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Exhibit 99.3
STOCK PURCHASE AGREEMENT
Between
BIONUTRICS, INC.,
a Nevada corporation
And
AC HUMKO CORP.
a Delaware corporation
As of August 14, 1998
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TABLE OF CONTENTS
PAGE
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Section 1.................................................................... 1
Authorization, Purchase and Sale of Shares; Purchase Price; Warrants... 1
1.1 Authorization of Shares.................................... 1
1.2 Sale and Purchase of Shares................................ 1
1.3 Purchase Price............................................. 1
1.4 Warrants................................................... 1
Section 2.................................................................... 1
Closing; Payment; Delivery............................................. 1
2.1 Closing Date and Place of Closing.......................... 2
2.2 Payment and Delivery....................................... 2
Section 3.................................................................... 2
Representations of the Company......................................... 2
3.1 Organization and Corporate Power; Compliance With Laws..... 2
3.2 Authorization.............................................. 2
3.3 Capitalization............................................. 3
3.4 Existing Stockholder List and Agreements................... 3
3.5 Subsidiaries............................................... 3
3.6 Financial Statements, Accounts Receivable and Inventories.. 3
3.7 Absence of Undisclosed Liabilities; Disclosure............. 4
3.8 Absence of Certain Developments............................ 4
3.9 Title to Properties........................................ 4
3.10 Tax Matters................................................ 5
3.11 Contracts and Commitments.................................. 5
3.12 Intellectual Property Rights; Employee Restrictions........ 5
3.13 Effect of Transactions..................................... 6
3.14 Litigation................................................. 7
3.15 Securities Laws............................................ 7
3.16 Business................................................... 7
3.17 Books and Records.......................................... 7
3.18 Environment Compliance..................................... 7
3.19 Information Supplied to Purchasers......................... 8
3.20 Brokerage.................................................. 8
3.21 Employee Benefit Plans..................................... 9
3.22 Employees.................................................. 9
3.23 Affiliated Transactions.................................... 9
3.24 Customers and Distributors................................. 9
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Section 4................................................................... 10
Representations and Warranties of Purchaser........................... 10
4.1 Experience................................................ 10
4.2 Investment................................................ 10
4.3 Access to Data............................................ 10
4.4 Authority................................................. 10
4.5 Enforceability............................................ 10
4.6 Effect of Transactions.................................... 10
Section 5................................................................... 11
Conditions to Closing of Purchaser.................................... 11
5.1 Accuracy of Representations and Warranties................ 11
5.2 Performance............................................... 11
5.3 Opinion of Company Counsel................................ 11
5.4 Legal Investment.......................................... 11
5.5 Compliance Certificate.................................... 11
5.6 Technology and Exclusive Supply Agreements................ 11
5.7 Warrant Purchase Agreements............................... 11
5.8 Proceedings and Documents................................. 11
5.9 Approvals and Consents.................................... 11
5.10 Proprietary Information and Inventions Agreements......... 12
5.11 Qualifications............................................ 12
5.12 Certificates and Documents................................ 12
5.13 Other Matters............................................. 12
5.14 Director.................................................. 12
Section 6................................................................... 13
Conditions to Closing of the Company.................................. 13
6.1 Accuracy of Representations and Warranties................ 13
6.2 Performance............................................... 13
6.3 Compliance Certificate.................................... 13
6.4 Technology Agreements..................................... 13
6.5 Other Matters............................................. 13
Section 7................................................................... 13
Covenants of the Company.............................................. 13
7.1 Basic Financial Information............................... 13
7.2 Additional Information.................................... 14
7.3 Prompt Payment of Taxes, etc.............................. 15
7.4 Maintenance of Properties and Leases...................... 15
7.5 Insurance................................................. 15
7.6 Accounts and Records...................................... 15
7.7 Compliance With Requirements of Governmental Authorities.. 15
7.8 Maintenance of Corporate Existence, etc................... 15
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7.9 Availability of Common Stock for Warrant Exercise......... 16
7.10 Proprietary Information and Inventions Agreements......... 16
7.11 Legal Fees ............................................... 16
7.12 Use of Proceeds........................................... 16
7.13 Compliance by Subsidiaries................................ 16
7.14 Indebtedness and Other Obligations........................ 16
7.15 Conduct of Business of the Company........................ 16
7.16 Valid Issuance............................................ 19
7.17 Government Regulations.................................... 19
7.18 Further Assurances........................................ 19
7.19 Securities Act Registration Statements.................... 19
7.20 Notices of Certain Events................................. 20
7.21 Environmental Laws........................................ 21
7.22 Listing of Common Stock................................... 21
7.23 Right of First Refusal.................................... 21
7.24 Purchaser's Director Nominee.............................. 23
Section 8................................................................... 23
Restrictions on Transferability of Securities; Compliance With
Securities Act.................................................. 23
8.1 Restrictions on Transferability........................... 23
8.2 Certain Definitions....................................... 23
8.3 Restrictive Legend........................................ 23
8.4 Notice of Proposed Transfers.............................. 24
8.5 Information by Holder..................................... 25
8.6 Rule 144 Reporting........................................ 25
8.7 "Market Stand-off" Agreement.............................. 25
Section 9................................................................... 25
Registration under Securities Act, etc................................ 25
9.1 Registration of Registrable Securities on Request......... 25
9.2 Incidental Registration................................... 28
9.3 Registration Procedures................................... 29
9.4 Underwritten Offerings.................................... 32
9.5 Preparation; Reasonable Investigation..................... 33
9.6 Indemnification........................................... 33
9.7 Rule 144.................................................. 35
Section 10.................................................................. 36
Indemnification....................................................... 36
10.1 Obligation of the Company to Indemnify.................... 36
10.2 Obligation of Purchaser to Indemnify...................... 37
10.3 Notice and Opportunity to Defend.......................... 37
Section 11.................................................................. 38
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Miscellaneous......................................................... 38
11.1 Governing Law............................................. 38
11.2 Survival.................................................. 38
11.3 Successors and Assigns.................................... 38
11.4 Entire Agreement; Amendment............................... 38
11.5 Notices, etc.............................................. 38
11.6 Delays or Omissions....................................... 38
11.7 Separability.............................................. 38
11.8 No Broker................................................. 38
11.9 Titles and Subtitles...................................... 38
11.10 Counterparts.............................................. 38
Disclosure Schedule referenced in Section 3
Exhibits
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A Warrant Purchase Agreements (referenced in section 1.4)
B Corporate Capitalization (referenced in section 3.4)
C Opinion of Counsel to Bionutrics, Inc. (referenced in section 5.3)
D Technology Agreement (referenced in section 5.6)
E Exclusive Supply Agreement (referenced in section 5.6)
F Form of Proprietary Information and Invention Agreement (referenced in
section 7.10)
G Agreement for Purchase and Sale of Assets (referenced in section 7.18)
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Stock Purchase Agreement dated as of August 14, 1998 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 AC Humko Corp., a Delaware corporation, having a principal
place of business at 0000 Xxxxxxxx Xxxxx Xxxxxxx, Xxxxxxx, Xxxxxxxxx
00000.
