1
EXHIBIT 10.45
STOCK ACQUISITION AGREEMENT
BETWEEN
BIONUTRICS, INC.,
A NEVADA CORPORATION
AND
ACH FOOD COMPANIES, INC.,
A DELAWARE CORPORATION
AS OF OCTOBER 30, 2000
2
TABLE OF CONTENTS
SECTION 1 -- AUTHORIZATION, ACQUISITION AND ISSUANCE OF SHARES; CONSIDERATION ............... 2
1.1 Authorization of Shares ........................................................... 2
1.2 Acquisition and Issuance of Shares ................................................ 2
1.3 Consideration ..................................................................... 2
SECTION 2 -- CLOSING; PAYMENT; DELIVERY ..................................................... 2
2.1 Closing Date and Place of Closing ................................................. 2
2.2 Delivery .......................................................................... 2
SECTION 3 -- REPRESENTATIONS OF THE COMPANY ................................................. 3
3.1 Organization and Corporate Power; Compliance With Laws ............................ 3
3.2 Authorization ..................................................................... 3
3.3 Capitalization .................................................................... 3
3.4 Effect of Transactions ............................................................ 4
3.5 Litigation ........................................................................ 4
3.6 Securities Laws ................................................................... 4
3.7 Brokerage ......................................................................... 4
3.8 Enforceability .................................................................... 4
SECTION 4 -- REPRESENTATIONS AND WARRANTIES OF ACH .......................................... 4
4.1 Experience ........................................................................ 4
4.2 Investment ........................................................................ 4
4.3 Authority ......................................................................... 5
4.4 Enforceability .................................................................... 5
4.5 Effect of Transactions ............................................................ 5
SECTION 5 -- CONDITIONS TO CLOSING OF ACH ................................................... 5
5.1 Accuracy of Representations and Warranties ........................................ 5
5.2 Performance ....................................................................... 5
5.3 Opinion of Company Counsel ........................................................ 5
5.4 Legal Investment .................................................................. 5
5.5 Proceedings and Documents ......................................................... 5
5.6 Approvals and Consents ............................................................ 6
5.7 Qualifications .................................................................... 6
5.8 Other Matters ..................................................................... 6
SECTION 6 -- CONDITIONS TO CLOSING OF THE COMPANY ........................................... 6
6.1 Accuracy of Representations and Warranties ........................................ 6
6.2 Performance ....................................................................... 6
SECTION 7 -- COVENANTS OF THE COMPANY ....................................................... 6
7.1 Basic Financial Information ....................................................... 7
7.2 Additional Information ............................................................ 7
7.3 Prompt Payment of Taxes, etc. ..................................................... 8
7.4 Maintenance of Properties and Leases .............................................. 8
7.5 Insurance ......................................................................... 8
7.6 Accounts and Records .............................................................. 8
-i-
3
7.7 Compliance With Requirements of Governmental Authorities .......................... 8
7.8 Maintenance of Corporate Existence, etc. .......................................... 9
7.9 Compliance by Subsidiaries ........................................................ 9
7.10 Valid Issuance ................................................................. 9
7.11 Government Regulations ......................................................... 9
7.12 Further Assurances ............................................................. 9
7.13 Securities Act Registration Statements ......................................... 9
7.14 Notices of Certain Events ...................................................... 10
7.15 Environmental Laws ............................................................. 10
7.16 Listing of Common Stock ........................................................ 10
7.17 ACH'S Director Nominee ......................................................... 10
SECTION 8 -- RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; COMPLIANCE WITH SECURITIES ACT .. 11
8.1 Restrictions on Transferability ................................................... 11
8.2 Certain Definitions ............................................................... 11
8.3 Restrictive Legend ................................................................ 11
8.4. Notice of Proposed Transfers ...................................................... 11
8.5 Information by Holder ............................................................. 12
8.6 Rule 144 Reporting ................................................................ 12
8.7 Market Stand-Off Agreement ........................................................ 12
SECTION 9 -- REGISTRATION UNDER SECURITIES ACT, ETC. ........................................ 13
9.1 Registration of Registrable Securities on Request ................................. 13
9.2 Incidental Registration ........................................................... 15
9.3 Registration Procedures ........................................................... 16
9.4 Underwritten Offerings ............................................................ 19
9.5 Preparation; Reasonable Investigation ............................................. 20
9.6 Indemnification ................................................................... 20
9.7 Rule 144 .......................................................................... 22
SECTION 10 -- INDEMNIFICATION ............................................................... 23
10.1 Obligation of the Company to Indemnify ......................................... 23
10.2 Obligation of ACH to Indemnify ................................................. 23
10.3 Notice and Opportunity to Defend ............................................... 23
SECTION 11 -- MISCELLANEOUS ................................................................. 24
11.1 Governing Law .................................................................. 24
11.2 Survival ....................................................................... 24
11.3 Successors and Assigns ......................................................... 24
11.4 Entire Agreement; Amendment .................................................... 24
11.5 Notices, etc. .................................................................. 24
11.6 Delays or Omissions ............................................................ 24
11.7 Severability ................................................................... 25
11.8 No Broker ...................................................................... 25
11.9 Titles and Subtitles ........................................................... 25
11.10 Counterparts ................................................................... 25
-ii-
4
Exhibit
A Opinion of Counsel to Bionutrics, Inc. (referenced in Section 5.3)
Schedule
3.3 Prior rights and obligations of Company
-iii-
5
This Stock Acquisition Agreement (this "Agreement") is dated as of
October 30, 2000, and is between Bionutrics, Inc. (the "Company"), a Nevada
corporation, having a principal place of business at 0000 Xxxx Xxxxxxxxx Xxxx,
Xxxxx 000, Xxxxxxx, Xxxxxxx 00000, and ACH Food Companies, Inc. ("ACH"), a
Delaware corporation, formerly known as AC HUMKO CORP., having a principal place
of business at 0000 Xxxxxxxx Xxxxx Xxxxxxx, Xxxxxxx, Xxxxxxxxx 00000.
RECITALS
WHEREAS, the Company, ACH, InCon Technologies, Inc. ("InCon"), InCon
International, Inc. and Nutrition Technology Corporation entered into that
certain Master Formation Agreement dated as of June 25, 1999 (the "Master
Agreement"); and
WHEREAS, ACH and InCon entered into that certain Members Agreement for
Incon Processing, L.L.C. dated as of June 25, 1999 (the "Members Agreement");
and
WHEREAS, all of the obligations of InCon under the Master Agreement and
the Members Agreement are guaranteed by Bionutrics under the terms and
provisions of that certain Guaranty from Bionutrics dated June 25, 1999, in
favor of ACH (the "Guaranty"); and
WHEREAS, under the terms of Section 7.4 of the Master Agreement, InCon
and Bionutrics are obligated to pay to ACH an amount not to exceed US$600,000
upon the occurrence of certain events; and
WHEREAS, under the terms of Section 4.7 of the Members Agreement, InCon
is obligated to pay to ACH an amount not to exceed US$600,000 upon the
occurrence of certain events; and
WHEREAS, Bionutrics and InCon have requested that (i) the Master
Agreement be modified to delete any obligation on the part of Bionutrics and
InCon under Section 7.4 of the Agreement, and (ii) the Members Agreement be
modified to delete any obligation on the part of InCon under Section 4.7 of the
Members Agreement (and Bionutrics as guarantor of InCon's obligations under
Section 4.7); and
WHEREAS, ACH is willing to release Bionutrics and InCon from their
obligations under Section 7.4 of the Master Agreement and under Section 4.7 of
the Members Agreement in consideration for Bionutrics issuance to ACH of 300,000
shares of common stock of Bionutrics in accordance with the terms and provisions
of this Agreement; and
WHEREAS, the Parties desire to set forth their agreements with respect
to the foregoing recitals.
