<PAGE>
As filed with the Securities and Exchange Commission on November 9, 1999
Registration No. 333-90187
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
AMENDMENT NO. 1
TO
FORM SB-2
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Originally filed on November 2, 1999
----------------------
AQUASEARCH, INC.
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
----------------------
COLORADO 2833 33-034535
(STATE OR OTHER (PRIMARY STANDARD (I.R.S. EMPLOYER
JURISDICTION OF INCORPORATION INDUSTRIAL CLASSIFICATION IDENTIFICATION
OR ORGANIZATION) CODE NUMBER) NUMBER)
73-4460 QUEEN KA'AHUMANU HIGHWAY
SUITE 110
KAILUA-KONA, HAWAII 96740
(808) 326-9301
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
----------------------
MARK E. HUNTLEY, PH.D.
73-4460 QUEEN KA'AHUMANU HIGHWAY
SUITE 110
KAILUA-KONA, HAWAII 96740
(808) 326-9301
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
----------------------
COPIES TO:
STEVEN L. BERSON, ESQ.
MICHAEL S. RUSSELL, ESQ.
WILSON SONSINI GOODRICH & ROSATI
PROFESSIONAL CORPORATION
650 PAGE MILL ROAD
PALO ALTO, CA 94304
(650) 493-9300
FAX: (650) 461-5375
----------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From
time to time as the selling shareholders may decide.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. /X/
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities
Act of 1933 registration statement number of the earlier effective registration
statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule
434, please check the following box. / /
Pursuant to Rule 416, there are also being registered such additional
shares and warrants as may become issuable pursuant to the anti-dilution
provisions of the warrants.
----------------------
<PAGE>
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration
statement shall become effective on such date as the Securities and
Exchange Commission, acting pursuant to said Section 8(a), may determine.
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 24. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Article Eight Section (b) of our Articles of Incorporation provides for the
indemnification of our officers and directors to the extent permitted by law and
further provides that our officers and directors shall not be liable to us for
any loss or damage suffered by us on account of any action taken by him as a
director or officer of the corporation if he acted in good faith and in a manner
reasonably believed to be in or not opposed to our best interests and, with
respect to a criminal matter, if he had no reasonable cause to believe that his
conduct was unlawful.
We have entered into indemnification agreements with our directors and executive
officers, and intend to enter into indemnification agreements with any new
directors and executive officers in the future.
ITEM 25. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the various expenses in connection with the sale
and distribution of the securities being registered. All of the amounts shown
are estimates except the Securities and Exchange Commission registration fee.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee................... $ 1,909.00
Printing and engraving expenses....................................... 10,000.00
Legal fees and expenses............................................... 20,000.00
Accounting fees and expenses.......................................... 4,000.00
Miscellaneous expenses................................................ 4,091.00
-------------
Total........................................................ $ 40,000.00
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-------------
</TABLE>
ITEM 26. RECENT SALES OF UNREGISTERED SECURITIES
During the period from September 1998 to September 1999, we sold an aggregate of
$4,734,800 aggregate principal amount of convertible notes bearing interest at
10% per annum. The holders of the convertible notes have an option to convert
their convertible notes into our common stock. The convertible notes provide
that upon conversion, the holders would receive warrants to purchase shares of
our common stock. The warrants have an exercise price of $0.40-$0.50 per share
and term of three years. As of September 30, 1999, some of the holders of these
convertibles notes and other outstanding convertible note holders (amounting to
$2,719,800 aggregate principal amount) exercised their option to convert their
convertible notes into shares of common stock. Upon conversion of the
outstanding principal of, and interest on , the convertible notes, we issued
16,829,822 shares of common stock and also issued 2,719,800 warrants in
connection thereto. These transactions were exempt from registration under the
Securities Act of 1933 pursuant to Section 4(2). No underwriters were involved
in these transactions.