Whereas the Company wishes to issue and sell, and Purchaser wishes to
purchase, certain securities of the Company;
Now therefore the Company and Purchaser agree as follows:
Section 1
Authorization, Purchase and Sale of Shares; Purchase Price; Warrants
1.1 Authorization of Shares. The Company has authorized the sale and
issuance of two million shares (the "Shares") of its Common Stock (as defined in
section 3.3) and reserved an additional two million shares of Common Stock for
issuance upon exercise of the Warrant Agreement (as defined in section 1.4)).
1.2 Sale and Purchase 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 and sell to
Purchaser and Purchaser shall purchase from the Company the Shares.
1.3 Purchase Price. The purchase price for the Shares is $4 million (the
"Purchase Price").
1.4 Warrants. On the Closing Date (as defined in section 2.1), the Company
shall grant to Purchaser a warrant to purchase in the aggregate two million
shares of Common Stock for a purchase price of $4 million pursuant to the form
of warrant purchase agreement (the "Warrant Agreement") attached hereto as
exhibit A.
Section 2
Closing; Payment; Delivery
2.1 Closing Date and Place of Closing. The closing of the purchase and
sale 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 Purchaser by the Company of the
certificates evidencing the Shares and the place of payment to the Company by
Purchaser of the Purchase Price) shall be at the offices of Xxxxxxxx Xxxxxxxxxx
LLP, 000 Xxxx Xxxxxx, 00xx Xxxxx, Xxx Xxxx, Xxx Xxxx 00000, or such other place
including the
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offices of counsel to Purchaser as Purchaser shall designate by notice to the
Company at least five business days prior to the Closing Date.
2.2 Payment and Delivery. At the Closing Purchaser shall pay the Purchase
Price to the Company by wire transfer, or such other form of payment as shall be
mutually agreed upon by the parties.
Section 3
Representations of the Company
Subject to the Disclosure Schedule attached hereto, the Company makes the
following representations and warranties to Purchaser:
3.1 Organization and Corporate Power; Compliance With Laws. The Company
and each of its subsidiaries are corporations duly organized, validly existing
and in good standing under the laws of their states of incorporation as set
forth in the Disclosure Schedule and are qualified to do business as foreign
corporations in each jurisdiction listed on the Disclosure Schedule, which are
all the jurisdictions in which such qualification is required. The Company and
each of its subsidiaries have all required corporate power and authority to own
their property, to carry on their business as currently conducted and in the
case of the Company 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. A copy of the certificate of incorporation and
by-laws of the Company, as amended to date, have been furnished to Purchaser by
the Company. Neither the Company nor any of its subsidiaries is in violation of
any term of its certificate of incorporation or by-laws, or in violation of any
term of any agreement (written or oral), instrument, judgment, decree, order,
authorization, law, statute, rule or government regulation applicable to it or
to which it is a party or by which it is bound.
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.
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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
18,319,381 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 contemplated by the Investment Documents (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. 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 with respect to the registration of any capital
stock of the Company under the Securities Act of 1933, as amended.
3.4 Existing Stockholder List and Agreements. Attached as exhibit B is the
capitalization table of the Company, prepared both on an outstanding and fully
diluted basis, showing the number of shares of Common Stock or other securities,
including options and warrants, of the Company held by any person or entity as
of the date of this agreement. There are no agreements, written or oral, between
the Company and any holder of its capital stock, or to the knowledge of the
Company between or among any holders of its capital stock, relating to the
acquisition, disposition or voting of the capital stock of the Company.
3.5 Subsidiaries. The Company's subsidiaries are set forth on the
Disclosure Schedule and are wholly owned either directly or indirectly by the
Company. Neither the Company nor its key executives owns or controls, directly
or indirectly, any other corporation, association or business entity.
3.6 Financial Statements, Accounts Receivable and Inventories.
(a) Included in the Disclosure Schedules are (i) the consolidated,
audited balance sheet of the Company (the "Audited Balance Sheet") as of October
31, 1997, (the "Audited Balance Sheet Date") and the consolidated related
statements of operations, statements of stockholders' equity and statements of
cash flows for the 12-month period then ended and (ii) an unaudited balance
sheet of the Company (the "Interim Balance Sheet") as of June 30, 1998, (the
"Interim Balance Sheet Date") and the related statement of operations for the
eight-month period then ended (collectively, the "Financial Statements"). The
Financial Statements (including the footnotes thereto) were prepared in
accordance with generally accepted accounting principles consistently applied
during
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the period covered thereby, are in accordance with the books and records
of the Company and fairly present the financial position of the Company on the
dates of such statements and the results of its operations for the periods
covered thereby.
(b) All accounts receivable reflected on the Interim Balance Sheet
of the Company have arisen from bona fide transactions in the ordinary course of
business of the Company. Except as reserved for on the Interim Balance Sheet,
all accounts receivable reflected on the Interim Balance Sheet are collectible
in the ordinary course of business in the recorded amounts thereof.
(c) The inventories of the Company as reflected on the Interim
Balance Sheet consist only of material in merchantable condition and saleable or
usable in the ordinary course of business.
3.7 Absence of Undisclosed Liabilities; Disclosure. Except as disclosed on
the Interim Balance Sheet, the Company does not have any liabilities that would
be required to be reflected on a balance sheet prepared in accordance with
generally accepted accounting principles, other than those incurred since the
Interim Balance Sheet Date in the ordinary course of business consistently with
past practice. The Company's filings made pursuant to the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), as of their respective dates, did
not contain any untrue statement of a material fact and did not omit to state
any material fact necessary in order to make the statements contained therein
not misleading in the light of the circumstances under which they were made.
3.8 Absence of Certain Developments. Since the Interim Balance Sheet Date
there has been (a) no material adverse effect on the business, operations,
assets or financial condition of the Company (a "Material Adverse Effect"), (b)
no declaration, setting aside or payment of any dividend or other distribution
with respect to, or any direct or indirect redemption or acquisition of, any of
the capital stock of the Company, (c) no waiver of any valuable right of the
Company or cancellation of any debt or claim held by the Company, (d) no loan by
the Company to any officer, director, employee or stockholder of the Company or
any of its subsidiaries, or any agreement or commitment therefor, (e) no
increase, direct or indirect, in the compensation paid or payable to an officer,
director, employee or agent of the Company, (f) no material loss, destruction or
damage to any property of the Company insured or not, (g) no labor dispute
involving the Company and no material change in the key management of the
Company or the terms and conditions of their employment, (h) no acquisition or
disposition of material assets of (or any contract or arrangement therefor), or
any other material transaction by, the Company except in the ordinary course of
business and (i) no material modification or amendment or cancellation of any
material contract or agreement.
3.9 Title to Properties. The Company and each of its subsidiaries have
good and marketable title to, or a valid leasehold interest in, all its
properties and assets, free and clear of all liens or encumbrances, except as
disclosed in the Interim Balance Sheet. All machinery and equipment included in
such assets necessary to the business of the Company are in good condition and
repair, and all leases of real or personal property to which the Company is a
party are fully effective and afford the Company peaceful and undisturbed
possession of the leasehold interest.
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Neither the Company nor any of its subsidiaries is in violation of any zoning,
building or safety ordinance, regulation or requirement or other law or
regulation applicable to the operation of its owned properties, if any. Neither
the Company nor any of its subsidiaries, in its capacity as lessee, is in
violation of any zoning, building or safety ordinance, regulation or requirement
or other law or regulation applicable to the operation of its leased properties.
Neither the Company nor any of its subsidiaries has received any notice of any
such violation with which it has not complied.