6
AGREEMENTS
Now therefore the Company and ACH agree as follows:
Section 1
Authorization, Acquisition and Issuance of Shares;
Consideration
1.1 Authorization of Shares. The Company has authorized the issuance of
three hundred thousand (300,000) shares (the "Shares") of its Common Stock (as
defined in section 3.1).
1.2 Acquisition and Issuance of Shares. At the Closing (as defined in
Section 2. 1), the Company shall, in reliance upon the representations,
warranties and agreements contained herein, and subject to this Agreement, issue
to ACH and ACH shall acquire from the Company the Shares.
1.3 Consideration. The consideration for the Shares is the release of
the Company and InCon from their obligations under Section 7.4 of the Master
Agreement and under Section 4.7 of the Members Agreement, as evidenced by the
execution by ACH of (i) that certain First Modification of Master Formation
Agreement of even date herewith, by and among the Company, ACH, InCon, InCon
International, Inc. and Nutrition Technology Corporation (the "Master
Modification Agreement"), and (ii) that certain First Modification of Members
Agreement of even date herewith, by and among the Company, ACH and InCon (the
"Members Agreement Modification").
Section 2
Closing; Payment; Delivery
2.1 Closing Date and Place of Closing. The closing of the acquisition
and issuance of the Shares hereunder (the "Closing") shall be held immediately
following the execution and delivery of this Agreement (the "Closing Date"). The
place of the Closing (including the place of delivery to ACH by the Company of
the certificates evidencing the Shares) shall be at the offices of ACH, or such
other place as ACH shall designate by notice to the Company.
2.2 Delivery. At the Closing ACH, the Company and all of the other
parties to the Master Modification Agreement and the Members Agreement
Modification shall execute and deliver to each other the Master Modification
Agreement and the Members Agreement Modification in the form agreed to by the
parties.
-2-
7
Section 3
Representations of the Company
The Company makes the following representations and warranties to ACH:
3.1 Organization and Corporate Power; Compliance With Laws. The Company
is duly organized, validly existing and in good standing under the laws of
Nevada. The Company has all required corporate power and authority to its own
property, to carry on their business as currently conducted and to enter into
and perform this Agreement and the other agreements to be executed by the
Company in connection with this Agreement (collectively, the "Investment
Documents"), and generally to carry out the transactions contemplated hereby.
3.2 Authorization. The Investment Documents are valid and binding
obligations of the Company, enforceable in accordance with their terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium and other laws
applicable to creditors' rights and remedies and to the exercise of judicial
discretion in accordance with general principles of equity. The execution,
delivery and performance of the Investment Documents have been duly authorized
by all necessary corporate or other action of the Company. The issuance, sale
and delivery of the Shares in accordance with this Agreement have been duly
authorized and issued or reserved for issuance as the case may be by all
necessary corporate action on the part of the Company. The Shares when issued,
sold and delivered against payment therefor in accordance with this Agreement
will be duly and validly issued, fully paid and non-assessable. No consent,
approval or authorization of, or designation, declaration or filing with, any
governmental. authority or any other person or entity is required of the Company
in connection with the execution and delivery of the Investment Documents and
the issuance and delivery of the Shares in accordance with this Agreement or the
consummation of any other transaction contemplated hereby or by the other
Investment Documents.
3.3 Capitalization. The authorized capital stock of the Company
consists of 45 million shares of common stock, $.001 par value ("Common Stock),
of which 21,471,252 shares are issued and outstanding, and five million shares
of Preferred Stock, none of which is issued and outstanding. All the issued and
outstanding shares of Common Stock have been, and upon issuance at the Closing
the Shares will be, duly authorized and validly issued, fully paid and
nonassessable and issued in compliance with applicable federal and state
securities laws. Except as otherwise set forth herein in Schedule 3.3(a) no
subscription, warrant, option, convertible security or other right (contingent
or otherwise) to purchase or acquire any shares of capital stock of the Company
is authorized or outstanding, (b) there is no commitment or offer of the Company
to issue any subscription, warrant, option, convertible security or other such
right or to issue or distribute to holders of any shares of its capital stock
any evidence of indebtedness or assets of the Company, (c) the Company has no
obligation (contingent or otherwise) to purchase, redeem or otherwise acquire
any shares of its capital stock or any interest therein or to pay any dividend
or make any other distribution in respect thereof and (d) there are no
restrictions on the transfer of the Company's capital stock other than those
arising from securities laws. Except for ACH and as set forth in Schedule 3.3,
no person or entity is entitled to (e) any preemptive or similar right with
respect to the issuance of any capital stock of the Company or (f) any rights
-3-
8
with respect to the registration of any capital stock of the Company under the
Securities Act of 1933, as amended.
3.4 Effect of Transactions. The execution, delivery and performance by
the Company or any subsidiaries of the Investment Documents does not and will
not conflict with or result in any default or the acceleration of any
obligations under any contract to which the Company or any of its subsidiaries
is a party or to which the Company or any of its subsidiaries or its properties
or business is bound, or any charter provision, by-law or corporate restriction
of the Company or any of its subsidiaries or the creation of any lien or
encumbrance of any nature upon any of the properties or assets of the Company or
any of its subsidiaries, except as contemplated by the Investment Documents, or
violate any agreement, judgment, decree, order, law, statute, rule or regulation
of any federal, state or local government or agency applicable to the Company or
any of its subsidiaries.
3.5 Litigation. There is no litigation or governmental proceeding or
investigation pending or threatened against the Company that may challenge the
validity or performance by the Company of the Investment Documents.
3.6 Securities Laws. The offer, issuance and sale of the Shares in
accordance with this Agreement will be in compliance with applicable federal and
state securities laws.
3.7 Brokerage. There are no claims for and no person is entitled to any
brokerage commission, finder's fee 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 Company or any subsidiary or by which it
is bound.
3.8 Enforceability. This Agreement has been duly and validly executed
and delivered by the Company and constitutes the valid and binding obligation of
the Company enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
applicable to creditors' rights and remedies and to the exercise of judicial
discretion in accordance with general principles of equity.
Section 4
Representations and Warranties of ACH
ACH represents and warrants to the Company as follows:
4.1 Experience. ACH has such knowledge and experience that it is
capable of evaluating the risks and merits of an investment in the Company.
4.2 Investment. ACH is acquiring the Shares for investment for its own
account and not with the view to, or for resale in connection with, any
distribution thereof. The parties stipulate that the Shares have not been
registered under the Securities Act by reason of an exemption from the
registration provisions of the Securities Act that depends upon, among other
things, the bona fide nature of its investment intent as expressed herein.
-4-
9
4.3 Authority. ACH has full power and authority to execute, deliver and
perform this Agreement in accordance with its terms. ACH has been duly organized
as a corporation under the laws of Delaware and is legally existing and in good
standing in such jurisdiction.
4.4 Enforceability. This Agreement has been duly and validly executed
and delivered by ACH and constitutes the valid and binding obligation of ACH
enforceable against it in accordance with its terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium and other laws applicable to
creditors' rights and remedies and to the exercise of judicial discretion in
accordance with general principles of equity.