During the period from June 1997 to September 1998, we sold $3,305,000 aggregate
principal amount of convertible notes to a total of twelve "accredited
investors" as defined under Rule 501 of the Securities Act. In connection with
the issuance of these notes, we also issued to these investors a total of
3,305,000 warrants to purchase a total of 3,418,713 shares of common stock. The
warrants have an exercise price of $0.50 per share and have a term of three
years. Between July and September 1998, the investors converted the convertible
notes into 20,075,648 shares of common stock. The number of shares and warrants
issued to the investors is as follows: Jane Eliza Weaver Brickey, 595,510
shares, 100,000 warrants; Margret Daul, 599,510 shares, 100,000 warrants; Jean
Farmer, 570,184 shares, 100,000 warrants; Earl S. Fusato Revocable Trust, Earl
S.
II-1
<PAGE>
Fusato, Trustee, 4,821,340 shares, 760,000 warrants; Gregory Kowal, 3,205,128
shares, 500,000 warrants; Linda and Joe Maloney, 584,409 shares, 100,000
warrants; James Stewart Miller Revocable Trust, James Stewart Miller,
Trustee, 142,468 shares, 25,000 warrants; Lance and Elaine Nakamura,
1,574,673 shares, 250,000 warrants; Viiu Niiler and Charles Cole, 324,265
shares, 50,000 warrants; Scott Family Trust, Tom Scott, Trustee, 663,102
shares, 120,000 warrants; Jean Sawyer Weaver Trust, Jean S. Weaver, Trustee,
6,391,223 shares, 1,100,000 warrants; and Sarah Anna Randsell Weaver, 599,837
shares, 100,000 warrants. No underwriters were used in these transactions.
This offering was made under Section 4(2) of the Securities Act.
From February to March 1998, we sold to Earl S. Fusato, our Chief Financial
Officer, Secretary and a member of our Board of Directors, certain short-term
notes in the aggregate principal amount of $250,000. The notes are payable in
full on September 30, 1998. In connection with the issuance of the notes, we
issued to Mr. Fusato warrants to purchase a total of 113,713 shares of our
common stock. The warrants have an exercise price of $0.50 per share and have
a term of three years. No underwriters were used. This offering was made
under Section 4(2) of the Securities Act.
In March 1998, we issued 108,000 shares of common stock at $0.25 per share to
Dr. Pearn Niiler, one of our directors, for prior services rendered to us as a
member of the Scientific Advisory Board. No underwriters were used. This
offering was made under Section 4(2) of the Securities Act.
In March 1998, Tana Acalay, formerly our Chief Financial Officer, exercised
options to purchase 466,862 shares of our common stock at the exercise price of
$0.063 per share. The total proceeds to us were $29,179. No underwriter was
used. This offering was made pursuant to the exemption provided under Section
4(2) of the Securities Act.
From January to March 1998, we issued an aggregate of 126,000 shares of common
stock at $0.25 per share to the following members of the Scientific Advisory
Board in exchange for services to us: Dr. Edward A. Laws -- 17,000 shares; Dr.
Robert R. Bidigare -- 17,000 shares; Dr. William Fenical -- 17,000 shares; Dr.
John Bardach -- 17,000 shares; Dr. Farooq Azam -- 12,000 shares; Dr. Malcolm
Gregory -- 37,000 shares; and Dr. Aladar Szalay -- 9,000 shares. No underwriters
were used. This offering was made under Section 4(2) of the Securities Act.
In October 1997, we issued 50,000 shares of common stock at $0.25 per share to
Edward E. David, Sc.D., for consulting services rendered as a member of our
Board of Directors. No underwriter was used. This offering was made pursuant to
the exemption provided under Section 4(2) of the Securities Act.
In October 1997, we sold 50,000 shares of common stock at $0.25 per share to
Edward E. David, Sc.D., a member of our Board of Directors. The total proceeds
to us from this transaction were $12,500. No underwriter was used. This offering
was made pursuant to the exemption provided under Section 4(2) of the Securities
Act.
In October 1997, we issued 10,000 shares of common stock at $0.25 per share to
Oskar R. Zaborsky, Ph.D., for consulting services rendered as a member of our
Board of Directors. No underwriter was used. This offering was made pursuant to
the exemption provided under Section 4(2) of the Securities Act.