3.10 Tax Matters. The Company has filed all foreign, federal, state and
local income, excise or franchise tax returns, real estate and personal property
tax returns, sales and use tax returns and other tax returns required to be
filed by it and has paid all taxes shown thereon to be due or assessed to date.
All taxes and other assessments and levies that the Company is required to
withhold or collect have been withheld and collected and have been paid over to
the proper governmental authorities or been set aside or reserved and will be
paid over when due. With respect to the income tax returns of the Company, the
Company has not received written notice of any audit or of any proposed
deficiencies from any taxing authority, and no controversy with respect to taxes
of any type is pending or threatened. No waivers of applicable statutes of
limitations with respect to any taxes owed by the Company for any year are in
effect.
3.11 Contracts and Commitments. Included as part of the Disclosure
Schedule is a list of each agreement to which the Company or any of its
subsidiaries is a party or by which it or any of its properties is bound
material to the conduct and operations of its business. All such agreements are
valid and binding on the Company or such subsidiary and all other parties
thereto and are in full force and effect. Neither the Company nor any of its
subsidiaries is a party to any contract, obligation or commitment, nor does it
have any employment contract; stock redemption or purchase agreement or
financing agreement or license, distributor or sales representative agreement or
agreement with an officer, director, employee or stockholder of the Company or
person or organization related to or affiliated with any officer, director or
stockholder of the Company or pension, profit-sharing, retirement or stock
option plan. No key employee of the Company or any of its subsidiaries who has
been employed by the Company or any of its subsidiaries for the past 12 months
is a party to any outstanding contract, obligation or commitment with any prior
employer. Neither the Company including its subsidiaries nor any of its
employees, officers or directors is a party to any oral or written contract or
agreement prohibiting them from freely competing or engaging in the business of
the Company or such subsidiary. Neither the Company nor any of its subsidiaries
is in material default under any contract, obligation or commitment and there is
no state of facts that upon notice or lapse of time or both would constitute
such a default.
3.12 Intellectual Property Rights; Employee Restrictions.
(a) All patents (including but not limited to all continuation or
divisional applications, reissued and reexamined patents, any foreign
counterpart patents or foreign counterpart patent applications), trade secrets
(including but not limited to customer lists, invention disclosures,
experimental data, manufacturing processes, hardware designs, programming
processes, software and other confidential information), copyrights, copyright
applications, registered and unregistered
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trademarks, registered and unregistered service marks, and tradenames owned by,
under an obligation of assignment to, or licensed to, the Company or its
subsidiaries and used in the conduct of the business of the Company or its
subsidiaries (the "Intellectual Property Rights") are set forth on the
Disclosure Schedule. All registrations, issued letters patent, and certificates
for such Intellectual Property Rights are in good standing, duly maintained, and
in full force and effect.
(b) All agreements between the Company and its subsidiaries, on the one
hand, and any third party on the other hand, granting the Company and its
subsidiaries or such third party, the right to use or practice any rights under
the Intellectual Property Rights, including without limitation patent or trade
secret licenses under third party owned patents, copyrights, or trade secrets,
(collectively referred to as "Third Party License Agreements") are set forth on
the Disclosure Schedule.
(c) The Company or its subsidiaries have exclusive ownership of, or the
exclusive license to use, free and clear of claims and rights of all third
parties, the Intellectual Property Rights. No present or former director,
consultant or employee of the Company or its subsidiaries has any rights in or
to any of the Intellectual Property Rights and there are no pending or
threatened Claims (as defined in section 3.12(d)) relating to the scope,
ownership or use of the Intellectual Property Rights. Nor do any of the
employees of the Company or the subsidiaries have any agreement or arrangement
with a former employer relating to patents, confidential information, or trade
secrets, and no activity of any employee on behalf of the Company or any of its
subsidiaries violates any agreement or arrangement that such employee has with a
former employer. The Company or its subsidiaries own free and clear of any and
all encumbrances, or are otherwise licensed to use or have the right to use, the
Intellectual Property Rights used in or necessary for the conduct of its
business, and can freely assign, license, convey, or transfer such Intellectual
Property Rights without alteration or impairment of such rights.
(d) No claims, demands, suits and causes of action (the "Claims") have
been asserted and, to the Company's and its subsidiaries' knowledge, no Claims
have been threatened or are contemplated by any third party with respect to the
use of any Intellectual Property Right or challenging the validity or
enforceability of any Third Party License Agreement granting rights to the
Company or its subsidiaries to the Intellectual Property Rights, and to the
Company's knowledge, there exists no valid basis for any such Claim. The use of
such Intellectual Property Right and the conduct of the business of the Company
and its subsidiaries do not infringe, misappropriate, or otherwise violate the
patent, trade secret, trademark, or copyright of any third party, and to the
Company 's knowledge, no third party is infringing upon, misappropriating or
otherwise violating the Intellectual Property Rights of the Company or any of
its subsidiaries.
3.13 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
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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.
3.14 Litigation. There is no litigation or governmental proceeding or
investigation pending or threatened (a) against the Company or any of its
subsidiaries affecting any of its properties or assets, or (b) that may
adversely affect the business, properties, assets or financial condition of the
Company or (c) that may challenge the validity or performance by the Company of
the Investment Documents.
3.15 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.
3.16 Business. The Company and each of its subsidiaries have all necessary
franchises, permits, licenses and other rights and privileges necessary to
permit it to own its property and to conduct its business as presently
conducted, all of which are listed on the Disclosure Schedule.
3.17 Books and Records. The stock ledger of the Company is complete and
reflects all issuances, transfers, repurchases and cancellations of shares of
capital stock of the Company.
3.18 Environment Compliance.
(a) The Company and each of its subsidiaries are currently in
compliance with all Environmental Laws (as defined below) applicable to its
business or the Facilities (as defined below) and has obtained all permits,
consents, approvals, authorizations, registrations, certificates and licenses
("Environmental Permits") required under or issued pursuant to Environmental
Laws necessary in order to conduct the Company's and its subsidiaries' business
as now conducted or to effect the transactions contemplated by the Investment
Documents. All such Environmental Permits are in full force and effect, the
Company and each of its subsidiaries are in material compliance therewith and
neither the Company nor any subsidiary has received any notice of pending or
threatened proceedings to revoke, suspend or deny the renewal of any
Environmental Permit.
(b) No lien has been imposed on or asserted against the Facilities
or other property of the Company or any subsidiary under any Environmental Laws
by any Governmental Entity (as defined below) arising from or in connection with
the presence, use, Release (as defined below), removal, abatement or remediation
of Hazardous Materials (as defined below).
(c) There is not now nor to the Company's knowledge has there ever
been located at any of the Facilities any underground storage tanks, subsurface
disposal units, surface impoundments, lagoons, landfills, disposal sites, areas
or vessels used or intended for the treatment, storage or disposal of Hazardous
Materials.