4.5 Effect of Transactions. The execution, delivery and performance by
ACH of the Investment Documents does not and will not conflict with or result in
any default or the acceleration of any obligations under any material contract,
obligation or commitment of ACH or the creation of any lien, charge or
encumbrance of any nature upon any of the properties or assets of ACH, or
violate any instrument, agreement, judgment, decree, order, statute, rule or
regulation of any federal, state or local government or agency applicable to
ACH.
Section 5
Conditions to Closing of ACH
The obligation of ACH to acquire the Shares at the Closing is subject
to the fulfillment to its satisfaction on or prior to the Closing Date of each
of the following conditions:
5.1 Accuracy of Representations and Warranties. The representations and
warranties made by the Company in Section 3 shall be correct when made, and
shall be correct on the Closing Date with the same force and effect as if made
on and as of the Closing Date.
5.2 Performance. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by the Company on or prior to
the Closing Date shall have been performed or complied with.
5.3 Opinion of Company Counsel. ACH shall have received from counsel to
the Company an opinion addressed to it, dated the Closing Date, in substantially
the form attached as Exhibit A.
5.4 Legal Investment. At the time of the Closing, the acquisition of
the Shares by ACH shall be legally permitted by the laws and regulations to
which it and the Company are subject.
5.5 Proceedings and Documents. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be satisfactory in substance and
form to ACH and its counsel.
-5-
10
5.6 Approvals and Consents. The Company shall have duly received all
authorizations, consents, approvals, licenses, franchises, permits and
certificates by or of all federal, state and local governmental authorities, by
any third parties pursuant to the terms of any agreement to which the Company is
a party or by the National Association of Securities Dealers, Inc. or any other
body or agency with jurisdiction, by contract or otherwise, over the Company,
necessary for the issuance of the Shares by the Company and the consummation of
the transactions contemplated hereby, and all thereof shall be in full force and
effect at the time of the Closing. The Company shall have delivered to ACH an
officer's certificate, dated the Closing Date, to such effect.
5.7 Qualifications. All authorizations, approvals, or permits of any
governmental authority or regulatory body required in connection with the lawful
issuance and sale of the Shares pursuant to this Agreement shall have been duly
obtained and shall be effective on and as of the Closing.
5.8 Other Matters. All corporate and other proceedings in connection
with the transactions contemplated at the Closing by this Agreement, and all
documents and instruments incident to such transactions, shall be reasonably
satisfactory in substance and form to ACH, and ACH shall have received all such
counterpart originals or certified or other copies of such documents as it may
reasonably request. All consents and approvals required to be obtained by the
Company in order to consummate the transactions contemplated hereby shall have
been obtained and shall be in full force and effect.
Section 6
Conditions to Closing of the Company
The Company's obligation to issue the Shares to be acquired at the
Closing is subject to the fulfillment to its satisfaction on or prior to the
Closing Date of each of the following conditions:
6.1 Accuracy of Representations and Warranties. The representations and
warranties made by ACH pursuant to section 4 shall be correct when made and on
the Closing Date.
6.2 Performance. All covenants, agreements and conditions contained in
this Agreement to be performed or complied with by ACH on or prior to the
Closing Date shall have been performed or complied with in all respects.
Section 7
Covenants of the Company
The Company covenants and agrees, so long as (except as otherwise
stated) ACH owns the Shares, as follows:
-6-
11
7.1 Basic Financial Information. The Company shall furnish the
following reports to ACH:
(a) As soon as practicable after the end of each fiscal year of the
Company, and in any event within 90 days thereafter, a consolidated balance
sheet of the Company and its subsidiaries as at the end of such fiscal year, and
consolidated statements of income and sources and applications of funds of the
Company and its subsidiaries for such year, prepared in accordance with
generally accepted accounting principles consistently applied and setting forth
in each case in comparative form the figures for the previous fiscal year, all
in reasonable detail and certified by independent public accountants of
recognized national standing selected by the Company.
(b) As soon as practicable after the end of the first, second and third
quarterly accounting periods in each fiscal year of the Company, and in any
event within 45 days thereafter, a consolidated balance sheet of the Company and
its subsidiaries as of the end of each such quarterly period, and consolidated
statements of income and sources and applications of funds of the Company and
its subsidiaries for such period and for the current fiscal year to date,
prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in comparative form the figures for the
corresponding periods of the previous fiscal year, subject to changes resulting
from year-end audit adjustments, all in reasonable detail and certified by the
principal financial or accounting officer of the Company.
(c) Such other financial information as ACH may request including
certificates of the principal financial officer of the Company concerning
compliance with the covenants of the Company under this Section 7.
7.2 Additional Information. The Company shall permit any authorized
representatives of ACH to visit and inspect any of the properties of the Company
and its subsidiaries, including its books of account, and to discuss its
affairs, finances and accounts with the Company's officers and its independent
public accountants, all at such reasonable times and as often as any such person
may reasonably request. The Company shall deliver to each such authorized
representative of ACH the following reports:
(a) For the first nine months after the Closing Date, as soon as
practicable after the end of each month and in any event within 30 days
thereafter, a consolidated balance sheet of the Company and its subsidiaries as
at the end of such month, and consolidated statements of income and of sources
and applications of funds of the Company and its subsidiaries, for each month
prepared (except for footnotes) in accordance with generally accepted accounting
principles consistently applied, together with a comparison of such statements
to the Company's operating plan then in effect and approved by its Board of
Directors, and certified, subject to changes resulting from year-end audit
adjustments, by the principal financial or accounting officer of the Company.
(b) For the first nine months after the Closing Date, as soon as
available (but in any event within 60 days after the commencement of its fiscal
year) a summary of the financial plan of the Company, as contained in its
operating plan approved by the Company's board of
-7-
12
directors. Any material changes in such financial plan shall be submitted as
promptly as practicable after such changes have been approved by the board of
directors.
(c) With reasonable promptness, such other information and data with
respect to the Company and its subsidiaries as any such person may form time to
time reasonably request under disclosure and use conditions reasonably imposed
by the Company.
7.3 Prompt Payment of Taxes, etc. The Company shall promptly pay and
discharge, or cause to be paid and discharged, when due and payable, all lawful
taxes, assessments and governmental charges or levies imposed upon the income,
profits, property or business of the Company or any subsidiary provided that any
such tax, assessment, charge or levy need not be paid if the validity thereof is
contested in good faith by appropriate proceedings and if the Company sets aside
on its books adequate reserves with respect thereto and provided further that
the Company shall pay all such taxes, assessments, charges or levies forthwith
upon the commencement of proceedings to foreclose any lien that may have
attached as security therefor. The Company shall promptly pay or cause to be
paid when due, or in conformance with customary trade terms, all other
indebtedness incident to operations of the Company and its subsidiaries.
7.4 Maintenance of Properties and Leases. The Company shall keep its
properties and those of its subsidiaries in good repair, working order and
condition, reasonable wear and tear excepted, and from time to time make all
necessary and proper repairs, renewals, replacements, additions and improvements
thereto. The Company and its subsidiaries shall at all times comply with leases
to which any of them is a party or under which any of them occupies property if
the breach thereof might have a material adverse effect on the condition,
financial or otherwise, or operations of the Company or such subsidiary.
7.5 Insurance. The Company shall keep its assets and those of its
subsidiaries that are of an insurable character insured by financially sound and
reputable insurers against loss or damage by fire, extended coverage and
explosion in amounts sufficient to prevent the Company or any subsidiary from
becoming a co-insurer and not in any event less than 100% of the insurable value
of the property insured, and the Company shall maintain, with financially sound
and reputable insurers, insurance against other hazards and risks and liability
to persons and property to the extent and in the manner customary for companies
in similar businesses similarly situated.
