SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
AMENDMENT NO. 1
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1998
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE TRANSITION PERIOD FROM _______ TO _________
Commission File No. 0-19844
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PARACELSIAN, INC.
------------------------------------------------------
(Name of small business issuer in its charter)
Delaware 16-1399565
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
222 Langmuir Laboratories, Cornel Technology Park, Ithaca, New York 14850
- --------------------------------------------------------------------------------
(Address of principal executive offices) Zip Code
Issuer's telephone number: (607) 257-4224
- --------------------------------------------------------------------------------
Securities registered under Section 12(b) of the Act: None
Securities registered under Section 12(g) of the Act:
Common Stock, $.01 par value
- --------------------------------------------------------------------------------
(Title of class)
Redeemable Common Stock Purchase Warrants
- --------------------------------------------------------------------------------
(Title of class)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
<PAGE>
Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]
Issuer's revenues for its most recent fiscal year were $ 55,730.
The aggregate market value of the voting stock (based on the closing price of
such stock on NASD OTC Electronic Bulletin Board) held by non-affiliates of the
Registrant at December 22, 1998 was approximately $7,637,595.
There were 18,690,253 shares of Common Stock and 1,736,870 Redeemable Common
Stock Purchase Warrants outstanding at December 22, 1998.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS IN
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
The Corporation's Bylaws provide that the Board shall be divided into
three classes, each containing as nearly equal a number of directors as
possible, each elected to staggered three-year terms of office and thereafter
directors elected to succeed those directors in each class shall be elected for
a term of office of three years.
Nine individuals serve as directors, with three elected to serve a one
year term until the Annual Meeting of Shareholders in 1999 ("Class I
Directors"), three elected to serve a two year term until the Annual Meeting of
Shareholders in 2000 ("Class II Directors"), and three elected to serve a three
year term until the Annual Meeting of Shareholders in the year 2001 ("Class III
Directors"), or until their successors are elected and qualified. Other than Mr
Israelsen, all of the current Board members were appointed to the Board
following the Biomar International, Inc. ("Biomar") investment in the
Corporation on January 14, 1998. Mr Israelsen was nominated for election to the
Board at the 1998 annual meeting.
Listed below are the names of the Class I Directors, together with
their ages at December 31, 1998, and their principal occupations during the past
five years.
NAME AND AGE PRINCIPAL OCCUPATION OVER LAST FIVE YEARS
T. Nelson Campbell 34 Chairman, Biomar International, Inc.
Chapel Hill, North Carolina since 1996;
prior to that, Vice President,
Paracelsian, Inc. from 1995 to 1996;
prior to that, President, Pacific
Liaisons, Ithaca, NY (until its merger
into Paracelsian in 1995).
James J. Dunseith 65 Retired in 1991; formerly President and
Chairman of Shields Asset Management, New
York.
Hira Gurtoo 60 President, Professional Financial
Advisers, Inc., Amherst, New York since
1992; Cancer Research Scientist, Roswell
Park Cancer Institute, Buffalo, New York
until February 1998.
Listed below are the names of the Class II Directors, together with
their ages at December 31, 1998, and their principal occupations during the past
five years.
NAME AND AGE PRINCIPAL OCCUPATION OVER LAST FIVE YEARS
Lianping He 51 President, Chinese Service Center for
Scholarly Exchange, Inc. and President,
New York Service Center for Chinese Study
Fellows, Inc. since 1995; prior to that,
Director, Chinese Education Association
for International Exchange and Vice
President, Chinese Service President, for
Scholarly Exchange, both of Beijing,
China since 1993; ; prior to that,
Director, US-China Exchange and First
Secretary, Chinese Embassy, Washington,
D.C.
Robert A. Buchanan, MD 66 Medical Consultant, Dainippon
Pharmaceutical U.S.A. Group, Teaneck, NJ
since 1996; Medical Consultant,
IBRD-Rostrum Global, Inc., Irvine, CA
from 1992 to 1997; prior to that, Medical
Consultant, Mylan Pharmaceutical Co.,
Morgantown, West Virginia from 1992 to
1994.
Thomas D. Livingston 46 President and Co-founder, TLC Management
Corp. since 1992; Chief Financial
Officer, Biomar International, Inc.
Chapel Hill, North Carolina since 1997.
Listed below are the names of the Class III Directors, together with
their ages at December 31, 1998, and their principal occupations during the past
five years.
NAME AND AGE PRINCIPAL OCCUPATION OVER LAST FIVE YEARS
T. Colin Campbell 64 Jacob Gould Schurman Professor of
Nutritional Sciences, Cornell University,
Ithaca. NY; Founder and Director, Pacific
Health Laboratories (Nasdaq Symbol PHLI)
since 1995; Founder and Director, Biomar
Intentional, Inc., Chapel Hill, North
Carolina.
Bernard M. Landes 49 President and Chairman of the Board,
Paracelsian since February, 1998; prior
to that, Vice President and General
Manager, Alacer Corporation, Foothill
Ranch, CA (manufacturer of dietary
supplements) since 1995; prior to that,
Director of Marketing, Health Valley
Foods, Irwindale, CA (manufacturer of
natural foods).
Loren Israelsen 43 President, LDI Group (dietary supplement
and phytomedicine consultants) since
1996; also, Executive Director, Utah
Natural Products Alliance since 1992;
prior to 1996, private practice of law.
Other than Dr. Campbell and Mr. Campbell, who are father and son, no
proposed director or principal officer is related to another director or
officer. Other than Dr. Campbell, no proposed director is a director of any
company with a class of securities registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
REPORTS OF BENEFICIAL OWNERSHIP
Directors and principal officers of the Corporation are required by
federal law to file reports with the Securities Exchange Commission regarding
the amount of and changes in their beneficial ownership of the Shares. To the
Corporation's knowledge, all such required reports have been timely filed except
for Mr. Dunseith who filed his initial statement of beneficial ownership late.
2
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ITEM 10. EXECUTIVE COMPENSATION
The cash and cash equivalent compensation paid by the Corporation during the
fiscal year ended September 30, 1998 to its chief executive officer is as
follows:
<TABLE>
<CAPTION>
Long Term Compensation
--------------------------
Annual Compensation Awards Payouts
------------------- ---------- ---------
Other Restricted
Annual Stock Option/ LTIP All Other
Name Salary Bonus Compensation Awards SARS Payouts Compensation
and Position Year ($) ($) ($)(1) ($) (#) (#) ($)
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Bernard M. Landes 1998 115,769 -0- -0- -0- 800,000 -0- -0-
President and CEO
</TABLE>
(1) The value of non-cash compensation paid to the chief executive officer of
the Corporation during the fiscal years disclosed did not exceed 10% of his cash
compensation.
The following table contains information with respect to stock options to
purchase shares of the Common Stock granted to the chief executive officer
during 1998.
Option/SAR Grants in Last Fiscal Year
Individual Grants
-------------------------------------
Number of Percent of
securities total
underlying Options/SARs
Options/ granted to Exercise or
SARs employees base price Expiration
Name Granted(#) in 1998(%) ($/Share) Date
- ---- ---------- ---------- --------- ----
Bernard M. Landes 800,000 100 0.22 1/15/08
The following table contains information with respect to stock options to
purchase shares of the Common Stock held by the chief executive officer during
1998.
<TABLE>
<CAPTION>
Aggregated Option Exercises in 1998 and September 30, 1998, Option Values
-------------------------------------------------------------------------
Number of Unexercised Value of Unexercised
Shares Options In-the-Money Options
Acquired on Value at September 30, 1998 at September 30, 1998(1)
Name Exercise(#) Realized($) Exercisable/Unexercisable Exercisable/Unexercisable
- ---- ----------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C> <C> <C>
Bernard M. Landes -0- -0- 100,000 / 700,000 $40,500 / $283,500
</TABLE>
(1) Value represents the difference between the fair market value and the
exercise price for the unexercised options at September 30, 1998.
3
<PAGE>
EMPLOYMENT AGREEMENT
The Corporation entered into an employment contract with Bernard M.
Landes (the "Officer") to be President and Chief Executive Officer of the
Corporation as of January 15, 1998 (the "Agreement"). The initial employment
term under the Agreement is for one year. On each anniversary of the effective
date of the Agreement, the term of the Agreement shall automatically be extended
for an additional one year period beyond the then effective expiration date
unless written notice from the Corporation or the Officer is received 90 days
prior to the anniversary date advising the other that the Agreement shall not be
further extended. In addition, the Officer has the option to terminate the
Agreement upon sixty days' written notice to the Corporation. Under the
Agreement, the Officer receives an annual cash salary, with annual adjustments
and discretionary bonuses as determined by the Board. The Officer's compensation
pursuant to the Agreement for 1998 is $175,000 and he is eligible for a bonus of
up to $50,000. The Officer was also granted 100,000 shares of the Common Stock
and granted options to acquire an additional 800,000 shares provided certain
performance criteria are satisfied. Under the Agreement, the Officer is entitled
to all fringe benefits which are generally provided by the Corporation for its
employees.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
To the Corporation's knowledge, as of December 22, 1998, listed below
are the only shareholders of the Corporation that owned more than five percent
of the Shares. The following table sets forth certain information as to these
shareholders:
SHARES PERCENT OF
NAME OF CURRENTLY SHARES
SHAREHOLDER BENEFICIALLY OWNED BENEFICIALLY OWNED(2)
- ----------- ------------------ ---------------------
Biomar International, Inc. 6,025,575 (1) 32.24%
100 Europa Drive, Suite 599
Chapel Hill, NC 27514
T. Colin Campbell 6,292,255 (1) 33.67%
100 Europa Drive, Suite 599
Chapel Hill, NC 27514
T. Nelson Campbell 6,318,420 (1) 33.80%
100 Europa Drive, Suite 599
Chapel Hill, NC 27514
The Travelers Insurance Company 1,390,000 7.16%
205 Columbus Boulevard
Hartford, CT 06183
(1) Dr. Campbell and Mr. Campbell are the principal shareholders of Biomar
and their total shares beneficially owned include the Shares owned by
Biomar.
(2) The calculation of the percentage of class beneficially owned is based
on the 18,690,253 Shares which were issued and outstanding at December
22, 1998.