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(d) As used in this agreement the following terms shall have the
following meanings:
"Environment Laws" means all federal, regional, state, county
or local laws, statutes or ordinances, decisional law, rules, regulations,
codes, orders, decrees, notices, directives, guidance and judgments relating to
public health or safety, pollution, damage to or protection of the environment
or the use, manufacture, processing, distribution, treatment, storage,
generation, disposal, transport or handling of Hazardous Materials, including,
without limitation, the Comprehensive Environmental Response, Compensation and
Liability Act, 42 U.S.C. Section 9601, et seq. ("CERCLA"), the Resource
Conservation and Recovery Act, 42 U.S.C. Section 6901, et seq., the Clean Water
Act, 33 U.S.C. Section 1251, et seq., the Clean Air Act, 42 U.S.C. Section 7401,
et seq., the Occupational Health and Safety Act, 29 U.S.C. 653, 655 and 657, the
Safe Drinking Water Act, U.S.C. 300F, et seq. and the laws and regulations
administered by the Louisiana Department of Environmental Quality and the
Illinois EPA relating to the business of Nutrition Technology Corporation and
InCon Technologies, Inc.
"Facilities" means all plants, offices, manufacturing or other
facilities owned, operated, leased, managed, used, controlled or occupied by the
Company or any subsidiary in connection with its business.
"Governmental Entity" means each federal, state, regional,
county or local governmental agency, department, commission, board, bureau,
instrumentality and political subdivision thereof authorized or having
jurisdiction to enforce Environmental Laws.
"Hazardous Materials" means any material or substance defined
as or included in the definition of pollutants, toxic substances, toxic
pollutants, hazardous materials, hazardous constituents, hazardous wastes,
hazardous substances or terms of similar import defined in or otherwise
regulated under any Environmental Law including asbestos and liquid petroleum
products.
"Release" means an intentional or unintentional release,
discharge, spill, leaking, pumping, pouring, emitting, emptying, injection,
disposal or dumping into the environment.
3.19 Information Supplied to Purchasers. Neither this agreement, the
Disclosure Schedule, exhibits attached hereto, the other Investment Documents
nor any other document or certificate to be furnished to Purchaser at the
Closing contains any untrue statement of a material fact or in the case of the
Disclosure Statement omits to state a material fact necessary in order to make
the statements contained herein relating to Section 3 or therein not misleading.
3.20 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.
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3.21 Employee Benefit Plans. The Company is and has been in material
compliance with the provisions of all laws or rules or regulations applicable to
any employee benefit plan maintained or contributed to by the Company for the
benefit of its employees and there are no claims pending or threatened with
respect to any such employee benefit plan. The Company does not maintain or
contribute to, and has never maintained or contributed to, any qualified
retirement plan subject to the minimum funding requirements of Section 412 of
the Internal Revenue Code of 1986, as amended. There are no unfunded obligations
of the Company under any retirement, pension, profit-sharing or deferred
compensation plan or program. The Company is not required to make any payment or
contribution to any employee benefit plan pursuant to any collective bargaining
agreement. The Company has never maintained or contributed to any employee
benefit plan providing or promising any health or other non-pension benefits to
terminated employees. For the purpose of this section, the term Company includes
all entities that have controlled, have been under the control of, or have been
under common control with, the Company.
3.22 Employees. Neither the Company nor any of its subsidiaries has
received notice that any director or key employee has any plan to terminate his
or her relationship with the Company or subsidiary. None of the employees of the
Company including its subsidiaries is represented by any labor union or covered
by any collective bargaining agreement, the Company is not aware of any effort
to certify a labor union or bargaining unit or similar organization effort with
respect to its employees and there is no labor strike or other labor trouble
pending or threatened with respect to the Company or any subsidiary.
3.23 Affiliated Transactions. All transactions between the Company,
including it subsidiaries, and any officer, employee or stockholder of the
Company or subsidiary or persons controlled by or affiliated with such officer,
employee or stockholder, have been conducted on an arms-length basis. Included
in the Disclosure Schedule are all transactions with any such person entered
into during 1997 and 1998, whether or not in effect, and such transactions
currently in effect.
3.24 Customers and Distributors. Set forth on the Disclosure Schedule are
(a) the representatives or distributors of the services and products of the
Company including its subsidiaries (whether pursuant to a commission, royalty or
other arrangement) and (b) the ten customers who account for the largest sales
of the Company including its subsidiaries, or if larger the number that accounts
for 75% of such sales, for the 12-month period ending June 30, 1998
(collectively, the "Customers and Distributors"). No Customer or Distributor has
any plan to terminate its relationship with, or to materially reduce the volume
of business conducted with, the Company or any subsidiary.
Section 4
Representations and Warranties of Purchaser
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Purchaser represents and warrants to the Company as follows:
4.1 Experience. Purchaser has such knowledge and experience that it is
capable of evaluating the risks and merits of an investment in the Company.
4.2 Investment. Purchaser 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, and the shares of
Common Stock issuable under the Warrant Agreements 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.
4.3 Access to Data. Purchaser has had an opportunity to discuss the
Company's including each of its subsidiaries, business, management and financial
affairs with its management and has had the opportunity to review the Company's
and each subsidiaries' facilities.
4.4 Authority. Purchaser has full power and authority to execute, deliver
and perform this agreement in accordance with its terms. Purchaser has been duly
organized as a corporation under the laws of Delaware and is legally existing
and in good standing in such jurisdiction.
4.5 Enforceability. This agreement has been duly and validly executed and
delivered by Purchaser and constitutes the valid and binding obligation of
Purchaser 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.
4.6 Effect of Transactions. The execution, delivery and performance by
Purchaser 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 Purchaser or the creation of any lien,
charge or encumbrance of any nature upon any of the properties or assets of
Purchaser, or violate any instrument, agreement, judgment, decree, order,
statute, rule or regulation of any federal, state or local government or agency
applicable to Purchaser.
Section 5
Conditions to Closing of Purchaser
The obligation of Purchaser to purchase 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:
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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. Purchaser shall have received from counsel
to the Company an opinion addressed to it, dated the Closing Date, in
substantially the form attached as exhibit C.
5.4 Legal Investment. At the time of the Closing, the purchase of the
Shares by Purchaser shall be legally permitted by the laws and regulations to
which it and the Company are subject.
5.5 Compliance Certificate. The Company shall have delivered to Purchaser
a certificate of the chief executive officer and chief financial officer of the
Company, dated the Closing Date, certifying to the fulfillment of the conditions
specified in sections 5.1 and 5.2 of this agreement and other matters that
Purchaser may reasonably request.
5.6 Technology and Exclusive Supply Agreements. The parties shall have
entered into and closed under a technology agreement ("the Technology
Agreement") in substantially the form of exhibit D and exclusive supply
agreement (the "Supply Agreement") in substantially the form of exhibit E.
5.7 Warrant Purchase Agreements. The Company shall have executed and
delivered to Purchaser the Warrant Agreements.
5.8 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 Purchaser and its counsel.
5.9 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 the
Purchaser an officer's certificate, dated the Closing Date, to such effect.
5.10 Proprietary Information and Inventions Agreements. Each person
employed by the Company who has access to proprietary information concerning the
Company shall have executed
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and delivered to the Company a Proprietary Information and Inventions Agreement
in substantially the form of exhibit F.
5.11 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, and the issuance of
Common Stock pursuant to the Warrant Agreement shall have been duly obtained and
shall be effective on and as of the Closing.
