year shall be
audited and certified by the independent public accountants retained by the
Corporation. Such quarterly and annual statements shall be (i) prepared in
accordance with generally accepted accounting principles of the United States
and (ii) in reasonable detail and shall contain such financial data as Cultor
and Aquasearch may deem necessary in order to keep each of them, respectively,
advised of the Corporation's financial status; PROVIDED, HOWEVER, that quarterly
statements shall not include footnotes as required by generally accepted
accounting principles or reflect required year-end adjustments. The Corporation
shall have the same fiscal year as Cultor, currently January 1 to December 31.
The Corporation shall pay for audited financial statements to be prepared to
match the Aquasearch fiscal year ending October 31 of each year, but only for so
long as Aquasearch continues to own at least 20% of the total voting power of
the Corporation's outstanding capital stock.
(d) RIGHT OF INSPECTION. During office hours of the Corporation,
Cultor and Aquasearch shall have full access to all properties, books of
account, records and the like of the Corporation, and the Corporation shall
furnish to Cultor and Aquasearch all information concerning the same which
Cultor or Aquasearch may reasonably require in connection with a complete
examination thereof, and each of Cultor and Aquasearch shall have the right to
make copies from the books and records of the Corporation at any reasonable
time. Any information obtained by Cultor
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or Aquasearch through exercise of said right of access shall (i) be used by them
only for purposes that are consistent with their status as equity holders of the
Corporation (except to the extent Cultor or Aquasearch shall otherwise have
rights for access to such information or to the extent used to determine
compliance with this Agreement) and not for the pursuit of business interests
outside the Corporation and (ii) be subject to the confidentiality provisions of
Article VIII hereof.
(e) DEALINGS WITH PARTIES AND AFFILIATES. The Corporation shall at
all times be conducted as an independent enterprise for the profit of Cultor and
Aquasearch as equity holders of the Corporation. Except as expressly herein
authorized, the Board of Directors and officers of the Corporation shall not at
any time deal or authorize dealings or transactions between the Corporation and
Cultor or Aquasearch or any Affiliate of Cultor or Aquasearch on terms more
favorable than would be accorded an independent, nonaffiliated Person.
(f) LIAISON MANAGER. Cultor and Aquasearch shall each appoint a
liaison manager for the purpose of coordinating communications between them with
respect to the relationship established herein. The liaison manager of either
Party may be changed at any time by notice to the other Party.
(g) EMPLOYEE MATTERS. All personnel working for the Corporation
shall be employed by the Corporation, and except as set forth below or as Cultor
and the Corporation may expressly agree, shall be independent of any continuing
affiliation with either Cultor or Aquasearch. All Corporation personnel shall
receive all salary, compensation, and retirement and other benefits accruing
from the start of permanent employment by the Corporation from the Corporation
and not from any prior employer or either Cultor or Aquasearch; PROVIDED,
HOWEVER, that each of Cultor and Aquasearch shall continue to pay the salary,
benefits and travel and lodging and all other costs of any of its employees
designated to become an employee of the Corporation until such time as the
employee becomes a permanent employee of the Corporation; and PROVIDED, FURTHER,
that from and after the time that Cultor exercises the Cultor Option, all
employees of the Corporation who were employees of Aquasearch immediately prior
to joining the Corporation shall receive credit for their time of service to
Aquasearch in addition to their time of service to the Corporation as though
they had worked for the Corporation continuously from the time they commenced
employment at Aquasearch. Each Corporation employee, and any employee of
another entity working for the Corporation but not a permanent employee of the
Corporation, shall sign an agreement reasonably acceptable to Cultor and
Aquasearch providing for confidentiality of information disclosed by the
Corporation and for ownership by the Corporation of inventions or original works
of authorship created by such individuals.
(h) PROHIBITION ON SOLICITATION OF EMPLOYEES. Cultor and Aquasearch
agree not to directly or indirectly encourage or solicit employees of the other
to leave the employ of the other to work for them or the Corporation. To the
extent of their control of the Corporation, Cultor and Aquasearch agree to
prevent the Corporation from encouraging or soliciting employees of either
Cultor or Aquasearch to leave the employ of Cultor or Aquasearch to work for the
other or the Corporation.
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(i) VOTING. Cultor and Aquasearch each agree to vote all shares held
by them to effect the provisions of this Article III.
ARTICLE IV
DISTRIBUTION OF PROFITS; MARKETING AGREEMENT AND ROYALTIES
Section 4.1 DISTRIBUTION OF PROFITS. The Corporation shall distribute
40% of its annual net profits to its stockholders in the form of dividends
provided that such funds are legally available to be paid and will not
significantly limit the future growth of the Corporation. Dividends will be
distributed to the stockholders pro rata based on their percentage ownership of
the outstanding capital stock of the Corporation at the end of the fiscal year
for which the dividend will be paid, or, if dividends are to be distributed
quarterly, at the end of the quarter for which the dividend will be paid.
Section 4.2. AMOUNT AND TIMING OF PAYMENTS. The amount of the dividends
to be paid for each fiscal year will be determined by the Board of Directors of
the Corporation in connection with its final review of the audited financial
results for the prior fiscal year. All dividends payable pursuant to this
Article IV shall be made within 30 days after determination by the Board of
Directors.
Section 4.3 MARKETING AGREEMENT; ROYALTIES. At such time as the Cultor
Option is exercised, Cultor, Aquasearch and the Corporation shall enter into a
Marketing Agreement (the "CULTOR/CORPORATION MARKETING AGREEMENT") with respect
to the exclusive, worldwide distribution of the Product by Cultor on
substantially the terms set forth in Article III of the Cultor/Aquasearch
Distribution Agreement, along with such additional terms as Cultor, Aquasearch
and the Corporation may determine at the time of execution. For the greater
period of (i) the expiration date of any patents licensed under the
Aquasearch/Corporation License Agreement or (ii) ten years from the date of the
Cultor/Corporation Marketing Agreement, the Corporation shall pay Aquasearch a
royalty of [confidential]% on the net sales price (the "ROYALTY"), payable
quarterly within 45 days from the conclusion of each quarterly accounting
period. The Royalty shall not be included in any transfer price calculation
between Cultor and the Corporation. The Corporation can be released from the
Royalty obligation at any time by making a one-time payment to Aquasearch in the
amount of U.S. $10 million.
ARTICLE V
PERMITTED TRANSFERS; RIGHT OF FIRST REFUSAL
Cultor and Aquasearch agree to hold their Securities in the Corporation
during the term of this Agreement subject to this Article V and, except as
provided in Sections 3.1(i) or 5.1(d), to not
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sell, transfer, assign, hypothecate or in any way alienate any of such
Securities or any right or interest therein except in accordance with each of
the following restrictions:
Section 5.1 PROPOSED TRANSFERS TO THIRD PARTIES AND OPERATION OF RIGHT
OF FIRST REFUSAL. (a) If Cultor or Aquasearch wishes to transfer its
Securities to a third party, the offering Party shall first give written notice
to the other Party stating its intention to transfer, the name of the proposed
transferee, the number of offered Securities and the price, terms and conditions
of the proposed sale or transfer.
(b) The other, non-offering Party shall have the right to purchase
all (but not less than all) of the Securities offered, which right shall be
exercisable by written notice, specifying the number of Securities which that
Party wishes to purchase, delivered or mailed to the offering Party not later
than the expiration of 30 days after delivery of the written notice of intention
to sell. The price and terms for the non-offering Party shall be the price and
terms stated in the notice.
(c) If the other Party does not exercise its right to purchase all of
the offered Securities within such 30-day period, the offering Party may within
60 days after expiration of such right, sell or transfer its Securities to the
transferee named in the notice; PROVIDED, HOWEVER, that (i) such sale or
transfer is not at a lower price or on terms more favorable to the transferee
than those specified in the written notice; (ii) prior to such transfer, such
transferee agrees in writing to become bound by this Article V as to such
Securities; and (iii) any such transfer shall not serve to excuse or terminate
any of the obligations of the transferring Party hereunder or under the
Additional Agreements.
(d) Notwithstanding any term or condition of this Article V, either
Cultor or Aquasearch may transfer its Securities to one of their respective
Affiliates or in connection with a sale of all or substantially all of the
assets of Cultor or Aquasearch provided that: (i) prior to such transfer, such
Affiliate or transferee agrees in writing to become bound by this Article V as
to such Securities; (ii) the transferor Party notifies the other Party not less
than 30 days prior to any such transfer; and (iii) any such transfer shall not
serve to excuse or terminate any of the obligations of the transferor Party
under this Agreement. The transferor Party shall cause any Affiliate which
acquires Securities to exercise its rights as a shareholder in accordance with
the transferor's obligations to vote its shares under this Agreement.
Section 5.2 APPLICABLE TO ALL SECURITIES HELD. The restrictions and
other provisions of this Article V shall apply to any Securities purchased by
Cultor and Aquasearch pursuant to Section 2.4 hereof and to any other equity
securities of the Corporation (or options, warrants or other rights to acquire
equity securities of the Corporation) acquired by either Cultor or Aquasearch
during the term of this Agreement.
Section 5.3 RESTRICTIVE LEGENDS. The certificates representing the
Securities and any Conversion Stock shall bear a restrictive legend in
substantially the following form:
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ANY DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO RESTRICTION IN ACCORDANCE WITH ARTICLE V OF THAT CERTAIN
STOCKHOLDERS' AGREEMENT BETWEEN CULTOR, LTD. AND AQUASEARCH, INC. DATED AS
OF _________, 199_ (THE "AGREEMENT"). A COPY OF ARTICLE V OF THE AGREEMENT
IS AVAILABLE FOR INSPECTION AT THE CORPORATION'S PRINCIPAL PLACE OF
BUSINESS.
The Corporation need not record a transfer of Securities, unless the
conditions specified in the foregoing legends are satisfied. The Corporation
may also instruct its transfer agent not to record the transfer of any of the
Securities unless the conditions specified in the foregoing legends are
satisfied.
Section 5.4 REMOVAL OF LEGEND AND TRANSFER RESTRICTIONS. The
restrictions and other provisions of this Section 5 shall no longer apply to any
Securities held by Cultor or Aquasearch after such time as the respective holder
owns Securities representing less than 20% of the total voting power of the
Corporation's outstanding capital stock.
ARTICLE VI
REPRESENTATIONS, WARRANTIES OF THE PARTIES
AND RESTRICTIONS ON TRANSFER IMPOSED BY THE
SECURITIES ACT
Section 6.1 REPRESENTATIONS AND WARRANTIES OF THE CORPORATION. The
Corporation represents and warrants to Aquasearch and Cultor that as of the date
of this Agreement and the date of the Closing, the following statements are and
shall be true and correct in all material respects:
(a) CORPORATE EXISTENCE AND POWER. The Corporation is duly
incorporated and validly existing as a corporation under the laws of Delaware.
The Corporation has all requisite corporate power and authority and all material
governmental licenses, authorizations, consents and approvals required to
execute and deliver this Agreement, the Aquasearch/Corporation License Agreement
and the Corporation/Aquasearch License Agreement and to consummate the
transactions contemplated hereby and thereby.
(b) BINDING EFFECT. The Corporation has full legal right and power
to execute and deliver this Agreement, the Aquasearch/Corporation License
Agreement and the Corporation/Aquasearch License Agreement and to perform its
obligations hereunder and thereunder. The execution, delivery and performance
by the Corporation of this Agreement, the Aquasearch/Corporation License
Agreement and the Corporation/Aquasearch License Agreement has been duly
authorized by all necessary action on the Corporation's part, requires no action
by or
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in respect of or consent or approval of or filing by the Corporation with, any
governmental body, agency or authority, and does not and will not contravene or
constitute a default under (a) the Corporation's Certificate of Incorporation or
Bylaws, (b) the terms of any judgment, injunction, order or decree applicable to
the Corporation, (c) any provision of law or regulation applicable to the
Corporation as in effect on the date hereof, or (d) any material agreement,
contract or other instrument binding upon the Corporation. Each of this
Agreement, the Aquasearch/Corporation License Agreement and the
Corporation/Aquasearch License Agreement has been duly executed and delivered by
the Corporation and constitutes a valid and binding agreement of the
Corporation, enforceable in accordance with its terms, subject only to (i)
bankruptcy, insolvency, reorganization, arrangement, fraudulent conveyance,
moratorium or other similar laws relating to or affecting the rights of
creditors, (ii) general principles of equity, including, without limitation,
specific performance and injunctive relief, regardless of whether considered in
a proceeding in equity or at law.
(c) DISCLOSURE. No representation or warranty by the Corporation
contained in this Agreement and no writing, certificate, exhibit, list or other
instrument required to be furnished pursuant hereto contains or will contain any
untrue statement of a material fact or omits or will omit any material fact
necessary in order to make the statements and information contained therein not
misleading.
Section 6.2 REPRESENTATIONS AND WARRANTIES OF CULTOR. Cultor represents
and warrants to Aquasearch and the Corporation that as of the date of this
Agreement and the date of the Closing, the following statements are and shall be
true and correct in all material respects:
(a) CORPORATE EXISTENCE AND POWER. Cultor is a company duly
incorporated and validly existing under the laws of Finland. Cultor has all
requisite corporate power and authority and all material governmental licenses,
authorizations, consents and approvals required to execute and deliver this
Agreement and to consummate the transactions contemplated hereby.
(b) BINDING EFFECT. Cultor has full legal right and power to execute
and deliver this Agreement and to perform its obligations hereunder. The
execution, delivery and performance by Cultor of this Agreement has been duly
authorized by all necessary action on Cultor's part, requires no action by or in
respect of or consent or approval of or filing by Cultor with, any governmental
body, agency or authority, and does not and will not contravene or constitute a
default under (a) Cultor's Articles of Association or Bylaws, (b) the terms of
any judgment, injunction, order or decree applicable to Cultor, (c) any
provision of law or regulation applicable to Cultor as in effect on the date
hereof, or (d) any material agreement, contract or other instrument binding upon
Cultor. This Agreement has been duly executed and delivered by Cultor and
constitutes a valid and binding agreement of Cultor, enforceable in accordance
with its terms, subject only to (i) bankruptcy, insolvency, reorganization,
arrangement, fraudulent conveyance, moratorium or other similar laws relating to
or affecting the rights of creditors, (ii) general principles of equity,
including, without limitation, specific performance and injunctive relief,
regardless of whether considered in a proceeding in equity or at law.
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(c) DISCLOSURE. No representation or warranty by Cultor contained in
this Agreement and no writing, certificate, exhibit, list or other instrument
required to be furnished pursuant hereto contains or will contain any untrue
statement of a material fact or omits or will omit any material fact necessary
in order to make the statements and information contained therein not
misleading.
(d) INVESTMENT INTENT. Cultor is acquiring the Shares and the
Conversion Stock for investment for its own account, not as a nominee or agent,
and not with the view to, or for resale in connection with, any distribution
thereof. Cultor understands that the Shares and the Conversion Stock have not
been, and will not be, registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of Cultor's representations as expressed
herein.
(e) RULE 144. Cultor acknowledges that the Shares and the Conversion
Stock must be held indefinitely unless subsequently registered under the
Securities Act or unless an exemption from such registration is available.
Cultor is aware of the provisions of Rule 144 promulgated under the Securities
Act ("RULE 144") which permit limited resale of shares purchased 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 Corporation, the resale
occurring not less than two years 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.
(f) NO PUBLIC MARKET. Cultor understands that no public market now
exists for any of the securities issued by the Corporation and that the
Corporation has made no assurances that a public market will ever exist for the
Corporation's securities.
(g) EQUITY OWNERSHIP IN AQUASEARCH. As of the date hereof and the
date of the Closing, Cultor owns no equity securities of Aquasearch other than
the 400,000 shares of Aquasearch Common Stock acquired pursuant to the
Cultor/Aquasearch Stock Subscription Agreement.
Section 6.3 REPRESENTATIONS AND WARRANTIES OF AQUASEARCH. Aquasearch
represents and warrants to Cultor and the Corporation that as of the date of
this Agreement and the date of the Closing, the following statements are and
shall be true and correct in all material respects:
(a) CORPORATE EXISTENCE AND POWER. Aquasearch is duly incorporated
and validly existing as a corporation under the laws of the State of Colorado.
Aquasearch has all requisite corporate power and authority and all material
governmental licenses, authorizations, consents and approvals required to
execute and deliver this Agreement, the Aquasearch/Corporation License Agreement
and the Corporation/Aquasearch License Agreement and to consummate the
transactions contemplated hereby and thereby.
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(b) BINDING EFFECT. Aquasearch has full legal right and power to
execute and deliver this Agreement, the Aquasearch/Corporation License Agreement
and the Corporation/Aquasearch License Agreement and to perform its obligations
hereunder and thereunder. The execution, delivery and performance by Aquasearch
of this Agreement, the Aquasearch/Corporation License Agreement and the
Corporation/Aquasearch License Agreement has been duly authorized by all
necessary action on Aquasearch's part, requires no action by or in respect of or
consent or approval of or filing by Aquasearch with, any governmental body,
agency or authority, and does not and will not contravene or constitute a
default under (a) Aquasearch's Articles of Incorporation or Bylaws, (b) the
terms of any judgment, injunction, order or decree applicable to Aquasearch, (c)
any provision of law or regulation applicable to Aquasearch as in effect on the
date hereof, or (d) any material agreement, contract or other instrument binding
upon Aquasearch. Each of this Agreement, the Aquasearch/Corporation License
Agreement and the Corporation/Aquasearch License Agreement has been duly
executed and delivered by Aquasearch and constitutes a valid and binding
agreement of Aquasearch, enforceable in accordance with its terms, subject only
to (i) bankruptcy, insolvency, reorganization, arrangement, fraudulent
conveyance, moratorium or other similar laws relating to or affecting the rights
of creditors, (ii) general principles of equity, including, without limitation,
specific performance and injunctive relief, regardless of whether considered in
a proceeding in equity or at law.
(c) DISCLOSURE. No representation or warranty by Aquasearch
contained in this Agreement and no writing, certificate, exhibit, list or other
instrument required to be furnished pursuant hereto contains or will contain any
untrue statement of a material fact or omits or will omit any material fact
necessary in order to make the statements and information contained therein not
misleading.
(d) INVESTMENT INTENT. Aquasearch is acquiring the Shares and the
Conversion Stock for investment for its own account, not as a nominee or agent,
and not with the view to, or for resale in connection with, any distribution
thereof. Aquasearch understands that the Shares and the Conversion Stock have
not been, and will not be, registered under the Securities Act by reason of a
specific exemption from the registration provisions of the Securities Act, the
availability of which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of Aquasearch's representations as
expressed herein.
