-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OKOXrOaM5Ep4g1wcU8zDLVKanxM3cKoQmkPyD+vJgxLRTaNrYGKWB9Mfodm8bjVx Cf6iiqk5b1xHBK28ofhfpw== 0000910117-99-000127.txt : 19991230 0000910117-99-000127.hdr.sgml : 19991230 ACCESSION NUMBER: 0000910117-99-000127 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 19 CONFORMED PERIOD OF REPORT: 19990930 FILED AS OF DATE: 19991229 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AGRITOPE INC CENTRAL INDEX KEY: 0001044865 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 930820945 STATE OF INCORPORATION: OR FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-23531 FILM NUMBER: 99782740 BUSINESS ADDRESS: STREET 1: 16160 SW UPPER BOONES FERRY RD CITY: PORTLAND STATE: OR ZIP: 97224 BUSINESS PHONE: 5036707702 MAIL ADDRESS: STREET 1: 16160 SW UPPER BOONES FERRY RD CITY: PORTLAND STATE: OR ZIP: 97224 10-K 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 ------------ FORM 10-K [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended September 30, 1999 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File No. 000-23531 AGRITOPE, INC. (Exact name of registrant as specified in its charter) DELAWARE 93-0820945 (State or other jurisdiction) (I.R.S. Employer incorporation or organization) Identification No.) 16160 SW Upper Boones Ferry Road Portland, Oregon 97224-7744 (Address of principal executive offices) (Zip Code) (503) 670-7702 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock (including preferred stock purchase rights), $.01 par value (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes /X/ No / / Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / / The aggregate market value of the registrant's common stock held by non-affiliates of the registrant, as of November 30, 1999, was approximately $3,750,000. The number of shares outstanding of the registrant's common stock, par value $.01 per share, on November 30, 1999 was 4,070,612. DOCUMENTS INCORPORATED BY REFERENCE Parts of registrant's Proxy Statement dated January 17, 2000 prepared in connection with the Annual Meeting of Stockholders to be held on February 29, 2000 are incorporated by reference into Part III of this Report.
T A B L E O F C O N T E N T S PART I ITEM 1. BUSINESS..................................................................... 3 ITEM 2. PROPERTIES................................................................... 12 ITEM 3. LEGAL PROCEEDINGS............................................................ 13 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.......................... 13 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS.................................................... 13 ITEM 6. SELECTED FINANCIAL DATA...................................................... 14 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.................................... 15 ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK...................................................... 19 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.................................. 19 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE................................. 19 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.......................... 20 ITEM 11. EXECUTIVE COMPENSATION...................................................... 20 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.................................................. 20 ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.............................. 20 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.................................................... 20
PART I CERTAIN STATEMENTS IN THIS REPORT CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. STATEMENTS THAT EXPRESSLY OR BY IMPLICATION PREDICT FUTURE RESULTS, PERFORMANCE OR EVENTS ARE FORWARD-LOOKING. THE WORDS "BELIEVES," "INTENDS," "EXPECTS," "ANTICIPATES," "ESTIMATES," AND SIMILAR EXPRESSIONS ALSO IDENTIFY FORWARD LOOKING-STATEMENTS. THE FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES AND OTHER FACTORS THAT MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY OR INDUSTRY RESULTS TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY THE FORWARD-LOOKING STATEMENTS. WITH RESPECT TO THE COMPANY, THESE FACTORS INCLUDE ITS LIMITED INDEPENDENT OPERATING HISTORY; UNCERTAINTY OF ADDITIONAL FUNDING; LOSS OR IMPAIRMENT OF SOURCES OF CAPITAL; DEPENDENCE ON STRATEGIC PARTNERS; UNCERTAINTIES RELATING TO PATENTS AND PROPRIETARY INFORMATION; DEPENDENCE ON KEY PERSONNEL; TECHNOLOGICAL CHANGE AND COMPETITION; UNCERTAINTIES AS TO CONSUMER ACCEPTANCE OF GENETICALLY ENGINEERED PRODUCTS; CHANGES IN LAWS OR REGULATIONS; AS WELL AS THE OTHER FACTORS DISCUSSED IN EXHIBIT 99 HERETO WHICH IS HEREBY INCORPORATED BY REFERENCE. GIVEN THESE UNCERTAINTIES, READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THE FORWARD-LOOKING STATEMENTS. AGRITOPE DOES NOT INTEND TO UPDATE ANY FORWARD-LOOKING STATEMENTS. ITEM 1. BUSINESS Agritope, Inc. ("Agritope" or the "Company") is an Oregon-based agricultural biotechnology company that develops improved plant products and provides technology to the agricultural industry. Agrinomics LLC, its joint venture with Aventis CropScience, S.A. ("Aventis CropScience"), conducts a gene discovery program, which is directed at finding and determining the function of plant genes. Aventis CropScience was formed in December 1999, combining the businesses formerly known as Rhone-Poulenc Agro and AgrEvo. The technology developed or acquired by the Company includes a variety of genes, promoters and enabling technologies. Agritope utilizes its patented ethylene control technology to develop a wide variety of fruits and vegetables that are resistant to the decaying effects of ethylene. The Company has also acquired certain rights to certain proprietary genes (the "Salk Genes") from the Salk Institute for Biological Studies (the "Salk Institute"). Agritope believes that the Salk Genes may have the potential to confer disease resistance, enhance crop yield, control flowering, regulate cell division and enhance gene expression in plants. Agritope has an option to obtain a worldwide license to use the Salk Genes in a wide range of fruit and vegetable species. The Company consists of two segments: Agritope Research and Development, as described above, and a majority-owned subsidiary, Vinifera, Inc. ("Vinifera"). See Note 11 of Notes to Consolidated Financial Statements for selected financial information regarding both segments. Vinifera propagates and markets grapevines to the U.S. premium wine grape production industry. Agritope believes that Vinifera offers one of the most technically advanced grapevine plant propagation and disease screening and elimination programs available to the grape production industry. B I O T E C H N O L O G Y P R O G R A M Historically, Agritope's biotechnology program focused on using the tools and techniques of plant genetic engineering to regulate the synthesis of ethylene in ripening fruits and vegetables. Ethylene is a gaseous plant hormone, which in higher plant species is responsible for fruit and vegetable ripening and senescence as well as numerous other physiological effects. The Company has identified and patented a single gene that can be inserted into plants and expressed to regulate the plant's ability to produce ethylene. In recent years, the Company has expanded its research to genetically regulating other physiological processes in plants. Agritope is also conducting research in the area of disease control, including screening plants for the presence of disease and creating genetically engineered plants with resistance to pathogens. 3 RIPENING CONTROL. The fresh produce industry is based largely upon rapid harvesting, processing and distribution of fruits and vegetables in order to prevent spoilage and ensure the arrival of product at retail outlets in acceptable condition for consumer purchase and use. The post-harvest period for most fruits and vegetables is one of continuous ripening and senescence (aging), as evidenced by rapid changes in color, texture, flavor, nutrient content, and other quality attributes. Product losses during harvesting, processing, packing, shipping and distribution can reach substantial proportions of overall crop yield. Growers frequently incur losses resulting from abandoning crops in the field or having shipments refused by receivers because the produce is overripe. In addition, wholesalers and retailers may be forced either to discard or sell overripe produce at reduced prices and consumers often must use produce shortly after purchase to avoid spoilage. Studies published in the Marketing Research Report of the U.S. Department of Agriculture ("USDA") have estimated post-harvest losses of 30% and 40%, respectively, for strawberries shipped from Florida to the Chicago and New York markets. In the U.S. fruit and vegetable markets, post-harvest losses are estimated to amount to several billion dollars annually. Post-harvest losses are largely attributable to the effects of ethylene. Because ethylene is a gas, it not only affects the plant producing it, but also surrounding plants as well. The physiological effects of ethylene include initiation and enhancement of ripening, senescence, leaf abscission and drooping, and flower fading and wilting. Common examples include the ripening and subsequent rotting of tomatoes and apples, discoloration in lettuce and broccoli, and the short bloom life of cut flowers. The importance of controlling ethylene production in plants has been recognized for decades, and has been addressed primarily through the use of controlled atmosphere storage, chemical treatment, and special packaging. Conventional techniques for controlling ethylene production have serious disadvantages that include high cost, time-critical handling requirements and lack of consistent ripening. For example, the majority of product sold in the fresh tomato market today is composed of "gas-green" tomatoes. These tomatoes are picked and packed while still green and firm. Prior to shipping to wholesale customers, green tomatoes are exposed to ethylene gas in order to initiate ripening of the product. In general, gas-green tomatoes are perceived by consumers to have less desirable taste and texture than vine-ripened tomatoes. Agritope believes the ability to regulate ethylene and control ripening through genetic engineering represents an opportunity to provide a superior product to consumers while also improving profitability for growers and distributors. Growers may achieve higher marketable yields due to fewer losses of overripe product in the field and may lower labor costs by decreasing frequency of harvest. For packer/shippers, better control of product marketability may result in improved inventory flexibility and control, and more uniform product quality. ETHYLENE CONTROL TECHNOLOGY. Agritope's ethylene control technology is focused on the use of a patented gene known as SAMase. The expression of SAMase in plants produces an enzyme that acts to degrade one of the important precursor compounds (S-adenosylmethionine or "SAM") necessary for the production of ethylene. Agritope has genetically engineered plants to express the SAMase gene only when certain levels of rising ethylene concentrations are reached in the tissues of the fruit or plant. This feature causes the production of greater levels of the enzyme that degrades SAM in response to a correspondingly higher level of ethylene. Agritope believes that this technology thus offers a major advantage over other approaches to ripening control in that the production of ethylene may be specifically reduced to levels that allow for the initiation of ripening but that delay the spoiling effects of excess ethylene. Therefore, the fruit can be maintained at an optimal level of ripeness for an extended period of time. An additional benefit of Agritope's technology is that the reaction catalyzed by the SAMase gene produces compounds normally found in plants. Agritope believes its SAMase technology can be utilized for the control of ethylene in any plant species where ethylene affects ripening or senescence. Agritope's application of ethylene control technology to various fruit and vegetable crops is at different stages, as described below. There are difficult scientific objectives to be achieved with respect to application of the technology to certain crops before the technical or commercial feasibility of the modified crops can be 4 demonstrated. There can be no assurance that the technology can be successfully applied to particular crops or that the modified crops can be successfully and profitably produced, distributed and sold. In 1999, Agritope licensed its ethylene control technology to Ball Horticultural Company ("Ball"), a global leader in the development, production and marketing of floricultural crops. Under the terms of the license, Ball was granted a license to utilize Agritope's proprietary ethylene control technology, including rights to genes and gene promoters, to develop and produce novel floricultural crops. In return, Agritope will receive royalties on the sale of products and derivatives that incorporate the licensed technology. A U.S. patent covering the use of any gene that encodes S-adenosylmethionine hydrolase (the enzyme expressed in any plant species by the SAMase gene) protects Agritope's ripening control technology. In addition to the patent on the SAMase gene, utility claims have been allowed on the promoter/gene combination used by Agritope in applications currently under development as well as potential applications in all other fruit-bearing plants. In the area of regulated gene expression and ripening control, Agritope has seven additional U.S. patents issued and two U.S. patents allowed but not yet issued. Agritope also has three pending U.S. patents in this area. Agritope also holds five foreign patents as well as 26 pending foreign applications, also primarily related to ripening control technology. THE SALK GENES. In 1997, Agritope acquired certain rights to certain proprietary genes discovered by scientists at the Salk Institute. The Company believes that the Salk Genes may have the potential to confer disease resistance, enhance yield, control flowering, regulate cell division and enhance gene expression in plants. Agritope believes these new technologies will allow Agritope to leverage its ability to genetically engineer fruits and vegetables and enhance its ability to broaden its pipeline of new genetically engineered products. U.S. and foreign patent filings have been made with respect to each of the Salk Genes. A U.S. patent covering one gene, LEAFY, has been issued to the Salk Institute. Under the terms of the Salk agreement, Agritope has an option to obtain an exclusive or nonexclusive worldwide license to use the Salk Genes in a wide range of fruit and vegetable crops. The agreement permits Agritope to use each Salk Gene for research and evaluation purposes, for which Agritope will pay an annual access fee until it elects to license the gene for commercial purposes. Agritope will pay a license issue fee and royalty for each Salk Gene it elects to license. Agritope has also agreed to reimburse a percentage of applicable Salk Institute patent costs. Salk Institute retains ownership of the Salk Genes, subject to applicable U.S. government rights. Agritope will own any modified plant species and fruit and vegetable crops it develops using the Salk Genes, and will therefore have control of the marketing and distribution rights to such products. Agritope's work with the Salk Genes to produce desirable fruit and vegetable crops is at an early stage. There are difficult scientific objectives to be achieved before the technological or commercial feasibility of the products can be demonstrated. There can be no assurance that any of Agritope's products under development using the Salk Genes, if and when fully developed and tested, will perform in accordance with Agritope's expectations, that necessary regulatory approvals will be obtained in a timely manner, if at all, or that these products can be successfully and profitably produced, distributed and sold. Agritope is currently conducting research regarding the following specific Salk Genes: CDR1 is a gene that may confer systemic acquired resistance ("SAR") to plants. SAR is the ability of plants to develop a powerful disease resistance state. After exposure to a non-lethal inoculum of a bacterial, viral or fungal pathogen, a plant will possess a heightened ability to defend itself against a broad range of new pathogenic challenges. Scientists at the Salk Institute, in collaboration with those at the Samuel Roberts Nobel Foundation, have discovered a gene, CDR1, which appears to play a key role in the maintenance of SAR. Agritope intends to utilize CDR1 in the development of plant varieties that have increased disease resistance to a broad range of plant pathogens. 5 DET2 is a gene that controls brassinosteroid synthesis in plants. Brassinosteroids are compounds that are naturally produced in minute quantities in plants and play a key role in plant growth and development. In addition to being difficult to extract (due to their small quantity within the plant), brassinosteroids are also exceedingly difficult to synthesize using organic synthesis methods. Nevertheless, research has demonstrated that application of purified brassinosteroids to crop plants can result in enhanced yields. Scientists at the Salk Institute have identified a key enzymatic step that limits brassinosteroid synthesis in plants and cloned the gene, DET2, which encodes the enzyme. Expression of the gene in transgenic plants has produced plants with enhanced growth properties due to increased synthesis of brassinosteroid by the transgenic plant. BRI1 is a gene that encodes the plant receptor for brassinosteroids. The BRI1 gene encodes a receptor-like protein kinase involved in brassinosteroid signaling and provides further opportunities for biotechnological applications related to yield increase in transgenic plants. In principle, it is possible to manipulate both hormone biosynthesis with DET2, as described above, as well as the level of brassinosteroid receptor through BRI1. In theory, it is possible to generate BRI1 derivatives that have been activated as if brassinosteroid were bound to the gene. Both approaches, either separately or together, have the potential to greatly stimulate plant growth and yield. CYCLIN is a gene that is involved in regulating cell division. Salk Institute scientists have expressed the CYCLIN gene in transgenic plants and believe it may play a role in accelerating plant growth, which is especially noticeable in the roots. Furthermore, transgenic crop plants containing the CYCLIN gene are also expected to have enhanced vegetative growth properties. LEAFY is a gene that is responsible for the initiation of flower development in plants. Scientists at the Salk Institute have demonstrated accelerated flowering in several species as a result of LEAFY expression. Transgenic aspen trees expressing LEAFY develop flowers within months rather than the 8 to 10 years that a non-transgenic aspen requires. Agritope intends to investigate uses of the LEAFY gene in tree fruits, vegetables and grapevines. Inhibiting LEAFY expression in selected crop species may also retard or prevent flowering, which could be of value in vegetable crops such as lettuce and celery. BOOSTER ELEMENT ("BE") is a genetic element (a small piece of DNA) that can be combined with plant gene promoters to enhance gene expression. The BE technology is applicable to a range of plant genetic engineering strategies, including the Company's SAMase ripening control technology, and Salk Genes. For example, certain crops may need a higher level of SAMase expression to produce a specific level of ripening control. BE may up-regulate the promoters controlling SAMase expression and thus improve the utility of the SAMase technology. FUNCTIONAL GENOMICS. In July 1999, Agritope and Aventis CropScience formed Agrinomics LLC ("Agrinomics") which has begun a research, development and commercialization program in the field of agricultural functional genomics. Agritope owns a 50% interest in Agrinomics and Aventis CropScience owns the remaining 50% interest. Agrinomics will identify, develop and commercialize novel genes expected to be discovered under a gene discovery program called the ACTTAG(TM) Gene Discovery Program. The ACTTAG program utilizes activation tagging, a technique that enables researchers to rapidly discover genes and the traits they confer. Agrinomics and its academic collaborators at The Salk Institute of San Diego, California will generate genetically modified seeds that will be screened by Agrinomics for a wide variety of traits such as disease resistance, insect resistance, new morphologies, abiotic stress tolerance, improved flowering characteristics, herbicide targets, herbicide tolerance and improved nutritional qualities. Agrinomics has an option to collaborate with scientists at the University of Edinburgh, Scotland in the ACTTAG program who would also generate genetically modified seeds for screening in the ACTTAG program, but it has not yet exercised the option. Aventis CropScience is expected to make capital contributions to Agrinomics, in cash, totaling $20 million over a five-year period. A $5 million contribution to support the first year of operations was made in 1999. Agritope contributed the ACTTAG technology, a collection of seeds generated using the ACTTAG techniques 6 and expertise in molecular and cell biology. In addition, Agritope will perform research work at its Oregon research facility, greenhouses and farm. Aventis CropScience will also provide high-throughput screening, robotics, microarray and bioinformatics technologies and support, and perform research work at its Research Triangle Park research facility and at other locations. Agrinomics intends to develop a network of research and commercial alliances with a broad range of interests including food and beverages, feed grains, fiber crops and forestry. Alliance participants would provide funding for specific projects. Participants would receive rights to technology in their field of interest as well as access to technology developed within the Agrinomics network. In December 1999, a joint venture owned by Vilmorin Clause & Cie ("Vilmorin") of France and Biotech Plant Genomic Fund of Israel, entered into a research agreement with Agrinomics. Under the terms of the research agreement, the joint venture will sponsor a $7.5 million five-year research program to discover genes that confer desirable traits in certain vegetables. Agrinomics will use $2.5 million of the funding to reimburse the joint venture for conducting screening activities in the program. ADDITIONAL TECHNOLOGIES. Agritope conducts research on several additional early-stage technologies. For example, Agritope scientists have devised a genetic engineering strategy to confer seedlessness to fruit crops. In addition, Agritope has completed a Phase I Small Business Innovation Research ("SBIR") grant to develop a novel geminivirus resistance strategy and to incorporate the approach into commercial tomato varieties. A second Phase I grant to continue the project is pending. Geminiviruses are a class of plant viruses that cause widespread damage in several crops including tomato, pepper, beans, melon, squash and cotton. Agritope has entered into an option agreement with The Ohio State University to use the geminivirus resistance strategy in a wide range of crop species susceptible to whitefly transmitted geminiviruses. The Company also entered into a collaboration agreement in 1999 with a specialist in the field of synthetic organic chemistry at the University of Calgary, Canada, Dr. Thomas G. Back, who has discovered a unique technology for the synthesis of novel brassinosteroids with exceptionally high biological activity. Under terms of the collaboration, Dr. Back will synthesize compounds in his laboratory and deliver them to Agritope for evaluation and commercial development. Agritope also maintains a leading position in promoter discovery, allowing the targeted expression of introduced genes to certain tissues or to specific developmental stages in plants. Company scientists have isolated or synthesized a number of fruit-specific promoters for a wide variety of fruits and vegetables, including apple, banana, peach, melon, tomato, and raspberry. In conjunction with work targeted at developing seedless plant varieties, two different seed-specific plant promoters have been identified and isolated. Other plant promoters identified include those that will target gene expression in a root-specific, senescence or wounding-associated manner. These promoters may be useful for the directed expression of our ethylene control genes as well as the Salk Genes and others. E X I S T I N G D E V E L O P M E N T P R O G R A M S Agritope's research and development programs are currently directed toward several highly perishable fruit and vegetable crops described below. MELON. The U.S. wholesale fresh melon market was estimated at $1.3 billion for 1998. Perishability in melons results in substantial product losses during the processes of production, harvesting and distribution. Agritope believes that melons represent a substantial market opportunity for implementation of its ripening control technology. Recent scientific reports have demonstrated a dramatic increase in shelf life for specialty type melons in which the ability to produce ethylene has been impaired. Using proprietary seed varieties supplied by two units of Vilmorin, Clause Semences and its U.S. affiliate Harris Moran Seed Company ("Harris Moran"), Agritope is developing commercial melon varieties with controlled ripening and increased post-harvest product life. Transgenic melons containing Agritope's ethylene control gene are currently being evaluated jointly by Harris Moran and Agritope technicians. Additional field trials will be conducted in the 7 2000 planting season, including trials designed to demonstrate the performance of the improved varieties in the wholesale distribution channel. TOMATO. Annual U.S. wholesale fresh market tomato revenues were estimated at $1.1 billion for 1998. In order to facilitate the commercialization of its ethylene control technology for this market, Agritope formed Superior Tomato Associates, L.L.C. ("Superior Tomato") in 1996. Superior Tomato is a joint venture with Sunseeds Company ("Sunseeds"), a developer and producer of several leading fresh market tomato varieties. Agritope provides genetic engineering technology and regulatory expertise, has responsibility for managing the joint venture, and has a two -thirds equity ownership interest in Superior Tomato. Sunseeds provides elite tomato germplasm and breeding expertise in the development of transgenic varieties. Superior Tomato owns rights to any fresh market cherry, roma and vine-ripened large fruited tomato varieties developed for the joint venture using Agritope ethylene control technology and Sunseeds germplasm. Superior Tomato also owns any technology jointly developed by Agritope and Sunseeds. The parties otherwise retain all rights to their respective technologies. Superior Tomato is currently in the process of developing and testing transgenic cherry, roma, and large fruited vine-ripe tomato varieties. Agritope has developed transgenic inbred lines of elite tomato germplasm provided by Sunseeds. Prior to the formation of Superior Tomato, Agritope submitted safety, nutritional and environmental information on a prototype transgenic tomato line to both the USDA and the FDA. In March 1996, the USDA issued its finding that this line has no significant environmental impact and would no longer be considered a regulated article. During the same month, the FDA announced that Agritope had completed the food safety consultation process with respect to its prototype transgenic tomato line and that the variety did not raise issues that would require pre-market review or approval by that agency. In order to commence sale of selected varieties, Agritope will be required to make supplemental submissions to the USDA and FDA that establish that such varieties are comparable to the previously cleared lines. RASPBERRY. The wholesale raspberry market, estimated in 1998 at $50 million annually in the U.S., has experienced limited growth because of the extreme perishability of the fruit. Agritope believes that the successful development of raspberries containing its ethylene control technology could permit a significant expansion of the fresh raspberry market. Agritope is pursuing active research involving raspberry in three different areas: (1) enhancement of post-harvest shelf life using Agritope's ethylene control technology; (2) possible control of gray mold and (3) control of raspberry bushy dwarf virus using a pathogen derived resistance gene. RASPBERRY: POST-HARVEST SHELF LIFE. In collaboration with Sweetbriar Development, Inc. ("Sweetbriar"), the largest fresh raspberry producer in the U.S., Agritope has engineered several of Sweetbriar's proprietary commercial raspberry varieties to contain the SAMase gene. Over the past several years, Sweetbriar has obtained promising results from a series of field evaluations of certain of its proprietary raspberry varieties containing the SAMase gene. In 1999, the field trials included evaluating the impact of simulated shipping conditions. Based on the successful completion of such trials, field trials scheduled for 2000 will include review of actual transportation to market under normal shipping conditions. Successful development of a commercial transgenic raspberry, which would be owned by Sweetbriar, will require successful completion of the scheduled field trials and filings to obtain the appropriate regulatory clearances. If these conditions are met, Sweetbriar will produce the new raspberries for distribution and marketing by Driscoll Strawberry Associates, the largest distributor of fresh raspberries and strawberries in the U.S. Agritope would receive royalties on wholesale product sales. Separately, Agritope has integrated its ripening control technology into several public domain varieties. RASPBERRY: FUNGAL CONTROL. BOTRYTIS CINEREA is a fungal pathogen that causes both pre-harvest and post-harvest fruit rot of red raspberry, resulting in loss estimated to be greater than 25%. Agritope researchers have 8 transformed plants with a gene that may confer resistance against fungal infection. Transgenic plants are currently undergoing field evaluations in cooperation with Sweetbriar and the USDA. RASPBERRY: PATHOGEN RESISTANCE. Raspberry bushy dwarf virus ("RBDV") is the most common virus disease of raspberry, affecting yield and fruit quality. The virus occurs throughout the raspberry growing areas of the world and has become an increasingly important problem over the past 10 years. Major effects of RBDV infection are crumbly fruit and reduced yield. Transmission of RBDV is associated with flowering and, therefore, control is very difficult or impossible by chemical means. Agritope has developed a genetic engineering approach to develop RBDV resistance in red raspberry. Transgenic plants have been evaluated in greenhouse trials in cooperation with a USDA/ARS Horticultural Crops Research facility. Based on early results, Agritope was awarded a Phase I SBIR grant in 1999 to continue the research project. VEGETABLE AND FLOWER CROPS. Agritope and Vilmorin, entered into a research and development agreement (the "Vilmorin Research Agreement") in December 1997 covering certain vegetable and flower crops. Under the terms of the Vilmorin Research Agreement, Vilmorin will provide proprietary seed varieties and germplasm to Agritope for use in research projects funded by Vilmorin, in which Agritope technology, and possibly Vilmorin technology, may be applied to the various covered crops. A project advisory committee, consisting of two scientists each from Agritope and Vilmorin, recommends projects for approval by Vilmorin and Agritope. Unless otherwise agreed, Vilmorin will pay, on a quarterly basis, all Agritope's out-of-pocket expenses, including employee salaries and overhead, for each selected research project. Agritope and Vilmorin have agreed to negotiate in good faith the terms of future commercialization agreements applicable to any commercial-stage products that arise out of such research and development projects. It is the intent of the parties that Agritope will receive royalties on revenues generated through sales of modified crops or modified seeds resulting from the research projects, or that Agritope will receive revenues through participation in programs providing royalties to Agritope and Vilmorin based on savings realized by growers and distributors growing or handling the modified products. If the parties are unable to agree on the terms on which a modified crop or seed is to be commercialized, the terms of commercialization will be determined by "baseball" style arbitration, in which the arbitrator chooses all of the terms proposed by one party or the other without modification or compromise. Each of Agritope and Vilmorin will continue to own its existing proprietary technology. The parties will jointly own any new technology developed in the course of the research, other than modified crops or seeds. Each will have a right to commercialize the new technology in designated fields of use, subject to an obligation to pay royalties for such use to the other party. During the term of the agreement, Vilmorin will have a right of first refusal to fund and participate in research projects proposed by Agritope involving the genetic alteration of a covered crop. The agreement provides that Agritope will deal with Vilmorin as a most favored customer in connection with research and commercialization agreements. Unless terminated for default, the agreement will remain in effect until the earlier of (i) expiration of all patents (and absence of trade secrets) for technology used in modified crops and seeds for which the parties have entered into commercialization agreements, and (ii) the date on which Vilmorin ceases to own at least 214,285 shares of Agritope capital stock. In connection with the Vilmorin Research Agreement, Vilmorin purchased 214,285 shares of Agritope Series A Preferred Stock ("Series A Preferred") at a price of $7 per share. Vilmorin has agreed to provide additional funding totaling $1 million either by exercising its option to purchase Series A Preferred or through the financing of research and development projects. Through September 30, 1999, Vilmorin has funded or agreed to fund projects totaling $796,000. 9 In September 1999 Vilmorin purchased 500,000 shares of Agritope's Series A Convertible Preferred Stock for $2.5 million. For every four shares of Series A Stock purchased in the private placement, Vilmorin also received a warrant to purchase one additional share of Series A Stock at a price of $7 per share at any time over the next five years. Vilmorin subsequently sold 150,000 shares of Series A Stock together with the related warrants to an Israeli seed company, Hazera Quality Seeds Ltd.("Hazera"), for $750,000. After completion of the sale, Vilmorin owned 564,285 shares of Series A Stock, or 11.8% of the outstanding capital stock of Agritope. Hazera's holdings amounted to 3.1% of Agritope's outstanding capital stock. A majority equity interest in Vilmorin is owned by Groupe Limagrain, S.A.., which is, in turn, owned by Societe Cooperative Agricole Limagrain ("Cooperative"), a French agricultural cooperative and one of the largest seed companies in the world. Cooperative's principal business is the production of seeds for grains, corn, garden vegetables, and oil-producing plants. ORNAMENTAL PLANTS. In 1999 Agritope licensed its SAMase ethylene technology to Ball Horticultural Company ("Ball"), a global leader in the development, production and marketing of ornamental species. Ball was granted a license to the technology for use in ornamental plants, including rights to both genes and gene promoters. In return, Agritope will receive royalties on the sale, if any, of plants and derivatives that incorporate the licensed technology. OTHER CROPS. Agritope is also pursuing research and development programs to incorporate its SAMase technology into other crops where perishability causes significant losses in the production and distribution process. These include strawberries, bananas, peaches, pears and apples. Agritope is working with leading proprietary tree fruit germplasm of peach, apple and pear and maintains thousands of shoots through routine micropropagation techniques. Agritope has developed rapid and efficient shoot regeneration methods in apple and pear. Transformation experiments to incorporate SAMase, the ripening control gene, into apple and pear cultivars are in progress. A patent application has been filed with respect to a novel method of apple transformation discovered during the course of the experimental work. One component of introducing Agritope's ethylene control technology into tree fruit is to target the expression of ethylene control genes to the ripening fruit. Toward this goal, Agritope has several proprietary promoters that have already been proven in tomato and melon. In addition, Agritope has been actively identifying and testing fruit-specific promoters from apple, banana, peach, and pear. Once appropriate promoters are isolated and tested, they are used to direct expression of ethylene control genes in ripening fruit of genetically modified plants. The estimated U.S. wholesale markets in 1998 ranged from approximately $275 million for pears, to $1.3 billion for apples and $2.4 billion for bananas. COMMERCIALIZATION STRATEGY. Agritope is currently evaluating a number of commercialization strategies in order to realize the value of its technology. The Company intends to generate revenues by licensing rights to its technology in exchange for license fees, royalties and other payments. Agritope intends to focus its development and licensing efforts primarily toward growers and distributors of fruits and vegetables who are likely to derive the most benefit from the reduced costs and spoilage losses that could potentially result from using the Company's technologies. As part of the Vilmorin Research Agreement, Agritope and Vilmorin have agreed to negotiate in good faith the terms of future commercialization agreements covering any products that reach commercial-stage development. Agritope anticipates that it will receive royalties on the sale of any products, including modified crops or seeds that arise out of research and development projects conducted by Agritope and funded by Vilmorin. G R A N T S A N D C O N T R A C T S U.S. DEPARTMENT OF COMMERCE GRANT. In October 1997, Agritope was awarded a U.S. Department of Commerce, National Institute of Standards and Technology ("NIST"), Advanced Technology Program 10 ("ATP") grant. The award covers a three-year project and totals $990,000. Agritope was awarded the grant for use in the application of its proprietary ripening-control technology to certain tree fruits and bananas. The NIST/ATP grant provides cost-shared funding for research and development projects with potential for important broad-based economic benefits to the U.S. Agritope will bear $1.8 million of the total costs of the program, which are estimated at $2.8 million. The awards are made on the basis of a rigorous competitive review that considers both scientific and technical merit. SBIR PROGRAMS. Agritope actively participates in the SBIR programs sponsored by the USDA. The SBIR programs have two phases. Phase I covers a six-month project period and a total award not to exceed $100,000. Phase II covers a two-year project period and a total award not to exceed $750,000. In 1999, Agritope was awarded a Phase I grant for $65,000 for the study of pathogen derived resistance to raspberry bushy dwarf virus in red raspberry. In 1997, Agritope received a $55,000 Phase I grant for work on geminivirus resistance strategies in tomatoes. Agritope was awarded a Phase I grant of $50,000 in 1994 plus a Phase II grant of $198,000 in 1995 for development of diagnostic tests for the detection of grapevine leafroll virus. COOPERATIVE RESEARCH AND DEVELOPMENT AGREEMENTS. Agritope has entered into two Cooperative Research and Development Agreements ("CRADA's") with the U.S. Department of Agriculture/Agricultural Research Services ("USDA/ARS"). Under the CRADA's, Agritope will collaborate with USDA/ARS laboratories by providing research services or partial funding for research projects. In return, Agritope has been granted a right of first refusal to obtain a license for any resulting inventions. The objective of the first CRADA is to create raspberries that are resistant to RBDV. This research is a collaborative effort with the Northwest Center for Small Fruit Research in Oregon. The research under this program in 1999 was partially funded by a Phase I SBIR grant (See "SBIR Programs" above). The second CRADA is funded jointly by Agritope and Harris Moran Seed Company. It is aimed at furthering the understanding of the ethylene associated physiological processes in ripening cantaloupe using SAMase-transformed cantaloupe. This research is being carried out in collaboration with a USDA/ARS research station in Texas. OTHER GRANTS AND CONTRACTS. Agritope has also received grant support in the past from the Oregon Strawberry Commission and Oregon Raspberry and Blueberry Commission for antifungal biocontrol research. Agritope also receives funds for research and development programs from its strategic partners, including Vilmorin (See "Agritope Existing Development Programs-Vegetable and Flower Crops"). Agritope intends to continue to participate in the SBIR program, similar grant programs and projects with strategic partners. Agritope regularly makes application for new grants, but there is no assurance that grant support will be continued. T E C H N O L O G I C A L C H A N G E A N D C O M P E T I T I O N A number of companies are engaged in research related to plant biotechnology, including other companies that rely on the use of recombinant DNA as a primary scientific strategy. Many of these companies are larger and have more resources than Agritope. Technological advances by others could render Agritope's technologies less competitive or obsolete. Competition in the fresh produce market is intense and is expected to increase as additional companies introduce products with longer shelf life and improved quality. There can be no assurance that such competition will not have an adverse effect on Agritope's business and results of operations. V I N I F E R A , I N C. Vinifera was incorporated in 1993 to participate in the grapevine nursery business. Industry sources have estimated that 30 million grafted wine grapevine plants were delivered to customers in California for the 1998 planting season. Through proprietary processes, Vinifera propagates and grafts grapevine plants for sale to vineyards and to growers of table grapes. All of Agritope's current product sales are attributable to Vinifera. 11 Traditionally, grapevine plants for sale to vineyards are produced seasonally using field grown, dormant cuttings that are grafted. In contrast, Vinifera uses year-round greenhouse propagation and a herbaceous grafting method that employs very young, actively growing cuttings. As a result of greenhouse propagation, Vinifera is able to develop in two years a quantity of new plants that is approximately ten times larger than can be produced with traditional techniques. In addition, herbaceous grafting with green cuttings could allow a vineyard to begin commercial production of grapes from a newly planted vineyard a year sooner than would otherwise be possible. This grafting process also produces sturdier unions than dormant grafting, resulting in significantly higher yields of successful grafts, both at the propagation stage and in the survival of actual plantings in the field. Agritope Research and Development provides disease-testing services for Vinifera. Vinifera is headquartered in Petaluma, California. Its library of grapevine plants includes 30 different phylloxera-resistant types of rootstock, 100 different wine varietal clones, and two different table grape varietal clones. Vinifera believes that this collection of different grapevine clones is one of the largest in the world. Vinifera's U.S. customer base consists of over 275 vineyards in California, Washington and Oregon. Several well-established family-owned nurseries that are significantly larger than Vinifera provide competition in the grapevine nursery business. Like Vinifera, these companies are based in California to service the major concentration of grape growers in the United States. Vinifera believes that growers tend to purchase plants from more than one nursery on the basis of availability and price of desired plant varieties and on the perceived quality of the product as measured by the health, survival and disease status of the plants. Vinifera believes that it is the only nursery in the industry that performs herbaceous grafting and, through its disease testing and elimination program, the only nursery whose primary focus is on distinctive, premium quality products and service. P E R S O N N E L At September 30, 1999, Agritope and its subsidiaries had 61 full-time employees, including 31 in research and development, nine in administration and 21 at the Vinifera grapevine plant nursery operation, which also employs seasonal part-time employees as needed. Agritope considers its relations with its employees to be excellent. None of its employees are represented by labor unions. Agritope employs seven persons holding Ph.D. degrees with specialties in the following disciplines: applied botany, bacteriology and public health, biological sciences, genetics, plant pathology and plant sciences. From time to time, Agritope also engages the services of scientists as consultants to augment the skills of its scientific staff. S C I E N T I F I C A D V I S O R Y B O A R D Agritope utilizes the services of a Scientific Advisory Board. The Scientific Advisory Board meets periodically to review Agritope's research and development efforts and to apprise Agritope of scientific developments pertinent to Agritope's business. The Agritope Scientific Advisory Board consists of Eugene W. Nester, Ph.D., Professor and Chair, Department of Microbiology, University of Washington; Peter R. Bristow, Ph.D., Associate Professor of Plant Pathology, Washington State University; Antoine de Courcel, Scientific Director, Vilmorin Clause & Cie. and Joseph R. Ecker, Ph.D., Professor, Department of Biology University of Pennsylvania. Dr. Nester is a member of the National Academy of Sciences. ITEM 2. PROPERTIES Agritope leases approximately 17,000 square feet of office and laboratory space in Portland, Oregon. Agritope relocated its office and research and development operations to leased facilities on March 15, 1998. The lease agreement, as amended in September 1999 to add additional adjacent space, requires monthly rental payments on a triple net lease basis of $16,610 through May 1, 2001, and thereafter of $18,104 until expiration of the lease on February 28, 2003. Agritope also owns a 15-acre farm in Woodburn, Oregon, 12 which it uses for propagation of experimental crops and for the ACTTAG gene discovery program. Greenhouse capacity at the farm currently totals 50,000 square feet. Vinifera leases 380,000 square feet of greenhouse space at two locations in Petaluma, California. A 250,000 square-foot greenhouse is leased under a lease that expires January 31, 2003 with the right to extend for two successive five-year terms at stipulated rental rates. The lease provides an option to purchase the leased premises for $1.3 million after February 1, 2001. A second lease covering 130,000 square feet of greenhouse space expires in March 2004 with the right to extend for two successive five-year terms at stipulated rental rates and a one-year option, which expires on March 31, 2005, to purchase, for $2.5 million, the 130,000 square feet space, an adjacent greenhouse of 70,000 square feet and nine acres of land. Agritope believes that its present facilities are adequate to meet current requirements. ITEM 3. LEGAL PROCEEDINGS As of the date of this filing, Agritope is not a party to any material pending legal proceedings. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year covered by this report. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Agritope common stock (the "Common Stock") is traded on The Nasdaq Stock Market under the symbol "AGTO." Trading commenced on December 29, 1997. As reported by Nasdaq, the following table sets forth the range of high and low sales prices for the Common Stock since commencement of trading: YEAR ENDED SEPTEMBER 30, 1999 -------------------------------------------------------- Sales price per share High Low First Quarter .................... 2.125 0.875 Second Quarter ................... 3.375 1.250 Third Quarter .................... 3.625 1.250 Fourth Quarter ................... 4.125 1.875 YEAR ENDED SEPTEMBER 30, 1998 -------------------------------------------------------- Sales price per share High Low First Quarter .................... 7.500 6.000 (from December 29, 1997) Second Quarter ................... 8.000 4.375 Third Quarter .................... 5.000 3.125 Fourth Quarter ................... 4.250 1.375 At November 30, 1999, the Company had 4,070,612 shares of Common Stock outstanding, held by 823 stockholders of record. 13 Agritope has never declared or paid cash dividends on its common stock. Agritope currently anticipates that it will retain all future earnings for use in the operation and growth of its business and does not anticipate paying any cash dividends in the foreseeable future. On September 28, 1999, the Company completed a $2.5 million private placement of 500,000 shares of Series A Preferred Stock at a price of $5 per share. Vilmorin purchased the shares. For every four shares of Series A Stock purchased in the private placement, Vilmorin also received a warrant to purchase one additional share of Series A Stock at a price of $7 per share at any time over the next five years. Vilmorin subsequently sold 150,000 shares and related warrants to Hazera Quality Seeds Ltd. of Israel. See Note 6 to Consolidated Financial Statements. The shares and warrants were sold in reliance upon the Regulation S exemption under the Securities Act of 1933, in off-shore transactions to non-US persons. The purchasers made representations regarding their status and actions necessary to comply with Regulation S. ITEM 6. SELECTED FINANCIAL DATA The following table sets forth selected historical consolidated income and balance sheet data of Agritope and its subsidiaries. The consolidated balance sheet data at September 30, 1999 and 1998 and the consolidated operating results data for the years ended September 30, 1999, 1998, and 1997 have been derived from audited consolidated financial statements and notes thereto included in this Annual Report. The balance sheet data at September 30, 1997, 1996 and 1995 and operating results data for the years ended September 30, 1996 and 1995 are derived from audited consolidated financial statements and notes thereto not included in this Annual Report. This information should be read in conjunction with the consolidated financial statements and notes thereto and "Management's Discussion and Analysis of Financial Condition and Results of Operations."