5.12 Certificates and Documents. The Company shall have delivered to
Purchaser:
(a) a copy of the certificate of incorporation of the Company, as in
effect immediately prior to the Closing, certified within ten days of the
Closing Date by the Secretary of State of Nevada, and a certificate, as of the
most recent practicable date within five days of the Closing Date, of the
Secretary of State of Nevada as to the Company's corporate good standing and of
the Secretaries of State of the jurisdictions of organization of its
subsidiaries as to their good standing; and
(b) a certificate of the secretary of the Company dated as of the
Closing Date, certifying as to (i) the incumbency of the officers of the Company
executing the Investment Documents and all other documents executed and
delivered in connection herewith, (ii) the by-laws of the Company as in effect
as of the Closing Date and (iii) a copy of the resolutions of the board of
directors of the Company authorizing the Company's execution, delivery and
performance of the Investment Documents, all matters in connection with the
Investment Documents and the transactions contemplated thereby.
5.13 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 Purchaser, and Purchaser shall have
received all such counterpart originals or certified or other copies of such
documents as it may reasonably request. Purchaser shall have had an opportunity
to conduct and shall be satisfied with such further technical audits and other
due diligence investigations as it deems necessary in connection with the
investment contemplated hereby based upon the Investment Documents 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.
5.14 Directors. All such action shall have been taken as may be necessary
to elect the nominee designated by the Purchaser to the Company's board of
directors effective upon the Closing.
Section 6
Conditions to Closing of the Company
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The Company's obligation to sell the Shares to be purchased 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 Purchaser 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 Purchaser on or prior to the
Closing Date shall have been performed or complied with in all respects.
6.3 Compliance Certificate. Purchaser shall have delivered to the Company
a certificate, dated the Closing Date, certifying to the fulfillment of the
conditions specified in sections 6.1 and 6.2.
6.4 Technology Agreements. Purchaser shall have executed and delivered the
Technology and Supply Agreement substantially in the forms attached hereto as
exhibit D and E and paid the $2 million of consideration under the Technology
Agreement.
6.5 Other Matters. All partnership proceedings on behalf of Purchaser 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 the Company, and the Company
shall have received all such counterpart originals or certified or other copies
of such documents as it may reasonably request.
Section 7
Covenants of the Company
The Company covenants and agrees, so long as (except as otherwise stated)
Purchaser owns the Shares, as follows:
7.1 Basic Financial Information. The Company shall furnish the following
reports to Purchaser:
(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.
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(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 Purchaser 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 Purchaser 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 Purchaser 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 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
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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.
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 Availability of Common Stock for Warrant Exercise. The Company, from
time to time, shall increase the authorized amount of Common Stock if at any
time the number of shares of Common Stock remaining unissued and available for
issuance is insufficient to permit exercise of the Warrant Agreement.
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7.10 Proprietary Information and Inventions Agreements. The Company and
each person now or hereafter employed by it or any subsidiary with access to
confidential information shall enter into a Proprietary Information and
Inventions Agreement in substantially the form of exhibit E.
7.11 Legal Fees. Each party shall pay their own respective legal fees and
out-of-pocket expenses with respect to this agreement, and the Closing documents
and transactions contemplated hereby and thereby.
7.12 Use of Proceeds. The Company shall use the proceeds from the sale of
the Shares and the closing of the Technology Agreement and the other cash
received by the Company from Purchaser pursuant to that certain agreement for
purchase and sale of assets to be negotiated by Purchaser and the Company based
upon the form submitted by Purchaser and attached as exhibit G (the "Asset
Purchase Agreement") to satisfy outstanding balance sheet obligations of the
Company and for working capital as set forth on the Disclosure Schedule.
7.13 Compliance by Subsidiaries. The Company shall cause any subsidiary
that it may organize in the future to comply with this section 7.
7.14 Indebtedness and Other Obligations. Included as part of the
Disclosure Schedule is a true and complete list of all outstanding obligations,
specifically noting all dollar amounts due and owing, of the Company and/or its
subsidiaries, including without limitation, all trade payables, accounts
payables, promissory notes, guarantees and other borrowings of whatever nature
incurred or outstanding as of August 7, 1998.
7.15 Conduct of Business of the Company. During the period from the date
of this agreement to the Closing Date (except for transactions contemplated by
this agreement), the Company shall and shall cause its subsidiaries to carry on
their respective businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and, to the extent
consistent therewith, use commercially reasonable efforts to preserve intact
their current officers and employees and preserve their relationships with
customers, suppliers, licensors, licensees, distributors and others having
business dealings with them, in each case consistent with past practice, to the
end that their goodwill and ongoing businesses shall be unimpaired to the
fullest extent possible at the Closing Date. Without limiting the generality of
the foregoing, and except as otherwise expressly contemplated by this agreement,
the Company shall not, and shall not permit any of its subsidiaries to, during
such period:
(a) (A) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, other than
dividends and distributions by any direct or indirect wholly owned subsidiary of
the Company to the Company or a wholly owned subsidiary of the Company, (B)
split, combine or reclassify any of its capital stock or issue or authorize the
issuance of any other securities in respect, in lieu of or substitution for
shares of its capital stock or (C) purchase, redeem or otherwise acquire any
shares of capital stock of the
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Company or any of its subsidiaries or any other securities thereof or any
rights, warrants or options to acquire any such shares or other securities other
than in connection with the exercise of outstanding stock options and warrants
and satisfaction of withholding obligations under outstanding stock operations
and restricted stock;
(b) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities other than, in the case of
the Company, the issuance of shares of Common Stock upon the exercise of stock
options and warrants outstanding on the date of this agreement in accordance
with their current terms;
(c) amend its Articles of Incorporation, By-laws or other
comparable charter or organizational document;
(d) acquire or agree to acquire (A) by merging or
consolidating with, or by purchasing a substantial portion of the stock or
assets of, or by any other manner, any business or any corporation, partnership,
association, joint venture, limited liability company or other entity or
division thereof or (B) any assets that, in each case, would be material,
individually or in the aggregate, to the Company and its subsidiaries taken as a
whole, except purchases in the ordinary course of business consistent with past
practice;
(e) sell, lease, mortgage, pledge, xxxxx x xxxx on or
otherwise encumber or dispose of any of its properties or assets, except (A)
sales or leases in the ordinary course of business consistent with past practice
and (B) other immaterial transactions not in excess of $100,000 in the
aggregate;
(f) (A) incur indebtedness for borrowed money or guarantee any
such indebtedness of another person, issue or sell any debt securities or
warrants or other rights to acquire any debt securities of the company or any of
its subsidiaries, guarantee any debt securities of another person, enter into
any "keep well" or other agreement to maintain any financial statement condition
of another person or enter into any arrangement having the economic effect of
any of the foregoing, except for working capital borrowings under currently
existing revolving credit facilities incurred in the ordinary course of
business, or (B) make any loans, advances or capital contributions to, or
investments in, any other person that would be material, individually or in the
aggregate, to the Company and its subsidiaries taken as a whole, other than to
the Company or any direct or indirect wholly owned subsidiary of the Company;
(g) make or incur any new capital expenditure (other than
purchases in the ordinary course of business) that, singly or in the aggregate
with all other expenditures, would exceed $100,000;
(h) make any material election relating to taxes or settle or
compromise any material tax liability;
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(i) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or contemplated by, the
most recent consolidated financial statements (or the notes thereto) of the
Company included in the Exchange Act documents or incurred in the ordinary
course of business consistent with past practice;
(j) waive the benefits of, or agree to modify in any manner,