7.6 Accounts and Records. The Company shall keep true records and books
of account in which full, true and correct entries are made of all dealings or
transactions in relation to its business and affairs in accordance with
generally accepted accounting principles applied on a consistent basis.
7.7 Compliance with Requirements of Governmental Authorities. The
Company and each of its subsidiaries shall meet all valid requirements of
governmental authorities relating to the conduct of their businesses or to their
property or assets.
-8-
13
7.8 Maintenance of Corporate Existence, etc. The Company and each of
its subsidiaries shall maintain in full force and effect its corporate
existence, rights and franchises and all licenses other rights to use patents,
processes, licenses, trademarks, trade names or copyrights owned or possessed by
it or any subsidiary and deemed by the Company to be necessary to the conduct of
its business.
7.9 Compliance by Subsidiaries. The Company shall cause any subsidiary
that it may organize in the future to comply with this Section 7.
7.10 Valid Issuance. The Company covenants that the Shares will, upon
issuance and upon full payment therefor in accordance with the terms hereof, be
validly issued, fully paid and nonassessable and free from all taxes, liens and
charges with respect to the issuance thereof.
7.11 Government Regulations. The Company covenants that it will comply,
and will cause each of its subsidiaries to comply, with all applicable
governmental restrictions and regulations, the failure to comply with which
would have a material adverse effect on the business or financial condition of
the Company and its subsidiaries taken as a whole, and obtain and maintain in
good standing all licenses, permits and approvals from any and all governments,
governmental commissions, boards or agencies of jurisdictions in which it or any
of its subsidiaries carries on business required in respect of the operations of
the Company or any of its subsidiaries, the failure to comply with which would
have a material adverse effect on the business or financial condition of the
Company and its subsidiaries taken as a whole.
7.12 Further Assurances. The Company covenants that it shall cooperate
with ACH and execute such further instruments and documents as ACH shall request
to carry out to the reasonably satisfaction of ACH the transactions contemplated
by this Agreement.
7.13 Securities Act Registration Statements. The Company covenants that
ACH shall have the right, at any time when it may be deemed to be a controlling
person of the Company, to participate in the preparation of any underwritten
registration statement of the Company (regardless of whether or not ACH will be
a selling security holder in connection with such registration statement) and to
request the insertion therein of material furnished to the Company in writing
that in ACH's judgment should be included. In connection with such registration
statement the Company will indemnify ACH, its members, officers and directors
and each person, if any, who controls ACH within the meaning of Section 15 of
the Securities Act, against all losses, claims, damages, liabilities and
expenses caused by any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or prospectus or any
amendment thereof or supplement thereto or caused by any omission or alleged
omission to state therein 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, except insofar as such losses, claims,
damages, liabilities or expenses are caused by any untrue statement or alleged
untrue statement or omission or alleged omission written information furnished
to the Company by ACH expressly for use in such registration statement. If, in
connection with any such registration statement, ACH shall furnish written
information to the Company expressly for use in the registration statement, ACH
will indemnify the Company, its directors, each of its officers who signs such
registration statement and each person, if any, who controls the Company within
-9-
14
the meaning of the Securities Act against all losses, claims, damages,
liabilities and expenses caused by any untrue statement or alleged untrue
statement of a material fact or any omission or alleged omission of a material
fact required to be stated in the registration statement or prospectus or any
preliminary prospectus or any amendment thereto or supplement thereto or
necessary to make the statements therein not misleading, but only to the extent
that such untrue statement or alleged untrue statement or such omission or
alleged omission attributable to information so furnished in writing by ACH for
use therein.
7.14 Notices of Certain Events. The Company shall promptly give notice
to ACH (i) of any default or event of default that has not been cured within any
applicable grace period under any indebtedness of the Company or any of its
subsidiaries, and contractual obligation of the Company or any of its
subsidiaries or (ii) of any pending or threatened litigation, investigation or
proceeding to which the Company or any of its subsidiaries is or is threatened
to be a party and of which the Company has been given notice; provided that any
such default litigation, investigation or proceeding would have a material
adverse effect on the business or financial condition of the Company and its
subsidiaries taken as a whole. Any notice delivered pursuant to this Section
7.14 shall be accompanied by an officer's certificate specifying the details of
the occurrence referred to therein and stating what action the Company proposes
to take with respect thereto.
7.15 Environmental Laws. The Company and its subsidiaries shall comply
with all applicable Environmental laws the failure to comply with which would
have a material adverse effect on the business or financial condition of the
Company and its subsidiaries taken as a whole. If the Company or any subsidiary
shall receive written notice that there exists a violation of Environmental law
with respect to its operations or any real property owned, formerly owned, used,
or leased thereby, which violation could have a material adverse effect on the
business or financial condition of the Company and its subsidiaries taken as a
whole, the Company shall immediately notify in writing ACH. Furthermore, if the
Company or any subsidiary shall receive written notice that there exists a
violation of Environmental law with respect to its operations or any real
property owned, formerly owned, used or leased thereby, which violation could
have a material adverse effect on the business or financial condition of the
Company and its subsidiaries taken as a whole, the Company shall within the time
period permitted by the applicable governmental authority (unless otherwise
contested by the Company in good faith) remove or remedy such violation in
accordance with all applicable Environmental Laws unless the board of directors
of the Company determines that it would be in the best interest of the Company
to delay the remedy of such violation.
7.16 Listing of Common Stock. The Company warrants and agrees for the
benefit of ACH that the Shares shall be approved for listing, subject to
official notice of issuance, on the NASDAQ (Small Cap) as of the Closing Date.
7.17 ACH's Director Nominee. The Company and the Key Management
Employee/Director listed on the signature page hereto, so long as he remains in
such position, shall nominate and vote for ACH's designee to the board of
directors of the Company so long as ACH shall own the Shares or shares of Common
Stock underlying any warrants held by it.
-10-
15
Section 8
Restrictions on Transferability of
Securities; Compliance With Securities Act
8.1 Restrictions on Transferability. The Shares shall not be
transferable, except upon the conditions specified in this Section 8, which
conditions are intended to insure compliance with the provisions of the
Securities Act of 1933, as amended (the "Securities Act"). ACH shall cause any
proposed transferee of Shares to agree to take and hold those securities subject
to the provisions and upon the conditions specified in this Section 8.
8.2 Certain Definitions. As used in this Section 8, "Restricted
Securities" shall mean the securities of the Company required to bear or bearing
the legend set forth in Section 8.3.
8.3 Restrictive Legend. Each certificate representing the Shares shall
(unless otherwise permitted or unless the securities evidenced by such
certificate shall have been registered under the Securities Act) be stamped or
otherwise imprinted with a legend in the following form (in addition to any
legend required under applicable state securities laws):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR ANY STATE SECURITIES LAWS. THEY MAY NOT BE SOLD OR OFFERED FOR
SALE IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT COVERING THE
SECURITIES UNDER SUCH ACT AND ANY APPLICABLE STATE SECURITIES LAW OR AN
OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
REGISTRATION IS NOT REQUIRED.
Upon request of ACH, the Company shall remove the foregoing legend from the
certificate or issue thereto a new certificate therefor free of any transfer
legend provided that the Company receives either the opinion referred to in
Section 8.4(a) or the "no-action" letter referred to in Section 8.4(b) to the
effect that any transfer by ACH of the securities evidenced by such certificate
will not violate the Securities Act or applicable state securities laws.