4
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The following table shows, as of December 22, 1998, the number of
Shares owned by each director and by all directors and principal officers of the
Corporation as a group. The address of each of the named individuals below is
c/o Paracelsian, Inc., 222 Langmuir Laboratories, Cornell Technology Park,
Ithaca, New York 14850.
NAME OF SHARES CURRENTLY PERCENT OF SHARES
BENEFICIAL OWNER BENEFICIALLY OWNED(1) BENEFICIALLY OWNED(2)
- ---------------- --------------------- ---------------------
Robert A. Buchanan, MD 9,095 *
T. Colin Campbell 6,292,255 33.67%
T. Nelson Campbell 6,318,420 33.80%
James J. Dunseith 18,246 *
Hira Gurtoo 9,095 *
Lianping He 5,846 *
Loren Israelson 4,000 *
Bernard M. Landes 203,000 1.08%
Thomas D. Livingston 208,095 1.11%
All Director and Principal
Officers as a Group (9 persons) 7,153,477 38.07%
* Denotes beneficial ownership of less than one percent of the Shares.
(1) To the Corporations's knowledge, each person has sole voting and
investment power over the Shares shown as beneficially owned by such
person, except for the following Shares which the individual indicates
that he or she shares voting and/or investment power: Dr. Colin
Campbell - 6,025,575 Shares; Mr. Nelson Campbell - 6,025,575 Shares;
and directors and principal officers as a group - 6,025,575 Shares. Dr.
Campbell and Mr. Campbell are the principal shareholders of Biomar and
their total shares beneficially owned include the Shares owned by
Biomar.
(2) The calculation of the percentage of class beneficially owned is based
on the 18,690,253 Shares which were issued and outstanding at December
22, 1998 plus the number of Shares capable of being issued to that
individual (if any) and to directors and principal officers as a group
within 60 days of the voting record date upon the exercise of stock
options held by each of them (if any) and by the group, respectively.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
5
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
EXHIBIT NO. DESCRIPTION
----------- -----------
3(i) Amendment to Articles of Incorporation
10.1 Stock Purchase Agreement among the Company
and certain investors dated January 14, 1998
10.2 Registration Rights Agreement among the
Company and certain investors dated January
14, 1998
10.3 Stock Purchase Agreement among the Company
and John A. Williams dated December 15, 1998
(a) REPORTS ON FORM 8-K.
July 9, 1998: Reported an agreement with R.P. Scherer
North America, a division of R.P. Scherer
International Corporation, that established
R.P. Scherer North America as the exclusive
marketing and distribution agent for
Paracelsian's BioFIT (Bio Functional
Integrity Testing) Certification program in
the Dietary Supplement and OTC market
segments in North America.
August 12, 1998: Announced (i) a second agreement that
extended the R.P. Scherer agreement on a
worldwide basis; and (ii)announced that its
Board of Directors approved an extension
through September 6, 1999, of the publicly
traded warrants for common stock which were
a dividend in September 1993. The warrants
were set to expire on September 6, 1998. In
addition to extending the warrants, the
Board of Directors approved changes to the
exercise price of the warrants. The exercise
price was reduced from $3.25 to $1.75
through December 1998. The exercise price
will increase to $2.50 from January 1, 1999
to April 30, 1999 and to $3.25 from May 1,
1999 to September 6, 1999.
6
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act,
the Registrant caused this amendment to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: January 27, 1999
PARACELSIAN, INC.
By: /s/ BERNARD M. LANDES
-----------------------------------------
Bernard M. Landes
President and Chief Executive Officer
In accordance with the Exchange Act, this amendment has been
signed below by the following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ BERNARD M. LANDES President, Chief Executive Officer and January 27, 1999
- ----------------------------------- Chairman of the Board
Bernard M. Landes Director
/s/ T. NELSON CAMPBELL Director January 27, 1999
- -----------------------------------
T. Nelson Campbell
Director January __, 1999
- -----------------------------------
James J. Dunseith
/s/ HIRA GURTOO Director January 27, 1999
- -----------------------------------
Hira Gurtoo
/s/ LIANPING HE Director January 27, 1999
- -----------------------------------
Lianping He
/s/ ROBERT A BUCHANAN, MD Director January 27, 1999
- -----------------------------------
Robert A. Buchanan, MD
/s/ THOMAS D. LIVINGSTON Director January 27, 1999
- -----------------------------------
Thomas D. Livingston.
/s/ T. COLIN CAMPBELL Director January 27, 1999
- -----------------------------------
T. Colin Campbell
Director January __, 1999
- -----------------------------------
Loren Israelsen
</TABLE>
EXHIBIT 3(i)
STATE OF DELAWARE
CERTIFICATE OF AMENDMENT OF CERTIFICATE OF INCORPORATION
OF PARACELSIAN, INC.
SECTION 242
PARACELSIAN, INC. (the "Corporation"), a corporation organized and existing
under and by virtue of the General Corporation Law of the State of Delaware DOES
HEREBY CERTIFY:
FIRST: That at a meeting of the Board of Directors of the Corporation
resolutions were duly adopted setting forth a proposed amendment of the
Certificate of Incorporation of said corporation, declaring said amendment to be
advisable and recommending said amendment for consideration at the annual
meeting of the stockholders of said corporation. The resolution setting forth
the proposed amendment is as follows:
RESOLVED, that the Fourth Article of the Certificate of Incorporation of this
corporation be amended by changing said Article to read as follows:
"FOURTH: The total number of shares of stock which the Corporation
shall have the authority to issue is Thirty Six Million (36,00,000)
being Thirty Five Million (35,000,000) shares of common stock with a
par value of $0.01 per share and One Million (1,000,000) shares of
preferred stock with a par value of $0.01.
SECOND: That thereafter, pursuant to resolution of its Board of Directors, the
annual meeting of the stockholders of said corporation was duly called and held
upon notice in accordance with the General Corporation Law of the State of
Delaware of which meeting the necessary number of shares as required by statue
were voted in favor of the amendment.
THIRD: That said amendment was duly adopted in accordance with the provisions of
the General Corporation Law of the State of Delaware.
FOURTH: That the capital of said corporation shall not be reduced under or by
reason of said amendment.
EXHIBIT 10.1
STOCK PURCHASE AGREEMENT
This Agreement ("Agreement") is entered into this 14th day of January,
1998, by and between Biomar International, Inc., a Delaware corporation with its
principal offices in Chapel Hill, North Carolina (the "Purchaser") and
Paracelsian, Inc., a Delaware corporation with its principal offices in New York
(the "Corporation").
WHEREAS, the Purchaser desires to purchase from the Corporation 3,571,429 newly
issued shares of the common stock of the Corporation (the "Shares") on the terms
and subject to the conditions set forth herein; and
WHEREAS, the Board of Directors of the Corporation, due to the financial
condition of the Corporation, desires to sell to the Purchaser the Shares on the
terms and subject to the conditions set forth herein.
NOW THEREFORE, IT IS AGREED AS FOLLOWS:
SECTION 1. PURCHASE OF SHARES.
1.1 PURCHASE OF SHARES. Subject to the terms and conditions set forth
herein, on or before January 15, 1998 (the "Purchase Date"), the Purchaser will
purchase 3,571,429 Shares and the Corporation will issue the Shares purchased by
the Purchaser, said Shares constituting approximately thirty percent (30%) of
all of the then issued and outstanding capital stock of the Corporation as of
the Purchase Date. On the Closing Date (as hereinafter defined) the Purchaser
will also receive warrants to purchase up to an additional $520,000 in common
stock, in increments of at least $100,000, at a per share price equal to $0.175
(the "Warrants"). The Warrants are in the form attached as Exhibit 1.1A and will
be exercisable at any time prior to their expiration which will occur 90 days
from the date the Shares and Warrants are registered with the Securities and
Exchange Commission ("SEC") as provided under the Registration Rights Agreement
in the form attached as Exhibit 1.1B. To the extent that the exercise of the
Warrants will require an increase in the number of authorized shares, the
Corporation will use its best efforts to obtain shareholder approval of an
increase in the authorized shares sufficient to accommodate issuance of the
shares under the Warrant.
1.2 PURCHASE PRICE. The Purchaser will pay to the Corporation the sum of
five hundred thousand dollars ($500,000) for the Shares (referred herein to as
the "Purchase Price").
1.3 PAYMENT OF PURCHASE PRICE. The Purchase Price will be paid as follows:
(i) the Purchaser will pay to the Corporation the sum of fifty thousand dollars
($50,000) on the Closing Date; and (ii) the Purchaser will deliver the sum of
four hundred and fifty thousand dollars ($450,000) on the Purchase Date.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF CORPORATION. As a material
inducement to the Purchaser to enter into this Agreement and purchase the
Shares, the Corporation represents and warrants that to the best of the
knowledge of the Corporation:
2.1 ORGANIZATION AND CORPORATE POWER. The Corporation is a corporation duly
incorporated and validly existing under the laws of the State of Delaware and
the Corporation is qualified to do business in every jurisdiction in which its
ownership of property or conduct of business requires it to qualify, except
where any failure does not have a material adverse effect on the Corporation.
The Corporation has all requisite corporate power and authority and all material
licenses, permits, and authorizations necessary to own and operate its
properties and to carry on its business as now conducted, except where any
failure does not have a material adverse effect on the Corporation. The copies
7
<PAGE>
of the Corporation's articles of incorporation and bylaws have been furnished to
the Purchaser and such copies reflect all amendments made thereto at any time
prior to the date of this Agreement and such copies are correct and complete.