any confidentiality, standstill or similar agreement to which the Company or any
of its subsidiaries is a party;
(k) adopt a plan of complete or partial liquidation or
resolutions providing for or authorizing such a liquidation or a dissolution,
merger, consolidation, restructuring, recapitalization or reorganization;
(l) enter into any new collective bargaining agreement;
(m) change any material accounting principle used by it,
except as required by regulations promulgated by the Securities and Exchange
Commission (the "Commission") or as mandated by accounting boards or bodies;
(n) settle or compromise any litigation (whether or not
commenced prior to the date of this agreement) other than settlements or
compromises: (A) of litigation where the amount paid in settlement or compromise
does not exceed $100,000, or (B) in consultation and cooperation with the
Purchaser, and, with respect to any such settlement, with the prior written
consent of the Purchaser, which shall not be unreasonably withheld or delayed;
(o) except for those contracts and agreements entered into in
the ordinary course of business, without the consent of the Purchaser, which
consent shall not be unreasonably withheld or delayed, enter into any joint
venture or partnership contract or agreement;
(p) amend (except as may be required by law) any bonus, profit
sharing, compensation, stock option, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund or other
arrangement for the benefit or welfare of any employee, director or former
director or employee, increase the compensation or fringe benefits of any
officer of the Company or any of its subsidiaries, or, except as provided in an
existing benefit plan or in the ordinary course of business consistent with past
practice, increase the compensation or fringe benefits of any employee or former
employee or pay any benefit not required by any existing plan, arrangement or
agreement;
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(q) grant any new or modified severance or termination
arrangement or increase or accelerate any benefits payable under its severance
or termination pay policies in effect on the date hereof;
(r) permit any of its subsidiaries to, take any action that
would, or that could reasonably be expected to, result (i) in any of the
representations and warranties of the Company set forth in this agreement
becoming untrue or (ii) in any of the covenants contained in this agreement
becoming unperformable. Pending the Closing the Company will promptly advise the
Purchaser of any action or event of which it becomes aware that has the effect
of making incorrect any of such representations or warranties or that has the
effect of rendering unperformable any of such covenants;
(s) authorize any of, or commit or agree to take any of, the
foregoing actions;
7.16 Valid Issuance. The Company covenants that the Shares will, upon
issuance and upon full payment therefor in accordance with the terms hereof, and
the common stock underlying the Warrant Agreement will, upon exercise thereof
pursuant thereto, be validly issued, fully paid and nonassessable and free from
all taxes, liens and charges with respect to the issuance thereof.
7.17 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.
7.18 Further Assurances. The Company covenants that it shall cooperate
with the Purchaser and execute such further instruments and documents as the
Purchaser shall request to carry out to the reasonably satisfaction of the
Purchaser the transactions contemplated by this agreement. The Company further
agrees to mutually negotiate in good faith and to finalize, execute and deliver
the Asset Purchase Agreement.
7.19 Securities Act Registration Statements. The Company covenants that
the Purchaser 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
the Purchaser 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 the Purchaser's judgment should be
included. In connection with such registration statement the Company will
indemnify Purchaser, its members, officers and directors and each
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person, if any, who controls the Purchaser 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 Purchaser expressly for use in such registration statement.
If, in connection with any such registration statement, Purchaser shall furnish
written information to the Company expressly for use in the registration
statement, Purchaser 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 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 prospectors 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 written information to the
Company expressly for use in the registration statement, Purchaser 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
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 the
Purchaser for use therein.
7.20 Notices of Certain Events. The Company shall promptly give notice to
the Purchaser (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
7.19 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.
7.21 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
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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
the Purchaser. 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.
7.22 Listing of Common Stock. The Company warrants and agrees for the
benefit of the Purchaser that the Shares and the shares of Common Stock issuable
upon exercise of the warrants under the Warrant Agreement shall be approved for
listing, subject to official notice of issuance, on the NASDAQ (National Market)
as of the Closing Date.
7.23 Right of First Refusal.
(a) The Company hereby grants to Purchaser the right of first refusal,
effective so long as it owns the Shares, to purchase New Securities (as defined
in this section 7.23) that the Company may, from time to time, propose to sell
and issue up to the amount of Purchaser's pro rata share. A pro rata share, for
purposes of this right of first refusal, is the ratio that the sum of the number
of shares of Common Stock then held by Purchaser and the number of shares of
Common Stock issuable upon conversion or exercise of any other securities
convertible or exercisable into Common Stock then held by Purchaser bears to the
sum of the total number of shares of Common Stock then outstanding and the
number of shares of Common Stock issuable upon conversion or exercise of any
then outstanding other securities convertible or exercisable into Common Stock
(excluding all shares of Common Stock held as treasury shares by the Company and
all shares of Common Stock held by direct or indirect subsidiaries of the
Company). In the event of a public offering by the Company, Purchaser shall be
permitted to purchase at the public offering price net of the underwriting
discount directly from the Company either in a separate transaction or if
permitted under applicable securities laws as part of the registered offering
such pro rata amount of securities as provided above.
(b) Except as set forth below, "New Securities" shall mean any shares of
capital stock of the Company, including Common Stock and voting preferred stock,
whether or not now authorized, and rights, options or warrants to purchase such
shares of Common Stock or preferred stock, and securities of any type whatsoever
that are, or may become, convertible into such shares of Common Stock or
preferred stock. Notwithstanding the foregoing, "New Securities" does not
include:
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(i) the Shares or common stock issuable upon exercise of the
Warrant Agreement;
(ii) capital stock issued or issuable to officers, directors or
employees of or consultants to the Company, primarily for the purpose of
soliciting or retaining their services to the Company directly or pursuant to a
stock option plan, restricted stock purchase plan or other arrangement approved
by the compensation committee of the board of directors, in such amount as shall
be approved by such compensation committee, provided that a majority of the
members of which consist of individuals who are not officers of, or consultants
to the Company or any corporation controlling or controlled by the Company or
the Company's direct or indirect parent;
(iii) capital stock issued pursuant to any rights or agreements,
including without limitation convertible securities, options and warrants,
provided that the rights of first refusal established by this section 7.23 apply
with respect to the initial sale or grant by the Company of such rights or
agreements;
(iv) capital stock issued in connection with any stock split, stock
dividend or recapitalization by the Company; and
(v) securities issued pursuant to the acquisition of another
corporation by the Company by merger, purchase of substantially all of the
assets, or other reorganization whereby the Company owns not less than 50% of
the voting power of the surviving corporation.
(c) The Company further grants to Purchaser the right of first offer,
effective so long as it owns the Shares, to purchase any and all material assets
or any and all direct or indirect subsidiaries of the Company ("Assets Held for
Sale") that the Company may, from time to time, propose to sell or otherwise
transfer.
(d) If subsections (a) and (c) apply in the event the Company proposes to
undertake an issuance of New Securities or dispose of Assets Held for Sale, it
shall promptly give Purchaser written notice of its intention, describing the
type of New Securities or the Assets Held for Sale, as appropriate, and the
price and general terms upon which the Company proposes to issue or transfer the
same. The Purchaser shall have twenty (20) business days (or the greater of (x)
five (5) business days or (y) such period as otherwise mutually agreed to by the
parties, in the case of New Securities offered solely to officers or directors
of the Company) from the date of receipt of any such notice to agree to purchase
up to its respective pro rata share of such New Securities or the Assets Held
for Sale, as appropriate, for the price and upon the terms specified in the
notice by giving written notice to the Company and, in the case of New
Securities, stating therein the quantify of New Securities to be purchased.