8.4. Notice of Proposed Transfers. The holder of each certificate
representing Restricted Securities by acceptance thereof agrees to comply with
this Section 8.4. Prior to any proposed transfer of any Restricted Securities
the holder thereof shall give written notice to the Company of such holder's
intention to effect such transfer. Each such notice shall describe the manner
and circumstances of the proposed transfer in sufficient detail, and shall be
accompanied (except in transactions in compliance with Rule 144) by either (a) a
written opinion of legal counsel reasonably satisfactory to the Company,
addressed to the Company and reasonably satisfactory in form and substance to
the Company's counsel, to the effect that the proposed transfer of the
Restricted Securities may be effected without registration under the Securities
Act or (b) a "no action" letter from the Commission to the effect that the
distribution of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect
thereto, whereupon the Holder of such Restricted Securities shall be entitled to
transfer such Restricted Securities in accordance with the terms of the notice
-11-
16
delivered by the holder to the Company. Each certificate evidencing the
Restricted Securities transferred as above provided shall bear the appropriate
restrictive legend set forth in Section 8.3, except that such certificate shall
not bear such restrictive legend if the opinion of counsel or "no-action" letter
referred to above is to the further effect that such legend is not required in
order to establish compliance with the Securities Act.
8.5 Information by Holder. Each holder of Restricted Securities shall
furnish to the Company such information regarding the transfer or distribution
proposed by such holder as the Company may reasonably request in writing.
8.6 Rule 144 Reporting. With a view to making available the benefits of
certain rules and regulations of the Commission that may permit the sale of the
Restricted Securities to the public without registration, the Company shall (a)
make and keep public information available as those terms are understood and
defined in Rule 144 under the Securities Act, (b) use its best efforts to file
with the Commission in a timely manner all reports and other documents required
of the Company under the Securities Act and the Securities Exchange Act of 1934
(the "Exchange Act") and (c) so long as ACH owns any Shares, furnish to ACH upon
request a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 and of the Securities Act and Exchange Act
and a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents so filed as it may reasonably request in
availing itself of any rule or regulation of the Commission allowing it to sell
any such securities without registration.
8.7 Market Stand-off Agreement. ACH shall agree, if requested by the
Company and the managing underwriter of Common Stock (or other securities) of
the Company, not to sell or otherwise transfer or dispose of any Common Stock
(or other securities) of the Company held by it during the 90-day period
following the effective date of a registration statement of the Company filed
under the Securities Act, provided that (a) such agreement shall apply only to
the first such registration statement of the Company including securities to be
sold on its behalf to the public in an underwritten offering and (b) the
officers and directors of the Company shall enter into similar agreements. Such
agreement shall be in writing in a form satisfactory to the Company and such
underwriter. The Company may impose stop-transfer instructions with respect to
the Shares (or securities) subject to the foregoing restriction until the end of
such 90-day period.
-12-
17
Section 9
Registration under Securities Act, etc.
9.1 Registration of Registrable Securities on Request.
(a) Request. At any time commencing 18 months from the date hereof, ACH
(and any transferee of ACH's Registrable Securities (as defined below)) shall
have the right to request in writing specifying that such request is made
pursuant to this Section 9.1, that the Company effect an underwritten
registration under the Securities Act on form S-3 or such other form of
registration statement that the Company is otherwise eligible to use for such
purpose of all or part of such holders' Registrable Securities. The Company
shall be obligated to effect only two (2) registrations pursuant to this Section
9.1 with respect to all holders of Registrable Securities and only until the
earlier of the date that all Registrable Securities have been sold or the date
that all Registrable Securities are freely transferable without restriction
under the Securities Act. The Company will promptly give written notice of such
requested registration to all other holders of Registrable Securities, which
holders shall be entitled to include their Registrable Securities in such
registration subject to Section 9.1(b). Thereupon the Company will use its best
efforts to effect the registrations under the Securities Act of:
(i) the Registrable Securities which the Company has been
so requested to register by such holders making the demand pursuant to
this Section 9. 1, and
(ii) subject to Section 9.1(b), all other Registrable
Securities which the Company has been requested to register by the
holders thereof by written request given to the Company within 30 days
after the giving of such written notice by the Company (which request
shall specify the intended method of disposition of such Registrable
Securities) all to the extent requisite to permit the disposition of
the Registrable Securities so to be registered.
The Company will not grant to any person at any time on or after the
date hereof the right (a "Piggyback Right") to request the Company to register
any securities of the Company under the Securities Act by reason of the exercise
by any holder of its rights under this Section 9.1 unless such Piggyback Right
provides that such securities shall not be registered and sold at the same time
if the managing underwriter for the respective holders believes that sale of
such securities would adversely affect the amount of, or price at which, the
respective Registrable Securities being registered under this Section 9.1 can be
sold. For purposes of this agreement, "Registrable Securities" shall mean the
Shares and all other shares of Common Stock issuable upon exercise of the
warrants under that certain warrant agreement entered into between the Company
and ACH dated as of October 30, 2000.
(b) Registration of Other Securities. Whenever the Company shall effect
a registration pursuant to this Section 9. 1, no securities other than
Registrable Securities shall be included among the securities covered by such
registration unless (i) the managing underwriter of such offering shall have
advised each holder of Registrable Securities to be covered by such registration
in writing that the inclusion of such other securities would not in the
underwriter's
-13-
18
reasonable judgment adversely affect such offering or (ii) the holders of a
majority of Registrable Securities to be covered by such registration shall have
consented in writing to the inclusion of such other securities.
(c) Registration Statement Form. Registrations under this Section 9.1
shall be on such appropriate registration form or prospectus of the Commission
(i) as shall be selected by the Company and as shall be reasonably acceptable to
the holders of more than 50% (by number of shares then outstanding) of the
Registrable Securities so to be registered and (ii) as shall permit the
disposition of such Registrable Securities in accordance with the intended
method or methods of disposition specified in their request for such
registration. The Company agrees to include in any such registration statement
all information which holders of Registrable Securities being registered shall
reasonably request.
(d) Expenses. The Company will pay all Registration Expenses in
connection with the registration requests made pursuant to this Section 9.1,
provided, however, that the Company shall not be required to pay expenses of any
registration proceeding begun pursuant to Section 9.1 if the registration is
subsequently withdrawn (other than by reason of the Company's failure to perform
its obligations hereunder or a material adverse change in the Company's
financial position or business), unless the holder agrees to forfeit his right
to a demand registration under Section 9.1. If such registration is withdrawn
(other than by reason of the Company's failure to perform its obligations
hereunder or a material adverse change in the Company's financial position or
business), the holder shall have the option to pay the expenses of such
registration and preserve all of his rights to demand registrations under
Section 9.1.
No holder shall have the right to cause the Company to employ any
expert or professional to act on behalf of the Company other than any expert or
professional, such as an independent accountant, whose report or consent is
required to be included in a registration statement for the Registrable
Securities.
(e) Effective Registration Statement. A registration requested pursuant
to this Section 9.1 shall not be deemed to have been effected and shall not
count as a requested registration pursuant to Section 9.1(a) hereof (i) unless a
registration statement with respect thereto has become effective, (ii) if after
it has become effective, such registration is interfered with by any stop order,
injunction or other order or requirement of the Commission or other governmental
agency or court for any reason not the fault of a holder of Registrable
Securities and the Registrable Securities covered hereby have not been sold, or
(iii) if the conditions to closing specified in the selling agreement or
underwriting agreement entered into in connection with such registration are not
satisfied or waived by the parties thereto other than a holder of Registrable
Securities.