(e) RULE 144. Aquasearch acknowledges that the Shares and the
Conversion Stock must be held indefinitely unless subsequently registered under
the Securities Act or unless an exemption from such registration is available.
Aquasearch is aware of the provisions of Rule 144 which permit limited resale of
shares purchased 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
Corporation, the resale occurring not less than two years 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.
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(f) NO PUBLIC MARKET. Aquasearch understands that no public market
now exists for any of the securities issued by the Corporation and that the
Corporation has made no assurances that a public market will ever exist for the
Corporation's securities.
Section 6.4 SECURITIES LAWS RESTRICTIVE LEGENDS. It is understood that
the certificates evidencing the Shares and the Conversion Stock will bear one or
all of the following legends:
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT.
THEY 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
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
Any legend required by the laws of the States of California, Colorado,
Delaware, Hawaii and any other applicable state.
The Corporation need not record a transfer of Securities, unless the
conditions specified in the foregoing legends are satisfied. The Corporation
may also instruct its transfer agent not to record the transfer of any of the
Securities unless the conditions specified in the foregoing legends are
satisfied.
Section 6.5 REMOVAL OF SECURITIES LAWS LEGENDS AND TRANSFER
RESTRICTIONS. The legend relating to the Securities Act endorsed on a stock
certificate pursuant to paragraph 6.4 of this Agreement and the stop transfer
instructions with respect to the Securities represented by such certificate
shall be removed and the Corporation shall issue a certificate without such
legend to the holder of such Securities if such Securities are registered under
the Securities Act and a prospectus meeting the requirements of Section 10 of
the Securities Act is available or if such holder provides to the Corporation an
opinion of counsel reasonably satisfactory to the Corporation, or a no-action
letter or interpretive opinion of the staff of the Commission (as hereinafter
defined) to the effect that a public sale, transfer or assignment of such
Securities may be made without registration and without compliance with any
restriction such as Rule 144.
ARTICLE VII
REGISTRATION RIGHTS
Section 7.1 CERTAIN DEFINITIONS. As used in this Article, the following
terms shall have the following respective meanings:
(a) "COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
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(b) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
(c) "HOLDER" shall mean Cultor or Aquasearch so long as they hold
Registrable Securities and any Person holding such securities to whom the rights
under this Section 7 have been transferred in accordance with Section 7.11
hereof.
(d) "INITIATING HOLDERS" shall mean any Holder or Holders who in the
aggregate hold the minimum specified percentage of outstanding Registrable
Securities set forth in Sections 7.2, 7.3 or 7.5 hereof, as the case may be.
(e) "REGISTRABLE SECURITIES" means
(i) the Series A Preferred Stock issued by the Corporation
pursuant to this Agreement and the Conversion Stock issued upon conversion of
such Series A Preferred Stock,
(ii) any securities that are convertible, exercisable, or
exchangeable for shares of Common Stock or Series A Preferred Stock, as the case
may be, of the Corporation issued to lenders, lessors, licensees, or other
Persons pursuant to arrangements approved by the Board of Directors of the
Corporation after the date hereof with respect to which (A) the Board of
Directors of the Corporation approves the granting of rights and imposition of
restrictions contained in this Agreement, and (B) the purchasers of such
securities agree to be bound by the provisions of this Agreement,
(iii) any Common Stock issued upon conversion, exercise, or
exchange of securities meeting the requirements of Section 7.1(e)(i) or
Section 7.1(e)(ii), and
(iv) any Common Stock or other securities convertible into Common
Stock of the Corporation which are issued in respect of the securities listed in
this Section 7.1(e) upon any stock split, stock dividend, recapitalization, or
similar event.
Notwithstanding the previous sentence, shares of Common Stock or
other securities shall only be treated as Registrable Securities for the
purposes of Section 7.3 hereof (A) if and so long as they have not been sold to
or through a broker or dealer or underwriter in a public distribution or a
public securities transaction, or (B) prior to the date such securities have
been sold or are all available for immediate sale in the opinion of counsel to
the Corporation in a transaction exempt from the prospectus delivery
requirements of the Securities Act so that all transfer restrictions and legends
with respect thereto are removed upon the consummation of such sale.
For purposes of calculating numbers of shares of Registrable
Securities, Registrable Securities shall be counted on an as-if-converted-to-
Common Stock basis.
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Only Common Stock can actually be registered under this
Agreement; Registrable Securities that are not Common Stock must be converted
into, exercised for, or exchanged for Common Stock before such Registrable
Securities can be registered.
(f) The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration of the effectiveness of
such registration statement.
(g) "REGISTRATION EXPENSES" shall mean all expenses, except as
otherwise stated below, incurred by the Corporation in complying with
Sections 7.2, 7.3 and 7.5 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Corporation, blue sky fees and
expenses, the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Corporation which shall be paid in any event by the Corporation).
(h) "RESTRICTED SECURITIES" shall have the meaning set forth in Rule
144 under the Securities Act.
(i) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
(j) "SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes and costs of special counsel to the
Holders, if any, applicable to the securities registered by the Holders.
Section 7.2 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. In case the Corporation shall receive
from Initiating Holders holding not less than ten percent (10%) of the
Registrable Securities then outstanding a written request that the Corporation
effect any registration, qualification or compliance with respect to at least
(i) ten percent (10%) of the shares of Registrable Securities then outstanding
or (ii) any lesser number of shares of Registrable Securities having an expected
aggregate offering price to the public, net of underwriting discounts and
commissions, of at least $1,000,000, the Corporation will (i) within ten days of
the receipt of such notice, give written notice of the proposed registration,
qualification or compliance to all other Holders and (ii) as soon as
practicable, use all reasonable efforts to effect such registration,
qualification or compliance (including, without limitation, appropriate
qualification under applicable blue sky or other state securities laws and
appropriate compliance with applicable regulations issued under the Securities
Act and any other governmental requirements or regulations) as may be so
requested and as would permit or facilitate the sale and distribution of all or
such portion of such Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request received
by the Corporation within 20 days after receipt
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of such written notice from the Corporation; PROVIDED, HOWEVER, that the
Corporation shall not be obligated to take any action to effect any such
registration, qualification or compliance pursuant to this Section 7.2(a):
(i) In any particular jurisdiction in which the Corporation
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Corporation
is already subject to service in such jurisdiction and except as may be required
by the Securities Act;
(ii) Prior to the earlier of [insert date that is two years
after the date of Closing] and the date six months after the closing of the
Corporation's initial public offering of Common Stock;
(iii) During the period starting with the date 60 days prior to
the Corporation's estimated date of filing of, and ending on the date six months
immediately following the effective date of, any registration statement
pertaining to an initial issuance of equity securities of the Corporation (other
than a registration of equity securities in a transaction pursuant to Rule 145
under the Securities Act ("RULE 145"), with respect to an employee benefit plan
or dividend reinvestment plan or with respect to the Corporation's first
registered public offering of its Common Stock); PROVIDED THAT the Corporation
is actively employing in good faith all reasonable efforts to cause such
registration statement to become effective;
(iv) After the Corporation has effected two registrations
pursuant to this Section 7.2(a) and such registrations have each been declared
effective and kept effective for a period of at least 180 days or until the
distribution described in such registrations has been completed;
(v) If the Corporation shall furnish to such Holders a
certificate signed by the President of the Corporation stating that in the good
faith judgment of the Board of Directors, it would be detrimental to the
Corporation or its stockholders for a registration statement to be filed in the
near future, then the Corporation's obligation to use all reasonable efforts to
register, qualify or comply under this Section 7.2 shall be deferred for a
period not to exceed 90 days from the date of receipt of the written request
from the Initiating Holders; PROVIDED, HOWEVER, that the Corporation shall not
exercise such right more than once in any twelve-month period.
(b) UNDERWRITING. In the event that the Corporation is advised that
a registration pursuant to this Section 7.2 is for a registered public offering
involving an underwriting, the Corporation shall so advise the Holders as part
of the notice given pursuant to Section 7.2(a). In such event, the right of any
Holder to registration pursuant to this Section 7.2 shall be conditioned upon
such Holder's participation in the underwriting arrangements required by this
Section 7.2, and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent requested shall be limited to the extent provided
herein.
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The Corporation shall (together with all Holders proposing
to distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter selected
for such underwriting by the Corporation and reasonably acceptable to the
Holders of a majority of the Registrable Securities to be included in such
registration. Notwithstanding any other provision of this Section 7.2, if the
managing underwriter advises the Initiating Holders in writing that marketing
factors require a limitation of the number of shares to be underwritten, then
the Corporation shall so advise all Holders. The number of shares of
Registrable Securities that may be included in the registration and underwriting
shall thereupon be allocated among all Holders thereof in accordance with
Section 7.4.
If any Holder of Registrable Securities disapproves of the
terms of the underwriting, such Holder may elect to withdraw therefrom by
written notice to the Corporation, the managing underwriter and the Initiating
Holders. The Registrable Securities and/or other securities so withdrawn shall
also be withdrawn from registration, and such Registrable Securities shall not
thereafter be transferred in a public distribution prior to 90 days after the
effective date of such registration, or such other shorter period of time as the
underwriters may require.
(c) RIGHT OF FIRST REFUSAL. Notwithstanding any other provision in
this Section 7.2 to the contrary, in connection with any requested registration
under this Section 7.2 that would constitute the initial public offering of the
Corporation's Securities, Cultor or Aquasearch, or both, shall, prior to the
filing of any registration statement with the Commission, have the right to
purchase all, but not less than all, Registrable Securities to be offered by the
Initiating Holders in a private placement transaction exempt from the
registration requirements of the Securities Act in accordance with the following
terms and conditions.
(i) The Corporation will, within five days after receipt of the
written requests for registration of Registrable Securities by any Holder or
Holders pursuant to Section 7.2(a) hereof, provide notice of the total number of
Registrable Securities for which registration has been requested to Cultor and
Aquasearch. Within five days after the receipt of such notice, Cultor and
Aquasearch must provide written notice to the Corporation of their intention to
purchase all, but not less than all, of such Registrable Securities in a private
placement transaction exempt from the registration requirements of the
Securities Act. In the event that both Cultor and Aquasearch indicate an
interest to purchase such Registrable Securities, then Cultor and Aquasearch
shall be permitted to purchase such Registrable Securities pro rata based on
their respective current ownership interests of the outstanding voting
securities of the Corporation.
(ii) The Corporation shall retain an investment banking firm of
national reputation mutually acceptable to Cultor or Aquasearch, or both, as the
case may be (hereinafter, collectively, the "DEMAND REGISTRATION BUYING PARTY")
and the Initiating Holders to perform a valuation not later than 30 days after
the date of engagement, of the fair market value of the Registrable Securities
proposed to be sold by the Initiating Holders pursuant to the requested
registration. Any such determination of fair market value pursuant to this
Section 7.2(c) shall be conclusive and binding on the Demand Registration Buying
Party, the Initiating Holders and the
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Corporation. The Demand Registration Buying Party shall be responsible for all
fees and disbursements of the investment banking firm in making the valuation.
(iii) The Registrable Securities owned by each Initiating Holder
shall be purchased by the Demand Registration Buying Party at the fair market
value specified in the valuation. The purchase price shall be paid in cash by
the Demand Registration Buying Party by delivery to the Initiating Holders
within 10 days after receipt of the valuation report from the investment banking
firm.
The right of first refusal in favor of Cultor and Aquasearch, or both, set
forth in this Section 7.2 may be exercised each time that a request for
registration is made pursuant to this Section 7.2; PROVIDED, HOWEVER, that this
right of first refusal shall automatically expire upon the effectiveness of any
registration statement under the Securities Act covering the sale of equity
securities of the Corporation, whether such equity securities are being sold by
the Corporation or by a shareholder of the Corporation.
Section 7.3 CORPORATION REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from time to time the
Corporation shall determine to register any of its securities, either for its
own account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans, (ii) a registration
relating solely to a transaction under Rule 145, (iii) a registration relating
to the initial underwritten public offering of the Corporation's Common Stock
pursuant to a registration statement filed under the Securities Act or (iv) a
registration pursuant to Section 7.2 hereof, the Corporation will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
requests, made within ten days after receipt of such written notice from the
Corporation, by any Holder, except as provided in Section 7.3(b).
(b) UNDERWRITING. If the registration of which the Corporation gives
notice is for a registered public offering involving an underwriting, the
Corporation shall so advise the Holders as a part of the written notice given
pursuant to Section 7.3(a). In such event the right of any Holder to
registration pursuant to Section 7.3 shall be conditioned upon such Holder's
participation in such underwriting and the inclusion of Registrable Securities
in the underwriting to the extent provided herein. All Holders proposing to
distribute their securities through such underwriting shall (together with the
Corporation) enter into an underwriting agreement in customary form with the
managing underwriter selected for such underwriting by the Corporation.
Notwithstanding any other provision of this Section 7.3, if the Corporation or
its underwriters determine that marketing factors require a limitation of the
number of shares to be underwritten, the underwriters may limit the Registrable
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Securities and other securities to be distributed through such underwriting, but
in no event may the Registrable Securities be limited to less than thirty
percent (30%) in value of the securities covered by the registration. The
Corporation shall advise all Holders distributing their securities through such
underwriting of any such limitation. The number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all Holders thereof in accordance with Section 7.4.
If any Holder disapproves of the terms of any such
underwriting, such Holder or holder may elect to withdraw therefrom by written
notice to the Corporation and the managing underwriter. Any securities excluded
or withdrawn from such underwriting shall be withdrawn from such registration,
and shall not thereafter be transferred in a public distribution prior to 90
days after the effective date of the registration statement relating thereto, or
such other shorter period of time as the underwriters may require.
(c) RIGHT TO TERMINATE REGISTRATION. The Corporation shall have the
right to terminate or withdraw any registration initiated by it under this
Section 7.3 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. The Registration
Expenses of such withdrawn registration shall be borne by the Corporation in
accordance with Section 7.5 hereof.
Section 7.4 ALLOCATION OF REGISTRATION RIGHTS. If, pursuant to
Section 7.2(b) or Section 7.3(b), the underwriters limit the Registrable
Securities and other securities to be distributed through any underwriting, the
number of Registrable Securities to be included in such registration shall be
allocated (i) first to the Holders of Registrable Securities who hold Series A
Preferred Stock or Conversion Stock issued upon conversion of Series A Preferred
Stock, in proportion, as nearly as practicable, to the respective amounts of
such Registrable Securities held by such Holders at the time of filing the
registration statement, up to the amount requested by such Holders, and (ii)
then (if any unallocated shares remain) to the holders of other Registrable
Securities, in proportion, as nearly as practicable, to the respective amounts
of such other Registrable Securities held by such Holders at the time of filing
the registration statement. To facilitate the allocation of shares in
accordance with the above provisions, the Corporation may round the number of
shares allocated to any Holder to the nearest 100 shares.
Section 7.5 REGISTRATION ON FORM S-3.
(a) If any Holder or Holders owning more than ten percent (10%) of
the Registrable Securities request that the Corporation file a registration
statement on Form S-3 (or any successor form to Form S-3), or any similar short-
term registration statement, for a public offering of Registrable Securities,
the reasonably anticipated aggregate price to the public of which, net of
underwriting discounts and commissions, would exceed $1,000,000, and the
Corporation is a registrant entitled to use Form S-3 to register the Registrable
Securities for such an offering, the Corporation shall use all reasonable
efforts to cause such Registrable Securities to be registered on such form for
the offering and to cause such Registrable Securities to be qualified in such
jurisdictions
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as the Holder or Holders may reasonably request; PROVIDED, HOWEVER, that the
Corporation shall not be required to effect more than one registration pursuant
to this Section 7.5 in any twelve month period. After the Corporation's first
public offering of its securities, the Corporation will use its best efforts to
qualify for Form S-3 registration or a similar short form registration at the
earliest opportunity. The provisions of Section 7.2(b) shall be applicable to
each registration initiated under this Section 7.5.
(b) Notwithstanding the foregoing, the Corporation shall not be
obligated to take any action pursuant to this Section 7.5:
(i) In any particular jurisdiction in which the Corporation
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Corporation
is already subject to service in such jurisdiction and except as may be required
by the Securities Act;
(iii) During the period starting with the date 60 days prior to
the Corporation's estimated date of filing of, and ending on the date six months
immediately following the effective date of, any registration statement
pertaining to an initial issuance of equity securities of the Corporation (other
than a registration of securities in a transaction under Rule 145 or with
respect to an employee benefit plan or dividend reinvestment plan), PROVIDED
THAT the Corporation is actively employing in good faith all reasonable efforts
to cause such registration statement to become effective; or
(iv) If the Corporation shall furnish to such Holder a
certificate signed by the President of the Corporation stating that in the good
faith judgment of the Board of Directors, it would be detrimental to the
Corporation or its shareholders for registration statements to be filed in the
near future, then the Corporation's obligation to use all reasonable efforts to
file a registration statement shall be deferred for a period not to exceed 90
days from the date of receipt of the written request from such Holder; PROVIDED,
HOWEVER, that the Corporation shall not exercise such right more than once in
any twelve-month period.
Section 7.6 EXPENSES OF REGISTRATION. All Registration Expenses
incurred in connection with registrations pursuant to Sections 7.2, 7.3 and 7.5
shall be borne by the Corporation. All Selling Expenses relating to securities
registered on behalf of the Holders shall be borne by the Holders of securities
included in such registration pro rata among each other on the basis of the
number of shares so registered.
Section 7.7 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Corporation pursuant to this
Article VII, the Corporation will keep each Holder advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense the Corporation will:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective
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for at least 180 days or until the distribution described in such registration
statement has been completed;
(b) Prepare and file with the Commission 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 Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities.