2.2 CAPITAL STOCK AND RELATED MATTERS. (a) The authorized capital stock of
the Corporation consists of twenty million (20,000,000) Shares, twelve million,
four thousand, eight hundred and sixty seven (12,004,867) of which are issued
and outstanding and are owned, of record, as shown on the books of the
Corporation on December 31, 1997 and no other shares, common or otherwise, of
the Corporation are issued and outstanding. Except as listed on Schedule 2.2,
the Corporation does not have outstanding and has not agreed, orally or in
writing, to issue any shares or securities convertible or exchangeable for any
shares, nor does it have outstanding nor has it agreed, orally or in writing, to
issue any options or rights to purchase or otherwise acquire its shares. The
Corporation is not subject to any obligation (contingent or otherwise) to
repurchase or otherwise acquire or retire any of its shares. Except as listed on
Schedule 2.2, the Corporation has not violated any applicable securities laws or
regulations in connection with the offer or sale of its securities other than
violations that have been, or will before the Closing have been, corrected by
post-issuance filings. All of the outstanding shares of the Corporation's
capital stock are validly issued, fully paid, and nonassessable. Upon purchase
thereof pursuant to the terms of this Agreement, the Purchaser will have, good
and marketable title to the Shares, free and clear of all security interests,
liens, encumbrances, or other restrictions or claims, subject only to
restrictions as to marketability imposed by securities laws. Assuming that the
representations in Section 3.6 are true and correct, the Corporation has not
violated or will not violate any applicable securities laws in connection with
the offer or sale of the Shares to the Purchaser hereunder.
(b) Except as noted on Schedule 2.2 or where the failure to file would
not have had or could not have a material and adverse effect on the Corporation,
the Corporation has filed all reports, registrations and statements, together
with any amendments required to be made with respect thereto, that were required
to be filed with the SEC or any other governmental or regulatory authorities
having jurisdiction over the Corporation. All such reports, registrations and
statements filed by the Corporation with the SEC or other such regulatory
authority are collectively referred to herein as the "Reports." As of their
respective dates, each Report complied in all material respects with all the
statutes, rules and regulations enforced or promulgated by the regulatory
authority with which it was filed and did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading. The Corporation has not been notified that
any such Report was deficient in any material respect as to form or content.
2.3 SUBSIDIARIES. The Corporation has no operating subsidiaries or
affiliated companies and does not otherwise own or control, directly or
indirectly, any equity interest in any operating corporation or entity.
2.4 CONDUCT OF BUSINESS; LIABILITIES. Except as set forth in Schedule 2.4,
the Corporation is not in default under, and no condition exists that with
notice or lapse of time would constitute a default of the Corporation under (i)
any mortgage, loan agreement, evidence of indebtedness, or other instrument
evidencing borrowed money to which the Corporation is a party or by which the
Corporation or the properties of the Corporation are bound or (ii) any judgment,
order, or injunction of any court, arbitrator, or governmental agency that would
reasonably be expected to affect materially and adversely the business,
financial condition, or results of operations of the Corporation taken as a
whole.
2.5 FINANCIAL STATEMENTS. (a) The audited balance sheet and income
statement of the Corporation as of the 30th day of September, 1997, in the form
attached to this Agreement as Exhibit 2.5(A) and the income statement for the
period ending the 30th day of September, 1997, in the form attached to this
Agreement as Exhibit 2.5(B) (collectively the "Audited Financial Statements"),
fairly presents in all material respects the financial position of the
Corporation as of the 30th day of September, 1997 and has been prepared in
accordance with generally accepted accounting principles, consistently applied,
and in a manner substantially consistent with prior financial statements of the
Corporation. The latest unaudited, balance sheet and income statement of the
Corporation as of the 31st day of
8
<PAGE>
December, 1997 and for the month then ended, in the form attached hereto as
Exhibit 2.5(C) ("Latest Financial Statements"), fairly presents in all material
respects the financial position of the Corporation as of the 31st day of
December, 1997 and the results of operations for the one month then ended and
have been prepared in accordance with generally accepted accounting principles
consistently applied and in a manner substantially consistent with the Audited
Financial Statements, except for differences resulting from normally occurring
audit adjustments, including, but not limited to, income tax and tax accrual
adjustments, or as noted in the Latest Financial Statements or the notes
thereto. Except as contemplated by or permitted under this Agreement, there are
no adjustments that would be required on review of the Latest Financial
Statements that would, individually or in the aggregate, have a material
negative effect upon the Corporation's reported financial condition.
(b) The audited balance sheet of the Corporation as of the 30th day of
September, 1997, reflects a tangible book value of not less than two million two
hundred thousand dollars ($2,200,000). The unaudited financial statements of the
Corporation as of November 30, 1997, reflect not less than $500,000 in cash and
cash equivalents and no more than $275,000 in payables (excluding any contingent
liabilities arising out of any lawsuits which have been disclosed in the filings
made with the SEC), obligations and other liabilities. Monthly, recurring
operational expenses of the Corporation do not exceed $75,000.
2.6 NO UNDISCLOSED LIABILITIES. Except for (i) liabilities and obligations
incurred in the ordinary course of business since the 31st day of December, 1997
("Statement Date"), and (ii) liabilities or obligations described in Schedule
2.6, neither the Corporation nor any of the property of the Corporation is
subject to any material liability or obligation that was required to be included
or adequately reserved against in the Latest Financial Statements or described
in the notes thereto and was not so included, reserved against, or described.
2.7 ABSENCE OF CERTAIN CHANGES. Except as contemplated or permitted by this
Agreement or as described in Schedule 2.7, since the Statement Date there has
not been:
2.7.1 Any material adverse change in the business, financial condition,
operations, or assets of the Corporation;
2.7.2 Any damage, destruction, or loss, whether covered by insurance or
not materially adversely affecting the properties or business of the
Corporation;
2.7.3 Any sale or transfer by the Corporation of any tangible or
intangible asset other than in the ordinary course of business, any mortgage or
pledge or the creation of any security interest, lien, or encumbrance on any
such asset, or any lease of property, including equipment, other than tax liens
with respect to taxes not yet due and contract rights of customers in inventory;
2.7.4 Any declaration, setting aside, or payment of a distribution in
respect of or the redemption or other repurchase by the Corporation of any stock
of the Corporation;
2.7.5 Any material transaction not in the ordinary course of business
of the Corporation;
2.7.6 The lapse of any material trademark, assumed name, trade name,
service mark, copyright, or license or any application with respect to the
foregoing;
2.7.7 The grant of any increase in the compensation of officers or
employees (including any such increase pursuant to any bonus, pension,
profit-sharing, or other plan) other than customary increases on a periodic
basis or required by agreement or understanding in the ordinary course of
business and in accordance with past practice;
2.7.8 The discharge or satisfaction of any material lien or encumbrance
or the payment of any material liability other than current liabilities in the
ordinary course of business;
2.7.9 The making of any material loan, advance, or guaranty to or for
the benefit of any person except the creation of accounts receivable in the
ordinary course of business; or
2.7.10 An agreement to do any of the foregoing.
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2.8 TITLE AND RELATED MATTERS. Except as set forth in Schedule 2.8, the
Corporation has good and marketable title to all of its property, real and
personal, and other assets included in the Latest Financial Statements (except
properties and assets sold or otherwise disposed of subsequent to the Statement
Date in the ordinary course of business or as contemplated in this Agreement),
free and clear of all security interests, mortgages, liens, pledges, charges,
claims, or encumbrances of any kind or character, except (i) statutory liens for
property taxes not yet delinquent or payable subsequent to the date of this
Agreement and statutory or common law liens securing the payment or performance
of any obligation of the Corporation, the payment or performance of which is not
delinquent, or that is payable without interest or penalty subsequent to the
date on which this representation is given, or the validity of which is being
contested in good faith by the Corporation; (ii) the rights of customers of the
Corporation with respect to inventory under orders or contracts entered into by
the Corporation in the ordinary course of business; (iii) claims, easements,
liens, and other encumbrances of record pursuant to filings under real property
recording statutes; and (iv) as described in the Unaudited Statements or the
notes thereto.
2.9 LITIGATION. Except as set forth in Schedule 2.9, there are no material
actions, suits, proceedings, orders, investigations, or claims pending or, to
the best of the Corporation's knowledge, overtly threatened against the
Corporation or any of its property, at law or in equity, or before or by any
governmental department, commission, board, bureau, agency, or instrumentality;
the Corporation is not subject to any arbitration proceedings under collective
bargaining agreements or otherwise or, to the best of the Corporation's
knowledge, any governmental investigations or inquiries; and the Corporation has
received in writing no threat of any of the foregoing.
2.10 TAX MATTERS. Except as set forth on Schedule 2.10, (i) the Corporation
has prepared in a substantially correct manner and has filed all federal, state,
local, and foreign tax returns and reports heretofore required to be filed by
them and have paid all taxes shown as due thereon; and (ii) no taxing authority
has asserted any deficiency in the payment of any tax or informed the
Corporation that it intends to assert any such deficiency or to make any audit
or other investigation of the Corporation for the purpose of determining whether
such a deficiency should be asserted against the Corporation.
2.11 COMPLIANCE WITH LAWS. Except as listed on Schedule 2.11, the
Corporation is, in the conduct of its business, in substantial compliance with
all laws, statutes, ordinances, regulations, orders, judgments, or decrees
applicable to them, the enforcement of which, if the Corporation was not in
compliance therewith, would have a materially adverse effect on the business of
the Corporation, taken as a whole. The Corporation has received no notice of any
asserted present or past failure by the Corporation to comply with such laws,
statutes, ordinances, regulations, orders, judgments, or decrees.
2.12 NO BROKERS OR FINDERS. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement made by or
on behalf of the Corporation.
2.13 INSURANCE. Schedule 2.13 contains a list of each insurance policy
maintained by the Corporation with respect to its properties, assets, and
businesses, and each such policy is in full force and effect. The Corporation is
not in material default with respect to its obligations under any such policy
maintained by it. The Corporation has not been notified of the cancellation of
any of the insurance policies listed on Schedule 2.13 or of any material
increase in the premiums to be charged for such insurance policies.
2.14 EMPLOYEES AND LABOR RELATIONS MATTERS. Except as set forth in Schedule
2.14 or as provided in this Agreement, no employee or former employee of the
Corporation is in violation of any material term of any employment contract,
patent disclosure agreement or any other contract or agreement relating to the
relationship of such employee with the Corporation or any other party because of
the nature of the business conducted or to be conducted by the Corporation. Each
employee or former employee of the Corporation with access to confidential or
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proprietary information has executed, or in the ordinary course will execute, a
proprietary information agreement obligating such employee to hold confidential
the Corporation's proprietary information. The Corporation has in all material
respects complied with all applicable state and federal laws related to
employment.