(f) Underwriters. Any registration effected pursuant to this Section
9.1 shall, at the election of the holders of at least 50% by number of shares
then outstanding of the Registrable Securities, be so registered by an
underwritten public offering on a firm commitment basis or a best efforts basis.
The managing underwriter or underwriters thereof shall be selected by the
Company, and such underwriter, as well as the price, terms and provisions of the
offering, shall
-14-
19
be subject to the approval of the holders of more than 50% (by number of shares
then outstanding) of the Registrable Securities to be so registered.
(g) Apportionment in Registrations Requested. If, in connection with a
registration requested pursuant to this Section 9. 1, the managing underwriter
shall advise the Company in writing (with a copy to each holder of Registrable
Securities requesting registration) that, in its opinion, the number of
securities requested to be included in such registration exceeds the number
which can be sold in such offering within a price range acceptable to the
holders of more than 50% (by number of shares then outstanding) of the
Registrable Securities requested to be included in such registration, the
Company will include in such registration, to the extent of the number which the
Company is so advised can be sold in such offering, Registrable Securities
requested to be included in such registration pro rata among the holders thereof
requesting such registration on the basis of the percentage of the Registrable
Securities of the Company held by the holders of Registrable Securities which
have requested that such Registrable Securities be included. In connection with
any registration as to which the provisions of this clause (g) apply, no
securities other than Registrable Securities shall be covered by such
registration and if the pro ration as aforesaid results in the exclusion of in
excess of 20% of the Registrable Securities originally sought to be registered,
the request shall not be counted for purposes of determining the number of
registrations pursuant to Section 9.1 hereof.
9.2 Incidental Registration.
(a) Right to Include Registrable Securities. If the Company at any time
proposes to register any of its Common Stock under the Securities Act (other
than by a registration on Form X-0, Xxxx X-0 or any successor or similar form),
whether or not for sale for its own account, it will each such time give prompt
written notice to all holders of Registrable Securities of its intention to do
so.
Upon the written request of any such holder made within 30 days after
the date of any such notice given in accordance with Section 11.5 hereof, the
Company will use its best efforts to effect the registration under the
Securities Act of all Registrable Securities which the Company has been so
requested to register by the holders thereof, to the extent requisite to permit
the disposition of the Registrable Securities so to be registered, provided that
if, at any time after giving written notice of its intention to register any
securities and prior to the effective date of the registration statement filed
in connection with such registration, the Company shall determine for any reason
not to register or to delay registration of such securities, the Company may, at
its election, give written notice of such determination to each holder of
Registrable Securities and, thereupon, (i) in the case of a determination not to
register, shall be relieved of its obligation to register any Registrable
Securities in connection with such registration (but not from its obligation to
pay the Registration Expenses in connection therewith), without prejudice,
however, to the rights of any holder or holders of Registrable Securities
entitled to do so to request that such registration be effected as a
registration under Section 9.2, and (ii) in the case of a determination to delay
registering, shall be permitted to delay registering any Registrable Securities,
for the same period as the delay in registering such other securities. No
registration effected under this Section 9.2 shall relieve the Company of its
obligation to effect any registration upon request under Section 9.1. The
Company will pay all Registration Expenses in
-15-
20
connection with each registration of Registrable Securities requested pursuant
to this Section 9.2. No holder shall have the right to cause the Company to
employ any expert or professional to act on behalf of the Company other than any
expert or professional, such as an independent engineer or accountant, whose
report or consent is required to be included in a registration statement for the
Registrable Securities.
(b) Apportionment in Incidental Registrations. If (i) a registration
pursuant to this Section 9.2 involves an underwritten offering of the securities
being registered, whether or not for sale for the account of the Company, to be
distributed (on a firm commitment basis) by or through one or more underwriters
of recognized national or regional standing under underwriting terms appropriate
for such a transaction, and (ii) the managing underwriter of such underwritten
offering shall inform the Company and the holders of the Registrable Securities
requesting such registration by letter of its belief that the number of
securities requested to be included in such registration exceeds the number
which can be sold in (or during the time of) such offering or that the inclusion
would adversely affect the marketing of the securities to be sold by the Company
therein, then the Company may include all securities proposed by the Company to
be sold for its own account and may decrease the number of Registrable
Securities and other securities of the Company so proposed to be sold and so
requested to be included in such registration (pro rata on the basis of the
percentage of the securities of the Company sought to be registered by the
holders of such Registrable Securities and such other securities) to the extent
necessary to reduce the number of securities to be included in the registration
to the level recommended by the managing underwriter. Notwithstanding the
foregoing, if the registration referred to herein involves an underwritten
offering of securities being registered for sale by holders of securities other
than registrable Securities, the Company will include in such registration the
securities proposed by such holders to be sold and may decrease the number of
Registrable Securities and such other securities exercising incidental
registration rights proposed to be sold in such registration (pro rata on the
basis of the percentage of the securities sought to be registered held by such
holders of Registrable Securities and such other securities exercising
incidental registration rights) to the extent necessary to reduce the number of
securities to be included in the registration to the level recommended by the
managing underwriter. In such case, no securities shall be offered for sale by
the Company.
(c) Registrable Securities. The Registrable Securities proposed to be
registered under any registration statement under Section 9.2 hereof will be
offered for sale at the same public offering price as the shares of Common Stock
offered for sale by the Company or any other selling shareholder covered
thereby.
9.3 Registration Procedures. If and whenever the Company is required to
use its best efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in Sections 9.1 and 9.2, the Company will
as expeditiously as possible:
(i) prepare and (as soon thereafter as possible or in any
event no later than 90 days after the end of the period within which
requests for registration may be given to the Company) file with the
Commission the requisite registration statement to effect such
registration and thereafter use its best efforts to cause such
registration statement to become effective, provided that the Company
may discontinue any registration of its
-16-
21
securities which are not Registrable Securities (and, under the
circumstances specified in Section 9.2(a), its securities which are
Registrable Securities) at any time prior to the effective date of the
registration statement relating thereto; and provided, further, that
the Company may defer its obligations under Section 9.1 for a period of
no more than ninety (90) days if the Company's Board of Directors
adopts a resolution that filing such a registration statement would
require a public disclosure by the Company which disclosure would have
material adverse consequences for the Company, such as a disclosure
regarding a pending material acquisition by the Company; provided
further, that once such information has been publicly disclosed, then
the Company shall promptly proceed to fulfill its obligations under
Section 9.1;
(ii) 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 and to comply with the provisions of the Securities
Act with respect to the disposition of all securities covered by such
registration statement until such time as all of such securities have
been disposed of in accordance with the intended methods of disposition
by the seller or sellers thereof set forth in such registration
statement;
(iii) furnish to each seller of Registrable Securities covered
by such registration statement such number of conformed copies of such
registration statement and of each such amendment and supplement
thereto, such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 or
Rule 430A under the Securities Act, in conformity with the requirements
of the Securities Act, and such other documents, as such seller may
reasonably request;
(iv) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such
registration statement under such other securities or blue sky laws of
such jurisdictions as each seller thereof shall reasonably request, to
keep such registration or qualification in effect for so long as such
registration statement remains in effect, and take any other action
which may be reasonably necessary to enable such seller to consummate
the disposition in such jurisdictions of the securities owned by such
seller, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation
in any jurisdiction wherein it would not but for the requirements of
this subsection (iv) be obligated to be so qualified or to consent to
general service of process in any such jurisdiction or subject itself
to be required to pay any franchise or income taxes in any such
jurisdiction;
(v) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the seller or sellers thereof to consummate the
disposition of such Registrable Securities;
-17-
22
(vi) furnish to each seller of Registrable Securities a signed
counterpart, addressed to such seller, except as provided in (y) below
(and the underwriters, if any), of:
(x) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, if such
registration includes an underwritten public offering, dated
the date of the closing under the underwriting agreement),
reasonably satisfactory in form and substance to such seller
or, if such registration includes an underwritten public
offering, to such underwriter, and
(y) a "comfort" letter, dated the effective date of
such registration statement (and, if such registration
includes an underwritten public offering, dated the date of
the closing under the underwriting agreement), signed by the
independent public accountants who have certified the
Company's financial statements included in such registration
statement, addressed to each seller, to the extent the same
can be reasonably obtained, and addressed to the underwriters,
if any, covering substantially the same matters with respect
to such registration statement (and the prospectus included
therein) and, in the case of the accountants' letter, with
respect to events subsequent to the date of such financial
statements, as are customarily covered in accountants' letters
delivered to the underwriters in underwritten public offerings
of securities and such other financial matters as such seller
or such holder (or the underwriters, if any) may reasonably
request;
(vii) notify each seller of Registrable Securities covered by
such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon
discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances under which they were made, and at the request of any
such seller or holder promptly prepare to furnish to such seller or
holder a reasonable number of copies of a supplement to or an amendment
of such prospectus as may be necessary so that, as thereafter delivered
to the purchasers of such securities, such prospectus shall not include
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances under which
they were made;
(viii) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not more
than eighteen months, beginning with the first fiscal quarter beginning
after the effective date of such registration statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the
Securities Act, and, in the case of a registration requested pursuant
to Section 9.1 hereof, will furnish to each such seller at least two
business days prior to the filing thereof a copy of any amendment or
supplement
-18-
23
to such registration statement or prospectus and shall not file any
thereof to which any such seller shall have reasonably objected on the
grounds that such amendment or supplement does not comply in all
material respects with the requirements of the Securities Act or of the
rules or regulations thereunder;
(ix) provide and cause to be maintained a transfer agent and
registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of
such registration statement; and
(x) use its best efforts to list all Registrable Securities
covered by such registration statement on any securities exchange on
which any of the Registrable Securities is then listed.