Section 7.8 INDEMNIFICATION. In the event any Registrable Securities
are included in a registration statement under this Article VII:
(a) To the extent permitted by law, the Corporation will indemnify
each selling Holder, each of its officers, directors, partners and legal
counsel, and each Person controlling such Holder within the meaning of
Section 15 of the Securities Act, with respect to which registration,
qualification or compliance has been effected pursuant to this Article VII, and
each underwriter, if any, and each Person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), as incurred,
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, preliminary prospectus, prospectus or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, or any violation by the Corporation of the Securities Act
or any rule or regulation promulgated under the Securities Act applicable to the
Corporation in connection with any such registration, qualification or
compliance, and the Corporation will reimburse each such Holder, each of its
officers, directors, partners, and legal counsel and each Person controlling
such Holder, each such underwriter and each Person who controls any such
underwriter, for any legal and any other expenses reasonably incurred, as
incurred, in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, provided that the Corporation will not
be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Corporation by such Holder,
controlling person or underwriter specifically for use therein.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Corporation, each of its directors, officers, and legal counsel, each
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underwriter, if any, of the Corporation's securities covered by such a
registration statement, each Person who controls the Corporation or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other Holder, each of its officers, directors, partners and legal counsel and
each Person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof), as incurred, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any such
registration statement, preliminary prospectus, prospectus or other document, or
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and will reimburse
the Corporation, such Holders, such directors, officers, Persons, underwriters
or control persons for any legal or any other expenses reasonably incurred, as
incurred, in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, preliminary prospectus,
prospectus or other document in reliance upon and in conformity with written
information furnished to the Corporation by such Holder specifically for use
therein. Notwithstanding the foregoing, the liability of each Holder under this
subsection (b) shall be limited in an amount equal to the proceeds to each such
Holder of Registrable Securities sold as contemplated herein, unless such
liability resulted from willful misconduct by such Holder. The managing
underwriter of any proposed underwritten offering of Registrable Securities may
require a Holder to enter into an agreement or undertaking in connection with a
registration under this Article VII providing for indemnification or
contribution on the part of such Holder greater than the Holder's obligations
under this Section 7.8(b).
(c) Each party entitled to indemnification under this Section 7.8
(the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; PROVIDED THAT counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, 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; AND PROVIDED FURTHER that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Article VII unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action;
AND PROVIDED FURTHER, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or separate and
different defenses but shall bear the expense of such defense nevertheless. 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 which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
Section 7.9 INFORMATION BY HOLDER. It shall be a condition precedent to
the obligations of the Corporation to take any action pursuant to this
Article VII with respect to the Registrable
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Securities of any selling Holder that such Holder shall furnish to the
Corporation such information regarding itself, the Registrable Securities held
by it, and the intended method of disposition of such securities as shall be
required to effect the registration of such Holder's Registrable Securities.
Section 7.10 RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, after such time as a public market exists for the Common Stock of
the Corporation, the Corporation agrees to use its best efforts to:
(a) Make and keep current public information available in compliance
with Rule 144(c) under the Securities Act, at all times after the effective
date that the Corporation becomes subject to the reporting requirements of the
Exchange Act.
(b) File with the Commission in a timely manner all reports and other
documents required of the Corporation under the Exchange Act (at any time after
it has become subject to such reporting requirements);
(c) So long as an Investor owns any Restricted Securities, upon
request, (i) a written statement by the Corporation as to its compliance with
the reporting requirements of said Rule 144(c) (at any time after 90 days after
the effective date of the first registration statement filed by the Corporation
for an offering of its securities), and of the Securities Act and the Exchange
Act (at any time after it has become subject to such reporting requirements),
(ii) a copy of the most recent annual or quarterly report of the Corporation
pursuant to Section 13(a) or 15(d) of the Exchange Act and (iii) such other
reports and documents of the Corporation and other information in the possession
of or reasonably obtainable by the Corporation as a Holder may reasonably
request in availing itself of any rule or regulation of the Commission allowing
a Holder to sell any such securities without registration.
Section 7.11 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Corporation to register securities granted Holders under Sections 7.2, 7.3 and
7.5 may be assigned to a transferee or assignee in connection with any transfer
or assignment of Registrable Securities by a Holder of (i) not less than the
greater of (a) ten percent (10%) of the Registrable Securities owned by any
Holder who owns at least 250,000 shares of Registrable Securities or (b) 25,000
shares in the case of any Holder who owns less than 250,000 shares of
Registrable Securities, or to any transferee or assignee who is a constituent
partner, officer, director or affiliate of a Holder or the estate of such
transferee; PROVIDED THAT the Corporation be given prior written notice of the
transfer and that such transfer may otherwise be effected in accordance with
applicable securities laws.
Section 7.12 STANDOFF AGREEMENT. Each Holder agrees in connection with
the Corporation's initial public offering of the Corporation's equity
securities, upon request of the Corporation or the underwriters of any
underwritten offering of the Corporation's securities, not to sell, make any
short sale of, loan, grant any option for the purchase of, or otherwise dispose
of any Registrable Securities (other than those included in such offering),
directly or indirectly, without the prior written consent
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of the Corporation or such underwriters, as the case may be, for a period of 180
days (or such greater or lesser number of days, including one or more staggered
periods) from the date such equity securities are first offered to the public,
as may be requested by the Corporation or the underwriters. The restrictions on
the Holders in this Section 7.12 are subject to the officers and key employees
of the Corporation entering into substantially identical agreements.
Section 7.13 TERMINATION OF REGISTRATION RIGHTS. The rights granted
under this Article VII shall terminate on the third anniversary of the closing
of the initial underwritten public offering of the Corporation's equity
securities pursuant to a effective registration statement filed under the
Securities Act.
ARTICLE VIII
CONFIDENTIALITY
Section 8.1 GENERAL. The Parties to this Agreement shall maintain in
strictest confidence and shall cause their directors, officers, employees,
agents, counsel and representatives to maintain in strictest confidence, all
proprietary and confidential information and materials (whether or not
patentable), including, without limitation, equipment, processes, methods, data,
software, reports, know-how, sources of supply, price information and
quotations, customer lists, patent positions and business plans which are
communicated to, learned of, developed or otherwise acquired by either Party,
directly or indirectly, pursuant to this Agreement, the Additional Agreements or
any other information designated by the disclosing Party as confidential or
proprietary in relation to the subject matter of this Agreement or the
Additional Agreements, which information is provided by one Party to the other
either directly or indirectly ("CONFIDENTIAL INFORMATION"). All such
Confidential Information shall remain the property of the Corporation, Cultor or
Aquasearch, as the case may be, and upon the expiration or termination of this
Agreement shall be returned to the Corporation, Cultor or Aquasearch, as
applicable, or, at the disclosing Party's election, destroyed.
Section 8.2 EXCEPTIONS. Confidential Information shall not include any
information that (i) becomes known to the general public without the fault or
breach (including simple negligence) of the receiving party; or (ii) was already
known to the recipient as evidenced by prior written documents in its
possession; or (iii) is disclosed to the recipient by a third party who is not
in default of any confidentiality obligation to the disclosing party hereunder;
or (iv) is developed by or on behalf of the receiving party, without reliance on
Confidential Information received hereunder. Each Party shall be entitled, in
addition to any other right or remedy it may have, at law or in equity, to an
injunction, without the posting of any bond or other security, enjoining or
restraining any other Party from any violation or threatened violation of this
Section 8.2.
Section 8.3 SURVIVAL. The obligations of this Article VIII shall
survive termination of this Agreement and each of the Parties hereto shall
continue to observe them regardless of whether its rights hereunder shall be
terminated or it shall cease to be a Party hereto.
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ARTICLE IX
TERM AND TERMINATION
Section 9.1 TERM. This Agreement shall be binding on all Parties as of
the date of execution hereof and shall continue in full force and effect for an
indefinite term thereafter unless sooner terminated by (i) the sale by either
Cultor or Aquasearch of all of the Initial Shares held by them to another Party
or a third party, (ii) mutual written agreement of Cultor, Aquasearch and the
Corporation, (iii) Cultor, Aquasearch or the Corporation prior to the Closing
in the event of a failure of a condition described in Article XI below to which
such Party's obligations hereunder are subject; (iv) a termination in accordance
with this Article IX; or (v) otherwise by lawful exercise by a Party of its
rights under applicable laws. The Parties' respective obligations pursuant to
Articles VIII and X and Sections 3.3(h), 12.4 and 12.7 shall survive a
termination for any reason.
Section 9.2 TERMINATING EVENTS. Each of the events set forth below
shall constitute a "TERMINATING EVENT" if Cultor or Aquasearch elects to
terminate this Agreement upon the occurrence of such event:
(a) The appointment of a trustee, receiver or other custodian for all
or substantially all of the property of Cultor or Aquasearch or for any lesser
portion of such property if the result is materially and adversely to affect the
ability of such Party to fulfill its affirmative or negative obligations
hereunder;
(b) The determination by a court or tribunal of competent
jurisdiction that Cultor or Aquasearch is insolvent;
(c) The filing of a petition for liquidation (and not for
reorganization) in bankruptcy by Cultor or Aquasearch on its own behalf or the
filing of any such petition against Cultor or Aquasearch if the proceeding is
not dismissed or withdrawn within 60 days thereafter;
(d) An assignment by Cultor or Aquasearch for the benefit of its
creditors;
(e) The dissolution or liquidation of Cultor or Aquasearch other than
in consequence of a merger, amalgamation or other corporate reorganization to
which it is a party;
(f) The occurrence of any of the events described in Sections 9.2(a)
through (e) as to the Corporation, including, without limitation, any
dissolution or liquidation pursuant to Section 3.1(i)(v); or
(g) The commission of a Material Breach by Cultor, Aquasearch or the
Corporation.
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Section 9.3 NOTICE OF EVENT. If Cultor, Aquasearch or the Corporation
should suffer any event described in Sections 9.2(a) through (g), they shall
immediately notify the other Parties of the occurrence of such event.
Section 9.4 MATERIAL BREACH DEFINED. For the purpose of this Agreement,
the commission of any of the following acts by Cultor, Aquasearch or the
Corporation, which is not cured within 60 days following notice thereof to the
breaching Party by the non-breaching Parties, shall constitute a Material
Breach:
(a) As to Cultor (or its Affiliates, if applicable) the failure by
Cultor, or such Affiliates to fully comply with its obligations contained in
Articles II, III, IV, V, VIII, X or XI hereof or any Additional Agreement;
(b) As to Aquasearch, the failure by Aquasearch (or its Affiliates,
as applicable) to fully comply with its obligations of contained in Articles II,
III, IV, V, VIII, X or XI hereof or any Additional Agreement; and
(c) As to the Corporation, the failure by the Corporation (or its
Affiliates, as applicable) to fully comply with its obligations of contained in
Articles III, IV, V , VI, VIII, X or XI hereof or any Additional Agreement.
The foregoing shall not be deemed to limit the ability of Cultor,
Aquasearch or the Corporation to seek such legal and equitable remedies as
Cultor, Aquasearch or the Corporation shall be entitled to seek on the basis of
a Material Breach by a Party or the breach or failure of a Party to perform any
other duty or obligation not set forth above which is otherwise contained in
this Agreement.
Section 9.5 NOTICE OF TERMINATION; MATERIAL CONSULTATION REGARDING
TERMINATION. Cultor and Aquasearch shall each have the option, upon written
notice to the Corporation and the other Party, to declare the various events
described in Sections 9.2 (a) through (g) above a Terminating Event and to
terminate this Agreement, the Aquasearch/Corporation License Agreement, the
Corporation/Aquasearch License Agreement and the Cultor/Corporation Marketing
Agreement (if applicable) upon the occurrence of such event as follows:
(a) As to those Terminating Events described in Sections 9.2(a)
through (e), the Party which is not subject to such bankruptcy, insolvency, or
other proceeding shall have the right to terminate;
(b) As to the Terminating Event described in Section 9.2(f), each of
Cultor and Aquasearch shall have the right to terminate; and
(c) As to the Terminating Events described in Section 9.2(g), the
nonbreaching Party shall have the right to terminate.
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After notice of termination, Cultor and Aquasearch shall consult in good
faith for 60 days concerning the disposition of their respective interests in
the Corporation and the future operations and continued viability of the
Corporation. If Cultor and Aquasearch cannot reach a complete and final
agreement regarding such matters during such 60 days, Sections 9.6, 9.7 and 9.8
shall govern the rights and obligations of Cultor and Aquasearch following such
termination.
Section 9.6 EFFECT OF TERMINATING EVENT. After notice by Cultor or
Aquasearch in accordance with Section 9.5, this Agreement shall terminate by one
of the following alternative means:
(a) The purchase of the interest of the other Party in accordance
with Section 9.7(a);
(b) The liquidation of the Corporation as described in
Section 9.7(b); or
(c) The dissolution of the Corporation in accordance with
Section 9.8.
Section 9.7 PURCHASE RIGHTS. Upon the occurrence of a Terminating Event
(other than as described in Section 9.7(b)), and if Cultor and Aquasearch fail
to reach a complete and final agreement regarding termination in accordance with
Section 9.5, Cultor and Aquasearch shall have the following rights and
obligations with respect to the Initial Shares still held by them in the
Corporation:
(a) As to any Terminating Event described in Sections 9.2(a) through
(e), the Party which is not subject to the bankruptcy, insolvency and other
proceeding shall purchase all the Securities of the bankrupt or insolvent Party
for an amount equal to the fair market value of such Securities, determined in
accordance with Section 9.7(e).
(b) As to any Terminating Event described in Section 9.2(f), the
Securities of the Parties shall not be purchased by one of the Parties, but
rather each such Party shall be entitled to receive such distributions, if any,
from the Corporation with respect to that Party's Securities as is distributable
pursuant to Section 9.8 or otherwise in accordance with the terms of such
dissolution, liquidation, bankruptcy, insolvency or other proceeding.
(c) As to any Terminating Event described in Section 9.2(g), the
Party which has not committed the Material Breach shall purchase all the
Securities of the Party which has committed the Material Breach for a total
amount equal to the fair market value of such Securities, as determined in
accordance with Section 9.7(e); PROVIDED, HOWEVER, that the breaching Party
shall only be entitled to receive for its Securities the difference between such
fair market value purchase price and the amount of damages sustained by the
Corporation and the non-breaching Party as a result of such Material Breach as
determined in accordance with this Section 9.7(c). In such event and in the
absence of an agreement resolving such issues between the Parties, the amount of
damages payable by the breaching Party to the Person to whom they shall be owing
shall be determined through the arbitration procedure described in Section 12.4
hereof. Any payment to the breaching Party with
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respect to its Securities shall be deferred until such arbitration is completed
and any determination or judgment based on such arbitration has been approved in
writing by all Parties or otherwise reduced to a final judgment by a court of
competent jurisdiction. The amount of such damages shall be withheld by a
damaged Party as an off-set against the purchase price or paid by a purchasing
Party to a damaged Party, as appropriate, and the breaching Party shall receive
the net payment, as reduced by such off-sets and payments to others, in full
satisfaction of its Securities.
(d) Any rights of Cultor or Aquasearch pursuant to this Section 9.7
to purchase all the Securities of the other Party shall be exercised, if at all,
within 30 days following expiration of the 60-day period described in
Section 9.5. The purchase price for a Party's Securities shall be paid, subject
to Section 9.7(c), by a cash payment within 90 days following expiration of the
60-day period described in Section 9.5.
(e) For the purpose of this Section 9.7, the fair market value of a
Party's Securities shall be determined by arm's-length agreement between the
selling Party and the purchasing Party. If no such agreement can be reached,
the fair market value of such Shares shall be determined on the basis of the
appraisal procedure as provided in this Section 9.7(e). The valuation shall be
made within 60 days thereafter by an investment banking firm of national
reputation mutually acceptable to both Cultor and Aquasearch, or, if it is not
possible or appropriate to retain such an investment banking firm, then by on
the basis of the following appraisal procedure. The selling Party and
purchasing Party shall each appoint an appraiser, and the two appraisers
appointed shall in turn appoint a third appraiser. Each such appraiser shall be
independent of and not affiliated with any of the Parties to this Agreement and
shall be qualified to appraise the fair market value of the selling Party's
Securities. Any such appraisal shall be based on the value of the business of
the Corporation as an ongoing, operational business entity. The three
appraisers shall each promptly render a good faith appraisal of the fair market
value of the Securities being transferred. The average of the three appraisals
shall be deemed to be the fair market value of such Securities. Any time
periods set forth in this Section 9.7 shall be suspended during this appraisal
procedure, which shall be completed not later than 60 days following completion
of any proceedings pursuant to Section 12.4 hereof. Any such determination of
fair market value pursuant to this Section 9.7(e) shall be conclusive and
binding on the Parties hereto. The fees and disbursements of any appraisers
retained pursuant to this Section 9.7(e) shall be deducted from the purchase
price to be received by the selling Party.
(f) During any period in which a Party has the right to purchase or
is purchasing all the Securities of the other Party pursuant to this
Section 9.7, Cultor and Aquasearch shall use all diligent efforts to maintain
and preserve the business of the Corporation pending the consummation of such
purchase.
(g) Following any purchase of all the Securities of Cultor by
Aquasearch pursuant to this Section 9.7, the rights in and to any Microalgae
Technology developed or obtained by Aquasearch or the Corporation shall be
governed by Section 10.3(b) hereof.
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(h) Following any purchase of all the Securities of Aquasearch by
Cultor pursuant to this Section 9.7, the rights in and to any Microalgae
Technology developed or obtained by Aquasearch or the Corporation shall be
governed by Section 10.4(c) hereof.
Section 9.8 DISSOLUTION AND LIQUIDATION OF THE CORPORATION. If the
Parties do not resolve their respective rights and obligations following the
occurrence of a Terminating Event through a purchase and sale of Securities
pursuant to Section 9.7, Cultor and Aquasearch shall promptly dissolve the
Corporation and cause the Corporation's debts to be paid to the extent the
Corporation's assets are available to do so and the remaining assets (other than
any Microalgae Technology developed or obtained by Aquasearch or the Corporation
prior to the date of such dissolution or liquidation, the rights in and to which
shall be determined in accordance with Section 10.4(b) hereof) shall be
distributed to the Parties in accordance with their rights as security holders
of the Corporation.
ARTICLE X
INTELLECTUAL PROPERTY
Section 10.1 AQUASEARCH/CORPORATION LICENSE AGREEMENT. Pursuant to the
terms and conditions of the Aquasearch/Corporation License Agreement (to be
finalized at the time of the execution of this Agreement), Aquasearch shall
grant to the Corporation an exclusive, worldwide, paid-up, royalty-free license,
without the right to sublicense or (except as provided in Section 10.3(b)
hereof) assign, under all of Aquasearch's rights in and to any and all
Microalgae Technology, whether already existing or hereinafter obtained, to
make, use and sell the Product within the Application Scope. Cultor, Aquasearch
and the Corporation agree that the Microalgae Technology to be licensed under
the Aquasearch/Corporation License Agreement is the proprietary and confidential
information of Aquasearch and that, except for the licenses explicitly granted
under the Aquasearch/Corporation License Agreement, Aquasearch shall retain all
right, title and interest in and to such Microalgae Technology, and no license,
right or other interest under any patents or patent applications (including,
without limitation, any divisionals, continuations, continuations-in-part,
reissues and foreign counterparts (whether or not claiming priority therefrom)),
trademarks, copyrights, trade secrets, regulatory filings, technical
information, know-how or other intellectual property rights other than as
explicitly set forth in the Aquasearch/Corporation License Agreement shall be
granted. In other words, the Parties agree that Aquasearch shall retain all
rights in and to any and all Microalgae Technology licensed under the
Aquasearch/Corporation License Agreement other than the right to make, use and
sell the Product within the Application Scope.