(In thousands, except per share data) YEAR ENDED SEPTEMBER 30, ---------------------------------------------------------------- CONSOLIDATED OPERATING RESULTS 1999 1998 1997 1996 1995(1) Revenues................................ $ 3,551 $ 2,800 $ 1,551 $ 585 $ 2,110 Operating costs and expenses............ 9,124 9,024 6,089 2,821 9,920 Other income (expense), net ............ 537 98 (4,427)(2) (265) (235) Minority interest in subsidiary net loss 360 882 274 - - Net loss................................ (4,675) (5,244) (8,691) (2,501) (8,045) Net loss per share (basic and diluted) (3) (1.15) (1.42) (3.23) (.93) (2.99) Shares used in per share calculations (3) 4,061 3,705 2,691 2,691 2,691 SEPTEMBER 30, -------------------------------------------------------------- CONSOLIDATED BALANCE SHEET 1999 1998 1997 1996 1995 Working capital (deficiency)............ $ 5,786 $ 6,884 $ 1,659 $ (3,163) $ 846 Total assets............................ 15,471 14,390 7,285 5,670 4,067 Revolving line of credit................ 1,463 - - - - Long-term debt.......................... 5 10 15 - 22 Convertible notes....................... - - - 3,620 3,620 Accumulated deficit..................... (51,094) (46,419) (41,175) (32,478) (29,976) Stockholder's equity ................... 9,323 11,010 4,763 1,008 75
(1) Data for 1995 includes revenues of $2.0 million and operating losses of $3.8 million attributable to business units, which were divested. (2) Includes non-cash charges of $2.3 million, reflecting the permanent impairment in the value of Agritope's investment in affiliated companies, and $1.2 million for the conversion of Agritope convertible notes into Epitope, Inc. common stock, no par value ("Epitope Stock") at a reduced price. (3) Net loss per share (basic and diluted) is presented on a pro forma basis assuming that the distribution of Agritope common stock pursuant to the spin-off had occurred on October 1, 1994. Potentially dilutive securities are excluded from net loss per share calculations as their effect would have been antidulutive. 14 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of operations and financial condition should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual Report. O V E R V I E W Agritope is organized into two segments: The Research and Development segment develops improved plant products and provides technology to the agricultural industry. The Grapevine Propagation segment, operated by Agritope's majority-owned subsidiary, Vinifera, Inc. ("Vinifera"), propagates, grows and distributes grapevine plants to the premium wine industry. It also provides disease testing and elimination services. To date, the Research and Development segment has not completed commercialization of its technology. A portion of the research and development efforts conducted by the segment has been performed under various research grants and contracts. In July 1997, the board of directors of Epitope, Inc. ("Epitope") approved a management proposal to spin off Agritope, subject to obtaining financing for Agritope and the satisfaction of certain other conditions. The spin-off was completed on December 30, 1997. To finance its operations as an independent entity, Agritope sold 1,343,704 shares of Agritope common stock, including associated preferred stock purchase rights, to certain foreign investors pursuant to the Regulation S exemptions under the Securities Act of 1933, as amended. The shares were sold at a price of $7 per share, for net aggregate proceeds of $9.4 million. Proceeds were received immediately after the spin-off. In connection with a research and development collaboration, Agritope also sold 214,285 shares of its newly designated Series A Preferred Stock to Vilmorin at a price of $7 per share, for an aggregate price of $1.5 million. The proceeds of the preferred stock sale were received approximately one week after the completion of the spin-off. Epitope no longer owns or controls any shares of Agritope stock following the spin-off. The accompanying consolidated financial statements have been prepared to reflect the historical operating results and financial condition of Agritope and its subsidiaries. The operating statements include the cost of certain corporate overhead services which were provided on a centralized basis for the benefit of the medical products business conducted by Epitope and the agricultural biotechnology business conducted by Agritope and its subsidiaries ("Shared Services"). Such expenses were allocated using activity indicators which, in the opinion of management, represent a reasonable measure of the respective business' utilization of or benefit from such Shared Services. Epitope provided such services through December 1, 1997 and, pursuant to a Transition Services and Facilities Agreement, continued to provide office and laboratory space and certain other services after that date until March 15, 1998 when the Company moved to a separate facility. 15 R E S U L T S O F O P E R A T I O N S YEARS ENDED SEPTEMBER 30, 1999, 1998 AND 1997 REVENUES. Total revenues increased by $752,000 million or 27% from 1998 to 1999, and increased by $1.2 million or 80% from 1997 to 1998. Revenues by component are shown below:
YEAR ENDED SEPTEMBER 30 (IN THOUSANDS) 1999 1998 1997 Product sales Grapevine plant sales....................... $ 2,503 $ 2,575 $ 1,436 Grants and contracts Government research grants.................. 314 207 30 Research projects with strategic partners... 498 - 53 Revenues from affiliates.................... 236 - - Other....................................... - 18 32 --------- ---- ---- 1,048 225 115 Total revenue........................... $ 3,551 $ 2,800 $ 1,551
Grapevine plant sales pertain to Vinifera, Agritope's majority-owned subsidiary. Grapevine plant sales decreased slightly in 1999 compared to 1998, but Vinifera continued to expand its customer base. Sales were made to approximately 275 customers in 1999 as compared to 175 customers in 1998 and 60 customers in 1997. Vinifera sales to new customers in 1999 replaced sales to one customer that accounted for 32.2% and 23.4% of net sales in 1998 and 1997, respectively. No single customer accounted for more than 5% of net sales during the year ended September 30, 1999. Vinifera commenced commercial stage operations in 1996. Vinifera currently has confirmed orders of approximately $2.6 million for delivery in the spring and summer of 2000 as compared to confirmed orders of $1.6 million at the beginning of fiscal 1999. Proposed sales contracts are also pending for an additional $1.4 million orders planned for delivery in the 2000 planting season. Grant and contract revenues pertain to research projects directed at developing superior new plants through genetic engineering. Revenue from such projects can vary significantly from year to year as new projects are started while other projects may be extended, completed or terminated. In addition, not all research projects conducted by Agritope receive grant or contract funding. Grant and contract revenues in 1999 included revenues from its strategic partner, Vilmorin and from its newly formed joint venture, Agrinomics LLC. In October 1997, the Company was awarded a three-year matching grant totaling $990,000 under the Advanced Technology Program of the U.S. Department of Commerce National Institute of Standards and Technology ("NIST") to study the application of Agritope's ripening technology to certain tree fruits and bananas. The NIST grant funds 49% of the Company's direct costs incurred for the study. Grant and contract revenues include $262,000 and $129,000, in 1999 and 1998, respectively, applicable to the study. In addition, the Company received matching funds in 1998 totaling $100,000 for the purchase of equipment used in conducting the research program. Revenues from grants under the Small Business Innovation Research program totaled $52,000, $78,000, and $30,000 in 1999, 1998 and 1997, respectively. GROSS MARGIN. Vinifera recorded a gross margin of 6.8% in 1999. Production yields improved significantly from those achieved in 1998, resulting in lower unit costs of production. Vinifera recorded a negative gross margin in 1998. Grafted plants were lost in 1998 due to abnormal weather conditions which caused grafting yield in 1998 to be significantly lower than planned, especially in the fourth quarter of 1998, and resulted in 16 a charge of $974,000 to reduce inventory to net realizable value. Gross margin on product sales was 7.7% of sales for 1997. RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses in 1999, 1998 and 1997 totaled $3.1 million, $2.5 million and $1.7 million, respectively. Increased expenses of $634,000 in 1999 were as the result of the addition of projects funded by Vilmorin and Agrinomics, together with a higher level of activity on the NIST grant. Research project expenses increased $790,000 in 1998 compared to 1997 as the Company initiated work on banana and tree fruit under the NIST grant and also conducted extensive field trials of its extended shelf-life cantaloupes SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and administrative expenses in 1999, 1998 and 1997 were $3.69 million, $3.14 million and $3.08 million, respectively. The increase of $546,854 in 1999 was attributable to several factors, primarily increased compensation expense related to amortization of expense for stock options granted in December 1997, increased sales expenses at Vinifera due to expanded sales activity and increased legal fees related to the Company's proposed gene discovery program. Rent, depreciation and other costs of occupancy also increased in 1999 as a result of the Company's move to expanded quarters in March 1998. The increases were partially offset by decreases in other professional fees and travel expenses due to the fact that expenses in the first quarter of the 1998 fiscal year included non-recurring fees and expenses incurred in connection with the transition from operating as a wholly owned subsidiary to operating as an independent public company. In 1998, expenses included non-cash charges of $309,000 for amortization of the excess of fair value of stock options at date of grant over the exercise price and $81,000 representing the fair value of stock options issued to consultants. Expenses in 1997 included $913,000 of costs incurred by Vinifera, which was not part of Agritope during the first eleven months of 1996. During 1997, Vinifera expanded greenhouse capacity and continued to establish marketing and administrative functions at its new headquarters location in Petaluma, California. Such activities contributed to relatively high selling, general and administrative expenses in comparison to product sales levels. Selling, general and administrative expenses included $228,000 and $1.4 million for the allocation of Shared Services in 1998 and 1997, respectively. Epitope provided such services through December 1, 1997 and, pursuant to a Transition Services and Facilities Agreement, continued to provide office and laboratory space and certain other services after that date until March 15, 1998 when the Company moved to a separate facility. OTHER INCOME (EXPENSE), NET. In 1999, Agritope sold a portion of its equity interest in Vinifera to certain minority shareholders thereby reducing its majority interest from 64% to 57%. The gain on the sale amounted to $290,000 and is included in other income. Also in 1999, Vinifera received, and recorded as other income, a payment of $170,000 representing reimbursement for certain expenses incurred in prior years to explore establishment of a grapevine nursery business in Spain in cooperation with a minority shareholder of Vinifera. Vinifera ultimately decided to discontinue its participation in the project and was reimbursed for expenses it incurred for the benefit of the venture. In 1998, Vinifera sold its minority interest in Vinifera Sudamericana, SA for $70,000 and recognized a loss of $130,000 in other expense. During 1997, Agritope recorded a non-cash charge to results of operations of $2.3 million, reflecting the permanent impairment in the value of its investment in two wholesale fresh-flower distribution businesses. Agritope also incurred a charge of $1.2 million for conversion of $3.4 million principal amount of Agritope convertible notes into Epitope common stock at a reduced conversion price. Also in 1997, a charge of $744,000 was recorded as other expense in recognition of the Company's contingent liability as primary lessee on two leases pertaining to the fresh flower businesses. See Note 9 to Consolidated Financial Statements. 17 Interest income of $103,000 and $224,000 was earned in 1999 and 1998, respectively, from investment of proceeds of private placements of capital stock in the last three quarters of 1998. L I Q U I D I T Y A N D C A P I T A L R E S O U R C E S SEPTEMBER 30, 1999 1998 (in thousands) Cash and cash equivalents................ $ 4,204 $ 3,904 Working capital ......................... 5,786 6,884 At September 30, 1999, Agritope had working capital of $5.8 million as compared to working capital of $6.9 million at September 30, 1998. Vinifera's inventory increased $1.8 million due to increased order activity and improved yield. The plants can be maintained in greenhouses or stored outside for several years during which time they continue to grow. Inventory on hand at September 30, 1999 represents grapevine plants expected to be sold in the spring and summer of 2000 and 2001. During 1999, expenditures for property and equipment were $447,000, principally for greenhouse improvements and expansion of grapevine propagation blocks at Vinifera. The Company also expended $485,000 for proprietary technology related to its patent portfolio. For the first nine months of 1999, Vinifera used expanded credit from vendors on open account and internally generated cash from collection of accounts receivable and deposits on future orders to fund operations and capital expenditures. In June 1999 Vinifera replaced a $1.5 million working capital line from Agritope with a $1.5 million commercial bank line. Advances of $363,000 under the line were used to support Vinifera's fourth quarter operating requirements. Agritope's cash requirements for the first nine months of 1999 were supplied primarily from cash reserves supplemented by research funding from government agencies and Vilmorin Clause & Cie ("Vilmorin"), a strategic partner, and, in the fourth quarter, from its newly formed joint venture, Agrinomics LLC. In addition, Agritope received $1 million from Vinifera in connection with refinancing the Vinifera line of credit. Agritope expended $1.3 million in 1998 to furnish and equip its newly occupied facilities and $638,000 for patents and licenses of proprietary technology. Vinifera expended $861,000 to expand production capacity. Agritope has also acquired certain rights to certain proprietary genes for which it made payments of $300,000 in 1999 and 1998. Such amounts are included in "patents and proprietary technology, net." In June 1999, Agritope entered into stock purchase agreements with certain minority shareholders of Vinifera pursuant to which minority ownership of Vinifera will increase from 36% to approximately 50% over a three-year period. Agritope received proceeds totaling $874,000 and its ownership interest in Vinifera was reduced from 64% to 57%. In September 1999, the Company completed a $2.5 million private placement of 500,000 shares of Series A Preferred Stock at a price of $5 per share. Vilmorin purchased the shares. For every four shares of Series A Stock purchased in the private placement, Vilmorin also received a warrant to purchase one additional share of Series A Stock at a price of $7 per share at any time over the next five years. Vilmorin subsequently sold 150,000 shares and related warrants to a strategic partner, Hazera Quality Seeds Ltd. of Israel. Historically, the primary sources of funds for meeting Agritope's requirements for operations, working capital and business expansion have been cash from its former parent company, Epitope, sale of convertible notes, investments in Vinifera by minority shareholders, and funding from strategic partners and other research grants. In 1999 Agritope received proceeds of $2.5 million from a private placement of 500,000 shares of Series A stock and $874,000 from the sale of a portion of its majority interest in Vinifera to certain minority shareholders. In 1998, Agritope realized $1.2 million in cash from Epitope prior to the spin-off. Proceeds from private placements in 1998 yielded $9.8 million for Agritope and minority shareholders of Vinifera invested another $1.8 million in Vinifera. Agritope expects to continue to require significant funds to support its operations and research activities. Agritope intends to utilize cash reserves, cash generated from sales of products, and research funding from strategic partners and other research grants to provide the necessary funds. Agritope may also rely on the sale of equity securities to generate additional funds. 18 Agritope presently anticipates that funds on hand as of September 30, 1999, will be sufficient to finance operations for the upcoming year, based on currently estimated revenues and expenses. Because this estimate is based on a number of factors, many of which are beyond the Company's control, there can be no assurance that this estimate will prove to be accurate, and to the extent that Agritope's operations do not progress as anticipated, additional capital may be required. Additional capital may not be available on acceptable terms, if at all, and the failure to raise such capital would have a material adverse effect on Agritope's business, financial condition, and results of operations. Agritope has completed a Year 2000 compliance review of its systems and procedures to determine the costs and risks related to the Year 2000 date conversion. As a result of this review, the Company believes that it will not incur material Year 2000 remedial costs and that its operations will not be materially affected by the Year 2000 conversion, and as a consequence it has not established a contingency plan. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK As of September 30, 1999, Vinifera, Inc. a majority-owned subsidiary of the Company had borrowings under a $1.5 million revolving line of credit, which is subject to interest rate risk. Due to the short-term nature of the borrowings under this credit facility, an immediate 10% increase in interest rates would not have a material effect on the Company's financial condition or the results of operations. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Information with respect to this Item is contained in the Company's consolidated financial statements included in response to Item 14 of this Annual Report on Form 10-K. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE (a) Effective February 23, 1998, Agritope dismissed its prior independent accountant, PricewaterhouseCoopers LLP. The decision to change accountants was recommended by Agritope's Audit Committee and was approved by its Board of Directors. PricewaterhouseCoopers LLP reports on Agritope's financial statements for fiscal years 1997 and 1996 did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles, except that the PricewaterhouseCoopers LLP report on the financial statements for the year ended September 30, 1997 included an explanatory paragraph regarding a change in the basis of presentation of such financial statements from those previously issued. During the audits for the years 1997 and 1996 and through the date hereof, there were no disagreement between Agritope and PricewaterhouseCoopers LLP on any matters of auditing scope or procedures, which disagreements, if not resolved to the satisfaction of PricewaterhouseCoopers LLP, would have caused it to make a reference to the subject matter of the disagreements in connection with its reports. Agritope requested that PricewaterhouseCoopers LLP furnish it with a letter addressed to the Securities and Exchange Commission stating whether or not it agrees with the above statements. A copy of such letter, dated February 27, 1998, was filed as Exhibit 16 to a report on Form 8-K dated February 23, 1998 and is incorporated herein by reference. (b) Effective February 23, 1998, Agritope engaged Arthur Andersen LLP ("Arthur Andersen") as its principal accountant. During fiscal years 1997 and 1996 and through February 23, 1998, Agritope did not consult Arthur Andersen regarding any of the matters or events set forth in Item 304 (a) (2) (i) and (ii) of Regulation S-K. 19 PART III The Company has omitted from Part III the information that will appear in the Company's definitive proxy statement for its 2000 annual meeting of stockholders (the "Proxy Statement"), which will be filed within 120 days after the end of the Company's fiscal year pursuant to Regulation 14A. ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The information required by this Item is incorporated by reference to the information under the caption "Election of Directors" and "Executive Officers" in the Proxy Statement ITEM 11. EXECUTIVE COMPENSATION The information required by this Item is incorporated by reference to the information under the caption "Executive Compensation" in the Proxy Statement ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The information required by this Item is incorporated by reference to the information under the caption "Principal Shareholders" in the Proxy Statement ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The information required by this Item is incorporated by reference to the information under the caption "Certain Transactions" in the Proxy Statement PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) (1) and (a) (2) Financial Statements and Schedules PAGE Agritope, Inc. and Subsidiaries Reports of Independent Accountants...................................................... 21 Consolidated Balance Sheets as of September 30, 1999 and 1998........................... 23 Consolidated Statements of Operations for the years ended September 30, 1999, 1998 and 1997................................. 24 Consolidated Statements of Changes in Stockholders' Equity for the years ended September 30, 1999, 1998 and 1997................................. 25 Consolidated Statements of Cash Flows for the years ended September 30, 1999, 1998 and 1997................................. 26 Notes to Consolidated Financial Statements.............................................. 27
No schedules are included in the foregoing financial statements because the required information is inapplicable or is presented in the financial statements or related notes thereto. (a) (3) Exhibits See Index to Exhibits following the signature page of this report. (b) Reports on Form 8-K No reports on Form 8-K were filed in the fourth quarter of the fiscal year covered by this report. 20 A G R I T O P E , I N C . A N D S U B S I D I A R I E S R E P O R T OF I N D E P E N D E N T A C C O U N T A N T S To the Board of Directors and Stockholders of Agritope, Inc. We have audited the accompanying consolidated balance sheets of Agritope, Inc. (a Delaware corporation) and subsidiaries as of September 30, 1999 and 1998, and the related consolidated statements of operations, changes in stockholders' equity and cash flows for each of the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Agritope, Inc. and subsidiaries as of September 30, 1999 and 1998, and the consolidated results of its operations and its cash flows for each of the two years then ended in conformity with generally accepted accounting principles. /s/ ARTHUR ANDERSEN LLP Portland, Oregon, October 29, 1999 21 A G R I T O P E , I N C . A N D S U B S I D I A R I E S R E P O R T O F I N D E P E N D E N T A C C O U N T A N T S To the Board of Directors and Stockholders of Agritope, Inc. In our opinion, the consolidated statements of operations, stockholders' equity and cash flows for the year ended September 30, 1997 present fairly, in all material respects, the results of operations and cash flows of Agritope, Inc.and its subsidiaries for the year ended September 30, 1997, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards, which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above. We have not audited the consolidated financial statements of Agritope, Inc. for any period subsequent to September 30, 1997. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Portland, Oregon October 31, 1997 22
A G R I T O P E , I N C . A N D S U B S I D I A R I E S C O N S O L I D A T E D B A L A N C E S H E E T S SEPTEMBER 30 1999 1998 ASSETS Current assets Cash and cash equivalents............................ $ 4,203,937 $ 3,904,087 Trade accounts receivable, net....................... 355,187 1,033,860 Other accounts receivable............................ 165,480 124,690 Due from affiliate................................... 119,088 - Inventories.......................................... 5,053,888 3,289,172 Prepaid expenses..................................... 73,440 172,196 ------------ ------------ Total current assets................................. 9,971,020 8,524,005 Property and equipment, net.......................... 3,511,824 4,100,804 Patents and proprietary technology, net.............. 1,945,586 1,736,998 Other assets and deposits ........................... 42,752 28,519 ------------ ------------ $15,471,182 $14,390,326 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable..................................... $642,178 $ 178,171 Revolving line of credit............................. 1,463,000 - Advances from minority shareholders of subsidiary.... 180,616 - Current portion of installment notes payable......... 4,576 4,255 Current portion of lease liability................... 140,935 358,404 Deposits on customer orders.......................... 1,173,303 599,944 Salaries, benefits and other accrued liabilities..... 580,028 499,313 ------------ ------------ Total current liabilities............................ 4,184,636 1,640,087 Long-term portion of installment notes payable....... 5,465 10,238 Long-term portion of lease liability................. - 115,785 Minority interest.................................... 1,958,538 1,613,977 Commitments and contingencies Stockholders' equity Preferred stock, par value $.01 10,000,000 shares authorized; 714,285 shares and 214,285 shares issued and outstanding, respectively 7,143 2,143 Common stock, par value $ .01 30,000,000 shares authorized; 4,070,612 shares and 4,050,150 shares issued and outstanding, respectively....................................... 40,706 40,502 Additional paid-in capital........................... 60,369,181 57,386,675 Accumulated deficit.................................. (51,094,487) (46,419,081) ------------- ------------- 9,322,543 11,010,239 $15,471,182 $ 14,390,326 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
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A G R I T O P E , I N C . A N D S U B S I D I A R I E S C O N S O L I D A T E D S T A T E M E N T S O F O P E R A T I O N S FOR THE YEAR ENDED SEPTEMBER 30 1999 1998 1997 Revenues Product sales........................... $ 2,503,377 $ 2,574,976 $ 1,436,498 Grants and contract revenues............ 811,676 224,688 114,692 Revenue from affiliates................. 236,416 - - ------------ ------------ ------------ 3,551,469 2,799,664 1,551,190 Costs and expenses Product costs........................... 2,333,673 3,414,293 1,326,163 Research and development costs.......... 3,105,183 2,471,374 1,681,646 Selling, general and administrative expenses................ 3,685,291 3,138,437 3,081,074 ------------ ------------ ------------ 9,124,147 9,024,104 6,088,883 Loss from operations.................... (5,572,678) (6,224,440) (4,537,693) ------------- ------------- ------------- Other income (expense), net Interest income......................... 102,742 224,350 - Interest expense........................ (21,446) (1,248) (25,307) Gain on sale of stock of subsidiary..... 289,603 - - Valuation loss.......................... - - (2,258,080) Debt conversion......................... - - (1,216,654) Other, net.............................. 166,365 (125,052) (927,234) ------------ ------------ ------------- 537,264 98,050 (4,427,275) Minority interest in subsidiary net loss 360,008 882,423 274,369 ------------ ----------- ------------- Net loss................................ $ (4,675,406) $ (5,243,967) $ (8,690,599) Net loss per share (basic and diluted).. $ (1.15) $ (1.42) $ (3.23) Weighted average number of shares outstanding................. 4,061,474 3,705,490 2,690,770 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
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A G R I T O P E , I N C . A N D S U B S I D I A R I E S C O N S O L I D A T E D S T A T E M E N T S O F C H A N G E S I N S T O C K H O L D E R S ' E Q U I T Y PREFERRED COMMON ADDITIONAL ACCUMULATED STOCK STOCK PAID-IN CAPITAL DEFICIT Balances at September 30, 1996............ $ - $ 26,908 $33,465,214 $(32,484,515) Compensation expense for stock awards.... - - 33,063 - Compensation expense for stock option grants..................... - - 20,832 - Capital contributed by Epitope, Inc., upon exchange of convertible notes........... - - 4,529,009 - Equity issuance costs..................... - - (86,134) - Minority interest investment in subsidiary - - 742,752 - Cash contribution from Epitope, Inc....... - - 7,206,196 - Net loss for the year .................... - - - (8,690,599) --------- ------------ ----------------- ------------- Balances at September 30, 1997............ - 26,908 45,910,932 (41,175,114) Compensation expense for stock option grants...................... - - 390,420 - Common stock issued as compensation- 15,670 shares........................... - 157 40,345 - Common stock issued in private placement- 1,343,704 shares........................ - 13,437 10,322,333 - Preferred stock issued in private placement- 214,285 shares.......................... 2,143 - 1,497,852 - Equity issuance costs .................... - - (2,023,347) - Cash contribution from Epitope, Inc....... - - 1,248,140 - Net loss for the year .................... - - - (5,243,967) --------- ------------ ----------------- ------------- Balances at September 30, 1998 ........... 2,143 40,502 57,386,675 (46,419,081) Compensation expense for stock option grants...................... - - 457,861 - Common stock issued as compensation- 20,462 shares............................ - 204 40,953 - Preferred stock issued in private placement- 500,000 shares........................... 5,000 - 2,615,000 - Equity issuance costs .................... - - (131,308) - Net loss for the year .................... - - - (4,675,406) --------- ------------ ----------------- ------------- Balances at September 30, 1999 ........... $ 7,143 $ 40,706 $60,369,181 $(51,094,487) THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
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A G R I T O P E , I N C . A N D S U B S I D I A R I E S C O N S O L I D A T E D S T A T E M E N T S O F C A S H F L O W S FOR THE YEAR ENDED SEPTEMBER 30 1999 1998 1997 > CASH FLOWS FROM OPERATING ACTIVITIES Net loss............................................. $(4,675,406) $ (5,243,967) $ (8,690,599) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization........................ 1,307,937 951,209 566,813 Loss on sale of property............................. 3,637 54 - Gain on sale of common stock of subsidiary........... (289,603) - - Compensation expense for stock awards................ 41,157 40,502 33,063 Compensation expense for stock option grants......... 457,861 390,420 20,832 Minority interest in subsidiary net loss............. (360,008) (882,423) (274,369) Valuation loss....................................... - `- 2,258,080 Non-cash portion of cost of debt conversion.......... - - 1,149,054 Decrease (increase) in receivables................... 637,883 (535,637) (325,590) (Increase) in receivable from affiliate.............. (119,088) - - (Increase) in inventories............................ (1,764,716) (1,207,877) (1,571,550) Decrease (increase) in prepaid expenses.............. 98,756 104,028 (275,412) Decrease (increase) in other assets and deposits..... (14,233) (1,722) 21,462 Increase in accounts payable and accrued liabilities. 665,058 86,966 1,022,592 Increase (decrease) in deposits on customer orders... 573,359 210,013 (76,986) Other................................................ - 162,647 - ---------- ---------- ---------- Net cash used in operating activities................ (3,437,406) (5,925,787) (6,142,610) CASH FLOWS FROM INVESTING ACTIVITIES Additions to property and equipment.................. (446,730) (2,126,906) (1,927,209) Proceeds from sale of property....................... 900 11,033 - Proceeds from sale of common stock of subsidiary..... 873,836 - - Expenditures for patents and proprietary technology......................................... (485,352) (646,712) (870,910) Investment in affiliated companies................... - 70,000 (56,419) ---------- ---------- ---------- Net cash used in investing activities................ (57,346) (2,692,585) (2,854,538) CASH FLOWS FROM FINANCING ACTIVITIES Issuance of long-term debt........................... - - 20,887 Principal payments on long-term debt ................ (4,452) (4,331) (242,063) Payments on long-term lease obligation............... (333,254) (317,920) - Proceeds from revolving line of credit............... 1,463,000 - - Advances from minority shareholders of subsidiary.... 180,616 - - Proceeds from issuance of stock, net................. 2,488,692 9,812,418 - Minority interest investment in subsidiary........... - 1,779,768 1,540,000 Cash from Epitope, Inc............................... - 1,248,140 7,206,196 ------------ ------------ ---------- Net cash provided by financing activities............ 3,794,602 12,518,075 8,525,020 Net increase (decrease) in cash and cash equivalents. 299,850 3,899,703 (472,128) Cash and cash equivalents at beginning of year....... 3,904,087 4,384 476,512 ------------ ------------ ----------- Cash and cash equivalents at end of year............. $ 4,203,937 $ 3,904,087 $ 4,384 THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
26 A G R I T O P E , I N C . A N D S U B S I D I A R I E S N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S N O T E 1 T H E C O M P A N Y Agritope, Inc. (the "Company" or "Agritope") is an Oregon-based agricultural biotechnology company that develops improved plant products and provides technology to the agricultural industry. Its 57% owned subsidiary, Vinifera, Inc. ("Vinifera"), offers superior grapevine plants to the premium wine industry together with disease testing and elimination services. Agrinomics LLC ("Agrinomics") is a 50% owned subsidiary that conducts a gene discovery program. Superior Tomato Associates, LLC ("Superior Tomato") is a 66-2/3% owned subsidiary formed to develop and market longer-lasting tomatoes. Agrimax Floral Products, Inc. ("Agrimax") is an inactive subsidiary that holds a 9% interest in UAF, Limited Partnership ("UAF"), a fresh flower distribution operation based in Tampa, Florida. Prior to December 30, 1997, Agritope was a wholly owned subsidiary of Epitope, Inc. ("Epitope"), an Oregon corporation engaged in the development and marketing of medical diagnostic products. AGRITOPE SPIN-OFF. In July 1997, the Epitope board of directors approved a management proposal to spin off Agritope, subject to obtaining financing for Agritope and the satisfaction of certain other conditions. In December 1997, Agritope sold 1,343,704 shares of Agritope common stock in a private placement to certain investors for aggregate net proceeds of $9,406,000, immediately after the spin-off. The spin-off was accomplished by a distribution of 2,690,776 shares of Agritope common stock to Epitope shareholders, representing 100% of Epitope's holdings of Agritope common stock. Agritope and Epitope entered into certain agreements governing the ongoing relationship between the companies after the spin-off, including a Separation Agreement, a Tax Allocation Agreement, a Transition Services and Facilities Agreement and an Employee Benefits Agreement. Pursuant to the Employee Benefits Agreement, Agritope established replacement plans that effectively continue to provide benefits available under current Epitope benefit plans. DELAWARE REINCORPORATION; RECAPITALIZATION. In November 1997, in connection with the spin-off of Agritope by Epitope, Agritope agreed to merge with Agritope, Inc., a newly formed Delaware corporation. The purpose of the merger was to change the Company's domicile from Oregon to Delaware and increase the Company's authorized capital stock to 30 million shares of common stock, par value $.01 per share, and 10 million shares of preferred stock, par value $.01 per share. The merger occurred on December 3, 1997. On November 25, 1997, the Agritope board of directors declared a stock dividend of 690,866 shares of Agritope common stock to the sole Agritope stockholder. Subsequently, 2,690,766 shares of Agritope common stock were distributed to the shareholders of Epitope in the spin-off and the remaining shares, representing fractional interest, were redeemed for cash. All of the shares of Agritope common stock that were distributed to Epitope shareholders have been reflected as outstanding for all periods presented in the accompanying financial statements. BASIS OF PRESENTATION. The accompanying consolidated financial statements include the assets, liabilities, revenues and expenses of Agritope and its majority owned subsidiaries. All significant intercompany transactions and balances have been eliminated in consolidation. Minority-owned investments and joint ventures are accounted for using the equity method. Investments of less than 20% are carried at cost or estimated net realizable value, whichever is lower. Intercompany balances with Epitope have been reflected as capital contributions (common stock and additional paid-in capital) in the accompanying consolidated financial statements because they were converted into a permanent capital contribution in conjunction with the spin-off. 27 A G R I T O P E , I N C . A N D S U B S I D I A R I E S N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S N O T E 2 S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S Certain corporate overhead services such as accounting, annual meeting costs, annual report preparation, audit, executive management, facilities, finance, general management, human resources, information systems, investor relations, legal services, payroll and SEC filings were provided by Epitope on a centralized basis for the benefit of Agritope ("Shared Services"). Such expenses have been allocated to Agritope in the accompanying financial statements using activity indicators, which, in the opinion of management, represent a reasonable measure of Agritope's utilization of such Shared Services. These activity indicators, which were reviewed periodically and adjusted to reflect changes in utilization, include number of employees, number of computers, and level of expenditures. Management believes that the amount allocated for these Shared Services is not materially different from the amount that would be incurred by Agritope for such services provided on a stand-alone basis. Allocated Shared Services of $227,990 and $1,402,895, respectively, for 1998 and 1997 are included under the caption "Selling, general and administrative expenses" in the accompanying consolidated statements of operations. Epitope discontinued provision of Shared Services in March 1998 when Agritope moved to separate physical facilities. CASH AND CASH EQUIVALENTS. For purposes of the consolidated balance sheets and statements of cash flows, all highly liquid investments with maturities at time of purchase of three months or less are considered to be cash equivalents. INVENTORIES. Inventories, consisting principally of growing grapevine plants at Vinifera, are recorded at the lower of average cost or market. Average cost includes all direct and indirect costs attributable to the growing grapevine plants. Inventory is summarized as follows: SEPTEMBER 30 1999 1998 Operating supplies ........................ $ 143,757 $ 142,900 Work-in-process ........................... 1,437,617 128,374 Finished goods ............................ 3,472,514 3,017,898 --------- --------- $5,053,888 $ 3,289,172 Loss of grafted plants due to abnormal weather conditions in 1998 caused grafting yield to be significantly lower than planned, especially in the fourth quarter, resulting in a charge of $974,000 to product costs in order to reduce inventory to net realizable value. DEPRECIATION AND CAPITALIZATION POLICIES. Property and equipment are stated at cost less accumulated depreciation. Expenditures for repairs and maintenance are charged to operating expense as incurred. Expenditures for renewals and betterments are capitalized. Depreciation and amortization of property and equipment are calculated primarily under the straight-line method over the estimated useful lives of the related assets (three to seven years). Leasehold improvements are amortized over the shorter of estimated useful lives or the terms of the related leases. When assets are sold or otherwise disposed of, cost and related accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is included in results of operations. 28 A G R I T O P E , I N C . A N D S U B S I D I A R I E S N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S N O T E 2 S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S, C O N T I N U E D ACCOUNTING FOR LONG-LIVED ASSETS. The Company reviews its long-lived assets for impairment periodically or as events or circumstances indicate that the carrying amount of long-lived assets may not be recoverable. If the estimated net cash flows are less than the carrying amount of the long-lived assets, the Company recognizes an impairment loss in an amount necessary to write down long-lived assets to fair value as determined from expected discounted future cash flows. This accounting policy is consistent with Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." PATENTS AND PROPRIETARY TECHNOLOGY. Direct costs associated with patent submissions and acquired technology are capitalized and amortized over their minimum estimated economic useful lives, generally five years. Amortization and accumulated amortization are summarized as follows: 1999 1998 1997 Amortization for the year........... $276,764 $ 186,406 $ 104,461 Accumulated amortization............ 696,192 419,428 233,022 FAIR VALUE OF FINANCIAL INSTRUMENTS. The carrying amounts for cash equivalents, accounts receivable, accounts payable and revolving line of credit approximate fair value because of the immediate or short-term maturity of these financial instruments. The carrying amount for installment notes payable approximates fair value because the related interest rates are comparable to rates currently available to the Company for debt with similar terms and maturities. The Company does not have any derivative financial instruments. REVENUE RECOGNITION. Product sales are recognized when the related products are shipped. Grant and contract revenues include funds received under research and development agreements with various entities. These grants and contracts generally provide for progress payments as expenses are incurred and certain research milestones are achieved. Revenue related to such grants and contracts is recognized as research milestones are achieved. Accounts receivable are stated net of an allowance for doubtful accounts of $24,054 as of September 30, 1999 and $25,057 as of September 30, 1998. MAJOR CUSTOMER. For the years ended September 30, 1998 and 1997, respectively, one customer purchased $829,578 and $337,374 of grapevine plants from Vinifera, representing 32.2% and 23.4% of Vinifera's net sales. No single customer accounted for more than 5% of net sales during the year ended September 30, 1999. RESEARCH AND DEVELOPMENT. Research and development expenditures are comprised of those costs associated with Agritope's ongoing research and development activities to develop superior new plants. Expenditures for research and development also include costs incurred under contracts to develop certain products, including those contracts resulting in grant and contract revenues. All research and development costs are expensed as incurred. INCOME TAXES. The Company accounts for certain revenue and expense items differently for income tax purposes than for financial reporting purposes. These differences arise principally from methods used in accounting for stock options and depreciation rates. Deferred tax assets and liabilities are recognized based on temporary differences between the financial statement and the tax bases of assets and liabilities using enacted tax rates in effect for the year in which the temporary differences are expected to reverse. 29 A G R I T O P E , I N C . A N D S U B S I D I A R I E S N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S N O T E 2 S U M M A R Y O F S I G N I F I C A N T A C C O U N T I N G P O L I C I E S, C O N T I N U E D STOCK-BASED COMPENSATION. In October 1995, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting No. 123, "Accounting for Stock-Based Compensation" ("SFAS 123"). SFAS 123 allows companies which have stock-based compensation arrangements with employees to adopt a fair-value basis of accounting for stock options and other equity instruments or to continue to apply the existing accounting rules under Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB 25"), but with additional financial statement disclosure. The Company has elected to apply the existing accounting rules under APB 25 to its stock-based compensation plans. See Note 6. NET LOSS PER SHARE. Basic earnings per share ("EPS") and diluted EPS are computed using the methods prescribed by Statement of Financial Accounting Standards No. 128, "Earnings Per Share" ("SFAS 128"). Basic EPS is calculated using the weighted-average number of common shares outstanding for the period and diluted EPS is computed using the weighted-average number of common shares and dilutive common equivalent shares outstanding. Basic and diluted EPS are the same for all periods presented since the Company was in a loss position in all periods. The following potentially dilutive securities are excluded from net loss per share calculations as their effect would have been antidilutive:
YEAR ENDED SEPTEMBER 30 1999 1998 1997 Options to purchase common stock........ 1,708,103 1,255,264 - Warrants to purchase common stock....... 708,333 583,333 - Preferred stock......................... 714,285 214,285 - ---------- ----------- -------- 3,130,721 2,052,882 -
SUPPLEMENTAL CASH FLOW INFORMATION. Non-cash financing and investing activities not included in the consolidated statements of cash flows are summarized as follows:
YEAR ENDED SEPTEMBER 30 1999 1998 1997 Cash paid for interest.................. $ 21,446 $ 1,248 $ 25,307 Fair value of warrants issued in connection with private placements............... 120,000 929,842 - Minority interest contribution of capital (Note 6)................... - - 742,752 Conversion of notes to equity (Notes 5 and 6)............. - - 3,380,000
MANAGEMENT ESTIMATES. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates relating to assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported amounts of revenues and expenses during the reporting period. Actual results could vary from these estimates. 30 A G R I T O P E , I N C . A N D S U B S I D I A R I E S N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S N O T E 3 I N V E S T M E N T I N A F F I L I A T E D C O M P A N I E S In June 1998, Vinifera accepted an offer to sell its minority interest in Vinifera Sudamericana, S.A. to the majority shareholder for $70,000. The resultant non-cash loss on disposition of $130,000 is included in "Other, net" under the caption "Other income (expense), net" in the accompanying consolidated statements of operations for 1998. In 1997, the Company recorded a charge of $2,258,080 to recognize the permanent impairment of its investment in a fresh flower distribution business. The Company's capital contributions to support the research activities of Superior Tomato are expensed as incurred. N O T E 4 P R O P E R T Y A N D E Q U I P M E N T
Property and equipment are summarized as follows: SEPTEMBER 30 1999 1998 Land........................................................ $ 30,020 $ 30,020 Grapevine propagation blocks................................ 1,723,317 1,602,617 Production equipment........................................ 120,031 127,736 Buildings and improvements.................................. 2,483,556 2,418,182 Research and development laboratory equipment............... 840,259 812,734 Office furniture and equipment.............................. 795,553 711,416 Leasehold improvements...................................... 317,016 306,146 Construction in progress.................................... 136,589 - ------------- ------------ 6,446,341 6,008,851 Less accumulated depreciation and amortization.............. (2,934,517) (1,908,047) ------------- ------------- $ 3,511,824 $ 4,100,804
N O T E 5 B O R R O W I N G A R R A N G E M E N T S ADVANCES TO VINIFERA FROM MINORITY SHAREHOLDERS. In September 1999, certain minority shareholders of Vinifera agreed to advance $519,000, interest-free, to Vinifera. The amounts to be advanced are equal to the second installment payable by the shareholders to Agritope under certain stock purchase agreements and they are to be repaid to the shareholders on or before July 15, 2000. As of September 30, 1999, $180,616 of the total had been advanced to Vinifera and is included as a current liability in the accompanying financial statements. The remaining advances were made in October. See Note 6 for further details with respect to the stock purchase agreements. REVOLVING LINE OF CREDIT. In June 1999, Vinifera borrowed $1.1 million from a commercial bank under a revolving line of credit. The proceeds were used to finance inventory production and repay a $1 million line of credit advanced by Agritope. The line provides for borrowings of up to $1.5 million, of which $1,463,000 was outstanding as of September 30, 1999. It is secured by Vinifera's inventories and accounts receivable and is guaranteed by one of Vinifera's minority shareholders. The line bears interest at the prime rate (8.5% as of September 30, 1999). It expires on May 1, 2000. ACCOUNTS RECEIVABLE LINE OF CREDIT. In May 1999, Agritope entered into an agreement with a commercial bank pursuant to which the bank will advance up to $500,000 based on 80% of qualified and approved accounts receivable. The line of credit bears interest at the rate of 2% per month and each advance carries an administration fee of 0.65%. It expires on May 20, 2000. The Company has not made any borrowings under the line. 31 A G R I T O P E , I N C . A N D S U B S I D I A R I E S N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S N O T E 5 B O R R O W I N G A R R A N G E M E N T S, C O N T I N U E D CONVERTIBLE NOTES. In November 1996, Epitope exchanged $3,380,000 principal amount of Agritope convertible notes for 250,367 shares of common stock of Epitope at a reduced exchange price of $13.50 per share. The exchange price had previously been fixed at $19.53 per share. Accordingly, Agritope recognized a charge to results of operations of $1,216,654 in the first quarter of fiscal 1997 representing the conversion expense. In conjunction with the exchange, unamortized debt issuance costs of $86,134 related to such notes were recognized as equity issuance costs during 1997. Concurrent with the note conversion, Epitope made a $4,529,009 capital contribution to Agritope. On June 30, 1997, Agritope paid in full the remaining $240,000 principal amount outstanding. Debt issuance costs incurred in connection with the notes were included in other assets and were being amortized over the five-year life of the notes. Amortization expense of debt issuance costs for the year ended September 30, 1997 totaled $2,687. Debt issuance costs were fully amortized as of September 30, 1997. N O T E 6 S T O C K H O L D E R S' E Q U I T Y STOCKHOLDER RIGHTS PLAN. In November 1997, Agritope adopted a Stockholders' Rights Plan, which enables holders of Common Stock, under certain circumstances, to purchase fractional shares of a series of preferred stock. Each share of Common Stock includes the right to purchase (the "Right"), if and when the Rights are exercisable, 1/1,000 of a share of Series B Junior Participating Preferred Stock at an exercise price of $25. The exercise price and the number of shares issuable upon exercise of the Rights are subject to adjustment in certain cases to prevent dilution. The Rights are evidenced by the Agritope Common certificates and are not exercisable, or transferable apart from the Agritope Common, until 10 business days after (i) a person acquires 15% or more of the Agritope Common; (ii) a person commences a tender offer which would result in the ownership of 15% or more of the Agritope Common; or (iii) the Agritope Board declares a person beneficially owning at least 10% of the Agritope Common to be an Adverse Person (the "Rights Distribution Date"). In the event any person becomes the beneficial owner of 15% or more of the Agritope Common or the Agritope Board determines that a person is an Adverse Person, each of the Rights (other than Rights held by the party triggering the Rights and certain of their transferees, all of which will be voided) becomes a discount right entitling the holder to acquire Agritope Common having a value equal to twice the Right's exercise price. Vilmorin, Clause and Cie ("Vilmorin") will not trigger the Stockholder Rights Plan if it acquires other Agritope securities directly from Agritope or with the prior approval of the Agritope Board. In the event Agritope is acquired in a merger or other business combination transaction (including one in which Agritope is the surviving corporation), each Right will entitle its holder to purchase, at the then current exercise price of the Right, that number of shares of common stock of the surviving company which at the time of such transaction would have a market value of two times the exercise price of the Right. The Rights do not have any voting rights and are redeemable, at the option of Agritope, at a price of $.01 per Right at any time until 10 business days after a person acquires beneficial ownership of at least 15% of the Agritope Common. The Rights expire on November 14, 2007. So long as the Rights are not separately transferable, Agritope will issue one Right with each new share of Agritope Common issued. COMMON STOCK. Cash and cash equivalents provided to Agritope by Epitope have been reflected in additional paid-in capital. Also reflected in additional paid-in capital are certain transactions in Epitope common stock. The exchange of shares of Epitope common stock for Agritope convertible debt and the related write-off of debt issuance costs have been reflected as Agritope additional paid-in capital. 32 A G R I T O P E , I N C . A N D S U B S I D I A R I E S N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S N O T E 6 S T O C K H O L D E R S' E Q U I T Y, C O N T I N U E D EPITOPE STOCK PLAN GRANTS. As employees of a wholly owned subsidiary of Epitope, the employees of Agritope and its subsidiaries participated in stock award, employee stock purchase and other benefit plans of Epitope. Compensation expense recognized for Epitope stock grants and awards to Agritope employees totaling $53,895 in 1997 has been recognized as operating expenses and additional paid-in capital of Agritope. VINIFERA COMMON STOCK. In June 1999, Agritope entered into stock purchase agreements with certain minority shareholders of Vinifera pursuant to which minority ownership of Vinifera will increase from 36% to approximately 50% over a three-year period. In a related transaction, also in June, Vinifera repaid the $1 million balance on its working capital line of credit to Agritope and replaced the line with a $1.5 million revolving bank line of credit that is guaranteed by a minority shareholder. In July 1999, the minority shareholders made the first purchases under the stock purchase agreements. Agritope received proceeds totaling $873,836 and its ownership interest in Vinifera was reduced from 64% to 57%. The gain on the first purchases amounted to $290,000 and is included in other income. In September 1999, the minority shareholders agreed to advance $519,000, interest-free, to Vinifera, representing the second installment under the agreements. The advances are to be repaid to the shareholders on or before July 15, 2000. As of September 30, 1999, $180,616 of the total had been advanced to Vinifera and is included as a current liability in the accompanying financial statements. In June 1998, Vinifera sold 898,269 shares of common stock to certain minority shareholders for $1.8 million. In connection with the terms of the related stock purchase agreements, Agritope canceled $4 million of working capital loans to Vinifera in exchange for 2 million shares of common stock of Vinifera. The transactions increased Agritope's percentage ownership from 61% to 64%. In January 1997, a minority shareholder in Vinifera contributed $100,000 to Vinifera in satisfaction of a stock subscription agreement. In June 1997, Agritope sold 770,000 shares of common stock of Vinifera to outside parties for $1,540,000 in cash. In accordance with the terms of the related stock purchase agreements, Agritope contributed the proceeds of these stock sales to Vinifera's capital. These sales of previously issued shares of Vinifera common stock reduced Agritope's percentage ownership of Vinifera voting stock from 76% to 61%. WARRANTS TO PURCHASE COMMON STOCK. As of September 30, 1999, the following warrants to purchase common stock were outstanding: DATE OF ISSUANCE SHARES EXERCISE PRICE EXPIRATION DATE September 24, 1999...... 125,000 $ 7.00 September 30, 2004 April 30, 1998.......... 83,333 $ 7.34 December 30, 2000 December 30, 1997....... 500,000 $ 7.00 December 30, 2000 ------- 708,333 33 A G R I T O P E , I N C . A N D S U B S I D I A R I E S N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S N O T E 6 S T O C K H O L D E R S' E Q U I T Y, C O N T I N U E D SERIES A PREFERRED STOCK. Agritope's board of directors has designated 1 million shares of Agritope preferred stock, par value $.01 per share, as Series A Preferred Stock ("Series A Preferred"). The Series A Preferred has preemptive rights and the right to elect a director, but otherwise has rights substantially equivalent to Agritope common stock and is convertible at any time into shares of Agritope common stock on a share-for-share basis, subject to adjustment upon the occurrence of certain events. In connection with a research agreement, Vilmorin purchased 214,285 shares of Series A Preferred in 1998 at a price of $7 per share. See Note 8. In September 1999, the Company completed a $2.5 million private placement of 500,000 shares of Series A Preferred Stock at a price of $5 per share. Vilmorin purchased the shares. For every four shares of Series A Stock purchased in the private placement, Vilmorin also received a warrant to purchase one additional share of Series A Stock at a price of $7 per share at any time over the next five years. The fair value of such warrants, $120,000, is included in "Preferred stock issued in private placement" with a corresponding charge to "Equity issuance costs" in the accompanying statement of stockholders equity. Each share of Series A Stock is convertible into one share of Agritope Common Stock. Vilmorin subsequently sold 150,000 shares of Series A Stock together with the related warrants to an Israeli seed company, Hazera Quality Seeds Ltd.("Hazera"), for $750,000. After completion of the sales, Vilmorin owned 564,285 shares of Series A Stock, or 11.8% of the outstanding capital stock of Agritope. Hazera's holdings amounted to 3.1% of Agritope's outstanding capital stock. STOCK AWARD PLAN. In November 1997, the Agritope, Inc. 1997 Stock Award Plan (the "Award Plan") was adopted by Agritope's board of directors and approved by Epitope as Agritope's sole stockholder. The Award Plan provides for stock-based awards to employees, outside directors, members of scientific advisory boards and consultants. Awards that may be granted under the Award Plan include incentive stock options, nonqualified stock options, stock appreciation rights, restricted awards, performance awards and other stock-based awards. The Award Plan provides for the issuance of a total of up to 2,000,000 shares of Agritope common stock, subject to adjustment for changes in capitalization. Options for 291,897 shares were available for future grants under the Award Plan as of September 30, 1999. The following tables summarizes Award Plan activity (shares and weighted average prices):
1999 1998 SHARES PRICE SHARES PRICE Outstanding, beginning of period ... 1,255,264 $ 5.54 - $ - Granted ............................ 509,439 2.80 1,422,664 5.51 Exercised .......................... - - - - Canceled ........................... (56,600) 5.91 (167,400) 5.31 -------- --------- Outstanding, end of period ......... 1,708,103 4.70 1,255,264 5.54 Exercisable......................... 369,445 5.38 65,000 5.07 Weighted average fair value of options granted .. .90 3.68
The amounts granted above include options granted to consultants in 1999 and 1998 covering 10,000 and 65,000 shares, respectively, at average exercise prices of $2.00 and $5.07, respectively. In accordance with SFAS 123, Agritope recognized compensation expense for these awards in 1999 and 34 A G R I T O P E , I N C . A N D S U B S I D I A R I E S N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S N O T E 6 S T O C K H O L D E R S' E Q U I T Y, C O N T I N U E D 1998 totaling $7,500 and $81,000, respectively, based on the fair value of the options as determined using the Black-Scholes method of valuation. With respect to options granted in 1999 and 1998 to participants other than consultants, Agritope will recognize compensation expense of $22,500 and $1,902,065, respectively, representing discounts from market prices on date of grant, which will be amortized over the vesting period of the options, in accordance with APB 25. Amortization in 1999 and 1998 amounted to $450,361 and $309,420, respectively. The following table summarizes information about stock options outstanding as of September 30, 1999:
REMAINING WEIGHTED WEIGHTED SHARES CONTRACT LIFE AVERAGE SHARES AVERAGE EXERCISE PRICE OUTSTANDING (YEARS) EXERCISE PRICE EXERCISABLE EXERCISE PRICE $2.00 to $3.00.... 381,939 9.02 $ 2.05 10,000 $ 2.00 $5.00 to $5.31.... 1,155,164 7.99 5.24 307,693 5.24 $7.00............. 171,000 8.17 7.00 51,752 7.00 --------- -------- 1,708,103 8.24 4.70 369,445 5.38