II-2
<PAGE>
In October 1997, we sold 10,000 shares of common stock at $0.25 per share to
Oskar R. Zaborsky, Ph.D., a member of our Board of Directors. The total proceeds
to us from this transaction were $2,500. No underwriter was used. This offering
was made pursuant to the exemption provided under Section 4(2) of the Securities
Act.
In September 1997, Tana Acalay, formerly our Chief Financial Officer, exercised
options to purchase 463,250 shares of our common stock at the exercise price of
$0.06 per share. The total proceeds to us were $28,953 in the form or a three
year note receivable bearing interest of five percent per annum. No underwriter
was used. This offering was made pursuant to the exemption provided under
Section 4(2) of the Securities Act.
In April 1997, we sold 1,000,000 shares of common stock at $0.21 per share to
Earl S. Fusato, our Chief Financial Officer, Secretary and a member of our Board
of Directors. The total proceeds to us were $210,000. No underwriter was used.
This offering was made pursuant to the exemption provided under Section 4(2) of
the Securities Act.
During the period from October 1996 to April 1997, we sold an aggregate of
5,044,570 units, consisting of one share of common stock and one common stock
purchase warrant, in a private placement under Section 4(2) of the Securities
Act of 1933, as amended, to the following persons at the following prices:
Bernadette Ahuna - 23,255 units at $0.43 per unit; Dorothy Ako - 33,333 units at
$0.30 per unit; Amy M. Matsuda Revocable Living Trust - 38,461 units at $0.26
per unit; Steve Berson - 95,238 units at $0.21 per unit and 22,727 units at
$0.22 per unit; Alfredo Briones - 23,255 units at $0.43 per unit; David Coury -
90,909 units at $0.22 per unit; Earl S. Fusato Revocable Living Trust - 115,384
units at $0.26 per unit; William and Bernice Frankoff - 17,857 units at $0.28
per unit; Edward Fukuyama - 45,454 units at $0.22 per unit; Ralph Fuller -
23,255 units at $0.43 per unit; Solomon and Alice Goldsmith - 33,333 units at
$0.30 per unit; Francis Gray - 45,454 units at $0.22 per unit; Christopher and
Lynne Harrison - - 75,000 units at $0.23 per unit; Hawaiian Trust Company, Ltd -
416,666 units at $0.24 per unit; Winston Healy - 34,482 units at $0.29 per unit;
Dan Hirashima - 68,965 units at $0.29 per unit; J.W.A. Buyers Revocable Living
Trust - 41,666 units at $0.24 per unit; Raymond & Anna Kam - 90,909 units at
$0.22 per unit, 86,956 units at 0.23 per unit and 41,666 units at $0.24 per
unit; Gerald and Patricia Kammier - 45,454 units at $0.22 per unit; Gregory
Kowal - 476,190 units at $0.21 per unit; Eddy Louis - 37,037 units at $0.27 per
unit; Alan & Amina Miyasaki - 24,390 units at $0.41 per unit; Grace Morrow -
108,695 units at $0.23 per unit, 153,846 units at $0.26 per unit and 38,461
units at $0.26 per unit; David Murakami - 173,809 units at $0.21 per unit,
28,000 units at $0.25 per unit and 20,833 units at $0.24 per unit; Donald and
Kimika Nakama - 238,095 units at $0.21 per unit; Lance and Elaine Nakamura
- -125,000 units at $0.32 per unit and 136,363 units at $0.22 per unit; Calvin and
Eunice Nakata - 100,000 units at $0.22 per unit; Clarence and Margaret Okimoto -
45,454 units at $0.22 per unit, 11,869 units at $0.23 per unit and 12,000 units
at $0.25 per unit; Charles Parl - 43,478 units at $0.23 per unit; Paul F. Glenn
Revocable Trust - 37,037 units at $0.27 per unit; Michie Proctor - 113,636 units
at $0.22 per unit, 119,047 units at $0.21 per unit and 454,545 units at $0.22
per unit; Scott Family Trust - 113,636 units at $0.44 per unit and 178,571 units
at $0.28 per unit; Gene Seltzer - 43,478 units at $0.23 per unit; Yoshiko Takara
- - 23,255 units at $0.43 per unit; Izidor Tischler - 43,478 units at $0.23 per