(e) Purchaser's notice to the Company of exercise of its rights under this
Section 7.23 shall constitute Purchaser's irrevocable acceptance of the
Company's offer, subject to customary closing conditions.
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(f) The purchase and sale of any securities or assets pursuant to any
offer made under this Section 7.23 that is accepted by the Purchaser shall take
place at such time and place as the Company and the Purchaser may mutually
agree. The purchase price shall be payable in such form as mutually agreed by
the Company and Purchaser or, in the case of New Securities, in such other form
as set forth in the terms to the new investors. The issuance of such shares
shall be conditioned upon compliance with applicable laws and regulations and
requirements of any applicable stock exchange and the absence of any order in
effect enjoining or restraining such exercise or issuance.
(g) In the event Purchaser fails to exercise the right of first refusal or
offer as the case may be within the period set forth in Section 7.23(d), as
appropriate, the Company shall have ninety (90) days thereafter to sell or enter
into an agreement (pursuant to which the sale of New Securities or the Assets
Held for Sale, as appropriate covered thereby shall be closed, if at all, within
sixty (60) days from the date of said agreement) to sell the New Securities or
the Assets Held for Sale, as appropriate, not elected to be purchased by
Purchaser at the price and upon terms no more favorable to the purchasers of
such securities or assets than specified in the Company's notice.
7.24 Purchaser's Director Nominee. The Company and the Key Management
Employee/Directors listed on the signature page hereto shall nominate and vote
for the Purchaser's designee to the board of directors of the Company so long as
Purchaser shall own the Shares or Common Stock underlying the Warrant Agreement.
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"). Purchaser 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, or
shares of Common Stock issued upon exercise of the warrants under the Warrant
Agreement, or any other securities issued in respect of the Preferred Shares or
the Common Stock issued upon exercise of the warrants under the Warrant
Agreements, upon any stock split, stock dividend, recapitalization, merger,
consolidation or similar event, shall (unless otherwise permitted or unless the
securities evidenced by such certificate shall have been registered under the
Securities Act) be stamped or otherwise
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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 Purchaser, 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(i) or the "no-action" letter referred to in section 8.4(ii) to the
effect that any transfer by Purchaser 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
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.
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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 Purchaser owns any Shares, furnish to
Purchaser 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. Purchaser 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.
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, the Purchaser (and any
transferee of Purchaser'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).
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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 the Warrant Agreement.
(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
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
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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 to 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
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
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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 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
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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) 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 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 or a material discovery of oil
and gas reserves; 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
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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 subdivision (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;
(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
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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 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
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(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 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.
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38
(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 percent 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 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
33
39
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 the Purchasers. The Purchasers will, and hereby do,
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 Purchaser 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 Purchaser.
(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 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
34
40
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.
Section 10
Indemnification
10.1 Obligation of the Company to Indemnify. Subject to section 11.2, the
Company shall indemnify, defend and hold harmless Purchaser (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 in the Disclosure Schedule or any
35
41
exhibit, schedule certificate or any of the other Transaction Documents
delivered by the Company at the Closing.
10.2 Obligation of Purchaser to Indemnify. Subject to section 11.2,
Purchaser 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 Purchaser contained in this
agreement or in any exhibit, schedule or certificate delivered by Purchaser 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 "Indemnitor"). 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 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.
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42
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 Purchaser 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 Disclosure
Schedule and exhibits 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 Purchaser.
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
Purchaser or the Company at its address set forth in the preamble of this
agreement, or at such other address as Purchaser 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 Purchaser or the Company upon any breach
or default of the Company or Purchaser 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.
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43
11.7 Separability. In case any provision of the 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 Purchaser harmless, and Purchaser 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 Purchaser 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.
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44
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/Directors:
(as to section 7.24 only) by /s/ XXXXXX X. XXXX
---------------------------------------
Xxxxxx X. Xxxx, Chief Executive Officer
/s/ XXXXXX X. XXXX
-------------------------
Xxxxxx X. Xxxx AC Humko Corp.
/s/ D. XXXXXXX XXXXX
------------------------- by /s/ XXXXX XXXXXXXXXXXXX
D. Xxxxxxx Xxxxx ---------------------------------------
Xxxxx Xxxxxxxxxxxxx
Vice President
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45
DISCLOSURE SCHEDULE
TO
STOCK PURCHASE AGREEMENT
(THE "AGREEMENT")
DATED AUGUST 14, 1998
BETWEEN
BIONUTRICS, INC.
("COMPANY")
AND
AC HUMKO CORP.
Section 3.1
Organization and Corporate Power; Compliance with Laws
1. The Company is incorporated in Nevada and qualified to do business in
Arizona.
2. The following entities are subsidiaries of the Company incorporated or
formed, as the case may be, and qualified to do business and in good
standing (except as noted in item no. 3) in the states and
jurisdictions set forth below:
Subsidiary Incorporated/Formed Qualified to do Business
---------- ------------------- ------------------------
LipoGenics, Inc. Delaware None
Bionutrics Health Products, Inc. Delaware Arizona
Nutrition Technology Corporation Nevada Louisiana
Bionutrics International Inc. British Virgin Islands None
InCon Technologies, Inc. Delaware Illinois
Cosmedics Inc. Delaware None
NuRx International, LLC Delaware None
Molecular Separation Illinois None
Laboratories, Inc.
3. Molecular Separation Laboratories, Inc. and NuRx International LLC,
inactive corporations, are not in good standing due to failure to file
the most recent annual report. The Company intends dissolve these
subsidiaries in the near future.
1
46
Section 3.2
Authorization
In connection with the Closing or the closing under the Asset Purchase Agreement
with Purchaser, the release of the UCC-1 financing statements covering the
assets of InCon Technologies, Inc. and the release of that certain escrow
agreement covering Company shares will be secured from Inabata America
Corporation as secured lender under the Loan Agreement dated March 23, 1998,
between Inabata America Corporation and the Company.
2
47
Section 3.3
Capitalization
The following warrants, options and other rights to purchase or acquire shares
of capital stock of the Company are authorized, outstanding, offered or
committed to by the Company.
1. See attached list of option and warrant holders.
2. The Company anticipates issuing restricted stock to certain officers as
a bonus for 1997.
3
48
Section 3.4
Existing Stockholder List and Agreements
None
4
49
Section 3.5
Subsidiaries
1. The following entities are wholly owned subsidiaries of the Company:
LipoGenics, Inc.
Bionutrics Health Products, Inc.
Nutrition Technology Corporation
Bionutrics International Ltd.
InCon Technologies, Inc.
Cosmedics Inc.
NuRx International, LLC
Molecular Separation Laboratories, Inc.
2. Xxxx Xxxxxx, CEO of InCon Technologies, Inc. owns or controls, with
another executive at InCon, PSW97 LLP, which leases to the Company the
Batavia, Illinois facility.
5
50
Section 3.6
Financial Statements, Accounts Receivable and Inventories
None
6
51
Section 3.7
Absence of Undisclosed Liabilities
The Interim Balance Sheet carries an account receivable in the amount of $1.4
million due from P.T. Bakrie of Indonesia. Owing to the financial crisis in that
country, the timeliness of collection if not collectibility, of such receivable
is in question and balance sheet reserves, the quantity of which cannot be
determined at this time, may have to be established.