EMPLOYEE STOCK PURCHASE PLAN. Also in November 1997, Agritope's board of directors and Epitope, as Agritope's sole stockholder, approved the Agritope, Inc. 1997 Employee Stock Purchase Plan (the "Purchase Plan"), covering up to 250,000 shares of Agritope common stock which Agritope employees may subscribe to purchase during offering periods to be established from time to time. The Compensation Committee of Agritope's board of directors was granted authority to determine the number of offering periods, the number of shares offered, and the length of each period. No more than three offering periods (other than Special Offering Subscriptions as defined in the Purchase Plan) may be set during each fiscal year. The purchase price for stock purchased under the Purchase Plan is the lesser of 85% of the fair market value of a share on the last trading day before the offering date established for the offering period and 85% of the fair market value of a share on the date the purchase period ends (or any earlier purchase date provided for in the Purchase Plan). No offerings were made in the year ended September 30, 1998. As of September 30, 1999, employees had subscribed to purchase 43,053 shares over a 24-month period at an initial price of $0.93 per share. During the year ended September 30, 1999, 754 shares, with a weighted-average fair market value of $2.93 per share, were issued at a price of $0.93 per share. VINIFERA STOCK AWARD PLAN. In 1993, Vinifera adopted a stock award plan, which was approved by Agritope as the sole shareholder of Vinifera. The plan provided for issuance of options to purchase up to 2,000,000 shares of Vinifera common stock. In 1993, Vinifera granted options to purchase 100,000 shares for $1.00 per share, a price equal to the market value as determined by Vinifera's board of directors. No options were granted from 1994 until 1999. In 1999, Vinifera granted options to purchase 525,000 shares for $1.50 per share, representing a discount of $0.50 from the market price as determined by the board of directors. As of September 30, 1999, options were outstanding to purchase 625,000 shares, at a weighted-average price of $1.42, of which options on 231,250 shares were exercisable, at a weighted-average price of $1.28. In accordance with APB 25, Vinifera will recognize compensation expense of $262,500 over a three-year vesting period. Amortization of such expense in 1999 amounted to $119,103. 35 A G R I T O P E , I N C . A N D S U B S I D I A R I E S N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S N O T E 6 S T O C K H O L D E R S' E Q U I T Y, C O N T I N U E D As required by SFAS 123, the Company has computed, for pro forma disclosure purposes, the value of options granted and amortized over the vesting periods using the Black-Scholes option pricing model. The assumptions used for stock option grants were as follows:
FOR THE YEAR ENDED SEPTEMBER 30 1999 1998 1997 Risk-free interest rate................. 5% 5% - Expected dividend yield................. - - - Expected life (years)................... 4 4 - Expected volatility..................... 80% 55% -
The assumptions used for rights granted under the Employee Stock Purchase Plan in 1999 were a risk-free interest rate of 5%, an expected dividend yield of zero, an expected volatility of 80% and an expected life of 2 years. If the Company had accounted for its stock-based compensation plans in accordance with SFAS 123, the Company's net loss and net loss per share would have increased as follows:
FOR THE YEAR ENDED SEPTEMBER 30 1999 1998 1997 Net loss: As reported............................. $ (4,675,406) $ (5,243,967) $ (8,690,599) Pro forma............................... $ (5,937,886) $ (6,165,274) $ (8,690,599) Net loss per share: As reported............................. $ (1.15) $ (1.42) $ ( 3.23) Pro forma............................... $ (1.46) $ (1.66) $ ( 3.23)
36 A G R I T O P E , I N C . A N D S U B S I D I A R I E S N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S N O T E 7 I N C O M E T A X E S As of September 30, 1999, Agritope had net operating loss carryforwards of approximately $41.8 million and $28.9 million to offset federal and Oregon state taxable income, respectively. These net operating loss carryforwards will expire if not used by Agritope, as follows: YEAR OF EXPIRATION FEDERAL OREGON 2004.......................................... $ 111,000 $ 111,000 2005.......................................... 317,000 317,000 2006.......................................... 941,000 941,000 2007.......................................... 2,620,000 2,620,000 2008.......................................... 6,733,000 4,847,000 2009.......................................... 8,327,000 2,179,000 2010.......................................... 8,477,000 3,765,000 2011.......................................... 2,249,000 2,168,000 2012.......................................... 4,284,000 4,284,000 2018.......................................... 3,856,000 3,856,000 2019.......................................... 3,840,000 3,840,000 ----------- ----------- Total......................................... $41,755,000 $28,928,000 Significant components of Agritope's deferred tax asset were as follows: SEPTEMBER 30 1999 1998 Net operating loss carryforwards................... $ 16,158,000 $ 14,636,000 Deferred compensation.............................. 784,000 631,000 Research and experimentation credit carryforwards.. 542,000 522,000 Accrued expenses................................... 162,000 233,000 Other.............................................. 667,000 630,000 ------------ ------------ Gross deferred tax assets.......................... 18,313,000 16,652,000 Valuation allowance................................ (18,313,000) (16,652,000) ------------ ------------- Net deferred tax asset............................. $ - $ - No benefit for Agritope's deferred tax assets has been recognized in the accompanying financial statements as they do not satisfy the recognition criteria set forth in SFAS 109. The valuation allowance increased by $1.7 million in 1999. The research and experimentation tax credit carryforwards will generally expire from 2004 through 2019 if not used by Agritope. Net operating loss and tax credit carryforwards incurred by Agritope through the date of the spin-off (see Note 1, The Company--Agritope Spin-off) continued as carryforwards of Agritope after the date of distribution. The issuance of voting stock following the spin-off may result in a change of ownership under federal tax rules and regulations. Upon occurrence of such a change in ownership, utilization of existing tax loss and tax credit carryforwards would be subject to cumulative annual limitations. The expected federal statutory tax benefit of $1.5 million for the year ended September 30, 1999 increased by approximately $177,000 for the effect of state and local taxes (net of federal impact), and decreased by approximately $1.7 million for the effect of the increase in valuation allowance, and by $6,000 for permanent differences consisting primarily of meals and entertainment. The consolidated financial statements include the financial results of Vinifera, a 57% owned subsidiary (see Note 1). However, the tax disclosures above do not include the deferred tax assets and related valuation allowance for Vinifera's carryforwards since Vinifera is not included in the consolidated group for tax purposes. Vinifera files its tax return separately on a stand-alone basis. 37 A G R I T O P E , I N C . A N D S U B S I D I A R I E S N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S N O T E 8 R E S E A R C H A N D D E V E L O P M E N T A R R A N G E M E N T S REVENUES. Revenues from research and development arrangements are included in the accompanying consolidated statements of operations under the caption "Grants and contracts." Expenses related to projects conducted under such arrangements are included under the caption "Research and development costs." The activity related to these arrangements is summarized as follows:
YEAR ENDED SEPTEMBER 30 1999 1998 1997 Government research grants................ $ 313,876 $ 206,974 $ 30,228 Research projects with strategic partners. 734,216 - 52,770 Other..................................... - 17,714 31,694 ------------- ------------ ---------- $1,048,092 $ 224,688 $ 114,692 Project related expenses.................. $1,331,356 $ 371,184 $ 272,309
NATIONAL INSTITUTES OF STANDARDS AND TECHNOLOGY. In October 1997, Agritope was awarded a U.S. Department of Commerce matching grant totaling $990,022 through the Advanced Technology Program of the National Institute of Standards and Technology (NIST) and covering a three-year period. Agritope was awarded the grant for use in the application of its proprietary ripening control technology to certain tree fruits and bananas. Under terms of the grant, the NIST reimburses Agritope for 49% of direct costs incurred for the projects. As of September 30, 1999, $ 245,558 was available for future reimbursement under the grant. VILMORIN. On December 5, 1997, Agritope and Vilmorin entered into a research and development agreement covering certain vegetable and flower crops. Under the terms of the research agreement, Vilmorin will provide certain proprietary seed varieties and germplasm for use by Agritope in research and development projects to be funded by Vilmorin, in which Agritope technology, and possibly Vilmorin technology, will be applied to the various covered crops. The specific research projects to be conducted will be determined by agreement of the parties. Unless otherwise agreed, Vilmorin will pay, on a quarterly basis, all of Agritope's out-of-pocket expenses, including employee salaries and overhead, for each selected research project. Agritope and Vilmorin have agreed to negotiate in good faith the terms of future commercialization agreements applicable to any commercial-stage products that arise out of Vilmorin-funded research. If the parties are unable to agree, commercialization terms will be determined by binding arbitration. Vilmorin also agreed to provide additional funding totaling $1 million through the financing of research and development projects over a three-year period. As of September 30, 1999, Vilmorin had committed $298,607 to fund specified projects which are planned to be completed by June 2000. Agritope earned revenues of $497,800 for work completed for the Vilmorin projects in 1999. No revenues were earned in 1998 with respect to such projects. 38 A G R I T O P E , I N C . A N D S U B S I D I A R I E S N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S N O T E 8 R E S E A R C H A N D D E V E L O P M E N T A R R A N G E M E N T S, C O N T I N U E D AGRINOMICS LLC. In July 1999, Agritope and Aventis CropScience S.A. ("Aventis CropScience") formed Agrinomics LLC ("Agrinomics") to conduct a research, development and commercialization program in the field of agricultural functional genomics. Agritope owns a 50% interest in Agrinomics and Aventis CropScience owns the remaining 50% interest. Aventis CropScience has agreed to make capital contributions in cash totaling $20 million over a five-year period, of which $5 million was contributed in 1999. Agritope contributed certain technology and a collection of seed generated using such technology. Agritope and Aventis CropScience will also perform research work at their respective facilities. In 1999, Agritope earned revenues of $236,416 for work performed for Agrinomics. The technology contributed to Agrinomics by Agritope had a zero basis for financial reporting purposes. Accordingly, Agritope has recorded its investment in Agrinomics as zero and will not include in its consolidated financial statements its proportionate share of the results of operations of Agrinomics until such time that Agritope makes capital contributions to Agrinomics, if ever. Summarized financial information for Agrinomics is as follows: FINANCIAL POSITION AS OF SEPTEMBER 30, 1999 Assets Current Assets Cash and marketable securities............................ $4,784,798 Other accounts receivable................................. 16,404 ----------- 4,801,202 Property, plant and equipment............................. 142,940 ---------- Total assets............................................ $ 4,944,142 Liabilities and Members' Equity Accounts payable, including 119,088 payable to Agritope... $ 180,682 Members' equity........................................... 4,763,460 --------- Total liabilities and members' equity..................... $ 4,944,142 OPERATING RESULTS FOR THE PERIOD FROM INCEPTION, JULY 1, 1999, THROUGH SEPTEMBER 30, 1999 Operating expenses Research and development.................................. $ 242,369 Administration............................................ 17,037 -------- 259,406 Interest earned........................................... 22,866 -------- Net loss.................................................. $ (236,540) 39 A G R I T O P E , I N C . A N D S U B S I D I A R I E S N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S N O T E 9 C O M M I T M E N T S A N D C O N T I N G E N C I E S Agritope leases office space and Vinifera leases office and greenhouse facilities under operating lease agreements, which require minimum annual payments as follows: YEAR ENDING SEPTEMBER 30 2000 ................................................... $535,860 2001 ................................................... 544,936 2002 ................................................... 560,048 2003 ................................................... 326,140 2004 ................................................... 90,500 Rent expense was $514,762, $556,717, and $326,388, for 1999, 1998 and 1997, respectively. Agritope is also contingently liable for a lease that has been assigned to UAF which requires payments totaling $55,701 for the year ending September 30, 2000. During 1997, the Company accrued its contingent obligation under these leases as both UAF and Petals have defaulted on the related subleases. The corresponding charge of $744,109 is included in "Other, net" under the caption "Other income (expense), net" in the accompanying consolidated statements of operations for 1997. N O T E 10 P R O F I T S H A R I N G A N D S A V I N G S P L A N S EMPLOYEE STOCK OWNERSHIP PLAN. Agritope's board of directors adopted the Agritope, Inc. Employee Stock Ownership Plan ("ESOP") in November 1997. After the spin-off, all employees, except excluded classes, of Agritope and those of its affiliates that elect to participate, were eligible to participate in the ESOP. The employers' contribution to the ESOP each year, if any, will be determined by the Agritope board of directors, and may be made either in Agritope common stock or in cash. Contributions will be allocated to participants in proportion to their compensation. Contributions vest based on years of service over the first six years of employment, or upon the participant's earlier death, disability, or attainment of age 65. To date, no contributions have been declared. 401(K) PROFIT SHARING PLAN. Agritope established the Agritope, Inc. 401(k) Profit Sharing Plan (the "401(k) Plan") in November 1997. All employees (including officers), other than excluded classes, are eligible to participate. Participants may contribute up to 17% of their cash compensation on a before-tax basis, subject to an annual maximum amount that is adjusted for the cost of living ($10,000 for 1999). The first 5% of a participant's compensation is eligible for a discretionary, pro-rata employer matching contribution which will be invested in Agritope common stock. Matching contributions vest based on years of service over the first six years of employment, or upon the participant's earlier death, disability, or attainment of age 65. In 1999 and 1998, Agritope made contributions of $40,456 and $40,502, respectively to the 401(k) Plan. The 401(k) plan holds 38,155 shares of Agritope common stock as of September 30, 1999. EPITOPE 401(K) PROFIT SHARING PLAN. Epitope established a profit sharing and deferred salary savings plan in 1986 and restated the plan in 1991. All Agritope employees were eligible to participate in the plan prior to the date of the spin off. During 1998 and 1997, respectively, Agritope was charged $8,196 and $33,063 by Epitope for its share of the matching contribution under the plan. 40 A G R I T O P E , I N C . A N D S U B S I D I A R I E S N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S N O T E 11 S E G M E N T I N F O R M A T I O N In 1999, Agritope adopted Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS 131"). Under SFAS 131, segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance. Agritope's chief operating decision-maker is the chief executive officer. Agritope is organized into two segments: The Research and Development segment develops improved plant products and provides technology to the agricultural industry. The Grapevine Propagation segment, operated by Vinifera, propagates, grows and distributes grapevine plants to the premium wine industry. It also provides disease testing and elimination services. The accounting policies of the segments are the same as those described in Note 2, Summary of Significant Accounting Policies. The Company has no revenues outside the United States. For information as to major customers, see Note 2 "Major Customer". Selected segment information is presented in the tables below:
RESEARCH AND GRAPEVINE DEVELOPMENT PROPAGATION TOTAL YEAR ENDED SEPTEMBER 30, 1999 Revenues from external sources.......... $ 1,048,092 $ 2,503,377 $ 3,551,469 Intersegment revenues................... 180,296 (180,296) - Operating loss.......................... (4,517,213) (1,055,465) (5,572,678) Intersegment interest income (expense).. 40,288 (40,288) - Interest income......................... 102,543 199 102,742 Interest expense........................ ( 27) (21,419) (21,446) Other income (expense).................. - 166,365 166,365 Segment loss............................ (4,374,409) (950,608) (5,325,017) Depreciation and amortization........... 669,672 638,265 1,307,937 Expenditures for long-lived assets...... 600,416 331,666 932,082 Segment assets.......................... 7,529,966 7,941,216 15,471,182 YEAR ENDED SEPTEMBER 30, 1998 Revenues from external sources.......... $ 224,688 $ 2,574,976 $ 2,799,664 Intersegment revenues................... 70,869 (70,869) - Operating loss.......................... (4,271,627) (1,952,813) (6,224,440) Intersegment interest income (expense).. 271,612 (271,612) - Interest income......................... 224,350 - 224,350 Interest expense........................ - (1,248) (1,248) Other income (expense).................. 6,450 (131,502) (125,052) Segment loss............................ (3,769,215) (2,357,175) (6,126,390) Depreciation and amortization........... 442,826 508,383 951,209 Expenditures for long-lived assets...... 1,903,973 869,645 2,773,618 Segment assets.......................... 7,395,950 6,994,376 14,390,326
41 A G R I T O P E , I N C . A N D S U B S I D I A R I E S N O T E S TO C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S N O T E 11 S E G M E N T I N F O R M A T I O N, C O N T I N U E D
RESEARCH AND GRAPEVINE DEVELOPMENT PROPAGATION TOTAL YEAR ENDED SEPTEMBER 30, 1997 Revenues from external sources.......... $ 114,692 $ 1,436,498 $1,551,190 Intersegment revenues................... 52,217 (52,217) - Operating loss.......................... (3,590,916) (946,777) (4,537,693) Intersegment interest income (expense).. 231,757 (231,757) - Interest income......................... - - - Interest expense........................ ( 24,457) (850) (25,307) Other income (expense).................. - (1,716) (1,716) Segment loss............................ (3,383,616) (1,181,100) (4,564,716) Depreciation and amortization........... 280,487 286,326 566,813 Expenditures for long-lived assets...... 1,042,102 1,756,017 2,798,119 Segment assets.......................... 2,069,629 5,215,426 7,285,055 RECONCILIATION OF LOSSES. The following table reconciles segment losses to consolidated net loss: YEAR ENDED SEPTEMBER 30................. 1999 1998 1997 Segment losses.......................... $ (5,325,017) $ (6,126,390) $ (4,564,716) Gain on sale of stock of Vinifera....... 289,603 - - Minority interest in Vinifera losses.... 360,008 882,423 274,369 Valuation loss.......................... - - (2,258,080) Debt conversion......................... - - (1,216,654) Other, net.............................. - - (925,518) ---------------- ------------ -------------- Net loss................................ $ (4,675,406) $ (5,243,967) $ (8,690,599)
42 SIGNATURES ....Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized. AGRITOPE, INC. By /s/ GILBERT N. MILLER -------------------------------------- Gilbert N. Miller Executive Vice President and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. December 29, 1999 /s/ ADOLPH J. FERRO - ----------------- --------------------------------------- Date Adolph J. Ferro Chairman, President, Chief Executive Officer (PRINCIPAL EXECUTIVE OFFICER) December 29, 1999 /s/ GILBERT N. MILLER - ----------------- --------------------------------------- Date Gilbert N. Miller Executive Vice President, Chief Financial Officer and Director (PRINCIPAL FINANCIAL AND ACCOUNTING OFFICER) December 29, 1999 /s/ W. CHARLES. ARMSTRONG * - ----------------- --------------------------------------- Date W. Charles Armstrong Director December 29, 1999 /s/ MICHEL de BEAUMONT * - ----------------- --------------------------------------- Date Michel de Beaumont Director December 29, 1999 /s/ NANCY L. BUC * - ----------------- --------------------------------------- Date Nancy L. Buc Director December 29, 1999 /s/ JAMES T. KING* - ----------------- --------------------------------------- Date James T. King Director December 29, 1999 /s/ PIERRE LEFEBVRE* - ----------------- --------------------------------------- Date Pierre Lefebvre Director December 29, 1999 /s/ ROGER L. PRINGLE * - ----------------- --------------------------------------- Date Roger L. Pringle Director *By /s/ GILBERT N. MILLER --------------------------------------- Gilbert N. Miller (Attorney-in-Fact) 43 EXHIBIT INDEX NUMBER DESCRIPTION 2.* Separation Agreement between Epitope, Inc. ("Epitope"), and Agritope, Inc. ("Agritope"), dated as of December 1, 1997. 3.1* Certificate of Incorporation of Agritope. 3.2* Bylaws of Agritope. 3.3* Certificate of Designation, Preferences and Rights of the Series A Preferred Stock. 4.1* Form of Common Stock Certificate. 4.2* Form of Rights Agreement between Agritope and ChaseMellon Shareholder Services, L.L.C., as Rights Agent, which includes as Exhibit A the Designation of Terms of the Series B Junior Participating Preferred Stock and as Exhibit B the form of Rights Certificate, as amended. 4.3* Form of stock purchase agreement in connection with the Regulation S Sale. 4.4* Preferred Stock Purchase Agreement between Agritope and Vilmorin dated December 5, 1997. 10.1* Transition Services and Facilities Agreement between Epitope and Agritope, dated as of December 1, 1997. 10.2* Tax Allocation Agreement between Epitope and Agritope, dated as of December 1, 1997. 10.3* Amended and Restated Employee Benefits Agreement between Epitope and Agritope, dated as of December 19, 1997.**** 10.4* Agritope, Inc. 1997 Stock Award Plan.**** 10.5* Agritope, Inc. 1997 Employee Stock Purchase Plan.**** 10.6* Form of Employment Agreement between Agritope and Adolph J. Ferro, Ph.D.**** 10.7* Form of Employment Agreement between Agritope and Gilbert N. Miller.**** 10.8** Form of Employment Agreement between Agritope and D. Ry Wagner.**** 10.9* Form of Employment Agreement between Agritope and Matthew G. Kramer.**** 10.10* Employment Agreement between Vinifera, Inc. and Joseph A. Bouckaert.**** 10.11* Form of Indemnification Agreement for directors. 10.12* Form of Indemnification Agreement for officers. 10.13* Lease of Land and Certain Improvements located at 4288 Bodega Avenue entered into by and between Gianni Neve and Maria Neve, Landlord, and Vinifera, Inc., Tenant, dated as of February 1, 1996. 10.14* Option to License and Research Support Agreement between the Salk Institute for Biological Studies and Epitope dated February 25, 1997, including Amendment dated July 25, 1997, and Assignment between Agritope and Epitope. 10.15* Superior Tomato Associates, L.L.C. Operating Agreement dated February 19, 1996, including Assignment and Assumption Agreement between the Company and Andrew and Williamson Sales, Co. 10.16* Form of Restated Placement Agent Agreement between American Equities Overseas Inc., and Agritope. 10.17** Form of Warrant Agreement to be issued to Vector Securities in partial consideration for services in connection with the Distribution. 10.18* Form of Warrant Agreement issued in connection with the Regulation S Sale. 10.19* Research and Development Agreement between Agritope and Vilmorin & Cie, dated as of December 5, 1997. 10.20* Assignment and Modification of Lease dated November 7, 1997 among Pacific Realty Associates, L.P. ("Pacific"), American Show Management, Inc. ("ASM"), and Agritope, Lease Amendment dated June 3, 1996, between Pacific and ASM, and Lease dated October 4, 1995, between Pacific and ASM. 10.21*** Limited Liability Company Agreement of Agrinomics LLC, dated as of July 1, 1999, among Agritope, ACTTAG, Inc., a Delaware corporation ("ACTTAG"), and RP Ag. 10.22*** Research and Management Contract, dated as of July 1, 1999, between Agritope and Agrinomics. 10.23*** Assignment and Assumption Agreement and Bill of Sale, dated as of July 15, 1999, between ACTTAG and Agrinomics. 10.24*** Research Contract and License Agreement, dated as of July 1, 1999, between RP Ag and Agrinomics. 10.25*** Research, License and Option Agreement, dated as of October 23, 1998, as amended and restated as of July 14, 1999, between The Salk Institute for Biological Studies, a California nonprofit public benefit corporation, and Agritope. 10.26*** Assignment and Assumption Agreement and Bill of Sale, dated as of July 5, 1999, between ACTTAG and Agritope. 10.27*** Research and Option to License Agreement, dated as of January 21, 1999, between the University Court of the University of Edinburgh, and Agritope. 10.28 Commercial Lease with Option to Purchase dated March 25, 1999 between Louis Neve, Lessor, and Vinifera, Inc. Lessee. 10.29 Lease Amendment dated September 8, 1999 between Pacific Realty Associates, L.P., Landlord, and Agritope, Tenant. 10.30 Amended and Restated Unit Purchase Agreement dated September 16, 1999, between Vilmorin Clause & Cie, Purchaser, and Agritope. 10.31 Form of Stock Purchase Agreement among, Agritope, Vinifera and Purchasers dated June 1, 1999. 10.32 First Amendment to Lease of Land and Improvements Located at 4288 Bodega Avenue Dated April 27, 1999 by and between Gianni Neve and Maria Neve, collectively, Landlord and Vinifera, Tenant. 10.33 Vinifera, Inc. 1993 Stock Award Plan dated March 9, 1993.**** 10.34 Revolving Line of Credit Note dated May 15, 1999 to Wells Fargo Bank National Association by Henry Wendt and Vinifera, Inc. 10.35 Addendum to Promissory Note dated May 15, 1999 to Wells Fargo Bank National Association by Henry Wendt and Vinifera, Inc. 10.36 Continuing Security Agreement Rights to Payment and Inventory dated May 15, 1999 to Wells Fargo Bank National Association by Vinifera, Inc. 10.37 Accounts Receivable Purchase Agreement dated May 20, 1999 between Silicon Valley Bank and Agritope, Inc. 21.1 List of Subsidiaries. 23.1 Consent of Arthur Andersen LLP. 23.2 Consent of PricewaterhouseCoopers LLP. 24.1 Power of Attorney for W. Charles Armstrong, Michel de Beaumont, James T. King, and Roger L. Pringle. 24.4 Power of Attorney for Nancy L. Buc. 24.5 Power of Attorney for Pierre LeFebvre. 27 Financial Data Schedule. 99 Certain Factors to Consider in Connection with Forward-Looking Statements. - - ----------------- Other exhibits listed in Item 601 of Regulation S-K are not applicable. * Incorporated by reference to Registrant's Registration Statement on Form S-1 (No. 333-34597). ** Incorporated by reference to Registrant's Annual Report on Form 10-K dated September 30, 1998. *** Incorporated by reference to Registrant's Current Report on Form 8-K/A dated July 20, 1999. Confidential Treatment Requested; the omitted material has been separately filed with the Securities and Exchange Commission. **** Compensatory plans or agreements. EX-10.28 2 COMMERCIAL LEASE WITH OPTION TO PURCHASE COMMERCIAL LEASE WITH OPTION TO PURCHASE AGENCY RELATIONSHIP CONFIRMATION. The following agency relationship is hereby confirmed for this transaction and supersedes any prior agency election: LISTING AGENT: ____________________________ is the agent of (check one): / / THE SELLER EXCLUSIVELY; OR / / BOTH THE BUYER AND THE SELLER. SELLING AGENT: ______________________________ (if not the same as the Listing Agent) is the agent of (check one): / / THE BUYER EXCLUSIVELY, OR / / THE SELLER EXCLUSIVELY; OR / / BOTH THE BUYER AND THE SELLER. NOTE: THIS CONFIRMATION DOES NOT TAKE THE PLACE OF THE AGENCY DISCLOSURE FORM WHICH MAYBE REQUIRED BY LAW. RECEIVED FROM Vinifera. Inc hereinafter referred to as LESSEE. -------------------------------- the sum of $ ( dollars). ----------- ----------------------------------------------- evidenced by as a deposit which will belong to ----------------------------------- Lessor and will be applied as follows:
TOTAL RECEIVED BALANCE DUE PRIOR TO OCCUPANCY Rent for the period from March 15 to March 31 .................$ 6500.00 $ 0 $ ____________ -------- -------- Security deposit (not applicable toward last months rent) ....$ 1300.00 $ 0 $ ____________ Other .........................................................$ $ $ ____________ TOTAL .........................................................$ 19,500.00 $ 0 $ ____________
In the event this Lease is not accepted by the Lessor WITHIN N/A DAYS, the total deposit received will be refunded. Lessee offers to lease from Lessor the premises situated in the City of PETALUMA County of SONOMA, State of CALIFORNIA, 2645 BODEGA AVE , commonly known as "A PORTION OF "SEE ADDENDUM 1, 1 & EXHIBIT A, B, C, D, consisting of approximately 130,000 square feet, upon the following terms and conditions: 1. TERM. The term will commence on APRIL 1, 1999 , and end on MARCH 31 , 2004. 2. RENT. The total rent will be $ 780,000.00 , payable at $ 13, 000.00 per month (based on first year's rates) payable on the 1ST day of each month. All rents will be paid to Lessor or his or her authorized agent, at the following address 2647 BODEGA AVE--LOUIS NEVE--NEVE BROTHERS ROSES. or at such other places as may be designated by Lessor from time to time. In the event rent is not paid within 5 days after due date, Lessee agrees to pay a late charge of $ 650.00 plus interest at 8 % per annum on the delinquent amount. Lessee further agrees to pay $ 150.00 for each dishonored bank check. The late charge period is not a grace period, and Lessor is entitled to make written demand for any rent if not paid when due. 3. USE. The premises are to be used for the operation of GRAPE VINE PRODUCTION AND GRAFTING , and for no other purpose, without prior written consent of Lessor. Lessee will not commit any waste upon the premises, or any nuisance or act, which may disturb the quiet enjoyment of any tenant in the building. 4. USES PROHIBITED. Lessee will not use any portion of the premises for purposes other than those specified. No use will be made or permitted to be made upon the premises, nor acts done, which will increase the existing rate of insurance upon the property, or cause cancellation of insurance policies covering the property. Lessee will not conduct or permit any sale by auction on the premises. 5. ASSIGNMENT AND SUBLETTING. Lessee will not assign this Lease or sublet any portion of the premises without prior written consent of the Lessor, which will not be unreasonably withheld. Any such assignment or subletting without consent will void and, at the option of the Lessor, will terminate this Lease. 6. ORDINANCES AND STATUTES. Lessee will comply with all statutes, ordinances, and requirements of all municipal, state and federal authorities now in force or which may later be in force, regarding the use of the premises. The commencement or pendency of any state or federal court abatement proceeding affecting the use of the premises will, at the option of the Lessor, be deemed a breach of this Lease. 7. MAINTENANCE, REPAIRS, ALTERATIONS. Unless otherwise indicated, Lessee acknowledges that the premises are in good order and repair. Lessee will at his or her own expense, maintain the premises in a good and safe condition, including plate glass electrical wiring, plumbing and heating and air conditioning installations, and any other system or equipment. The premises will be surrendered at termination of the Lease, in as good condition as received, normal wear and tear excepted. Lessee will be responsible for all repairs required, except the following which will be maintained by Lessor: roof, exterior walls, structural foundations (including any retrofitting required by governmental authorities) and: BOILER AND HEATING SYSTEMS Lessee /x/ will, / / will not maintain the property adjacent to the premises, such as sidewalks, driveways, lawns, and shrubbery, which would otherwise be maintained by Lessor. No improvement or alteration of the premises will be made without the prior written consent of the Lessor. Prior to the commencement of any substantial repair, improvement, or alteration, Lessee will give Lessor at least two (2) DAYS WRITTEN NOTICE in order that Lessor may post appropriate notices to avoid any liability for liens. LESSEE [ JB ] [ ] AND LESSOR [ LN ] [ ] HAVE READ THIS PAGE. Property Address 2645 BODEGA AVE. - "A PORTION OF" ----------------------------------------------------------- 8. ENTRY AND INSPECTION. Lessee will permit Lessor or Lessor's agents to enter the premises at reasonable times and upon reasonable notice for the purpose of inspecting the premises, and will permit Lessor, at any time within sixty (60)days prior to the expiration of this Lease, to place upon the premises any usual "For Lease" signs, and permit persons desiring to lease the premises at reasonable times. 9. INTENTIONALLY OMITTED. 10. POSSESSION. If Lessor is unable to deliver possession of the premises at the commencement date set forth above, Lessor will not be liable for any damage caused by the delay, nor will this Lease be void or voidable, but Lessee will not be liable for any rent until possession is delivered. Lessee may terminate this Lease if possession is not delivered within _______ days of the commencement term in Item 1. 11. LESSEE'S INSURANCE. Lessee, at his or her expense, will maintain plate glass, public liability, and property damage insurance insuring Lessee and Lessor with minimum coverage as follows: $500,000.00 - $1,000,000.00. Lessee will provide Lessor with a Certificate of Insurance showing Lessor as additional insured. The policy will require ten (10) days written notice to Lessor prior to cancellation or material change of coverage. 12. LESSOR'S INSURANCE. Lessor will maintain hazard insurance covering one hundred percent (100%) actual cash value of the improvements throughout the Lease term. Lessor's insurance will not insure Lessee's personal property, leasehold improvements, or trade fixtures. 13. SUBROGATION. To the maximum extent permitted by insurance policies which may be owned by the parties, Lessor and Lessee waive any and all rights of subrogation which might otherwise exist. 14. UTILITIES. Lessee agrees that he or she will be responsible for the payment of all utilities, including electricity, heat and other services delivered to the premises, except: His prorated share of gas for Boiler. 15. SIGNS. Lessee will not place, maintain, nor permit any sign or awning on any exterior door, wall, or window of the premises without the express written consent of Lessor, which will not be unreasonably withheld, and of appropriate governmental authorities. 16. ABANDONMENT OF PREMISES. Lessee will not vacate or abandon the premises at any time during the term of this Lease. If Lessee does abandon or vacate the premises, or is dispossessed by process of law, or otherwise, any personal property belonging to Lessee left on the premises will be deemed to be abandoned, at the option of Lessor. 17. CONDEMNATION. If any part of the premises is condemned for public use, and a part remains which is susceptible of occupation by Lessee, this Lease will, as to the part taken, terminate as of the date of condemnor acquires possession. Lessee will be required to pay such proportion of the rent of the remaining term as the value of the premises remaining bears to the total value of the premises the date of condemnation; provided, however, that either party may, at his or her option, terminate this Lease as of the date of condemnor acquires possession. In the event to that the premises are condemned in whole, or the remainder is not susceptible for use by the Lessee, this Lease will terminate upon the date which the condemnor acquires possession. All sums which may be payable on account of any condemnation will belong solely to the Lessor; except that Lessee will be entitled to retain any amount awarded to him or her for his or her trade fixtures and moving expenses. 18. TRADE FIXTURES. Any and all improvements made to the premises during the term will belong to the Lessor, except trade fixtures of the Lessee. Lessee may, upon termination, remove all his or her trade fixtures, but will pay for all costs necessary to repair any damage to the premises occasioned by the removal. 19. DESTRUCTION OF PREMISES. In the event of a partial destruction of the premises during the term, from any cause except acts or omission of Lessee, Lessor will promptly repair the premises, provided that such repairs can be reasonably made WITHIN SIXTY (60) DAYS. Such partial destruction will not terminate this Lease, except that Lessee will be entitled to a proportionate reduction of rent while such repairs are being made, based upon the extent to which making of such repairs interferes with the business of Lessee on the premises. If the repairs cannot be made WITHIN SIXTY (60) DAYS, this Lease may be terminated at the option of either party by giving written notice to the other party WITHIN THE SIXTY (60) DAY PERIOD. 20. HAZARDOUS MATERIALS. Lessee will not use, store, or dispose of any hazardous substances upon the premises, except the use and storage of such substances that are customarily used in Lessee's business, and are in compliance with all environmental laws. Hazardous substances means any hazardous waste, substance or toxic materials regulated under any environmental laws or regulations applicable to the property. Lessee will be responsible for the cost of removal of any toxic contamination caused by lessee's use of the premises. 21. INSOLVENCY. The appointment of a receiver, an assignment for the benefits of creditors, or the filing of a petition in bankruptcy by or against Lessee, will constitute a breach of this Lease by Lessee. 22. DEFAULT. In the event of any breach of this Lease by Lessee, Lessor may, at his or her option, terminate the Lease and recover from Lessee: (a) the wroth at the time of award of the unpaid rent which had been earned at the time of termination; (b) the worth a the time of award of the amount by which the unpaid rent which would have been earned after termination until the time of the award exceeds the amount of such rental loss that the Lessee proves could have been reasonably avoided; (c) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the LESSEE [ JB ] [ ] AND LESSOR [ LN ] [ ] HAVE READ THIS PAGE. Property Address 2645 BODEGA AVE. - "A PORTION OF" ------------------------------------------------------------- time of award exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided; and (d) any other amount necessary to compensate Lessor for all the detriment proximately caused by the Lessee's failure to perform his or her obligations under the Lease or which in the ordinary course of things would be likely to result therefrom. Lessor may, in the alternative, continue this Lease in effect, as long as Lessor does not terminate Lessees' right to possession, and Lessor may enforce all of Lessor's rights and remedies under the Lease, including the right to re over the rent as it becomes due under the Lease. If said breach of Lease continues, Lessor may, at any time thereafter, elect to terminate the Lease. These provisions will not limit any other rights or remedies which Lessor may have. 23. SECURITY. The security deposit will secure the performance of the Lessee's obligations. Lessor may, but will not be obligated to, apply all or portions of the deposit on account of Lessee's obligations. Any balance remaining upon termination will be returned to Lessee. Lessee will not have the right to apply the security deposit In payment of the last month's rent. 24. DEPOSIT REFUNDS. The balance of all deposits will be refunded WITHIN THREE (3) WEEKS (or as otherwise required by law), from date possession is delivered to Lessor or his or her authorized agent, together with a statement showing any charges made against the deposits by Lessor. 25. ATTORNEY FEES. In any action or proceeding involving a dispute between Lessor and Lessee arising out of this Lease, the prevailing party will be entitled to reasonable attorney fees. 26. WAIVER. No failure of Lessor to enforce any term of this Lease will be deemed to be a waiver. 27. NOTICES. Any notice which either party may or is required to give, will be given by mailing the notice, postage prepaid, to Lessee at the premises, or to Lessor at the address shown in Item 2, or at such other places as may be designated in writing by the parties from time to time. Notice will be effective FIVE (5) DAYS AFTER MAILING, or on personal delivery, or when receipt is acknowledged in writing. 28. HOLDING OVER. Any holding over after the expiration of this Lease, with the consent of Owner, will be a month-to-month tenancy at a monthly rent of $ 14,950.00 , payable in advance and otherwise subject to the terms of this Lease, as applicable, until either party will terminate the tenancy by giving the other party THIRTY (30) DAYS WRITTEN NOTICE. 29. TIME. Time is of the essence of this Lease. 30. HEIRS, ASSIGNS, SUCCESSORS. This Lease is binding upon and inures to the benefit of the heirs, assigns, and successors of the parties. 31. INTENTIONALLY OMITTED. 32. INTENTIONALLY OMITTED. 33. OPTION. So long as Lessee is not in default in the performance of any term of this Agreement, Lessee will have the option to purchase the real property for a purchase price of $2,450,000.00 (Two mill. four hund fifty the dollars), upon the following terms and conditions. a. DISCLAIMER. The parties acknowledge that availability of financing and other purchase costs cannot be ascertained with certainty. Therefore, the parties agree that these items will not be conditions of performance of this Agreement. The parties acknowledge that they have not relied upon any representations or warranties by the Broker or Lessor in this regard. b. FIXTURES. All improvements, fixtures, attached floor coverings, draperies including hardware, shades, blinds, window and door screens, storm sash, combination doors, awnings, outdoor plants potted or otherwise, trees, and items permanently attached to the real property are included in the sale, free of liens, unless specifically excluded. c. PERSONAL PROPERTY. The following personal property, on the premises when inspected by Lessee, are included in the purchase price and will be transferred by a Warranty Bill of Sale at close of escrow: ----------------------------------------------------------------------. d. ENCUMBRANCES. In addition to any encumbrances assumed by Lessee, Lessee will take title to the property subject to: [1] real estate taxes not yet due; and [2] covenants, conditions, restrictions, reservations, rights, rights of way and easements of record, if any, which do not materially affect the value or intended use of the property. The amount of any bond or assessment which is a lien will be assumed by Lessee without credit toward the purchase price, except: ----------------------------------------------------------------------. e. EXAMINATION OF TITLE. WITHIN FIFTEEN (15) DAYS AFTER THE EXERCISE OF THIS OPTION, Lessee will examine the title to the property and report in writing any valid objections. Any exceptions to the title which would be disclosed by LESSEE [ JB ] [ LN ] AND LESSOR [ LN ] [ ] HAVE READ THIS PAGE. Property Address 2645 BODEGA AVE. - "A PORTION OF" ------------------------------------------------------------- examination of the records will be deemed to have been accepted unless reported in writing WITHIN THE FIFTEEN (15) DAYS. If Lessee objects to any exceptions to the title, Lessor will use due diligence to remove such exceptions at his or her own expense WITHIN SIXTY (60) DAYS. If such exceptions cannot in good faith be removed WITHIN SIXTY (60) DAYS, Lessee may terminate the Agreement unless he or she elects to purchase the property subject to the exceptions. f. EVIDENCE OF TITLE. Evidence of title will be in the form of /X/ a policy of title insurance, / / other to be paid for by BUYER. g. CLOSING COSTS. Escrow fees and other closing costs will be paid in accordance with local custom, except as otherwise provided in this Agreement. h. CLOSE OF ESCROW. WITHIN 90 DAYS AFTER EXERCISE OF THE OPTION, or upon removal of any exceptions to the title by the Lessor, as provided above, whichever is later, both parties will deposit with an authorized escrow holder, to be selected by the Lessee, all funds and instruments necessary to complete the sale in accordance with the terms and conditions of this Agreement. The representations and warranties contained in this Agreement will survive close of escrow. i. PRORATIONS. Rents and taxes will be prorated as of recordation of deed. Security deposits, advance rentals, or considerations involving future lease credits will be credited to Lessee. j. EXPIRATION OF OPTION. This Option may be exercised at any time after MARCH 31, 2004, 19 ___, and will expire at midnight MARCH 31, 2005, 19___. Upon expiration Lessor will be released from any obligation to sell the property to Lessee. If requested, Lessee will execute a quit claim deed to evidence the termination of the Option. k. EXERCISE OF OPTION. The Option will be exercised by mailing or delivering written notice to the Lessor and by an additional payment, on account of the purchase price, in the amount of $ 25,000.00 (Twenty Five THOUSAND AND 00/100 ----------------- DOLLARS) for account of Lessor to the authorized escrow holder referred to above, prior to the expiration date of the Option. Notice. If mailed, the exercise option will be by certified mail, postage prepaid, to the Lessor at the address set forth in Item 2, and will be deemed to have been given on the day following deposit in the U.S. Mail. In the event the Option is exercised, the consideration paid for the Option and 0 % of the rent paid by Lessee prior to the exercise of the Option will be credited toward the purchase price. THE UNDERSIGNED LESSEE HEREBY ACKNOWLEDGES THAT HE OR SHE HAS THOROUGHLY READ AND APPROVED EACH OF THE PROVISIONS CONTAINED IN THIS OFFER, AND AGREES TO THE TERMS AND CONDITIONS SPECIFIED. Lessee /s/ J. Bouchaert Date 3/25/99 Lessee Date ----------------------------- ------------- ------ --- Joseph Bouckaert, President Receipt for deposit acknowledged by Date ---------------------------------- --- ACCEPTANCE THE UNDERSIGNED LESSOR ACCEPTS THE FOREGOING OFFER AND GRANTS THE OPTION TO PURCHASE SET FORTH ABOVE. NOTICE: THE AMOUNT OR RATE OF REAL ESTATE COMMISSIONS IS NOT FIXED BY LAW. THEY ARE SET BY EACH BROKER INDIVIDUALLY AND MAY BE NEGOTIABLE BETWEEN THE SELLER AND BROKER. 34. COMMISSION. Upon execution, the Lessor agrees to pay to __________________, the Broker in this transaction, ______% of the option consideration for securing the Option plus the sum of $ ___________ (________________________________________________ dollars) for leasing services rendered and authorizes Broker to deduct this sum from the deposit received from Lessee. In the event the Option is exercised, the Lessor agrees to pay Broker the additional sum of $ _____________________ (_____________________________________________ dollars) from sale proceeds at close of escrow. This Agreement will not limit the rights of Broker provided for in any listing or other agreement which may be in effect between Lessor and Broker. In any action for commission the prevailing party will be entitled to reasonable attorney fees, whether or not the action proceeds to trial or final judgment. Lessor acknowledges that he or she has read and understands the provisions of this Agreement, agrees to the terms and conditions specified, and acknowledges receipt of a copy. Lessor /s/ Louis Neve Date 3/25/99 ------------------------------------------- --------------------- Louis Neve Lessor ___________________________________________ Date _____________________ THE LESSEE HEREBY ACKNOWLEDGES RECEIPT OF A COPY OF THE ACCEPTED AGREEMENT ON (DATE) ___________. [____][____] (INITIALS). ADDENDUM NO. 1 To Agreement dated MARCH 18, 1999 between Vinifera, And LOUIS NEVE, concerning property located at 2645 BODEGA AVENUE "A PORTION OF" PETALUMA, CA 94952 The parties agree as follows: 1.) April 1, 2004 - The lessee shall have the right to extend his lease to March 31, 2009, for $14,950.00 per month with all other Terms and Conditions remaining the same. 2.) April 1, 2009 - The lessee shall have the right to extend his lease to March 31, 2014, for $17,190.000 per month with all other Terms and Conditions remaining the same. 3.) $45,000 .00 shall be due and payable not later than May 31, 1999. These monies are the Aggregate funds payable in Rent and Deposits for the period March 15, 1999 - May 31, 1999. ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ ________________________________________________________________________________ This Addendum, upon its execution by both parties, is made a part of the above Agreement. Lessor /s/ Louis Neve Date 3/25/99 ------------------------------------------- ---------------------- Louis Neve Seller/Lessor Date ------------------------------------ ---------------------- Buyer/Lessee /s/ J. Bouckaert Date 3/25/99 ------------------------------------ ----------------------- J. Bouckaert, President Buyer/Lessee Date ------------------------------------- ---------------------- DESCRIPTION FIRST TRACT: BEGINNING IN THE CENTER OF A CREEK, AT A POINT IN THE DIVIDING LINE BETWEEN THE LANDS OF HENRY HASPER AND THE LANDS NOW OR FORMERLY OF ALKIRE, WHICH POINT OF BEGINNING IS NORTH 89o 30' EAST, 10.79 CHAINS FROM THE SOUTHWESTERLY CORNER OF THE LANDS OF HASPER, WHICH SAID CORNER IS THE DIVIDING LINE BETWEEN THE LANDS OF HASPER AND ALBERTS; RUNNING THENCE FROM SAID POINT OF BEGINNING, SOUTH 89o 30' WEST, 10.79 CHAINS TO THE DIVIDING LINE BETWEEN THE LANDS OF ALBERTS AND THE LANDS OF HASPER; THENCE NORTH 30o WEST, 4.10 CHAINS; THENCE NORTH 89o 45' WEST, 0.33 CHAINS; THENCE NORTH 9o 15; WEST, 1.82 CHAINS; THENCE NORTH 62o 30' EAST, 11.47 CHAINS TO THE CENTER OF A CREEK; THENCE SOUTHERLY FOLLOWING THE MEANDERINGS OF SAID CREEK, TO THE POINT OF BEGINNING. APN 021-010-001 SECOND TRACT: FIRST PARCEL: BEGINNING AT THE SOUTHEAST CORNER OF THE PROPERTY SITUATED ON THE SOUTH SIDE OF THE PETALUMA AND BLOOMFIELD ROAD, KNOWN AS THE LIBERTY RACE TRACT PROPERTY; AND FROM THENCE NORTH 44o 40' WEST, 32.10 CHAINS; THENCE NORTH 46o 40' WEST, 10.21 CHAINS; THENCE NORTH 57o WEST, 1.88 CHAINS; THENCE SOUTH 1o 00' WEST, 7.85 CHAINS; THENCE SOUTH 37o 30' WEST, 1.68 CHAINS; THENCE SOUTH 19o WEST, 1.38 CHAINS; THENCE SOUTH 3o 30' WEST, 1.43 CHAINS; THENCE SOUTH 6o 30' EAST, 2 CHAINS; THENCE SOUTH 8o 30' EAST, 6.79 CHAINS; THENCE SOUTH 88o 30' EAST, 0.32 CHAINS; THENCE SOUTH 11.30 CHAINS; THENCE EAST, 29.32 CHAINS; FROM THENCE NORTH 1o 15' EAST, 1.33 CHAINS TO THE PLACE OF BEGINNING. BEING THE SAME LANDS AS WERE CONVEYED TO JAMES LOUGHNANE BY VINCENT LIBERTY BY DEED DATED SEPTEMBER 12, 1871 AND RECORDED IN BOOK 35 OF DEEDS, PAGE 154, SONOMA COUNTY RECORDS. APN 021-010-002 EXCEPTING THEREFROM THE LAND HERETOFORE CONVEYED BY SAID JAMES LOUGHNANE TO JOHN R. DAVIS, BY DEED DATED SEPTEMBER 20, 1871, AND RECORDED IN BOOK 35 OF DEEDS, PAGE 177, SONOMA COUNTY RECORDS. ALSO EXCEPTING THEREFROM THE LAND DESCRIBED IN A DEED FROM SAID JAMES LOUGHNANE AND WIFE, TO WILLIAM SEXTON, DATED MAY 17, 1873 AND RECORDED IN BOOK 41 OF DEEDS, PAGE 342, SONOMA COUNTY RECORDS. EACH TRACT OF LAND COVERED BY SAID TWO EXCEPTIONS CONSISTING OF 12 ACRES EACH, MORE OR LESS, AND BEING EACH ON THE SOUTHERLY SIDE OF SAID PETALUMA AND BLOOMFIELD ROAD AND BEING THE SOUTHERLY PART OF THE FIRST PARCEL HEREIN DESCRIBED. ALSO EXCEPTING THEREFROM THE FOLLOWING DESCRIBED PORTION THEREOF: BEGINNING IN THE CENTER OF A CREEK AT A POINT IN THE DIVIDING LINE BETWEEN THE LANDS OF HENRY HASPER AND THE LANDS NOW OR FORMERLY OF ALKIRE, WHICH POINT OF BEGINNING IS NORTH 89o 30' EAST, 10.79 CHAINS FROM THE SOUTHWESTERLY CORNER OF THE LANDS OF HASPER, WHICH SAID CORNER IS IN THE DIVIDING LINE BETWEEN THE LANDS OF HASPER AND ALBERTS; RUNNING THENCE FROM SAID POINT OF BEGINNING, SOUTH 89o 30' /s/JB /s/LN WEST, 10.79 CHAINS TO THE DIVIDING LINE BETWEEN THE LANDS OF ALBERTS AND THE LANDS OF HASPER; THENCE NORTH 30o WEST, 4.10 CHAINS; THENCE NORTH 89o 45' WEST, 0.33 CHAINS; THENCE NORTH 9o 15' WEST, 1.82 CHAINS; THENCE NORTH 62o 30' EAST, 11.47 CHAINS TO THE CENTER OF A CREEK; THENCE SOUTHERLY FOLLOWING THE MEANDERINGS OF SAID CREEK TO THE POINT OF BEGINNING. SECOND PARCEL: A RIGHT OF WAY OF A UNIFORM WIDTH OF 10 FEET DESCRIBED AS FOLLOWS: BEGINNING AT A POINT ON THE NORTHERLY LINE OF THE ABOVE DESCRIBED LAND, WHICH POINT OF BEGINNING IS 53 FEET SOUTHWESTERLY FROM TAE WESTERLY END OF A BRIDGE ACROSS THE CREEK ABOVE MENTIONED; THENCE NORTHEASTERLY 53 FEET TO SAID BRIDGE; THENCE NORTHEASTERLY 311 FEET TO THE COUNTY ROAD LEADING FROM PETALUMA TO BLOOMFIELD, ALSO EXCEPTING THEREFROM THE FOLLOWING DESCRIBED PORTION THEREOF: BEING A PORTION OF THE HENRY HASPER RANCH, SO-CALLED, AND WHICH SAID PORTION HEREBY CONVEYED IS DESCRIBED AS FOLLOWS: COMMENCING AT A 6 INCH BY 6 INCH POST IN A GATEWAY ON THE SOUTH SIDE OF THE PETALUMA AND BLOOMFIELD ROAD, WHICH POST IS 35.10 CHAINS NORTHWESTERLY FROM THE SOUTHEAST CORNER OF THE PROPERTY KNOWN AS THE LIBERTY RACE TRACT; THENCE ALONG A FENCE SOUTH 59o 45' WEST, 9.17 CHAINS TO A STAKE; THENCE ALONG A FENCE AND THE LANDS OF THE HEIRS OF LEWIS VESTAL, DECEASED, NORTH 18o 45' EAST, 1.06 CHAINS; NORTH 33o 45' EAST, 0.92 CHAINS; NORTH 41o 30' EAST, 0.61 CHAINS; AND NORTH 0o 15' EAST, 8.42 CHAINS TO THE CENTERLINE OF THE 46o 45' EAST, 7.21 CHAINS TO A POINT IN LINE WHICH WITH THE POST AND FENCE FIRST MENTIONED; THENCE SOUTH 59o 45' WEST, 0.49 CHAINS TO THE POINT OF BEGINNING. BEARINGS TRUE. BEING THE NORTHWESTERLY CORNER OF THE TRIANGULAR PIECE OF LAND CONVEYED TO JAMES LOUGHNANE BY VINCENT LIBERTY BY DEED DATED SEPTEMBER 12, 1871, AND RECORDED IN BOOK 35 OF DEEDS, PAGE 154, SONOMA COUNTY RECORDS. BEING THE SAME PROPERTY CONVEYED BY DEED DATED OCTOBER 21, 1913, BY HENRY HASPER TO EDWARD LAWRENCE AND MARY LAWRENCE, HIS WIFE, AND RECORDED OCTOBER 22, 1913, IN BOOK 316 OF DEEDS, PAGE 166, SONOMA COUNTY RECORDS, WHICH DEED IS HEREBY REFERRED TO AND MADE A PART HEREOF. ALSO EXCEPTING THEREFROM THE FOLLOWING DESCRIBED PORTION THEREOF. BEING A PORTION OF THE PROPERTY SITUATED ON THE SOUTH SIDE OF THE PETALUMA AND BLOOMFIELD ROAD, KNOWN AS THE LIBERTY RACE TRACT PROPERTY, DEEDED TO WILLIAM HASPER AND HENRY HASPER, BY DEED DATED DECEMBER 1, 1903 AND RECORDED IN BOOK 208 OF DEEDS, PAGE 210, SONOMA COUNTY RECORDS, BEING MORE PARTICULARLY DESCRIBED AS FOLLOWS: BEGINNING AT THE SOUTHEAST CORNER OF THE ABOVE MENTIONED TRACT; THENCE ALONG THE NORTHERLY LINE OF THE A.B. SILVA TRACT, SOUTH 20o 38' WEST, 467.30 FEET; THENCE SOUTH 89o 13 WEST, 174.45 FEET; THENCE NORTH 20o 38' EAST, 605.00 FEET TO A POINT IN THE CENTER OF THE PETALUMA AND BLOOMFIELD ROAD; THENCE SOUTH 44o 52' EAST, 178.47 FEET TO THE POINT OF BEGINNING. /s/JB /s/LN RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: HAAS & NAJARIAN 58 Maiden Lane, Second Floor San Francisco, CA 94108 Attention: Robert C. Nicholas MAIL TAX STATENMENTS TO: Vinifera, Inc. 4288 Bodega Avenue Petaluma, CA 94952 - -------------------------------------------------------------------------------- SPACE ABOVE THIS LINE RESERVED FOR RECORDER'S USE MEMORANDUM OF OPTION TO PURCHASE This Memorandum of Option ("Memorandum') is made as of March 25, 1999, by and between Louis Neve ("Optionor") and Vinifera, Inc., a California corporation ("Optionee'). 1. Optionor hereby grants to Optionee an option to purchase (the "Option) all of that certain real property commonly known as 2645 Bodega Avenue, Petaluma, California 94952 (the "Property"), as depicted in EXHIBIT "A" attached hereto and incorporated herein. Said Property consists of approximately two hundred thousand (200,000) square feet of greenhouse space plus approximately nine (9) acres of land. 2. The specific terms and conditions of Optionee's Option are set forth in the Commercial Lease With Option to Purchase (the "Agreement") dated March 25, 1999. All of the terms and conditions of The Agreement are incorporated herein by this reference. 3. The term of the Option expires at midnight on March 31, 2005. 4. Any party who is interested in acquiring an interest in the Property should contact the Optionor and Optionee. Optionor's address is: For Louis Neve: 410 Petaluma Blvd. So. c/o Aldo Baccala Suite D P.O. Box 259 Petaluma, CA 94953 1 Optionee's address is: Vinifera, Inc., 4288 Bodega Avenue, Petaluma, CA 94952. IN WITNESS WHEREOF, the parties hereto have executed this Memorandum as of the date first above written. OPTIONOR: OPTIONEE: VINIFERA, INC., A CALIFORNIA CORPORATION /s/ Louis Neve ------------------------ LOUIS NEVE By: /s/ J. Bouckaert ------------------------------------- Joseph Bouckaert, President Its: ------------------------------------- By: /s/ J. Bouckaert ------------------------------------- Joseph Bouckaert, Secretary Its: ------------------------------------ /s/JB /s/LN 2 STATE OF CALIFORNIA ) ) ss COUNTY OF SONOMA ) On this 28TH day of APRIL, 1999, before me, a Notary Public, State of California, duly commissioned and sworn, personally appeared: JOSEPH A. BOUCKAERT known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument, and acknowledged that he/she executed the same. Official Seal: /s/ Dee A. J. Hernlund --------------------------------------------- Notary Public My Commission Expires: March 28, 2003 ----------------------- DEE A. J. HERNLUND Comm. # 1214328 NOTARY PUBLIC -CALIFORNIA Sonoma County My Comm. Expires Mar. 28,2003 3 /s/JB /s/LN ADDENDUM NO. 2 TO COMMERCIAL LEASE WITH OPTION TO PURCHACE ------------------------------------------- This Addendum No. 2 to Commercial Lease with Potion to Purchase (this "Addendurn") is made and entered into as of March 25, 1999, by and between LOUIS NEVE ("Lessor) and VINIFERA, INC., a California corporation ("Lessee"). 1. The following language is added following the word "Lessor" in the second line of Paragraph 3 of the Commercial Lease with Option to Purchase ("'Lease"): "which consent shall not be unreasonably withheld". 2. ORDINANCES AND STATUTES. Lessor warrants and represents that the premises currently comply with all statutes, ordinances and requirements of all municipal, state and federal authorities now in force. Lessor agrees to defend, indemnify and hold Lessee harmless from and against all claims, demands, causes of action, liabilities, damages, costs and expenses (including reasonable attorneys' fees, court costs, and expert witness and consultant fees) relating to or arising from Lessor's breach of this warranty and representation. Lessee shall comply with all statutes, ordinances and requirements of all. municipal, state and federal authorities which may later apply to the premises following the date of the Lease relating to or arising from Lessee's particular use of the premises. If such law compliance, however, does not relate to or apply because of Lessee's particular us of the premises but generally applies to all such buildings without regard to Lessee's particular use, Lessor, at Lessor's sole cost and expense, shall comply with such requirements." 3. The term "and Acts of God" is inserted following the words "normal wear and tear" in the fourth line of Paragraph 7 of the Lease. Notwithstanding the language contained in Paragraph 7 of the Lease, Lessee shall have no obligation to maintain, repair of alter any part of the premises damaged by an act or omission on the part of Lessor or Lessor's employees, agents, contractors, agents and invitees. The obligation of Lessee to maintain and repair the electrical wiring, plumbing and heating and air-conditioning installations is limited to the equipment and wiring actually situated in the premised leased by Lessor to Lessee. Such obligation of Lessee shall not extend to nor include any electrical wiring, plumbing and heating and air-conditioning installations located outside of the premises but which service the premises. 4. INDEMNIFICATION OF LESSOR. Lessor will not be liable for any damage or injury to Lessee, or to any other person, or to any property, occurring on the premises, except for any such damage or injury relating to or arising from Lessor's acts or omissions. Lessee agrees to hold Lessor harmless from any claims for damages arising out of Lessee's use of the premises, and to indemnify Lessor for any expense incurred by Lessee in defending any such claims, except for those claims resulting from the acts or omissions of the Lessor or of Lessor's employees, agents, contractors, agents and invitees. 5. Not withstanding anything to the contrary in Paragraph 18, only those improvements listed in Exhibit "B" attached hereto shall belong to Lessor upon the expiration or earlier termination of the Lease. 6. Lessor agrees to defend, indemnify, and hold Lessee harmless from and against any and all claims, demands, causes of action, liabilities, damages, costs and expenses (including reasonable attorneys' fees, court costs and expert witness and consultant fees), relating to or, arising from any breach by Lessor or failure to comply with any and all city, county, state and federal environmental laws or other laws relating to the storage, control or handling of hazardous materials. /s/JB /s/LN 7. The Option to Purchase, contained in Paragraph 3 relates to the entire property described in Exhibit "C" attached hereto. In the event Lessee exercises the Option, said property shall be sold unencumbered by any leases now or hereafter entered into by Lessor and third parties. Notwithstanding anything to the contrary contained in Paragraph 33j, Lessee may exercise the Option to Purchase at any time after March 31, 2002, but said Option to Purchase shall expire March 31, 2005. Landlord and Tenant agree to execute the Memorandum of Option attached hereto as Exhibit "D" and to record same in the Official Records of the County of Sonoma. IN WITNESS WHEREOF, this Addendum No. 2 has been executed as of the day and year first written above. LESSOR: LESSEE: By: /s/ Louis Neve VINIFERA, INC., a California corporation ---------------------------- LOUIS NEVE By: /s/ Joseph Bouckaert ----------------------------------- Its: President ----------------------------------- By: /s/ Joseph Bouckaert ----------------------------------- Its: J. Bouckaert, Secretary ----------------------------------- /s/JB /s/LN EXHIBIT A "A PORTION OF" PARCEL APN 021-010-001 County Assessor's Parcel Map EXHIBIT B IMPROVEMENTS ------------ 1. All heating systems, and ventilation systems. 2. 12 Green Houses 3. Well and Pumping system EXHIBIT "C" OPTION PROPERTY ENTIRE PARCEL APN 021-010-001 County Assessor's Parcel Map EX-10.29 3 LEASE AMENDMENT LEASE AMENDMENT DATED: September 8, 1999 BETWEEN: PACIFIC REALTY ASSOCIATES, L.P., LANDLORD a Delaware limited partnership AND: AGRITOPE, INC., an Oregon corporation TENANT Pacific Realty Associates, L.P., a Delaware limited partnership, as Landlord, and American Show Management, Inc. ("Original Tenant"), entered into a written lease dated October 4, 1995, consisting of approximately 11,059 square feet of office and warehouse space located in Building C, PacTrust Business Center, 16160 S.W. Upper Boones Ferry Road, Portland, Oregon 97224 (hereinafter referred to as "the Premises"). By Lease Amendment dated June 3, 1996, the Lease was amended. By Assignment and Modification of Lease, dated November 7, 1997, Original Tenant assigned the Lease to Agritope, Inc.. Such documents are hereinafter jointly referred to as "the Lease." The Lease expires February 28, 2003. Tenant now wishes to lease an additional approximately 6,801 square feet of office and warehouse space adjacent to and immediately north of the Premises (hereinafter referred to as the "First Additional Space") and as further described on the attached Exhibits A, B-1, B-2, B-3 and C. NOW, THEREFORE, the parties agree as follows: 1. The First Additional Space shall become subject to the terms of the Lease upon occupancy by Tenant, which is estimated to be October 1, 1999. Tenant's total leased area shall increase from approximately 11,059 to 17,860 total square feet of office and warehouse space. 2. Base rent shall be according to the following schedule:
First Base Rent Period Premises Additional Per Month Space October 1, 1999 through May 31, 2001 $10,285.00 $6,325.00 $16,610.00 June 1, 2001 through February 28, 2003 $11,210.00 $6,894.00 $18,104.00
3. Landlord shall construct improvements generally as shown on attached Exhibit B and as further described in a work letter attached as Exhibit C. Upon execution of this Lease Amendment, the attached floor plan (Exhibit B) and work letter (Exhibit C) shall be deemed approved by Landlord and Tenant. 4. Upon completion of Tenant Improvements, Tenant shall reimburse Landlord $29,413.00 for its share of construction costs. The total cost of the work is $63,418.00. 5. Should the cost of such tenant improvements, adjusted by any increases in cost initiated by Landlord and Tenant approved change orders, exceed the Allowance, Tenant shall pay Landlord the amount by which this cost exceeds the Allowance upon occupancy of the First Additional Space. 6. If not then in default, Tenant and only Tenant, shall have the first option to renew this Lease for an additional sixty (60) months immediately following expiration of the extended lease term by giving Landlord 180 days' advance written notice of its intent to extend. All provisions of this Lease shall apply during the extended term, except that rent for the renewal period shall be an amount determined on a fair market value basis and agreed upon by parties at least 90 days prior to commencement of the renewal period, but in no case less than that of the preceding term. In no event shall Landlord grant any third party the option to extend the term of this Lease. N-AGRITOPE, INC..DOC / SKB PBC-C 9/8/99 193-04 Page 2 of 2 Portland, OR 7. Except as expressly modified hereby, all terms of the Lease shall remain in full force and effect and shall continue through the extended term. IN WITNESS WHEREOF, the parties have executed this agreement as of the day and year first written above. LANDLORD: PACIFIC REALTY ASSOCIATES, L.P., a Delaware limited partnership By: PacTrust Realty, Inc., a Delaware corporation, its General Partner Date: September 9, 1999 By: /s/ Sam K. Briggs -------------------------------------------- Sam K. Briggs Vice President TENANT: AGRITOPE, INC., an Oregon corporation Date: September 8, 1999 By: /s/ Gilbert N. Miller -------------------------------------------- Name: Gilbert N. Miller Title: Executive Vice President, CFO Address for Legal Notices/Invoices to Assignee: ----------------------------------------------- ----------------------------------------------- ----------------------------------------------- (Note: Unless a different address is indicated above, notices to Assignee will be addressed to the Premises.) Assignee Employer Identification Number: ----------------------------------------------- N-AGRITOPE, INC..DOC / SKB PBC-C 9/8/99 193-04 Page 2 of 2 Portland, OR EX-10.30 4 AMENDED AND RESTATED UNIT PURCHASE AGREEMENT AMENDED AND RESTATED UNIT PURCHASE AGREEMENT Between AGRITOPE, INC. ("Agritope") VILMORIN CLAUSE & CIE ("Purchaser") 16160 SW Upper Boones Ferry Rd. Rue Limagrain Portland, Oregon 97224 B.P. 1 Fax: (503) 670-7703 63720 Chappes France Fax (33) 473 63 40 04 Purchaser agrees to purchase, and Agritope agrees to sell, units (the "Units"), each Unit consisting of four (4) shares of Series A Preferred Stock, $.01 par value per share, of Agritope and one five-year warrant to purchase one (1) share of such Series A Preferred Stock at an exercise price of U.S. $7.00 per share, on the terms and conditions stated in this Unit Purchase Agreement: 1. NUMBER OF UNITS: 125,000 2. TOTAL PURCHASE PRICE AT U.S.$20.00 PER UNIT: U.S. $2,500,000 3. DOMICILE OF PURCHASER: France (Country of organization, if a corporation or other entity; country of residence, if an individual.) 4. WAIVER OF PREEMPTIVE RIGHTS: Subsequent to its purchase of Units hereunder, Purchaser intends to sell 37,500 of such Units to Hazera Quality Seeds Ltd., an Israeli corporation ("Hazera"). Purchaser, as the current holder of all issued shares of Series A Preferred Stock, hereby waives any and all preemptive rights to the extent the same may be applicable (including those described in Section 7 of the Certificate of Designation, Preferences and Rights of the Series A Preferred Stock of Agritope, Inc.) with respect to such sales to Hazera, and hereby consents to such sale. [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] 5. EXHIBITS. The following exhibits are part of this Unit Purchase Agreement: Exhibit A: General Terms Exhibit B: Certain Definitions under Regulation S Exhibit C: Rights to Acquire Shares Exhibit D: Certificate of Designation Exhibit E: Form of Warrant 6. THIRD PARTY BENEFICIARY: Agritope and Purchaser specifically intend that Hazera shall benefit from and have the right to enforce the registration rights provided in Article V of Exhibit A to this Unit Purchase Agreement. Dated: September 16, 1999 AGRITOPE, INC. VILMORIN CLAUSE & CIE (Agritope) (Purchaser) By /s/ Adolph J. Ferro By /s/ Pierre Lefebvre ----------------------------- ----------------------------------- Adolph J. Ferro Pierre Lefebvre Chief Executive Officer President and Chief Executive Officer [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] EXHIBIT A UNIT PURCHASE AGREEMENT GENERAL TERMS NEITHER THE SHARES OF SERIES A PREFERRED STOCK NOR THE WARRANTS BEING SOLD PURSUANT TO THIS AGREEMENT NOR THE UNITS THEREOF, NOR THE SHARES OF SERIES A PREFERRED STOCK OR COMMON STOCK ISSUABLE UPON EXERCISE OF SUCH WARRANTS OR UPON CONVERSION OF THE SERIES A PREFERRED STOCK HAVE BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED ("1933 ACT"). SUCH SHARES, WARRANTS, AND UNITS MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, OR OTHERWISE DISPOSED OF, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OR TO A U.S. PERSON, AS SUCH TERMS ARE DEFINED IN REGULATION S UNDER THE 1933 ACT ("REGULATION S"), UNLESS (i) THE TRANSACTION IS REGISTERED UNDER THE 1933 ACT AND ANY APPLICABLE SECURITIES LAWS OF ANY STATE, TERRITORY OR POSSESSION OF THE UNITED STATES OR THE DISTRICT OF COLUMBIA ("STATE ACT"), OR (ii) AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT AND ANY APPLICABLE STATE ACT IS AVAILABLE AND THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL TO SUCH EFFECT REASONABLY SATISFACTORY TO IT. [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] TABLE OF CONTENTS ARTICLE I. PURCHASE AND SALE OF UNITS ........................... 1 1.1 Sale of Units ........................................ 1 1.2 Payment and Delivery ................................. 1 ARTICLE II. CLOSING .............................................. 2 2.1. Closing .............................................. 2 2.2 Actions at Closing ................................... 2 ARTICLE III. RESTRICTIONS ON TRANSFER ............................. 2 3.1 General .............................................. 2 3.2 Certificate Legends .................................. 3 ARTICLE IV. INVESTMENT MATTERS ................................... 3 4.1 Investment Representations ........................... 3 4.2 Certain Restrictions ................................. 4 4.3 Disclosure Documents ................................. 4 ARTICLE V. REGISTRATION RIGHTS .................................. 5 5.1 Definitions .......................................... 5 5.2 Requested Registration ............................... 5 5.3 Registration Procedure ............................... 5 5.4 Deferral for Material Events ......................... 6 5.5 Furnish Information; Expenses ........................ 6 5.6 Expenses of Registration ............................. 6 5.7 Indemnification ...................................... 7 ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF AGRITOPE ........... 9 6.1 Organization, Etc. ................................... 9 6.2 Authority ............................................ 9 6.3 Capitalization ....................................... 9 6.4 Valid Issuance; Title ................................ 9 6.5 Disclosure Documents ................................. 10 6.6 Tax Matters .......................................... 10 6.7 Assets Needed for Business ........................... 10 6.8 Litigation and Other Contingent Liabilities .......... 10 6.9 Absence of Certain Adverse Effects ................... 10 6.10 No Brokers ........................................... 10 6.11 Disclosure ........................................... 10 [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -i- ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF PURCHASER .......... 11 7.1 Corporate Existence; Execution and Performance of Agreement ............................................ 11 7.2 Binding Obligations; Due Authorization ............... 11 7.3 No Brokers ........................................... 11 7.4 Litigation ........................................... 11 7.5 Disclosure ........................................... 11 7.6 Access ............................................... 11 ARTICLE VIII. CONDITIONS ........................................... 12 8.1 Conditions Precedent to Obligations of Purchaser ..... 12 8.2 Conditions Precedent to Obligations of Agritope ...... 13 ARTICLE IX. OTHER MATTERS ........................................ 13 9.1 Notices .............................................. 13 9.2 Amendments and Waiver ................................ 14 9.3 Expenses ............................................. 14 9.4 Headings ............................................. 14 9.5 Counterparts ......................................... 14 9.6 Parties in Interest; Assignment ...................... 14 9.7 Entire Agreement ..................................... 14 9.8 Severability ......................................... 14 9.9 Attorney Fees ........................................ 15 9.10 Survival ............................................. 15 9.11 Form of Public Disclosures ........................... 15 9.12 Cumulative Rights and Remedies ....................... 15 9.13 No Third-Party Beneficiaries ......................... 15 9.14 Dispute Resolution ................................... 15 9.15 Governing Law ........................................ 16 [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -ii- UNIT PURCHASE AGREEMENT GENERAL TERMS RECITALS A. Agritope is a publicly-traded corporation with authorized capital of 30,000,000 shares of common stock ("Common Stock") and 10,000,000 shares of preferred stock subject to designation by Agritope's Board of Directors pursuant to Agritope's certificate of incorporation. The Board of Directors has designated a series of preferred stock having 1,000,000 authorized shares pursuant to the Certificate of Designation in the form set forth in Exhibit D to this Unit Purchase Agreement (the "Series A Preferred Stock"). B. Purchaser wishes to invest in Agritope (or, if Purchaser already owns shares in Agritope, to increase such investment) by purchasing Units (the "Unit(s)"), each consisting of four (4) shares of Series A Preferred Stock (the "Purchased Shares") and a Warrant to purchase one (1) share of Series A Preferred Stock (the "Warrant(s)"). The number of Units to be purchased hereunder is provided in the cover page of the Unit Purchase Agreement of which these General Terms are a part. Purchaser intends to hold the Series A Preferred Stock purchased hereunder or issuable upon exercise of the Warrants (the "Warrant Shares") (collectively the Purchased Shares and the Warrant Shares are referred to herein as the "Preferred Shares"), and the shares of Common Stock issuable upon conversion of the Preferred Shares, for investment. AGREEMENT The parties agree as follows: ARTICLE I. PURCHASE AND SALE OF UNITS 1.1 SALE OF UNITS Upon the terms and conditions of this Agreement, Agritope shall issue and sell the Units to Purchaser and Purchaser shall purchase the Units from Agritope for the total purchase price listed on the cover page (the "Purchase Price"). 1.2 PAYMENT AND DELIVERY On the Closing date, Purchaser shall pay the Purchase Price by wire transfer in United States dollars to Agritope. At Closing, Agritope shall deliver to the Purchaser stock certificates representing the Purchased Shares and a Warrant in the form of Exhibit E to this Unit Purchase Agreement, covering a number of Warrant Shares equal to the number of Units purchased hereunder by the Purchaser and providing for an Expiration Date (as defined therein) on the fifth anniversary of the Closing date (the "Purchaser's Warrant"). [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -1- ARTICLE II. CLOSING 2.1. CLOSING The sale of the Units shall be consummated at a closing (the "Closing") on or before the third business day after Agritope notifies Purchaser that Agritope is prepared to close such sale, subject to the satisfaction of the conditions stated in Article VIII below which are to be satisfied at or before Closing. 2.2 ACTIONS AT CLOSING At the Closing: (a) The Purchaser shall pay Agritope the Purchase Price by wire transfer in United States dollars. (b) Agritope shall deliver to Purchaser stoc certificates representing the Purchased Shares. (c) Agritope shall deliver to Purchaser the Purchaser's Warrant. (d) Agritope shall deliver to Purchaser an opinion of Agritope's counsel as described in Section 8.1(e) below. (e) The parties shall take all other actions that they deem necessary or desirable to consummate the purchase and sale of the Units hereunder. ARTICLE III. RESTRICTIONS ON TRANSFER 3.1 GENERAL (a) PURCHASER SHALL NOT SELL, OFFER TO SELL, PLEDGE, OR OTHERWISE TRANSFER ANY PREFERRED SHARES OR ANY SHARES OF AGRITOPE COMMON STOCK ISSUED UPON CONVERSION OF THE PREFERRED SHARES (THE "CONVERSION SHARES") TO ANY OTHER PERSON EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S AS IN EFFECT ON THE DATE OF TRANSFER, PURSUANT TO REGISTRATION UNDER THE 1933 ACT, OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION. AGRITOPE SHALL REFUSE TO REGISTER ON ITS BOOKS ANY PURPORTED TRANSFER MADE IN VIOLATION OF THIS SECTION 3.1, AND ANY SUCH PURPORTED TRANSFER SHALL BE VOID. (b) PURCHASER SHALL NOT ENGAGE IN ANY HEDGING TRANSACTIONS INVOLVING THE PREFERRED SHARES OR THE CONVERSION SHARES UNLESS IN COMPLIANCE WITH THE 1933 ACT. (c) NEITHER THE PREFERRED SHARES, THE CONVERSION SHARES, NOR PURCHASER'S WARRANT HAVE BEEN REGISTERED UNDER [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -2- THE 1933 ACT. THE PREFERRED SHARES, CONVERSION SHARES AND PURCHASER'S WARRANT MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, IN THE UNITED STATES OR TO A U.S. PERSON (AS SUCH TERMS ARE DEFINED IN REGULATION S UNDER THE 1933 ACT), UNLESS (i) THE TRANSACTION IS REGISTERED UNDER THE 1933 ACT AND ANY APPLICABLE STATE ACT, OR (ii) AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT AND ANY APPLICABLE STATE ACT IS AVAILABLE AND THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL TO SUCH EFFECT REASONABLY SATISFACTORY TO IT. (d) Purchaser agrees to be bound by and comply with all restrictions provided for in this Agreement on transfer of the Preferred Shares, the Conversion Shares, and Purchaser's Warrant and further agrees that it shall not offer, sell, transfer, pledge or otherwise dispose of the Preferred Shares, the Conversion Shares or Purchaser's Warrant in violation of any applicable securities or other laws and regulations of a governmental authority having jurisdiction over such disposition. 3.2 CERTIFICATE LEGENDS Certificates for the Preferred Shares and the Conversion Shares shall bear substantially the following legends: "THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED ("1933 ACT"), AND MAY NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED OR OTHERWISE DISPOSED OF, IN WHOLE OR IN PART, DIRECTLY OR INDIRECTLY, UNLESS (i) THE TRANSACTION IS EFFECTED IN ACCORDANCE WITH THE PROVISIONS OF REGULATION S UNDER THE 1933 ACT, (ii) THE TRANSACTION IS REGISTERED UNDER THE 1933 ACT AND ANY APPLICABLE SECURITIES LAWS OF ANY STATE, TERRITORY OR POSSESSION OF THE UNITED STATES OR THE DISTRICT OF COLUMBIA ("STATE ACT"), OR (iii) AN EXEMPTION FROM REGISTRATION UNDER THE 1933 ACT AND ANY APPLICABLE STATE ACT IS AVAILABLE AND THE ISSUER HAS RECEIVED AN OPINION OF COUNSEL TO SUCH EFFECT REASONABLY SATISFACTORY TO IT." "HEDGING TRANSACTIONS INVOLVING THESE SHARES MAY NOT BE CONDUCTED UNLESS IN COMPLIANCE WITH THE 1933 ACT." ARTICLE IV. INVESTMENT MATTERS 4.1 INVESTMENT REPRESENTATIONS Purchaser represents and warrants to Agritope as follows: (a) DOMICILE. PURCHASER IS NOT A U.S. PERSON, AS THAT TERM IS DEFINED ON EXHIBIT B. [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -3- (b) ACCESS TO INFORMATION. Purchaser has been given, a reasonable time before execution of this Agreement, the opportunity to ask questions and receive answers concerning Agritope and the terms and conditions of the offering of the Preferred Shares and the Conversion Shares, and to obtain any additional information that Agritope possesses or can acquire without unreasonable effort or expense that is necessary to verify the accuracy of information furnished to Purchaser. Purchaser has received any such additional information that Purchaser has requested. (c) EXPERIENCE. Purchaser has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of an investment in the Preferred Shares and the Conversion Shares, and has the ability to bear the economic risk of that investment. (d) INVESTMENT INTENT. Purchaser is acquiring the Preferred Shares and the Conversion Shares for Purchaser's own account and not on behalf of any other person. Purchaser is not acquiring the Preferred Shares or the Conversion Shares with a view to distribution or with the intent to divide Purchaser's participation with others by reselling or otherwise distributing the Preferred Shares or the Conversion Shares, either directly or indirectly through a sale of its own capital stock. 4.2 CERTAIN RESTRICTIONS Purchaser acknowledges the following restrictions: (a) FRANCE. If this Agreement and any related documents are issued, circulated, or distributed to Purchaser in France, Purchaser hereby acknowledges that this Agreement has been supplied in the context of a private placing and that the placing of the Units, the Preferred Shares and the Conversion Shares has not been effected through "demarchage" (solicitation) within the meaning of the Law No. 72-6 of 3 January 1972. Purchaser hereby undertakes not to transfer or assign directly or indirectly the Units, the Preferred Shares or the Conversion Shares in France subsequent to their subscription. This Agreement and any related documents (together with any further information) are made available to Purchaser on the condition that they are for use only by Purchaser in connection with the proposed investment and shall neither be passed on by Purchaser to any further person nor reproduced in whole or in part. Purchaser has been notified by Agritope to ensure that the terms of this undertaking are strictly adhered to. (b) ISRAEL. If this Agreement and any related documents are issued, circulated, or distributed to Purchaser in Israel, Purchaser hereby acknowledges that this Agreement has been supplied in the context of a private placing for a designated oferee and not for solicitation to the public. Purchaser hereby undertakes not to transfer or assign directly or indirectly the Preferred Shares or the Conversion Shares in Israel subsequent to their subscription, unless it is permitted by Israeli law. This Agreement and any related documents (together with any further information) are made available to Purchaser on the condition that they are for use only by Purchaser in connection with the proposed investment and shall neither be passed on by Purchaser to any further person nor reproduced in whole or in part. Purchaser has been notified by Agritope to ensure that the terms of this undertaking are strictly adhered to. [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -4- 4.3 DISCLOSURE DOCUMENTS Agritope has furnished or made available to Purchaser (whether in tangible form or electronically, such as through EDGAR) complete copies of all reports or registration statements filed by Agritope in the last 18 months with the U.S. Securities and Exchange Commission under the United States Securities Exchange Act of 1934, as amended (the "1934 Act"). Such reports and statements are referred to herein as the "Disclosure Documents." ARTICLE V. REGISTRATION RIGHTS 5.1 DEFINITIONS (a) "Eligible Shares" refers to shares of Common Stock issuable upon conversion of Series A Preferred Stock, other than shares that are not "restricted securities" for purposes of Rule 144 promulgated under the 1933 Act. (b) The terms "register," "registered," and "registration" refer to a registration effected by preparing and filing a registration statement or similar document in compliance with the 1933 Act and the declaration or ordering of effectiveness of such registration statement or document. 5.2 REQUESTED REGISTRATION If Agritope shall be requested by Purchaser or an affiliated holder of Series A Preferred Stock or Eligible Shares to effect a registration under the 1933 Act covering the Eligible Shares, Agritope shall promptly give written notice of such proposed registration to all persons who purchased Series A Preferred Stock from Agritope. Any holders of Series A Preferred Stock who wish to participate in the offering must respond within 10 days after receipt of such notice. Upon such a request, Agritope shall as expeditiously as possible use its best efforts to file a registration statement (the "Registration Statement") under the 1933 Act with respect to the resale of Eligible Shares. If the request is made at a time when Agritope is not eligible to use Form S-3, Agritope shall use its best efforts to file the Registration Statement with respect to the Eligible Shares which Agritope has been requested to register (a) in such request and (b) in any response to such notice received by Agritope, within 60 days after the date by which holders must respond to Agritope's notice. If the request is made at a time when Agritope is eligible to use Form S-3, the Registration Statement shall be filed with respect to all Eligible Shares as expeditiously as is practicable. Agritope shall have an obligation to file a Registration Statement under this Section 5.2 only once, except that if the Registration Statement filed is not on Form S-3, and is not filed with respect to all Eligible Shares, Agritope shall have an obligation to file a Registration Statement on Form S-3 with respect to the remaining Eligible Shares if a later request is made under this section at a time when Agritope is entitled to use Form S-3. 5.3 REGISTRATION PROCEDURE If obligated to file a Registration Statement under Section 5.2, Agritope shall follow the registration procedures set forth in this Section 5.3. Agritope shall use its best efforts to cause the Registration Statement to become effective under the 1933 Act and to maintain the effectiveness of the Registration Statement for a period of 90 days or, if the Registration Statement is on Form S-3, two years. If required to permit resale of the Eligible Shares in the state of New York, Agritope shall use its best efforts to register or qualify the Eligible Shares covered by the Registration Statement under [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -5- the blue sky laws of the state of New York, provided that Agritope shall not be required in connection therewith or as a condition precedent thereto to qualify to do business or to file a general consent to service of process in the state of New York. If required by applicable law, Agritope shall furnish to the holders of the registered Eligible Shares such reasonable number of copies of a prospectus, in conformity with the requirements of the 1933 Act, and any amendments or supplements thereto and such other documents as the holders of the registered Eligible Shares may reasonably request in order to facilitate the disposition of the registered Eligible Shares after the Registration Statement has been declared effective. Agritope shall use reasonable efforts to notify the holders of the registered Eligible Shares when a prospectus relating to the Eligible Shares is required to be delivered under the 1933 Act, to notify the holders of the registered Eligible Shares of the happening of any event as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing, to file as promptly as may be practicable under the circumstances such amendments and supplements as may be required on account of such event, and to use its best efforts to cause each such amendment to become effective. The holders of the registered Eligible Shares shall not effect sales of Eligible Shares after receipt of notice from Agritope that any such amendment or supplement is required on account of any such event, until the amendment becomes effective or the supplement has been filed. Agritope's obligations under this Section 5.3 shall expire at such time as Agritope is no longer required to maintain the effectiveness of the Registration Statement as provided for above. 5.4 DEFERRAL FOR MATERIAL EVENTS If, because of a proposed material acquisition or any other material event, the Agritope board of directors reasonably determines that the filing or effectiveness of a Registration Statement or of a supplement or amendment to the prospectus pursuant to this Article V would be detrimental to Agritope, Agritope may defer such filing or effectiveness for a period of up to 90 days after such filing or effectiveness would otherwise ordinarily have occurred. For the purposes of the preceding sentence, it shall be presumed that a Registration Statement would ordinarily be filed 45 days after request under Section 5.2, that a supplement or amendment to the prospectus would ordinarily be filed 10 days after notice referred to in Section 5.3 and that the Registration Statement or any amendment to the prospectus would ordinarily become effective five business days after filing an acceleration request. 5.5 FURNISH INFORMATION; EXPENSES It shall be a condition precedent to the obligations of Agritope in regard to the Eligible Shares to be registered pursuant to Section 5.2 for any holder of such shares that the holder shall furnish to Agritope such information regarding itself, the Eligible Shares held by it, and the intended method of disposition of its Eligible Shares as shall be required to effect the registration of its Eligible Shares, and shall agree to be bound by the terms of this Article V if such holder is not already a party to this Agreement. 5.6 EXPENSES OF REGISTRATION All expenses relating to registration of the Eligible Shares (other than underwriting discounts and commissions, transfer taxes, if any, and fees and disbursements of counsel to the holders of the Eligible Shares) incurred in connection with the registrations, filings or qualifications pursuant to Section 5.3 above, including without limitation all registration, filing and qualification fees, printing and accounting fees, and fees and disbursements of counsel for Agritope, shall be borne by Agritope. [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -6- 5.7 INDEMNIFICATION (a) INDEMNIFICATION BY AGRITOPE. To the extent permitted by law, Agritope shall indemnify and hold harmless the Purchaser, each other holder of Eligible Shares being registered, and the officers, directors, partners, agents, and employees of each holder or any underwriter (as defined in the 1933 Act) of such Eligible shares, and each person, if any, who controls the Purchaser, each other such holder or such underwriter within the meaning of the 1933 Act or the 1934 Act, against any losses, claims, damages, or liabilities (joint or several) to which they may become subject under the 1933 Act, the 1934 Act, or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following statements, omissions or violations (a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) any violationor alleged violation by Agritope of the 1933 Act, the 1934 Act, any state securities law, or any rule or regulation promulgated under the 1933 Act, the 1934 Act, or any state securities law. Agritope shall reimburse the Purchaser and each such holder, officer, director, partner, agent, employee, underwriter or controlling person for any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action. The indemnity agreement contained in this subsection 5.7(a) shall not apply to amounts paid in settlement of any loss, claim, damage, liability, or action if such settlement is effected without the consent of Agritope (which consent shall not be unreasonably withheld), nor shall Agritope be liable to the Purchaser or such other holder in any such case for any such loss, claim, damage, liability, or action (A) to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by or on behalf of the Purchaser, such other holder, or such underwriter or controlling person or (B) in the case of a sale directly by the Purchaser or such other holder of the Eligible Shares (including a sale of such Eligible Shares through any underwriter retained by the Purchaser or such other holder to engage in a distribution solely on behalf of the Purchaser or such other holder), if such untrue statement or alleged untrue statement or omission or alleged omission was contained in a preliminary prospectus and corrected in a final or amended prospectus, and the Purchaser or such other holder failed to deliver a copy of the final or amended prospectus at or prior to the confirmation of the sale of the Eligible Shares to the person asserting any such loss, claim, damage or liability in any case where such delivery is required by the 1933 Act. [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -7- (b) INDEMNIFICATION BY HOLDERS OF THE SHARES. To the extent permitted by law, the Purchaser and each other holder of Eligible Shares being registered shall indemnify and hold harmless Agritope, each of its directors, each of its officers who have signed the Registration Statement, each person, if any, who controls Agritope within the meaning of the 1933 Act, each agent and underwriter for Agritope, each other holder of shares selling securities covered by the Registration Statement, each director, officer, partner, agent, and employee of such other holder or underwriter, and each person, if any, who controls such other holder or underwriter, against any losses, claims, damages, or liabilities (joint or several) to which Agritope or any such director, officer, partner, agent, employee, controlling person, underwriter, or other holder may become subject, under the 1933 Act, the 1934 Act, or other federal or state law, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by or on behalf of the Purchaser or such other holder expressly for use in connection with such registration; and the Purchaser or such other holder shall reimburse any legal or other expenses reasonably incurred by Agritope or any such director, officer, partner, agent, employee, controlling person, underwriter, or other holder, in connection with investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 5.7(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action if such settlement is effected without the consent of such holder, which consent shall not be unreasonably withheld; and provided, further, that the indemnification obligation of the Purchaser or such other holder shall be limited to the aggregate public offering price of the Eligible Shares sold by the Purchaser or such other holder pursuant to such registration. (c) NOTICE, DEFENSE AND COUNSEL. Promptly after receipt by an indemnified party under this Section 5.7 of notice of the commencement of any action (including any governmental action), such indemnified party shall, if a claim in respect thereof is to be made against any indemnifying party under this Section 5.7, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume and control the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party shall have the right to retain its own counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this Section 5.7 to the extent of such prejudice, but the omission so to deliver written notice to the indemnifying party shall not relieve it of any liability that it may have to any indemnified party otherwise than under this Section 5.7. (d) SURVIVAL OF RIGHTS AND OBLIGATIONS. The obligations of Agritope, the Purchaser, and any other holders of Eligible Shares under this Section 5.7 shall [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -8- survive the completion of any offering of the Eligible Shares covered by the Registration Statement. ARTICLE VI. REPRESENTATIONS AND WARRANTIES OF AGRITOPE To induce Purchaser to purchase the Shares, Agritope represents and warrants to Purchaser as follows: 6.1 ORGANIZATION, ETC. Agritope is a corporation duly organized and validly existing under the laws of the state of Delaware. Agritope has all requisite corporate power and authority to own its properties and carry on its business as now conducted. 6.2 AUTHORITY Agritope has all requisite corporate power and authority to execute, deliver, and perform this Agreement. This Agreement has been duly executed and delivered by Agritope and is the valid, legal, and binding agreement of Agritope, enforceable against Agritope in accordance with its terms. No consent of, approval by, filing with, or notice to any governmental authority or any other person or entity is required for Agritope to execute, deliver, and perform this Agreement, other than those that have been obtained, made, or given. 6.3 CAPITALIZATION The authorized capital stock of Agritope as of the Closing Date will consist of 30,000,000 shares of common stock and 10,000,000 shares of preferred stock. Immediately following the Closing Date, the number of shares of capital stock outstanding shall not be more than 5,800,000, and shall consist only of Common Stock and Series A and C Preferred Stock. No right to purchase or acquire shares of any unissued capital stock of Agritope or shares convertible into or exchangeable for such capital stock is authorized or outstanding, other than as set forth on Exhibit C. 6.4 VALID ISSUANCE; TITLE When issued and paid for in accordance with the terms of this Agreement, the Preferred Shares will be validly issued, fully paid, and nonassessable. Upon delivery to Purchaser of the certificates representing the Preferred Shares pursuant to this Agreement or pursuant to an exercise of Purchaser's Warrant by Purchaser, Purchaser will have valid, marketable title to the Preferred Shares, free and clear of all encumbrances, other than restrictions on transfer described in this Agreement. 6.5 DISCLOSURE DOCUMENTS The financial statements contained in the Disclosure Documents (except as otherwise noted therein) were prepared in conformity with U.S. generally accepted accounting principles, consistently applied, and fairly present the financial position and the results of operations at the date and for the year or period indicated. [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -9- 6.6 TAX MATTERS Agritope has filed all required federal, state, and other tax returns in a timely fashion and is not delinquent with respect to the payment of any federal, state, or other taxes. 6.7 ASSETS NEEDED FOR BUSINESS Agritope owns, leases, or otherwise has the right to use all assets necessary for its present business. 6.8 LITIGATION AND OTHER CONTINGENT LIABILITIES There are no actions or proceedings pending or to the best of Agritope's knowledge threatened against Agritope or any of its properties or assets or outstanding judgments or orders to which Agritope is subject, which adversely affect Agritope's business, operations, or financial condition. There is no action or proceeding pending or to the best of Agritope's knowledge threatened against Agritope to restrain or prohibit the sale of the Preferred Shares to Purchaser. 6.9 ABSENCE OF CERTAIN ADVERSE EFFECTS Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (a) conflict with, result in any violation of, constitute a default under, or give rise to a right of acceleration or termination under, any provision of the certificate of incorporation or bylaws of Agritope or any agreement, mortgage, bond, indenture, agreement, franchise, or other instrument or obligation to which Agritope is a party or by which it is bound, (b) result in the creation of any encumbrance upon any of the assets or properties of Agritope, (c) violate any judgment or order against, or binding upon, Agritope or upon the Preferred Shares, assets, properties, or business of Agritope, or (d) constitute a violation by Agritope of any law. 6.10 NO BROKERS Agritope has not hired any broker or finder or incurred any liability for fees or commissions to any such person in connection with this Agreement. 6.11 DISCLOSURE Except as disclosed herein and in the Disclosure Documents, no representation or warranty by Agritope contained in this Agreement or in the Disclosure Documents contains any untrue statement of a material fact, or omits to state any material fact required to make the statements herein or therein contained not misleading. ARTICLE VII. REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser represents and warrants to Agritope as follows: 7.1 CORPORATE EXISTENCE; EXECUTION AND PERFORMANCE OF AGREEMENT If Purchaser is a corporation, Purchaser is duly organized and validly existing under the laws of the country listed on the cover page and has all requisite corporate power and authority to execute, deliver, and perform this Agreement. The execution, delivery, and performance of this Agreement by [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -10- Purchaser will not conflict with any provision of its articles of incorporation or bylaws or similar charter documents (if Purchaser is a corporation) or with any undertaking, agreement, indenture, decree, order, or judgment by which it is bound and will not violate any law applicable to Purchaser. 7.2 BINDING OBLIGATIONS; DUE AUTHORIZATION This Agreement constitutes the valid, legal, and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms. If Purchaser is a corporation, the execution, delivery, and performance of this Agreement by Purchaser has been duly and validly authorized by its board of directors and no other corporate proceedings on the part of Purchaser are necessary to authorize its execution, delivery, and performance of this Agreement. Purchaser is not required to obtain any consent of or approval by, to make any filing with, or to give any notice to, any governmental authority or any other person or entity for Purchaser to execute, deliver, and perform this Agreement. 7.3 NO BROKERS Purchaser has not hired any broker or agent or incurred any liability for fees or commissions to any such person in connection with this Agreement. 7.4 LITIGATION There is no action or proceeding pending or threatened against Purchaser before any court, other governmental body or arbitrator to restrain or prohibit the purchase of the Units or the Preferred Shares. 7.5 DISCLOSURE No representation or warranty by Purchaser contained in this Agreement contains any untrue statement of a material fact, or omits to state any material fact required to make the statements herein not misleading. 7.6 ACCESS As of the Closing, Agritope has afforded to Purchaser and its representatives, including its counsel and accountants, such access to all of Agritope's properties, documents, contracts, books and records and such other information with respect to Agritope's business affairs and properties as Purchaser has requested. ARTICLE VIII. CONDITIONS 8.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER The obligation of Purchaser to effect the Closing is subject to the satisfaction, or waiver by Purchaser, of each of the following conditions on or prior to the Closing: (a) Agritope shall have delivered certificates representing the Purchased Shares to the Purchaser. (b) Agritope shall have delivered Purchaser's Warrant to the Purchaser. [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -11- (c) All representations and warranties of Agritope contained in this Agreement shall be true and correct in all respects as of the Closing with the same effect as if such representations and warranties had been made or given at and as of the Closing, and all agreements, covenants and conditions to be performed or met by Agritope on or prior to the Closing shall have been so performed or met in all respects, and there shall have been no material adverse change in the financial or business condition of Agritope. There shall have been no modification of any material disclosure contained in the Disclosure Document since the date of this Agreement. (d) No action or proceeding shall have been instituted or threatened before any court, other governmental body or arbitrator (i) to restrain or prohibit the transactions contemplated by this Agreement, (ii) that might restrict the operation of Agritope's business in any material respect if the purchase and sale of the Preferred Shares hereunder is consummated, (iii) that might restrict the ownership of the Preferred Shares or the exercise of any rights with respect thereto by Purchaser, or (iv) that might subject any of the parties hereto, to any liability, fine, forfeiture or penalty on the ground that any of the parties hereto has violated or will violate any applicable law in connection with the transactions contemplated hereby. (e) Purchaser shall have received an opinion of Agritope's counsel to the effect that when issued and paid for in accordance with the terms of this Agreement, the Preferred Shares will be validly issued, fully paid, and nonassessable. (f) The Rights Agreement approved by Agritope's board of directors shall permit Purchaser and other holders of Series A Preferred Stock to convert such shares to Common Stock without being deemed "Acquiring Persons" for purposes of the Rights Agreement and Agritope's board of directors shall have adopted resolutions to the effect that such holders are not "Adverse Persons" (as defined in the Rights Agreement), subject to execution of a standstill agreement in form and substance satisfactory to Agritope. (g) Agritope shall have delivered to Purchaser an officer's certificate confirming the correctness of Agritope's representations and warranties and satisfaction of the foregoing closing conditions. 8.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF AGRITOPE The obligation of Agritope to effect the Closing is subject to the satisfaction, or waiver by Agritope, of each of the following conditions on or prior to the Closing: (a) Purchaser shall have paid the Purchase Price in immediately available funds to Agritope. (b) Agritope shall simultaneously close the sale of a total of 125,000 Units to Vilmorin Clause & Cie. and Hazera Quality Seeds Ltd., inclusive of the Units to be sold to Purchaser under this Agreement. (c) All representations and warranties of Purchaser and Agritope contained in this Agreement shall be true and correct in all respects as of the Closing with the same effect as if such representations and warranties had been made or given [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -12- at and as of the Closing, and all agreements, covenants and conditions to be performed or met by Purchaser on or prior to the Closing have been so performed or met in all respects. (d) No action or proceeding shall have been instituted or threatened before any court, other governmental body or arbitrator to restrain or prohibit the transactions contemplated in this Agreement or that might subject any of the parties hereto to any liability, fine, forfeiture or penalty on the ground that any of the parties hereto has violated or will violate any applicable law in connection with the transactions contemplated hereby. (e) The issuance and sale of the Units and the Preferred Shares shall not violate any applicable state, federal, or foreign securities laws. ARTICLE IX. OTHER MATTERS 9.1 NOTICES Any notice, request, or demand under this Agreement shall be in writing and shall be deemed to have been duly given and received (i) upon personal delivery, (ii) upon fax transmission to the recipient at the fax number listed below, provided that a copy of the fax is promptly deposited for delivery by one of the methods listed in (iii) or (iv) below, (iii) ten days after deposit in the mails, if sent certified or comparable form of mail with return receipt requested, addressed to the recipient at the address listed below, or (iv) five days after deposit if deposited for delivery with a reputable courier or express service, addressed to the recipient at the address listed below: If to Agritope: Agritope, Inc. 16160 SW Upper Boones Ferry Rd. Portland, Oregon 97224 U.S.A. Attention: President Fax: (503) 670-7703 If to Purchaser: Purchaser's address listed on the cover page A party may change its address or fax number for purposes of this Section 9.1 by giving the other parties notice of the change. 9.2 AMENDMENTS AND WAIVER This Agreement may be amended or modified by, and only by, a written instrument executed by each of the parties hereto. The terms of this Agreement may be waived by, and only by, a written instrument executed by the party or parties against whom such waiver is sought to be enforced. 9.3 EXPENSES Each party to this Agreement shall pay its own expenses (including, without limitation, the fees and expenses of such party's counsel incidental to the preparation of and consummation of this Agreement). [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -13- 9.4 HEADINGS The headings contained in this Agreement are for convenience of reference only and shall not in any way affect the meaning or interpretation of this Agreement. 9.5 COUNTERPARTS This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. A facsimile transmission of a signed original shall have the same effect as delivery of the signed original. 9.6 PARTIES IN INTEREST; ASSIGNMENT This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. This Agreement shall not be assigned by any party hereto without the prior written consent of the other party. 9.7 ENTIRE AGREEMENT This Agreement, together with all exhibits hereto, constitutes the entire agreement and understanding between the parties hereto relating to the subject matter hereof and supersedes any prior agreements and understandings relating to such subject matter. 9.8 SEVERABILITY If any restriction in this Agreement exceeds that permitted under applicable law, it shall be deemed modified to include the maximum permissible restriction. If any provision is nonetheless held unenforceable in any jurisdiction, the enforceability of this Agreement in any other jurisdiction and the enforceability of the remaining provisions in that jurisdiction shall not be affected. 9.9 ATTORNEY FEES In the event any party shall seek enforcement of any covenant, warranty, indemnity, or other term or provision of this Agreement, the party that prevails in such enforcement proceeding shall be entitled to recover such reasonable costs and attorney fees which shall be determined by the arbitrator or court (including any appellate court). 9.10 SURVIVAL All the respective representations, warranties, covenants, and other agreements of the parties hereunder or contained in any schedule or certificate given in connection herewith or contemplated hereby shall survive the Closing Date, except as they may be fully performed prior to or at the Closing Date. 9.11 FORM OF PUBLIC DISCLOSURES Except as required by applicable law, Purchaser shall not make any public disclosure concerning this Agreement and the transactions contemplated herein unless Agritope has approved in advance the form and substance thereof. [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -14- 9.12 CUMULATIVE RIGHTS AND REMEDIES All the rights and remedies provided to the parties under this Agreement are cumulative, and none is exclusive of any other right or remedy a party may have hereunder or under applicable law. 9.13 NO THIRD-PARTY BENEFICIARIES Each party hereto intends that this Agreement shall not benefit or create any right or cause of action in or on behalf of any person or entity other than the parties hereto and their respective successors and permitted assigns. 9.14 DISPUTE RESOLUTION (a) CONDUCT. Any dispute arising in connection with this Agreement shall be finally settled by arbitration referred to and conducted in accordance with the International Arbitration Rules of the American Arbitration Association, except as such rules may conflict with the provisions of this section in which event the provisions of this section shall control. Any party may be represented by counsel therein. Any such arbitration shall be conducted by a panel of one or more arbitrators selected in accordance with the International Arbitration Rules of the American Arbitration Association. The arbitration shall be conducted in English in Portland, Oregon, U.S.A. (b) DECISION. Any decision or award of the arbitral tribunal shall be final and binding upon the parties to the arbitration proceeding. The arbitral tribunal's decision shall include a reasonably detailed statement of the basis for the decision and computation of the award, if any. The parties further agree to exclude any right of application or appeal to any court in connection with any question of law arising in the course of the arbitration. The award may be enforced against the parties to the arbitration proceeding or their assets wherever they may be found. Judgment upon the award may be entered in any court having jurisdiction thereof or an application may be made to such court for judicial acceptance of the award and an order of enforcement, as the case may be. (c) COSTS. Except as the arbitral tribunal may otherwise determine in its discretion, a party substantially prevailing in the arbitration shall be entitled to recover its attorney fees and costs, including the costs and expenses of its witnesses, and the other parties shall pay the fees, costs and expenses of the arbitral tribunal and the administering and appointing authority. 9.15 GOVERNING LAW This Agreement shall be governed by and construed in accordance with the substantive law (but not the conflict of law rules) of the state of Oregon. [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -15- EXHIBIT B CERTAIN DEFINITIONS UNDER REGULATION S Set forth below is the text of Rule 902(o) promulgated under the 1933 Act which defines "U.S. person" as follows: (o) U.S. Person. (1) "U.S. person" means: (i) Any natural person resident in the United States; (ii) Any partnership or corporation organized or incorporated under the laws of the United States; (iii) Any estate of which any executor or administrator is a U.S. person; (iv) Any trust of which any trustee is a U.S. person; (v) Any agency or branch of a foreign entity located in the United States; (vi) Any non-discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary for the benefit or account of a U.S. person; (vii) Any discretionary account or similar account (other than an estate or trust) held by a dealer or other fiduciary organized, incorporated, or (if an individual) resident in the United States; and (viii) Any partnership or corporation if: (A) Organized or incorporated under the laws of any foreign jurisdiction; and (B) Formed by a U.S. person principally for the purpose of investing in securities not registered under the 1933 Act, unless it is organized or incorporated, and owned, by accredited investors (as defined in Rule 501(a) under the Act (ss.230.501(a) of this chapter)) who are not natural persons, estates or trusts. (2) Notwithstanding paragraph (o)(1) of this section, any discretionary account or similar account (other than an estate or trust) held for the benefit or account of a non-U.S. person by a dealer or other professional fiduciary organized, incorporated, or (if an individual) resident in the United States shall not be deemed a "U.S. person." (3) Notwithstanding paragraph (o)(1) of this section, any estate of which any professional fiduciary acting as executor or administrator is a U.S. person shall not be deemed a U.S. person if: [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -16- (i) An executor or administrator of the estate who is not a U.S. person has sole or shared investment discretion with respect to the assets of the estate; and (ii) The estate is governed by foreign law. (4) Notwithstanding paragraph (o)(1) of this section, any trust of which any professional fiduciary acting as trustee is a U.S. person shall not be deemed a U.S. person if a trustee who is not a U.S. person has sole or shared investment discretion with respect to the trust assets, and no beneficiary of the trust (and no settlor if the trust is revocable) is a U.S. person. (5) Notwithstanding paragraph (o)(1) of this section, an employee benefit plan established and administered in accordance with the law of a country other than the United States and customary practices and documentation of such country shall not be deemed a U.S. person. (6) Notwithstanding paragraph (o)(1) of this section, any agency or branch of a U.S. person located outside the United States shall not be deemed a "U.S. person" if: (i) The agency or branch operates for valid business reasons; and (ii) The agency or branch is engaged in the business of insurance or banking and is subject to substantive insurance or banking regulation, respectively, in the jurisdiction where located. (7) The International Monetary Fund, the International Bank for Reconstruction and Development, the Inter-American Development Bank, the Asian Development Bank, the African Development Bank, the United Nations, and their agencies, affiliates and pension plans, and any other similar international organizations, their agencies, affiliates and pension plans shall not be deemed "U.S. persons." Set forth below is the text of Rule 9.02(p) promulgated under the 1933 Act which defines "United States" as follows: (p) "United States" means the United States of America, its territories and possessions, any State of the United States, and the District of Columbia. [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -17- EXHIBIT C RIGHTS TO ACQUIRE SHARES See the Disclosure Documents for more detailed descriptions of rights. Preferred Stock Purchase Rights, as described in the Information Statement/Prospectus included in the Registration Statement on Form S-1 filed with the Securities and Exchange Commission (File No. 333-34597) ( the "Form S-1"). Options to purchase Common Stock issued or issuable under the 1997 Stock Award Plan, which provides for issuance of options to purchase up to 2,000,000 shares of Common Stock. Rights to purchase Common Stock under the 1997 Employee Stock Purchase Plan, which provides for the issuance of up to 250,000 shares of Common Stock. 38,722 shares of Common Stock reserved for issuance as matching contributions under Agritope's 401(k) plan. Warrants issued to Vector Securities International, Inc. in connection with the spin-off of Agritope by Epitope, Inc. on December 30, 1997, to purchase up to 83,333 shares of Common Stock at a price of $7.343 per share, as described in the Form S-1. Warrants issued to American Equities Overseas, Inc. and eight of its unaffiliated European designees, to purchase up to a total of 500,000 shares of Common Stock at a price of $7.00 per share. Warrants granted or to be granted to Purchaser and other purchasers of Units, representing in the aggregate, rights to purchase 125,000 shares of Series A Preferred Stock at a price of $7.00 per share. Warrants granted to or to be granted to Rhone-Poulenc, S.A. to purchase up to a total of 250,00 shares of Series C Preferred Stock at a price of $7.00 per share. [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -18- EXHIBIT D CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF THE SERIES A PREFERRED STOCK OF AGRITOPE, INC. (Pursuant to Section 151 of the General Corporation Law of the state of Delaware) -------------------- The undersigned officers of Agritope, Inc., a corporation organized and existing under the General Corporation Law of the state of Delaware (the "Corporation"), in accordance with the provisions of Section 103 thereof, do hereby certify: That, pursuant to authority conferred upon the Board of Directors of the Corporation by its Certificate of Incorporation, and pursuant to Section 151 of the Delaware General Corporation Law , the Board of Directors adopted the following resolution creating a series of 1,000,000 shares of Preferred Stock, par value $.01 per share, designated as Series A Preferred Stock: RESOLVED, that, pursuant to the authority vested in the Board of Directors of the Corporation in accordance with the provisions of its Certificate of Incorporation, a new series of Preferred Stock of the Corporation be, and it hereby is, created, and that the designation and amount thereof and the voting powers, preferences and relative, participating, optional and other special rights of the shares of such series, and the qualifications, limitations or restrictions thereof are as follows: SERIES A PREFERRED STOCK 1. Designation and Amount. The shares of such series of Preferred Stock shall be designated as "Series A Preferred Stock," and the number of shares constituting such series be 1,000,000. 2. Par Value. The par value of the Series A Preferred Stock shall be $.01 per share. 3. Dividends and Distributions (a) The Corporation shall not declare, set aside or pay any dividends or other distributions (as defined below) on shares of Common Stock unless and until the Corporation shall have declared, set aside or paid a dividend or other distribution with respect to each share of Series A Preferred Stock then outstanding in an amount at least equal to the product of (i) the per share amount, if any, of the dividends or other distributions to be declared, paid or set aside for the Common Stock, multiplied by (ii) the number of whole shares of Common Stock into which the shares of Series A Preferred Stock are then convertible. (b) For purposes of this Section 3, unless the context requires otherwise, "distribution" shall mean the transfer of cash or property without consideration, whether by way of dividend or otherwise, payable other than in Common Stock, or the purchase or redemption of shares of the Corporation (other than repurchases of Common Stock held by employees or directors of, or [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -19- consultants to, the Corporation upon termination of their employment or services and other than redemptions in liquidation or dissolution of the Corporation) for cash or property, including any such transfer, purchase or redemption by a subsidiary of this Corporation. All payments due under this Section 3 shall be made to the nearest cent. (c) Anything in this Section 3 to the contrary notwithstanding, stock dividends on Series A Preferred Stock shall be made in shares of Series A Preferred Stock only. 4. Liquidation, Dissolution or Winding Up (a) In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the holders of shares of Series A Preferred Stock then outstanding shall be entitled to be paid out of the assets of the Corporation available for distribution to its stockholders, pari passu with the payment of all amounts required to be distributed to the holders of Common Stock, but before any payment shall be made to the holders of any other class or series of stock ranking on liquidation junior to the Series A Preferred Stock. 5. Voting (a) In addition to voting rights provided by the General Corporation Law of the state of Delaware, the holders of the Series A Preferred Stock voting as one class shall have the right to elect one director to the Corporation's Board of Directors annually, so long as not less than 214,285 of the shares of Series A Preferred Stock originally issued are outstanding. The holders of the Series A Preferred Stock also shall have voting rights for any other purpose pari passu with holders of Common Stock as one class, provided that each share of Series A Preferred Stock shall entitle the holder to such number of votes equal to the number of shares of Common Stock (rounded to the nearest whole number) into which the Series A Preferred Stock is then convertible under the terms provided below. (b) The Corporation shall not amend, alter or repeal the preferences, special rights or other powers of the Series A Preferred Stock so as to affect adversely the Series A Preferred Stock, without the written consent or affirmative vote of the holders of a majority of the then outstanding shares of Series A Preferred Stock, given in writing or by vote at a meeting. The number of authorized shares of Series A Preferred Stock may be decreased (but not below the number of shares then outstanding) by the directors of the Corporation pursuant to the General Corporation Law of Delaware, but may be increased (other than increases necessary to issue stock dividends of Series A Preferred Stock on the outstanding shares of Series A Preferred Stock) only by the affirmative vote of the holders of a majority of the then outstanding shares of Series A Preferred Stock, voting as a single class. 