unit; Joseph Triggs - 232,558 units at $0.43 per unit; Bruce Tyson - 45,454
units at $0.22 per unit; Robert Walker - 47,619 units at $0.21 per unit; Eileen
Winter - 50,000 units at $0.25 per unit; Alvin Kuo Wong - 41,666 units at $0.36
per unit; and Russell Yamamoto - 217,391 units at $0.23 per unit. The warrants
have a term of three years and are exercisable at $1.00 per share, subject to
adjustment. The warrants are redeemable by us at $.01 per
II-3
<PAGE>
warrant during their three-year exercise period upon 30 days' notice anytime
that the closing bid price per share of the common stock exceeds $1.50 per share
(subject to adjustment) for 20 trading days out of 30 consecutive trading days
ending on the third day prior to the date of the notice of redemption. The gross
proceeds from this offering were $1,275,980. The Placement Agent for this
offering, First Honolulu Securities, Inc., received total commissions of
$76,558.80 (equal to 6% of the gross proceeds from the sale of the units) and
302,674 common stock purchase warrants (equal to 6% of the number of units
sold). The terms of the warrants issued to First Honolulu Securities, Inc. are
identical to the terms of the warrants issued to the purchasers in the offering.
In March 1997, John Emerick, our Vice President of Operations, exercised options
to purchase 25,000 shares of our common stock at the exercise price of $0.06 per
share. The total proceeds to us were $1,562 in the form of a three year note
receivable bearing interest of five percent per annum. No underwriter was used.
This offering was made pursuant to the exemption provided under Section 4(2) of
the Securities Act.
In February 1997, we issued 4,000 shares of common stock at $0.46 per share to
Albert Leong in exchange for services to us. No underwriters were used. This
offering was made under Section 4(2) of the Securities Act.
In November 1996, we issued an aggregate of 18,760 shares of common stock at an
average price of $0.64/share to the following members of the Scientific Advisory
Board in exchange for services to us: Dr. Edward A. Laws -- 4,690 shares; Dr.
Robert R. Bidigare -- 4,690 shares; Dr. William Fenical -- 4,690 shares; and Dr.
John Bardach -- 4,690 shares. No underwriters were used. This offering was made
under Section 4(2) of the Securities Act.
In October 1996, we sold 400,000 shares of common stock at $0.50 per share to
Cultor pursuant to the Cultor Stock Subscription Agreement. The total proceeds
to us from this transaction were $200,000. No underwriters were used. This
offering was made in reliance on the exemption provided under Section 4(2) of
the Securities Act.
ITEM 27. EXHIBITS
<TABLE>
<S> <C>
3.1* Articles of Incorporation
3.2+ Articles of Amendment to Articles of Incorporation
3.3* By-laws
4.1+ Form of Bridge Loan Note
4.2+ Form of 1997 Warrant
4.3++ Form of Convertible Note
4.4++ Form of Warrant
4.5++ Form of Note and Warrant Purchase Agreement
5.1## Opinion of Wilson Sonsini Goodrich & Rosati
10.1# Distribution and Development Agreement between Cultor
Ltd. and Aquasearch, dated May 14,
1996
10.2# Stock Subscription Agreement between Cultor Ltd. and
Aquasearch, dated May 14, 1996
10.3+ The Amended Keahole Point Facilities Use Agreement
dated August 22, 1996 by and between The National
Energy Laboratory of Hawaii Authority and Aquasearch
10.4$ Letter of Intent between C. Brewer and Company
Limited and Aquasearch
10.5 Amendment to Distribution and Development Agreement
between Cultor Ltd. and Aquasearch, dated June 14,
1999
23.1## Consent of Ernst & Young LLP
II-4
<PAGE>
23.2** Consent of Wilson Sonsini Goodrich & Rosati, P.C.
</TABLE>
- ----------------------------
* Incorporated by reference to the exhibit filed with our Annual Report
on Form 10-KSB filed October 31, 1995.