Section 10.2 CORPORATION/AQUASEARCH LICENSE AGREEMENT. The Corporation
and Aquasearch shall enter into a license agreement (to be finalized at the time
of the execution of this Agreement) (the "CORPORATION/AQUASEARCH LICENSE
AGREEMENT"), pursuant to which the Corporation will grant to Aquasearch an
exclusive, worldwide, paid-up, royalty-free license, with the right to
sublicense and assign, under all of the Corporation's rights in and to any and
all Microalgae
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Technology, whether already existing or hereinafter obtained, to make, use and
sell (i) the Product outside the Application Scope and (ii) any and all
microalgae products other than the Product in any and all fields (including
within the Application Scope). Cultor, Aquasearch and the Corporation agree
that the Microalgae Technology to be licensed under the Corporation/Aquasearch
License Agreement is the proprietary and confidential information of the
Corporation and that, except for the licenses explicitly granted under the
Corporation/Aquasearch License Agreement, the Corporation shall retain all
right, title and interest in and to such Microalgae Technology, and no license,
right or other interest under any patents or patent applications (including,
without limitation, any divisionals, continuations, continuations-in-part,
reissues and foreign counterparts (whether or not claiming priority therefrom)),
trademarks, copyrights, trade secrets, regulatory filings, technical
information, know-how or other intellectual property rights other than as
explicitly set forth in the Corporation/Aquasearch License Agreement shall be
granted. In other words, the Parties agree that the Corporation shall retain
all rights in and to any and all Microalgae Technology licensed under the
Corporation/Aquasearch License Agreement to make, use and sell the Product
within the Application Scope.
Section 10.3 RIGHTS IN AND TO MICROALGAE TECHNOLOGY WHEN CULTOR AND
AQUASEARCH OWN LESS THAN 50% OF THE CORPORATION; UPON PURCHASE OF CULTOR'S
INTEREST BY AQUASEARCH PURSUANT TO SECTION 3.1(i)(iv)(b) OR 9.7(g) HEREOF; OR
UPON DISSOLUTION PURSUANT TO SECTION 2.4(f), 3.1(i)(v) OR 9.8 HEREOF. On the
date (if any) Cultor and Aquasearch (including any respective Affiliates) shall
hold less than 50% of the total voting power of the outstanding shares of the
Corporation, the date (if any) that Aquasearch purchases all of Cultor's
Securities pursuant to Section 3.1(i)(iv)(B) or 9.7(g) hereof, or the date (if
any) of the dissolution of the Corporation pursuant to Section 2.4(f), 3.1(i)(v)
or 9.8 hereof (in each case, the "CHANGE IN CONTROL DATE"), then, unless Cultor
and Aquasearch shall otherwise agree, the rights of Aquasearch and the
Corporation in and to any Microalgae Technology developed or obtained by
Aquasearch or the Corporation prior to, on and after, the Change in Control Date
shall be as provided in this Section 10.3:
(a) AQUASEARCH/CORPORATION LICENSE AGREEMENT. As of the Change in
Control Date, unless Cultor and Aquasearch shall otherwise agree, (i) the
Aquasearch/Corporation License Agreement shall become an exclusive, worldwide,
paid-up, royalty-free license, without right to sublicense or assign, from
Aquasearch to the Corporation under all of Aquasearch's rights in and to any and
all Microalgae Technology developed or obtained by Aquasearch, prior to the
Change in Control Date, to make, use and sell the Product within the Application
Scope and (ii) the Aquasearch/Corporation License Agreement shall terminate with
respect to the obligation of Aquasearch to license to the Corporation any of
Aquasearch's rights in and to any and all Microalgae Technology developed or
obtained by Aquasearch on and after the Change in Control Date, to make, use and
sell the Product within the Application Scope
(b) ASSIGNMENT OF MICROALGAE TECHNOLOGY TO AQUASEARCH BY THE
CORPORATION. As of the Change in Control Date, unless Cultor and Aquasearch
shall otherwise agree, the Corporation agrees to assign, and hereby does assign,
to Aquasearch all of its right, title and interest in and to any and all
Microalgae Technology developed or obtained by the Corporation prior to the
Change in
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Control Date to make, use and sell any and all microalgae products (including
the Product) in any and all fields (including within the Application Scope) (the
"CHANGE IN CONTROL ASSIGNED TECHNOLOGY"). The Corporation hereby agrees to
assist Aquasearch in every proper way to secure Aquasearch's rights in the
Change in Control Assigned Technology in any and all countries, including the
disclosure to Aquasearch of all pertinent information and data with respect
thereto, the execution of all applications, specifications, oaths, assignments
and all other instruments which Aquasearch shall deem necessary or advisable in
order to apply for and obtain such rights and in order to assign and convey to
Aquasearch its successors, assigns and nominees the sole and exclusive right,
title and interest in and to such Change in Control Assigned Technology. The
Corporation further agrees that the Corporation's obligation to execute or cause
to be executed, when it is in the Corporation's power to do so, any such
instrument or papers shall continue after the termination of this Agreement. If
Aquasearch is unable for any reason to secure the Corporation's signature to
apply for or to pursue any application for any United States or foreign patents
or copyright registrations covering the Change in Control Assigned Technology or
original works of authorship assigned to Aquasearch as above, then the
Corporation hereby irrevocably designates and appoints Aquasearch and its duly
authorized officers and agents as the Corporation's agent and attorney in fact,
to act for and in the Corporation's behalf and stead to execute and file any
such applications and to do all other lawfully permitted acts to further the
prosecution and issuance of letters patent or copyright registrations thereon
with the same legal force and effect as if executed by the Corporation. As of
the Change in Control Date, unless Cultor and Aquasearch shall otherwise agree,
all of the Corporation's obligations under this Section 10.3(b) to assign to
Aquasearch all of its right, title and interest in and to any and all Microalgae
Technology existing prior to the Change in Control Date shall survive in
perpetuity but any such obligations with respect to any and all Microalgae
Technology developed or obtained by the Corporation on and after the Change in
Control Date shall terminate on the Change in Control Date.
(c) LICENSE OF CHANGE IN CONTROL ASSIGNED TECHNOLOGY TO THE
CORPORATION BY AQUASEARCH. As of the Change in Control Date, Aquasearch shall
grant to the Corporation an exclusive (except as to Aquasearch), worldwide,
paid-up, royalty-free license, without right to sublicense or assign, under all
of Aquasearch's rights in and to any and all Change in Control Assigned
Technology assigned to Aquasearch by the Corporation pursuant to Section 10.3(b)
hereof, to make, use and sell the Product within the Application Scope;
PROVIDED, HOWEVER, that Aquasearch shall have no obligation to license to the
Corporation any of Aquasearch's rights in and to any Microalgae Technology
developed or obtained by Aquasearch on and after the Change in Control Date to
make, use and sell the Product within the Application Scope; and, PROVIDED,
FURTHER, that, for the avoidance of doubt, Cultor, Aquasearch and the
Corporation explicitly agree that (i) the Corporation shall have the exclusive
right to use any and all Change in Control Assigned Technology licensed to it
under this Section 10.3(c) and any and all Microalgae Technology licensed to it
under Section 10.3(a) hereof (pursuant to the Aquasearch/Corporation License
Agreement) to make, use and sell the Product within the Application Scope, (ii)
nothing in this Section 10.3(c) shall be construed to permit Aquasearch to use
any Change in Control Assigned Technology or any other Microalgae Technology to
make, use and sell the Product within the Application Scope and (iii) nothing in
this Section 10.3(c) shall be construed to prohibit Aquasearch from using any
Change in Control Assigned
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Technology or any other Microalgae Technology to make, use and sell (A) the
Product outside the Application Scope and (B) any and all microalgae products
other than the Product in any and all fields (including within the Application
Scope). Nothing in this Section 10.3 to the contrary shall affect in any
manner the Corporation's continuing obligation to pay Aquasearch any royalties,
if any, due to Aquasearch in accordance with the Cultor/Corporation Marketing
Agreement (if applicable).
Section 10.4 DISPOSITION OF TECHNOLOGY UPON TERMINATION OR PURCHASE OF
INTERESTS. On the date (if any) this Agreement is terminated pursuant to any
provision of Section 9.2 hereof or on the date (if any) that Cultor purchases
all of the Securities of Aquasearch pursuant to Section 3.1(i)(iv)(C) or 9.7(h)
hereof (in each case, the "TERMINATION DATE"), the rights of Aquasearch and the
Corporation in and to any Microalgae Technology developed or obtained by
Aquasearch or the Corporation prior to, on and after the Termination Date shall
be as provided in this Section 10.4:
(a) TERMINATION DUE TO SECTION 9.2(a), (b), (c), (d), (e) OR (g)
EVENT REGARDING CULTOR. In the event of the termination of this Agreement
pursuant to Sections 9.2(a), (b), (c), (d), (e) or (g) hereof with respect to
Cultor, and unless Cultor and Aquasearch shall otherwise agree, Aquasearch and
the Corporation shall thereafter each have the co-exclusive worldwide rights in
and to any and all Microalgae Technology of Aquasearch and the Corporation as of
the Termination Date, to manufacture, use and sell the Product within the
Application Scope (subject to the terms and conditions of this Section 10.4(a))
to all customers and prospective customers, to perform all ancillary sales and
marketing activities and to appoint other agents and distributors. In addition,
unless Cultor and Aquasearch shall otherwise agree, (i) the
Aquasearch/Corporation License Agreement shall become an exclusive (except as to
Aquasearch), worldwide, paid-up, royalty-free license, without right to
sublicense or assign, from Aquasearch to the Corporation under all of
Aquasearch's rights in and to any and all Microalgae Technology developed or
obtained by Aquasearch prior to the Termination Date, to make, use and sell the
Product within the Application Scope, (ii) the Aquasearch/Corporation License
Agreement shall terminate with respect to the obligation of Aquasearch to
license to the Corporation all of Aquasearch's rights in and to any and all
Microalgae Technology developed or obtained by Aquasearch on and after the
Termination Date, to make, use and sell the Product within the Application
Scope, (iii) the Corporation/Aquasearch License Agreement shall become an
exclusive (except as to the Corporation), worldwide, paid-up, royalty-free
license, with the right to sublicense and assign, from the Corporation to
Aquasearch under all of the Corporation's rights in and to any and all
Microalgae Technology developed or obtained by the Corporation prior to the
Termination Date, to make, use and sell any and all microalgae products
(including the Product) in any and all fields (including within the Application
Scope) and (iv) the Corporation/Aquasearch License Agreement shall terminate
with respect to the obligation of the Corporation to license to Aquasearch all
of the Corporation's rights in and to any and all Microalgae Technology
developed or obtained by the Corporation on and after the Termination Date to
make, use and sell any and all microalgae products (including the Product) in
any and all fields (including within the Application Scope). Nothing in this
Section 10.4(a) to the contrary shall affect in any manner the Corporation's
continuing obligation to pay Aquasearch any royalties, if any, due to Aquasearch
in accordance with the Cultor/Corporation Marketing Agreement (if applicable).
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(b) TERMINATION DUE TO SECTION 9.2 (f) OR (g) EVENT REGARDING THE
CORPORATION. In the event of the termination of this Agreement pursuant to
Sections 9.2(f) or (g) hereof with respect to the Corporation, and unless Cultor
and Aquasearch shall otherwise agree, (i) the Aquasearch/Corporation License
Agreement shall terminate on the Termination Date with respect to any and all
Microalgae Technology, developed or obtained by Aquasearch prior to the
Termination Date, to make, use and sell the Product within the Application Scope
licensed to the Corporation pursuant to Section 10.1 and 10.3(c) hereof. As of
the Termination Date, unless Cultor and Aquasearch shall otherwise agree, the
Corporation agrees to assign, and hereby does assign, to Aquasearch all of its
right, title and interest in and to any and all Microalgae Technology developed
or obtained by the Corporation prior to the Termination Date to make, use and
sell any and all microalgae products (including the Product) in any and all
fields (including within the Application Scope) (the "TERMINATION DATE ASSIGNED
TECHNOLOGY"). The Corporation hereby agrees to assist Aquasearch in every
proper way to secure Aquasearch's rights in the Termination Date Assigned
Technology in any and all countries, including the disclosure to Aquasearch of
all pertinent information and data with respect thereto, the execution of all
applications, specifications, oaths, assignments and all other instruments which
Aquasearch shall deem necessary or advisable in order to apply for and obtain
such rights and in order to assign and convey to Aquasearch its successors,
assigns and nominees the sole and exclusive right, title and interest in and to
such Termination Date Technology. The Corporation further agrees that the
Corporation's obligation to execute or cause to be executed, when it is in the
Corporation's power to do so, any such instrument or papers shall continue after
the termination of this Agreement. If Aquasearch is unable for any reason to
secure the Corporation's signature to apply for or to pursue any application for
any United States or foreign patents or copyright registrations covering the
Termination Date Assigned Technology or original works of authorship assigned to
Aquasearch as above, then the Corporation hereby irrevocably designates and
appoints Aquasearch and its duly authorized officers and agents as the
Corporation's agent and attorney in fact, to act for and in the Corporation's
behalf and stead to execute and file any such applications and to do all other
lawfully permitted acts to further the prosecution and issuance of letters
patent or copyright registrations thereon with the same legal force and effect
as if executed by the Corporation. Nothing in this Section 10.4(b) to the
contrary shall affect in any manner the Corporation's obligation to pay
Aquasearch any accrued royalties, if any, due to Aquasearch in accordance with
the Cultor/Corporation Marketing Agreement (if applicable).
(c) TERMINATION DUE TO SECTION 9.2(a), (b), (c), (d), (e) OR (g)
EVENT REGARDING AQUASEARCH OR PURCHASE OF AQUASEARCH INTEREST BY CULTOR PURSUANT
TO SECTION 3.1(i)(iv)(c) OR 9.7(h) HEREOF. In the event of the termination of
this Agreement pursuant to Sections 9.2(a), (b), (c), (d), (e) or (g) hereof
with respect to Aquasearch (or if Cultor purchases Aquasearch's interest in the
Corporation pursuant to Section 3.1(i)(iv)(c) or 9.7(h) hereof), and unless
Cultor and Aquasearch shall otherwise agree, the Corporation shall thereafter
have the exclusive worldwide rights in and to any and all Microalgae Technology
of Aquasearch and the Corporation, as of the Termination Date (subject to the
terms and conditions of this Section 10.4(c)), to manufacture, use and sell the
Product within the Application Scope to all customers and prospective customers,
to perform all ancillary sales and marketing activities and to appoint other
agents and distributors. In addition, unless Cultor and Aquasearch shall
otherwise agree, (i) the Aquasearch/Corporation License Agreement shall
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become an exclusive (except as to Aquasearch), worldwide, paid-up, royalty-free
license, without right to sublicense or assign, from Aquasearch to the
Corporation under all of Aquasearch's rights in and to any and all Microalgae
Technology developed or obtained by Aquasearch prior to the Termination Date, to
make, use and sell the Product within the Application Scope, (ii) the
Aquasearch/Corporation License Agreement shall terminate with respect to the
obligation of Aquasearch to license to the Corporation all of Aquasearch's
rights in and to any and all Microalgae Technology developed or obtained by
Aquasearch on and after the Termination Date to make, use and sell the Product
within the Application Scope, (iii) the Corporation/Aquasearch License Agreement
shall become an exclusive (except as to the Corporation), worldwide, paid-up,
royalty-free license, with the right to sublicense and assign, from the
Corporation to Aquasearch under all of the Corporation's rights in and to any
and all Microalgae Technology developed or obtained by the Corporation prior to
the Termination Date to make, use and sell (A) the Product outside the
Application Scope and (B) any and all microalgae products other than the Product
in any and all fields (including within the Application Scope) and (iv) the
Corporation/Aquasearch License Agreement shall terminate with respect to the
obligation of the Corporation to license to Aquasearch all of the Corporation's
rights in and to any and all Microalgae Technology developed or obtained by the
Corporation on and after the Termination Date to make, use and sell (X) the
Product outside the Application Scope and (Y) any and all microalgae products
other than the Product in any and all fields (including within the Application
Scope). Nothing in this Section 10.4(c) to the contrary shall affect in any
manner the Corporation's continuing obligation to pay Aquasearch any royalties,
if any, due to Aquasearch in accordance with the Cultor/Corporation Marketing
Agreement (if applicable).
ARTICLE XI
CONDITIONS TO OBLIGATIONS
Section 11.1 CONDITIONS TO OBLIGATIONS OF CULTOR. The obligation of
Cultor to enter into this Agreement shall be subject to the fulfillment, prior
to or at the Closing, of all of the following conditions:
(a) TRUTH AND PERFORMANCE. The representations, warranties and
covenants of the Aquasearch and the Corporation contained in this Agreement
shall be true and correct in all material respects at and as of the time of the
Closing, and Aquasearch and the Corporation shall have performed and complied in
all material respects with all agreements and covenants required by this
Agreement to be performed or complied with by Aquasearch prior to or at the
Closing.
(b) NO PROHIBITION. The transactions contemplated by this Agreement
and the Additional Agreements shall not be prohibited by any applicable law,
court order or governmental regulation.
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Section 11.2 CONDITIONS TO OBLIGATIONS OF AQUASEARCH. The obligation of
Aquasearch to enter into this Agreement shall be subject to the fulfillment,
prior to or at the Closing, of all of the following conditions:
(a) TRUTH AND PERFORMANCE. The representations, warranties and
covenants of Cultor and the Corporation contained in this Agreement shall be
true and correct in all material respects at and as of the time of the Closing
and Cultor and the Corporation shall have performed and complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by Cultor and the Corporation prior to or at the
Closing.
(b) NO PROHIBITION. The transactions contemplated by this Agreement
and the Additional Agreements shall not be prohibited by any applicable law,
court order or governmental regulation.