2.15 DISCLOSURE. Neither this Agreement nor any of the schedules,
attachments, written statements, documents, certificates, or other items
prepared or supplied to the Purchaser by or on behalf of the Corporation with
respect to this purchase contain any untrue statement of a material fact or omit
a material fact necessary to make each statement contained herein or therein not
misleading. The Corporation has not intentionally concealed any fact known to
have a material adverse effect upon the Corporation's existing or expected
financial condition, operating results, assets, customer relations, employee
relations, or business prospects taken as a whole.
2.16 POWER OF ATTORNEY. No material power of attorney or similar
authorization given by the Corporation is presently in effect.
2.17 ACCOUNTS RECEIVABLE. All accounts receivable of the Corporation
reflected in the Latest Financial Statements represent bona fide sales actually
made in the ordinary course of business.
2.18 AGREEMENTS AND COMMITMENTS. Schedule 2.18 contains a complete and
accurate list of each agreement, contract, instrument, and commitment (including
license agreements) to which the Corporation is a party that provides for
payments in excess of $10,000 per year or whose term is in excess of one year
and is not cancelable upon 30 or fewer days' notice without any liability,
penalty, or premium, other than a nominal cancellation fee or charge ("Third
Party Agreements"). Except as otherwise set forth in Schedule 2.18, the
Corporation is not in material default under any Third Party Agreements, nor, to
the Corporation's best knowledge, does there exist any event that, with notice
or the passage of time or both, would constitute a material default or event of
default by the Corporation under any Third Party Agreements.
2.19 PERSONAL PROPERTY. Without material exception, Schedule 2.19 contains
lists of all tangible personal property and assets owned or held by the
Corporation and used or useful in the conduct of the business of the
Corporation. Except as set forth in Schedule 2.19, the Corporation owns and has
good title to such properties and none of such properties is subject to any
security interest, mortgage, pledge, conditional sales agreement, or other lien
or encumbrance (except for liens for current taxes, assessments, charges, or
other governmental levies not yet due and payable). The Corporation has
delivered to the Purchaser copies of all leases and other agreements relating to
property described in Schedule 2.19 (including any and all amendments and other
modifications to such leases and other agreements) all of which are valid and
binding, and the Corporation is not in material default under any such leases or
agreements. Except as set forth in Schedule 2.19 and to the best of the
Corporation's knowledge, all material properties listed therein are generally in
good operating condition and repair (ordinary wear and tear excepted), are
performing satisfactorily, and are available for immediate use in the conduct of
the business and operations of the Corporation. To the best of the Corporation's
knowledge, all such tangible personal property is in compliance in all material
respects with all applicable statutes, ordinances, rules, and regulations. The
properties listed in Schedule 2.19 include substantially all such properties
necessary to conduct the business and operations of the Corporation as now
conducted.
2.20 INTELLECTUAL PROPERTY. The Corporation (i) owns or has the right to
use, free and clear of all liens, charges, claims and restrictions, those
patents, trademarks, service marks, trade names, copyrights, licenses, and other
intellectual property rights necessary for the operation of its businesses now
conducted or presently proposed to be conducted, and (ii) to its knowledge, and
except for the payments required in connection with those patents, trademarks,
service marks, trade names, copyrights, licenses and other intellectual property
rights listed on Schedule 2.20, is not obligated or under any liability
whatsoever to make any payments by way of royalties, fees or otherwise to any
owner or licensee of, or other claimant to, any patent, trademark, service mark,
trade name, copyright or other intangible asset, with respect to the use thereof
or in connection with the conduct of its business or otherwise. To the knowledge
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of the Corporation, the Corporation has not infringed upon nor is it infringing
upon any patent, trademark, service mark, trade name, copyright or other
intellectual property of any third party. The Corporation is not aware of any
violation by a third party of any of the Corporation's patents, licenses,
trademarks, service marks, trade names, copyrights, trade secrets or other
proprietary rights.
2.21 ERISA and Related Matters Schedule 2.21 sets forth a description of all
"Employee Welfare Benefit Plans" and "Employee Pension Benefit Plans" (as
defined in ss.ss. 3(1) and 3(2), respectively, of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA")) existing on the date hereof that are
or have been maintained or contributed to by the Corporation. Except as listed
on Schedule 2.21, the Corporation does not maintain any retirement or deferred
compensation plan, savings, incentive, stock option or stock purchase plan,
unemployment compensation plan, vacation pay, severance pay, bonus or benefit
arrangement, insurance or hospitalization program or any other fringe benefit
arrangement for any employee, consultant or agent of the Corporation, whether
pursuant to contract, arrangement, custom or informal understanding, which does
not constitute an "Employee Benefit Plan" (as defined in ss. 3(3) of ERISA), for
which the Corporation may have any ongoing material liability after Closing. The
Corporation does not maintain nor has it ever contributed to any Multiemployer
Plan as defined by ss. 3(37) of ERISA. The Corporation does not currently
maintain any Employee Pension Benefit Plan subject to Title IV of ERISA. There
have been no "prohibited transactions" (as described in ss. 406 of ERISA or ss.
4975 of the Code) with respect to any Employee Pension Benefit Plan or Employee
Welfare Benefit Plan maintained by the Corporation as to which the Corporation
has been a party. As to any employee pension benefit plan listed on Schedule
2.21 and subject to Title IV of ERISA, there have been no reportable events (as
such term is defined in ss. 4043 of ERISA).
2.22 OPERATING RIGHTS. The Corporation has all operating authority,
licenses, franchises, permits, certificates, consents, rights and privileges
(collectively "Licenses") as are necessary or appropriate to the operation of
its business as now conducted and which the failure to possess would have a
material adverse effect on the assets, operations or financial condition of the
Corporation. Except where any failure would not have a material adverse effect
on the Corporation, such Licenses are in full force and effect, no violations
have been or are expected to have been recorded in respect of any such licenses,
and no proceeding is pending or, to the knowledge of the Corporation, threatened
that could result in the revocation or limitation of any such licenses. The
Corporation has conducted its business so as to comply in all material respects
with all such Licenses.
2.23 TRANSACTIONS WITH AFFILIATES. Except for regular salary payments and
fringe benefits under an individual's compensation package with the Corporation,
none of the officers, employees, directors, or other affiliates of the
Corporation, or members of their families is a party to any agreements,
understandings, or proposed transactions with the Corporation. The Corporation
has not guaranteed or assumed any obligations of the Corporation's officers,
directors, or employees.
2.24 MINUTE BOOKS. Except as described on Schedule 2.24, the minute books of
the Corporation contain a materially complete summary of all meetings of
directors and shareholders since the time of incorporation and reflect all
transactions referred to in such minutes accurately in all material respects.
2.25 KNOWLEDGE. Notwithstanding anything to the contrary herein, to the
extent that any of the representations and warranties contained in this Section
2 shall have been breached and the fact or facts constituting such breach were
at the date hereof known to T. Colin Campbell and T. Nelson Campbell, then and
in such event, no breach shall be deemed to have occurred.
Section 3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. As a material inducement
to the Corporation to enter into this Agreement and sell the Shares, the
Purchaser hereby represents and warrants to the Corporation that to the best of
the knowledge of the Purchaser:
3.1 ORGANIZATION; POWER. The Purchaser is a corporation duly incorporated
and validly existing under the laws of the State of Delaware and has all
requisite corporate power and authority to enter into this Agreement and perform
its obligations hereunder.
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3.2 AUTHORIZATION. The execution, delivery, and performance by the
Purchaser of this Agreement and all other agreements contemplated hereby to
which the Purchaser is a party have been duly and validly authorized by all
necessary corporate action of the Purchaser, and this Agreement and each such
other agreement, when executed and delivered by the parties thereto, will
constitute the legal, valid, and binding obligation of the Purchaser enforceable
against it in accordance with its terms, except as enforceability may be limited
by applicable bankruptcy, insolvency, and similar statutes affecting creditors'
rights generally and judicial limits on equitable remedies.
3.3 NO CONFLICT WITH OTHER INSTRUMENTS OR AGREEMENTS. The execution,
delivery, and performance by the Purchaser of this Agreement and all other
agreements contemplated hereby to which the Purchaser is a party will not result
in a breach or violation of, or constitute a default under, its Articles of
Incorporation or Bylaws or any material agreement to which the Purchaser is a
party or by which the Purchaser is bound.
3.4 GOVERNMENTAL AUTHORITIES. Except as set forth in Schedule 3.4, (i) the
Purchaser is not required to submit any notice, report, or other filing with any
governmental or regulatory authority in connection with the execution and
delivery by the Purchaser of this Agreement and the consummation of the purchase
and (ii) no consent, approval, or authorization of any governmental or
regulatory authority is required to be obtained by the Purchaser or any
affiliate in connection with the Purchaser's execution, delivery, and
performance of this Agreement and the consummation of this purchase.
3.5 LITIGATION. There are no actions, suits, proceedings, or governmental
investigations or inquiries pending or, to the knowledge of the Purchaser,
threatened against the Purchaser or its properties, assets, operations, or
businesses that might delay, prevent, or hinder the consummation of this
purchase.
3.6 INVESTMENT REPRESENTATIONS
3.6.1 The Purchaser is a corporation in good standing and a
sophisticated investor that has substantial experience in evaluating and
investing in private placement transactions of securities in companies similar
to the Corporation so that the Purchaser is capable of evaluating the merits and
risks of the Purchaser's investment in the Corporation and has the capacity to
protect the Purchaser's own interests.
3.6.2 The Purchaser is acquiring the Shares for investment for the
Purchaser's own account, not as a nominee or agent, and not with the view to, or
for resale in connection with, any distribution thereof. The Purchaser
understands that the Shares to be purchased have not been registered under the
Securities Act of 1933 ("Securities Act") or the securities laws of any state by
reason of a specific exemption from the registration provisions of the
Securities Act and the applicable state securities laws, the availability of
which depends upon, among other things, the bona fide nature of the investment
intent and the accuracy of the Purchaser's representations as expressed herein.
The Purchaser is acquiring the Shares without expectation, desire, or need for
resale and not with the view toward distribution, resale, subdivision, or
fractionalization of the Shares except as provided under the Registration Rights
Agreement.