# Incorporated by reference to the exhibit filed with our Current Report
on Form 8-K filed September 13, 1996.
+ Incorporated by reference to the exhibit filed with our Annual Report
on Form 10-KSB for the fiscal year ended October 31, 1996.
++ Incorporated by reference to the exhibit filed with Amendment No. 1 to
our registration statement on Form SB-2 filed October 28, 1998.
$ Incorporated by reference to our Current Report on Form 8-K dated
November 13, 1996.
** Included in Exhibit 5.1 filed in the initial filing on November 2,
1999.
## Previously filed in the initial filing on November 2, 1999.
ITEM 28. UNDERTAKING
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by us of expenses incurred or paid by one or
more of our directors, officers or controlling persons in the successful defense
of any action, suit or proceeding) is asserted by one or more of our directors,
officers or controlling persons in connection with the securities being
registered, we will, unless in the opinion of our counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by us is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
We hereby undertake to:
(1) file during any period in which we offer or sell securities, a
post-effective amendment to this registration statement to:
(a) include any prospectus required by Section 10(a)(3) of the
Securities Act;
(b) reflect in the prospectus any facts or events which,
individually or together, represent a fundamental change
in the information in the registration statement.
Notwithstanding the foregoing, any increase or decrease in
volume of securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high end of
the estimated maximum offering range may be reflected in a
form of prospectus filed with the Securities and Exchange
Commission pursuant to Rule 424(b) if, in the aggregate,
the changes in volume and price represent no more than a
20% change in the maximum aggregate offering price set
forth in the "Calculation of the Registration Fee" table
in the effective registration statement; and
(c) include any additional or changed material information on
the plan of distribution.
II-5
<PAGE>
(2) for purposes of determining liability under the Securities
Act, treat each post-effective amendment as a new registration statement of the
securities offered, and the offering of the securities at that time to be the
bona fide offering.
(3) file a post-effective amendment to remove from registration
any of the securities that remain unsold at the end of the offering.
II-6
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Act of 1933,
the registrant certifies that it has reasonable grounds to believe that it
meets all the requirements of filing on Form SB-2 and authorized this
Amendment No. 1 to this registration statement to be signed on its behalf by
the undersigned, in the City of Honolulu, State of Hawaii, on November 9,
1999.
AQUASEARCH, INC.
/s/ Mark E. Huntley
-----------------------------------------------
Mark E. Huntley
President and Chief Executive Officer
In accordance with the requirements of the Securities Act of 1933, this
registration statement was signed by the following persons in the capacities and
on the dates stated.
SIGNATURE DATE
--------- ----
/s/ Mark E. Huntley
- ----------------------------------------- November 9, 1999
Mark E. Huntley
Chairman of the Board, Chief Executive Officer
and President
(Principal Executive Officer)
Pearn P. Niiler*
- ----------------------------------------- November 9, 1999
Pearn P. Niiler
Director
Edward E. David*
- ----------------------------------------- November 9, 1999
Edward E. David
Director
/s/ Earl S. Fusato
- ----------------------------------------- November 9, 1999
Earl S. Fusato
Director and Chief Financial Officer
(Chief Accounting Officer)
David Tarnas*
- ----------------------------------------- November 9, 1999
David Tarnas
Director
* By: /s/ Earl S. Fusato
- -----------------------------------------
Earl S. Fusato
Attorney-in-Fact
(Signing under the authority
of a Power of Attorney
previously filed with the
Securities and Exchange Commission.)