Section 11.3 CONDITIONS TO OBLIGATIONS OF THE CORPORATION. The
obligation of the Corporation to enter into this Agreement shall be subject to
the fulfillment, prior to or at the Closing, of all of the following conditions:
(a) TRUTH AND PERFORMANCE. The representations, warranties and
covenants of Cultor and Aquasearch contained in this Agreement shall be true and
correct in all material respects at and as of the time of the Closing and Cultor
and Aquasearch shall have performed and complied in all material respects with
all agreements and covenants required by this Agreement to be performed or
complied with by Cultor and Aquasearch prior to or at the Closing.
(b) NO PROHIBITION. The transactions contemplated by this Agreement
and the Additional Agreements shall not be prohibited by any applicable law,
court order or governmental regulation.
ARTICLE XII
MISCELLANEOUS
Section 12.1 NOTICES. Any notice, consent or approval required or
permitted to be given or sent hereunder shall be in writing and may be delivered
personally or sent by telecopied facsimile, or by first class mail, postage
prepaid (if to an address in the same country as the sender) or air mail or its
equivalent (if to an address outside the sender's country) to the Party on whom
it is to be served at the address of that Party set forth below:
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(a) If to Aquasearch, to:
Aquasearch, Inc.
73-4460 Queen Kaahumanu Highway
Suite 110
Kailua Kona HI 96740
Attention: General Manager
Fax: 808-326-9401
with a copy to:
Steven L. Berson, Esq.
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto
California 94304-1050
Fax: 415-493-6811
(b) If to Cultor, to:
Cultor Ltd.
Kyllikkiportti 2
FIN-00240 Helsinki
Finland
Attention: General Counsel
Facsimile Transmission No.: 358-0-1344-1472
with a copy to:
Robert A. McTamaney, Esq.
Carter, Ledyard & Milburn
2 Wall Street
New York, New York 10005
Facsimile Transmission No.: 212-732-3232
(c) If to the Corporation, to:
Attention:
Facsimile Transmission No.:
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with a copy to:
Facsimile Transmission No.:
(d) Any notice or other documents sent by post properly addressed as
aforesaid shall be deemed served seven days after the date of posting if sent
air mail, one day after the date of posting (if sent domestically by domestic
courier) and three days after the date of posting (if sent internationally by
international courier) and any notice or other documents sent by telecopied
facsimile shall be deemed served on the day of transmission.
(d) Notices shall be served on the parties hereto at their addresses
set out herein or at such other addresses as may be substituted for the purpose
by a notice duly served in accordance with the provisions of this Section 12.1.
Section 12.2 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the Parties with respect to the matters dealt with herein and
supersedes any previous agreements or understandings between the Parties in
relation to such matters. Each of the Parties acknowledges that in entering
into this Agreement, it has not relied on any representation or warranty save as
expressly set out herein or in any document referred to herein. No variation of
this Agreement shall be valid or effective unless made by one or more
instruments in writing and signed by the Parties.
Section 12.3 AMENDMENTS. This Agreement may be amended, modified or
supplemented only by a written instrument that refers expressly to this
Agreement and that is executed by an authorized signatory of both of the Parties
hereto. Any modification or variation of this Agreement other than in accordance
with this Section 12.3 shall be null and void.
Section 12.4 GOVERNING LAW; ARBITRATION.
(a) Any dispute or claim arising out of or in relation to this
contract, or the interpretation, making, performance, breach, validity or
termination thereof, shall be finally settled by binding arbitration in New
York, New York under the International Arbitration Rules of the American
Arbitration Association (the "ARBITRATION RULES") by three arbitrators. All
arbitrators must be impartial, independent, and experienced in international
arbitration. Within 30 days after commencement of the arbitral proceedings,
each Party shall select one arbitrator and, if possible, the Parties will
jointly agree on a third arbitrator who will be the chair of the arbitral
tribunal. If either Party fails to appoint an arbitrator, or if the Parties do
no jointly agree on a third arbitrator within such 30-day period, the AAA shall,
within 15 days thereafter, appoint such arbitrator(s) from the International
Panel.
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(b) This contract shall be governed, interpreted and construed
exclusively under the substantive laws of the State of New York. The
arbitrators shall apply New York law to the merits of any dispute or claim,
without referenced to rules of conflict of law. The arbitrators shall have the
power to decide all questions of arbitrability. The arbitration proceedings
shall be governed by federal arbitration law and by the Arbitration Rules,
without reference to state arbitration law. At the request of either Party, the
arbitrators will enter an appropriate protective order to maintain the
confidentiality of information produced or exchanged in the course of the
arbitration proceedings. Judgment on the award rendered by the arbitrators may
be entered in any court having jurisdiction thereof.
(c) The Parties may apply to any court of competent jurisdiction for
a temporary restraining order, preliminary injunction, or other interim or
conservatory relief, as necessary, without breach of this arbitration agreement
and without any abridgment of the powers of the arbitrators.
(d) The arbitrators will award to the prevailing party, if any, as
determined by the arbitrators, all of its costs and fees, including, without
limitation, AAA administrative fees, arbitrator fees, travel expenses, out-of-
pocket expenses (including, without limitation, such expenses as copying,
telephone, facsimile, postage, and courier fees), witness fees, and attorneys'
fees and disbursements.
Section 12.5 ASSIGNMENT. The rights and liabilities conferred by this
Agreement are personal to the Parties hereto and, except as specifically
provided in this Agreement, may not be assigned or transferred in whole or in
part by either Party hereto without the prior consent in writing of the other
Parties, except that either may, with the consent of the other not to be
unreasonably withheld, assign its rights and obligations hereunder to any of its
Affiliates, provided that in such event the assigning party shall not be
relieved of its obligations hereunder. Notwithstanding anything else in this
Section 12.5 or this Agreement to the contrary, the Parties each understand and
agree that Aquasearch desires to change the jurisdiction of its incorporation
from Colorado to Delaware, that a proposal to approve such reincorporation in
Delaware will be included in the proxy statement to be distributed to
Aquasearch's shareholders in connection with Aquasearch's Annual Shareholders'
Meeting, and that, if the reincorporation proposal is approved by Aquasearch's
Shareholders at the Aquasearch Annual Shareholders' Meeting, Aquasearch will
proceed to effect the reincorporation as soon as possible thereafter.
Aquasearch, and Cultor and the Corporation each expressly approve of the
reincorporation and agree that Aquasearch may assign all of its rights, duties,
obligations, covenants and benefits under this Agreement to the Delaware
successor corporation, and that, upon consummation of such assignment, all of
the rights, obligations, covenants and benefits of Cultor and the Corporation
and such Delaware successor corporation shall be the same as if this Agreement
had been entered into between Cultor, the Corporation and such Delaware
successor corporation on the date hereof.
Section 12.6 BINDING EFFECT. This Agreement shall be binding upon, and
shall inure to the benefit of and be enforceable by, the Parties hereto and
their respective successors and permitted assigns. This Agreement is for the
sole benefit of the Parties hereto and nothing in this Agreement,
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expressed or implied, is intended or shall be construed to confer upon any
Person, other than the Parties and successors and assigns permitted by
Section 12.5, any right, remedy or claim under or by reason of this Agreement.
Section 12.7 WAIVERS. (a) No failure to exercise and no delay in
exercising on the part of any Party hereto any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege preclude any other or further exercise
thereof.
(b) In the event that any Party hereto shall expressly waive any
breach, default or omission hereunder, no such waiver shall apply to, or operate
as, a waiver of similar breaches, defaults or omissions or be deemed a waiver of
any other breach, default or omission hereunder.
(c) The rights and remedies of each of the Parties in connection
herewith are cumulative and are not exclusive of any rights or remedies provided
by law or equity.
Section 12.8 PARTIAL INVALIDITY. The respective restrictions on the
Parties herein contained are considered reasonable by the Parties but, if any
such restriction shall be found void but would be valid if some part thereof
were deleted or the period or area of application reduced, such restriction
shall apply with such modification as may be necessary to make it valid and
effective.
Section 12.9 SEVERABILITY. If at any time any provision of this
Agreement is or becomes invalid, illegal or unenforceable in any respect under
the law of any jurisdiction, neither the validity, legality or enforceability of
the remaining provisions shall in any way be affected or impaired thereby.
Section 12.10 COSTS AND ATTORNEYS' FEES. Each Party will pay its own
costs and attorneys' fees incident to this Agreement and the transactions
contemplated hereby (except as may be specifically provided for herein) whether
or not these transactions shall be consummated.
Section 12.11 PUBLIC ANNOUNCEMENTS. Neither of the Parties hereto shall
issue any press release or otherwise publicize this Agreement or the
transactions contemplated herein prior to the Closing without the approval of
the other Party, which approval shall not be unreasonably withheld. Cultor and
the Corporation recognize that Aquasearch is a public company subject to
disclosure requirements under applicable law. The approval of a specific press
release or other form of publicity shall not constitute approval of subsequent
press releases or publicity.
Section 12.12 INDEMNITY AS TO REPRESENTATIONS, WARRANTIES AND COVENANTS.
The rights of the Parties to enforce the representations, warranties and
covenants contained in this Agreement shall survive the Closing. Cultor,
Aquasearch and the Corporation agree to indemnify and hold each other harmless
from any losses, damages, expenses (including interest, penalties, and
reasonable attorneys' fees and disbursements, which shall include attorneys'
fees and disbursements on appeal), or other liabilities which either may suffer,
directly or indirectly, by reason of the inaccuracy of any warranty or
representation, or breach of any covenant, of the other Party hereto contained
in this Agreement.
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Section 12.13 ENGLISH LANGUAGE. This Agreement is in the English language
only, which language shall be controlling in all respects. All communications
and notices hereunder shall be in the English language
Section 12.14 UNITED STATES CURRENCY. All amounts described under this
Agreement and all transactions between the Parties in connection with this
Agreement shall be paid in U.S. dollars.
Section 12.15 LIMITATION OF LIABILITY. EXCEPT FOR BODILY INJURY OF A
PERSON, NEITHER PARTY SHALL BE LIABLE FOR INCIDENTAL OR CONSEQUENTIAL DAMAGES
UNDER ANY NEGLIGENCE, STRICT LIABILITY, CONTRACT OR OTHER THEORY WITH RESPECT TO
ANY TERM OR SUBJECT MATTER OF THIS AGREEMENT.
Section 12.16 IRREPARABLE HARM. The Parties recognize that breach of this
Agreement by one will cause irreparable injury to the other for which damages is
not an adequate remedy. Accordingly, the non-breaching Party shall be entitled
to mandatory or injunctive equitable relief in addition to whatever remedies it
may have at law or under this Agreement.
Section 12.17 ACKNOWLEDGMENT OF LIABILITY AND REMEDY PROVISIONS. Each
Party recognizes and agrees that the liability and remedy limitations in this
Agreement are material bargained for bases of this Agreement and that they have
been taken into account and reflected in determining the consideration to be
given by each Party under this Agreement and in the decision by each Party to
enter into this Agreement.
Section 12.18 NO AGENCY. Nothing herein contained may be construed as
constituting either Cultor, Aquasearch or the Corporation the agent of, or
possessing any authority to bind, the other.
Section 12.19 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, and by ether Party on separate counterparts, each of which as
so executed and delivered shall be deemed an original but all of which together
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement as to any Party hereto
[SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be signed by their authorized representatives as of the date first written
above.
Attest: CULTOR, LTD.
By: By:
-------------------------------- ------------------------------
(Secretary) Name:
Title:
Attest: AQUASEARCH, INC.
By: By:
-------------------------------- ------------------------------
(Secretary) Name:
Title:
Attest: CORPORATION
By: By:
-------------------------------- ------------------------------
(Secretary) Name:
Title:
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EXECUTION COPY
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
STOCK SUBSCRIPTION
AGREEMENT
between
CULTOR LTD.
and
AQUASEARCH, INC.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
May 14, 1996
<PAGE>
TABLE OF CONTENTS
PAGE
----
RECITALS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE I - DEFINITIONS. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Defined Terms. . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2 Other Definitional Provisions. . . . . . . . . . . . . . . 3
ARTICLE II - SUBSCRIPTION FOR SHARES . . . . . . . . . . . . . . . . . . . . . 3
Section 2.1 Number of Shares and Purchase Price. . . . . . . . . . . . 3
Section 2.2 Closing. . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 2.3 Delivery of Stock and Payment. . . . . . . . . . . . . . . 3
Section 2.4 Registration Rights Agreement. . . . . . . . . . . . . . . 3
ARTICLE III - REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE COMPANY. . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.1 Corporate Existence and Power. . . . . . . . . . . . . . . 4
Section 3.2 Articles of Incorporation and By-Laws. . . . . . . . . . . 4
Section 3.3 Capitalization . . . . . . . . . . . . . . . . . . . . . . 4
Section 3.4 Authority; Shareholders' Meeting; Noncontravention . . . . 5
ARTICLE IV - REPRESENTATIONS, WARRANTIES AND COVENANTS OF CULTOR . . . . . . . 5
Section 4.1 Corporate Existence and Power. . . . . . . . . . . . . . . 5
Section 4.2 Investment . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 4.3 Access to Information. . . . . . . . . . . . . . . . . . . 6
Section 4.4 Binding Effect . . . . . . . . . . . . . . . . . . . . . . 6
Section 4.5 Restrictions on Transfer . . . . . . . . . . . . . . . . . 6
ARTICLE V - CONDITIONS TO OBLIGATIONS. . . . . . . . . . . . . . . . . . . . . 6
Section 5.1 Conditions to Obligations of the Company . . . . . . . . . 6
(a) Truth and Performance . . . . . . . . . . . . . . . . . . . . . 7
(b) No Prohibition. . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) Svenska Foder AB. . . . . . . . . . . . . . . . . . . . . . . . 7
(d) Additional Conditions . . . . . . . . . . . . . . . . . . . . . 7
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TABLE OF CONTENTS
(CONTINUED)
PAGE
----
Section 5.2 Conditions to Obligations of Cultor. . . . . . . . . . . . 7
(a) Truth and Performance . . . . . . . . . . . . . . . . . . . . . 7
(b) No Prohibition. . . . . . . . . . . . . . . . . . . . . . . . . 7
(c) Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . 7
(d) Additional Conditions . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE VI - SHARE CERTIFICATES. . . . . . . . . . . . . . . . . . . . . . . . 8
Section 6.1 Transfer and Exchange of Share Certificates. . . . . . . . 8
Section 6.2 Share Certificate Legends. . . . . . . . . . . . . . . . . 8
ARTICLE VII - CONFIDENTIALITY. . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 7.1 General. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 7.2 Exceptions . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 7.3 Survival . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE VIII - MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 8.1 Period of Agreement and Termination. . . . . . . . . . . . 9
Section 8.2 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 8.3 Entire Agreement . . . . . . . . . . . . . . . . . . . . .11
Section 8.4 Amendments . . . . . . . . . . . . . . . . . . . . . . . .11
Section 8.5 Governing Law; Arbitration . . . . . . . . . . . . . . . .11
Section 8.6 Assignment . . . . . . . . . . . . . . . . . . . . . . . .12
Section 8.7 Binding Effect . . . . . . . . . . . . . . . . . . . . . .12
Section 8.8 Waivers. . . . . . . . . . . . . . . . . . . . . . . . . .12
Section 8.9 Partial Invalidity . . . . . . . . . . . . . . . . . . . .13
Section 8.10 Severability . . . . . . . . . . . . . . . . . . . . . . .13
Section 8.11 Costs and Attorneys' Fees. . . . . . . . . . . . . . . . .13
Section 8.12 Public Announcements . . . . . . . . . . . . . . . . . . .13
Section 8.13 Indemnity as to Representations, Warranties and
Covenants. . . . . . . . . . . . . . . . . . . . . . . . .13
Section 8.14 English Language . . . . . . . . . . . . . . . . . . . . .13
Section 8.15 Counterparts . . . . . . . . . . . . . . . . . . . . . . .13
EXHIBITS
Exhibit A - Registration Rights Agreement
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<PAGE>
STOCK SUBSCRIPTION AGREEMENT
This Stock Subscription Agreement is dated as of May 14, 1996 between
Cultor Ltd., a corporation organized under the laws of Finland ("Cultor") and
Aquasearch, Inc., a Colorado corporation (the "Company").
RECITALS
The Company has designed and developed a system for the commercial
production of astaxanthin, a micro algae-based carotenoid (the "Product") for
use in animal feed (including fish, shrimp and other aquaculture animal
species) and animal nutrition applications (excluding any human food and human
nutrition applications) and desires to develop further the production,
distribution and marketing of the Product.
The Company and Cultor have entered into a Distribution and Development
Agreement of even date herewith, wherein the Company has appointed Cultor as the
Company's exclusive distributor for the Product and the Company and Cultor have
agreed on certain terms for the development of the Product.
At the date of this Agreement, the Company has an authorized capitalization
of 50,000,000 shares of common stock, par value $0.0001 per share (the "Common
Shares"), of which 39,410,488 Common Shares are issued and outstanding.
In order to implement the Distribution and Development Agreement, Cultor
wishes to subscribe for and purchase 400,000 Common Shares (the "Shares") and
the Company wishes to issue and sell the Shares to Cultor on the terms and
conditions and subject to the representations, warranties and covenants set
forth herein.
Accordingly, in consideration of the foregoing and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 DEFINED TERMS. Unless the context otherwise requires, in
this Agreement the following terms shall have the meanings defined below:
"Affiliate" with respect to any Person, any other Person that
directly or indirectly, through one or more
intermediaries, controls or is controlled by or is
under common control with the Person specified;
<PAGE>
"Agreement" this Agreement and any modification, alternation,
addition or deletion hereto made in writing after
the date of execution of this Agreement;
"the Articles of the Articles of Association of Cultor and all
Association" amendments thereto, as in effect on the date
hereof;
"the Articles of the Articles of Incorporation of the Company and
"Incorporation" all amendments thereto, as in effect on the date
hereof;
"the By-Laws" the By-Laws of the Company, or Cultor, as the
context requires, and all amendments thereto, as
in effect on the date hereof;
"the Closing" or the date and time upon which the Shares shall be
"the Closing Date" issued to Cultor pursuant to Section 2.1 hereof;
"the Company" Aquasearch, Inc., a Colorado corporation;
"Common Shares" the common stock in the authorized capital of the
Company, U.S.$0.0001 par value per share;
"1995 Form 10-KSB" the Annual Report to Shareholders on Form 10-KSB
for the fiscal year ended October 31, 1995,
including the financial statements and schedules
thereto;
"January 31, 1996 the Quarterly Report on Form 10-QSB for the
Form 10-QSB" quarter ended January 31, 1996, including the
financial statements and schedules thereto;
"the Parties" or the parties to this Agreement or a party to this
"Party" Agreement;
"Person" any individual, corporation, partnership,
association, joint-stock company, trust,
unincorporated organization, joint venture,
governmental body, agency or authority;
"Securities Act" the U.S. Securities Act of 1933, as amended; and
"Shares" the 400,000 Common Shares to be sold by the
Company and purchased by Cultor pursuant to the
terms and conditions of this Agreement.