3.6.3 The Purchaser understands that the Shares to be purchased have
not been registered under Securities Act, or under any state securities law and
will contain a legend to that effect.
3.6.4 The Purchaser understands that the Shares cannot be resold in a
transaction to which the Securities Act and state securities laws apply unless
(i) subsequently registered under the Securities Act and applicable state
securities laws or (ii) exemptions from such registrations are available. The
Purchaser is aware of the provisions of Rule 144 promulgated under the
Securities Act which permit limited resale of shares purchased in a private
transaction subject to the satisfaction of certain conditions.
3.7 TAX LIABILITY. To the extent the Purchaser deems necessary, the
Purchaser has reviewed with the Purchaser's own tax advisors the federal, state,
local and foreign tax consequences of this investment and the transactions
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contemplated by this Agreement. The Purchaser relies solely on such advisors and
not on any statements or representations of the Corporation or any of its
agents. The Purchaser understands that the Purchaser (and not the Corporation)
shall be responsible for the Purchaser's own tax liability that may arise as a
result of this investment or the transactions contemplated by this Agreement.
3.8 DISCLOSURE. To the Purchaser's knowledge, this Agreement, with the
Exhibits hereto, when taken as a whole, does not contain any untrue statement of
a material fact concerning the Purchaser or omit to state a material fact
necessary in order to make the statements concerning the Purchaser contained
herein not misleading in light of the circumstances under which they were made.
3.9 LITIGATION. There are no actions, suits, proceedings or investigations
pending against the Purchaser or the Purchaser's properties before any court or
governmental agency (nor, to the Purchaser's knowledge, is there any threat
thereof) which would impair in any way the Purchaser's ability to enter into and
fully perform the Purchaser's commitments and obligations under this Agreement
or the transactions contemplated hereby.
3.10 COMPLIANCE WITH OTHER INSTRUMENTS. The execution, delivery and
performance of and compliance with this Agreement, and the issuance of shares
will not result in any material violation of, or conflict with, or constitute a
material default under, any Purchaser's articles of incorporation or bylaws or
any of the Purchaser's material agreements nor result in the creation of any
mortgage, pledge, lien, encumbrance or charge against any of the assets or
properties of the Corporation or the Shares.
Section 4. COVENANTS OF CORPORATION. The Corporation covenants and agrees with
the Purchaser that upon the reasonable request of the Purchaser hereto after the
Closing, the Corporation will take all action and will execute all documents and
instruments necessary or desirable to consummate and give effect to this
purchase. These include, by way of illustration and not by way of limitation,
the following:
4.1 Various conditions relating to filing, payment, and collecting of
refunds relating to taxes;
4.2 Prompt delivery of Corporate books and records;
4.3 Provisions relating to treatment of confidential proprietary
information obtained in the acquisition process; and
4.4 Dr. Thomas Tachovsky agrees to continue his employment with the
Corporation at not less than his present compensation for at least 30 days after
the Closing Date.
Section 5. AGREEMENTS. 5.1 As a material inducement to the Purchaser to enter
into this Agreement and purchase the Shares, the Corporation agrees to:
5.1.1 provide for the resignation of the current Board of Directors and
the appointment of the Purchaser's nominees to the Board of Directors of the
Corporation;
5.1.2 take such actions as are necessary to qualify and facilitate the
issuance of the Shares without a shareholder vote under any applicable law and
the rules and regulations of the applicable Nasdaq market system; and
5.1.3 provide prompt reimbursement by the Corporation to the Purchaser
for all reasonable legal and other out-of-pocket expenses incurred in connection
with the completion of this transaction.
5.1.4 indemnify the Purchaser from and against all losses, claims,
expenses and liabilities arising out of any breach of any representations,
warranties, covenants and agreements made by the Corporation in this Agreement.
Purchaser understands and agrees that the foregoing indemnification is the
Purchaser's sole and exclusive remedy with respect to any breach of any
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representations, warranties, covenants and agreements made by the Corporation in
this Agreement, except to the extent such breach could be expected to have a
material adverse effect on the future operations or financial condition of the
Corporation.
5.2 As a material inducement to the Corporation to enter into
this Agreement and issue the Shares, the Purchaser agrees to use its best
efforts to cause the Corporation to maintain director and officer liability
coverage in substantially the same amounts and with substantially the same
coverages as that maintained by the Corporation on the Closing Date for at least
three years.
SECTION 6. RELEASE. Dr. T. Colin Campbell, a principal in the Purchaser,
agrees not to pursue his claims in C.A. No. 15072 BB in the Court of Chancery in
New Castle County, State of Delaware (the "Lawsuit"). Dr. Campbell understands
that this Agreement is a full and final release of all claims stated in the
Lawsuit, including any claims which he may have or may contend that he may have,
and Dr. Campbell further understands that he is releasing all claims arising out
of or related to the Lawsuit that are known, unknown, suspected and unsuspected.
SECTION 7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF PURCHASER. Each and
every obligation of the Purchaser under this Agreement is subject to the
condition, at or before the Closing, that the Corporation will have furnished to
the Purchaser a certificate of an officer of the Corporation that its present
legal counsel has been instructed to deliver all files of the Corporation in its
possession to the Purchaser and, to the best of the knowledge of the officer,
all documents of the Corporation have been provided to the Purchaser.
SECTION 8. CLOSING.
8.1 TIME, PLACE, AND MANNER OF CLOSING. The closing ("Closing") will be
held at such time and place as the parties may agree, on January 12, 1998. At
the time of the Closing, the parties to this Agreement will exchange such
instruments and documents in order to determine whether the terms and conditions
of this Agreement have been satisfied. Upon the determination of each party that
its conditions to consummate this purchase have been satisfied or waived, the
Corporation shall deliver to the Purchaser the certificate(s) evidencing the
Shares, and the Purchaser shall deliver to the Corporation the monies referred
to in Section 1.3, in a manner to be agreed upon by the parties. After the
Closing, the Corporation will execute, deliver, and acknowledge all such further
instruments of transfer and conveyance and will perform all such other acts as
the Purchaser may reasonably request to effectively transfer the Shares.
8.2 CONSUMMATION OF CLOSING. All acts, deliveries, and confirmations
comprising the Closing regardless of chronological sequence shall be deemed to
occur contemporaneously and simultaneously upon the occurrence of the last act,
delivery, or confirmation of the Closing and none of such acts, deliveries, or
confirmations shall be effective unless and until the last of the same shall
have occurred. The time of the Closing has been scheduled to correspond with the
close of business at the principal office of the Corporation and, regardless of
when the last act, delivery, or confirmation of the Closing shall take place,
the transfer of the Shares shall be deemed to occur as of the close of business
at the principal office of the Corporation on the date of the Closing.
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SECTION 10. MISCELLANEOUS PROVISIONS.
10.1 AMENDMENT AND MODIFICATION. Subject to applicable law, this Agreement
may be amended, modified, or supplemented only by a written agreement signed by
the parties.
10.2 WAIVER OF COMPLIANCE; CONSENTS
10.2.1 Any failure of any party to comply with any obligation,
covenant, agreement, or condition herein may be waived by the party entitled to
the performance of such obligation, covenant, or agreement or who has the
benefit of such condition, but such waiver or failure to insist upon strict
compliance with such obligation, covenant, agreement, or condition will not
operate as a waiver of, or estoppel with respect to, any subsequent or other
failure.
10.2.2 Whenever this Agreement requires or permits consent by or on
behalf of any party hereto, such consent will be given in a manner consistent
with the requirements for a waiver of compliance as set forth above.
SECTION 11. WAIVER. Failure of either party at any time to require
performance of any provision of this Agreement shall not limit the party's right
to enforce the provision, nor shall any waiver of any breach of any provision be
a waiver of any succeeding breach of any provision or a waiver of the provision
itself for any other provision.
SECTION 12. LAW GOVERNING. This Agreement shall be governed by and
construed in accordance with the laws of the State of North Carolina.
SECTION 13. ATTORNEY FEES. In the event any suit or action is brought by
any party under this Agreement to enforce any of its terms, or in any appeal
therefrom, it is agreed that the prevailing party shall be entitled to
reasonable attorneys fees to be fixed by the trial court, and/or appellate
court.
SECTION 14. PRESUMPTION. This Agreement or any section thereof shall not
be construed against any party due to the fact that said Agreement or any
section thereof was drafted by said party.
SECTION 15. COMPUTATION OF TIME. In computing any period of time pursuant
to this Agreement, the day of the act, event or default from which the
designated period of time begins to run shall be included, unless it is a
Saturday, Sunday, or a legal holiday, in which event the period shall begin to
run on the next day which is not a Saturday, Sunday or a legal holiday, in which
event the period shall run until the end of the next day thereafter which is not
a Saturday, Sunday or legal holiday.
SECTION 15. TITLES AND CAPTIONS. All article, section and paragraph titles
or captions contained in this Agreement are for convenience only and shall not
be deemed part of the context or affect the interpretation of this Agreement.
SECTION 16. PRONOUNS AND PLURALS. All pronouns and any variations thereof
shall be deemed to refer to the masculine, feminine, neuter, singular or plural
as the identity of the Person or Persons may require.
SECTION 17. ENTIRE AGREEMENT. This Agreement contains the entire
understanding between and among the parties and supersedes any prior
understandings and agreements among them respecting the subject matter of this
Agreement.
SECTION 18. AGREEMENT BINDING. This Agreement shall not be binding upon
the successors and assigns of the parties hereto.
SECTION 19. FURTHER ACTION. The parties hereto shall execute and deliver
all documents, provide all information and take or forbear from all such action
as may be necessary or appropriate to achieve the purposes of this Agreement.
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SECTION 20. GOOD FAITH, COOPERATION, AND DUE DILIGENCE. The parties hereto
covenant, warrant and represent to each other good faith, complete cooperation,
due diligence and honesty in fact in the performance of all obligations of the
parties pursuant to this Agreement. All promises and covenants are mutual and
dependent.
SECTION 21. COUNTERPARTS. This Agreement may be executed in several
counterparts and all so executed shall constitute one Agreement, binding on all
the parties hereto even though all the parties are not signatories to the
original or the same counterpart.
SECTION 22. PARTIES IN INTEREST. Nothing herein shall be construed to be
the benefit of any third party, nor is it intended that any provision shall be
for the benefit of any third party.