II-7
<PAGE>
INDEX TO EXHIBITS
3.1* Articles of Incorporation
3.2+ Articles of Amendment to Articles of Incorporation
3.3* By-laws
4.1+ Form of 1996 Bridge Loan Note
4.2+ Form of 1997 Warrant
4.3++ Form of Convertible Note
4.4++ Form of Warrant
4.5++ Form of Note and Warrant Purchase Agreement
5.1## Opinion of Wilson Sonsini Goodrich & Rosati
10.1# Distribution and Development Agreement between Cultor Ltd. and
Aquasearch, dated May 14, 1996
10.2# Stock Subscription Agreement between Cultor Ltd. and
Aquasearch, dated May 14, 1996
10.3+ The Amended Keahole Point Facilities Use Agreement dated
August 22, 1996 by and between The National Energy Laboratory
of Hawaii Authority and Aquasearch
10.4$ Letter of Intent between C. Brewer and Company Limited and
Aquasearch
10.5 Amendment to Distribution and Development Agreement between
Cultor Ltd. and Aquasearch, dated June 14, 1999
23.1## Consent of Ernst & Young LLP
23.2** Consent of Wilson Sonsini Goodrich & Rosati, P.C.
- ---------------------
* Incorporated by reference to the exhibit filed with our Annual Report
on Form 10-KSB filed October 31, 1995.
# Incorporated by reference to the exhibit filed with our Current Report
on Form 8-K filed September 13, 1996.
+ Incorporated by reference to the exhibit filed with our Annual Report
on Form 10-KSB for the fiscal year ended October 31, 1996.
++ Incorporated by reference to the exhibit filed with Amendment No. 1 to
our registration statement on Form S-B filed October 28, 1998.
$ Incorporated by reference to our Current Report on Form 8-K dated
November 13, 1996.
** Included in Exhibit 5.1 filed in the initial filing on November 2,
1999.
## Previously filed in the initial filing on November 2, 1999.
<PAGE>
EXHIBIT 10.5
THIS AGREEMENT is made the 14th of June, 1999
BETWEEN
1. CULTOR OY, a corporation organised under the laws of Finland
whose address is Keilaranta 9, P.O. Box 99, FIN-02151, Finland ("Cultor"); and
2. AQUASEARCH, INC, a Colorado corporation whose address is 77-4680
Queen Ka'ahumanu Highway, Suite 110, Kailua-Kona, Hawaii, USA 96740
("Aquasearch")
WHEREAS
(A) Cultor and Aquasearch entered into a Distribution and
Development Agreement dated 14th May 1996 (the "Distribution and Development
Agreement") under which the parties agreed to collaborate on the further
development and eventual marketing and distribution of a micro algae-based
carotenoid for use in animal feed and animal nutrition applications ("the
Product").
(B) Concurrently the parties also entered a Stock Subscription
Agreement (the "Stock Subscription Agreement") under which under which Cultor
subscribed and purchased 400,000 shares in Aquasearch at a total subscription
price of USD 200,000 (the "Cultor Aquasearch shares").
(C) The parties now wish to vary and amend the terms and conditions of
the above agreements as set out below.
IT IS AGREED as follows:
1. (a) Cultor or its nominee shall, within twelve (12) months of the
date of this Agreement, purchase from Aquasearch an amount of USD200,000
worth of the Product based on a price of USD1,800 per kilogram of total
Astaxanthin. Astaxanthin content of the Product shall be at least 2% of the
Product, as determined by spectrophotometric analysis of the Product
extracted in DMSO. The Product shall be stabilised with the antioxidant
ethoxyquin, at an inclusion rate of 5000 ppm, unless otherwise agreed by both
parties. The obligations set out under Section 3.3 of the Distribution and
Development Agreement shall be waived.
(b) The purchase of the Product will be subject to Aquasearch
fulfilling all its obligations hereunder and the necessary registrations,
availability, stability and homogeneity of the Product so that it is suitable
for use as a pigment for animal feed as required by Cultor.
(c) Payment for the Product shall be offset against the repurchase
of shares by Aquasearch or its nominee under clause 3(a).
(d) Cultor shall be free to sell the Product as it may in its
absolute discretion decide.
<PAGE>
(e) For a period of 24 months Cultor agree not to buy any Product
or any identical product to the Product from any other supplier if the price,
quality, availability and other terms offered by Aquasearch are equal or
better than those offered by the other supplier.
2. (a) Within twelve (12) months of the date of this Agreement,
whether itself or via a third party, Aquasearch shall repurchase the Cultor
Aquasearch shares that remain, if any, after the application of the offset
described under 1(c). The price to be paid by Aquasearch for each share shall
be the original price paid by Cultor of USD0.50 per share.