6. Optional Conversion. The holders of the Series A Preferred Stock shall have conversion rights as follows (the "Conversion Rights"): (a) Right to Convert. Each share of Series A Preferred Stock shall be convertible, at the option of the holder thereof, at any time and from time to time, and without the payment of additional consideration by the holder thereof, into such number of fully paid and nonassessable shares of Common Stock as is determined by dividing (i) $7.00 by (ii) the Series A Conversion Price, in each instance as such Conversion Price is in effect at the time of conversion. The "Series A Conversion Price" initially shall be $7.00. The rate at which shares of Series A Preferred Stock may be converted into shares of Common Stock shall be subject to adjustment as provided below; such adjusted Conversion Price and rate of conversion thereafter shall be applicable to the [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -20- outstanding shares of Series A Preferred Stock and any newly issued shares of such series (as, for example, the result of a stock dividend). In the event of a liquidation, dissolution or winding up of the Corporation, the Conversion Rights shall terminate at the close of business on the fifth business day preceding the date fixed for the payment of any amounts distributable on liquidation to the holders of Series A Preferred Stock. (b) Fractional Shares. No fractional shares of Common Stock shall be issued upon conversion of Series A Preferred Stock. In lieu of any fractional shares to which the holder would otherwise be entitled, the Corporation shall pay cash equal to such fraction multiplied by the then effective Conversion Price. (c) Mechanics of Conversion (i) In order for a holder of Series A Preferred Stock to convert shares of Series A Preferred Stock into shares of Common Stock, such holder shall surrender the certificate or certificates for such shares of Series A Preferred Stock, at the office of the Corporation's transfer agent (or at the principal office of the Corporation if the Corporation serves as its own transfer agent), together with written notice that such holder elects to convert all or any number of the shares of the Series A Preferred Stock represented by such certificate or certificates. Such notice shall state such holder's name or the names of the nominees in which such holder wishes the certificate or certificates for shares of Common Stock to be issued. If required by the Corporation, certificates surrendered for conversion shall be endorsed or accompanied by a written instrument or instruments of transfer, in form satisfactory to the Corporation, duly executed by the registered holder or the holder's attorney duly authorized in writing. The date of receipt of such certificates and notice to the transfer agent (or to the Corporation if the Corporation serves as its own transfer agent) shall be the conversion date (the "Conversion Date"). The Corporation shall, as soon as practicable after the Conversion Date, issue and deliver at such office to such holder of Series A Preferred Stock, or to the holder's nominees, a certificate or certificates for the number of shares of Common Stock to which such holder shall be entitled, together with cash in lieu of any fraction of a share. (ii) The Corporation shall at all times when any Series A Preferred Stock shall be outstanding, reserve and keep available out of its authorized but unissued stock, for the purpose of effecting the conversion of such Series A Preferred Stock, such number of its duly authorized shares of Common Stock as shall from time to time be sufficient to effect the conversion of all outstanding shares of such Series A Preferred Stock. (iii) Upon any such conversion, no adjustment to the Conversion Price shall be made for any declared or accrued but unpaid dividends on any Series A Preferred Stock surrendered for conversion or on the Common Stock delivered upon conversion. (iv) All shares of Series A Preferred Stock which shall have been surrendered for conversion as herein provided shall no longer be deemed to be outstanding and all rights with respect to such shares, including the rights, if any, to receive notices and to vote, shall immediately cease and terminate on the Conversion Date, except only the right of the holders thereof to receive shares of Common Stock (and cash in lieu of any fractional share) in exchange therefor and payment of any dividends declared but unpaid thereon. Any shares of Series A Preferred Stock so converted shall be retired and canceled and shall not be reissued, and the Corporation (without the [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -21- need for stockholder action) may from time to time take such appropriate action as may be necessary to reduce the authorized Series A Preferred Stock accordingly. (v) The Corporation shall pay any and all issue and other taxes that may be payable in respect of any issuance or delivery of shares of Common Stock upon conversion of shares of Series A Preferred Stock pursuant to this Section 6. The Corporation shall not, however, be required to pay any tax which may be payable in respect of any transfer involved in the issuance and delivery of shares of Common Stock in a name other than that in which the shares of the Series A Preferred Stock so converted were registered, and no such issuance or delivery shall be made unless and until the person or entity requesting such issuance has paid to the Corporation the amount of any such tax or has established, to the satisfaction of the Corporation, that such tax has been paid. (d) Adjustment for Stock Splits and Combinations. If the Corporation shall, at any time or from time to time after the date on which a share of Series A Preferred Stock was first issued (the "Original Issue Date"), effect a subdivision of the outstanding Common Stock, the Conversion Price then in effect immediately before that subdivision shall be proportionately decreased. If the Corporation shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Conversion Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this paragraph shall become effective at the close of business on the date the subdivision or combination becomes effective. (e) Adjustment for Certain Dividends and Distributions. In the event the Corporation, at any time or from time to time after the Original Issue Date, shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Conversion Price for Series A Preferred Stock then in effect shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price then in effect by a fraction: (1) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date, and (2) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price for Series A Preferred Stock shall be recomputed accordingly as of the close of business on such record date and thereafter the Conversion Price for Series A Preferred Stock shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends or distributions. Notwithstanding the foregoing, the shares of Common Stock issuable upon conversion of the Series A Preferred Stock shall be deemed outstanding for all calculations under this Subsection 6(e). (f) Adjustments for Other Dividends and Distributions. In the event the Corporation, at any time or from time to time after the Original Issue Date for Series A Preferred Stock, shall make or issue, or fix a record date for the determination of holders of Common Stock [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -22- entitled to receive, a dividend or other distribution payable in securities of the Corporation other than shares of Common Stock, then and in each such event provision shall be made so that the holders of Series A Preferred Stock shall receive upon conversion thereof, in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Corporation that they would have received had such Series A Preferred Stock been converted into Common Stock on the date of such event and had thereafter, during the period from the date of such event to and including the conversion date, retained such securities receivable by them as aforesaid during such period, giving application to all adjustments called for during such period under this paragraph with respect to the rights of the holders of Series A Preferred Stock. (g) Adjustment for Reclassification, Exchange or Substitution. If the Common Stock issuable upon the conversion of Series A Preferred Stock shall be changed into the same or a different number of shares of any class or classes of stock, whether by capital reorganization, reclassification or otherwise (other than a subdivision or combination of shares or stock dividend provided for above, or a reorganization, merger, consolidation or sale of assets provided for below), then and in each such event the holder of each such share of Series A Preferred Stock shall have the right thereafter to convert such share into the kind and amount of shares of stock and other securities and property receivable upon such reorganization, reclassification or other change, by holders of the number of shares of Common Stock into which such shares of Series A Preferred Stock might have been converted immediately prior to such reorganization, reclassification or change, all subject to further adjustment as provided herein. (h) Adjustment for Merger or Reorganization, etc. In case of any consolidation or merger of the Corporation with or into another corporation, or the sale of all or substantially all of the assets of the Corporation to another corporation each share of Series A Preferred Stock shall thereafter be convertible (or shall be converted into a security which shall be convertible) into the kind and amount of shares of stock or other securities or property to which a holder of the number of shares of Common Stock of the Corporation deliverable upon conversion of Series A Preferred Stock would have been entitled upon such consolidation, merger or sale; and, in such case, appropriate adjustment (as determined in good faith by the Board of Directors) shall be made in the application of the provisions in this Section 6 set forth with respect to the rights and interest thereafter of the holders of Series A Preferred Stock, to the end that the provisions set forth in this Section 6 (including provisions with respect to changes in and other adjustments of the Conversion Price) shall thereafter be applicable, as nearly as reasonably may be, in relation to any shares of stock or other property thereafter deliverable upon the conversion of Series A Preferred Stock. (i) No Impairment. The Corporation will not, by amendment of its Certificate of Incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms to be observed or performed hereunder by the Corporation, but will at all times in good faith assist in the carrying out of all the provisions of this Section 6 and in the taking of all such action as may be necessary or appropriate in order to protect the Conversion Rights of the holders of Series A Preferred Stock against impairment. (j) Certificate as to Adjustments. Upon the occurrence of each adjustment or readjustment of the Conversion Price pursuant to this Section 6, the Corporation at its expense shall promptly compute such adjustment or readjustment in accordance with the terms hereof and furnish to each holder of Series A Preferred Stock a certificate, signed by the Corporation's chief financial officer, setting forth such adjustment or readjustment and showing in detail the facts upon which such adjustment or readjustment is based. The Corporation shall, upon the written request at any time of any [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -23- holder of Series A Preferred Stock, furnish or cause to be furnished to such holder a similar certificate setting forth (i) such adjustments and readjustments, (ii) the Conversion Price then in effect, and (iii) the number of shares of Common Stock and the amount, if any, of other property which then would be received upon the conversion of Series A Preferred Stock. (k) Notice of Record Date. In the event: (i) that the Corporation declares a dividend (or any other distribution) on its Common Stock payable in Common Stock or other securities of the Corporation; (ii) that the Corporation subdivides or combines its outstanding shares of Common Stock (iii) of any reclassification of the Common Stock of the Corporation (other than a subdivision or combination of its outstanding shares of Common Stock or a stock dividend or stock distribution thereon), or of any consolidation or merger of the Corporation into or with another corporation, or of the sale of all or substantially all of the assets of the Corporation; or (iv) of the involuntary or voluntary dissolution, liquidation or winding up of the Corporation; then the Corporation shall cause to be filed at its principal office and shall cause to be mailed to the holders of Series A Preferred Stock at their last addresses as shown on the records of the Corporation or its transfer agent, at least 10 days prior to the date specified in (A) below or 20 days before the date specified in (B) below, a notice stating (A) the record date of such dividend, distribution, subdivision or combination, or, if a record is not to be taken, the date as of which the holders of Common Stock of record to be entitled to such dividend, distribution, subdivision or combination are to be determined, or (B) the date on which such reclassification, consolidation, merger sale, dissolution, liquidation or winding up is expected to become effective, and the date as of which it is expected that holders of Common Stock of record shall be entitled to exchange their shares of Common Stock for securities or other property deliverable upon such reclassification, consolidation, merger, sale, dissolution or winding up. 7. Preemptive Rights. (a) Subject to the provisions of Section 7(f), in case of the proposed issuance or granting by the Corporation of shares of any class of capital stock (whether heretofore or hereafter authorized) or notes, bonds, debentures or other securities convertible into, or carrying options or warrants to purchase shares of any class of capital stock (all of which are collectively referred to herein as "equity securities"), the Corporation shall afford to each holder of Series A Preferred Stock the preemptive right to subscribe for, purchase or receive such securities, in such proportion as would, as nearly as practicable, preserve such holder's relative equity position on a Common Stock equivalent basis arising from such holder's ownership of shares of Series A Preferred [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -24- Stock then held by such stockholder), on the terms and conditions provided in Sections 7(b) through 7(f), inclusive. (b) Notice. Written notice of the proposed issuance or granting of securities within the scope of Section 7(a) shall be given to each holder of Series A Preferred Stock not less than 30 days prior to the proposed date of issuance or granting, setting forth the principal terms and conditions of the proposed issuance or granting, including the aggregate number of securities to be issued or granted, the price therefor, and, if a security other than shares or authorized capital stock, the significant terms thereof, the proportionate amount of such securities which such holder shall have the right to purchase pursuant to Section 7(a) and the price to be paid by and other terms offered to the holder therefor, which price and principal terms shall be not less favorable than the price and terms at which such securities are proposed to be offered for sale to others. (c) Subscription. A shareholder of Series A Preferred Stock by written notice given to the Corporation not less than 15 days prior to the proposed date of issuance or granting, may subscribe for or agree to purchase up to the entire amount of securities covered by the holder's proportionate right at the price and upon the terms set forth in said notice. (d) Enforceability. Upon giving notice to the Company in accordance with Section 7(c), such holder of Series A Preferred Stock shall be obligated as if the holder had executed a subscription agreement containing the price and terms stated in the notice given pursuant to Section 7(a) and the Corporation thereafter may enforce such agreement pursuant to the provisions of Delaware law; provided, however, that a stockholder's obligation to purchase any securities hereunder shall be conditioned upon the issuance or granting by the Corporation of the securities at the price and on the terms and conditions set forth in the Corporation's notice given to the stockholder in accordance with Section 7(b). (e) Free Period. If a holder of Series A Preferred Stock shall not exercise such holder's preemptive rights in the manner and time set forth in Section 7(c), then the Corporation may thereafter for a period not exceeding 120 days following the expiration of said time period issue, grant, sell or subject to rights or options (upon the terms and conditions and at the price or prices set forth in the Corporation's notice) the securities described in the notice given to such stockholder by the Corporation in accordance with Section 7(b), which such stockholder would have been entitled to purchase, free of the stockholder's preemptive rights herein provided; any such securities not so issued, granted, sold or subjected to rights or options of others during such 120-day period shall thereafter again be subject to the preemptive rights provided in Section 7(a). (f) Exempt Transactions. Shares of capital stock or other securities proposed to be issued or granted by the Corporation shall not be subject to preemptive rights under Section 7(a) if they (a) are securities issued by the Corporation to effect a merger, consolidation or acquisition of a business or company on a stock-for-stock or stock-for-assets basis or are offered or subject to rights or options for consideration other than cash as part of such acquisition; (b) are to be issued to satisfy conversion, option or contingent Common Stock issuances or warrant rights heretofore authorized or granted by the Corporation; (c) are sold, issued or granted to employees, directors or consultants pursuant to a plan or agreement approved by vote of the Corporation's stockholders; (d) are treasury shares; (e) are to be issued under a plan of reorganization approved in a proceeding under any applicable act of Congress relating to reorganization of corporations; (f) are issued in connection with a registered public offering of the Corporation's securities on behalf of the Corporation pursuant to an effective Registration Statement pursuant to the Securities Act of 1933, as amended; (g) are granted in transactions not to exceed, in each case, an amount equal to 5 percent of the total of outstanding shares [29020-0401/10K_99 Ex 10.30 VCC Unit Purch.doc] -25- of Common Stock as at the date of such transaction with (i) underwriters in connection with the public offering of the Corporation's securities on behalf of the Corporation pursuant to an effective Registration Statement pursuant to the Securities Act of 1933, as amended; (ii) finders or brokers in connection with a private placement or public offering of the Corporation's securities on behalf of the Corporation; or (iii) financial institutions (including, but not limited to, banks, trust companies, investment companies, insurance companies or pension or profit-sharing trusts) in connection with financing furnished to the Corporation, if such financing is in the form of loans or non-convertible debt or is approved by the Corporation's stockholders; or (h) are issuable in connection with the exercise of rights under the Corporation's stockholder rights plan. IN WITNESS WHEREOF, we have executed and attested this Certificate of Designation on behalf of the Corporation this 1st day of December, 1997. We further declare under penalty of perjury under the laws of the state of Delaware that the matters set forth herein are, to our knowledge, true and correct. AGRITOPE, INC. By /s/ Adolph J. Ferro ---------------------------------------- Adolph J. Ferro Chairman, President and Chief Executive Officer Attest: /s/ Gilbert N. Miller - -------------------------------- Gilbert N. Miller, Secretary EX-10.31 5 FORM OF STOCK PURCHASE AGREEMENT ================================================================================ - -------------------------------------------------------------------------------- STOCK PURCHASE AGREEMENT AMONG AGRITOPE, INC., VINIFERA, INC., AND [PURCHASER] ================================================================================ JUNE 1, 1999 135741-0014/062599/PDXDOCS:1092296.2 Article I DEFINITIONS..............................................1 1.1 Definitions..................................................1 Article II PURCHASE AND SALE OF SHARES..............................2 2.1 Sale of Shares...............................................2 2.2 Timing of Sale...............................................2 2.3 Option to Retain Shares......................................2 Article III CLOSING..................................................2 3.1 Closing......................................................2 3.2 Actions at Closings..........................................2 Article IV RESTRICTIONS ON TRANSFER.................................3 4.1 General......................................................3 4.2 Securities Law Compliance....................................3 4.3 Voluntary Transfers..........................................3 4.4 Involuntary Transfers........................................3 (a) Death...............................................3 (b) Involuntary Lifetime Transfer.......................3 4.5 Acceptance of Option to Purchase.............................4 (a) Option Period.......................................4 (b) Election............................................4 4.6 Payment and Transfer of Shares...............................4 4.7 Power of Attorney............................................4 4.8 Rejection of Offer by Company................................4 4.9 Lock-Up Agreement............................................5 4.10 Certificate Legend...........................................5 4.11 Purchaser's Right of First Refusal...........................5 (a) Duration of Right...................................5 (b) Restriction on Sale of Shares.......................5 (c) Acceptance of Offer.................................5 (d) Sale to Third Party.................................6 Article V REPRESENTATIONS AND WARRANTIES OF VINIFERA...............6 5.1 Organization, Etc............................................6 5.2 Authority....................................................6 5.3 Capitalization...............................................6 BOUCKAERT - 1 - 135741-0014/062599/PDXDOCS:1092296.2 5.4 Valid Issuance; Title........................................6 5.5 Financial Statements.........................................6 5.6 Tax Matters..................................................7 5.7 Assets Needed for Business...................................7 5.8 Litigation and Other Contingent Liabilities..................7 5.9 Absence of Certain Adverse Effects...........................7 5.10 No Brokers...................................................7 5.11 Disclosure...................................................7 Article VI REPRESENTATIONS AND WARRANTIES OF AGRITOPE...............7 6.1 Corporate Existence..........................................7 6.2 Authority....................................................8 Article VII REPRESENTATIONS AND WARRANTIES OF PURCHASER..............8 7.1 Execution and Performance of Agreement.......................8 7.2 Binding Obligations; Due Authorization.......................8 7.3 No Brokers...................................................8 7.4 Investment Representations...................................8 (a) Accredited Investor Status..........................8 (b) Access to Information...............................8 (c) Experience..........................................8 (d) Investment Intent...................................9 7.5 Nature of Shares.............................................9 (a) No SEC or State Registration........................9 7.6 Litigation...................................................9 7.7 Disclosure...................................................9 Article VIII COVENANTS................................................9 8.1 Best Efforts.................................................9 8.2 Right of Access..............................................9 8.3 Preservation of Business; Notice of Change..................10 Article IX CONDITIONS..............................................10 9.1 Conditions Precedent to Obligations of Purchaser............10 9.2 Conditions Precedent to Obligations of Agritope.............10 Article X OTHER MATTERS...........................................11 10.1 Notices.....................................................11 BOUCKAERT - 2 - 135741-0014/062599/PDXDOCS:1092296.2 10.2 Amendments and Waiver.......................................12 10.3 Expenses....................................................12 10.4 Headings....................................................12 10.5 Counterparts................................................12 10.6 Parties in Interest; Assignment.............................12 10.7 Entire Agreement............................................12 10.8 Severability................................................12 10.9 Attorney Fees...............................................12 10.10 Survival....................................................12 10.11 Form of Public Disclosures..................................12 10.12 Cumulative Rights and Remedies..............................13 10.13 No Third-Party Beneficiaries................................13 10.14 Dispute Resolution..........................................13 (a) Conduct............................................13 (b) Decision...........................................13 (c) Costs..............................................13 10.15 Governing Law...............................................13 BOUCKAERT - 3 - 135741-0014/062599/PDXDOCS:1092296.2 THIS STOCK PURCHASE AGREEMENT (this "Agreement") is entered into as of June 1, 1999, among AGRITOPE, INC., an Oregon corporation ("Agritope"), VINIFERA, INC., an Oregon corporation ("Vinifera"), and the purchaser listed on SCHEDULE 1 ("Purchaser"). RECITALS A. Purchaser wishes to purchase from Agritope [ ] shares of Vinifera Common Stock (the "Shares") according to the schedule and at the prices per share specified in Exhibit A. Agritope wishes to sell the Shares to Purchaser on the terms and conditions set forth below. B. Capitalized terms not otherwise defined have the meanings given in Article I. AGREEMENT The parties agree as follows: ARTICLE I DEFINITIONS 1.1 DEFINITIONS. As used in this Agreement, the following terms have the meanings set forth below: (a) "Closing" means a closing of the purchase and sale of a portion of the Shares according to the schedule set forth in EXHIBIT A. (b) "Common Stock" means the Common Stock of Vinifera, no par value. (c) "Financial Statements" means Vinifera's Balance Sheet dated as of May 31, 1999, Statement of Operations for the eight-month period ending May 31, 1999, Statement of Shareholders' Equity for the eight-month period ending May 31, 1999, and the Statement of Cash Flows for the eight-month period ending May 31, 1999, each of which have been prepared for Vinifera's internal use, copies of which are attached as EXHIBIT B and which shall be updated as provided in this Agreement. (d) "First Anniversary Closing Date" means the date of Closing in year 2000 for the portion of the Shares specified in EXHIBIT A. (e) "Initial Closing Date" means the date of Closing in year 1999 for the portion of the Shares specified in EXHIBIT A. (f) "Preferred Stock" means the Preferred Stock of Vinifera. (g) "Second Anniversary Closing Date" means the date of Closing in year 2001 for the portion of the Shares specified in EXHIBIT A. (h) "Securities Act" means the Securities Act of 1933, as amended. BOUCKAERT - 1 - 135741-0014/062599/PDXDOCS:1092296.2 (i) "Third Anniversary Closing Date" means the date of Closing in year 2002 for the portion of the Shares specified in EXHIBIT A. (j) "Voting Stock" means the outstanding shares of Common Stock, Preferred Stock entitled to vote in an election of directors, and Preferred Stock convertible into Common Stock. ARTICLE II PURCHASE AND SALE OF SHARES 2.1 SALE OF SHARES. Upon the terms and conditions of this Agreement, Agritope shall sell and transfer the Shares to Purchaser and Purchaser shall purchase the Shares from Agritope for a total purchase price of [ ]. 2.2 TIMING OF SALE. The Shares shall be purchased and sold in four annual installments according to the schedule and at the prices per share specified in Exhibit A. 2.3 OPTION TO RETAIN SHARES. Notwithstanding anything to the contrary contained herein, Agritope shall have no obligation to sell to Purchaser the portion of the Shares that would otherwise be transferred to Purchaser on any Closing Date if (i) prior to the transfer of such shares, Agritope owns less than a majority of the Voting Stock of Vinifera or (ii) as a result of the transfer of such shares, together with all shares that Agritope has agreed to transfer to other purchasers on such date, Agritope will own less than a majority and more than 19 percent of the outstanding Voting Stock of Vinifera. ARTICLE III CLOSING 3.1 CLOSING. The sale of the Shares shall be consummated at a series of Closings on a date and on successive anniversaries of that date as agreed by the parties. The closing date for consummating the sale of the portion of the Shares to be purchased in 1999 (the "Initial Closing Date") shall occur not later than July 15, 1999. Successive closing dates as contemplated by the schedule in Exhibit A shall occur on the first, second and third anniversaries of the Initial Closing Date ("First Anniversary Closing Date," "Second Anniversary Closing Date," and "Third Anniversary Closing Date"). If the anniversary of the Initial Closing Date falls on a Saturday, Sunday, or holiday, the Closing shall be continued to the next business day following the anniversary. 3.2 ACTIONS AT CLOSINGS. At each Closing: (a) Purchaser shall pay Agritope the portion of the purchase price for the portion of the Shares specified in EXHIBIT A. Purchaser shall pay the portion of the purchase price by wire transfer in United States dollars. (b) Agritope shall deliver to Purchaser stock certificates representing the portion of the Shares specified in EXHIBIT A. BOUCKAERT - 2 - 135741-0014/062599/PDXDOCS:1092296.2 (c) The parties shall take all other actions that they deem necessary or desirable to consummate the purchase and sale of the portion of the Shares hereunder. ARTICLE IV RESTRICTIONS ON TRANSFER 4.1 GENERAL. Voting Stock may not be transferred by Purchaser or any subsequent transferee, except to a transferee who agrees to comply with all restrictions on transfer of Voting Stock provided for in this Agreement and the certificates for Voting Stock and all other restrictions of this Agreement applicable by their terms to transferees. Any purported transfer in violation of the preceding sentence shall be void. 4.2 SECURITIES LAW COMPLIANCE. The holder of Voting Stock shall not offer, sell, transfer, pledge, or otherwise dispose of Voting Stock in violation of any applicable securities or other laws of a governmental authority having jurisdiction over such disposition. 4.3 VOLUNTARY TRANSFERS. If Purchaser wishes to transfer any Voting Stock, Purchaser must first offer to transfer the Voting Stock to Vinifera. The offer shall be made by giving Vinifera written notice of the proposed transfer (the "Proposed Transfer Notice"). The Proposed Transfer Notice must state (i) that Purchaser intends to transfer the Voting Stock; (ii) the number of shares of Voting Stock involved in the proposed transfer; (iii) the terms of the proposed transfer, including the name and address of the proposed transferee; and (iv) the price per share and the terms of payment. The Proposed Transfer Notice shall constitute an offer to transfer the Voting Stock to Vinifera at the price and on the terms of the proposed transfer. 4.4 INVOLUNTARY TRANSFERS. (a) DEATH. If Purchaser is an individual, upon Purchaser's death, Purchaser (or Purchaser's personal representative, whether or not properly qualified) shall be deemed to have made an offer to sell to Vinifera all of Purchaser's Voting Stock for its fair market value as determined by Vinifera's board of directors; provided, however, that no such offer shall be deemed made if Purchaser's Voting Stock will be transferred solely to Purchaser's spouse or children as a result of Purchaser's death and such persons make the agreement required of transferees under Section 4.1. (b) INVOLUNTARY LIFETIME TRANSFER. If Purchaser (a) becomes a debtor under the United States Bankruptcy Code (voluntarily or involuntarily) or any similar foreign law; or (b) makes a general assignment for the benefit of creditors or permits any of Purchaser's Voting Stock to be attached or levied upon or to become subject to judicial sale or execution of judgment; or (c) would, but for this Agreement, be required to involuntarily transfer Voting Stock as a result of any other event; Purchaser shall be deemed, immediately before such event occurs, to have made an offer to sell to Vinifera all of the Voting Stock then owned by Purchaser for its fair market value as determined by Vinifera's board of directors. BOUCKAERT - 3 - 135741-0014/062599/PDXDOCS:1092296.2 4.5 ACCEPTANCE OF OPTION TO PURCHASE. (a) OPTION PERIOD. For 30 days after Vinifera receives a Proposed Transfer Notice or learns of an event giving rise to an option to purchase Voting Stock under Section 4.4 (the "Option Period"), Vinifera shall have the option to purchase some or all of the offered Voting Stock. The decision whether to exercise the option shall be made by Vinifera's board of directors or, if a disinterested quorum of the board of directors cannot be convened, at a special shareholders' meeting. If the decision is made at a special shareholders' meeting, Purchaser hereby grants an irrevocable proxy to the remaining shareholders to vote Purchaser's Voting Stock in accordance with the majority of the other votes cast, excluding Purchaser's Voting Stock. (b) ELECTION. Vinifera may elect to purchase any of the offered Voting Stock by giving written notice to Purchaser within the Option Period specifying the number of shares of Voting Stock that Vinifera is electing to purchase and the total purchase price of the shares. 4.6 PAYMENT AND TRANSFER OF SHARES. Vinifera shall designate a transfer date, which shall be within 30 days after the Option Period (the "Transfer Date"). On the Transfer Date, the Purchaser or Purchaser's legal representative must transfer and deliver the certificates for the Voting Stock, duly endorsed for transfer, to Vinifera. On the Transfer Date, Vinifera must pay the purchase price for the Voting Stock to Purchaser. 4.7 POWER OF ATTORNEY. Purchaser irrevocably appoints each vice-president of Vinifera as Purchaser's agent and attorney-in-fact, with full power of substitution, for the limited purpose of effecting the transfer of Voting Stock purchased by Vinifera under this Agreement. If, after tender to Purchaser on or before the Transfer Date of the purchase price for the Voting Stock, Purchaser does not deliver to Vinifera the Voting Stock to be transferred, any vice-president, as Purchaser's agent and attorney-in-fact, may take all actions and may execute all documents necessary to effect the transfer of the Voting Stock to Vinifera. Upon the taking of such action and execution of such documents, Purchaser shall have no further interest in the Voting Stock transferred. Purchaser acknowledges and agrees that the granting of this power of attorney is coupled with an interest and shall survive Purchaser's death or disability, if Purchaser is an individual, and Purchaser's assignment of any interest in the Voting Stock. 4.8 REJECTION OF OFFER BY COMPANY. If Vinifera does not purchase Voting Stock offered in a Proposed Transfer Notice, the Voting Stock may be transferred to the proposed transferee within three months after the Option Period subject to the following conditions: (i) the transferee must become a party to this Agreement; (ii) the transferee and the transferor must certify to Vinifera the terms of the transfer; and (iii) the transfer must be made at a price and on terms and conditions no more favorable to Purchaser than those specified in the Proposed Transfer Notice. If Vinifera does not purchase Voting Stock offered pursuant to Section 4.4, the Voting Stock may be transferred within six months after the Option Period in connection with the event giving rise to Vinifera's purchase option, subject to the condition that the transferee must become a party to this Agreement. If a transfer is not made within the applicable three- BOUCKAERT - 4 - 135741-0014/062599/PDXDOCS:1092296.2 month or six-month period, no transfer shall be made without again offering the Voting Stock as provided above. 4.9 LOCK-UP AGREEMENT. In the event of an underwritten public offering of the capital stock of Vinifera, Purchaser shall not transfer any Shares except pursuant to the registration statement filed with the Securities and Exchange Commission for the offering for a period of 15 days prior to and 180 days after the effective date of such registration statement without the underwriters' consent, provided that Agritope and any Vinifera directors and executive officers holding Voting Stock agree to similar transfer restrictions in connection with the offering. 4.10 CERTIFICATE LEGEND. Certificates for Purchaser's Voting Stock shall bear substantially the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER RESTRICTIONS SET FORTH IN A STOCK PURCHASE AGREEMENT AMONG AGRITOPE, INC., VINIFERA, INC., AND PURCHASER, DATED JUNE 1, 1999. 4.11 PURCHASER'S RIGHT OF FIRST REFUSAL. (a) DURATION OF RIGHT. Agritope shall provide Purchaser with the rights set forth in this Section 4.11 for the period beginning on the day after the Initial Closing Date and ending on the earliest to occur of (i) the Third Anniversary Closing Date, (ii) the date on which shares of capital stock of Vinifera are publicly traded, and (iii) the date on which Agritope owns less than a majority of the Voting Stock of Vinifera. (b) RESTRICTION ON SALE OF SHARES. During the period described in Section 4.11(a), Agritope shall not sell any shares of Voting Stock for less than $2.50 per share to any party other than a current holder of Voting Stock, if as a result of such sale Agritope would own less than a majority of the Voting Stock, unless Agriope shall have first communicated to Purchaser, by written notice, a written offer ("Agritope's Offer") to sell an amount of such shares to Purchaser in proportion to the percentage of votes Purchaser is entitled to cast. The notice shall specify the consideration and general terms and conditions upon which Agritope is willing to sell such shares. (c) ACCEPTANCE OF OFFER. Purchaser shall have a period (the "Acceptance Period") of 30 days from the effective date of the notice of Agritope's Offer to give Agritope written notice of acceptance. If Agritope's Offer is accepted, the parties shall use their best efforts in good faith to negotiate and execute definitive agreements in accordance with the terms of Agritope's Offer by the date occurring 30 days following acceptance or by such later date as may be specified in Agritope's Offer (the "Expiration Date"). BOUCKAERT - 5 - 135741-0014/062599/PDXDOCS:1092296.2 (d) SALE TO THIRD PARTY. If Purchaser does not accept Agritope's Offer within the Acceptance Period, or if mutually acceptable definitive agreements have not been negotiated and executed by Purchaser by the Expiration Date, Agritope may sell the shares offered to Purchaser to any other party pursuant to an agreement executed within 180 days following the earlier of the expiration of the Acceptance Period or the effective date of any written notice of rejection of Agritope's Offer by Purchaser. The agreement shall contain the same price, terms, and conditions as those specified in Agritope's Offer (or terms and conditions more favorable to Agritope). Nothing in this Section 4.11 shall restrict the issuance and sale to a third party of shares not required to be offered to Purchaser pursuant to Section 4.11(b). ARTICLE V REPRESENTATIONS AND WARRANTIES OF VINIFERA To induce Purchaser to purchase the Shares, Vinifera represents and warrants to Purchaser as follows: 5.1 ORGANIZATION, ETC. Vinifera is a corporation duly organized and validly existing under the laws of the state of Oregon. Vinifera has all requisite corporate power and authority to own its properties and carry on its business as now conducted. 5.2 AUTHORITY. Vinifera has all requisite corporate power and authority to execute, deliver, and perform this Agreement. This Agreement has been duly executed and delivered by Vinifera and is the valid, legal, and binding agreement of Vinifera, enforceable against Vinifera in accordance with its terms. No corporate proceedings on the part of Vinifera are necessary to authorize the execution, delivery, and performance of this Agreement by it. No consent of, approval by, filing with, or notice to any governmental authority or any other person or entity is required for Vinifera to execute, deliver, and perform this Agreement, other than those that have been obtained, made, or given. 5.3 CAPITALIZATION. The authorized capital stock of Vinifera consists of 10,000,000 shares of Common Stock and 10,000,000 shares of Preferred Stock, of which 5,000,000 shares have been authorized to be issued as Series A Preferred Stock. 6,458,269 shares of Common Stock and 1,440,000 shares of Preferred Stock are currently issued and outstanding. No right to purchase or acquire shares of any unissued capital stock of Vinifera or securities convertible into or exchangeable for such capital stock is authorized or outstanding, other than as set forth in Exhibit C. 5.4 VALID ISSUANCE; TITLE. The Shares are validly issued, fully paid, and nonassessable. Upon delivery to Purchaser of the certificates representing a portion of the Shares pursuant to this Agreement and the schedule in Exhibit A, Purchaser will have valid, marketable title to such portion of the Shares, free and clear of all encumbrances, other than restrictions on transfer described in this Agreement. 5.5 FINANCIAL STATEMENTS. The Financial Statements have been prepared in conformity with generally accepted accounting principles consistently applied, except for the BOUCKAERT - 6 - 135741-0014/062599/PDXDOCS:1092296.2 omission of footnotes, and fairly present the financial position and the results of operations at the date and for the year or period indicated. Since the date of the Financial Statements, there have been no material adverse changes in the condition of Vinifera, except that Vinifera continues to incur operating losses. 5.6 TAX MATTERS. Vinifera has filed all required federal, state, and other tax returns in a timely fashion and is not delinquent with respect to the payment of any federal, state, or other taxes. 5.7 ASSETS NEEDED FOR BUSINESS. Vinifera owns, leases, or otherwise has the right to use all assets necessary for its present business. 5.8 LITIGATION AND OTHER CONTINGENT LIABILITIES. There are no actions or proceedings pending or to the best of Vinifera's knowledge threatened against Vinifera or any of its properties or assets or outstanding judgments or orders to which Vinifera is subject, which adversely affect Vinifera's business, operations, or financial condition. There is no action or proceeding pending or to the best of Vinifera's knowledge threatened against Vinifera to restrain or prohibit the sale of the Shares to Purchaser. 5.9 ABSENCE OF CERTAIN ADVERSE EFFECTS. Neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (a) conflict with, result in any violation of, constitute a default under, or give rise to a right of acceleration or termination under, any provision of the articles of incorporation or bylaws of Vinifera or any agreement, mortgage, bond, indenture, agreement, franchise, or other instrument or obligation to which Vinifera is a party or by which it is bound, (b) result in the creation of any encumbrance upon any of the assets or properties of Vinifera, (c) violate any judgment or order against, or binding upon, Vinifera or upon the securities, assets, properties, or business of Vinifera, or (d) constitute a violation by Vinifera of any law. 5.10 NO BROKERS. Vinifera has not hired any broker or finder or incurred any liability for fees or commissions to any such person in connection with this Agreement. 5.11 DISCLOSURE. Except as disclosed herein, no representation or warranty by Vinifera contained in this Agreement contains any untrue statement of a material fact, or omits to state any material fact required to make the statements herein contained not misleading. All documents furnished to Purchaser or made available to Purchaser by or on behalf of Vinifera in connection with the acquisition of the Shares pursuant to this Agreement are true and complete originals or copies thereof and include all amendments, supplements, and modifications thereof and all material waivers thereunder. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF AGRITOPE Agritope represents and warrants to Purchaser as follows: 6.1 CORPORATE EXISTENCE. Agritope is a corporation duly organized and validly existing under the laws of the state of Delaware. BOUCKAERT - 7 - 135741-0014/062599/PDXDOCS:1092296.2 6.2 AUTHORITY. Agritope has all requisite corporate power and authority to execute, deliver, and perform this Agreement. This Agreement has been duly executed and delivered by Agritope and is the valid, legal, and binding agreement of Agritope, enforceable against Agritope in accordance with its terms. No corporate proceedings on the part of Agritope are necessary to authorize the execution, delivery, and performance of this Agreement by it. No consent of, approval by, filing with, or notice to any governmental authority or any other person or entity is required for Agritope to execute, deliver, and perform this Agreement, other than those that have been obtained, made, or given. ARTICLE VII REPRESENTATIONS AND WARRANTIES OF PURCHASER Purchaser represents and warrants to Agritope and Vinifera as follows: 7.1 EXECUTION AND PERFORMANCE OF AGREEMENT. If Purchaser is a corporation or other entity, Purchaser is duly organized and validly existing under the laws of the jurisdiction of its organization and has all requisite corporate power and authority to execute, deliver, and perform this Agreement. The execution, delivery, and performance of this Agreement by Purchaser will not conflict with any provision of its articles of incorporation or by-laws or similar charter documents (if Purchaser is a corporation or other entity) or with any undertaking, agreement, indenture, decree, order, or judgment by which Purchaser is bound and will not violate any law applicable to Purchaser. 7.2 BINDING OBLIGATIONS; DUE AUTHORIZATION. This Agreement constitutes the valid, legal, and binding obligation of Purchaser, enforceable against Purchaser in accordance with its terms. Purchaser is not required to obtain any consent of or approval by, to make any filing with, or to give any notice to, any governmental authority or any other person or entity for Purchaser to execute, deliver, and perform this Agreement. 7.3 NO BROKERS. Purchaser has not hired any broker or agent or incurred any liability for fees or commissions to any such person in connection with this Agreement. 7.4 INVESTMENT REPRESENTATIONS. (a) ACCREDITED INVESTOR STATUS. Purchaser is an "accredited investor" for purposes of the Securities Act as described on EXHIBIT D. (b) ACCESS TO INFORMATION. Purchaser has been given, a reasonable time before execution of this Agreement, the opportunity to ask questions and receive answers concerning Agritope and Vinifera, and the terms and conditions of the offering of the Shares and to obtain any additional information that Agritope or Vinifera possesses or can acquire without unreasonable effort or expense that is necessary to verify the accuracy of information furnished to Purchaser. Purchaser has received any such additional information that Purchaser has requested. (c) EXPERIENCE. Purchaser has sufficient knowledge and experience in financial and business matters to be capable of evaluating the merits and risks of BOUCKAERT - 8 - 135741-0014/062599/PDXDOCS:1092296.2 an investment in the Shares and has the ability to bear the economic risk of that investment. (d) INVESTMENT INTENT. Purchaser is acquiring the Shares for Purchaser's own account and not on behalf of any other person. Purchaser is not acquiring the Shares with a view to distribution or with the intent to divide Purchaser's participation with others by reselling or otherwise distributing the Shares, either directly or indirectly, other than in a registered offering. 7.5 NATURE OF SHARES. Purchaser is aware that: (a) NO SEC OR STATE REGISTRATION. The Shares will not be registered under federal or state securities laws when issued to Purchaser, must be held indefinitely unless they are registered or unless an exemption from registration is available, and will bear substantially the following legend: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER UNITED STATES FEDERAL OR STATE SECURITIES LAWS. THEY MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED, OR OTHERWISE TRANSFERRED UNLESS THE TRANSACTION IS REGISTERED OR UNLESS THE ISSUER IS FURNISHED A SATISFACTORY OPINION OF COUNSEL THAT REGISTRATION IS NOT REQUIRED. (b) NO OBLIGATION. Agritope and Vinifera have no obligation to register the Shares, comply with any exemptions from registration, or repurchase the Shares at any time. 7.6 LITIGATION. There is no action or proceeding pending or threatened against Purchaser before any court, other governmental body or arbitrator to restrain or prohibit the purchase of the Shares. 7.7 DISCLOSURE. No representation or warranty by Purchaser contained in this Agreement contains any untrue statement of a material fact, or omits to state any material fact required to make the statements herein not misleading. ARTICLE VIII COVENANTS 8.1 BEST EFFORTS. Each party shall use such party's good faith efforts to cause the transactions contemplated hereby to be consummated as soon as practicable. 8.2 RIGHT OF ACCESS. Throughout the period from the date hereof through the Initial Closing Date, Vinifera shall give Purchaser and Purchaser's representatives, including Purchaser's counsel and accountants, on reasonable notice, full access during normal business hours to all of Vinifera's properties, documents, contracts, books and records and such other information with respect to Vinifera's business affairs and properties as Purchaser may reasonably request. BOUCKAERT - 9 - 135741-0014/062599/PDXDOCS:1092296.2 8.3 PRESERVATION OF BUSINESS; NOTICE OF CHANGE. From the date hereof through the Initial Closing Date, (a) Vinifera shall use its best efforts to conduct its business in the usual and ordinary course consistent with past practice and all applicable laws and in a manner that will not breach any of Vinifera's representations, warranties, and covenants in this Agreement and (b) Vinifera shall preserve its business organization intact. ARTICLE IX CONDITIONS 9.1 CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER. The obligation of Purchaser to effect the Closing of each portion of the Shares specified in Exhibit A is subject to the satisfaction, or waiver by Purchaser, of each of the following conditions on or prior to the Closing relating to such portion: (a) All representations and warranties of Agritope and Vinifera contained in this Agreement shall be true and correct in all respects as of the Closing with the same effect as if such representations and warranties had been made or given at and as of the Closing, and all agreements, covenants and conditions to be performed or met by Agritope and Vinifera on or prior to the Closing shall have been so performed or met in all respects. (b) No action or proceeding shall have been instituted or threatened before any court, other governmental body or arbitrator (i) to restrain or prohibit the transactions contemplated by this Agreement, (ii) that might restrict the operation of Vinifera's business in any material respect if the purchase and sale of the Shares hereunder is consummated, (iii) that might restrict the ownership of the Shares or the exercise of any rights with respect thereto by Purchaser, or (iv) that might subject any of the parties hereto, to any liability, fine, forfeiture or penalty on the ground that any of the parties hereto has violated or will violate any applicable law in connection with the transactions contemplated hereby. (c) One month prior to the First Anniversary Closing Date, the Second Anniversary Closing Date, and the Third Anniversary Closing Date respectively, Vinifera shall deliver to Purchaser updated Financial Statements representing available financial information for the most-recent three-month period. 9.2 CONDITIONS PRECEDENT TO OBLIGATIONS OF AGRITOPE. The obligation of Agritope to effect the Closing of each portion of the Shares specified in Exhibit A is subject to the satisfaction, or waiver by Agritope, of each of the following conditions on or prior to the Closing: (a) All representations and warranties of Purchaser, Agritope, and Vinifera contained in this Agreement shall be true and correct in all respects as of the Closing with the same effect as if such representations and warranties had been made or given at and as of the Closing, and all agreements, covenants and conditions to be performed or met by Purchaser on or prior to the Closing have been so performed or met in all respects. BOUCKAERT - 10 - 135741-0014/062599/PDXDOCS:1092296.2 (b) No action or proceeding shall have been instituted or threatened before any court, other governmental body or arbitrator to restrain or prohibit the transactions contemplated in this Agreement or that might subject any of the parties hereto to any liability, fine, forfeiture or penalty on the ground that any of the parties hereto has violated or will violate any applicable law in connection with the transactions contemplated hereby. (c) The issuance and sale of the Shares shall not violate any applicable state, federal, or foreign securities laws. ARTICLE X OTHER MATTERS 10.1 NOTICES. Any notice, request, or demand under this Agreement shall be in writing and shall be deemed to have been duly given (i) upon personal delivery, (ii) upon fax transmission to the recipient at the fax number listed below, provided that a copy of the fax is promptly deposited for delivery by one of the methods listed in (iii) or (iv) below, (iii) ten days after deposit in the mails, if sent certified or comparable form of mail with return receipt requested, addressed to the recipient at the address listed below, or (iv) five days after deposit if deposited for delivery with a reputable courier or express service, addressed to the recipient at the address listed below: If to Vinifera: Vinifera, Inc. 4288 Bodega Road Petaluma, California 94952 Attention: President Fax: 707.773.0665 If to Agritope: Agritope, Inc. 16160 S.W. Upper Boones Ferry Road Portland, Oregon 97224-7744 Attention: President Fax: 503.670.7703 If to Purchaser: Purchaser's address listed on Schedule 1 A party may change its address or fax number for purposes of this Section 10.1 by giving the other parties notice of the change. BOUCKAERT - 11 - 135741-0014/062599/PDXDOCS:1092296.2 10.2 AMENDMENTS AND WAIVER. This Agreement may be amended or modified by, and only by, a written instrument executed by each of the parties hereto. The terms of this Agreement may be waived by, and only by, a written instrument executed by the party or parties against whom such waiver is sought to be enforced. 10.3 EXPENSES. Each party to this Agreement shall pay its own expenses (including, without limitation, the fees and expenses of such party's counsel incidental to the preparation of and consummation of this Agreement). 10.4 HEADINGS. The headings contained in this Agreement are for convenience of reference only and shall not in any way affect the meaning or interpretation of this Agreement. 10.5 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original and all of which shall constitute one and the same instrument. A facsimile transmission of a signed original shall have the same effect as delivery of the signed original. 10.6 PARTIES IN INTEREST; ASSIGNMENT. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective successors and permitted assigns. This Agreement shall not be assigned by any party hereto without the prior written consent of the other parties. 10.7 ENTIRE AGREEMENT. This Agreement, together with all exhibits hereto, constitutes the entire agreement and understanding between the parties hereto relating to the subject matter hereof and supersedes any prior agreements and understandings relating to such subject matter. 10.8 SEVERABILITY. If any restriction in this Agreement exceeds that permitted under applicable law, it shall be deemed modified to include the maximum permissible restriction. If any provision is nonetheless held unenforceable in any jurisdiction, the enforceability of this Agreement in any other jurisdiction and the enforceability of the remaining provisions in that jurisdiction shall not be affected. 10.9 ATTORNEY FEES. In the event any party shall seek enforcement of any covenant, warranty, indemnity, or other term or provision of this Agreement, the party that prevails in such enforcement proceeding shall be entitled to recover such reasonable costs and attorney fees which shall be determined by the arbitrator or court (including any appellate court). 10.10 SURVIVAL. All the respective representations, warranties, covenants, and other agreements of the parties hereunder or contained in any schedule or certificate given in connection herewith or contemplated hereby shall survive the Initial Closing Date and shall continue for the period ending on the Third Anniversary Closing Date, except as they may be fully performed prior to such time. 10.11 FORM OF PUBLIC DISCLOSURES. Purchaser shall not make any public disclosure concerning this Agreement and the transactions contemplated herein unless Vinifera and Agritope have approved in advance the form and substance thereof. BOUCKAERT - 12 - 135741-0014/062599/PDXDOCS:1092296.2 10.12 CUMULATIVE RIGHTS AND REMEDIES. All the rights and remedies provided to the parties under this Agreement are cumulative, and none is exclusive of any other right or remedy a party may have hereunder or under applicable law. 10.13 NO THIRD-PARTY BENEFICIARIES. Each party hereto intends that this Agreement shall not benefit or create any right or cause of action in or on behalf of any person or entity other than the parties hereto and their respective successors and permitted assigns. 10.14 DISPUTE RESOLUTION. (a) CONDUCT. Any dispute arising in connection with this Agreement shall be finally settled by arbitration referred to and conducted in accordance with the International Arbitration Rules of the American Arbitration Association, except as such rules may conflict with the provisions of this section in which event the provisions of this section shall control. Any party may be represented by counsel therein. Any such arbitration shall be conducted by a panel of one or more arbitrators selected in accordance with the International Arbitration Rules of the American Arbitration Association. The arbitration shall be conducted in English in Portland, Oregon, U.S.A. (b) DECISION. Any decision or award of the arbitral tribunal shall be final and binding upon the parties to the arbitration proceeding. The arbitral tribunal's decision shall include a reasonably detailed statement of the basis for the decision and computation of the award, if any. The parties waive any rights to appeal such award to or have it reviewed by any court or tribunal. The parties further agree to exclude any right of application or appeal to any court in connection with any question of law arising in the course of the arbitration. The award may be enforced against the parties to the arbitration proceeding or their assets wherever they may be found. Judgment upon the award may be entered in any court having jurisdiction thereof or an application may be made to such court for judicial acceptance of the award and an order of enforcement, as the case may be. (c) COSTS. Except as the arbitral tribunal may otherwise determine in its discretion, a party substantially prevailing in the arbitration shall be entitled to recover its attorney fees and costs, including the costs and expenses of its witnesses, and the other parties shall pay the fees, costs and expenses of the arbitral tribunal and the administering and appointing authority. 10.15 GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the substantive law (but not the conflict of law rules) of the state of Oregon. BOUCKAERT - 13 - 135741-0014/062599/PDXDOCS:1092296.2 The parties have executed this Agreement as of the date set forth above. AGRITOPE, INC. VINIFERA, INC. By By -------------------------------- --------------------------------- (Signature) (Signature) Gilbert N. Miller Gilbert N. Miller - ---------------------------------- ----------------------------------- (Print or type name) (Print or type name) Executive Vice President and Executive Vice President and Chief Financial Officer Chief Financial Officer - -------------------------------------------------------------------------------- (Title) (Title) - -------------------------------- (PURCHASER) By By -------------------------------- --------------------------------- (Signature) (Signature) - ---------------------------------- ----------------------------------- (Print or type name) (Print or type name) - ---------------------------------- ----------------------------------- (Title) (Title) BOUCKAERT - 14 - 135741-0014/062599/PDXDOCS:1092296.2 SCHEDULE 1 ---------- PURCHASER INFORMATION Name of Purchaser: Authorized Signator: _______________________________ _______________________________ Address for Notices: BOUCKAERT 135741-0014/062599/PDXDOCS:1092296.2 EXHIBIT A PURCHASE SCHEDULE
YEAR NUMBER OF SHARES PRICE PER SHARE TOTAL PRICE ---- ---------------- --------------- ----------- 1999 [ ] $1.65 $[ ] 2000 [ ] $2.00 $[ ] 2001 [ ] $2.50 $[ ] 2002 [ ] $2.50 $[ ] Total [ ] $[ ]