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Section 1.2 OTHER DEFINITIONAL PROVISIONS.
(a) Where the context permits, the singular includes the plural and
vice versa and one gender includes any gender. Words importing the whole shall
be treated as including a reference to any part thereof.
(b) References to Sections are references to sections of this
Agreement.
(c) Section headings are inserted in this Agreement for convenience
only and shall not affect the construction hereof in any way.
ARTICLE II
SUBSCRIPTION FOR SHARES
Section 2.1 NUMBER OF SHARES AND PURCHASE PRICE. Upon the terms and
conditions and subject to the representations, warranties and covenants of this
Agreement, the Company agrees to sell and Cultor agrees to purchase on the
Closing Date 400,000 Shares at an aggregate purchase price not to exceed a
maximum of U.S.$200,000 (the "Subscription Price"), subject to the approval of
the transactions contemplated by this Agreement at the Shareholders' Meeting of
the Company contemplated by Section 3.4 of this Agreement (the "Shareholders'
Meeting).
Section 2.2 CLOSING. The Closing shall take place at the offices of
Carter, Ledyard & Milburn, 2 Wall Street, New York, New York 10005, or at such
other place as the Company and Cultor shall mutually agree, promptly following
the approval of the transactions contemplated by this Agreement at the
Shareholders' Meeting, or on such other date as the parties may agree, but in no
event later than August 31, 1996 unless the parties otherwise agree.
Section 2.3 DELIVERY OF STOCK AND PAYMENT.
(a) At the Closing the Company will deliver to Cultor a certificate
evidencing the Shares, registered in the name of Cultor, together with any other
documents Cultor may reasonably request to enable title to the Shares purchased
hereunder to pass to Cultor and be registered on the books and records of the
Company.
(b) At the Closing, Cultor shall pay the Subscription Price for the
Shares in immediately available funds by wire transfer pursuant to instructions
which shall be provided by the Company.
Section 2.4 REGISTRATION RIGHTS AGREEMENT. As a condition to Closing
pursuant to Article V hereof, the Company and Cultor shall enter into a
Registration Rights Agreement with respect to the Shares on substantially the
terms and conditions set forth in the Registration Rights Agreement attached
hereto as Exhibit A (the "Registration Rights Agreement"). Cultor's rights
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under the Registration Rights Agreement shall be subject to the terms and
conditions of Section 4.5 hereof.
ARTICLE III
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY
In order to induce Cultor to enter into this Agreement, the Company makes
the following representations and warranties to Cultor, intending Cultor to rely
upon each of said representations and warranties:
Section 3.1 CORPORATE EXISTENCE AND POWER. The Company is a public
company duly incorporated, validly existing and in good standing under the laws
of the State of Colorado. The Company has all requisite corporate power and
authority and all material governmental licenses, authorizations, consents and
approvals required to acquire and own, lease and operate its properties and to
carry on its business as currently conducted in all states and countries where
required except where the failure to have such licenses, authorizations,
consents and approvals, would not have, in the aggregate, a material adverse
effect on the business, assets, financial condition, or results of operations of
the Company.
Section 3.2 ARTICLES OF INCORPORATION AND BY-LAWS. The Company has
previously delivered to Cultor true and complete copies of its Articles of
Incorporation and By-Laws as in effect on the date hereof and will provide a
true and correct copy of its Articles of Incorporation and By-Laws as a
condition to Closing pursuant to Article V hereof.
Section 3.3 CAPITALIZATION.
(a) The authorized capital stock of the Company as of the date hereof
consists of 50,000,000 Common Shares, of which 39,410,488 Common Shares are
issued and outstanding (prior to the issuance of the Shares to Cultor pursuant
hereto). Other than as described in the 1995 Form 10-KSB and the January 31,
1996 Form 10-QSB, there are no outstanding obligations of the Company to
(i) allot, issue or sell any capital shares or other equity securities of the
Company (including any securities convertible into or exchangeable for, or
options or other rights to acquire, such capital shares or equity securities),
or (ii) redeem, repurchase or otherwise acquire any such capital shares or
equity securities. There are no dividends or distributions of any kind that
have been declared and remain unpaid on any of the Common Shares.
(b) Upon delivery to Cultor of the certificate representing the
Shares to be purchased by Cultor hereunder in accordance with the terms of this
Agreement, such Shares will be duly authorized, validly issued, fully paid,
nonassessable and there will be no outstanding unpaid calls on the Shares, and
Cultor will acquire good and valid title to such Shares free of any lien or
other encumbrance except for any lien or encumbrances resulting from acts or
omissions of Cultor.
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Section 3.4 AUTHORITY; SHAREHOLDERS' MEETING; NONCONTRAVENTION. The
execution, delivery and performance by the Company of this Agreement and the
transactions contemplated hereby has been duly authorized by all necessary
corporate action on the Company's part and requires no action by or in respect
of or consent or approval of or filing by the Company with, any governmental
body, agency or authority, provided, however, that the Company has advised
Cultor that the transactions contemplated by this Agreement require the approval
of the shareholders of the Company, which the Company covenants to use its best
efforts to secure as promptly as practicable at the Shareholders Meeting to be
held following the execution of this Agreement and in any event on or before
August 31, 1996, or such other date as the parties may agree. Subject only to
such shareholders' approval, the execution, delivery and performance by the
Company of this Agreement and the transactions contemplated hereby does not and
will not contravene or constitute a default under (a) the Articles of
Incorporation and By-Laws of the Company, (b) the terms of any judgment,
injunction, order or decree applicable to the Company, (c) any provision of law
or regulation applicable to the Company as in effect on the date hereof, or
(d) any material agreement, contract or other instrument binding upon the
Company. This Agreement has been duly executed and delivered by the Company and
constitutes a valid and binding agreement of the Company, enforceable in
accordance with its terms, subject only to (i) bankruptcy, insolvency,
reorganization, arrangement, fraudulent conveyance, moratorium or other similar
laws relating to or affecting the rights of creditors, (ii) general principles
of equity, including, without limitation, specific performance and injunctive
relief, regardless of whether considered in a proceeding in equity or at law,
and (iii) the approval of the transactions contemplated hereby by the Company's
shareholders at the Shareholders' Meeting.
ARTICLE IV
REPRESENTATIONS, WARRANTIES AND COVENANTS OF CULTOR
In order to induce the Company to enter into this Agreement, Cultor makes
the following representations and warranties, intending that the Company rely
upon each of said representations and warranties:
Section 4.1 CORPORATE EXISTENCE AND POWER. Cultor is a company duly
incorporated, validly existing and in good standing under the laws of Finland.
Cultor has all requisite corporate power and authority and all material
governmental licenses, authorizations, consents and approvals required to
execute and deliver this Agreement and to consummate the transactions
contemplated hereby.
Section 4.2 INVESTMENT. Cultor is acquiring the Shares being purchased
hereunder and any additional shares that may be acquired as a result of any
conversion, stock dividend or stock split with respect to the Shares purchased
hereunder (collectively with the Shares being purchased hereunder, the
"Securities") for its own account and not with a view to, or for resale in
connection with, the distribution thereof. As of the date hereof, Cultor owns
no equity securities of the Company and covenants not to purchase any such
securities of the Company except as contemplated by this Agreement.
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Section 4.3 ACCESS TO INFORMATION. Cultor has been given full access to
information concerning the condition, properties, operations and prospects of
the Company and the financing thereof. Cultor's knowledge and experience in
financial matters is such that it is capable of evaluating the merits and risks
of its investment in the Securities.
Section 4.4 BINDING EFFECT. Cultor has the full legal right and power
to execute and deliver this Agreement and to perform its obligations hereunder.
The execution, delivery and performance by Cultor of this Agreement and the
transactions contemplated hereby has been duly authorized by all necessary
action on Cultor's part, requires no action by or in respect of or consent or
approval of or filing by Cultor with, any governmental body, agency or
authority, and does not and will not contravene or constitute a default under
(a) Cultor's Articles of Association or By-Laws, (b) the terms of any judgment,
injunction, order or decree applicable to Cultor, (c) any provision of law or
regulation applicable to Cultor as in effect on the date hereof, or (d) any
material agreement, contract or other instrument binding upon Cultor. This
Agreement has been duly executed and delivered by Cultor and constitutes a valid
and binding agreement of Cultor, enforceable in accordance with its terms,
subject only to (i) bankruptcy, insolvency, reorganization, arrangement,
fraudulent conveyance, moratorium or other similar laws relating to or affecting
the rights of creditors, (ii) general principles of equity, including, without
limitation, specific performance and injunctive relief, regardless of whether
considered in a proceeding in equity or at law, and (iii) the approval of the
transactions contemplated hereby by the Company's shareholders at the
Shareholders' Meeting.
Section 4.5 RESTRICTIONS ON TRANSFER. Cultor has been advised by the
Company that (a) the offer and sale of the Securities has not been registered
under the Securities Act; (b) for a period of four years from the Closing Date
the Securities may not be offered, sold, transferred, or distributed by Cultor
to any third party without the prior written consent of the Company and
thereafter may only be offered, sold, transferred, or distributed in compliance
with the Securities Act and the rules and regulations adopted pursuant thereto,
and, if requested by the Company, Cultor shall furnish an opinion of counsel
satisfactory to the Company to the effect that the Securities may be legally
sold or distributed without registration under the Securities Act and any
applicable state or Federal statutes, or that the Securities shall have been so
registered or qualified and an appropriate prospectus, if required, shall then
be in effect and current; (c) the restrictive legend referred to in Section 6.2
hereof will be placed on the certificates representing the Shares; and (d) a
notation will be made in the appropriate records of the Company indicating that
the Shares are subject to restriction on transfer and appropriate stop transfer
restrictions will be issued to the transfer agent with respect to the Shares.
ARTICLE V
CONDITIONS TO OBLIGATIONS
Section 5.1 CONDITIONS TO OBLIGATIONS OF THE COMPANY The obligations of
the Company to issue and sell the Shares to Cultor hereunder shall be subject to
the fulfillment, prior to or at the Closing, of all the following conditions:
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(a) TRUTH AND PERFORMANCE. The representations, warranties and
covenants of Cultor contained in this Agreement shall be true and correct in all
material respects at and as of the time of the Closing and Cultor shall have
performed and complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by Cultor
prior to or at the Closing.
(b) NO PROHIBITION. The issuance of the Shares pursuant hereto shall
not be prohibited by any applicable law, court order or governmental regulation.
(c) SVENSKA FODER AB. Prior to executing this Agreement, Cultor
shall provide a letter from Svenska Foder AB to the Company dated the date of
this Agreement confirming that the execution, delivery and performance by the
Company and Cultor of this Agreement will not violate or constitute a breach of
or default under any agreement between the Company and Svenska Foder AB.
(d) ADDITIONAL CONDITIONS. The documentation required to be
delivered pursuant to Sections 2.4 and 3.2 hereof shall have been delivered.
Section 5.2 CONDITIONS TO OBLIGATIONS OF CULTOR. The obligation of
Cultor to purchase and pay for the Shares to be purchased by Cultor hereunder
shall be subject to the fulfillment, prior to or at the Closing, of all the
following conditions:
(a) TRUTH AND PERFORMANCE. The representations, warranties and
covenants of the Company contained in this Agreement shall be true and correct
in all material respects at and as of the time of the Closing, and the Company
shall have performed and complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by the
Company prior to or at the Closing.
(b) NO PROHIBITION. The issuance of the Shares pursuant hereto shall
not be prohibited by any applicable law, court order or governmental regulation.
(c) OPINION OF COUNSEL. Cultor shall have received the opinion of
the Company's counsel dated the Closing Date in form and substance satisfactory
to Cultor's counsel.
(d) ADDITIONAL CONDITIONS. The documentation required to be
delivered pursuant to Sections 2.4 and 3.2 hereof shall have been delivered.
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ARTICLE VI
SHARE CERTIFICATES
Section 6.1 TRANSFER AND EXCHANGE OF SHARE CERTIFICATES. The Company
will maintain a transfer agent to keep a register for the registration of the
shares of the Company. Upon surrender to the Company or its transfer agent of
any certificate representing shares of the Company for registration of exchange
or transfer, subject to the restrictions on transfer contained herein, the
Company will issue, at its expense, one or more new certificates, in such
denomination or denominations as may be requested by the holder or transferee,
for the same aggregate number and class of shares represented by the certificate
so surrendered, as appropriate, and in each case registered as such holder or
transferee may request. Any certificate representing shares of the Company
surrendered for registration of transfer shall be duly endorsed, or accompanied
by a written instrument of transfer duly executed by the holder of such
certificate or his attorney duly authorized in writing.
Section 6.2 SHARE CERTIFICATE LEGENDS. The Parties hereto shall procure
that any certificate for shares in the capital of the Company issued at any time
shall on its face bear clearly and legibly the following words:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE BEING ACQUIRED FOR
INVESTMENT WITHOUT ANY PRESENT INTENTION OF SELLING OR DISTRIBUTING ALL OR
ANY PART THEREOF AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"). NO SALE, TRANSFER, OR OTHER
DISPOSITION OF THE SECURITIES REPRESENTED HEREBY OR ANY PART THEREOF MAY BE
MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT UNLESS AN EXEMPTION
THEREUNDER IS AVAILABLE IN THE OPINION OF COUNSEL FOR AQUASEARCH, INC. (THE
"COMPANY"). THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO
CERTAIN RESTRICTIONS ON TRANSFER CONTAINED IN THE STOCK SUBSCRIPTION
AGREEMENT DATED AS OF MAY 14, 1996 BETWEEN THE COMPANY AND CULTOR, LTD. A
COPY OF SUCH STOCK SUBSCRIPTION AGREEMENT MAY BE OBTAINED BY WRITTEN
REQUEST OF THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF THE
COMPANY AT THE PRINCIPAL EXECUTIVE OFFICES OF THE COMPANY."
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ARTICLE VII
CONFIDENTIALITY
Section 7.1 GENERAL. The Parties to this Agreement shall maintain in
strictest confidence and shall cause their directors, officers, employees,
agents, counsel and representatives to maintain in strictest confidence, all
proprietary and confidential information and materials (whether or not
patentable), including, without limitation, equipment, processes, methods, data,
software, reports, know-how, sources of supply, price information and
quotations, customer lists, patent positions and business plans which are
communicated to, learned of, developed or otherwise acquired by either Party,
directly or indirectly, pursuant to this Agreement and any other information
designated by the disclosing Party as confidential or proprietary in relation to
the subject matter of this Agreement, which information is provided by one Party
to the other either directly or indirectly ("Confidential Information"). All
such Confidential Information shall remain the property of the Company or Cultor
as the case may be and upon the expiration or termination of this Agreement
shall be returned to the Company or Cultor as applicable, or, at either Party's
election, destroyed.
Section 7.2 EXCEPTIONS. Confidential Information shall not include any
information that (a) becomes known to the general public without the fault or
breach (including simple negligence) of the receiving party; or (b) was already
known to the recipient as evidenced by prior written documents in its
possession; or (c) is disclosed to the recipient by a third party who is not in
default of any confidentiality obligation to the disclosing party hereunder; or
(iv) is developed by or on behalf of the receiving party, without reliance on
Confidential Information received hereunder. Each party shall be entitled, in
addition to any other right or remedy it may have, at law or in equity, to an
injunction, without the posting of any bond or other security, enjoining or
restraining the other party from any violation or threatened violation of this
Section 7.2.
Section 7.3 SURVIVAL. The obligations of this Article VII shall survive
termination of this Agreement and each of the Parties hereto shall continue to
observe them regardless of whether its rights hereunder shall be terminated or
it shall cease to be a Party hereto.
ARTICLE VIII
MISCELLANEOUS
Section 8.1 PERIOD OF AGREEMENT AND TERMINATION. Subject only to the
approval of the shareholders of the Company contemplated by Section 3.4 of this
Agreement, this Agreement shall come into effect on the date hereof and shall
continue hereafter to bind the Company and Cultor for so long as Cultor shall
beneficially own any Shares, except as otherwise set forth in Article IV hereof.
Section 8.2 NOTICES. Any notice, consent or approval required or
permitted to be given or sent hereunder shall be in writing and may be delivered
personally or sent by telecopied facsimile, or by first class mail, postage
prepaid (if to an address in the same country as the sender) or air mail
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or its equivalent (if to an address outside the sender's country) to the Party
on whom it is to be served at the address of that Party set forth below:
(a) If to the Company, to:
Aquasearch, Inc.
73-4460 Queen Kaahumanu Highway
Suite 110
Kailua Kona HI 96740
Attention: General Manager
Fax: 808-326-9401
with a copy to:
Steven L. Berson, Esq.
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto
California 94304-1050
Fax: 415-493-6811
(b) If to Cultor, to:
Cultor Ltd.
Kyllikkiportti 2
FIN-00240 Helsinki
Finland
Attention: General Counsel
Facsimile Transmission No.: 358-0-1344-1472
with a copy to:
Robert A. McTamaney, Esq.
Carter, Ledyard & Milburn
2 Wall Street
New York, New York 10005
Facsimile Transmission No.: 212-732-3232
(c) Any notice or other documents sent by post properly addressed as
aforesaid shall be deemed served seven days after the date of posting if sent
air mail and two days after the date of posting if sent by first class post and
any notice or other documents sent by telecopied facsimile shall be deemed
served on the day of transmission.
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(d) Notices shall be served on the parties hereto at their addresses
set out herein or at such other addresses as may be substituted for the purpose
by a notice duly served in accordance with the provisions of this Section 8.2.
Section 8.3 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the Parties with respect to the matters dealt with herein and
supersedes any previous agreements or understandings between the Parties in
relation to such matters. Each of the Parties acknowledges that in entering
into this Agreement, it has not relied on any representation or warranty save as
expressly set out herein or in any document referred to herein. No variation of
this Agreement shall be valid or effective unless made by one or more
instruments in writing and signed by the Parties.