The Company may require each proposed seller of Registrable Securities as to
which any registration is being effected to promptly furnish the Company, as a
condition precedent to including such holder's Registrable Securities in any
registration, such information regarding such seller and the distribution of
such securities as the Company may from time to time reasonably request in
writing.
Each holder of Registrable Securities agrees by acquisition of such
Registrable Securities that upon receipt of any notice from the Company of the
happening of any event of the kind described in subdivision (vii) of this
Section 9.3, such holder will forthwith discontinue such holder's disposition of
Registrable Securities pursuant to the registration statement relating to such
Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
Section 9.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
9.4 Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the underwriters
for any offering by holders of Registrable Securities pursuant to a registration
requested under Section 9.1, the Company will enter into an underwriting
agreement with such underwriters for such offering, such agreement to be
satisfactory in substance and form to the Company, to holders of more than 50%
of the Registrable Securities included in such registration and the underwriters
and to contain such representations and warranties by the Company and such other
terms as are generally prevailing in agreements of this type, including, without
limitation, indemnities to the effect and to the extent provided in Section 9.6.
The holders of the Registrable Securities will cooperate with the Company in the
negotiation of the underwriting agreement and will give consideration to the
reasonable requests of the Company regarding the form thereof, provided that
nothing herein contained shall diminish the foregoing obligations of the
Company. The holders of Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement and may, at their
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of such holders of
-19-
24
Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. Other
than as required under Section 9.3 hereof, any such holder of Registrable
Securities shall not be required to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such holder, such holder's Registrable
Securities, and such holder's intended method of distribution, any other
information supplied by such holder to the Company for use of the Registration
Statement and any other representation required by law.
(b) Incidental Underwritten Offerings. If the Company at any time
proposes to register any of its securities under the Securities Act as
contemplated by Section 9.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by any holder
of Registrable Securities as provided in Section 9.2 and subject to the
provisions of Sections 9.2(a), 9.2(b) and 9.3, arrange for such underwriters to
include all the Registrable Securities to be offered and sold by such holder
among the securities to be distributed by such underwriters. The holders of
Registrable Securities to be distributed by such underwriters shall be parties
to the underwriting agreement between the Company and such underwriters and may,
at their option, require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the benefit
of such underwriters shall also be made to and for the benefit of such holders
of Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. Other
than as required under Section 9.3 hereof, any such holder of Registrable
Securities shall not be required to make any representations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties, or agreements regarding such holder, such holder's Registrable
Securities and such holder's intended method of distribution, any other
information supplied by such holder to the Company for use in the Registration
Statement and any other representation required by law.
9.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the holders of Registrable
Securities registered under such registration statement, their underwriters, if
any, and their respective counsel and firm of accountants (such holders' counsel
and firm of accountants to be appointed by the holders of a majority of such
Registrable Securities), the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of such holders' and such underwriters' respective counsel, to
conduct a reasonable investigation within the meaning of the Securities Act.
9.6 Indemnification.
(a) Indemnification by the Company. In the event of any registration of
any Registrable Securities of the Company under the Securities Act pursuant to
this Agreement, the
-20-
25
Company will, and hereby does, indemnify and hold harmless the seller of any
Registrable Securities covered by such registration statement, its directors and
officers, each other Person who participates as an underwriter in the offering
or sale of such securities and such other Person, if any, who controls such
seller or any such underwriter within the meaning of the Securities Act, against
any losses, claims, damages or liabilities, joint or several, to which such
seller or any such director or officer or underwriter or controlling person may
become subject under the Securities Act or any other statute or at common law,
insofar as such losses, claims, damages or liabilities (or actions or
proceedings, whether commenced or threatened, in respect thereof) arise out of
or are based upon any untrue statement or alleged untrue statement of any
material fact contained, on the effective date thereof, in any registration
statement under which such Registrable Securities were registered under the
Securities Act, or in any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will reimburse such seller and each such director, officer,
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding; provided that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company through an instrument duly executed by such seller for use in the
preparation thereof. Such indemnity shall remain in full force and effect
regardless of any investigation made by or on behalf of such seller or any such
director, officer, underwriter or controlling person and shall survive the
transfer of such securities by such seller.
(b) Indemnification by ACH. ACH will, and hereby does, indemnify and
hold harmless (in the same manner and to the same extent as set forth in
subdivision (a) of this Section 9.6) the Company, each director of the Company,
each officer of the Company and each other Person, if any, who controls the
Company within the meaning of the Securities Act with respect to any statement
or alleged statement in or omission or alleged omission from such registration
statement, any preliminary prospectus, final prospectus or summary prospectus
contained therein, or any amendment or supplement thereto, if such statement or
alleged statement or omission or alleged omission was made in reliance upon and
in conformity with written information furnished to the Company by such ACH for
use in the preparation of such registration statement, preliminary prospectus,
final prospectus, summary prospectus, amendment or supplement. Such indemnity
shall remain in full force and effect, regardless of any investigation made by
or on behalf of the Company or any such director, officer or controlling Person
and shall survive the transfer of such securities by such ACH.
(c) Notices of Claims, etc. Promptly after receipt by an indemnified
party of notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subdivisions of this Section 9.6, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein
-21-
26
shall not relieve the indemnifying party of its obligations under the preceding
subdivisions of this Section 9.6, except to the extent that the indemnifying
party is prejudiced by such failure to give notice. In case any such action is
brought against an indemnified party, unless in such indemnified party's
reasonable judgment a conflict of interest between such indemnified party and
indemnifying parties may exist in respect of such claim, the indemnifying party
shall be entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be liable to
such indemnified party for any legal or other expenses subsequently incurred by
the latter in connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability
in respect to such claim or litigation.