BOUCKAERT 135741-0014/062599/PDXDOCS:1092296.2 EXHIBIT B FINANCIAL STATEMENTS (See attached) BOUCKAERT 135741-0014/062599/PDXDOCS:1092296.2 EXHIBIT C RIGHTS TO ACQUIRE SHARES (1) Vinifera has adopted a stock award plan pursuant to which 2,000,000 shares of Common Stock are reserved for issuance pursuant to options and other rights that may be granted to officers, directors, employees, and agents of Vinifera. Options to purchase 625,000 shares of stock have been granted to certain employees and non-employee directors at prices ranging from $1.00 to $1.50, of which 228,750 shares are exercisable. (2) Vinifera has entered into a five-year employment agreement with its president pursuant to which the president has the right to receive incentive stock options to purchase 400,000 shares of Common Stock at a price per share equal to the fair market value of one share of common stock at the time the option is granted. To date, 200,000 options have been granted and are included in the amounts in item 1 above. The remaining options, if granted, would vest annually in two equal amounts in May 1999 and May 2000, dependent on the president's continued employment. (3) Holders of Vinifera Series A Preferred Stock have been granted rights of first refusal to purchase additional shares of capital stock that Vinifera issues in the future. BOUCKAERT 135741-0014/062599/PDXDOCS:1092296.2 EXHIBIT D Set forth below is a partial listing of persons who are "accredited investors" for purposes of the Securities Act: (1) Any organization described in Section 501(c)(3) of the Internal Revenue Code, corporation, Massachusetts or similar business trust, or partnership, not formed for the specific purpose of acquiring the securities offered, with total assets in excess of $5,000,000; (2) Any natural person whose individual net worth, or joint net worth with that person's spouse, at the time of his or her purchase exceeds $1,000,000; (3) Any natural person who had an individual income in excess of $200,000 in each of the two most recent years or joint income with that person's spouse in excess of $300,000 in each of those years and has a reasonable expectation of reaching the same income level in the current year; (4) Any bank as defined in Section 3(a)(2) of the Securities Act or any savings and loan association or other institution as defined in Section 3(a)(5)(A) of the Securities Act; (5) Any broker-dealer registered pursuant to Section 15 of the Securities Exchange Act of 1934; (6) Any insurance company as defined in Section 2(13) of the Securities Act; (7) Any investment company registered under the Investment Company Act of 1940 or a business development company as defined in Section 2(a)(48) of that act; (8) Any Small Business Investment Company licensed by the U.S. Small Business Administration under Section 301(c) or (d) of the Small Business Investment Act of 1958; (9) Any private business development company as defined in Section 202(a)(22) of the Investment Advisers Act of 1940; and (10) Any entity in which all of the equity owners are accredited investors. BOUCKAERT 135741-0014/062599/PDXDOCS:1092296.2 EX-10.32 6 FIRST AMENDMENT TO LEASE OF LAND FIRST AMENDMENT TO LEASE OF LAND AND ------------------------------------ IMPROVEMENTS LOCATED AT 4288 BODEGA AVENUE ------------------------------------------ This First Amendment to Lease of Land and Improvements Located at 4288 Bodega Avenue (this "First Amendment") is made and entered into as of April 27, 1999, by and between GIANNI NEVE and MARIA NEVE (COLLECTIVELY, "Landlord" without regard to number or gender) and VINIFERA, INC. ("Tenant"). RECITALS -------- A. Landlord is the owner of all of that certain real property commonly known as 4288 Bodega Avenue, Petaluma, California 94952 (the "Property"). B. Landlord and Tenant entered into a written lease dated as of February 1, 1996 (the "Lease"), whereby Landlord leased the Property to Tenant for a five (5) year term, commencing on February 1, 1996 and expiring on January 31, 2001, at a rental of Twelve Thousand Five Hundred Dollars ($12,500.00) per month. C. Pursuant to Article 22 of the Lease, Landlord granted an option to purchase to Tenant (the "Original Option") exercisable by Tenant during the period February 1, 1996 through January 31, 1999. The Lease referred to and incorporated an option agreement dated as of February 1, 1996 (the "Original Option Agreement") and a purchase and sale agreement and escrow instructions dated as of February 1, 1996 (the "Purchase and Sale Agreement"). Pursuant to the Original Option Agreement, Landlord and Tenant recorded a Memorandum of Option to Purchase on May 7, 1996, in the Official Records of Sonoma County, Document No. 1996 0040886 (the "Original Memorandum of Option"). D. Tenant duly exercised the Original Option on January 30, 1999. Subsequent to the exercise of the Original Option, Landlord requested Tenant to delay the purchase of the Property until February 1, 2001 for personal and financial reasons. E. Landlord and Tenant now wish to amend the Lease to extend the initial term, increase the Rent and grant Tenant a new Option to Purchase in accordance with the Option Agreement and Purchase and Sale Agreement attached hereto as EXHIBITS "A" AND "B", respectively. AGREEMENT --------- NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and 1 sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree to and do hereby amend the Lease in the following respects: 1. DEFINED TERMS. All undefined terms used herein shall have the same respective meanings as are given to them in the Lease, unless expressly provided otherwise by the terms of this First Amendment. 2. LEASE TERM. The initial term of the Lease is hereby extended to and including January 31, 2003. 3. OPTIONS TO EXTEND. Landlord and Tenant hereby acknowledge that the two (2) five (5) year Options to Extend contained in Article 20 of the Lease shall remain in full force and effect. The first Option to Extend, if exercised by Tenant, will commence on February 1, 2003. The Base Rent for each year of the first five (5) year extension shall be one hundred five percent (105%) of the Base Rent for the last year of the original term of the Lease. The Base Rent for each year of the second five (5) year extension shall be one hundred five percent (105%) of the Base Rent for the last year of the first five (5) year extension. 4. OPTION TO PURCHASE. Article 22 of the Lease is hereby deleted in its entirety and replaced with the following: Landlord grants to Tenant the Option to Purchase the Property in accordance with the provisions of the Option Agreement and the Purchase and Sale Agreement attached hereto as EXHIBITS "A" AND "B", respectively, which now replace EXHIBITS "C" AND "D" attached to the Lease. The Option to Purchase shall be exercisable by Tenant during the period February 1, 2001 to and including February 2, 2003 (the "Option Period"). 5. BASE RENT. The Base Rent payable by Tenant pursuant to the Lease shall be increased two percent (2%) per year commencing on February 1, 1999, as follows: PERIOD MONTHLY BASE RENT ------ ----------------- May 1, 1999 through January 31, 2000 $12,750.00 February 1, 2000 through January 31, 2001 $13,005.00 February 1, 2001 through January 31, 2002 $13,265.00 February 1, 2002 through January 31, 2003 $13,530.00 6. ADDITIONAL SPACE. Landlord agrees to rent two units (the "Two Units") of the house structure located on the Property not occupied by Landlord to Tenant free of all tenants. Landlord shall be allowed to occupy the area in the house structure currently being occupied by Landlord during the term of this Lease. Landlord shall remove the tenants from the Two Units at Landlord's sole cost. Tenant shall pay rent to Landlord for the Two Units in the amount of Five Hundred Dollars ($500.00) per unit with the rent obligation to begin on delivery of possession. The lease for the Two Units shall provide in part that the units are leased "As-Is" and Tenant shall bear sole responsibility to maintain the premises. 2 7. MISCELLANEOUS. a. Except as modified herein, the Lease shall remain unmodified and in full force and effect. b. The provisions of this First Amendment shall bind and inure to the benefit of the heirs, representatives, successors and permitted assigns of the Parties hereto. c. This First Amendment may be executed in several counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and same Agreement. d. The Parties agree to cooperate with one another and to execute any additional documents necessary to reflect the agreements contained herein. IN WITNESS WHEREOF, this First Amendment has been executed as of the day and year first written above. LANDLORD: TENANT: /s/ Gianni Neve VINIFERA, INC. - --------------------------- GIANNI NEVE By: /s/ J. Bouckaert ------------------------------ /s/ Maria Neve Joseph Bouckaert - --------------------------- MARIA NEVE Its: J. Bouckaert, President _ ------------------------------ By: /s/ J. Bouckaert ------------------------------ Joseph Bouckaert Its: J. Bouckaert, Secretary ------------------------------ 3 EXHIBIT "A" ----------- LEGAL DESCRIPTION OF PROPERTY ----------------------------- LEGAL DESCRIPTION OF PROPERTY ----------------------------- PARCEL ONE: COMMENCING AT A POINT ON THE COUNTY HIGHWAY LEADING FROM PETALUMA TO BLOOMFIELD, SAID POINT BEING THE MOST SOUTHEASTERLY CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS AT PAGE 56, SONOMA COUNTY RECORDS; RUNNING THENCE DUE NORTH 800.43 FEET TO THE POINT OF COMMENCEMENT; THENCE RUNNING FROM SAID POINT OF COMMENCEMENT DUE NORTH 452 FEET; THENCE RUNNING NORTH 89o 26' 10" WEST 385 FEET; THENCE RUNNING SOUTH 0o 3' 30" EAST 452 FEET; THENCE RUNNING SOUTH 89o 26' 10" EAST 384 FEET TO THE POINT OF COMMENCEMENT. PARCEL TWO: COMMENCING AT THE SOUTHEAST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS AT PAGE 56, SONOMA COUNTY RECORDS. RUNNING THENCE FROM SAID POINT OF BEGINNING ALONG THE EASTERLY BOUNDARY OF SAID LANDS NORTH 800.43 FEET; THENCE NORTH 89o 26' 10" WEST 192.13 FEET; THENCE SOUTH 690.21 FEET AND THENCE SOUTH 59o 42' 20 " EAST 222.25 FEET TO THE POINT OF BEGINNING. EXCEPTING THEREFROM THE FOLLOWING DESCRIBED PARCEL: BEGINNING AT THE SOUTHEAST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS AT PAGE 56, SONOMA COUNTY RECORDS. FROM SAID POINT OF BEGINNING RUNNING NORTH 326.23 FEET; THENCE NORTH 89o 26' 10" WEST 192.13 FEET; THENCE SOUTH 216. 01 FEET; THENCE SOUTH 59o 42' 20" EAST 222.25 FEET TO THE POINT OF BEGINNING. PARCEL THREE: COMMENCING AT THE SOUTHWEST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS AT PAGE 56, SONOMA COUNTY RECORDS; RUNNING THENCE FROM SAID POINT OF BEGINNING ALONG THE WEST BOUNDARY OF SAID LANDS NORTH 0o 03' 30" WEST 580 FEET; THENCE SOUTH 89o 26' 10" EAST 192.13 FEET; THENCE SOUTH 690.21 FEET; THENCE NORTH 59o 42' 20" WEST 222.25 FEET TO THE POINT OF BEGINNING. EXHIBIT "B" ----------- PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS --------------------------------------------------- PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS --------------------------------------------------- THIS PURCHASE AND SALE AGREEMENT AND ESCROW INSTRUCTIONS (the "Agreement") is made as of April ___, 1999, by and between Gianni Neve and Maria Neve (COLLECTIVELY, "Seller" without regard to number or gender) and Vinifera, Inc., a California corporation "Buyer"). ARTICLE I RECITALS -------- This Agreement is entered into with reference to facts as follows: A. Buyer agrees to purchase from Seller and Seller agrees to sell to Buyer that certain real property commonly known as 4288 Bodega Avenue, Petaluma, California 94952, as described in EXHIBIT "A" attached hereto and incorporated herein, including all tangible and intangible personal property now or hereafter located on or about the property or used in connection with the property, including, without limitation, all governmental permits, approvals, authorizations, declarations and applications therefor obtained or filed in connection with the property, all agreements, understandings, reports, plans, maps, bonds, deposits, fees, studies, notices and other materials prepared, given, filed, or used, or to be used in connection with the property and all contracts, if any, entered into by Seller and approved by Buyer, which shall affect directly or indirectly the property (the "Property"). B. This Agreement is entered into as a result of the exercise by Buyer of an option to purchase the Property as provided in the Option Agreement dated February 1, 1999, between Seller and Buyer ("the Option"). NOW, THEREFORE, IN CONSIDERATION OF THE MUTUAL COVENANTS AND PROMISES OF THE PARTIES HERETO, AND OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND SUFFICIENCY OF WHICH IS HEREBY ACKNOWLEDGED, THE PARTIES HERETO AGREE AS FOLLOWS: 1.1 PURCHASE PRICE. The purchase price (the "Price") for the Property is One Million, Three Hundred Thousand and No/100 Dollars ($1,300,000.00) payable BY Buyer at THE close of escrow. 1.2 ESCROW. Within five (5) business days after the exercise of the Option, an escrow (the "Escrow") shall be opened with Chicago Title Company, 1101 College Avenue, 1 Santa Rosa, CA 95404 ("Chicago Title") (the "Escrow Holder"), or at such other title company acceptable to Seller and Buyer. This Agreement shall constitute escrow instructions to the Escrow Holder. Seller and Buyer shall execute such additional escrow instructions as may be reasonably required by Escrow Holder. 1.3 TERM OF ESCROW. Escrow shall close within ninety (90) days following the exercise of the Option. The close of Escrow ("Close of Escrow") shall mean the date upon which the grant deed from Seller to Buyer is recorded in the Sonoma County Recorder's Office. ARTICLE II CONDITIONS TO BUYER'S OBLIGATION -------------------------------- Buyer's obligations hereunder shall be contingent upon satisfaction of all of the matters listed as follows: 2.1 TITLE. Chicago Title's issuance of an ALTA Extended Owner's Coverage Form Policy of Title Insurance with endorsements selected by Buyer (the "ALTA Policy"), with liability in the amount of the Price, showing title to the Property vested in Buyer, subject only to those exceptions approved by Buyer within thirty (30) days after the delivery to Buyer through Escrow of the Preliminary Report and legible copies of the exceptions of record; and also subject to those exceptions approved by Buyer within ten (10) days after Buyer's receipt of any ALTA supplemental title report. Escrow Holder is instructed to order immediately the Preliminary Report together with legible copies of all documents referred to therein. Seller agrees to convey title to the Property to the Buyer at close of Escrow free and clear of all monetary liens and encumbrances, excluding those items approved by Buyer. If Seller does not remove one or more such monetary encumbrances, liens or claims, in addition to all other remedies Buyer may have at law or in equity, Buyer may close Escrow on the scheduled closing date and offset dollar for dollar against the Price an amount equal to such monetary encumbrances, liens or claims. Seller shall convey title to the Property subject only to: 1) real estate taxes not yet due, and 2) covenants, conditions, restrictions, rights of way, and easements of record, if any, which do not materially affect the value or intended use of the Property. 2.2. HAZARDOUS AND/OR TOXIC WASTES. Buyer shall have the right, but not the obligation, to determine, at its sole cost, whether hazardous or toxic wastes, underground storage tanks, substances, chemicals, solvents, asbestos, PCB's or any environmental conditions exist on or under the Property of any type, quantity or nature whatsoever which violate or may violate in any way any local, state or federal law, ordinance, rule or regulation for the protection of the environment or otherwise, or which would require further environmental testing or remediation by Seller. These provisions shall be liberally construed for the benefit of Buyer, and Buyer may rely on advice of its environmental consultants and counsel to determine whether or not it can 2 satisfy this environmental contingency and condition to the Close of Escrow. If Buyer determines that the foregoing environmental contingency and condition to the Close of Escrow require remediation, Buyer shall provide written notice thereof to Seller and Seller shall, at its sole cost up to and including the sum of One Hundred Thousand and No/100 Dollars ($100,000), so remediate. If the cost of said remediation exceeds One Hundred Thousand and No/ 100 Dollars ($100,000), then Seller has no obligation to so remediate, and Buyer may, at Buyer's sole election: (1) continue with the purchase of the Property and receive a credit from Seller against the Purchase Price in the amount of One Hundred Thousand and No/100 Dollars ($100,000); or (2) terminate this Agreement without any further liability on the part of Buyer. If any remediation is undertaken pursuant to this Paragraph 2.2, Close of Escrow shall be delayed until certificates of compliance regarding such remediation have been issued from all appropriate government agency(ies). 2.3 SELLER'S REPRESENTATIONS AND WARRANTIES. Seller's representations and warranties as set forth in Article 5 herein shall be true and correct as of the Close of Escrow. All conditions to the Close of Escrow, or to Buyer's obligations hereunder, are for Buyer's benefit only, and Buyer may waive all or any part of such rights by written notice to Seller and Escrow Holder. ARTICLE III CLOSING ------- 3.1 DOCUMENTS TO BE DELIVERED. At the Close of Escrow, Seller shall deliver to Buyer through Escrow original documents, which shall be in a form satisfactory to Buyer's counsel, as follows: (A) A grant deed (the "Grant Deed") conveying the Property to Buyer; (B) An assignment of all guaranties and warranties relating to the Property, and a bill of sale (the "Bill of Sale") of the equipment and fixtures therein, if any; and (C) All contracts affecting the Property, if any. At the Close of Escrow, the Escrow Holder shall cause the Grant Deed to be recorded in the Official Records of the Sonoma County Recorder's Office, and shall cause the Bill of Sale and the ALTA Policy to be delivered to Buyer. 3 3.2 CLOSING COSTS AND PRORATIONS. Buyer shall be credited and Seller charged with security deposits or advance rentals made by Buyer under the Lease between Buyer and Seller dated as of February 1, 1996, as amended (the "Lease"). Escrow holder shall prorate the following between the parties as of the Close of Escrow: (a) real estate takes and personal property taxes for the year in which the sale closes; (b) rent payments under the Lease; (c) charges and fees paid or payable under service contracts which are assigned to Buyer; (d) premiums payable under insurance assigned to Buyer at Buyer's request.; (e) and all other items which are customarily prorated. All prorations shall be based on a thirty (30) day month. Escrow Holder is to assume that all rents have been collected unless otherwise advised by Seller. 3.3 UTILITIES. Seller shall have all meters read and final bills rendered for all utilities servicing the Property, including, without limitation, water, sewer, gas and electricity, for the period to and including the day preceding the Close of Escrow, and Seller shall pay such bills. Buyer shall arrange for utility service to the Property after the Close of Escrow. 3.4 POSSESSION. Possession of the Property shall be given to Buyer at Close of Escrow. ARTICLE IV EXPENSES -------- 4.1 EXPENSES OF SELLER. Seller shall pay: (a) the documentary transfer tax applicable to this transaction; (b) the premium for a CLTA owner's title insurance policy; (c) one-half the Escrow fees; (d) expenses of clearing title; and (e) other costs or expenses not expressly provided for herein which a-re customarily paid by the seller in similar transactions. 4.2 EXPENSES OF BUYER. Buyer shall pay: (a) all recording charges on any document recorded pursuant to this Agreement; (b) the difference between the premium for the ALTA Policy and the premium for a CLTA owner's title insurance policy; (c) the cost of any title endorsements requested by Buyer; (d) any costs associated with obtaining the consent of the holder of the existing loan to the transfer of the Property without accelerating or modifying the loan or the costs of obtaining a new loan and (e) one-half the Escrow fees. 4 ARTICLE V SELLER' S REPRESENTATIONS AND WARRANTIES ---------------------------------------- Seller represents, warrants and covenants, each of which shall be true in all respects as of the date of this Agreement and as of the date of Close of Escrow and shall survive the Close of Escrow and shall not merge with any deed, as follows: 5.1 FIXTURES AND PERSONAL PROPERTY. Seller shall not remove any fixtures or personal property from the Property. 5.2 ENVIRONMENTAL REPRESENTATION AND WARRANTIES. To the best of Seller's knowledge: (A) Throughout the period of ownership of the Property by Seller and prior to February 1, 1996, there have been no notices, directives, violation reports or actions by any local, state or federal department or agency concerning environmental law or regulations; (B) All underground storage tanks (the "USTs") will be removed from the Property prior to Close of Escrow by Seller at Seller's sole cost and expense and certificates of compliance as to removal of all the USTs from the appropriate governmental agency(ies) will be issued to Buyer; (C) There are no soil or geological conditions which might impair or adversely affect the current use or future plans for use of the Property; (D) None of the Property is located in an area identified by an agency or department of federal, state or local governments, or identified by Seller, as having special flood or mudslide hazards or wetlands; (E) The business and operations of Seller have at all times been conducted in compliance in all material respects with all applicable local, state, federal and/or foreign laws, ordinances, regulations, orders and other requirements of governmental authorities in matters relating to the environment; (F) There has been no spill, discharge, release, cleanup or contamination of or by any hazardous or toxic waste or substance used, generated, treated, stored, disposed of or handled by the Seller at the Property; (G) No hazardous or toxic substances or wastes are located at, or have been removed from the Property; and 5 (H) There are no writs, injunctions, decrees, orders or judgments outstanding, or any actions, suits, claims, proceedings or investigations pending or, to Seller's knowledge, threatened, relating to compliance with or liability under any Environmental Law affecting the Property. 5.3 DOCUMENTS. Seller shall deliver true, accurate and complete copies of contracts, surveys, drawings, plans and specifications describing the Property and known by Seller to exist. No documents supplied to Buyer by Seller contains any untrue statement of material fact or fails to state any fact, which would be necessary, considering the circumstances, to make the documents supplied not misleading. 5.4 EXPENSES. At Close of Escrow, there will be no outstanding expenses not fully paid, except those expenses previously approved by Buyer in writing. 5.5 CLAIM AGAINST THE PROPERTY. Seller has no knowledge of any pending or threatened claim or litigation against the Property and Seller has not received any notice from any governmental authority of defects in the Property or noncompliance with any applicable law, code or regulation. 5.6 AUTHORIZATION FOR EXECUTION OF THE AGREEMENT. The persons executing this Agreement are authorized by the Seller to enter into the transaction described herein. 5.7 EXECUTION OF FURTHER CONTRACTS. During the Escrow period, Seller shall not enter into any new lease, option to lease or extension of an existing lease or any other contract or agreement pertaining to the Property unless Seller shall first send to Buyer for approval a copy of the document it proposes to sign. Buyer shall have three (3) business days after receipt of the document to object in writing to Seller's signing of the document. Any such objection shall, in the case of any lease, lease option or lease extension, not be unreasonable. Buyer's failure to respond shall be deemed approval. ARTICLE VI INDEMNIFICATION --------------- 6.1 INDEMNIFICATION. Seller and Seller's officers and directors agree to protect, indemnify, hold harmless and defend Buyer and any mortgagee, and each of their respective partners, directors, officers, agents and employees, successors and assigns, from and against: (A) Any and all loss, cost, damage, liability or expense as incurred (including but not limited to attorneys' fees and legal costs) arising out of or related to any 6 claim, suit or judgment brought by or in favor of any person or persons for damage, loss or expense due to, but not limited to, bodily injury, including death, or property damage sustained by such person or persons which arises out of, is occasioned by or is in any way attributable to the use or occupancy of the Property by Seller or the acts or omissions of Seller or its agents, employees, contractors, clients, invitees or subtenants except that caused by the sole active negligence of Buyer or its agents or employees. Such loss or damage shall include, but not be limited to, any injury or damage to, or death of, Buyer's employees or agents or damage to the Property. (B) Any and all environmental damages which arise from: (i) the handling of any hazardous and/or toxic wastes by Seller, as referred to in Paragraph 2.2 herein, or (ii) the breach of any of the provisions in this Agreement. For the purpose of this Agreement, "environmental damages" shall mean (a) all claims, judgments, damages, penalties, fines, costs, liabilities, and losses (including without limitation, diminution in the value of the Property, damages for the loss of or restriction on use of rentable or usable space or of any amenity of the Property; (b) all reasonable sums paid for settlement of claims, attorneys' fees, consultants' fees and experts' fees; and (c) all costs incurred by Buyer in connection with investigation or remediation relating to the handling of any hazardous and/or toxic wastes by Seller, as referred to in Paragraph 2.2 herein, whether or not required by any environmental laws, necessary for Buyer to make full economic use of the Property, or otherwise required under this Agreement. To the extent that Buyer is strictly liable under any environmental laws, Seller's obligation to Buyer and the other indemnities under the foregoing indemnification shall likewise be without regard to fault on Seller's part with respect to the violation of any environmental law which results in liability to the indemnitee. Seller's obligations and liabilities pursuant to this Section 6.1 shall survive the expiration or earlier termination of this Agreement and the Close of Escrow. ARTICLE VII MISCELLANEOUS ------------- 7.1 BROKER'S COMMISSION. Buyer and Seller acknowledge that, except as set forth herein, no broker's commission or finder's fee is payable in connection with this transaction; and each ("Indemnitor") agrees to indemnify and hold the other harmless from and against all liability, claims, demands, damages or costs of any kind whatsoever arising from or connected with any broker's or finder's fee, commission or charge claimed to be due any person arising from the Indemnitor's conduct with respect to this transaction. 7 7.2 CONDEMNATION AND CASUALTY. (A) If, before the Closing (as defined in the Purchase and Sale Agreement), Seller receives notice that the Property is to be wholly condemned, or to be condemned in such substantial part as would materially and adversely effect the Buyer's ability to operate its business on the Property, or if the Property is wholly destroyed by fire or other casualty, or if so much of the Property is damaged by fire or other casualty to the extent that the cost of repairing such damage shall amount to at least twenty-five percent (25%) of the Purchase Price as determined by the casualty insurer insuring the Property, then, in any such event, Buyer, in the event it has already exercised the Option, shall have the right to terminate this Agreement by delivering notice of such termination in writing to Seller within (30) days after receipt of notice of such condemnation or casualty, and Seller and Buyer shall each be released and discharged from any obligation to each other hereunder; provided, however, that if Buyer elects not to terminate this Agreement after it has exercised the Option, the purchase contemplated herein shall be consummated without reduction to the Purchase Price, but Buyer shall be entitled to all proceeds of fire or other casualty insurance or condemnation, and Seller shall have no responsibility for the restoration and repair of the Property. (B) If, prior to the Closing (assuming Buyer has exercised its Option), the Property is damaged by fire or other casualty to the extent that the cost of repairing or restoring the same shall be less than an amount equal to twenty-five percent (25%) of the Purchase Price or if Seller receives notice that the Property is to be partially condemned but without materially and adversely effecting Buyer's ability to operate its business on the remaining portion of the Property, then, in any such event, the Closing shall proceed as scheduled and Seller shall assign to Buyer the proceeds of any casualty insurance or any condemnation award, as the case may be, and Seller shall have no responsibility for restoration or repair of the Property. In the event all or a part of the Property is appropriated during the Option Period and Buyer elects not to proceed with the Closing, Buyer will have a compensable interest and a right to share in the condemnation award to the extent that the excess, if any, of the total award is above the Purchase Price. 7.3 ASSIGNMENT. Buyer may assign its rights under this Agreement, to any other person, firm or entity. 7.4 NOTICES. All notices, demands and requests which may be given by either party to the other, or to Escrow Holder, shall be in writing and shall be deemed served upon personal delivery or, alternatively, by mailing the same by registered or certified mail, postage prepaid, addressed to the party to be notified at the address as set forth in Paragraphs 7.25 and 7.26 herein, or addressed to such other address or addresses as either party may from time to time designate to the other in writing or, if addressed to Escrow Holder, at the address in Paragraph 8 1.2 herein. All notices to Escrow Holder shall make specific reference to the escrow number of the Escrow. Any notice shall be deemed to have been served at the time the same was posted. 7.5 INTENTIONALLY OMITTED. 7.6 ARHITRATION OF DISPUTES. ANY CONTROVERSY ARISING FROM THIS AGREEMENT OR ITS BREACH SHALL BE DETERMINED BY ONE (1) ARBITRATOR APPOINTED AS SET FORTH AS FOLLOWS: WITHIN TEN (10) DAYS AFTER A NOTICE BY EITHER PARTY TO THE OTHER REQUESTING ARBITRATION AND STATING THE BASIS OF THE PARTY'S CLAIM, THE REQUESTING PARTY SHALL COMMENCE AN ARBITRATION PROCEEDING EITHER UNDER THE AUSPICES OF THE AMERICAN ARBITRATION ASSOCIATION (AAA) OR JUDICIAL ARBITRATION & MEDIATION SERVICES, INC. (JAMS). THE ARBITRATION SHALL BE CONDUCTED UNDER THE RULES OF THE ORGANIZATION SELECTED AND CODE OF CIVIL PROCEDURE SECTIONS 1280 THROUGH 1294.2, INCLUDING THE RIGHT TO DISCOVERY. ALL NOTICES, INCLUDING NOTICES UNDER CODE OF CIVIL PROCEDURE SECTION 1290.4, SHALL BE GIVEN AS PROVIDED IN PARAGRAPH 6.4 HEREIN. NOTICE: BY INITIALING IN THE SPACE BELOW, YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA LAW, AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL BY INITIALING IN THE SPACE BELOW, YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS SUCH RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY. WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION. SELLER'S INITIALS BUYER'S INITIALS /s/ MN /s/JB ---------- ----------- /S/ GN 9 7.7 FEDERAL REPORTING REQIREMENTS. Buyer and Seller acknowledge that IRC Section 6045(e) requires that the amount of gross proceeds from a real estate transaction be reported to the IRS. Buyer and Seller hereby instruct Escrow Holder to comply with IRC Section 6045(e) and make said report. Seller hereby instructs Escrow Holder to report the gross proceeds of this sale to the IRS on Form 1099-B or W-9 or any subsequently approved IRS form. 7.8 FEDERAL WITHHOLDING. So that Buyer may comply with the Foreign Investment in Real Property Tax Act ("FIRPTA"), Seller hereby declares under penalty of perjury that he/she is not a foreign person or non-resident alien as defined in FIRPTA. Seller shall provide Buyer with such additional information and affidavits as may be necessary for Buyer to comply with FIRPTA. 7.9 STATE WITHHOLDING. California Revenue and Taxation Code Sections 18805 and 26131 require a buyer of real property to withhold California income taxes from escrow funds if all of the following conditions are met: (a) The buyer has received a standard notification of the withholding requirements established by the Act; (b) The selling price is greater than One Hundred Thousand and No/100 Dollars ($100,000.00); (c) The seller has not received a California Homeowner's Property Tax Exemption during the year of the sale; and (d) The funds from the transaction are to be disbursed to either: (i) A seller with a last known street address outside of California, or (ii) A financial intermediary of the seller if the seller is a nonresident of California. The withholding rate is three and one-half percent (31/2%) of the selling price. Seller may request a waiver by contacting: Franchise Tax Board Withholding at Source Unit P.0. Box 651 Sacramento, CA 95812-0651 (916) 369-4900 10 7.10 PRELIMINARY CHANGE OF OWNERSHIP REPORT. Buyer is aware that any person acquiring an interest in real property must file a Preliminary Change of Ownership Report with the County Recorder or Tax Assessor upon recording any documents effecting a change of ownership unless the document is accompanied by an affidavit that the transferee is not a resident of California. Failure to file may result in an additional recording fee for the Buyer. 7.11 REASSESSMENT. Property will be reassessed upon a change of ownership. This will affect the taxes to be paid. A supplemental tax bill may be issued, which shall be paid as follows: (a) for periods after the Close of Escrow, by Buyer, and (b) for periods before the Close of Escrow by Seller. Tax bills issued after the Close of Escrow shall be handled directly between Buyer and Seller. 7.12 WAIVER. The waiver of any provision of this Agreement shall be invalid unless evidenced by a writing signed by the party to be charged therewith. The waiver of, or failure to enforce, any provision of this Agreement shall not be a waiver of any further breach of such provision or of any other provision hereof. The waiver by either or both parties of the time for performing an act shall not be a waiver of the time for performing any other act or acts required hereunder. 7.13. MODIFICATIONS. No change or addition to this Agreement or any part hereof shall be valid unless in writing and signed by each of the parties hereto. 7.14 SUCCESSORS AND ASSIGNS. Except as expressly provided herein, this Agreement and the obligations of Seller and Buyer contained herein shall bind and benefit the successors and assigns of the parties hereto. 7.15 GOVERNING LAW. This Agreement shall be governed by California law. 7.16 HEADINGS. The headings in this Agreement are for convenience only and shall not be used to interpret this Agreement. 7.17 FURTHER ACTS. Each party agrees to take such further action and to execute and deliver such further documents as may be necessary to carry out the purposes of this Agreement. 7.18 ATTORNEYS' FEES AND COSTS. If either party incurs attorneys' fees and/or costs to enforce this Agreement or because of a breach of this Agreement by the other party, the prevailing party shall be entitled to recover from the losing party, in addition to any other relief, its actual attorneys' fees and costs irrespective of whether or not the action or other proceeding is prosecuted to judgment and irrespective of any court schedule of reasonable attorneys' fees. 11 7.19 TIME. Time is of the essence of this Agreement. 7.20 EXCHANGE TRANSACTION. Buyer Agrees upon the request of Seller to cooperate with Seller enclosing this transaction as an exchange pursuant to IRC Section 1031, provided Buyer shall incur no additional expense or liability in connection therewith and is not required to take title to any property in connection with such exchange. 7.21 ENTIRE AGREEMENT. This Agreement contains all of the agreement and understandings relating to the purchase of the Property and the obligations of Seller and Buyer in connection therewith. Seller has not made, and Buyer is not relying upon, any warranties, representations, promises or statements made by Seller, or any agent of Seller, except as expressly set forth herein. This Agreement supersedes any and all prior agreements and understandings between Seller and Buyer and alone expresses the agreement of the parties. 7.22 FORCE MAJEURE. The parties shall incur no liability to the other with respect to, and shall not be responsible for, any failure to perform any of the obligations hereunder if such failure is caused by reason of strike, other labor trouble, governmental rule, regulations, ordinance, statute or interpretation, or by fire, earthquake, civil commotion, or failure or disruption of utility services, or any and all other causes reasonably beyond control of the parties. The amount of time for the parties to perform any of the obligations hereunder shall be extended by the amount of time the party is delayed in performing such obligation by reason of such force majeure occurrence. 7.23 INTERPRETATION. Seller and Buyer acknowledge that they have read and reviewed this Agreement and that they have had the opportunity to confer with counsel in negotiation of this Agreement. Accordingly, this Agreement shall be construed neither for nor against Seller or Buyer, but shall be given a fair and reasonable interpretation in accordance with the meaning of its terms and intent of the parties. 7.24 NUMBER AND GENDER. All terms and words used in this Agreement, regardless of the number and gender in which they are used, shall be deemed to include the appropriate number and gender, as the contacts may require. 7.25 SELLER'S ADDRESS FOR NOTICES. The term "Seller's Address for Notice" shall mean: (a) For Gianni Neve: 4288 Bodega Avenue Petaluma, CA 94952 (b) For Maria Neve: 1109 Lohrman Lane Petaluma, CA 94952 12 7.26 BUYER'S ADDRESS FOR NOTICES. The term "Buyer's Address for Notices" shall mean: 7.27 EXHIBITS. Exhibit "A" (Property Description) are incorporated in this Agreement by reference and made a part hereof IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. SELLER: BUYER: VINIFERA INC., A CALIFORNIA CORPORATION /s/ Gianni Neve - ------------------------------- GIANNI NEVE By: /s/ J. Bouckaert ------------------------------------- /s/ Maria Neve Joseph Bouckaert - ------------------------------- Its: J. Bouckaert; Presiden MARIA NEVE ------------------------------------- By: /s/ J. Bouckeart ------------------------------------- Joseph Bouckeart Its: J. Bouckaert; Secretary ------------------------------------- 13 EXHIBIT "A" LEGAL DESCRIPTION OF PROPERTY ----------------------------- PARCEL ONE: COMMENCING AT A POINT ON THE COUNTY HIGHWAY LEADING FROM PETALUMA TO BLOOMFIELD, SAID POINT BEING THE MOST SOUTHEASTERLY CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS AT PAGE 56, SONOMA COUNTY RECORDS; RUNNING THENCE DUE NORTH 800.43 FEET TO THE POINT OF COMMENCEMENT; THENCE RUNNING FROM SAID POINT OF COMMENCEMENT DUE NORTH 452 FEET; THENCE RUNNING NORTH 89o 26' 10" WEST 385 FEET; THENCE RUNNING SOUTH 0o 3' 30" EAST 452 FEET; THENCE RUNNING SOUTH 89o 26' 10" EAST 384 FEET TO THE POINT OF COMMENCEMENT. PARCEL TWO: COMMENCING AT THE SOUTHEAST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS AT PAGE 56, SONOMA COUNTY RECORDS. RUNNING THENCE FROM SAID POINT OF BEGINNING ALONG THE EASTERLY BOUNDARY OF SAID LANDS NORTH 800.43 FEET; THENCE NORTH 89o 26' 10" WEST 192.13 FEET; THENCE SOUTH 690.21 FEET AND THENCE SOUTH 59o 42' 20" EAST 222.25 FEET TO THE POINT OF BEGINNING. EXCEPTING THEREFROM THE FOLLOWING DESCRIBED PARCEL: BEGINNING AT THE SOUTHEAST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS AT PAGE 56, SONOMA COUNTY RECORDS. FROM SAID POINT OF BEGINNING RUNNING NORTH 326.23 FEET; THENCE NORTH 89o 26' 10" WEST 192.13 FEET; THENCE SOUTH 216.01 FEET; THENCE SOUTH 59o 42' 20" EAST 222.25 FEET TO THE POINT OF BEGINNING. PARCEL THREE: COMMENCING AT THE SOUTHWEST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS AT PAGE 56, SONOMA COUNTY RECORDS; RUNNING THENCE FROM SAID POINT OF BEGINNING ALONG THE WEST BOUNDARY OF SAID LANDS NORTH 0o 03' 30" WEST 580 FEET; THENCE SOUTH 89o 26'10" EAST 192.13 FEET; THENCE SOUTH 690.21 FEET; THENCE NORTH 59o 42' 20" WEST 222.25 FEET TO THE POINT OF BEGINNING. RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: HAAS & NAJARIAN 58 MAIDEN LANE, SECOND FLOOR SAN FRANCISCO, CA 94108 ATTENTION: ROBERT C. NICHOLAS MAIL TAX STATEMENTS TO: VINIFERA INC. 775 BAYWOOD DRIVE, SUITE 213 PETALUMA, CA 94954 - -------------------------------------------------------------------------------- SPACE ABOVE THIS LJNE RESERVED FOR RECORDER'S USE NOTICE OF EXERCISE OF OPTION ---------------------------- THIS NOTICE OF EXERCISE OF OPTION (the "Notice") serves to notify Gianni Neve and Maria Neve (collectively, "Optionor" without regard to number or gender) of Vinifera, Inc.'s ("Optionee") exercise of the option to purchase (the "Option") all that certain real property commonly known as 4288 Bodega Avenue, Petaluma, California (94952) (the "Property"), as depicted in EXHIBIT "A" attached hereto and incorporated herein. 1. The specific terms and conditions of Optionee's Option are set forth in the Option Agreement (the "Agreement") dated February 1, 1999. All of the terms and conditions of the Agreement are incorporated herein by this reference. 2. This Notice may be served by Optionee as set forth in Paragraph 20 of the Agreement. DATED: -------------------------------- VINIFERA INC., A CALIFORNIA CORPORATION By: ----------------------------------- Its: ---------------------------------- By: ----------------------------------- Its: ---------------------------------- PARCEL ONE: COMMENCING AT A POINT ON THE COUNTY HIGHWAY LEADING FROM PETALUMA TO BLOOMFIELD, SAID POINT BEING THE MOST SOUTHEASTERLY CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS AT PAGE 56, SONOMA COUNTY RECORDS; RUNNING THENCE DUE NORTH 800.43 FEET TO THE POINT OF COMMENCEMENT; THENCE RUNNING FROM SAID POINT OF COMMENCEMENT DUE NORTH 452 FEET; THENCE RUNNING NORTH 89o 26' 10", WEST 385 FEET; THENCE RUNNING SOUTH 0o 3' 30" EAST 452 FEET; THENCE RUNNING SOUTH 89o 26' 10" EAST 384 FEET TO THE POINT OF COMMENCEMENT. PARCEL TWO: COMMENCING AT THE SOUTHEAST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS AT PAGE 56, SONOMA COUNTY RECORDS. RUNNING THENCE FROM SAID POINT OF BEGINNING ALONG THE EASTERLY BOUNDARY OF SAID LANDS NORTH 800.43 FEET; THENCE NORTH 89o 26' 10" WEST 192.13 FEET; THENCE SOUTH 690.21 FEET AND THENCE SOUTH 59o 42' 20" EAST 222.25 FEET TO THE POINT OF BEGINNING. EXCEPTING THEREFROM THE FOLLOWING DESCRIBED PARCEL: BEGINNING AT THE SOUTHEAST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS AT PAGE 56, SONOMA COUNTY RECORDS. FROM SAID POINT OF BEGINNING RUNNING NORTH 326.23 FEET; THENCE NORTH 89o 26' 10" WEST 192.13 FEET; THENCE SOUTH 216. 01 FEET; THENCE SOUTH 59o 42' 20" EAST 222.25 FEET TO THE POINT OF BEGINNING. PARCEL THREE: COMMENCING AT THE SOUTHWEST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS AT PAGE 56, SONOMA COUNTY RECORDS; RUNNING THENCE FROM SAID POINT OF BEGINNING ALONG THE WEST BOUNDARY OF SAID LANDS NORTH 0o 03' 30" WEST 580 FEET; THENCE SOUTH 89o 26' 10" EAST 192.13 FEET; THENCE SOUTH 690.21 FEET; THENCE NORTH 59o 42' 20 " WEST 222.25 FEET TO THE POINT OF BEGINNING. EXHIBIT "A" EXHIBIT "B" ----------- MEMORANDUM OF OPTION TO PURCHASE -------------------------------- RECORDING REQUESTED BY AND WHEN RECORDED RETURN TO: HAAS & NAJARIAN 58 MAIDEN LANE, SECOND FLOOR SAN FRANCISCO, CA 94108 ATTENTION: ROBERT C. NICHOLAS MAIL TAX STATEMENTS TO: VINIFERA INC. 775 BAYWOOD DRIVE, SUITE 213 PETALUMA, CA 94954 - -------------------------------------------------------------------------------- SPACE ABOVE THIS LJNE RESERVED FOR RECORDER'S USE MEMORANDUM OF OPTION TO PURCHASE -------------------------------- This Memorandum of Option ("Memorandum") is made as of February 1, 1999, by and between Gianni Neve and Maria Neve (collectively, "Optionor" without regard to number or gender) and Vinifera, Inc., a California corporation ("Optionee"). 1. Optionor hereby grants to Optionee an option to purchase (the "Option") all of that certain real property commonly known as 4288 Bodega Avenue, Petaluma, California 94952 (the "Property"), as depicted in EXHIBIT "A" attached hereto and incorporated herein. 2. The specific terms and conditions of Optionee's Option are set forth in the Option Agreement (the "Agreement") dated February 1, 1999. All of the terms and conditions of the Agreement are incorporated herein by this reference. 3. The term of the Option expires at midnight on February 2, 2003. 4. Any party who is interested in acquiring an interest in the Property should contact the Optionor and Optionee. Optionor's address is: a. For Gianni Neve: 4288 Bodega Avenue Petaluma, CA 94952 b. For Maria Neve: 1109 Lohrman Lane Petaluma, CA 94952 1 Optionee's address is: Vinifera, Inc., 775 Baywood Drive, Suite 213, Petaluma, CA 94954. IN WITNESS WHEREOF, the parties hereto have executed this Memorandum as of the date first above written. OPTIONOR: OPTIONEE: VINIFERA INC., A CALIFORNIA CORPORATION /s/ Gianni Neve - ------------------------------- GIANNI NEVE By: /s/ J. Bouckaert ------------------------------------- /s/ Maria Neve Joseph Bouckaert - ------------------------------- Its: J. Bouckaert; President MARIA NEVE ------------------------------------- By: /s/ J. Bouckeart ------------------------------------- Joseph Bouckeart Its: J. Bouckaert; Secretary ------------------------------------- 2 STATE OF CALIFORNIA ) ) SS COUNTY OF SONOMA ) On this 28th day of April, 1999, before me, a Notary Public, State of California, duly commissioned and sworn, personally appeared: Maria Neve known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument, and acknowledged that he/she executed the same. Official Seal: /S/ Dee A. J. Hernlund ---------------------------------------- Notary Public My Commission Expires: March 28, 2003 ------------------ Dee A. J. Hernlund Comm. #1214328 NOTARY PUBLIC - CALIFORNIA Sonoma County My Comm. Expires Mar. 28, 2003 3 STATE OF CALIFORNIA ) ) SS COUNTY OF SONOMA ) On this 28th day of April, 1999, before me, a Notary Public, State of California, duly commissioned and sworn, personally appeared: Gianni Neve known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument, and acknowledged that he/she executed the same. Official Seal: /S/ Dee A. J. Hernlund ---------------------------------------- Notary Public My Commission Expires: March 28, 2003 ------------------- Dee A. J. Hernlund Comm. #1214328 NOTARY PUBLIC - CALIFORNIA Sonoma County My Comm. Expires Mar. 28, 2003 4 STATE OF CALIFORNIA ) ) SS COUNTY OF SONOMA ) On this 28th day of April, 1999, before me, a Notary Public, State of California, duly commissioned and sworn, personally appeared: Joseph A. Bouckaert known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument, and acknowledged that he/she executed the same. Official Seal: /S/ Dee A. J. Hernlund ---------------------------------------- Notary Public My Commission Expires: March 28, 2003 ------------------- Dee A. J. Hernlund Comm. #1214328 NOTARY PUBLIC - CALIFORNIA Sonoma County My Comm. Expires Mar. 28, 2003 5 EXHIBIT "A" LEGAL DESCRIPTION OF PROPERTY ----------------------------- PARCEL ONE: COMMENCING AT A POINT ON THE COUNTY HIGHWAY LEADING FROM PETALUMA TO BLOOMFIELD, SAID POINT BEING THE MOST SOUTHEASTERLY CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS AT PAGE 56, SONOMA COUNTY RECORDS; RUNNING THENCE DUE NORTH 800.43 FEET TO THE POINT OF COMMENCEMENT; THENCE RUNNING FROM SAID POINT OF COMMENCEMENT DUE NORTH 452 FEET; THENCE RUNNING NORTH 89o 26' 10" WEST 385 FEET; THENCE RUNNING SOUTH 0o 3' 30" EAST 452 FEET; THENCE RUNNING SOUTH 89o 26' 10" EAST 384 FEET TO THE POINT OF COMMENCEMENT. PARCEL TWO: COMMENCING AT THE SOUTHEAST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS AT PAGE 56, SONOMA COUNTY RECORDS. RUNNING THENCE FROM SAID POINT OF BEGINNING ALONG THE EASTERLY BOUNDARY OF SAID LANDS NORTH 800.43 FEET; THENCE NORTH 89o 26' 10" WEST 192.13 FEET; THENCE SOUTH 690.21 FEET AND THENCE SOUTH 59o 42' 20" EAST 222.25 FEET TO THE POINT OF BEGINNING. EXCEPTING THEREFROM THE FOLLOWING DESCRIBED PARCEL: BEGINNING AT THE SOUTHEAST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS AT PAGE 56, SONOMA COUNTY RECORDS. FROM SAID POINT OF BEGINNING RUNNING NORTH 326.23 FEET; THENCE NORTH 89o 26' 10" WEST 192.13 FEET; THENCE SOUTH 216.01 FEET; THENCE SOUTH 59o 42' 20" EAST 222.25 FEET TO THE POINT OF BEGINNING. PARCEL THREE: COMMENCING AT THE SOUTHWEST CORNER OF THE LANDS DESCRIBED IN VOLUME 232 OF DEEDS AT PAGE 56, SONOMA COUNTY RECORDS; RUNNING THENCE FROM SAID POINT OF BEGINNING ALONG THE WEST BOUNDARY OF SAID LANDS NORTH 0o 03' 30" WEST 580 FEET; THENCE SOUTH 89o 26' 10" EAST 192.13 FEET; THENCE SOUTH 690.21 FEET; THENCE NORTH 59o 42' 20" WEST 222.25 FEET TO THE POINT OF BEGINNING. EXHIBIT "A" ----------- OPTION AGREEMENT ---------------- THIS OPTION AGREEMENT (the "Agreement") is made as of April 1999, by and between GIANNI NEVE and MARIA NEVE (COLLECTIVELY, "Optionor", without regard to number or gender) and VINIFERA, INC., a California corporation ("Optionee"). RECITALS -------- This Agreement is entered into with reference to the following facts: A. Optionor is the owner of all of that certain real property commonly known as 4288 Bodega Avenue, Petaluma, California 94952 (the "Property"), as more particularly described in EXHIBIT "A", incorporated herein by this reference. B. Optionor, as landlord, and Optionee, as tenant, entered into a written lease dated as of February 1, 1996 (the "Lease"), whereby Optionor leased the Property to Optionee for a five (5) year term, commencing on February 1, 1996 and expiring on January 31, 2001, at a rental of Twelve Thousand Five Hundred Dollars ($12,500.00) per month. C. Pursuant to Article 22 of the Lease, Optionor granted an option to purchase to Optionee (the "Original Option") exercisable by Optionee during the period February 1, 1996 through January 31, 1999. The Lease referred to and incorporated an option agreement dated as of February 1, 1996 (the "Original Option Agreement") and a purchase and sale agreement and escrow instructions dated as of February 1, 1996 (the "Purchase and Sale Agreement"). Pursuant to the Original Option Agreement, Optionor and Optionee recorded a Memorandum of Option to Purchase on May 7, 1996, in the Official Records of Sonoma County, Document No. 1996 0040886 (the "Original Memorandum of Option"). D. Optionee duty exercised the Original Option on January 30, 1999. Subsequent to the exercise of the Original Option, Optionor requested Optionee to delay the purchase of the Property until February 1, 2001 for personal and financial reasons. E. Optionee now rescinds its exercise of the Original Option and Optionor and Optionee desire to terminate the Original Option and create a new one pursuant to the terms, promises and covenants contained in this Agreement. AGREEMENT --------- NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and 1 sufficiency of which are hereby acknowledged, Optionor and Optionee agree as follows: 1. DEFINED TERMS. All undefined terms used herein shall have the same meanings as are given to them in the Lease, as amended by the First Amendment, unless expressly provided otherwise by the terms of this Agreement. 2. RECITALS. The Recitals set forth above are incorporated into this Agreement and are true and correct. 3. RESCISSION. Optionee rescinds its Notice of Exercise of Option dated January 30, 1999 effective upon the execution of this Agreement by Optionor or Optionee. 4. TERMINATION OF ORIGINAL OPTION AGREEMENT. Optionor and Optionee agree to terminate the Original Option Agreement upon the mutual execution of this Agreement. Optionee agrees to execute a release, quitclaim deed, or any other document required by Optionor or a title insurance company to verify the termination of the Original Option Agreement and the Original Memorandum of Option. 5. GRANT OF 0PTION TO PURCHASE. Optionor hereby grants to Optionee a new Option to Purchase the Property (the "Option") upon all of the terms, covenants and conditions hereinafter set forth. 6. OPTION CONSIDERATION. As consideration for the Option, Optionee has agreed to rescind the Original Option, postpone the purchase of the Property under the Original Option, extend the initial term of the Lease to January 31, 2003 and pay the increased Rent pursuant to the First Amendment to Lease to which this Agreement is attached. In further consideration of the Option, Optionce must obtain and deliver to Optionor, at Optionee's expense, a Preliminary Title Report issued by a title company acceptable to both Optionor and Optionee covering the Property. In further consideration of the granting of this Option, Optionee must provide to Optionor, at Optionee's expense, all inspection and environmental reports, studies, drawings and other documents prepared by or on behalf of Optionee in connection with its investigation of the Property. 7. MEMORANDUM OF OPTION OF PURCHASE. Optionor has duly executed, acknowledged and delivered to Optionee a Memorandum of Option to Purchase in the form attached hereto as EXHIBIT "B" and agrees that Optionee may cause such Memorandum of Option to Purchase to be recorded. Optionee agrees to execute, acknowledge and deliver to Optionor a Quitclaim Deed to the Property promptly at the request of Optionor if Optionee does not exercise the Option to clear Optionor's title. Optionor shall bear any expenses of recording of such instrument. 8. TERM OF OPTION AND EXERCISE. The term of this Option shall commence on February 1, 1999, and shall expire at midnight on January 31, 2003 (the "Option Period"). If not 2 exercised during the Option Period, the Option shall automatically and without further notice, act or documentation by any party expire on the aforementioned date. Optionee may exercise this Option at any time AFTER February 1, 2001 by giving Optionor written notice, as set forth in Paragraph 20 below of its intention to exercise the Option. As soon as reasonably practicable after exercise of the Option, Optionor and Optionee shall execute and cause to be recorded in the Sonoma County Recorder's Office a Notice of Exercise of Option in the form attached hereto as EXHIBIT "C". 9. PURCHASE PRICE. The Purchase Price (the "Price") which Optionee agrees to pay Optionor for the Property following the exercise of the Option is the sum of One Million Three Hundred Thousand Dollars ($1,300,000.00). The Price shall be payable as follows: The Price will be paid pursuant to the Purchase and Sale Agreement. 10. ESCROW. See the Purchase and Sale Agreement, Paragraphs 1.2 and 1.3. 11. CONDITION OF TITLE UPON CLOSING. See the Purchase and Sale Agreement, Paragraphs 2.2 and 2.3. 12. CONDEMNATION AND CASUALTY. (a) If, before the Closing (as defined in the Purchase and Sale Agreement), Optionor receives notice that the Property is to be wholly condemned, or to be condemned in such substantial part as would materially and adversely effect the Optionee's ability to operate its business on the Property, or if the Property is wholly destroyed by fire or other casualty, or if so much of the Property is damaged by fire or other casualty to the extent that the cost of repairing such damage shall amount to at least twenty-five percent (25%) of the Purchase Price as determined by the casualty insurer insuring the Property, then, in any such event, Optionee, in the event it has already exercised the Option, shall have the right to terminate this Agreement by delivering notice of such termination in writing to Optionor within thirty (30) days after receipt of notice of such condemnation or casualty, and Optionor and Optionee shall each be released and discharged from any obligation to each other hereunder; provided, however, that if Optionee elects not to terminate this Agreement after it has exercised the Option, the purchase contemplated herein shall be consummated without reduction to the Purchase Price, but Optionee shall be entitled to all proceeds of fire or other casualty insurance or condemnation, and Optionor shall have no responsibility for the restoration and repair of the Property. (b) If, prior to the Closing (assuming Optionee has exercised its Option), the Property is damaged by fire or other casualty to the extent that the cost of repairing or restoring the same shall be less than an amount equal to twenty-five percent (25%) of the Purchase Price or if Optionor receives notice that the Property is to be partially condemned but without materially and adversely effecting Optionee's ability to operate its business on the remaining portion of the Property, then, in any such event, the Closing shall proceed as scheduled and Optionor shall assign to Optionee the proceeds of any casualty insurance or any 3 condemnation award, as the case may be, and Optionor shall have no responsibility for restoration or repair of the Property. In the event all or a part of the Property is appropriated during the Option Period and Optionee elects not to proceed with the Closing, Optionee will have a compensable interest and a right to share in the condemnation award to the extent that the excess, if any, of the total award is above the Purchase Price. 13. TIME OF THE ESSENCE; FAILURE TO EXERCISE OPTION. Time is of the essence with regard to this Agreement. If the Option is not exercised in the manner as set forth in Paragraph 8 above, Optionee shall have no interest whatsoever in the Property, subject to Paragraph 14 below, and the Option may not be revived by any subsequent payment or any further action by Optionee. 14. REINSTATEMENT OF LEASE. In the event Optionee exercises the Option and then fails to Close, the Lease shall be reinstated and shall remain in full force and effect just as though Optionee had never exercised the Option. The Optionee's obligation to pay rent shall continue until close of escrow on the exercise of the Option. 15. OPTIONOR'S ADDRESS FOR NOTICE. The term "Optionor's Address for Notice" shall mean: (a) For Gianni Neve: 4288 Bodega Avenue Petaluma, CA 94952 (b) For Maria Neve: 1109 Lohrman Lane Petaluma, CA 94952 16. RETENTION OF CONSIDERATION. In the event the Option or an extension thereof is not exercised, all sums paid and services rendered to Optionor by Optionee will be retained by Optionor in consideration of the granting of the Option. 17. ASSIGNMENT OF OPTION. Optionee may at any time during the Option Period assign this Agreement; provided, however, that an assignment will be effective only on tile giving of ten (10) days written notice of the assignment by Optionee to Optionor. 18. ATTORNEYS' FEES. If either Optionor or Optionee shall commence any action or other proceeding against the other arising out of, or relating to, this Agreement, the prevailing party shall be entitled to recover from the losing party, in addition to any other relief, its actual Attorneys' Fees irrespective of whether or not the action or other proceeding is prosecuted to judgment and irrespective of any court schedule of reasonable attorneys' fees. 19. INDEMNIFICATION. Should Optionor be made a party to any litigation instituted by Optionee against a party other than Optionor, or by a third party against Optionee, 4 Optionee shall indemnify, hold harmless and defend Optionor against any and all loss, cost, liability, damage or expense incurred by Optionor, including attorneys' fees, in connection with the litigation. 20. NOTICE OF EXERCISE OF OPTION. Notice to Optionor of exercise of Option by Optionee may be served, as an alternative to personal service, by mailing the same by registered or certified mail, postage prepaid, addressed to Optionor at the address for Optionor as set forth in Paragraph 15 above, or addressed to such other address or addresses as Optionor may from time to time designate to Optionee in writing. Any notice shall be deemed to have been served at the time the same was posted. 21. Miscellaneous. (a) ENTIRE AGREEMENT. This Agreement contains all of the agreements and understandings relating to the exercise of the Option and the obligations of the Optionor and Optionee in connection with such exercise. Optionor has not made, and Optionee is not relying upon, any warranties, or representations, promises or statements made by Optionor or any agent of Optionor, except as expressly set forth in the Agreement. This Agreement supersedes any and all prior agreements and understandings between Optionor and Optionee and alone expresses the agreement of the parties. (b) AMENDMENTS. This Agreement shall not be amended, changed or modified in any way unless in writing executed by Optionor and Optionee. Optionor shall not have waived or released any of its rights hereunder unless in writing and executed by Optionor. (c) SUCCESSORS. Except as expressly provided herein, this Agreement and the obligations of Optionor and Optionce contained herein shall bind and benefit the successors and assigns of the parties hereto. (d) FORCE MAJEURE. Optionor shall incur no liability to Optionee with respect to, and shall not be responsible for any failure to perform, any of Optionor's obligations hereunder if such failure is caused by reason of strike, other labor trouble, detrimental rule, regulations, ordinance, statute, or interpretation, or by fire, earthquake, civil commotion, or failure or disruption of utility services, or any and all other causes reasonably beyond control of Optionor. The amount of time for Optionor to perform any of Optionor's obligations shall be extended by the amount of time Optionor is delayed in performing such obligation by reason of such force majeure occurrence. (e) GOVERNING LAW. This Agreement shall be governed by, and construed in accordance with, the laws of the State of California. (f) CAPTIONS. All captions, headings, titles, numerical references and computer highlighting are for convenience only and shall have no effect on the interpretation of 5 this Agreement. (g) INTERPRETATION. Optionor and Optionee acknowledge that they have read and reviewed this Agreement and that they have had the opportunity to confer with counsel in negotiation of this Agreement. Accordingly, this Agreement shall be construed neither for nor against Optionor or Optionee, but shall be given a fair and reasonable interpretation in accordance with the meaning of its terms and intent of the parties. (h) NUMBER AND GENDER. All terms and words used in this Agreement, regardless of the number and gender in which they are used, shall be deemed to include the appropriate number and gender, as the context may require. (i) EXHIBITS: Exhibit "A" - Property Description Exhibit "B" - Memorandum of Option Exhibit "C" - Notice of Exercise IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written. OPTIONOR: OPTIONEE: VINIFERA INC. /s/ Gianni Neve - ------------------------------- GIANNI NEVE By: /s/ J. Bouckaert ------------------------------------- /s/ Maria Neve Joseph Bouckaert - ------------------------------- Its: J. Bouckaert, President MARIA NEVE ------------------------------------- [Exhibits Attached] [Acknowledgments Attached] 6 STATE OF CALIFORNIA ) ) SS COUNTY OF SONOMA ) On this 28th day of April, 1999, before me, a Notary Public, State of California, duly commissioned and sworn, personally appeared: Maria Neve known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument, and acknowledged that he/she executed the same. Official Seal: /S/ Dee A. J. Hernlund ---------------------------------------- Notary Public My Commission Expires: March 28, 2003 ------------------- Dee A. J. Hernlund Comm. #1214328 NOTARY PUBLIC - CALIFORNIA Sonoma County My Comm. Expires Mar. 28, 2003 7 STATE OF CALIFORNIA ) ) SS COUNTY OF SONOMA ) On this 28th day of April, 1999, before me, a Notary Public, State of California, duly commissioned and sworn, personally appeared: Gianni Neve known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument, and acknowledged that he/she executed the same. Official Seal: /S/ Dee A. J. Hernlund ---------------------------------------- Notary Public My Commission Expires: March 28, 2003 ------------------- Dee A. J. Hernlund Comm. #1214328 NOTARY PUBLIC - CALIFORNIA Sonoma County My Comm. Expires Mar. 28, 2003 8 STATE OF CALIFORNIA ) ) SS COUNTY OF SONOMA ) On this 28t day of April, 1999, before me, a Notary Public, State of California, duly commissioned and sworn, personally appeared: Joseph A. Bouckaert known to me (or proved to me on the basis of satisfactory evidence) to be the person whose name is subscribed to the within instrument, and acknowledged that he/she executed the same. Official Seal: /S/ Dee A. J. Hernlund ---------------------------------------- Notary Public My Commission Expires: March 28, 2003 ------------------- Dee A. J. Hernlund Comm. #1214328 NOTARY PUBLIC - CALIFORNIA Sonoma County My Comm. Expires Mar. 28, 2003 9 FIRST AMENDMENT TO LEASE OF LAND AND ------------------------------------ IMPROVEMENTS LOCATED AT 4288 BODEGA AVENUE ------------------------------------------ This First Amendment to Lease of Land and Improvements Located at 4288 Bodega Avenue (this "First Amendment") is made and entered into as of April 27, 1999, by and between GIANNI NEVE and MARIA NEVE COLLECTIVELY, "Landlord" without regard to number or gender) and VINIFERA, INC. ("Tenant"). RECITALS -------- A. Landlord is the owner of all of that certain real property commonly known as 4288 Bodega Avenue, Petaluma, California 94952 (the "Property"). B. Landlord and Tenant entered into a written lease dated as of February 1, 1996 (the "Lease"), whereby Landlord leased the Property to Tenant for a five (5) year term, commencing on February 1, 1996 and expiring on January 31, 2001, at a rental of Twelve Thousand Five Hundred Dollars ($12,500.00) per month. C. Pursuant to Article 22 of the Lease, Landlord granted an option to purchase to Tenant (the "Original Option") exercisable by Tenant during the period February 1, 1996 through January 31, 1999. The Lease referred to and incorporated an option agreement dated as of February 1, 1996 (the "Original Option Agreement") and a purchase and sale agreement and escrow instructions dated as of February 1, 1996 (the "Purchase and Sale Agreement"). Pursuant to the Original Option Agreement, Landlord and Tenant recorded a Memorandum of Option to Purchase on May 7, 1996, in the Official Records of Sonoma County, Document No. 1996 0040886 (the "Original Memorandum of Option"). D. Tenant duly exercised the Original Option on January 30, 1999. Subsequent to the exercise of the Original Option, Landlord requested Tenant to delay the purchase of the Property until February 1, 2001 for personal and financial reasons. E. Landlord and Tenant now wish to amend the Lease to extend the initial term, increase the Rent and grant Tenant a new Option to Purchase in accordance with the Option Agreement and Purchase and Sale Agreement attached hereto as EXHIBITS "A" and "B", respectively. AGREEMENT --------- NOW, THEREFORE, in consideration of the foregoing Recitals and the mutual covenants contained herein, and for other good and valuable consideration, the receipt and 1 sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree to and do hereby amend the Lease in the following respects: 1. DEFINED TERMS. All undefined terms used herein shall have the same respective meanings as are given to them in the Lease, unless expressly provided otherwise by the terms of this First Amendment. 