(b) Within six (6) months from the date of this Agreement,
Aquasearch shall remove any and all encumbrances on the sale of Cultor
Aquasearch shares so that Cultor may trade any shares not repurchased by
Aquasearch on the open market as it may in its absolute discretion decide. If
at any time the bid price of Aquasearch shares exceeds USD 0.50 per share,
then Aquasearch shall immediately approve Cultor's request to remove any and
all encumbrances on the sale of Cultor Aquasearch shares. The removal of such
encumbrances on the sale Cultor Aquasearch shares must, under U.S. securities
regulations, be initiated by Cultor, who must make a formal request, in
writing, for the removal of such encumbrances. Such request should be
addressed to American Securities Transfer and Trust, Denver, Colorado
(Attention: Nicole Hunt; tel: 1-303-234-5300; fax: 1-3030-234-5340). The
request should refer to the removal of "restrictive legends" as being in
accordance with this Agreement, and should request approval by Aquasearch.
3. (a) Save as otherwise set out in this Agreement, Aquasearch shall
be free to sell the Product as it may wish without further commission or
royalty to Cultor.
(b) If Aquasearch decides to enter into any exclusive supply
arrangement with any third party or enters any supply arrangement which
represents 30% or more of Aquasearch's production capacity then Aquasearch
will first offer identical terms to Cultor. If Cultor does not indicate its
wish to enter into such arrangements within thirty (30) days of the offer,
Aquasearch shall be free to enter into an agreement with a third party.
4. As of the signing of this Agreement the Ocean Color Option as
defined under the Distribution and Development Agreement shall lapse.
5. (a) As soon as reasonably possible following signature of this
Agreement, Cultor agree to assign its trademark "Aquaxan" to Aquasearch for
an amount equal to the registration and maintenance costs and expenses
incurred by Cultor up to and including the date of assignment, not to exceed
70,000 Finnish Marks. All transfer costs associated in such an assignment
shall be borne by Aquasearch. For the avoidance of doubt Aquasearch will be
liable for all future costs and expenses in relation to this trademark.
(b) Save as expressly set out in this Agreement or as required by
law, Aquasearch shall not disclose the terms of this Agreement or any
existing arrangements or use Cultor's name or any of its trademarks for any
purpose whatsoever without the prior written consent of Cultor. Such approval
shall be at Cultor's absolute discretion and subject to such conditions as
Cultor in its absolute discretion may require.
-2-
<PAGE>
6. The Parties agree that during the term of this Agreement, where it
is convenient and reasonable to do so, they will co-operate in any proposed
pigment feeding trials. The terms of such co-operation will be negotiated in
good faith on terms to be agreed save that any additional costs of including
the Product in such trials will be paid by Aquasearch. Aquasearch will be
free to use the results of any such trial in the future marketing of the
Product.
7. The term of this Agreement shall be twenty four (24) months from
the date of this Agreement. At the end of the term the Parties agree that the
Distribution and Development Agreement and the Stock Subscription Agreement
shall terminate without any further compensation being payable by either
Party.
8. (a) Save as set out in this Agreement the terms and conditions of
the Distribution and Development Agreement and the Stock Subscription
Agreement shall remain in full force and effect.
(b) In the event of any conflict between the terms of this
Agreement and the terms of either the Distribution and Development Agreement
or the Stock Subscription Agreement, the terms of this Agreement shall take
precedent.
9. This Agreement shall be governed and construed in accordance with
the laws of the State of New York.
IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be
executed by their authorized representatives as of the date first above
written.
Signed for and on behalf of
CULTOR OYJ
/s/ Tommy Laakso
- ---------------------------------------
Name: Tommy Laakso
Title: VP Finance
/s/ Jyrki Prusila
- ---------------------------------------
Name: Jyrki Prusila
Title: General Counsel, Corporate Staff
Signed for and on behalf of
AQUASEARCH INC
/s/ Mark Huntley
- ---------------------------------------
Name: Mark Huntley
Title: President & CEO
-3-