(d) Other Indemnification. Indemnification similar to that specified in
the preceding subdivisions of this Section 9.6 (with appropriate modifications)
shall be given by the Company and each seller of Registrable Securities with
respect to any required registration or other qualification of securities under
any Federal or state law or regulation of any governmental authority other than
the Securities Act.
(e) Indemnification Payments. The indemnification required by this
Section 9.6 shall be made by periodic payments of the amount thereof during the
course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
9.7 Rule 144. If the Company shall have filed a registration statement
pursuant to the requirements of Section 12 of the Exchange Act or a registration
statement pursuant to the requirements of the Securities Act, the Company will
file the reports required to be filed by it, and in the manner required to be
filed by it, under the Securities Act and the Exchange Act (or, if the Company
is not required to file such reports, will, upon the request of any holder of
Registrable Securities, make publicly available other information) and will take
such further action as any holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (a) Rule 144 under the Securities
Act, as such Rule may be amended from time to time or (b) any similar rule or
regulation hereafter adopted by the Commission ("Rule 144"). Upon the request of
any holder of Registrable Securities, the Company will deliver to such holder a
written statement as to whether it has complied with such requirements.
-22-
27
Section 10
Indemnification
10.1 Obligation of the Company to Indemnify. Subject to Section 11.2,
the Company shall indemnify, defend and hold harmless ACH (and its respective
partners, directors, officers, employees, affiliates and assigns) from and
against all losses, liabilities, damages, deficiencies, diminution in value,
costs or expenses (including interest and penalties imposed or assessed by any
judicial or administrative body and reasonable attorneys' fees) (collectively,
"Losses") based upon, arising out of or relating to any inaccuracy or in any
breach of any representation, warranty, covenant or agreement of the Company
contained in this Agreement or any exhibit, schedule certificate or any of the
other Transaction Documents delivered by the Company at the Closing.
10.2 Obligation of ACH to Indemnify. Subject to Section 11.2, ACH shall
indemnify, defend and hold harmless the Company from and against any Losses
based upon, arising out of or relating to any breach of any representation,
warranty, covenant or agreement of ACH contained in this agreement or in any
exhibit, schedule or certificate delivered by ACH at the Closing.
10.3 Notice and Opportunity to Defend.
(a) Within 30 days after receipt by any party hereto (the "Indemnitee")
of notice of any demand, claim or circumstance that, with the lapse of time,
would give rise to a claim or the commencement (or threatened commencement) of
any action, proceeding or investigation or within 30 days of an Indemnitee
learning that a representation or warranty is materially inaccurate, in each
case that may result in a Loss (an "Asserted Liability"), the Indemnitee shall
give notice thereof (the "Claims Notice") to the party required to provide
indemnification pursuant to Section 10. 1 or 10.2 hereof (the "Indemnitee'). The
Claims Notice shall describe the Asserted Liability in reasonable detail, and
shall indicate the amount (estimated, if necessary) of the Loss that has been or
may be suffered by the Indemnitee.
(b) Opportunity to Defend. The Indemnitor may elect to compromise or
defend, and control the defense of, at its own expense and by counsel reasonably
satisfactory to the Indemnitee, any Asserted Liability provided that the
Indemnitee shall have no liability under any compromise or settlement agreed to
by the Indemnitor that it has not approved in writing. If the Indemnitor elects
to compromise or defend such Asserted Liability, it shall within 30 days (or
sooner, if the nature of the Asserted Liability so requires) notify the
Indemnitee of its intent to do so, and the Indemnitee shall cooperate upon the
request and at the expense of the Indemnitor in the compromise of, or defense
against, such Asserted Liability. If the Indemnitor elects not to compromise or
defend against the Asserted Liability, or fails to notify the Indemnitee of its
election as herein provided, the Indemnitee may pay, compromise or defend such
Asserted Liability and receive full indemnification for its Losses as provided
in Sections 10.1 and 10.2. In any event, the Indemnitee and the Indemnitor may
participate, at their own expense, in the defense of such Asserted Liability by
the Indemnitor or the Indemnitee, respectively. If the Indemnitor chooses to
defend any claim, the Indemnitee shall make available to the Indemnitor
-23-
28
any books, records or other documents within its control that are reasonably
requested for such defense and shall otherwise cooperate with the Indemnitor, in
which event the Indemnitee shall be reimbursed for its out-of-pocket expense.
Section 11
Miscellaneous
11.1 Governing Law. This Agreement shall be governed in all respects by
the law of the State of New York without regard to its choice of law rules.
11.2 Survival. The representations, warranties, covenants and
agreements made herein subject to indemnification pursuant to Section 10 shall
survive (a) any investigation made by ACH and (b) the earlier of two years after
Closing and the applicable statute of limitations.
11.3 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto provided the Company may not assign its rights hereunder.
11.4 Entire Agreement; Amendment. This Agreement (including the
schedule and exhibit hereto) and the other documents delivered pursuant hereto
at the Closing constitute the entire understanding and agreement between the
parties with regard to the subjects hereof and thereof. Except as otherwise
expressly provided herein, neither this Agreement nor any term hereof may be
amended, waived, discharged or terminated orally, except by a written agreement
signed by the Company and ACH.
11.5 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by first-class mail,
postage prepaid, or delivered either by hand or by messenger, addressed if to
ACH or the Company at its address set forth in the preamble of this agreement,
or at such other address as ACH or the Company furnishes to the other party in
writing.
11.6 Delays or Omissions. No delay in exercising or omission to
exercise any right, power or remedy accruing to ACH or the Company upon any
breach or default of the Company or ACH under this Agreement shall impair any
such party's right, power or remedy nor construed to be a waiver of any such
breach or default, or an acquiescence therein, or of any similar breach or
default thereafter occurring, nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any party of any breach or default under this
Agreement, or any waiver by either party of any provisions of this agreement
shall to be effective be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
agreement or by law or otherwise, shall be cumulative and not alternative.
-24-
29
11.7 Severability. In case any provision of this Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not be affected thereby.
11.8 No Broker. Each party represents and warrants to the other that it
has retained no finder or broker or other like person in connection with the
transactions contemplated by this Agreement. The Company shall indemnify and
hold ACH harmless, and ACH shall indemnify and hold the Company harmless, from
any liability for any commission or compensation in the nature of an agent's fee
to any broker, finder or other person (and the costs and expenses of defending
against such liability or asserted liability) arising from any act by the
Company or ACH as the case may be or any of its employees or representatives.
11.9 Titles and Subtitles. The titles of the Sections of this Agreement
are for convenience of reference only and are not to be considered in construing
this Agreement.
11.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
[SIGNATURE PAGE ATTACHED]
-25-
30
In witness whereof the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
date and year first written above.
Key Management BIONUTRICS, INC.
Employee/Director
By: /s/ Xxxxxx X. Xxxx
---------------------------
/s/ Xxxxxx X. Xxxx Xxxxxx X. Xxxx,
--------------------------------
Xxxxxx X. Xxxx Chief Executive Officer
(as to Section 7.17 only)
ACH FOOD COMPANIES, INC.
By: /s/ Xxxxx Xxxxxxxxxxxxx
---------------------------
Xxxxx Xxxxxxxxxxxxx,
Vice President