2. LEASE TERM. The initial term of the Lease is hereby extended to and including January 31, 2003. 3. OPTIONS TO EXTEND. Landlord and Tenant hereby acknowledge that the two (2) five (5) year Options to Extend contained in Article 20 of the Lease shall remain in full force and effect. The first Option to Extend, if exercised by Tenant, will commence on February 1, 2003. The Base Rent for each year of the first five (5) year extension shall be one hundred five percent (105%) of the Base Rent for the last year of the original term of the Lease. The Base Rent for each year of the second five (5) year extension shall be one hundred five percent (105%) of the Base Rent for the last year of the first five (5) year extension. 4. OPTION TO PURCHASE. Article 22 of the Lease is hereby deleted in its entirety and replaced with the following: Landlord grants to Tenant the Option to Purchase the Property in accordance with the provisions of the Option Agreement and the Purchase and Sale Agreement attached hereto as Exhibits "A" and "B", respectively, which now replace Exhibits "C" and "D" attached to the Lease. The Option to Purchase shall be exercisable by Tenant during the period February 1, 2001 to and including February 2, 2003 (the "Option Period"). 5. BASE RENT. The Base Rent payable by Tenant pursuant to the Lease shall be increased two percent (2%) per year commencing on February 1, 1999, as follows: PERIOD MONTHLY BASE RENT ------ ----------------- May 1, 1999 through January 31, 2000 $12,750.00 February 1, 2000 through January 31, 2001 $13,005.00 February 1, 2001 through January 31, 2002 $13,265.00 February 1, 2002 through January 31, 2003 $13,530.00 6. ADDITIONAL SPACE. Landlord agrees to rent two units (the "Two Units") of the house structure located on the Property not occupied by Landlord to Tenant free of all tenants. Landlord shall be allowed to occupy the area in the house structure currently being occupied by Landlord during the term of this Lease. Landlord shall remove the tenants from the Two Units at Landlord's sole cost. Tenant shall pay rent to Landlord for the Two Units in the amount of Five Hundred Dollars ($500.00) per unit with the rent obligation to begin on delivery of possession. The lease for the Two Units shall provide in part that the units are leased "As-Is" and Tenant shall bear sole responsibility to maintain the premises. 2 7. MISCELLANEOUS. a. Except as modified herein, the Lease shall remain unmodified and in full force and effect. b. The provisions of this First Amendment shall bind and inure to the benefit of the heirs, representatives, successors and permitted assigns of the Parties hereto. c. This First Amendment may be executed in several counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and same Agreement. d. The Parties agree to cooperate with one another and to execute any additional documents necessary to reflect the agreements contained herein. IN WITNESS WHEREOF, this First Amendment has been executed as of the day and year first written above. LANDLORD: TENANT: VINIFERA, INC. /s/ Gianni Neve - ------------------------------- GIANNI NEVE By: /s/ J. Bouckaert ------------------------------- /s/ Maria Neve Joseph Bouckaert - ------------------------------- Its: J. Bouckaert; President MARIA NEVE ------------------------------- By: /s/ J. Bouckaert ------------------------------- Joseph Bouckeart Its: J. Bouckaert; Secretary ------------------------------- 3 EX-10.33 7 1993 STOCK AWARD PLAN Exhibit 10.33 VINIFERA, INC. 1993 STOCK AWARD PLAN March 9, 1993 TABLE OF CONTENTS Page ---- ARTICLE 1 ETABLISHMENT AND PURPOSE ............................... 1 1.1 Establishment; Amendment and Restatement ............... 1 1.2 Purpose ................................................ 1 ARTICLE 2 DEFINITIONS ............................................ 1 2.1 Defined Terms........................................... 1 2.2 Gender and Number....................................... 4 ARTICLE 3 ADMINISTRATION.......................................... 4 3.1 General................................................. 4 3.2 Composition of the Committee............................ 4 3.3 Authority of the Committee.............................. 4 3.4 Action by the Committee................................. 5 3.5 Delegation.............................................. 5 3.6 Liability of Committee Members.......................... 5 3.7 Awards to Non-Employee Directors........................ 5 3.8 Costs of Plan........................................... 5 ARTICLE 4 DURATION OF THE PLAN AND SHARES SUBJECT TO THE PLAN................................................ 5 4.1 Duration of the Plan.................................... 5 4.2 Shares Subject to the Plan.............................. 5 ARTICLE 5 ELIGIBILITY ............................................ 5 5.1 Employees and Advisors ................................. 5 5.2 Non-Employee Directors ................................. 5 ARTICLE 6 AWARDS ................................................. 5 6.1 Types of Awards ........................................ 5 6.2 General ................................................ 6 6.3 Nonuniform Determinations .............................. 6 6.4 Award Agreements ....................................... 6 6.5 Provisions Governing All Awards ........................ 6 ARTICLE 7 OPTIONS ................................................ 8 i 7.1 Types of Options ....................................... 8 7.2 General ................................................ 8 7.3 Option Price ........................................... 8 7.4 Option Term ............................................ 8 7.5 Time of Exercise ....................................... 8 7.6 Method of Exercise ..................................... 8 7.7 Special Rules for Incentive Stock Options ............. 9 7.8 Restricted Shares ...................................... 9 7.9 Deferred Compensation Options .......................... 9 7.10 Reload Options ......................................... 9 Page ---- ARTICLE 8 STOCK APPRECIATION RIGHTS .............................. 10 8.1 General................................................. 10 8.2 Nature of Stock Appreciation Right...................... 10 8.3 Exercise................................................ 10 8.4 Form of Payment......................................... 10 ARTICLE 9 RESTRICTED AWARDS....................................... 10 9.1 Types of Restricted Awards.............................. 10 9.2 General................................................. 11 9.3 Restriction Period...................................... 11 9.4 Forfeiture.............................................. 11 9.5 Settlement of Restricted Awards......................... 11 9.6 Rights as a Shareholder................................. 11 ARTICLE 10 PERFORMANCE AWARDS...................................... 12 10.1 General ................................................ 12 10.2 Nature of Performance Awards............................ 12 10.3 Performance Cycles...................................... 12 10.4 Performance Goals ...................................... 12 10.5 Determination of Awards................................. 12 10.6 Timing and Form of Payment ............................. 12 ARTICLE 11 OTHER STOCK BASED AND COMBINATION AWARDS................ 12 11.1 Other Stock-Based Awards ............................... 12 11.2 Combination Awards...................................... 12 ii ARTICLE 12 DEFERRAL ELECTIONS...................................... 13 ARTICLE 13 DIVIDEND EQUIVALENTS ................................... 13 ARTICLE 14 NON-EMPLOYEE DIRECTORS.................................. 13 14.1 General................................................. 13 14.2 Eligibility............................................. 13 14.3 Director Options........................................ 13 14.4 Award Agreements........................................ 13 ARTICLE 15 ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, ETC .................................... 14 15.1 Plan Does Not Restrict Corporation ..................... 14 15.2 Adjustments by the Committee............................ 14 ARTICLE 16 AMENDMENT AND TERMINATION .............................. 14 ARTICLE 17 MISCELLANEOUS .......................................... 14 17.1 Tax Withholding ........................................ 14 17.2 Unfunded Plan........................................... 15 17.3 Payments to Trust ...................................... 15 17.4 Annulment of Awards..................................... 15 17.5 Engaging in Competition With the Corporation ........... 15 17.6 Other Corporation Benefit and Compensation Programs .... 15 Page ---- 17.7 Securities Law Restrictions ............................ 15 17.8 Governing Law .......................................... 16 ARTICLE 18 SHAREHOLDER APPROVAL ................................... 16 EXHIBITS Exhibit A -- Non-Employee Director Award Agreement iii VINIFERA, INC. 1993 STOCK AWARD PLAN ARTICLE 1 ESTABLISHMENT AND PURPOSE 1.1 ESTABLISHMENT: AMENDMENT AND RESTATEMENT. Vinifera, Inc. ("Corporation"), hereby establishes the Vinifera, Inc., 1993 Stock Award Plan (the "Plan"), effective as March 9, 1993, subject to shareholder approval as provided in Article 18. 1.2 PURPOSE. The purpose of the Plan is to promote and advance the interests of Corporation and its shareholders by enabling Corporation to attract, retain, and reward key employees, outside advisors, and directors of Corporation and its subsidiaries. It is also intended to strengthen the mutuality of interests between such employees, advisors, and directors and Corporation's shareholders. The Plan is designed to meet this intent by offering stock options and other equity-based incentive awards, thereby providing a proprietary interest in pursuing the long-term growth, profitability, and financial success of Corporation. ARTICLE 2 DEFINITIONS 2.1 DEFINED TERMS. For purposes of the Plan, the following terms shall have the meanings set forth below: "ADVISOR" means a member of an Advisory Committee of Corporation or a Subsidiary, or any other consultant selected by the Committee, who is neither an employee of Corporation or a Subsidiary nor a Non-Employee Director. "ADVISORY COMMITTEE" means a scientific advisory committee to Corporation or a Subsidiary. "AWARD" means an award or grant made to a Participant of Options, Stock Appreciation Rights, Restricted Awards, Performance Awards, or Other Stock-Based Awards pursuant to the Plan. "AWARD AGREEMENT" means an agreement as described in Section 6.4. "BOARD" means the Board of Directors of Corporation. "CODE" means the Internal Revenue Code of 1986, as amended and in effect from time to time, or any successor thereto, together with rules, regulations, and interpretations promulgated thereunder. Where the context so requires, any reference to a particular Code section shall be construed to refer to the successor provision to such Code section. 1 "COMMITTEE" means the committee appointed by the Board to administer the Plan as provided in Article 3 of the Plan. "COMMON STOCK" means the Common Stock, of Corporation or any security of Corporation issued in substitution, exchange, or lieu thereof. "CONTINUING RESTRICTION" means a Restriction contained in Sections 6.5.(g), 17.4, 17.5, and 17.7 of the Plan and any other Restrictions expressly designated by the Committee in an Award Agreement as a Continuing Restriction. "CORPORATION" means Vinifera, Inc., an Oregon corporation, or any successor corporation. "DEFERRED COMPENSATION OPTION" means a Nonqualified Option granted with an option price less than Fair Market Value on the date of grant pursuant to Section 7.9 of the Plan. "DISABILITY" means the condition of being "disabled" within the meaning of Section 422(c)(7) of the Code. However, the Committee may change the foregoing definition of "Disability" or may adopt a different definition for purposes of specific Awards. "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended and in effect from time to time, or any successor statute. Where the context so requires, any reference to a particular section of the Exchange Act, or to any rule promulgated under the Exchange Act, shall be .construed to refer to successor provisions to such section or rule. "FAIR MARKET VALUE" means on any given date, (i) until the Registration Date, the fair market value of the Common Stock as determined by the Board and (ii) from and after the Registration Date, the daily closing price on the day preceding the date an Award is granted. For purposes of the foregoing clause (ii), the closing price for each day shall be the last reported sales price or, in case no such reported sales take place on such day, the last reported bid price, in either case on the principal national securities exchange on which the Common Stock is listed or admitted to trading or the last reported sales price on the National Market System ("NMS") of the National Association of Securities Dealers Automated Quotation System ("NASDAQ"), or if the Common Stock is not included in the NMS, the average of the reported last closing bid and asked prices on NASDAQ, or if not listed or admitted to trading on any national securities exchange or NASDAQ, the average reported bid price as furnished by The National Quotation Bureau, Incorporated (or the equivalent recognized source of quotations), all as adjusted. "INCENTIVE STOCK OPTION" or "ISO" means any Option granted pursuant to the Plan that is intended to be and is specifically designated in its Award Agreement as an "incentive stock option" within the meaning of Section 422 of the Code. "NON-EMPLOYEE DIRECTOR" means a member of the Board who is not an employee of Corporation or any Subsidiary. 2 "NONQUALIFIED OPTION" or "NQO" means any Option, including a Deferred Compensation Option, granted pursuant to the Plan that is not an Incentive Stock Option. "OPTION" means an ISO, an NQO, or a Deferred Compensation Option. "OTHER STOCK-BASED AWARD" means an Award as defined in Section 11.1. "PARTICIPANT" means an employee of Corporation or a Subsidiary, an Advisor, or a Non-Employee Director who is granted an Award under the Plan. "PERFORMANCE AWARD" means an Award granted pursuant to the provisions of Article 10 of the Plan, the Vesting of which is contingent on performance agent. "PERFORMANCE CYCLE" means a designated performance period pursuant to the provisions of Section 10.3 of the Plan. "PERFORMANCE GOAL" means a designated performance objective pursuant to the provisions of Section 10.4 of the Plan. "PLAN" means this Vinifera, Inc., 1993 Stock Award Plan, as set forth herein and as it may be hereafter amended and from time to time. "REGISTRATION DATE" shall mean the effective date upon which the Common Stock is registered under the Exchange Act. "REPORTING PERSON" means a Participant who is subject to the reporting requirements of Section 16(a) of the Exchange Act. "RESTRICTED AWARD" means a Restricted Share or a Restricted Unit granted pursuant to Article 9 of the Plan. "RESTRICTED SHARE" means an Award described in Section 9.1.(a) of the Plan. "RESTRICTED UNIT" means an Award of units representing Shares described in Section 9. 1.(b) of the Plan. "RESTRICTION" means a provision in the Plan or in an Award Agreement which limits the exercisability or transferability, or which governs the forfeiture, of an Award or the Shares, cash, or other property payable pursuant to an Award. "RETIREMENT" means: (a) For Participants who are employees, retirement from active employment with Corporation and its Subsidiaries on or after age 65, or such earlier retirement date as approved by the Committee for purposes of the Plan; 3 (b) For Participants who are Non-Employee Directors, termination of membership on the Board after attaining age 70, or such earlier retirement date as approved by the Committee for purposes of the Plan; and (c) For Participants who are Advisors, termination of service as an Advisor after attaining age 70, or such earlier retirement date as approved by the Committee for purposes of the Plan. However, the Committee may change the foregoing definition of "Retirement' or may adopt a different definition for purposes of specific Awards. "SHARE" means a share of Common Stock. "STOCK APPRECIATION RIGHT" or "SAR' means an Award to benefit from the appreciation of Common Stock granted pursuant to the provisions of Article 8 of the Plan. "SUBSIDIARY" means a 'subsidiary corporation" of Corporation, within the meaning of Section 425 of the Code, namely any corporation in which Corporation directly or indirectly controls 50 percent or more of the total combined voting power of all classes of stock having voting power. "VEST" or 'Vested" means: (a) In the case of an Award that requires exercise, to be or to become immediately and fully exercisable and free of all Restrictions (other than Continuing Restrictions); (b) In the case of an Award that is subject to forfeiture, to be or to become nonforfeitable, freely transferable, and free of all Restrictions (other than Continuing Restrictions); (c) In the case of an Award that is required to be earned by attaining specified Performance Goals, to be or to become earned and nonforfeitable, freely transferable, and free of all Restrictions (other than Continuing Restrictions); or (d) In the case of any other Award as to which payment is not dependent solely upon the exercise of a right, election, exercise, or option, to be or to become immediately payable and free of all Restrictions (except Continuing Restrictions). 2.2 GENDER AND NUMBER. Except where otherwise indicated by the context, any masculine or feminine terminology used in the Plan shall also include the opposite gender; and the definition of any term in Section 2.1 in the singular shall also include the plural, and vice versa. ARTICLE 3 ADMINISTRATION 3.1 GENERAL. The Plan shall be administered by the Board until the Registration Date; until such time the Board shall have all of the powers 4 of the Committee as set forth in this Article 3. Thereafter, the Plan shall be administered by a Committee composed as described in Section 3.2. 3.2 COMPOSITION OF THE COMMITTEE. The Committee shall be appointed by the Board and shall consist of not less than a sufficient number of disinterested members of the Board so as to qualify the Committee to administer the Plan as contemplated by Rule 16b-3 under the Exchange Act. The Board may from time to time remove members from, or add members to, the Committee. Vacancies on the Committee, however caused, shall be filled by the Board. The initial members of the Committee shall be the members of Corporation's existing Executive Compensation Committee. The Board may at any time replace the Executive Compensation Committee with another Committee. In the event that the Executive Compensation Committee shall cease to satisfy the requirements of Rule 16b-3, the Board shall appoint another Committee satisfying such requirements. 3.3 AUTHORITY OF THE COMMITTEE. The Committee shall have full power and authority (subject to such orders or resolutions as may be issued or adopted from time to time by the Board) to administer the Plan in its sole discretion, including the authority to: (a) Construe and interpret the Plan and any Award Agreement; (b) Promulgate, amend, and rescind rules and procedures relating to the implementation of the Plan; (c) With respect to employees and Advisors: (i) Select the employees and Advisors who shall be granted Awards; (ii) Determine the number and types of Awards to be granted to each such Participant; (iii) Determine the number of Shares, or Share equivalents, to be subject to each Award; (iv) Determine the option price, purchase price, base price, or similar feature for any Award; and (v) Determine all the terms and conditions of all Award Agreements, consistent with the requirements of the Plan. Decisions of the Committee, or any delegate as permitted by the Plan, shall be final, conclusive, and binding on all Participants. 3.4 ACTION BY THE COMMITTEE. A majority of the members of the Committee shall constitute a quorum for the transaction of business. Action approved by a majority of the members present at any meeting at which a quorum 5 is present, or action in writing by a majority of the members of the Committee, shall be the valid acts of the Committee. 3.5 DELEGATION. Notwithstanding the foregoing, the Committee may delegate to one or more officers of Corporation the authority to determine the recipients, types, amounts, and terms of Awards granted to Participants who are not Reporting Persons. 3.6 LIABILITY OF COMMITTEE Members. No member of the Committee shall be liable for any action or determination made in good faith with respect to the Plan, any Award, or any Participant. 3.7 Awards to Non-Employee Directors. From and after the Registration Date, the Committee shall have no discretion as to any aspects of Awards to Non-Employee Directors, which Awards shall be governed by Article 14. 3.8 Costs of Plan. The costs and expenses of administering the Plan shall be home by Corporation. ARTICLE 4 DURATION OF THE PLAN AND SUBJECT TO THE PLAN 4.1 DURATION OF THE PLAN. The Plan is effective March 9, 1993, subject to approval by Corporation's shareholders as provided in Article 18. The Plan shall remain in effect until Awards have been granted covering all the available Shares or the Plan is otherwise terminated by the Board. Termination of the Plan shall not affect outstanding Awards. 4.2 SHARES SUBJECT TO THE PLAN. The shares which may be made subject to Awards under the Plan shall be Shares of Common Stock, which may be either authorized and unissued Shares or reacquired Shares. No fractional Shares shall be issued under the Plan. The maximum number of Shares for which Awards may be granted under the Plan shall be 2,000,000 Shares, subject to adjustment pursuant to Article 15. If an Award under the Plan is canceled or expires for any reason prior to having been fully Vested or exercised by a Participant or is settled in cash in lieu of Shares or is exchanged for other Awards, all Shares covered by such Awards shall be made available for future Awards under the Plan. ARTICLE 5 ELIGIBILITY 5.1 EMPLOYEES AND ADVISORS. Officers and other key employees of Corporation and its Subsidiaries (who may also be directors of Corporation or a Subsidiary), Advisors, and, until the Registration Date, Non-Employee Directors, who, in the Committee's judgment, are or will be contributors to the long-term success of Corporation shall be eligible to receive Awards under the Plan. 6 5.2 NON-EMPLOYEE DIRECTORS. From and after the Registration Date, all Non-Employee Directors shall be eligible to receive Awards only pursuant to Article 14 of the Plan. ARTICLE 6 AWARDS 6.1 TYPES OF AWARDS. The types of Awards that may be granted under the Plan are: (a) Options governed by Article 7 of the Plan; (b) Stock Appreciation Rights governed by Article 8 of the Plan; (c) Restricted Awards governed by Article 9 of the Plan; (d) Performance Awards governed by Article 10 of the Plan; and (e) Other Stock-Based Awards or combination awards governed by Article 11 of the Plan. In the discretion of the Committee, any Award may be granted alone, in addition to, or in tandem with other Awards under the Plan. 6.2 GENERAL. Subject to the limitations of the Plan, the Committee may cause Corporation to grant Awards to such Participants, at such times, of such types, in such amounts, for such periods, with such option prices, purchase prices, or base prices, and subject to such terms, conditions, limitations, and restrictions as the Committee, in its discretion, shall deem appropriate. Awards may be granted as additional compensation to a Participant or in lieu of other compensation to such Participant. A Participant may receive more than one Award and more than one type of Award under the Plan. 6.3 NONUNIFORM DETERMINATIONS. The Committee's determinations under the Plan or under one or more Award Agreements, including without limitation, (a) the selection of Participants to receive Awards, (b) the type, form, amount, and timing of Awards, (c) the terms of specific Award Agreements, and (d) elections and determinations made by the Committee with respect to exercise or payments of Awards, need not be uniform and may be made by the Committee selectively among Participants and Awards, whether or not Participants are similarly situated. 6.4 AWARD AGREEMENTS. Each Award shall be evidenced by a written Award Agreement between Corporation and the Participant. Award Agreements may, subject to the provisions of the Plan, contain any provision approved by the Committee. 6.5 PROVISIONS GOVERNING ALL AWARDS. All Awards shall be subject to the following provisions: (a) ALTERNATIVE AWARDS. If any Awards are designated in their Award Agreements as alternative to each other, the exercise of all or part 7 of one Award automatically shall cause an immediate equal (or pro rata) corresponding termination of the other alternative Award or Awards. (b) RIGHTS AS SHAREHOLDERS. Except as provided under Section 9.6 with respect to grants of Restricted Shares, no Participant shall have any rights of a shareholder with respect to Shares subject to an Award until such Shares are issued in the name of the Participant. (c) EMPLOYMENT RIGHTS. Neither the adoption of the Plan nor the granting of any Award shall (i) confer on any person the right to continued employment with Corporation or any Subsidiary or the right to remain as a director of Corporation or a member of any Advisory Committee, as the case may be, (ii) interfere in any way with the right of Corporation or a Subsidiary to terminate such person's employment or to decrease such employee's compensation or benefits or to remove such person as an Advisor or as a director at any time for any reason, with or without cause, or (iii) confer on any person engaged by Corporation any right to be retained or employed by Corporation or to the continuation, extension, renewal, or modification of any compensation, contract, or arrangement with or by Corporation. (d) NONTRANSFERABLE. Each Award (other than Restricted Shares after they Vest) shall not be transferable otherwise than by will or the laws of descent and distribution of the state or country of the Participant's domicile at the time of death or pursuant to a qualified domestic relations order as defined under the Code or Title I of the Employee Retirement Income Security Act, and each Award shall be exercisable (if exercise is required) during the lifetime of the Participant, only by the Participant or, in the event the Participant becomes legally incompetent, by the Participant's guardian or legal representative. (e) TERMINATION OF EMPLOYMENT. The terms and conditions under which an Award may be exercised, if at all, after a Participant's termination of employment or service as an Advisor or as a Non-Employee Director shall be determined by the Committee and specified in the applicable Award Agreement. The Committee, at the time of grant or at any time thereafter, may extend the period of time, if any, not later than the original expiration date of the Award, during which an Award may be exercised following termination of employment, and may increase the portion of an Award that is exercisable, subject to terms and conditions specified by the Committee. (f) CHANGE IN CONTROL. The Committee, in its discretion, may provide in any Award Agreement that in the event of a change in control of Corporation (as the Committee may define such term in the Award Agreement), as of the date of such change in control: (i) All, or a specified portion of, Awards requiring exercise shall become fully and immediately exercisable, notwithstanding any other limitations on exercise; 8 (ii) All, or a specified portion of, Awards subject to Restrictions shall become fully Vested; and (iii) All, or a specified portion of, Awards subject to Performance Goals shall be deemed to have been fully earned. The Committee, in its discretion, may include change in control provisions in some Award Agreements and not in others, may include different change in control provisions in different Award Agreements, and may include change in control provisions for some Awards or some Participants and not for others. (g) REPORTING PERSONS. With respect to all Awards granted to Reporting Persons, the Award Agreement shall provide that, except as may be otherwise determined by the Committee: (i) For Awards requiring exercise, if the Reporting Person exercises the Award within six months after the date the Award was granted, any Shares acquired upon exercise of the Award may not be sold until at least six months after the date the Award was granted, except in the case of the death or Disability of the Participant; and (ii) Shares issued pursuant to any other Award may not be sold by the Participant for at least six months after acquisition, except in the case of the death or Disability of the Participant; provided, however, that (unless an Award Agreement provides otherwise) the limitation of this Section 6.5.(g) shall apply only if or to the extent required by Rule 16b-3 under the Exchange Act. Award Agreements for Awards to Reporting Persons shall also comply with any future restrictions imposed by such Rule 16b-3. (h) SERVICE PERIODS . At the time of granting Awards, the Committee may specify, by resolution or in the Award Agreement, the period or periods of service performed or to be performed by the Participant in connection with the grant of the Award. ARTICLE 7 OPTIONS 7.1 TYPES OF OPTIONS. Options granted under the Plan may be in the form of Incentive Stock Options or Nonqualified Options (including Deferred Compensation Options). The grant of each Option and the Award Agreement governing each Option shall identify the Option as an ISO or an NQO. In the event the Code is amended to provide for tax-favored forms of stock options other than or in addition to Incentive Stock Options, the Committee may grant Options under the Plan meeting the requirements of such forms of options. 9 7.2 GENERAL. Options shall be subject to the terms and conditions set forth in Article 6 and this Article 7 and shall contain such additional terms and conditions, not inconsistent with the express provisions of the Plan, as the Committee shall deem desirable. 7.3 OPTION PRICE. Each Award Agreement for Options shall state the option exercise price per Share of Common Stock purchasable under the Option, which shall not be less than: (a) $1 per share in the case of a Deferred Compensation Option; (b) 75 percent of the Fair Market Value of a Share on the date of grant for all other Nonqualified Options; or (c) 100 percent of the Fair Market Value of a Share on the date of grant for all Incentive Stock Options; provided that if an Incentive Stock Option is granted under the Plan to an employee possessing more than 10 percent of the total combined voting power of all classes of stock of Corporation or of any parent or Subsidiary of Corporation, the option price must be at least 1 10 percent of the Fair Market Value of a Share on the date the Option is granted. 7.4 OPTION TERM. The Award Agreement for each Option shall specify the term of each Option, have a specified period during which the Option may be exercised, as determined by the Committee; provided that if an Incentive Stock Option is granted to an employee possessing more than 10 percent of the total combined voting power of all classes of stock of Corporation, the term of the Option shall not exceed five years, and the term of all Incentive Stock Options shall not exceed 10 years. 7.5 TIME OF EXERCISE. The Award Agreement for each Option shall specify, as determined by the Committee: (a) The time or times when the Option shall become exercisable and whether the Option shall become exercisable in full or in graduated amounts over a period specified in the Award Agreement; (b) Such other terms, conditions, and restrictions as to when the Option may be exercised as shall be determined by the Committee; and (c) The extent, if any, that the Option shall remain exercisable after the Participant ceases to be an employee, Advisor, or director of Corporation or a Subsidiary. An Award Agreement for an Option may, in the discretion of the Committee, provide whether, and to what extent, the Option will become immediately and fully exercisable (i) in the event of the death, Disability, or Retirement of the Participant, or (ii) upon the occurrence of a change in control of Corporation. 10 7.6 METHOD OF EXERCISE. The Award Agreement for each Option shall specify the method or methods of payment acceptable upon exercise of an Option. An Award Agreement may provide that the option price is payable in full in cash or, at the discretion of the Committee: (a) In installments on such terms and over such period as the COMMITTEE shall determine; (b) In previously acquired Shares (including Restricted Shares); (c) By surrendering outstanding Awards under the Plan denominated in Shares or in Share equivalent units; (d) By delivery (in a form approved by the Committee) of an irrevocable direction to a securities broker acceptable to the Committee: (i) To sell Shares subject to the Option and to deliver all or a part of the sales proceeds to Corporation in payment of all or a part of the option price and withholding taxes due; or (ii) To pledge Shares subject to the Option to the broker as security for a loan and to deliver all or a part of the loan proceeds to Corporation in payment of all or a part of the option price and withholding taxes due; or (e) In any combination of the foregoing or in any other form approved by the Committee. If Restricted Shares are surrendered in full or partial payment of an Option price, a corresponding number of the Shares issued upon exercise of the Option shall be Restricted Shares subject to the same Restrictions as the surrendered Restricted Shares. 7.7 SPECIAL RULES FOR INCENTIVE STOCK OPTIONS. In the case of an Option designated as an Incentive Stock Option, the terms of the Option and the Award Agreement shall be in conformance with the statutory and regulatory requirements specified in Section 422 of the Code, as in effect on the date such ISO is granted. ISOs may be granted only to employees of Corporation or a Subsidiary. No employee may be granted Incentive Stock Options under the Plan if the aggregate fair market value, on the date of grant, of the Shares with respect to which Incentive Stock Options are exercisable for the first time by that employee during any calendar year under the Plan and under any other incentive stock option plan (within the meaning of Section 422 of the Code) of Corporation or any parent or Subsidiary of Corporation exceeds $100,000. ISOs may not be granted under the Plan after March 9, 2003, unless the ten-year limitation of Section 422(b)(2) of the Code is removed or extended. 7.8 RESTRICTED SHARES. In the discretion of the Committee, the Shares issuable upon exercise of an Option may be Restricted Shares if so provided in the Award Agreement. 11 7.9 DEFERRED COMPENSATION OPTIONS. The Committee may, in its discretion, grant Deferred Compensation Options with an option price less than Fair Market Value to provide a means for deferral of compensation to future dates. The option price shall be determined by the Committee subject to Section 7.3(a) of the Plan. The number of Shares subject to a Deferred Compensation Option shall be determined by the Committee, in its discretion, by dividing the amount of compensation to be deferred by the difference between the Fair Market Value of a Share on the date of grant and the option price of the Deferred Compensation Option. Amounts of compensation deferred with Deferred Compensation Options may include amounts earned under Awards granted under the Plan or under any other compensation program or arrangement of Corporation as permitted by the Committee. The Committee shall grant Deferred Compensation Options only if it reasonably determines that the recipient of such an Option is not likely to be deemed to be in constructive receipt for income tax purposes of the income being deferred. 7.10 RELOAD OPTIONS. The Committee, in its discretion, may provide in an Award Agreement for an Option that in the event all or a, portion of the Option is exercised by the Participant using previously acquired Shares, the Participant shall automatically be granted a replacement Option (with an option price equal to the Fair Market Value of a Share on the date of such exercise) for a number of Shares equal to (or equal to a portion of) the number of shares surrendered upon exercise of the Option. Such reload Option features may be subject to such terms and conditions as the Committee shall determine, including without limitation, a condition that the Participant retain the Shares issued upon exercise of the Option for a specified period of time. ARTICLE 8 STOCK APPRECIATION RIGHTS 8.1 GENERAL. Stock Appreciation Rights shall be subject to the terms and conditions set forth in Article 6 and this Article 8 and shall contain such additional terms and conditions, not inconsistent with the express terms of the Plan, as the Committee shall deem desirable. 8.2 NATURE OF STOCK APPRECIATION RIGHT. A Stock Appreciation Right is an Award entitling a Participant to receive an amount equal to the excess (or if the Committee shall determine at the time of grant, a portion of the excess) of the Fair Market Value of a Share of Common Stock on the date of exercise of the SAR over the base price, as described below, on the date of grant of the SAR, multiplied by the number of Shares with respect to which the SAR shall have been exercised. The base price shall be designated by the Committee in the Award Agreement for the SAR and may be the Fair Market Value of a Share on the grant date of the SAR or such other higher or lower price as the Committee shall determine. 8.3 EXERCISE. A Stock Appreciation Right may be exercised by a Participant in accordance with procedures established by the Committee. The Committee may also provide that a SAR shall be automatically exercised on one or more specified dates or upon the satisfaction of one or more specified conditions. In the case of SARs granted to Reporting Persons, exercise of the 12 SAR shall be limited by the Committee to the extent required to comply with the applicable requirements of Rule 16b-3 under the Exchange Act. 8.4 FORM OF PAYMENT. Payment upon exercise of a Stock Appreciation Right may be made in cash, in installments, in Shares, by issuance of a Deferred Compensation Option, or in any combination of the foregoing, or in any other form as the Committee shall determine. ARTICLE 9 RESTRICTED AWARDS 9.1 TYPES OF RESTRICTED AWARDS. Restricted Awards granted under the Plan may be in the form of either Restricted Shares or Restricted Units. (a) RESTRICTED SHARES. A Restricted Share is an Award of Shares transferred to a Participant subject to such terms and conditions as the Committee deems appropriate, including, without limitation, restrictions on the sale, assignment, transfer, or other disposition of such Restricted Shares and may include a requirement that the Participant forfeit such Restricted Shares back to Corporation upon termination of Participant's employment (or service as an Advisor) for specified reasons within a specified period of time or upon other conditions, as set forth in the Award Agreement for such Restricted Shares. Each Participant receiving a Restricted Share shall be issued a stock certificate in respect of such Shares, registered in the name of such Participant, and shall execute a stock power in blank with respect to the Shares evidenced by such certificate. The certificate evidencing such Restricted Shares and the stock power shall be held in custody by Corporation until the Restrictions thereon shall have lapsed. (b) RESTRICTED UNITS. A Restricted Unit is an Award of units (with each unit having a value equivalent to one Share) granted to a Participant subject to such terms and conditions as the Committee deems appropriate, and may include a requirement that the Participant forfeit such Restricted Units upon termination of Participant's employment (or service as an Advisor) for specified reasons within a specified period of time or upon other conditions, as set forth in the Award Agreement for such Restricted Units. 9.2 GENERAL. Restricted Awards shall be subject to the terms and conditions of Article 6 and this Article 9 and shall contain such additional terms and conditions, not inconsistent with the express provisions of the Plan, as the Committee shall deem desirable. 9.3 RESTRICTION PERIOD. Restricted Awards shall provide that such Awards, and the Shares subject to such Awards, may not be transferred, and may provide that, in order for a Participant to Vest in such Awards, the Participant must remain in the employment (or remain as an Advisor) of Corporation or its Subsidiaries, subject to relief for reasons specified in the Award Agreement, for a period commencing on the date of the Award and ending on such later date or dates as the Committee may designate at the time of the Award (the "Restriction Period"). During the Restriction Period, a 13 Participant may not sell, assign, transfer, pledge, encumber, or otherwise dispose of Shares received under or governed by a Restricted Award grant. The Committee, in its sole discretion, may provide for the lapse of restrictions in installments during the Restriction Period. Upon expiration of the applicable Restriction Period (or lapse of Restrictions during the Restriction Period where the Restrictions lapse in installments) the Participant shall be entitled to settlement of the Restricted Award or portion thereof, as the case may be. Although Restricted Awards shall usually Vest based on continued employment (or service as an Advisor) and Performance Awards under Article 10 shall usually Vest based on attainment of Performance Goals, the Committee, in its discretion, may condition Vesting of Restricted Awards on attainment of Performance Goals as well as continued employment (or service as an Advisor). In such case, the Restriction Period for such a Restricted Award shall include the period prior to satisfaction of the Performance Goals. 9.4 FORFEITURE. If a Participant ceases to be an employee or Advisor of Corporation or a Subsidiary during the Restriction Period for any reason other than reasons which may be specified in an Award Agreement (such as death, Disability, or Retirement) the Award Agreement may require that all non-Vested Restricted Awards previously granted to the Participant be forfeited and returned to Corporation. 9.5 SETTLEMENT OF RESTRICTED AWARDS. (a) RESTRICTED SHARES. Upon Vesting of a Restricted Share Award, the legend on such Shares will be removed and the Participant's stock power will be returned and the Shares will no longer be Restricted Shares. The Committee may also, in its discretion, permit a Participant to receive, in lieu of unrestricted Shares at the conclusion of the Restriction Period, payment in cash, installments, or by issuance of a Deferred Compensation Option equal to the Fair Market Value of the Restricted Shares as of the date the Restrictions lapse. (b) RESTRICTED UNITS. Upon Vesting of a Restricted Unit Award, a Participant shall be entitled to receive payment for Restricted Units in an-amount equal to the aggregate Fair Market Value of the Shares covered by such Restricted Units at the expiration of the Applicable Restriction Period. Payment in settlement of a Restricted Unit shall be made as soon as practicable following the conclusion of the applicable Restriction Period in cash, in installments, in Shares equal to the number of Restricted Units, by issuance of a Deferred. Compensation Option, or in any other manner or combination of such methods as the Committee, in its sole discretion, shall determine. . 9.61 RIGHTS AS A SHAREHOLDER. A Participant shall have, with respect to unforfeited Shares received under a grant of Restricted Shares, all the rights of a shareholder of Corporation, including the right to vote the shares, and the right to receive any cash dividends. Stock dividends issued with respect to Restricted Shares shall be treated as additional Shares covered by the grant of Restricted Shares and shall be subject to the same Restrictions. ARTICLE 10 14 PERFORMANCE AWARDS 10.1 GENERAL. Performance Awards shall be subject to the terms and conditions set forth in Article 6 and this Article 10 and shall contain such other terms and conditions not inconsistent with the express provisions of the Plan, as the Committee shall deem desirable. 10.2 NATURE OF PERFORMANCE AWARDS. A Performance Award is an Award of units with each unit having a value equivalent to one Share) granted to a Participant subject to such terms and conditions as the Committee deems appropriate, including, without limitation, the requirement that the Participant forfeit such Performance Award or a portion thereof in the event specified performance criteria are not met within a designated period of time. 10.3 PERFORMANCE CYCLES. For each Performance Award, the Committee shall designate a performance period (the "Performance Cycle") with a duration to be determined by the Committee in its discretion within which specified Performance Goals are to be attained. There may be several Performance Cycles in existence at any one time and the duration of Performance Cycles may differ from each other. 10.4 PERFORMANCE GOALS. The Committee shall establish Performance Goals for each Performance Cycle on-the basis of such criteria and to accomplish such objectives as the Committee may from time to time select. Performance Goals may be based on performance criteria for Corporation, a Subsidiary, or an operating group, or based on a Participant's individual performance. Performance Goals may include objective and subjective criteria. During any Performance Cycle, the Committee may adjust the Performance Goals for such Performance Cycle as it deems equitable in recognition of unusual or nonrecurring events affecting Corporation, changes in applicable tax laws or accounting principles, or such other factors as the Committee may determine. 10.5 DETERMINATION OF AWARDS. As soon as practicable after the end of a Performance Cycle, the Committee shall determine the extent to which Performance Awards have been earned on the basis of performance in relation to the established Performance Goals. 15.2 TIMING AND FORM OF PAYMENT. Settlement of earned Performance Awards shall be made to the Participant as soon as practicable after the expiration of the Performance Cycle and the Committee's determination under Section 10.5, in the form of cash, installments, Shares, Deferred Compensation Options, or any combination of the foregoing or in any other form as the Committee shall determine. ARTICLE 11 OTHER STOCK BASED AND COMBINATION AWARDS 11.1 OTHER STOCK-BASED AWARDS. The Committee may grant other Awards under the Plan pursuant to which Shares are or may in the future be acquired, or Awards denominated in or measured by Share equivalent units, including Awards valued using measures other than the market value of Shares. Such Other Stock-Based 15 Awards may be granted either alone, in addition to, or in tandem with, any other type of Award granted under the Plan. 11.2 COMBINATION AWARDS. The Committee may also grant Awards under the Plan in tandem or combination with other Awards or in exchange of Awards, or in tandem or combination with, or as alternatives to, grants or rights under any other employee plan of Corporation, including the plan of any acquired entity. No action authorized by this section shall reduce the amount of any existing benefits or change the terms and conditions thereof without the Participant's consent. ARTICLE 12 DEFERRAL ELECTIONS The Committee may permit a Participant to elect to defer receipt of the payment of cash or the delivery of Shares that would otherwise be due to such Participant by virtue of the exercise, earn out, or Vesting of an Award made under-the Plan. If any such election is permitted, the Committee shall establish rules and procedures for such payment deferrals, including, but not limited to: (a) payment or crediting of reasonable interest on such deferred amounts credited in cash, (b) the payment or crediting of dividend equivalents in respect of deferrals credited in Share equivalent units, or (c) granting of Deferred Compensation Options. ARTICLE 13 DIVIDEND EQUIVALENTS Any Awards may, at the discretion of the Committee, earn dividend equivalents. In respect of any such Award which is outstanding on a dividend record date for Common Stock, the Participant may be credited with an amount equal to the amount of cash or stock dividends that would have been paid on the Shares covered by such Award, had such covered Shares been issued and outstanding on such dividend record date. The Committee shall establish such rules and procedures governing the crediting of dividend equivalents, including the timing, form of payment, and payment contingencies of such dividend equivalents, as it deems are appropriate or necessary. ARTICLE 14 NON-EMEPLOYEE DIRECTORS 14.1 GENERAL. From and after the Registration Date, Awards shall be made to Non-Employee Directors only under this Article 14. No person, including the members of the Board or the Committee, shall have any discretion as to the selection of eligible recipients or the determination of the type, amount, or terms of Awards pursuant to this Article 14. 14.2 ELIGIBILITY. The persons eligible to receive Awards pursuant to this Article 14 are all Non-Employee Directors. 14.3 DIRECTOR OPTIONS. Effective as of the Registration Date, the Chairman of the Board of Directors shall be granted a Nonqualified Option (a 'Non-Employee Director Option') to purchase 75,000 Shares, and each other 16 person who is then a Non-Employee Director shall be granted a Non-Employee Director Option to purchase 50,000 Shares, with an Option price equal to 75 percent of the Fair Market Value of a Share on the Registration Date. Each person who becomes a Non-Employee Director after the Registration Date shall be granted, on the date such person becomes a Non-Employee Director, a Non-Employee Director Option to purchase 50,000 Shares with an Option price equal to 75 percent of the Fair Market Value of a Share on such date. A Non-Employee Director elected as Chairman of the Board of Directors after the Registration Date shall be granted, as of the date of such election, a Non-Employee Director Option to purchase 75,000 Shares (or, if such person has previously received a Non-Employee Director Option, a Non-Employee Director Option to purchase an additional 25,000 shares) with an Option price equal to 75 percent of the Fair Market Value of a Share on such date. 14.4 AWARD AGREEMENTS. Each Award of Non-Employee Director Options made pursuant to this Article 14 shall be governed by and shall be subject to the terms and conditions set forth in an Non-Employee Director Award Agreement in the form attached to this Plan as EXHIBIT A. Except to the extent otherwise provided in this Article 14 or in such Non-Employee Director Award Agreement, each such Award shall be governed by Article 7 of the Plan. With respect to persons who become Non-Employee Directors after the Registration Date, the Non-Employee Director Award Agreement for the Director Option shall be in substantially the same form as Exhibit A, but with the dates of annual meetings specified in such Non-Employee Director Award Agreement adjusted to refer to dates subsequent to such person becoming a Non-Employee Director. ARTICLE 15 ADJUSTMENTS UPON CHANGES IN CAPITALIZATTON, ETC. 15.1 PLAN DOES NOT RESTRICT CORPORATION. The existence of the Plan and the Awards granted hereunder shall not affect or restrict in any way the right or power of the Board or the shareholders of Corporation to make or authorize any adjustment, recapitalization, reorganization, or other change in Corporation's capital structure or its business, any merger or consolidation of Corporation, any issue of bonds, debentures, preferred or prior preference stocks ahead of or affecting Corporation's capital stock or the rights thereof, the dissolution or liquidation of Corporation or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding. 15.2 ADJUSTMENTS BY THE COMMITTEE. In the event of any change in capitalization affecting the Common Stock of Corporation, such as a stock dividend, stock split, recapitalization, merger, consolidation, split-up, combination or exchange of shares or other form of reorganization, or any other change affecting the Common Stock, such proportionate adjustments, if any, as the Committee, in its sole discretion, may deem appropriate to reflect such change, shall be made with respect to the aggregate number of Shares for which Awards in respect thereof may be granted under the Plan, the maximum number of Shares which may be sold or awarded to any Participant, the number of Shares covered by each outstanding Award, and the price per Share in respect of outstanding Awards. The Committee may also make such adjustments in the number of Shares covered by, and price or other value of any 17 outstanding Awards in the event of a spin-off or other distribution (other than normal cash dividends), of Corporation assets to shareholders. ARTICLE 16 AMENDMENT AND TERMINATION The Board may at any time terminate the Plan, or may amend it from time to time in such respects as the Board may deem advisable because of changes in the law while the Plan is in effect or for any other reason, except that the provisions of Article 14 of the Plan shall not be amended more than once every six months, other than to comport with changes in the Code or in Rule 16b-3 under the Exchange Act. ARTICLE 17 MISCELLANEOUS 17.1 TAX WITHHOLDING. (a) GENERAL. Corporation shall have the right to deduct from any settlement, including the delivery or vesting of Shares, made under the Plan any federal, state, or local taxes of any kind required by law to be withheld with respect to such payments or to take such other action as may be necessary in the opinion of the Committee to satisfy all obligations for the payment of such taxes. 'Me recipient of any payment or distribution under the Plan shall make arrangements satisfactory to Corporation for the satisfaction of any such withholding tax obligations. Corporation shall not be required to make any such settlement under the Plan until such obligations are satisfied. (b) STOCK WITHHOLDING. The Committee, in its sole discretion, may permit a Participant to satisfy all or a part of the withholding tax obligations incident to the settlement of an Award involving payment or delivery of Shares to the Participant by having Corporation withhold a portion of the Shares that would otherwise be issuable to the Participant. Such Shares shall be valued based on their Fair Market Value on the date the tax withholding is required to be made. Any stock withholding with respect to a Reporting Person shall be subject to such limitations as the Committee may impose to comply with the requirements of the Exchange Act. 17.2 UNFUNDED PLAN. The Plan shall be unfunded and Corporation shall not be required to segregate any assets that may at any time be represented by Awards under the Plan. Any liability of Corporation to any person with respect to any Award under the Plan shall be based solely upon any contractual obligations that may be effected pursuant to the Plan. No such obligation of Corporation shall be deemed to be secured by any pledge of, or other encumbrance on, any property of Corporation. 17.3 PAYMENTS TO TRUST. The Committee is authorized to cause to be established a trust agreement or several trust agreements whereunder the Committee may make payments of amounts due or to become due to Participants in the Plan. 18 17.4 ANNULMENT OF AWARDS. Any Award Agreement may provide that the grant of an Award payable in cash is provisional until cash is paid in settlement thereof or that grant of an Award payable in Shares is provisional until the Participant becomes entitled to the certificate in settlement thereof. In the event the employment (or service as an Advisor or membership on the Board) of a Participant is terminated for cause (as defined below), any Award which is provisional shall be annulled as of the date of such termination for cause. For the purpose of this Section 17.4, the term "for cause" shall have the meaning set forth in the Participant's employment agreement, if any, or otherwise means any discharge (or removal) for material or flagrant violation of the policies and procedures of Corporation or for other job performance or conduct which is materially detrimental to the best interests of Corporation, as determined by the Committee. 17.5 ENGAGING IN COMPETITION WITH THE CORPORATION. Any Award Agreement may provide that, if a Participant terminates employment with Corporation or a- Subsidiary for any reason whatsoever, and within 18 months after the date thereof accepts employment with any competitor of (or otherwise engages in competition with) Corporation, the Committee, in its sole discretion, may require such Participant to return to Corporation the economic value of any Award that is realized or obtained (measured at the date of exercise, Vesting, or payment) by such Participant at any time during the period beginning on the date that is six months prior to the date of such Participant's termination of employment with Corporation. 17.6 OTHER CORPORATION BENEFIT AND COMPENSATION PROGRAMS. Payments and other benefits received by a Participant under an Award made pursuant to the Plan shall not be deemed a part of a Participant's regular, recurring compensation for purposes of the termination indemnity or severance pay law of any state or country and shall not be included in, nor have any effect on, the determination of benefits under any other employee benefit plan or similar arrangement provided by Corporation or a Subsidiary unless expressly so provided by such other plan or arrangements, or except where the Committee expressly determines that an Award or portion of an Award should be included to accurately reflect competitive compensation practices or to recognize that an Award has been made in lieu of a portion of cash compensation. Awards under the Plan may be made in combination with or in tandem with, or as alternatives to, grants, awards, or payments under any other Corporation or Subsidiary plans, arrangements, or programs. The Plan notwithstanding, Corporation or any Subsidiary may adopt such other compensation programs and additional compensation arrangements as it deems necessary to attract, retain, and reward employees and directors for their service with Corporation and its Subsidiaries. 17.7 SECURITIES LAW RESTRICTIONS. No Shares shall be issued under the Plan unless counsel for Corporation shall be satisfied that such issuance will be in compliance with applicable federal and state securities laws. Certificates for Shares delivered under the Plan may be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Common Stock is then listed, and any applicable federal or state securities law. The 19 Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. 17.8 GOVERNING LAW. Except with respect to references to the Code or federal securities laws, the Plan and all actions taken thereunder shall be governed by and construed in accordance with the laws of the state of Oregon. ARTICLE 18 SHAREHOLDER APPROVAL The adoption of the Plan and the grant of Awards under the Plan are expressly subject to the approval of the Plan by the affirmative vote of the holders of a majority of the shares of Common Stock outstanding on the date of shareholder approval acting pursuant to written consent or present at a meeting of Corporation's shareholders. 