Section 8.4 AMENDMENTS. This Agreement may be amended, modified or
supplemented only by a written instrument that refers expressly to this
Agreement and that is executed by an authorized signatory of both of the Parties
hereto. Any modification or variation of this Agreement other than in accordance
with this Section 8.4 shall be null and void.
Section 8.5 GOVERNING LAW; ARBITRATION.
(a) Any dispute or claim arising out of or in relation to this
contract, or the interpretation, making, performance, breach, validity or
termination thereof, shall be finally settled by binding arbitration in New
York, New York under the International Arbitration Rules of the American
Arbitration Association (the "Rules") by three arbitrators. All arbitrators
must be impartial, independent, and experienced in international arbitration.
Within thirty (30) days after commencement of the arbitral proceedings, each
Party shall select one arbitrator and, if possible, the Parties will jointly
agree on a third arbitrator who will be the chair of the arbitral tribunal. If
either Party fails to appoint an arbitrator, or if the Parties do no jointly
agree on a third arbitrator within such thirty (30) day period, the AAA shall,
within fifteen (15) days thereafter, appoint such arbitrator(s) from the
International Panel.
(b) This contract shall be governed, interpreted and construed
exclusively under the substantive laws of the State of New York. The
arbitrators shall apply New York law to the merits of any dispute or claim,
without referenced to rules of conflict of law. The arbitrators shall have the
power to decide all questions of arbitrability. The arbitration proceedings
shall be governed by federal arbitration law and by the Rules, without reference
to state arbitration law. At the request of either Party, the arbitrators will
enter an appropriate protective order to maintain the confidentiality of
information produced or exchanged in the course of the arbitration proceedings.
Judgment on the award rendered by the arbitrators may be entered in any court
having jurisdiction thereof.
(c) The Parties may apply to any court of competent jurisdiction for
a temporary restraining order, preliminary injunction, or other interim or
conservatory relief, as necessary, without breach of this arbitration agreement
and without any abridgment of the powers of the arbitrators.
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(d) The arbitrators will award to the prevailing party, if any, as
determined by the arbitrators, all of its costs and fees, including, without
limitation, AAA administrative fees, arbitrator fees, travel expenses, out-of-
pocket expenses (including, without limitation, such expenses as copying,
telephone, facsimile, postage, and courier fees), witness fees, and attorneys'
fees and disbursements.
Section 8.6 ASSIGNMENT. The rights and liabilities conferred by this
Agreement are personal to the Parties hereto and may not be assigned or
transferred in whole or in part by either Party hereto without the prior consent
in writing of the other Party; except that either may, with the consent of the
other not to be unreasonably withheld, assign its rights and obligations
hereunder to any of its Affiliates, provided that in such event the assigning
party shall not be relieved of its obligations hereunder. Notwithstanding
anything else in this Section 8.6 or this Agreement to the contrary, the Parties
each understand and agree that the Company desires to change the jurisdiction of
its incorporation from Colorado to Delaware, that a proposal to approve such
reincorporation to Delaware may be included in the proxy statement to be
distributed to the Company's shareholders in connection with the Shareholders'
Meeting and that, if the reincorporation proposal is approved by the Company's
shareholders at the Shareholders' Meeting (or at another meeting of the
Company's shareholders held at a later date), the Company will proceed to effect
the reincorporation as soon as possible thereafter. The Company and Cultor each
expressly approve of the reincorporation and agree that the Company may assign
all of its rights, duties, obligations, covenants and benefits under this
Agreement to the Delaware successor corporation, and that, upon consummation of
such assignment, all of the rights, obligations, covenants and benefits of
Cultor and such Delaware successor corporation shall be the same as if this
Agreement had been entered into between Cultor and such Delaware successor
corporation on the date hereof.
Section 8.7 BINDING EFFECT. This Agreement shall be binding upon, and
shall inure to the benefit of and be enforceable by, the Parties hereto and
their respective successors and permitted assigns. This Agreement is for the
sole benefit of the Parties hereto and nothing in this Agreement, expressed or
implied, is intended or shall be construed to confer upon any Person, other than
the Parties and successors and assigns permitted by Section 8.6, any right,
remedy or claim under or by reason of this Agreement.
Section 8.8 WAIVERS.
(a) No failure to exercise and no delay in exercising on the part of
any Party hereto any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege preclude any other or further exercise thereof.
(b) In the event that any Party hereto shall expressly waive any
breach, default or omission hereunder, no such waiver shall apply to, or operate
as, a waiver of similar breaches, defaults or omissions or be deemed a waiver of
any other breach, default or omission hereunder.
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(c) The rights and remedies of each of the Parties in connection
herewith are cumulative and are not exclusive of any rights or remedies provided
by law or equity.
Section 8.9 PARTIAL INVALIDITY. The respective restrictions on the
Parties herein contained are considered reasonable by the Parties but, if any
such restriction shall be found void but would be valid if some part thereof
were deleted or the period or area of application reduced, such restriction
shall apply with such modification as may be necessary to make it valid and
effective.
Section 8.10 SEVERABILITY. If at any time any provision of this
Agreement is or becomes invalid, illegal or unenforceable in any respect under
the law of any jurisdiction, neither the validity, legality or enforceability of
the remaining provisions shall in any way be affected or impaired thereby.
Section 8.11 COSTS AND ATTORNEYS' FEES. Each Party will pay its own
costs and attorneys' fees incident to this Agreement and the transactions
contemplated hereby (except as may be specifically provided for herein) whether
or not these transactions shall be consummated.
Section 8.12 PUBLIC ANNOUNCEMENTS. Neither of the Parties hereto shall
issue any press release or otherwise publicize this Agreement or the
transactions contemplated herein prior to the Closing without the approval of
the other Party, which approval shall not be unreasonably withheld. Cultor
recognizes that the Company is a public company subject to disclosure
requirements under applicable law and agrees to cooperate fully with the Company
with respect to the compliance by the Company with such disclosure requirements.
The approval of a specific press release or other form of publicity shall not
constitute approval of subsequent press releases or publicity.
Section 8.13 INDEMNITY AS TO REPRESENTATIONS, WARRANTIES AND COVENANTS.
The rights of the Parties to enforce the representations, warranties and
covenants contained in this Agreement shall survive the Closing. Cultor and the
Company agree to indemnify and hold each other harmless from any losses,
damages, expenses (including interest, penalties, and reasonable attorneys' fees
and disbursements, which shall include attorneys' fees and disbursements on
appeal), or other liabilities which either may suffer, directly or indirectly,
by reason of the inaccuracy of any warranty or representation, or breach of any
covenant, of the other Party hereto contained in this Agreement.
Section 8.14 ENGLISH LANGUAGE. This Agreement is in the English language
only, which language shall be controlling in all respects. All communications
and notices hereunder shall be in the English language.
Section 8.15 COUNTERPARTS. This Agreement may be executed in any number
of counterparts, and by either Party on separate counterparts, each of which as
so executed and delivered shall be deemed an original but all of which together
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement as to any Party hereto to produce or account for
more than one such counterpart executed and delivered by such Party.
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be signed by their authorized representatives as of the date first written
above.
Attest: CULTOR, LTD.
By: /s/ Juha Kurkinen By: /s/ Tom von Weyman
---------------------------- --------------------------------
(Secretary) Name: Tom von Weyman
Title: Executive Vice President
By: /s/ Tommy Laakso
-----------------------------------
Name: Tommy Laakso
Title: Business Development Director
Cultor Food Ingredients
Attest: AQUASEARCH, INC.
By: /s/ Steven L. Berson By: /s/ Mark E. Huntley
--------------------------- ----------------------------------
(Secretary) Name: Mark E. Huntley, Ph.D.
Title: President and Chief
Executive Officer
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EXHIBIT A
TO STOCK SUBSCRIPTION AGREEMENT
DATED AS OF MAY 14, 1996
BETWEEN AQUASEARCH, INC AND CULTOR LTD.
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement, made as of the ____ day of _______, 1996, between
Aquasearch, Inc., ("AQUASEARCH" or the "CORPORATION"), a Colorado corporation,
and Cultor Ltd., a Finnish corporation ("CULTOR").
RECITALS:
WHEREAS, Aquasearch and Cultor are parties to that certain Stock
Subscription Agreement dated as of May 14, 1996 (the "STOCK SUBSCRIPTION
AGREEMENT") relating to the sale by Aquasearch and the purchase by Cultor of an
aggregate of 400,000 shares (the "Shares") of the Common Stock, par value
$0.0001 per share, of the Corporation; and
WHEREAS, pursuant to Section 2.4 of the Stock Subscription Agreement,
Aquasearch and Cultor desire that Cultor be granted certain registration rights
with respect to the Shares; and
NOW, THEREFORE, in consideration of the mutual promises herein contained,
Aquasearch and Cultor agree as follows:
ARTICLE I
REGISTRATION RIGHTS
Section 1.1 CERTAIN DEFINITIONS. As used in this Article, the following
terms shall have the following respective meanings:
(a) "COMMISSION" shall mean the Securities and Exchange Commission or
any other federal agency at the time administering the Securities Act.
(b) "EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect from time to time.
(c) "HOLDER" shall mean Cultor so long as it holds Registrable
Securities and any Person holding such securities to whom the rights under this
Article I have been transferred in accordance with Section 1.11 hereof.
<PAGE>
(d) "INITIATING HOLDERS" shall mean any Holder or Holders who
initiate the actions contemplated by Sections 1.2 or 1.5 hereof, as the case may
be.
(e) "PERSON" shall mean any individual, corporation, partnership,
association, joint-stock company, trust, unincorporated organization, joint
venture, governmental body, agency or authority.
(f) "REGISTRABLE SECURITIES" means
(i) the Shares issued to Cultor pursuant to the Stock
Subscription Agreement,
(ii) any securities of the Corporation issued in exchange for the
Shares, and
(iii) any Common Stock or other securities of the
Corporation which are issued in respect of the securities listed in this
Section 1.1(e) upon any stock split, stock dividend, recapitalization, or
similar event.
Notwithstanding the previous sentence, the Shares or other
securities shall only be treated as Registrable Securities for the purposes of
Section 1.3 hereof (A) if and so long as they have not been sold to or through a
broker or dealer or underwriter in a public distribution or a public securities
transaction, or (B) prior to the date such securities have been sold or are all
available for immediate sale in the opinion of counsel to the Corporation in a
transaction exempt from the prospectus delivery requirements of the Securities
Act so that all transfer restrictions and legends with respect thereto are
removed upon the consummation of such sale.
(g) The terms "REGISTER," "REGISTERED" and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration of the effectiveness of
such registration statement.
(h) "REGISTRATION EXPENSES" shall mean all expenses, except as
otherwise stated below, incurred by the Corporation in complying with
Sections 1.2, 1.3 and 1.5 hereof, including, without limitation, all
registration, qualification and filing fees, printing expenses, escrow fees,
fees and disbursements of counsel for the Corporation, blue sky fees and
expenses, the expense of any special audits incident to or required by any such
registration (but excluding the compensation of regular employees of the
Corporation which shall be paid in any event by the Corporation).
(i) "RESTRICTED SECURITIES" shall have the meaning set forth in Rule
144 under the Securities Act.
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(j) "SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
(k) "SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes and costs of counsel to the Holders, if
any, applicable to the securities registered by the Holders.
Section 1.2 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. In case the Corporation shall receive
from Initiating Holders a written request that the Corporation effect any
registration, qualification or compliance with respect to (i) all of the shares
of Registrable Securities then outstanding or (ii) any lesser number of shares
of Registrable Securities held by such holders having an expected aggregate
offering price to the public, net of underwriting discounts and commissions, of
at least $1,000,000, the Corporation will (I) within ten days of the receipt of
such notice, give written notice of the proposed registration, qualification or
compliance to all other Holders and (II) as soon as practicable, use all
reasonable efforts to effect such registration, qualification or compliance
(including, without limitation, appropriate qualification under applicable blue
sky or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as may be so requested and as would permit or
facilitate the sale and distribution of all or such portion of such Registrable
Securities as are specified in such request, together with all of the
Registrable Securities of the Holder or Holders joining in such request as are
specified in written requests received by the Corporation within 20 days after
their receipt of such written notice from the Corporation; PROVIDED, HOWEVER,
that the Corporation shall not be obligated to take any action to effect any
such registration, qualification or compliance pursuant to this Section 1.2(a):
(i) In any particular jurisdiction in which the Corporation
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Corporation
is already subject to service in such jurisdiction and except as may be required
by the Securities Act;
(ii) Prior to [insert date that is four years after the date of
Closing] without the prior written consent of Corporation as provided in
Section 4.5 of the Stock Subscription Agreement;
(iii) During the period starting with the date 60 days prior to
the Corporation's estimated date of filing of, and ending on the date six months
immediately following the effective date of, any registration statement
pertaining to an initial issuance of equity securities of the Corporation (other
than a registration of equity securities in a transaction pursuant to Rule 145
under the Securities Act ("RULE 145") or with respect to an employee benefit
plan or dividend reinvestment
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plan); PROVIDED THAT the Corporation is actively employing in good faith all
reasonable efforts to cause such registration statement to become effective;
(iv) After the Corporation has effected two registrations
pursuant to this Section 1.2(a) and such registrations have each been declared
effective and kept effective for a period of at least 180 days or until the
distribution described in such registrations has been completed;
(v) If the Corporation shall furnish to such Holders a
certificate signed by the President of the Corporation stating that in the good
faith judgment of the Board of Directors, it would be detrimental to the
Corporation or its stockholders for a registration statement to be filed in the
near future, then the Corporation's obligation to use all reasonable efforts to
register, qualify or comply under this Section 1.2 shall be deferred for a
period not to exceed 90 days from the date of receipt of the written request
from the Initiating Holders; PROVIDED, HOWEVER, that the Corporation shall not
exercise such right more than once in any twelve-month period.
(b) UNDERWRITING. In the event that the Corporation is advised that
a registration pursuant to this Section 1.2 is for a registered public offering
involving an underwriting, the Corporation shall so advise the Holders as part
of the notice given pursuant to Section 1.2(a). In such event, the right of any
Holder to registration pursuant to this Section 1.2 shall be conditioned upon
such Holder's participation in the underwriting arrangements required by this
Section 1.2, and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent requested shall be limited to the extent provided
herein.
The Corporation shall (together with all Holders proposing
to distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the managing underwriter which is
selected for such underwriting by the Holders of a majority of the Registrable
Securities to be included in such registration and which is reasonably
acceptable to the Corporation. Notwithstanding any other provision of this
Section 1.2, if the managing underwriter advises the Initiating Holders in
writing that marketing factors require a limitation of the number of shares to
be underwritten, then the Corporation shall so advise all Holders. The number
of shares of Registrable Securities that may be included in the registration and
underwriting shall thereupon be allocated among all Holders thereof in
accordance with Section 1.4.
If any Holder of Registrable Securities disapproves of the
terms of the underwriting, such Holder may elect to withdraw therefrom by
written notice to the Corporation, the managing underwriter and the Initiating
Holders. The Registrable Securities and/or other securities so withdrawn shall
also be withdrawn from registration, and such Registrable Securities shall not
thereafter be transferred in a public distribution prior to 90 days after the
effective date of such registration, or such other shorter period of time as the
underwriters may require.
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Section 1.3 CORPORATION REGISTRATION.
(a) NOTICE OF REGISTRATION. If at any time or from time to time the
Corporation shall determine to register any of its securities, either for its
own account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans, (ii) a registration
relating solely to a transaction under Rule 145, (iii) a registration relating
to the initial underwritten public offering of the Corporation's Common Stock
pursuant to a registration statement filed under the Securities Act or (iv) a
registration pursuant to Section 1.2 hereof, the Corporation will:
(i) promptly give to each Holder written notice thereof; and
(ii) include in such registration (and any related qualification
under blue sky laws or other compliance), and in any underwriting involved
therein, all the Registrable Securities specified in a written request or
request made within ten days after receipt of such written notice from the
Corporation by any Holder, except as provided in Section 1.3(b).
(b) UNDERWRITING. If the registration of which the Corporation gives
notice is for a registered public offering involving an underwriting, the
Corporation shall so advise the Holders as a part of the written notice given
pursuant to Section 1.3(a). In such event, the right of any Holder to
registration pursuant to this Section 1.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of Registrable
Securities in the underwriting to the extent provided herein. All Holders
proposing to distribute their securities through such underwriting shall
(together with the Corporation) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by
the Corporation. Notwithstanding any other provision of this Section 1.3, if
the Corporation or its underwriters determine that marketing factors require a
limitation of the number of shares to be underwritten, the underwriters may
limit the Registrable Securities and other securities to be distributed through
such underwriting, but in no event may the Registrable Securities be limited to
less than thirty percent (30%) in value of the securities covered by the
registration. The Corporation shall advise all Holders distributing their
securities through such underwriting of any such limitation. The number of
shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders thereof in accordance with
Section 1.4.
If any Holder disapproves of the terms of any such
underwriting, such Holder or holder may elect to withdraw therefrom by written
notice to the Corporation and the managing underwriter. Any securities excluded
or withdrawn from such underwriting shall be withdrawn from such registration,
and shall not thereafter be transferred in a public distribution prior to 90
days after the effective date of the registration statement relating thereto, or
such other shorter period of time as the underwriters may require.
(c) RIGHT TO TERMINATE REGISTRATION. The Corporation shall have the
right to terminate or withdraw any registration initiated by it under this
Section 1.3 prior to the effectiveness
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of such registration whether or not any Holder has elected to include securities
in such registration. The Registration Expenses of such withdrawn registration
shall be borne by the Corporation in accordance with Section 1.5 hereof.
Section 1.4 ALLOCATION OF REGISTRATION RIGHTS. If, pursuant to
Section 1.2(b) or Section 1.3(b), the underwriters limit the Registrable
Securities and other securities to be distributed through any underwriting, the
number of Registrable Securities to be included in such registration shall be
allocated (i) first to Cultor, and (ii) then to the Holders of other Registrable
Securities, in proportion, as nearly as practicable, to the respective amounts
of such other Registrable Securities held by such Holders at the time of filing
the registration statement. To facilitate the allocation of shares in
accordance with the above provisions, the Corporation may round the number of
shares allocated to any Holder to the nearest 100 shares.
Section 1.5 REGISTRATION ON FORM S-3.