SECTION 23. SAVINGS CLAUSE. If any provision of this Agreement, or the
application of such provision to any person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to persons or circumstances other than those as to which it is held invalid,
shall not be affected thereby.
[The remainder of this page left blank intentionally.]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first written above.
Biomar International, Inc.
By: /s/ T. Nelson Campbell
----------------------------
T. Nelson Campbell
Chairman of the Board
Paracelsian, Inc.
By: /s/ Thomas Tachovsky
----------------------------
Dr. Thomas Tachovsky
President and Chief Executive Officer
Agreed and consented to by:
/s/ T. Colin Campbell
- ---------------------------
Dr. T. Colin Campbell
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EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement, dated as of January 14, 1998 (the
"Agreement"), is by and between PARACELSIAN, INC., a Delaware corporation with
its principal offices in New York (the "Company"), and BIOMAR INTERNATIONAL,
INC., a Delaware corporation with its principal offices in North Carolina (the
"Investor").
WITNESSETH:
WHEREAS, pursuant to the terms of a Stock Purchase Agreement (the
"Purchase Agreement"), dated the date hereof, between the Company and the
Investor, the Investor is investing in newly issued shares of the common stock
of the Company;
WHEREAS, it is a condition to the obligations of the Investor under the
Purchase Agreement that this Agreement be executed by the parties hereto, and
the parties are willing to execute this Agreement and to be bound by the
provisions hereof;
NOW, THEREFORE, in consideration of the foregoing, the agreements set
forth below, and the parties' desire to provide for continuity of ownership of
the Company to further the interests of the Company and its present and future
stockholders, the parties hereby agree with each other as follows:
1. DEFINITIONS. As used in this Agreement, the following
terms shall have the following
respective meanings:
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency at the time administering the Securities
Act.
"Common Stock" shall mean the common stock of the Company, as
constituted as of the date of this Agreement.
"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 at the time.
"Holder" shall mean an Investor owning or having the right to
acquire Restricted Stock or any transferee of rights under this Agreement under
Section 13.
"Registration Expenses" shall mean all expenses incurred in
connection with a registration statement, including, without limitation, all
registration and filing fees, printing expenses, fees and disbursements of
counsel and independent public accountants for the Company, fees and expenses
(including counsel fees) incurred in connection with complying with state
securities or "blue sky" laws, fees of the National Association of Securities
Dealers, Inc., transfer taxes, fees of transfer agents and registrars, costs of
insurance, and fees and disbursements of one counsel for the sellers of
Restricted Stock, but excluding any Selling Expenses.
"Restricted Stock" shall mean the mean the "Shares," the
"Warrants" (both as defined in the Purchase Agreement) and the Common Stock to
be issued under the Warrants.
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"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.
"Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Restricted Stock which are
incurred in connection with a registration statement, plus any portion of
Registration Expenses required by law to be paid by the selling shareholder.
2. RESTRICTIVE LEGEND. Each certificate representing Restricted
Stock shall be stamped or otherwise imprinted with a legend substantially in the
following form:
THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933. THE CORPORATION WILL NOT TRANSFER THIS
CERTIFICATE UNLESS (i) THERE IS AN EFFECTIVE REGISTRATION
COVERING THE SHARES REPRESENTED BY THIS CERTIFICATE UNDER THE
SECURITIES ACT OF 1933 AND ALL APPLICABLE STATE SECURITIES
LAWS, (ii) IT FIRST RECEIVES A LETTER FROM AN ATTORNEY,
ACCEPTABLE TO THE BOARD OF DIRECTORS OR ITS AGENTS, STATING
THAT IN THE OPINION OF THE ATTORNEY THE PROPOSED TRANSFER IS
EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND
UNDER ALL APPLICABLE STATE SECURITIES LAWS, OR (iii) THE
TRANSFER IS MADE PURSUANT TO RULE 144 UNDER THE SECURITIES ACT
OF 1933.
3. NOTICE OF PROPOSED TRANSFER. Prior to any proposed transfer of
any Restricted Stock or other shares of capital stock of the Company (other than
under the circumstances described in Sections 4 or 5), the Holder thereof shall
give written notice to the Company of its intention to effect such transfer.
Each such notice shall describe the manner of the proposed transfer and, if
requested by the Company, shall be accompanied by an opinion of counsel
reasonably satisfactory to the Company to the effect that the proposed transfer
may be effected without registration under the Securities Act, whereupon the
Holder of such stock shall be entitled to transfer such stock in accordance with
the terms of its notice; PROVIDED, HOWEVER, that no such opinion of counsel
shall be required for a transfer to one or more partners of the transferor (in
the case of a transferor that is a partnership) or to a parent corporation,
subsidiary corporation or to a corporation which is under common control with a
transferor (in the case of a transferor that is a corporation, to a member of
the transferor's immediate family or other descendant of the transferor or to a
trust or other entity for the benefit of the transfer and/or such person
provided that in such case the transferee(s) remain bound hereby).
4. REQUIRED REGISTRATION. (a) At any time within six months
following the date of this Agreement, one or more Holders of Restricted Stock
constituting at least sixty percent (60%) of the total shares of Restricted
Stock then outstanding may request the Company to register under the Securities
Act all or any portion of the shares of Restricted Stock held by such requesting
Holder or Holders ("Initiating Holders").
(b) Notwithstanding anything to the contrary contained in this
Section 4, no request may be made under this Section 4 within one hundred eighty
(180) days after the effective date of a registration statement filed by the
Company other than on Form S-4 or S-8 or their successor forms.
(c) If at the time of any request to register Restricted Stock
pursuant to this Section 4 (i) the Company is engaged or has fixed plans to
engage within sixty (60) days of the time of the request in a registered public
offering of its securities, (ii) the Company is in possession of material
non-public information the public disclosure of which, in the good faith
determination of the Company's Board of Directors, would materially and
adversely affect the Company, (iii) the Company shall have delivered to the
Holders of Restricted Stock that have requested a registration a certificate of
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an officer of the Company to the effect that, on the advice of counsel, the
Company believes such delay is necessary to comply with Regulation M under the
Exchange Act, or (iv) the Company is engaged in any other activity which, in the
good faith determination of the Company's Board of Directors, would be adversely
affected by the requested registration to the material detriment of the Company,
then the Company may at its option direct that such request be delayed for a
reasonable period not in excess of one hundred twenty (120) days from the time
of such request to register Restricted Stock pursuant to this Section 4;
PROVIDED, HOWEVER, that such right to delay a request may be exercised by the
Company not more than once in any twelve-month period. Such delay, however,
shall not in any way restrict the Holders from exercising piggyback registration
rights under Section 5 during such period.
(d) Following receipt of any notice under this Section 4, the
Company shall immediately notify all Holders of Restricted Stock from whom
notice has not been received, and such Holders shall be entitled within thirty
(30) days thereafter to request the Company to include in the requested
registration all or any portion of their shares of Restricted Stock. The Company
shall use its best efforts to register under the Securities Act, for public sale
in accordance with the method of disposition specified in the notice from
requesting Holders, the number of shares of Restricted Stock specified in such
notice (and in all notices received by the Company from other Holders within
thirty (30) days after the giving of such notice by the Company). If such method
of disposition shall be an underwritten public offering, the Holders of a
majority of the shares of Restricted Stock to be sold in such offering may
designate the managing underwriter of such offering, subject to the approval of
the Company, which approval shall not be unreasonably withheld or delayed.
Notwithstanding any other provision of this Section 4, if the underwriter
advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, then the Initiating
Holders shall so advise all Holders of Restricted Stock which would otherwise be
underwritten pursuant hereto, and the number of shares of Restricted Stock that
may be included in the underwriting shall be allocated among all Holders
thereof, including the Initiating Holders, in proportion (as nearly as
practicable) to the amount of Restricted Stock of the Company owned by each
Holder; PROVIDED, HOWEVER, that the number of shares of Restricted Stock to be
included in such underwriting shall not be reduced unless all other securities
are first entirely excluded from the underwriting.
(e) The Company shall be obligated to register Restricted
Stock pursuant to this Section 4, on only one (1) occasion; PROVIDED, HOWEVER,
that such obligation shall be deemed satisfied only when a registration
statement covering all shares of Restricted Stock specified in notices received
as aforesaid, for sale in accordance with the method of disposition specified by
the requesting Holders shall have become effective and, if such method of
disposition is a firm commitment underwritten public offering, all such shares
shall have been sold pursuant thereto, unless a failure was caused by a Holder.
(f) Except for registration statements on Form S-4, S-8 or any
successor forms thereto, and unless the Company (i) has previously given the
notice referred to in Section 5 or (ii) has exercised its rights to delay a
requested registration under Section 4(c)(i) and within the time period
prescribed in Section 4(c) files a registration statement with respect to a
registered public offering of it securities, the Company will not file with the
Commission any other registration statement with respect to a registered public
offering of its securities, the Company will not file with the Commission any
other registration statement under the Securities Act with respect to Common
Stock, whether for its own account or that of other stockholders, from the date
of receipt of a notice from requesting Holders pursuant to this Section 4 until
the completion of the period of distribution of the registration contemplated
thereby.
5. PIGGYBACK REGISTRATION. (a) If the Company at any time (other
than pursuant to Section 4 or Section 13) proposes to register any of its
securities under the Securities Act for sale to the public, whether for its own
account or for the account of other security holders or both (except with
respect to registration statements on Forms S-4, S-8 or any successor forms
thereto), each such time it will give written notice to all Holders of
outstanding Restricted Stock of its intention so to do; PROVIDED HOWEVER that no
such notice shall be required after such time that the Company ceases to have
registration obligations under this Section 5. Upon the written request of any
such Holder, received by the Company within ten (10) days after the giving of
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any such notice by the Company, to register any of its Restricted Stock (which
request shall state the intended method of disposition thereof), the Company
will use its best efforts to cause the Restricted Stock as to which registration
shall have been so requested to be included in the securities to be covered by
the registration statement proposed to be filed by the Company, all to the
extent required to permit the sale or other disposition by the Holder (in
accordance with its written request) of such Restricted Stock so registered.