7
52
Section 3.8
Absence of Certain Developments
1. On July 22, 1998, Inabata America Corporation served a complaint on the
Company relating to the default under the loan agreement between
Inabata America Corporation and the Company, dated March 23, 1998,
whereby Inabata America Corporation extended a bridge loan to the
Company in the amount of $1.5 million that was due June 23 but had been
informally extended until the start of its lawsuit.
2. The Company has substantial overdue balances owed to a number of
vendors and creditors.
3. Xxxxxx Xxxx, a director of the Company, has extended loans to the
Company in the aggregate amount of $1,625,000, which will be secured by
the stock of InCon Technologies, Inc.
4. Regarding Section 3.8(c), see Disclosure Schedule 3.11, item no.2.
8
53
Section 3.9
Title to Properties
1. UCC-1 Financing Statement filed against Bionutrics, Inc.; file number
00-0000000; filed in Maricopa County, Arizona on January 2, 1998;
creditor:
Hibernia National Bank
Loan Administration Department
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
2. UCC-1 Financing Statement filed against Bionutrics, Inc.; file number
36-124441; filed in the State of Louisiana on December 29, 1997;
creditor:
Hibernia National Bank
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
3. UCC Financing Statement filed against Bionutrics, Inc.; file number
36-124665 to original 36-124665; filed in the State of Louisiana on
January 6, 1996; creditor:
Hibernia National Bank
000 Xxxxxxxxxx Xxxxxx
Xxx Xxxxxxx, XX 00000
4. UCC-1 Financing Statement filed against InCon Technologies, Inc.; file
number 003830336; filed in the State of Illinois on April 8, 1998;
creditor:
Inabata America Corp.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
5. UCC-1 Financing Statement filed against InCon Technologies Inc.; file
number B180211; filed in Xxxx County, Illinois on April 3, 1998;
creditor:
Inabata America Corp.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
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54
6. UCC-1 Financing Statement filed against InCon Technologies, Inc.; file
number B180212; filed in Xxxx County, Illinois on April 3, 1998;
creditor:
Inabata America Corp.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, XX 00000
7. The Company is entering into a Security Agreement with Xxxxxx Xxxx, a
director of the Company, whereby Xx. Xxxx will have a security interest
in the stock of InCon Technologies, Inc.
8. United Lift Truck, L.P. has a security interest in a fork lift owned by
InCon Technologies, Inc. pursuant to a retail installment contract
dated May 6, 1997.
10
55
Section 3.10
Tax Matters
None
11
56
Section 3.11
Contracts and Commitments
1. Attached is a list of each agreement to which the Company or any of its
subsidiaries is a party.
2. The Company along with other investors during the first quarter of 1998
informally agreed to fund Xiagen Limited in a private placement in the
amount of approximately $2.5 million, subject to a capital call of an
additional $2.5 million, but this financing has been held in abeyance
awaiting identification of an investor in South East Asia. Company
funding, as then contemplated, would have been through the sale of
common stock. Xiagen's business plan contemplates the manufacture and
sale abroad of rice bran oil.
3. As of July 30, 1998, approximately 88% of the accounts payable to
Company vendors and creditors is overdue 30 days and approximately 69%
is overdue 60 days.
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57
Section 3.12
Proprietary Rights; Employee Restrictions
The use or practice of Intellectual Property Rights is covered by the related
technology transfer and supply agreements to be entered into with Purchaser.
13
58
Section 3.13
Effect of Transactions
None
14
59
Section 3.14
Litigation
1. On July 22, 1998, Inabata America Corporation served a complaint on the
Company relating to the default under the Loan Agreement dated March
23, 1998 between Inabata America Corporation and the Company, whereby
Inabata America Corporation extended a bridge loan to the Company in
the amount of $1.5 million that was due June 23 but had been informally
extended until the start of its lawsuit.
2. The Company has substantial overdue balances owed to a number of
vendors and creditors. See Disclosure Schedule 3.11, item no. 3. As a
result, certain of such vendors and creditors have threatened to
commence proceedings against the Company for payment of such balances.
3. On July 29, 1998, Summit Construction Corp. served a complaint on the
Company relating to an overdue balance for work at Nutrition Technology
Corporation in the amount of approximately $138,000.
15
60
Section 3.15
Securities Laws
None
16
61
Section 3.16
Business
1. Operating with instruction permits dated August 20, 1997, ad July 23,
1996, from the Illinois EPA.
2. Change of ownership date July 21, 1998, with operating permit dated
September 20, 1997, from the Louisiana Department of Environmental
Quality.
3. Good standing certificates referred to in Disclosure Schedule 3.1.
17
62
Section 3.17
Books and Records
None
18
63
Section 3.18
Environmental Compliance
None
19
64
Section 3.19
Information Supplied to Purchasers
None
20
65
Section 3.20
Brokerage
Pursuant to engagement letters dated June 8, 1998 with HSBC Securities, Inc. the
Company is constrained during an exclusivity period through July 31, 1998, and
November 30, 1998 from initiating or entering into discussions or negotiations
looking to the loan or offer or sale of securities of approximately $4 million
or $15 million with respect to the latter date without first offering to do so
through HSBC Securities, Inc. The Company believes that the transaction covered
by this agreement is not covered by either engagement letter, and therefore is
not subject to a 7% fee on the financing contemplated by this agreement or the
technology or Asset Purchase transactions or 5% warrant coverage on the
financing. HSBC Securities, Inc. has informally advised the Company that, in its
view, this agreement is subject to the engagement letter. Although there is
disagreement on this matter the Company expects to reach an amicable settlement
through negotiation and continue a banking relationship with HSBC Securities.
21
66
Section 3.21
Employee Benefit Plans
Former Bionutrics Health Products President Xxxxxx Xxxxxx, whose employment
terminated effective January 1, 1998, was slated to receive one-half his salary
and health plan benefits through June 30, 1998, but his reduced pay and benefits
have been informally extended.
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67
Section 3.22
Employees
Xxxxxxx Xxxxx, president of Nutrition Technology Corporation, may become
employed by Purchaser.
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68
Section 3.23
Affiliated Transactions
1. See attached February 27, 1998 Proxy, p. 15-16.
2. Xxxxxx Xxxx, a director of the Company, extended a loan to the Company
in the amount of $225,000 on April 24, 1998 and $1 million on June 18,
1998. Xx. Xxxx extended an additional loan to the Company in the amount
of $400,000. The Company will issue to Xx. Xxxx a promissory note
bearing interest at 9-1/2% per annum due the earlier of December 31,
1998 and an additional financing in excess of $5 million. The note will
be secured by the stock of InCon Technologies, Inc.
3. On February 3, 1998, Xxxxxxxxx Xxxxxxxxxx, a director of the Company,
extended an unsecured loan to the Company in the amount of $100,000 in
exchange for a promissory note bearing interest at 9-1/2% per annum due
in 120 days. The term of this note has been informally extended to the
closing of this private placement.
4. With respect to the Company prospective investment in Xiagen Limited,
see Disclosure Schedule Section 3.11, item no. 2.
5. See Disclosure Schedule 3.5 (2).
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69
Section 3.24
Customers and Distributors
1. See attached list of brokers of the services and products of the
Company and its subsidiaries.
2. See attached list of the customers that account for 75% of the sales of
the Company and its subsidiaries for the 12 months ended June 30, 1998.
25