(a) If any Holder or Holders owning more than fifty percent (50%) of
the Registrable Securities request that the Corporation file a registration
statement on Form S-3 (or any successor form to Form S-3), or any similar short-
form registration statement, for a public offering of Registrable Securities,
the reasonably anticipated aggregate price to the public of which, net of
underwriting discounts and commissions, would exceed $1,000,000, and the
Corporation is a registrant entitled to use Form S-3 or any similar short-form
registration statement to register the Registrable Securities for such an
offering, the Corporation shall use all reasonable efforts to cause such
Registrable Securities to be registered on such form for the offering and to
cause such Registrable Securities to be qualified in such jurisdictions as the
Holder or Holders may reasonably request; PROVIDED, HOWEVER, that the
Corporation shall not be required to effect more than one registration pursuant
to this Section 1.5 in any twelve month period. The Corporation will use its
best efforts to qualify for Form S-3 registration or a similar short form
registration at the earliest opportunity. The provisions of Section 1.2(b)
shall be applicable to each registration initiated under this Section 1.5.
(b) Notwithstanding the foregoing, the Corporation shall not be
obligated to take any action pursuant to this Section 1.5:
(i) In any particular jurisdiction in which the Corporation
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance unless the Corporation
is already subject to service in such jurisdiction and except as may be required
by the Securities Act;
(iii) During the period starting with the date 60 days prior to
the Corporation's estimated date of filing of, and ending on the date six months
immediately following the effective date of, any registration statement
pertaining to an initial issuance of equity securities of the Corporation (other
than a registration of securities in a transaction under Rule 145 or with
respect to an employee
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<PAGE>
benefit plan or dividend reinvestment plan), PROVIDED THAT the Corporation is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(iv) If the Corporation shall furnish to such Holder a
certificate signed by the President of the Corporation stating that in the good
faith judgment of the Board of Directors, it would be detrimental to the
Corporation or its shareholders for a registration statement to be filed in the
near future, then the Corporation's obligation to use all reasonable efforts to
file a registration statement shall be deferred for a period not to exceed 90
days from the date of receipt of the written request from such Holder; PROVIDED,
HOWEVER, that the Corporation shall not exercise such right more than once in
any twelve-month period.
Section 1.6 EXPENSES OF REGISTRATION. All Registration Expenses
incurred in connection with registrations pursuant to Sections 1.2, 1.3 and 1.5
shall be borne by the Corporation. All Selling Expenses relating to Registrable
Securities registered on behalf of the Holders shall be borne by the Holders of
such Registrable Securities pro rata among each other on the basis of the gross
proceeds from the role of the Registrable Securities so registered.
Section 1.7 REGISTRATION PROCEDURES. In the case of each registration,
qualification or compliance effected by the Corporation pursuant to this
Section 1.7, the Corporation will keep each Holder advised in writing as to the
initiation of each registration, qualification and compliance and as to the
completion thereof. At its expense the Corporation will:
(a) Prepare and file with the Commission a registration statement
with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective for at least 180 days or
until the distribution described in such registration statement has been
completed;
(b) Prepare and file with the Commission 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 Securities Act with respect to the disposition of all
securities covered by such registration statement.
(c) Furnish to the Holders participating in such registration and to
the underwriters of the securities being registered such reasonable number of
copies of the registration statement, preliminary prospectus, final prospectus
and such other documents as such underwriters may reasonably request in order to
facilitate the public offering of such securities.
Section 1.8 INDEMNIFICATION. In the event any Registrable Securities
are included in a registration statement under this Article I:
(a) To the extent permitted by law, the Corporation will indemnify
each selling Holder, each of its officers, directors, partners and legal
counsel, and each Person controlling such Holder within the meaning of
Section 15 of the Securities Act, with respect to which registration,
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qualification or compliance has been effected pursuant to this Article I, and
each underwriter, if any, and each Person who controls any underwriter within
the meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, damages or liabilities (or actions in respect thereof), as incurred,
including any of the foregoing incurred in settlement of any litigation,
commenced or threatened, arising out of or based on any untrue statement (or
alleged untrue statement) of a material fact contained in any registration
statement, preliminary prospectus, prospectus or other document, or any
amendment or supplement thereto, incident to any such registration,
qualification or compliance, or based on any omission (or alleged omission) to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, or any violation by the Corporation of the Securities Act
or any rule or regulation promulgated under the Securities Act applicable to the
Corporation in connection with any such registration, qualification or
compliance, and the Corporation will reimburse each such Holder, each of its
officers, directors, partners, and legal counsel and each Person controlling
such Holder, each such underwriter and each Person who controls any such
underwriter, for any legal and any other expenses reasonably incurred, as
incurred, in connection with investigating, preparing or defending any such
claim, loss, damage, liability or action, provided that the Corporation will not
be liable in any such case to the extent that any such claim, loss, damage,
liability or expense arises out of or is based on any untrue statement or
omission or alleged untrue statement or omission, made in reliance upon and in
conformity with written information furnished to the Corporation by such Holder,
controlling person or underwriter specifically for use therein.
(b) To the extent permitted by law, each Holder will, if Registrable
Securities held by such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Corporation, each of its directors, officers, and legal counsel, each
underwriter, if any, of the Corporation's securities covered by such a
registration statement, each Person who controls the Corporation or such
underwriter within the meaning of Section 15 of the Securities Act, and each
other Holder, each of its officers, directors, partners and legal counsel and
each Person controlling such Holder within the meaning of Section 15 of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof), as incurred, arising out of or based on any untrue
statement (or alleged untrue statement) of a material fact contained in any such
registration statement, preliminary prospectus, prospectus or other document, or
any omission (or alleged omission) to state therein a material fact required to
be stated therein or necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading, and will reimburse
the Corporation, such Holders, such directors, officers, Persons, underwriters
or control persons for any legal or any other expenses reasonably incurred, as
incurred, in connection with investigating or defending any such claim, loss,
damage, liability or action, in each case to the extent, but only to the extent,
that such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, preliminary prospectus,
prospectus or other document in reliance upon and in conformity with written
information furnished to the Corporation by such Holder specifically for use
therein. Notwithstanding the foregoing, the liability of each Holder under this
subsection (b) shall be limited in an amount equal to the proceeds to each such
Holder of Registrable Securities sold as contemplated herein, unless such
liability resulted from willful misconduct by such Holder. The managing
underwriter of any proposed underwritten offering
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of Registrable Securities may require a Holder to enter into an agreement or
undertaking in connection with a registration under this Article I providing for
indemnification or contribution on the part of such Holder greater than the
Holder's obligations under this Section 1.8(b).
(c) Each party entitled to indemnification under this Section 1.8
(the "INDEMNIFIED PARTY") shall give notice to the party required to provide
indemnification (the "INDEMNIFYING PARTY") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom; PROVIDED THAT counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, 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; AND PROVIDED FURTHER that the failure of any Indemnified Party
to give notice as provided herein shall not relieve the Indemnifying Party of
its obligations under this Article I unless the failure to give such notice is
materially prejudicial to an Indemnifying Party's ability to defend such action;
AND PROVIDED FURTHER, that the Indemnifying Party shall not assume the defense
for matters as to which there is a conflict of interest or separate and
different defenses but shall bear the expense of such defense nevertheless. 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 which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
Section 1.9 INFORMATION BY HOLDER. It shall be a condition precedent to
the obligations of the Corporation to take any action pursuant to this Article I
with respect to the Registrable Securities of any selling Holder that such
Holder shall furnish to the Corporation such information regarding itself, the
Registrable Securities held by it, and the intended method of disposition of
such securities as shall be required to effect the registration of such Holder's
Registrable Securities.
Section 1.10 RULE 144 REPORTING. With a view to making available the
benefits of certain rules and regulations of the Commission which may at any
time permit the sale of the Restricted Securities to the public without
registration, the Corporation agrees to use its best efforts to:
(a) Make and keep current public information available in compliance
with Rule 144(c) under the Securities Act;.
(b) File with the Commission in a timely manner all reports and other
documents required of the Corporation under the Exchange Act; and
(c) So long as an Investor owns any Restricted Securities, upon
request, (i) a written statement by the Corporation as to its compliance with
the reporting requirements of said Rule 144(c), and of the Securities Act and
the Exchange Act (at any time after it has become subject to such reporting
requirements), (ii) a copy of the most recent annual or quarterly report of the
Corporation pursuant to Section 13(a) or 15(d) of the Exchange Act and
(iii) such other reports and
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documents of the Corporation and other information in the possession of or
reasonably obtainable by the Corporation as a Holder may reasonably request in
availing itself of any rule or regulation of the Commission allowing a Holder to
sell any such securities without registration.
Section 1.11 TRANSFER OF REGISTRATION RIGHTS. The rights to cause the
Corporation to register securities granted Holders under Sections 1.2, 1.3 and
1.5 may be assigned to a transferee or assignee in connection with any transfer
or assignment of Registrable Securities by a Holder of (i) all of the
Registrable Securities owned by any Holder or (b) that number of shares of
Registrable Securities with a fair market value or book value at the time of
such transfer of not less U.S. $500,000, or to any transferee or assignee who is
a constituent partner, officer, director or affiliate of a Holder or the estate
of such transferee; PROVIDED THAT the Corporation be given prior written notice
of the transfer and that such transfer may otherwise be effected in accordance
with applicable securities laws.
Section 1.12 TERMINATION OF REGISTRATION RIGHTS. The rights granted
under this Article I shall terminate on the earlier to occur of the fifth
anniversary of the date of this Agreement or the date that the last share of
Registrable Securities is sold by a Holder.
ARTICLE II
MISCELLANEOUS
Section 2.1 NOTICES. Any notice, consent or approval required or
permitted to be given or sent hereunder shall be in writing and may be delivered
personally or sent by telecopied facsimile, or by first class mail, postage
prepaid (if to an address in the same country as the sender) or air mail or its
equivalent (if to an address outside the sender's country) to the Party on whom
it is to be served at the address of that Party set forth below:
(a) If to Aquasearch, to:
Aquasearch, Inc.
73-4460 Queen Kaahumanu Highway
Suite 110
Kailua Kona HI 96740
Attention: General Manager
Fax: 808-326-9401
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with a copy to:
Steven L. Berson, Esq.
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto
California 94304-1050
Fax: 415-493-6811
(b) If to Cultor, to:
Cultor Ltd.
Kyllikkiportti 2
FIN-00240 Helsinki
Finland
Attention: General Counsel
Facsimile Transmission No.: 358-0-1344-1472
with a copy to:
Robert A. McTamaney, Esq.
Carter, Ledyard & Milburn
2 Wall Street
New York, New York 10005
Facsimile Transmission No.: 212-732-3232
(d) Any notice or other documents sent by post properly addressed as
aforesaid shall be deemed served seven days after the date of posting if sent
air mail, one day after the date of posting (if sent domestically by domestic
courier) and three days after the date of posting (if sent internationally by
international courier) and any notice or other documents sent by telecopied
facsimile shall be deemed served on the day of transmission.
(d) Notices shall be served on the parties hereto at their addresses
set out herein or at such other addresses as may be substituted for the purpose
by a notice duly served in accordance with the provisions of this Section 2.1.
Section 2.2 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement between the Parties with respect to the matters dealt with herein and
supersedes any previous agreements or understandings between the Parties in
relation to such matters. Each of the Parties acknowledges that in entering
into this Agreement, it has not relied on any representation or warranty save as
expressly set out herein or in any document referred to herein. No variation of
this Agreement shall be valid or effective unless made by one or more
instruments in writing and signed by the Parties.
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Section 2.3 AMENDMENTS. This Agreement may be amended, modified or
supplemented only by a written instrument that refers expressly to this
Agreement and that is executed by an authorized signatory of both of the Parties
hereto. Any modification or variation of this Agreement other than in accordance
with this Section 2.3 shall be null and void.
Section 2.4 GOVERNING LAW; ARBITRATION.
(a) Any dispute or claim arising out of or in relation to this
contract, or the interpretation, making, performance, breach, validity or
termination thereof, shall be finally settled by binding arbitration in New
York, New York under the International Arbitration Rules of the American
Arbitration Association (the "ARBITRATION RULES") by three arbitrators. All
arbitrators must be impartial, independent, and experienced in international
arbitration. Within 30 days after commencement of the arbitral proceedings,
each Party shall select one arbitrator and, if possible, the Parties will
jointly agree on a third arbitrator who will be the chair of the arbitral
tribunal. If either Party fails to appoint an arbitrator, or if the Parties do
no jointly agree on a third arbitrator within such 30-day period, the AAA shall,
within 15 days thereafter, appoint such arbitrator(s) from the International
Panel.
(b) This contract shall be governed, interpreted and construed
exclusively under the substantive laws of the State of New York. The
arbitrators shall apply New York law to the merits of any dispute or claim,
without referenced to rules of conflict of law. The arbitrators shall have the
power to decide all questions of arbitrability. The arbitration proceedings
shall be governed by federal arbitration law and by the Arbitration Rules,
without reference to state arbitration law. At the request of either Party, the
arbitrators will enter an appropriate protective order to maintain the
confidentiality of information produced or exchanged in the course of the
arbitration proceedings. Judgment on the award rendered by the arbitrators may
be entered in any court having jurisdiction thereof.
(c) The Parties may apply to any court of competent jurisdiction for
a temporary restraining order, preliminary injunction, or other interim or
conservatory relief, as necessary, without breach of this arbitration agreement
and without any abridgment of the powers of the arbitrators.
(d) The arbitrators will award to the prevailing party, if any, as
determined by the arbitrators, all of its costs and fees, including, without
limitation, AAA administrative fees, arbitrator fees, travel expenses, out-of-
pocket expenses (including, without limitation, such expenses as copying,
telephone, facsimile, postage, and courier fees), witness fees, and attorneys'
fees and disbursements.
Section 2.5 ASSIGNMENT. The rights and liabilities conferred by this
Agreement are personal to the Parties hereto and, except as specifically
provided in this Agreement, may not be assigned or transferred in whole or in
part by either Party hereto without the prior consent in writing of the other
Party, except that either may, with the consent of the other not to be
unreasonably withheld, assign its rights and obligations hereunder to any of its
affiliates, provided that in such event the assigning
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party shall not be relieved of its obligations hereunder. Notwithstanding
anything else in this Section 2.5 or this Agreement to the contrary, the Parties
each understand and agree that Aquasearch desires to change the jurisdiction of
its incorporation from Colorado to Delaware, that a proposal to approve such
reincorporation in Delaware will be included in the proxy statement to be
distributed to Aquasearch's shareholders in connection with Aquasearch's Annual
Shareholders' Meeting, and that, if the reincorporation proposal is approved by
Aquasearch's Shareholders at the Aquasearch Annual Shareholders' Meeting,
Aquasearch will proceed to effect the reincorporation as soon as possible
thereafter. Aquasearch and Cultor each expressly approve of the reincorporation
and agree that Aquasearch may assign all of its rights, duties, obligations,
covenants and benefits under this Agreement to the Delaware successor
corporation, and that, upon consummation of such assignment, all of the rights,
obligations, covenants and benefits of Cultor and such Delaware successor
corporation shall be the same as if this Agreement had been entered into between
Cultor and such Delaware successor corporation on the date hereof.
Section 2.6 BINDING EFFECT. This Agreement shall be binding upon, and
shall inure to the benefit of and be enforceable by, the Parties hereto and
their respective successors and permitted assigns. This Agreement is for the
sole benefit of the Parties hereto and nothing in this Agreement, expressed or
implied, is intended or shall be construed to confer upon any Person, other than
the Parties and successors and assigns permitted by Section 2.5, any right,
remedy or claim under or by reason of this Agreement.
Section 2.7 WAIVERS. (a) No failure to exercise and no delay in
exercising on the part of any Party hereto any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any right, power or privilege preclude any other or further exercise
thereof.
(b) In the event that any Party hereto shall expressly waive any
breach, default or omission hereunder, no such waiver shall apply to, or operate
as, a waiver of similar breaches, defaults or omissions or be deemed a waiver of
any other breach, default or omission hereunder.
(c) The rights and remedies of each of the Parties in connection
herewith are cumulative and are not exclusive of any rights or remedies provided
by law or equity.
Section 2.8 PARTIAL INVALIDITY. The respective restrictions on the
Parties herein contained are considered reasonable by the Parties but, if any
such restriction shall be found void but would be valid if some part thereof
were deleted or the period or area of application reduced, such restriction
shall apply with such modification as may be necessary to make it valid and
effective.
Section 2.9 SEVERABILITY. If at any time any provision of this
Agreement is or becomes invalid, illegal or unenforceable in any respect under
the law of any jurisdiction, neither the validity, legality or enforceability of
the remaining provisions shall in any way be affected or impaired thereby.
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Section 2.10 COSTS AND ATTORNEYS' FEES. Each Party will pay its own
costs and attorneys' fees incident to this Agreement and the transactions
contemplated hereby (except as may be specifically provided for herein) whether
or not these transactions shall be consummated.
Section 2.11 PUBLIC ANNOUNCEMENTS. Neither of the Parties hereto shall
issue any press release or otherwise publicize this Agreement or the
transactions contemplated herein without the approval of the other Party, which
approval shall not be unreasonably withheld. Cultor recognizes that Aquasearch
is a public company subject to disclosure requirements under applicable law.
The approval of a specific press release or other form of publicity shall not
constitute approval of subsequent press releases or publicity.
Section 2.12 ENGLISH LANGUAGE. This Agreement is in the English language
only, which language shall be controlling in all respects. All communications
and notices hereunder shall be in the English language
Section 2.13 UNITED STATES CURRENCY. All amounts described under this
Agreement and all transactions between the Parties in connection with this
Agreement shall be paid in U.S. dollars.
Section 2.14 ACKNOWLEDGMENT OF LIABILITY AND REMEDY PROVISIONS. Each
Party recognizes and agrees that the liability and remedy limitations in this
Agreement are material bargained for bases of this Agreement and that they have
been taken into account and reflected in determining the consideration to be
given by each Party under this Agreement and in the decision by each Party to
enter into this Agreement.
Section 2.15. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, and by ether Party on separate counterparts, each of which as
so executed and delivered shall be deemed an original but all of which together
shall constitute one and the same instrument, and it shall not be necessary in
making proof of this Agreement as to any Party hereto
[SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to
be signed by their authorized representatives as of the date first written
above.
Attest: CULTOR LTD.
By: By:
------------------------------ ---------------------------------
(Secretary) Name:
Title:
Attest: AQUASEARCH, INC.
By: By:
------------------------------ ---------------------------------
(Secretary) Name:
Title:
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