(b) If any registration pursuant to this Section 5 shall be,
in whole or in part, an underwritten public offering of Common Stock, the number
of shares of Restricted Stock to be included in such an underwriting may be
reduced pro rata among the requesting Holders based upon the number of shares of
Restricted Stock owned by such Holders if and to the extent that the managing
underwriter shall be of the opinion that such inclusion would adversely affect
the marketing of the securities to be sold by the Company therein; PROVIDED,
HOWEVER, that: (1) if the Company registers any of its securities for its own
account in such underwriting, such number of shares of Restricted Stock shall
not be reduced if any shares are to be included in such underwriting for the
account of any person other than the Company or requesting Holders of Restricted
Stock or (2) if the Company does not register any of its securities for its own
account in such underwriting, the number of shares of Restricted Stock to be
included in such underwriting shall not be reduced unless all other securities
are first entirely excluded from the underwriting unless the Holders of more
than 60% of the Restricted Securities consent to the inclusion of such other
securities.
(c) Notwithstanding the foregoing provisions of this Section
5, the Company may withdraw any registration statement referred to in this
Section 5 without thereby incurring any liability to the Holders of Restricted
Stock.
6. OBLIGATIONS OF THE COMPANY. If and whenever the Company is
required by the provisions of Section 4 or 5 to use its best efforts to effect
the registration of any shares of Restricted Stock under the Securities Act, the
Company will, as expeditiously as possible:
(a) prepare and file with the Commission a registration
statement (which, in the case of an underwritten public offering pursuant to
Section 4, shall be on Form S-1 or other form of general applicability
satisfactory to the managing underwriter selected as therein provided) with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective for the period of the distribution
contemplated thereby (determined as hereinafter provided);
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
therewith as may be necessary to keep such registration statement effective
until completion of the period of distribution and comply with the provisions of
the Securities Act with respect to the disposition of all Restricted Stock
covered by such registration statement in accordance with the sellers' intended
method of disposition set forth in such registration statement for such period;
(c) furnish to each seller of Restricted Stock and to each
underwriter such number of copies of the registration statement and the
prospectus included therein (including each preliminary prospectus) as such
person reasonably may request in order to facilitate the public sale or other
disposition of the Restricted Stock covered by such registration statement;
(d) use its best efforts to register or qualify the Restricted
Stock covered by such registration statement under the securities or "blue sky"
laws of such jurisdictions as the sellers of Restricted Stock or, in the case of
an underwritten public offering, the managing underwriter reasonably shall
request; PROVIDED, HOWEVER, that the Company shall not for any such purpose be
required to qualify generally to transact business as a foreign corporation in
any jurisdiction where it is not so qualified or to consent to general service
of process in any such jurisdiction;
(e) use its best efforts to list the Restricted Stock covered
by such registration statement with any securities exchange on which the Common
Stock of the Company is then listed;
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(f) immediately notify each seller of Restricted Stock and
each underwriter under such registration statement, at any time when a
prospectus relating thereto is required to be delivered under the Securities
Act, of the happening of any event of which the Company has knowledge as a
result of which the prospectus contained in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(g) if the offering is underwritten and at the request of any
seller of Restricted Stock, use its best efforts to furnish on the date that
Restricted Stock is delivered to the underwriters for sale pursuant to such
registration: (i) an opinion dated such date of counsel representing the Company
for the purposes of such registration, addressed to the underwriters and to such
seller, stating that such registration statement has become effective under the
Securities Act and that (A) to the best knowledge of such counsel, no stop order
suspending the effectiveness thereof has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated under the Securities
Act, (B) the registration statement, the related prospectus and each amendment
or supplement thereof comply as to form in all material respects with the
requirements of the Securities Act (except that such counsel need not express
any opinion as to financial statements contained therein) and (C) to such other
effects as reasonably may be requested by counsel for the underwriters or by
such seller or its counsel, and (ii) a letter dated such date from the
independent public accountants retained by the Company, addressed to the
underwriters and to such seller, stating that they are independent public
accountants within the meaning of the Securities Act and that, in the opinion of
such accountants, the financial statements of the Company included in the
registration statement or the prospectus, or any amendment or supplement
thereof, comply as to form in all material respects with the applicable
accounting requirements of the Securities Act, and such letter shall
additionally cover such other financial matters (including information as to the
period ending no more than five (5) business days prior to the date of such
letter) with respect to such registration as such underwriters reasonably may
request; and
(h) make available for inspection by each seller of Restricted
Stock, any underwriter participating in any distribution pursuant to such
registration statement, and any attorney, accountant or other agent retained by
such seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors and employees to supply all information reasonably requested by any
such seller, underwriter, attorney, accountant or agent in connection with such
registration statement, subject to each party's obligations not to disclose or
misuse any confidential information disclosed to it.
For purposes of Sections 4(f), 6(a) and 6(b), the
period of distribution of Restricted Stock in a firm commitment underwritten
public offering shall be deemed to extend until each underwriter has completed
the distribution of all securities purchased by it, and the period of
distribution of Restricted Stock in any other registration shall be deemed to
extend until the earlier of the sale of all Restricted Stock covered thereby and
sixty (60) days after the effective date thereof.
7. OBLIGATIONS OF SELLING STOCKHOLDERS. In connection with each
registration hereunder, the sellers of Restricted Stock will furnish to the
Company in writing such information with respect to themselves and the proposed
distribution by them as reasonably shall be necessary to assure compliance with
federal and applicable state securities laws.
8. CERTAIN UNDERWRITING MATTERS. In connection with each
registration pursuant hereto covering an underwritten public offering, the
Company and each seller agree to enter into a written agreement with the
managing underwriter selected in the manner herein provided in such form and
containing such provisions as are customary in the securities business for such
an arrangement between such underwriter and companies of the Company's size and
investment stature.
9. EXPENSES. The Company will pay all Registration Expenses in
connection with each registration statement hereunder.
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10. INDEMNIFICATION AND CONTRIBUTION. (a) In the event of a
registration of any of the Restricted Stock under the Securities Act pursuant
hereto, the Company will and hereby does indemnify and hold harmless each seller
of such Restricted Stock thereunder, each underwriter of such Restricted Stock
thereunder and each other person, if any, who controls such seller or
underwriter within the meaning of the Securities Act, against any losses,
claims, damages or liabilities, joint or several, to which such seller,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in any registration statement
under which such Restricted Stock was registered under the Securities Act
pursuant hereto, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse each such seller, each such underwriter and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action, PROVIDED, HOWEVER, that the Company will not be liable in
any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with information
furnished by any such seller, any such underwriter or any such controlling
person in writing specifically for use in such registration statement or
prospectus.
(b) In the event of a registration of any of the Restricted
Stock under the Securities Act pursuant hereto, each seller of such Restricted
Stock thereunder severally and not jointly, will indemnify and hold harmless the
Company, each person, if any, who controls the Company within the meaning of the
Securities Act, each officer of the Company who signs the registration
statement, each director of the Company, each other seller of Restricted Stock,
each underwriter and each person who controls any underwriter within the meaning
of the Securities Act, against all losses, claims, damages or liabilities, joint
or several, to which the Company or such officer, director, other seller,
underwriter or controlling person may become subject under the Securities Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in the registration statement
under which such Restricted Stock was registered under the Securities Act
pursuant hereto, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereof, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein no misleading,
and will reimburse the Company and each such officer, director, other seller,
underwriter and controlling person for any legal or other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability or action, PROVIDED, HOWEVER, that such seller will be
liable hereunder in any such case if and only to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in reliance upon
and in conformity with information pertaining to such seller, as such, furnished
in writing to the Company by such seller specifically for use in such
registration statement or prospectus, and PROVIDED FURTHER that the liability of
each seller hereunder shall not apply to amounts paid in settlement without such
seller's prior written consent.
(c) Promptly after receipt by an indemnified party hereunder
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against the indemnifying party hereunder,
notify the indemnifying party in writing thereof, but the omission so to notify
the indemnifying party shall not relieve it from any liability which it may have
to such indemnified party other than under this Section 10 and shall only relive
it from any liability which it may have to such indemnified party under this
Section 10 if and to the extent the indemnifying party is prejudiced by such
omission. In case any such action shall be brought against any indemnified party
and it shall notify the indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate in and, to the extent it
shall wish, to assume and undertake the defense thereof with counsel
satisfactory to such indemnified party, and, after notice from the indemnifying
party to such indemnified party of its election so to assume and undertake the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under this Section 10 for any legal expenses subsequently incurred by such
indemnified party in connection with the defense thereof other than reasonable
costs of investigation and of liaison with counsel so selected, PROVIDED,
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HOWEVER, that, if the defendants in any such action include both the indemnified
party and the indemnifying party and the indemnified party shall have reasonably
concluded that there may be reasonable defenses available to it which are
different from or additional to those available to the indemnifying party or if
the interests of the indemnified party reasonably may be deemed to conflict with
the interests of the indemnifying party, the indemnified party shall have the
right to select a separate counsel and to assume such legal defenses and
otherwise to participate in the defense of such action, with the expenses and
fees of such separate counsel and other expenses related to such participation
to be reimbursed by the indemnifying party as incurred.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (i) any
Holder of Restricted Stock exercising rights under this Agreement, or any
controlling person of any such Holder, makes a claim for indemnification
pursuant to this Section 10 but it is judicially determined (by the entry of a
final judgment or decree by a court of competent jurisdiction and the expiration
of time to appeal or the denial of the last right of appeal) that such
indemnification may not be enforced in such case notwithstanding the fact that
this Section 10 provides for indemnification in such case, or (ii) contribution
under the Securities Act may be required on the part of any such selling Holder
or any such controlling person in circumstances for which indemnification is
provided under this Section 10; then, and in each such case, the Company and
such Holder will contribute to the aggregate losses, claims, damages or
liabilities to which they may be subject (after contribution from others) in
such proportion so that such Holder is responsible for the portion represented
by the percentage that the public offering price of its Restricted Stock offered
by the registration statement bears to the public offering price of all
securities offered by such registration statement, and the Company is
responsible for the remaining portion; PROVIDED, HOWEVER, that, in Section 11(f)
of the Securities Act) will be entitled to contribution from any person or
entity who was not guilty of such fraudulent misrepresentation.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
(f) The obligations of the Company and Holders under this
Section 10 shall survive the completion of any offering of Restricted Stock in a
registration statement under Section 4, 5 or 13 of this Agreement, and
otherwise.
11. CHANGES IN COMMON STOCK OR PREFERRED STOCK. If, and as often
as, there is any change in the Common Stock of Common Stock by way of a stock
split, stock dividend, combination or reclassification, or through a merger,
consolidation, reorganization or recapitalization, or by any other means,
appropriate adjustment shall be made in the provisions hereof so that the rights
and privileges granted hereby shall continue with respect to the Common Stock as
so changed.
12. 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 Stock to the public without registration,
at all times after ninety (90) days after any registration statement covering a
public offering of securities of the Company under the Securities Act shall have
become effective, the Company agrees to:
(a) make and keep public information available, as those terms
are understood and defined in Rule 144 under the Securities Act;
(b) file with the Commission in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act; and;
(c) furnish to each Holder of Restricted Stock forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of such Rule 144 and of the Securities Act and the
Exchange Act, a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as such
Holder may reasonably request in availing itself of any rule or regulation of
the Commission allowing such Holder to sell any Restricted Stock without
registration.
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13. TRANSFERABILITY OF REGISTRATION RIGHTS. The rights conferred
herein on the Holders of Restricted Stock shall only inure to the benefit of a
transferee of Restricted Stock, (i) if the transfer was approved by the Board of
Directors of the Company (which approval shall not be unreasonably withheld) and
there is transferred to such transferee all of the Restricted Stock then held by
the transferor or (ii) if the transferee is a transferee permitted in the
provision to Section 3; PROVIDED HOWEVER that no transferee shall receive rights
pursuant to this Agreement unless it first agrees in writing to abide by all
restrictions on the Holders hereunder.
14. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Investor as follows:
(a) The execution, delivery and performance of this Agreement
by the Company have been duly authorized by all requisite corporate action and
will not violate any provision of law, any order of any court or other agency of
government, the certificate of incorporation or bylaws of the Company or any
provision of any indenture, agreement or other instrument to which it or any or
its properties or assets is bound, conflict with, result in a breach of or
constitute (with due notice or lapse of time or both) a default under any such
indenture, agreement or other instrument or result in the creation or imposition
of any lien, charge or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company.
(b) This Agreement as been duly executed and delivered by the
Company and constitutes the legal, valid and binding obligation of the Company,
enforceable in accordance with its terms.
15. MISCELLANEOUS.
(a) BINDING EFFECT. All covenants and agreements contained in
this Agreement by or on behalf of any of the parties hereto shall bind and inure
to the benefit of the respective successors and assigns of the parties hereto
(including without limitation transferees of any Restricted Stock), whether so
expressed or not.
(b) NOTICES. All notices, requests, consents and other
communications hereunder shall be in writing and shall be sent by nationally
recognized overnight courier which obtains a signed receipt upon delivery,
mailed by certified or registered mail, return receipt requested, postage
prepaid, or telexed, in the case of non-U.S. residents, addressed as follows:
(i) if to the Company or any other party hereto, at the address of such party
set forth in the Purchase Agreement; or (ii) if to any subsequent Holder of
Common Stock, to it at such address or addresses as shall have furnished in
writing to the Company (in the case of a Holder of Restricted Stock) or to the
Holders of Restricted Stock (in the case of the Company) in accordance with the
provisions of this paragraph.
(c) NO WAIVER: Cumulative Remedies. No failure or delay on the
part of any party to this Agreement in exercising any right, power or remedy
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
(d) AMENDMENTS, WAIVERS AND CONSENTS. This Agreement may not
be amended or modified, and no provision hereof may be waived, without the
written consent of the Company and the Holders of at least sixty percent (60%)
of the outstanding shares of Restricted Stock.
(e) TERMINATION. The obligations of the Company to register
shares of Restricted Stock under Sections 4 and 5 shall terminate with respect
to any Holder at such time as Rule 144 or another similar exemption under the
Securities Act is available for the sale of all such Holder's shares during a
three (3) month period without registration.
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(f) SEVERABILITY. If any provision of this Agreement shall be
held to be illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
(g) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of North Carolina, without
giving effect to the principles of the conflicts of laws thereof.
(h) INJUNCTIVE RELIEF. The Company recognizes that the rights
of the Investor under this Agreement are unique and, accordingly, the Investor
shall, in addition to such other remedies as may be available to them at law or
in equity, have the right to enforce their rights hereunder by actions for
injunctive relief and specific performance to the extent permitted by law. This
Agreement is not intended to limit or abridge any rights of the Investor which
may exist apart from this Agreement.
(i) MERGER PROVISION. This Agreement, along with the Purchase
Agreement of even date herewith, including all exhibits and schedules thereto,
constitute the entire agreement among the parties hereto pertaining to the
subject matter hereof and supersede all prior and contemporaneous agreements and
understandings, of any of the parties hereto concerning the subject matter
hereof.
(j) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
[The remainder of this page left blank intentionally.]
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IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first above written.
BIOMAR INTERNATIONAL, INC.
By: /s/ T. Nelson Campbell
---------------------------------------------
T. Nelson Campbell
Chairman of the Board
PARACELSIAN, INC.
By: /s/ Thomas Tachovsky
---------------------------------------------
Dr. Thomas Tachovsky
President and Chief Executive Officer
10
EXHIBIT 10.3
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement, dated as of December 15, 1998 (the
"Agreement"), is by and between PARACELSIAN, INC., a Delaware corporation with
its principal offices in the State of New York (the "Company"), and JOHN A.
WILLIAMS, a resident of the State of North Carolina (the "Investor").
WHEREAS, the Company desires to sell, and the Investor desires to buy,
a certain number of shares of common stock of the Company on certain terms and
conditions (the "Shares").
NOW THEREFORE, in consideration of the foregoing, the mutual covenants
hereinafter contained, and other good and valuable consideration, the parties
hereto agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency at the time administering the Securities
Act.
"Common Stock" shall mean the common stock of the Company, as
constituted as of the date of this Agreement.
"Restricted Stock" shall mean the "Shares".
"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.
2. THE SALE. (a) Upon the terms and subject to the conditions of
this Agreement, the Company agrees to sell, assign, transfer and deliver the
Shares to the Investor, and the Investor agrees to accept and purchase the
Shares from the Company.
(b) CONSIDERATION. Upon the terms and subject to the conditions
contained in this Agreement, the Investor hereby delivers to the Company in
immediately available United States funds the aggregate amount of $250,000 for
666,666 Shares (the "Purchase Price").
(c) CERTIFICATES. As soon as practicable, the Company will deliver
to the Investor the stock certificates representing the Shares and any other
documents that are necessary to transfer to the Investor good title to the
Shares.
3. REPRESENTATIONS AND WARRANTIES OF COMPANY. The Company
represents and warrants as follows:
(a) EFFECT OF TRANSFER OF SHARES. Upon consummation of the
transactions contemplated by this Agreement, the Investor will acquire from the
Company the Shares to be transferred by the Company to Investor, free and clear
of all Restrictions, other than such Restrictions on transfer of the Shares
arising under federal or state securities laws, and will own such shares of
record.
<PAGE>
(b) PERFORMANCE. The execution, delivery and performance of
this Agreement by the Company have been duly authorized by all requisite
corporate action and will not violate any provision of law, any order of any
court or other agency of government, the certificate of incorporation or bylaws
of the Company or any provision of any indenture, agreement or other instrument
to which it or any or its properties or assets is bound, conflict with, result
in a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument or result in the
creation or imposition of any lien, charge or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company.
<PAGE>
(c) REGISTRATION. The Company intends to file a registration
statement with the Commission to register securities under the Securities Act
for the account of certain security holders within ninety (90) days of the date
of this Agreement. The Company agrees, subject to compliance with all applicable
laws and regulations, to use its best efforts to (i) effect such registration;
and (ii) include the Shares acquired by the Investor pursuant to this Agreement
in such registration statement.
All of the above representations and warranties shall survive the
making of this Agreement.
4. REPRESENTATIONS AND WARRANTIES OF INVESTOR. As of the Closing, the
Investor represents and warrants as follows:
(a) ACCREDITED INVESTOR. The Investor qualifies as an
accredited investor within the meaning of the Securities Act, and is not
acquiring the Shares for the account or for the benefit of any other person.
(b) ACQUISITION OF STOCK FOR INVESTMENT. The Investor is
acquiring the Shares for investment and not with a view toward, or for sale in
connection with, any distribution thereof, nor with any present intention of
distributing or selling such Shares. The Investor acknowledges that such Shares
have not been registered under the Securities Act, and such Shares may not be
sold, transferred, offered for sale, pledged, hypothecated or otherwise disposed
of without registration under the Securities Act and other applicable securities
laws, except pursuant to an available exemption from such registration under the
Securities Act and such laws.
(c) FINANCING. Investor has available to it funds sufficient
to complete the transactions contemplated by this Agreement.
All of the above representations and warranties shall survive the
making of this Agreement
5. RESTRICTIVE LEGEND. Each certificate representing Restricted
Stock shall be stamped or otherwise imprinted with a legend indicating that the
Shares have not been registered under the Securities Act and may not be
transferred without an effective registration statement or the availability of
an exemption from the registration provisions of the Securities Act.
6. MISCELLANEOUS. (a) BINDING EFFECT. All covenants and
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto (including without limitation transferees of any
Restricted Stock), whether so expressed or not.
(b) GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of North Carolina, without
giving effect to the principles of the conflicts of laws thereof.
(c) ENTIRE AGREEMENT. This Agreement contains the entire
agreement of the parties with respect to the transactions described herein and
supersedes any and all other oral or written agreement(s) heretofore made, and
there are no representations or inducements by or to, or and agreements between,
any of the parties hereto other than those contained herein in writing.
(d) COUNTERPARTS. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, this Agreement has been executed as of the date and
year first above written.
INVESTOR
/s/ John A. Williams
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John A. Williams
PARACELSIAN, INC.
By: /s/ Bernard M. Landes
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Dr. Bernard M. Landes
President and Chief Executive Officer