20 EXHIBIT A AWARD AGREEMENT UNDER THE VINIFERA, INC., 1993 STOCK AWARD PLAN NON-EMLOYEE DIRECTOR OPTION Dated ______________ ___, 199__ Vinifera, Inc. 8505 S.W. Creekside Place Beaverton, Oregon 97005 ("Corporation") [Name and Address of Participant] __________________ __________________ ("Participant") Corporation maintains the Vinifera, Inc., 1993 Stock Award Plan (the "Plan"). This Agreement governs the Award of a Nonqualified Option to Participant as a Non-Employee Director pursuant to Article 14 of the Plan. The parties agree as follows: 1. DEFINED TERMS When used in this Agreement, the following terms shall have the meanings specified below: (a) "ACQUIRING PERSON" shall mean any person or related person or related persons which constitute a "group" for purposes of Section 13(d) and Rule 13d-5 under the Exchange Act, as such Section and Rule are in effect as of the date of this Agreement; provided, however, that the term Acquiring Person shall not include (i) Corporation or any of its Subsidiaries, (ii) any employee benefit plan of Corporation or any of its Subsidiaries, (iii) any entity holding voting capital stock of Corporation for or pursuant to the terms of any such employee benefit plan, or (iv) any person or group solely because such person or group has voting power with respect to capital stock of Corporation arising from a revocable proxy or consent given in response to a public proxy or consent solicitation made pursuant to the Exchange Act. (b) "ANNUAL MEETING" means an annual meeting of the Board held in conjunction with an annual meeting of the shareholders of Corporation. (c) "APPROVED CHANGE IN CONTROL" shall mean a Change in Control- which is approved in writing by the Board prior to the Change in Control Date. 1 (d) "CHANGE IN CONTROL" shall mean: (i) A change in control of Corporation of a nature that would be required to be reported in response to Item 6(e) of Schedule 14A of Regulation 14A as in effect on the date of this Agreement pursuant to the Exchange Act; provided that, without limitation, such a change in control shall be deemed to have occurred at such time as any Acquiring Person hereafter becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 30 percent or more of the combined voting power of Corporation Voting Securities; or (ii) During any period of 12 consecutive calendar months, individuals who at the beginning of such period constitute the Board cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election, by Corporation's shareholders of each new director was approved by a vote of at least a majority of the directors then still in office who were directors at the beginning of the period; or (iii) There shall be consummated (1) any consolidation or merger of Corporation in which Corporation is not the continuing or surviving corporation or pursuant to which Voting Securities would be converted into cash, securities, or other property, other than a merger of Corporation in which the holders of Voting Securities immediately prior to the merger have the same, or substantially the same, proportionate ownership of common stock of the surviving corporation immediately after the merger, or (2) any sale, lease, exchange, or other transfer (in one transaction or a series of related transactions) of all, or substantially all, of the assets of Corporation, provided that any such consolidation, merger, sale, lease, exchange, or other transfer consummated at the insistence of an appropriate banking regulatory agency shall not constitute a change in control; or (iv) Approval by the shareholders of Corporation of any plan or proposal for the liquidation or dissolution of Corporation. (e) "CHANGE IN CONTROL DATE" shall mean the first date following the date of this Agreement on which a Change in Control has occurred. (f) "EFFECTIVE DATE" means the date of this Agreement, which is the date the Option is granted to Participant. (g) "OPTION" means the Nonqualifted Option granted to Participant evidenced by this Agreement. (h) "VOTING SECURITIES" shall mean Corporation's issued and outstanding securities ordinarily having the right to vote at elections for Corporation's Board. 2 (i) Capitalized terms not otherwise defined in this Agreement have the meanings given them in the Plan. 2. GRANT OF OPTION Subject to the terms and conditions of this Agreement and the Plan, as of the Effective Date Corporation granted to Participant a Nonqualified Option (the "Option") to purchase [50,000 or 75,000] Shares. 3. TERMS OF THE QPTION The Option shall have the following terms and conditions: (a) PRICE. The Option price per Share of the Option shall be $[75% of Fair Market Value on Effective Date] per Share. (b) TERM. The term of the Option shall be unlimited unless otherwise terminated pursuant to the terms of this Agreement. (c) TIME OF EXERCISE. Unless the Option is terminated or the time of its exercisability is accelerated in accordance with the provisions of this Agreement: (i) The Option shall not be exercisable prior to the date of the [first Annual Meeting occurring more than six months after Effective Date], except as to [10,000 or 15,000 multiplied by whole number of months of service as a director until anticipated date of first Annual Meeting occurring more than six months after Effective Date] Shares, for which the Option shall become exercisable as of [date occurring six months after Effective date]; and (ii) As of the dates of each of the 199- through 199 Annual Meetings, providing Participant is a director of Corporation at such meeting, the option shall become exercisable as follows: ANNUAL MEETING DATES NUMBER OF SHARES -------------------- ---------------- 199_ [10,000 or 15,000] 199_ [10,000 or 15,000] 199_ [10,000 or 15,000] 199_ (d) CONTINUATION AS A DIRECTOR. If Participant ceases to be a member of the Board for any reason, the right to exercise the Option, to the extent the Option is then exercisable (or becomes exercisable at 3 that time pursuant to Subsection 3.(e)) shall expire at the end of the following periods: After Termination On Account Of Period ----------------- ------ Death 1 year Retirement 5 years Disability 1 year Any other reason 1 year (e) ACCELERATION OF EXERCISABILITY. Notwithstanding the schedule provided in Subsection 3.(d), the exercisability of the Option shall be accelerated upon a Change in Control Date (other than in connection with an Approved Change in Control). Upon such a Change in Control Date, the Option shall become immediately and fully exercisable as to all Shares covered by the Option; provided, however, that no portion of the Option shall become exercisable in any event sooner than six months after the Effective Date, except in the case of Participant's death or Disability. (f) SERVICE PERIODS. The periods of service as a director in connection with the grant of the Option are as follows: (i) The portion of the Option becoming exercisable pursuant to Subsection 3.(c)(i) is in connection with services to be performed in the [__________] period preceding the [first Annual Meeting occurring more than six months after Effective Date]; (ii) The portions of the Option becoming exercisable pursuant to Subsection 3.(c)(ii) are respectively in connection with services to be performed in the 1-year periods commencing on each Annual Meeting. 4. METHOD OF EXERCISE. (a) EXERCISE OF OPTIONS. The Option, or a portion thereof, may be exercised, to the extent it has become exercisable pursuant to Subsections 3.(c) and 3.(e), by delivery of written notice to Corporation stating the number of Shares, form of payment, and proposed date of closing. (b) OTHER DOCUMENTS. Participant shall furnish Corporation, before closing of any exercise of the Option, such other documents or representations as Corporation may require to assure compliance with applicable laws and regulations. (c) PAYMENT. The purchase price for the Shares purchased upon exercise of the Option shall be paid in full at or before closing by one or a combination of the following: (i) Payment in cash; 4 (ii) By delivery (in a form approved by the Committee) of an irrevocable direction to a securities broker acceptable to the Committee: (1) To sell Shares subject to the Option and to deliver all or a part of the sales proceeds to Corporation in payment of all or a part of the option price and withholding taxes due; or (2) To pledge Shares subject to the Option to the broker as security for a loan and to deliver all or a part of the loan proceeds to Corporation in payment of all or a part of the option price and withholding taxes due; or (iii) Delivery of previously acquired Shares having a Fair Market Value equal to the purchase price. (d) PREVIOUSLY ACQUIRED SHARES. Delivery of previously acquired Shares surrendered in full or partial payment of the exercise price of the Option, or any portion thereof, shall be subject to the following conditions: (i) The Shares tendered shall be in good delivery form; (ii) The Fair Market Value of the Shares, together with the amount of cash, if any, tendered shall equal or exceed the exercise price of the Option; (iii) Any Shares remaining after satisfying the payment of the Option shall be reissued in the same manner as the Shares tendered; and (iv) No fractional Shares will be issued and cash will not be paid to Participant for any fractional Share value not used to satisfy the Option exercise price. (e) RELOAD OPTION. In the event all or a portion of the Option is exercised by Participant by delivering previously acquired Shares, Participant shall be granted automatically a replacement Option -for a number of Shares equal to the number of Shares delivered upon exercise of the Option. The grant date for such replacement Option shall be the date of exercise and the option price for such replacement Option shall be the Fair Market Value of a Share on such grant date. The replacement Option initially shall not be exercisable and shall become fully exercisable six months after the grant date. In all other respects, the replacement Option shall be subject to all the terms and conditions of this Agreement. 5. SECURITIES LAWS. Corporation shall not be required to distribute any Shares upon exercise of the Option, or any portion thereof, until Corporation shall have 5 taken any action required to comply with the provisions of the Securities Act of 1933 or any other then applicable federal or state securities laws. 6. TAX REIMBURSEMENT. In the event any withholding or similar tax liability is imposed on Corporation in connection with or with respect to the exercise of the Option governed by this Agreement, Participant agrees to pay to Corporation an amount sufficient to provide for such tax liability. 7. CONDITIONS PRECEDENT. The grant of Awards under the Plan is subject to the approval of the Plan by Corporation's shareholders as set forth in the Plan. Corporation will use its best efforts to obtain any required approvals of the Plan and the Awards of Restricted Shares governed by this Agreement by any state or federal agency or authority that Corporation determines has jurisdiction. If Corporation determines that any required approval cannot be obtained, all Awards to Participant shall terminate on notice to Participant to that effect. 8. SUCCESSORSHIP. Subject to the restrictions on transferability set forth in this Agreement and in the Plan, this Agreement shall be binding upon and benefit the parties, their successors, and assigns. 9. NOTICES. Any notices under this Agreement shall be in writing and shall be effective when actually delivered personally or, if mailed, when deposited as registered or certified, mail directed to the address maintained in Corporation's records or to such other address as a party may certify by notice to the other party. VINIFERA, INC. By: -------------------------------------- (Title) ----------------------------------------- Participant 6 EX-10.34 8 LINE OF CREDIT WITH WELLS FARGO BANK WELLS FARGO BANK REVOLVING LINE OF CREDIT NOTE - -------------------------------------------------------------------------------- $1,500,000.00 SANTA ROSA, CALIFORNIA MAY 15, 1999 FOR VALUE RECEIVED, the undersigned HENRY WENDT AND VINIFERA, INC. ("Borrower") promises to pay to the order of WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") at its office at NORTH COAST RCBO, 200 B STREET SUITE 300, SANTA ROSA, CA 95401, or at such other place as the holder hereof may designate, in lawful money of the United States of America and in immediately available funds, the principal sum of $1,500,000.00, or so much thereof as may be advanced and be outstanding, with interest thereon, to be computed on each advance from the date of its disbursement as set forth herein. DEFINITIONS: As used herein, the following terms shall have the meanings set forth after each, and any other term defined in this Note shall have the meaning set forth at the place defined: (a) "Business Day" means any day except a Saturday, Sunday or any other day on which commercial banks in California are authorized or required by law to close. (b) "Fixed Rate Term" means a period commencing on a Business Day and continuing for 1,2,3,6, OR 12 MONTHS, as designated by Borrower, during which all or a portion of the outstanding principal balance of this Note bears interest determined in relation to LIBOR; provided however, that no Fixed Rate Term may be selected for a principal amount less than $500,000.00; and provided further, that no Fixed Rate Term shall extend beyond the scheduled maturity date hereof. If any Fixed Rate Term would end on a day which is not a Business Day, then such Fixed Rate Term shall be extended to the next succeeding Business Day. (c) "LIBOR" means the rate per annum (rounded upward, if necessary, to the nearest whole 1/8 of 1%) determined by dividing Base LIBOR by a percentage equal to 100% less any LIBOR Reserve Percentage. (i) "Base LIBOR" means the rate per annum for United States dollar deposits quoted by Bank as the Inter-Bank Market Offered Rate, with the understanding that such rate is quoted by Bank for the purpose of calculating effective rates of interest for loans making reference thereto, on the first day of a Fixed Rate Term for delivery of funds on said date for a period of time approximately equal to the number of days in such Fixed Rate Term and in an amount approximately equal to the principal amount to which such Fixed Rate Term applies. Borrower understands and agrees that Bank may base its quotation of the Inter-Bank Market Offered Rate upon such offers or other market indicators of the Inter-Bank Market as Bank in its discretion deems appropriate including, but not limited to, the rate offered for U.S. dollar deposits on the London Inter-Bank Market. (ii) "LIBOR Reserve Percentage" means the reserve percentage prescribed by the Board of Governors of the Federal Reserve System (or any successor) for "Eurocurrency Liabilities" (as defined in Regulation D of the Federal Reserve Board, as amended), adjusted by Bank for expected changes in such reserve percentage during the applicable Fixed Rate Term. (d) "Prime Rate" means at any time the rate of interest most recently announced within Bank at its principal office as its Prime Rate, with the understanding that the Prime Rate is one of Bank's base rates and serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto, and is evidenced by the recording thereof after its announcement in such internal publication or publications as Bank may designate. INTEREST: (a) INTEREST. The outstanding principal balance of this Note shall bear interest (computed on the basis of a 360-day year, actual days elapsed) either (i) at a fluctuating rate per annum EQUAL TO the Prime Rate in effect from time to time, or (ii) at a fixed rate per annum determined by Bank to be 1.25000% above LIBOR in effect on the first day of the applicable Fixed Rate Term. When interest is determined in relation to the Prime Rate, each change in the rate of interest hereunder shall become effective on the date each Prime Rate change is announced within Bank. With respect to each LIBOR selection option selected hereunder, Bank is hereby authorized to note the date, principal amount, interest rate and Fixed Rate Term applicable thereto and any payments made thereon on Bank's books and records (either manually or by electronic entry) and/or on any schedule attached to this Note, which notations shall be prima facie evidence of the accuracy of the information noted. (b) SELECTION OF INTEREST RATE OPTIONS. At any time any portion of this Note bears interest determined in relation to LIBOR, it may be continued by Borrower at the end of the Fixed Rate Term applicable thereto so that all or a portion hereof bears interest determined in relation to the Prime Rate or to LIBOR for a new Fixed Rate Term designated by Borrower. At any time any portion of this Note bears interest determined in relation to the Prime Rate, Borrower may convert all or a portion thereof so that it bears interest determined in relation to LIBOR for a Fixed Rate Term designated by Borrower. At such time as Borrower requests an advance hereunder or wishes to select a LIBOR option for all or a portion of the outstanding principal balance hereof, and at the end of each Fixed Rate Term, Borrower shall give Bank notice specifying: (i) the interest rate option selected by Borrower; (ii) the principal amount subject thereto; and (iii) for each LIBOR selection, the length of the applicable Fixed Rate Term. Any such notice may be given by telephone so long as, with respect to each LIBOR selection, (A) Bank receives written confirmation from Borrower not later than 3 Business Days after such telephone notice is given, and (B) such notice is given to Bank prior to 10:00 a.m., California time, on the 1 first day of the Fixed Rate Term. For each LIBOR option requested hereunder, Bank will quote the applicable fixed rate to Borrower at approximately 10:00 a.m., California time, on the first day of the Fixed Rate Term. If Borrower does not immediately accept the rate quoted by Bank, any subsequent acceptance by Borrower shall be subject to a redetermination by Bank of the applicable fixed rate; provided however, that if Borrower fails to accept any such rate by 11:00 a.m., California time, on the Business Day such quotation is given, then the quoted rate shall expire and Bank shall have no obligation to permit a LIBOR option to be selected on such day. If no specific designation of interest is made at the time any advance is requested hereunder or at the end of any Fixed Rate Term, Borrower shall be deemed to have made a Prime Rate interest selection for such advance or the principal amount to which such Fixed Rate Term applied. (c) ADDITIONAL LIBOR PROVISIONS. (i) If Bank at any time shall determine that for any reason adequate and reasonable means do not exist for ascertaining LIBOR, then Bank shall promptly give notice thereof to Borrower. If such notice is given and until such notice has been withdrawn by Bank, then (A) no new LIBOR option may be selected by Borrower, and (B) any portion of the outstanding principal balance hereof which bears interest determined in relation to LIBOR, subsequent to the end of the Fixed Rate Term applicable thereto, shall bear interest determined in relation to the Prime Rate. (ii) If any law, treaty, rule, regulation or determination of a court or governmental authority or any change therein or in the interpretation or application thereof (each, a "Change in Law") shall make it unlawful for Bank (A) to make LIBOR options available hereunder, or (B) to maintain interest rates based on LIBOR, then in the former event, any obligation of Bank to make available such unlawful LIBOR options shall immediately be cancelled, and in the latter event, any such unlawful LIBOR-based interest rates then outstanding shall be converted, at Bank's option, so that interest on the portion of the outstanding principal balance subject thereto is determined in relation to the Prime Rate; provided however, that if any such Change in Law shall permit any LIBOR-based interest rates to remain in effect until the expiration of the Fixed Rate Term applicable thereto, then such permitted LIBOR-based interest rates shall continue in effect until the expiration of such Fixed Rate Term. Upon the occurrence of any of the foregoing events, Borrower shall pay to Bank immediately upon demand such amounts as may be necessary to compensate Bank for any fines, fees, charges, penalties or other costs incurred or payable by Bank as a result thereof and which are attributable to any LIBOR options made available to Borrower hereunder, and any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower. (iii) If any Change in Law or compliance by Bank with any request or directive (whether or not having the force of law) from any central bank or other governmental authority shall: (A) subject Bank to any tax, duty or other charge with respect to any LIBOR options, or change the basis of taxation of payments to Bank of principal, interest, fees or any other amount payable hereunder (except for changes in the rate of tax on the overall net income of Bank); or (B) impose, modify or hold applicable any reserve, special deposit, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances or loans by, or any other acquisition of funds by any office of Bank; or (C) impose on Bank any other condition; and the result of any of the foregoing is to increase the cost to Bank of making, renewing or maintaining any LIBOR options hereunder and/or to reduce any amount receivable by Bank in connection therewith, then in any such case, Borrower shall pay to Bank immediately upon demand such amounts as may be necessary to compensate Bank for any additional costs incurred by Bank and/or reductions in amounts received by Bank which are attributable to such LIBOR options. In determining which costs incurred by Bank and/or reductions in amounts received by Bank are attributable to any LIBOR options made available to Borrower hereunder, any reasonable allocation made by Bank among its operations shall be conclusive and binding upon Borrower. (d) PAYMENT OF INTEREST. Interest accrued on this Note shall be payable on the 1ST day of each MONTH, commencing JUNE 1, 1999. (e) DEFAULT INTEREST. From and after the maturity date of this Note, or such earlier date as all principal owing hereunder becomes due and payable by acceleration or otherwise, the outstanding principal balance of this Note shall bear interest until paid in full at an increased rate per annum (computed on the basis of a 360-day year, actual days elapsed) equal to 4% above the rate of interest from time to time applicable to this Note. BORROWING AND REPAYMENT: (a) BORROWING AND REPAYMENT. Borrower may from time to time during the term of this Note borrow, partially or wholly repay its outstanding borrowings, and reborrow, subject to all of the limitations, terms and conditions of this Note and of any document executed in connection with or governing this Note; provided however, that the total outstanding borrowings under this Note shall not at any time exceed the principal amount stated above. The unpaid principal balance of this obligation at any time shall be the total amounts advanced hereunder by the holder hereof less the amount of principal payments made hereon by or for any Borrower, which balance may be endorsed hereon from time to time by the holder. The outstanding principal balance of this Note shall be due and payable in full on MAY 1, 2000. (b) ADVANCES. Advances hereunder, to the total amount of the principal sum available hereunder, may be made by the holder at the oral or written request of (i) _______________________________________________________,I any 2 one acting alone, who are authorized to request advances and direct the disposition of any advances until written notice of the revocation of such authority is received by the holder at the office designated above, or (ii) any person, with respect to advances deposited to the credit of any account of any Borrower with the holder, which advances, when so deposited, shall be conclusively presumed to have been made to or for the benefit of each Borrower regardless of the fact that persons other than those authorized to request advances may have authority to draw against such account. The holder shall have no obligation to determine whether any person requesting an advance is or has been authorized by any Borrower. (c) APPLICATION OF PAYMENTS. Each payment made on this Note shall be credited first, to any interest then due and second, to the outstanding principal balance hereof. All payments credited to principal shall be applied first, to the outstanding principal balance of this Note which bears interest determined in relation to the Prime Rate, if any, and second, to the outstanding principal balance of this Note which bears interest determined in relation to LIBOR, with such payments applied to the oldest Fixed Rate Term first. PREPAYMENT: (a) PRIME RATE. Borrower may prepay principal on any portion of this Note which bears interest determined in relation to the Prime Rate at any time, in any amount and without penalty. (b) LIBOR. Borrower may prepay principal on any portion of this Note which bears interest determined in relation to LIBOR at any time and in the minimum amount of $500,000.00; provided however, that if the outstanding principal balance of such portion of this Note is less than said amount, the minimum prepayment amount shall be the entire outstanding principal balance thereof. In consideration of Bank providing this prepayment option to Borrower, or if any such portion of this Note shall become due and payable at any time prior to the last day of the Fixed Rate Term applicable thereto by acceleration or otherwise, Borrower shall pay to Bank immediately upon demand a fee which is the sum of the discounted monthly differences for each month from the month of prepayment through the month in which such Fixed Rate Term matures, calculated as follows for each such month: (i) DETERMINE the amount of interest which would have accrued each month on the amount prepaid at the interest rate applicable to such amount had it remained outstanding until the last day of the Fixed Rate Term applicable thereto. (ii) SUBTRACT from the amount determined in (i) above the amount of interest which would have accrued for the same month on the amount prepaid for the remaining term of such Fixed Rate Term at LIBOR in effect on the date of prepayment for new loans made for such term and in a principal amount equal to the amount prepaid. (iii) If the result obtained in (ii) for any month is greater than zero, discount that difference by LIBOR used in (ii) above. Each Borrower acknowledges that prepayment of such amount may result in Bank incurring additional costs, expenses and/or liabilities, and that it is difficult to ascertain the full extent of such costs, expenses and/or liabilities. Each Borrower, therefore, agrees to pay the above-described prepayment fee and agrees that said amount represents a reasonable estimate of the prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay any prepayment fee when due, the amount of such prepayment fee shall thereafter bear interest until paid at a rate per annum 2.000% above the Prime Rate in effect from time to time (computed on the basis of a 360-day year, actual days elapsed). Each change in the rate of interest on any such past due prepayment fee shall become effective on the date each Prime Rate change is announced within Bank. EVENTS OF DEFAULT: The occurrence of any of the following shall constitute an "Event of Default" under this Note: (a) The failure to pay any principal, interest, fees or other charges when due hereunder or under any contract, instrument or document executed in connection with this Note. (b) The filing of a petition by or against any Borrower, any guarantor of this Note or any general partner or joint venturer in any Borrower which is a partnership or a joint venture (with each such guarantor, general partner and/or joint venturer referred to herein as a "Third Party Obligor") under any provisions of the Bankruptcy Reform Act, Title 11 of the United States Code, as amended or recodified from time to time, or under any similar or other law relating to bankruptcy, insolvency, reorganization or other relief for debtors; the appointment of a receiver, trustee, custodian or liquidator of or for any part of the assets or property of any Borrower or Third Party Obligor; any Borrower or Third Party Obligor becomes insolvent, makes a general assignment for the benefit of creditors or is generally not paying its debts as they become due; or any attachment or like levy on any property of any Borrower or Third Party Obligor. (c) The death or incapacity of any individual Borrower or Third Party Obligor, or the dissolution or liquidation of any Borrower or Third Party Obligor which is a corporation, partnership, joint venture or other type of entity. (d) Any default in the payment or performance of any obligation, or any defined event of default, under any provisions of any contract, instrument or document pursuant to which any Borrower or Third Party Obligor has incurred any obligation for borrowed money, any purchase obligations or any other liability of any kind to any person or entity, including the holder. 3 (e) Any financial statement provided by any Borrower or Third Party Obligor to Bank proves to be incorrect, false or misleading in any material respect. (f) Any sale or Transfer of all or a substantial or material pan of the assets of any Borrower or Third Party Obligor other than in the ordinary course of its business. (g) Any violation or breach of any provision of, or any defined event of default under, any addendum to this Note or any loan agreement, guaranty, security agreement, dead of trust, mortgage or other document executed in connection with or securing this Note. MISCELLANEOUS: (a) REMEDIES. Upon the occurrence of any Event of Default, the holder of this Note, at the holder's option, may declare all sums of principal and interest outstanding hereunder to be immediately due and payable without presentment, demand, notice of nonperformance, notice of protest, protest or notice of dishonor, all of which are expressly waived by each Borrower, and the obligation, if any,. of the holder to extend any further credit hereunder shall immediately cease and terminate. Each Borrower shall pay to the holder immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of the holder's in-house counsel), expended or incurred by the holder in connection with the Enforcement of the holder's rights and/or the collection of any amounts which become due to the holder under this Note, and the prosecution or defense of any action in any way related to this Note, including without limitation, any action for declaratory relief, whether incurred at the trial or appellate level, in an arbitration proceeding or otherwise, and Including any of the foregoing incurred in connection with any bankruptcy proceeding (including without limitation, any adversary proceeding, contested matter or motion brought by Bank or any other person) relating to any Borrower or any other person or entity. (b) OBLIGATIONS JOINT AND SEVERAL. Should more than one person or entity sign this Note as a Borrower, the obligations of each such Borrower shall be joint and several. (c) GOVERNING LAW. This Note shall be governed by and construed in accordance with the laws of the state of California. IN WITNESS WHEREOF, the undersigned has executed this Note as of the date first written above. /s/ HENRY WENDT - ------------------------------------------ HENRY WENDT VINIFERA, INC. By: /s/ J. Bouckaert - ------------------------------------------ Joseph Bouckaert Title: President - ------------------------------------------ By: /s/ Gillbert N. Miller - ------------------------------------------ Gilbert N. Miller Title: Executive VP/CFO - ------------------------------------------ 4 EX-10.35 9 ADDENDUM TO PROMISSORY NOTE DATED 05/15/99 ADDENDUM TO PROMISSORY NOTE THIS ADDENDUM is attached to and made a part of that certain promissory note executed by HENRY WENDT AND VINIFERA, INC. (each individually, a "Borrower") and payable to WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank"), or order, dated as of May 15, 1999, in the principal amount of One Million Five Hundred Thousand Dollars ($1,500,000.00) (the "Note"). Each reference herein to "Borrower" shall mean each and every party, collectively and individually, defined above as a Borrower. The following provisions are hereby incorporated into the Note: 1. So long as Bank remains committed to extend credit to Borrower under this Note and until payment in full of all obligations of Borrower hereunder, Borrower shall provide to Bank all of the following, in form and detail satisfactory to Bank: (a) not later than 90 days after and as of the end of each calendar year, a financial statement of Henry Wendt, prepared by Borrower, to include balance sheet and income statement, and within 30 days after filing, but in no event later than each October 31, copies of Henry Wendt's filed federal income tax returns for such year; (b) not later than 90 days after and as of the end of each fiscal year, a financial statement of Vinifera, Inc., prepared by Borrower, to include balance sheet and income statement; and within 30 days after filing, but in no event later than each October 31, copies of Vinifera, Inc.'s, corporate filed federal income tax returns for such year, prepared by a certified public accountant acceptable to Bank; (c) from time to time such financial and other information as Bank may reasonably request. 2. YEAR 2000 COMPLIANCE: So long as Bank remains committed to extend credit to Borrower under this Note and until payment in full of all obligations of Borrower hereunder, Borrower agrees to perform all acts reasonably necessary to ensure that (a) Borrower and any business in which Borrower holds a substantial interest, and (b) all customers, suppliers and vendors that are material to Borrower's business, become Year 2000 Compliant in a timely manner. Such acts shall include, without limitation, performing a comprehensive review and assessment of all of Borrower's systems and adopting a detailed plan, with itemized budget, for the remediation, monitoring and testing of such systems. As used herein, "Year 2000 Compliant" shall mean, in regard to any entity, that all software, hardware, firmware, equipment, goods or systems utilized by or material to the business operations or financial condition of such entity, will properly perform date sensitive functions before, during and after the year 2000. Borrower shall, immediately upon request, provide to Bank such certifications or other evidence of Borrower's compliance with the terms hereof as Bank may from time to time require. 3. ARBITRATION: (a) ARBITRATION. Upon the demand of any party, any Dispute shall be resolved by binding arbitration (except as set forth in (e) below) in accordance with the terms of this Note. A "Dispute" shall mean any action, dispute, claim or controversy of any kind, whether in contract or tort, statutory or common law, legal or equitable, now existing or hereafter arising under or in connection with, or in any way pertaining to, this Note and each other document, contract and instrument required hereby or now or hereafter delivered to Bank in connection herewith (collectively, the "Documents"), or any past, present or future extensions of credit and other activities, transactions or obligations of any kind related directly or indirectly to any of the Documents, including without limitation, any of the foregoing arising in connection with the exercise of any self-help, ancillary or other remedies pursuant to any of the Documents. Any party may by summary proceedings bring an action in court to compel arbitration of a Dispute. Any party who fails or refuses to submit to arbitration following a lawful demand by any other party shall bear all costs and expenses incurred by such other party in compelling arbitration of any Dispute. (b) GOVERNING RULES. Arbitration proceedings shall be administered by the American Arbitration Association ("AAA") or such other administrator as the parties shall mutually agree upon in accordance with the AAA Commercial Arbitration Rules. All Disputes submitted to arbitration shall be resolved in accordance with the Federal Arbitration Act (Title 9 of the United States Code), notwithstanding any conflicting choice of law provision in any of the Documents. The arbitration shall be conducted at a location in California selected by the AAA or other administrator. If there is any inconsistency between the terms hereof and any such rules, the terms and procedures set forth herein shall control. All statutes of limitation applicable to any Dispute shall apply to any arbitration proceeding. All discovery activities shall be expressly limited to matters directly relevant to the Dispute being arbitrated. Judgment upon any award rendered in an arbitration may be entered in any court having jurisdiction; provided however, that nothing contained herein shall be deemed to be a waiver by any party that is a bank of the protections afforded to it under 12 U.S.C. ss.91 or any similar applicable state law. (c) NO WAIVER; PROVISIONAL REMEDIES, SELF-HELP AND FORECLOSURE. No provision hereof shall limit the right of any party to exercise self-help remedies such as setoff, foreclosure against or sale of any real or personal property collateral or security, or to obtain provisional or ancillary remedies, including without limitation injunctive relief, sequestration, attachment, garnishment or the appointment of a receiver, from a court of competent jurisdiction before, after or during the pendency of any arbitration or other proceeding. The exercise of any such remedy shall not waive the right of any party to compel arbitration or reference hereunder. (d) ARBITRATOR QUALIFICATIONS AND POWERS; AWARDS. Arbitrators must be active members of the California State Bar or retired judges of the state or federal judiciary of California, with expertise in the substantive law applicable to the subject matter of the Dispute. Arbitrators are empowered to resolve Disputes by summary rulings in response to motions filed prior to the final arbitration hearing. Arbitrators (i) shall resolve all Disputes in accordance with the substantive law of the state of California, (ii) may grant any remedy or relief that a court of the state of California could order or grant within the scope hereof and such ancillary relief as is necessary to make effective any award, and (iii) shall have the power to award recovery of all costs and fees, to impose sanctions and to take such other actions as they deem necessary to the same extent a judge could pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil Procedure or other applicable law. Any Dispute in which the amount in controversy is $5,000,000 or less shall be decided by a single arbitrator who shall not render an award of greater than $5,000,000 (including damages, costs, fees and expenses). By submission to a single arbitrator, each party expressly waives any right or claim to recover more than $5,000,000. Any Dispute in which the amount in controversy exceeds $5,000,000 shall be decided by majority vote of a panel of three arbitrators; provided however, that all three arbitrators must actively participate in all hearings and deliberations. (e) JUDICIAL REVIEW. Notwithstanding anything herein to the contrary, in any arbitration in which the amount in controversy exceeds $25,000,000, the arbitrators shall be required to make specific, written findings of fact and conclusions of law. In such arbitrations (A) the arbitrators shall not have the power to make any award which is not supported by substantial evidence or which is based on legal error, (B) an award shall not be binding upon the parties unless the findings of fact are supported by substantial evidence and the conclusions of law are not erroneous under the substantive law of the state of California, and (C) the parties shall have in addition to the grounds referred to in the Federal Arbitration Act for vacating, modifying or correcting an award the right to judicial review of (1) whether the findings of fact rendered by the arbitrators are supported by substantial evidence, and (2) whether the conclusions of law are erroneous under the substantive law of the state of California. Judgment confirming an award in such a proceeding may be entered only if a court determines the award is supported by substantial evidence and not based on legal error under the substantive law of the state of California. (f) REAL PROPERTY COLLATERAL; JUDICIAL REFERENCE. Notwithstanding anything herein to the contrary, no Dispute shall be submitted to arbitration if the Dispute concerns indebtedness secured directly or indirectly, in whole or in part, by any real property unless (i) the holder of the mortgage, lien or security interest specifically elects in writing to proceed with the arbitration, or (ii) all parties to the arbitration waive any rights or benefits that might accrue to them by virtue of the single action rule statute of California, thereby agreeing that all indebtedness and obligations of the parties, and all mortgages, liens and security interests securing such indebtedness and obligations, shall remain fully valid and enforceable. if any such Dispute is not submitted to arbitration, the Dispute shall be referred to a referee in accordance with California Code of Civil Procedure Section 638 et seq., and this general reference agreement is intended to be specifically enforceable in accordance with said Section 638. A referee with the qualifications required herein for arbitrators shall be selected pursuant to the AAA's selection procedures. Judgment upon the decision rendered by a referee shall be entered in the court in which such proceeding was commenced in accordance with California Code of Civil Procedure Sections 644 and 645. (g) MISCELLANEOUS. To the maximum extent practicable, the AAA, the arbitrators and the parties shall take all action required to conclude any arbitration proceeding within 180 days of the filing of the Dispute With the AAA. No arbitrator or other party to an arbitration Proceeding may disclose the existence, content or results thereof, except for disclosures of information by a party required in the ordinary course of its business, by applicable law or regulation, or to the extent necessary to exercise any judicial review rights set forth herein. If more than one agreement for arbitration by or between the partlie3 potentially applies to a Dispute, the arbitration provision most directly related to the Documents or the subject matter of the Dispute shall control. This Note may be amended or modified only in writing signed by Bank and Borrower. If any provision of this Note shall be held to be prohibited by or invalid under applicable law, such provision invalidity be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder ok such provision or any remaining provisions of this Note. This arbitration provision shall survive termination, amendment or expiration of any of the Documents or any relationship between the parties. IN WITNESS WHEREOF, this Addendum has been executed as of the same date as the Note. /s/ Henry Wendt - ------------------------------- Henry Wendt VINIFERA, INC. By: /s/ J. Bouckaert - ------------------------------- Joseph Bouckaert Title: President - ------------------------------- By: /s/ Gilbert N. Miller - ------------------------------- Gilbert N. Miller Title: Exec. VP/CFO - ------------------------------- EX-10.36 10 CONTINUING SECURITY AGREEMENT CONTINUING SECURITY GREEMENT WELLS FARGO BANK RIGHTS TO PAYMENT AND INVENTORY - -------------------------------------------------------------------------------- 1. GRANT OF SECURITY INTEREST. For valuable consideration, the undersigned VINIFERA, INC., or any of them ("Debtor"), hereby grants and transfers to WELLS FARGO BANK, NATIONAL ASSOCIATION ("Bank") a security interest in' all accounts, deposit accounts, chattel paper, instruments, documents and general intangibles (collectively called "Rights to Payment"), now existing or at any time hereafter, and prior to the termination hereof, arising (whether they arise from the sale, lease or other disposition of inventory or from performance of contracts for service, manufacture, construction, repair or otherwise or from any other source whatsoever), including all securities, guaranties, warranties, indemnity agreements, insurance policies and other agreements pertaining to the same or the property described therein, and in all goods returned by or repossessed from Debtor's customers, together with a security interest in all inventory, goods held for sale or lease or to be furnished under contracts for service, goods so leased or furnished, raw materials, component parts, work in process or materials used or consumed in Debtor's business and all warehouse receipts, bills of lading and other documents evidencing goods owned or acquired by Debtor, and all goods covered thereby, now or at any time hereafter, and prior to the termination hereof, owned or acquired by Debtor, wherever located, and all products thereof (collectively called "Inventory"), whether in the possession of Debtor, warehousemen, bailees or any other person, or in process of delivery and whether located at Debtor's places of business or elsewhere (with all Rights to Payment and Inventory referred to herein collectively as the "Collateral"), together with whatever is receivable or received when any of the Collateral or proceeds thereof are sold, leased, collected, exchanged or otherwise disposed of, whether such disposition is voluntary or involuntary, including without limitation, all Rights to Payment, including returned premiums, with respect to any insurance relating to any of the foregoing, and all Rights to Payment with respect to any cause of action affecting or relating to any of the foregoing (hereinafter called "Proceeds"). 2. OBLIGATIONS SECURED. The obligations secured hereby are the payment and performance of: (a) all present and future Indebtedness of Debtor to Bank; (b) all obligations of Debtor and rights of Bank under this Agreement; and (c) all present and future obligations of Debtor to Bank of other kinds. The word "Indebtedness" is used herein in its most comprehensive sense and includes any and all advances, debts, obligations and liabilities of Debtor, or any of them, heretofore, now or hereafter made, incurred or created, whether voluntary or involuntary and however arising, whether due or not due, absolute or contingent, liquidated or unliquidated, determined or undetermined, and whether Debtor may be liable individually or jointly, or whether recovery upon such Indebtedness may be or hereafter becomes unenforceable. 3. TERMINATION. This Agreement will terminate upon the performance of all obligations of Debtor to Bank, including without limitation, the payment of all Indebtedness of Debtor to Bank, and the termination of all commitments of Bank to extend credit to Debtor, existing at the time Bank receives written notice from Debtor of the termination of this Agreement. 4. OBLIGATIONS OF BANK. Bank has no obligation to make any loans hereunder. Any money received by Bank in respect of the Collateral may be deposited, at Bank's option, into a non-interest bearing account over which Debtor shall have no control, and the same shall, for all purposes, be deemed Collateral hereunder. 5. REPRESENTATIONS AND WARRANTIES. Debtor represents and warrants to Bank that: (a) Debtor is the owner and has possession or control of the Collateral and Proceeds; (b) Debtor has the right to grant a security interest in the Collateral and Proceeds; (c) all Collateral and Proceeds are genuine, free from liens, adverse claims, setoffs, default, prepayment, defenses and conditions precedent of any kind or character, except the lien created hereby or as otherwise agreed to by Bank, or heretofore disclosed by Debtor to Bank, in writing; (d) all statements contained herein and, where applicable, in the Collateral are true and complete in all material respects; (a) no financing statement covering any of the Collateral or Proceeds, and naming any secured party other than Bank, is on file in any public office; (f) all persons appearing to be obligated on Rights to Payment and Proceeds have authority and capacity to contract and are bound as they appear to be; (g) all property subject to chattel paper has been properly registered and filed in compliance with law and to perfect the interest of Debtor in such property; and (h) all Rights to Payment and Proceeds comply with all applicable laws concerning form, content and manner of preparation and execution, including where applicable Federal Reserve Regulation Z and any State consumer credit laws. 6. COVENANTS OF DEBTOR. (a) Debtor Agrees in general: (i) to pay Indebtedness secured hereby when due; (ii) to indemnify Bank against all losses, claims, demands, liabilities and expenses of every kind caused by property subject hereto; (iii) to pay all costs and expenses, including reasonable attorneys' fees, incurred by Bank in the perfection and preservation of the Collateral or Bank's interest therein and/or the realization, enforcement and exercise of Bank's rights, powers and remedies hereunder; (iv) to permit Bank to exercise its powers; (v) to execute and deliver such documents as Bank deems necessary to create, perfect and continue the security interests contemplated hereby; and (vi) not to change its chief place of business (or personal residence, if applicable) or the places where Debtor keeps any of the Collateral or Debtor's records concerning the Collateral and Proceeds without first giving Bank written notice of the address to which Debtor is moving same. (b) Debtor agrees with regard to the Collateral and Proceeds, unless Bank agrees otherwise in writing: (i) to insure Inventory and, where applicable, Rights to Payment with Bank as loss payee, in form, substance and amounts, under agreements, against risks and liabilities, and with insurance companies satisfactory to Bank; (ii) not to use any Inventory or any unlawful purpose or in any way that would void any insurance required to be carried in connection therewith; (iii) not to remove Inventory from Debtor's premises, except for deliveries to buyers in the ordinary course of Debtor's business and except Inventory which consists of mobile goods as defined in the California Uniform 1 Commercial Code, in which case Debtor agrees not to remove or permit the removal of the Inventory from its state of domicile for a period in excess of 30 calendar days; (iv) not to permit any security interest in or lien on the Collateral or Proceeds, including without limitation, liens arising from the storage of Inventory, except in favor of Bank; (v) not to sell, hypothecate or otherwise dispose of, nor permit the transfer by operation of law of, any of the Collateral or Proceeds or any interest therein, except sales of Inventory to buyers in the ordinary course of Debtor's business; (vi) to furnish reports to Bank of all acquisitions, returns, sales and other dispositions of the Inventory in such form and detail and at such times as Bank may require; (vii) to permit Bank to inspect the Collateral at any time; (viii) to keep, in accordance with generally accepted accounting principles, complete and accurate records regarding all Collateral and Proceeds, and to permit Bank to inspect the same and make copies thereof at any reasonable time; (ix) if requested by Bank, to receive and use reasonable diligence to collect Rights to Payment and Proceeds, in trust and as the property of Bank, and to immediately endorse as appropriate and deliver such Rights to Payment and Proceeds to Bank daily in the exact form in which they are received together with a collection report in form satisfactory to Bank; (x) not to commingle Rights to Payment, Proceeds or collections thereunder with other property; (xi) to give only normal allowances and credits and to advise Bank thereof immediately in writing if they affect any Rights to Payment or Proceeds in any material respect; (xii) on demand, to deliver to Bank returned property resulting from, or payment equal to, such allowances or credits on any Rights to Payment or Proceeds or to execute such documents and do such other things as Bank may reasonably request for the purpose of perfecting, preserving and enforcing its security interest in such returned property; (xiii) from time to time, when requested by Bank, to prepare and deliver a schedule of all Collateral and Proceeds subject to this Agreement and to assign in writing and deliver to Bank all accounts, contracts, leases and other chattel paper, instruments, documents and other evidences thereof; (xiv) in the event Bank elects to receive payments of Rights to Payment or Proceeds hereunder, to pay all expenses incurred by Bank in connection therewith, including expenses of accounting, correspondence, collection efforts, reporting to account or contract debtors, filing, recording, record keeping and expenses incidental thereto; and (xv) to provide any service and do any other acts which may be necessary to maintain, preserve and protect all Collateral and, as appropriate and applicable, to keep all Collateral in good and saleable condition in accordance with the standards and practices adhered to generally by users and manufacturers of like property, and to keep all Collateral and Proceeds free and clear of all defenses, rights of offset and counterclaims. 7. POWERS OF BANK. Debtor appoints Bank its true attorney-in-fact to perform any of the following powers, which are coupled with an interest, are irrevocable until termination of this Agreement and may be exercised from time to time by Bank's officers and employees, or any of them, whether or not Debtor is in default: (a) to perform any obligation of Debtor hereunder in Debtor's name or otherwise; (b) to give notice to account debtors or others of Bank's rights in the Collateral and Proceeds, to enforce the same and make extension agreements with respect thereto; (c) to release persons liable on Proceeds and to give receipts and acquittances and compromise disputes in connection therewith; (d) to release security; (e) to resort to security in any order; (f) to prepare, execute, file, record or deliver notes, assignments, schedules, designation statements, financing statements, continuation statements, termination statements, statements of assignment, applications for registration or like papers to perfect, preserve or release Bank's interest in the Collateral and Proceeds; (g) to receive, open and read mail addressed to Debtor; (h) to take cash, instruments for the payment of money and other property to which Bank is entitled; (i) to verify facts concerning the Collateral and Proceeds by inquiry of obligors thereon, or otherwise, in its own name or a fictitious name; (j) to endorse, collect, deliver and receive payment under instruments for the payment of money constituting or relating to Proceeds; (k) to prepare, adjust, execute, deliver and receive payment under insurance claims, and to collect and receive payment of and endorse any instrument in payment of loss or returned premiums or any other insurance refund or return, and to apply such amounts received by Bank, at Bank's sole option, toward repayment of the Indebtedness or replacement of the Collateral; (l) to exercise all rights, powers and remedies which Debtor would have, but for this Agreement, with respect to all Collateral and Proceeds subject hereto; (m) to enter onto Debtor's premises in inspecting the Collateral; (n) to make withdrawals from and to close deposit accounts or other accounts with any financial institution, wherever located, into which Proceeds may have been deposited, and to apply funds so withdrawn to payment of the Indebtedness; (o) to preserve or release the interest evidenced by chattel paper to which Bank is entitled hereunder and to endorse and deliver evidences of title incidental thereto; and (p) to do all acts and things and execute all documents in the name of Debtor or otherwise, deemed by Bank as necessary, proper and convenient in connection with the preservation, perfection or enforcement of its rights hereunder. 8. PAYMENT OF PREMIUMS, TAXES, CHARGES, LIENS AND ASSESSMENTS. Debtor agrees to pay, prior to delinquency, all insurance premiums, taxes, charges, liens and assessments against the Collateral and Proceeds, and upon the failure of Debtor to do so, Bank at its option may pay any of them and shall be the sole judge of the legality or validity thereof and the amount necessary to discharge the same. Any such payments made by Bank shall be obligations of Debtor to Bank, due and payable immediately upon demand, together with interest at a rate determined in accordance with the provisions of Section 15 herein, and shall be secured by the Collateral and Proceeds, subject to all terms and conditions of this Agreement. 9. EVENTS OF DEFAULT. The occurrence of any of the following shall constitute an "Event of Default" under this Agreement: (a) any default in the payment or performance of any obligation, or any defined event of default, under (i) any contract or instrument evidencing any Indebtedness, or (ii) any other agreement between any Debtor and Bank, including without limitation any loan agreement, relating to or executed in connection with any Indebtedness; (b) any representation or warranty made by any Debtor herein shall prove to be incorrect in any material respect when made; (c) any Default shall fail to observe or perform any obligation or agreement contained herein; (d) any attachment or like levy on any property of any Debtor; and (e) Bank, in good faith, believes any or all of the Collateral and/or Proceeds to be in danger of misuse, dissipation, commingling, loss, theft, damage or destruction, or otherwise in jeopardy or unsatisfactory in character or value. 10. REMEDIES. Upon the occurrence of any Event of Default, Bank shall have the right to declare immediately due and payable all or any Indebtedness secured hereby and to terminate any commitments to make loans or otherwise extend credit to Debtor. Bank shall have all other rights, powers, privileges and remedies granted to a secured party upon 2 default under the California Uniform Commercial Code or otherwise provided by law, including without limitation, the right to contact all persons obligated to Debtor on any Collateral or Proceeds and to instruct such persons to deliver all Collateral and/or Proceeds directly to Bank. All rights, powers, privileges and remedies of Bank shall be cumulative. No delay, failure or discontinuance of Bank in exercising any right, power, privilege or remedy hereunder shall affect or operate as a waiver of such right, power, privilege or remedy; nor shall any single or partial exercise of any such right, power, privilege or remedy preclude, waive or otherwise affect any other or further exercise thereof or the exercise of any other right, power, privilege or remedy. Any waiver, permit, consent or approval of any kind by Bank of any default hereunder, or any such waiver of any provisions or conditions hereof, must be in writing and shall be effective only to the extent set forth in writing. It is agreed that public or private sales, for cash or on credit, to a wholesaler or retailer or investor, or user of property of the types subject to this Agreement, or public auction, are all commercially reasonable since differences in the sales prices generally realized in the different kinds of sales are ordinarily offset by the differences in the costs and credit risks of such sales. While an Event of Default exists: (a) Debtor will deliver to Bank from time to time, as requested by Bank, current lists of all Collateral and Proceeds; (b) Debtor will not dispose of any of the Collateral or Proceeds except on terms approved by Bank; (c) at Bank's request, Debtor will assemble and deliver all Collateral and Proceeds, and books and records pertaining thereto, to Bank at a reasonably convenient place designated by Bank; and (d) Bank may, without notice to Debtor, enter onto Debtor's premises and take possession of the Collateral. With respect to any sale by Bank of any Collateral subject to this Agreement, Debtor hereby expressly grants to Bank the right to sell such Collateral using any or all of Debtor's trademarks, trade names, trade name rights and/or proprietary labels or marks. 11. DISPOSITION OF COLLATERAL AND PROCEEDS. Upon the transfer of all or any part of the Indebtedness, Bank may transfer all or any part of the Collateral or Proceeds and shall be fully discharged thereafter from all liability and responsibility with respect to any of the foregoing so transferred, and the transferee shall be vested with all rights and powers of Bank hereunder with respect to any of the foregoing so transferred; but with respect to any Collateral or Proceeds not so transferred Bank shall retain all rights, powers, privileges and remedies herein given. Any proceeds of any disposition of any of the Collateral or Proceeds, or any part thereof, may be applied by Bank to the payment of expenses incurred by Bank in connection with the foregoing, including reasonable attorneys' fees, and the balance of such proceeds may be applied by Bank toward the payment of the Indebtedness in such order of application as Bank may from time to time elect. 12. STATUTE OF LIMITATIONS. Until all Indebtedness shall have been paid in full and all commitments by Bank to extend credit to Debtor have been terminated, the power of sale and all other rights, powers, privileges and remedies granted to Bank hereunder shall continue to exist and may be exercised by Bank at any time and from time to time irrespective of the fact that the Indebtedness or any part thereof may have become barred by any statute of limitations, or that the personal liability of Debtor may have ceased, unless such liability shall have ceased due to the payment in full of all Indebtedness secured hereunder, 13. MISCELLANEOUS. (a) The obligations of Debtor are joint and several; (b) Debtor hereby waives any right (i) to require Bank to make any presentment or demand, or give any notice of nonpayment or nonperformance, protest, notice of protest or notice of dishonor hereunder, (ii) to direct the application of payments or security for Indebtedness of Debtor or indebtedness of customers of Debtor, or (iii) to require proceedings against others or to require exhaustion of security; and (c) Debtor hereby consents to extensions, forbearances or alterations of the terms of Indebtedness, the release or substitution of security, and the release of any guarantors; provided however, that in each instance, Bank believes in good faith that the action in question is commercially reasonable in that it does not unreasonably increase the risk of nonpayment of the Indebtedness to which the action applies. Until all Indebtedness shall have been paid in full, no Debtor shall have any right of subrogation or contribution, and each Debtor hereby waives any benefit of or right to participate in any of the Collateral or Proceeds or any other security now or hereafter held by Bank. 14. NOTICES. All notices, requests and demands required under this Agreement must be in writing, addressed to Bank at the address specified in any other loan documents entered into between Debtor and Bank and to Debtor at the address of its chief executive office (or personal residence, if applicable) specified below or to such other address as any party may designate by written notice to each other party, and shall be deemed to have been given or made as follows: (a) if personally delivered, upon delivery; (b) if sent by mail, upon the earlier of the date of receipt or 3 days after deposit in the U. S. mail, first class and postage prepaid; and (c) if sent by telecopy, upon receipt. 15. COSTS, EXPENSES AND ATTORNEYS' FEES. Debtor shall pay to Bank immediately upon demand the full amount of all payments, advances, charges, costs and expenses, including reasonable attorneys' fees (to include outside counsel fees and all allocated costs of Bank's in-house counsel), expended or incurred by Bank in exercising any right, power, privilege or remedy conferred by this Agreement or in the enforcement adversary proceeding, contested matter or motion brought by Bank or any other person) relating to Debtor or any way affecting any of the collateral or Bank's ability to exercise any of its rights or remedies with respect thereto. All of the foregoing shall be paid by Debtor with interest from the date of demand until paid in full at a rate per annum equal to the greater of ten percent (10%) or the Prime Rate in effect from time to time. The "Prime Rate" is a base rate that Bank from time to time establishes and which serves as the basis upon which effective rates of interest are calculated for those loans making reference thereto. 16. SUCCESSORS; ASSIGNS; AMENDMENT. This Agreement shall be binding upon and inure to the benefit of the heirs, executors, administrators, legal representatives, successors and assigns of the parties, and may be amended or modified only in writing signed BY Bank and Debtor. 3 17. OBLIGATIONS OF MARRIED PERSONS. Any married person who signs this Agreement as Debtor hereby expressly agrees that recourse may be had against his or her separate property for all his or her Indebtedness to Bank secured by the Collateral and Proceeds under this Agreement. 18. SEVERABILITY OF PROVISIONS. If any provision of this Agreement Shall be held to be prohibited by or invalid under applicable law, such provision shall be ineffective only to the extent of such prohibition or invalidity, without invalidating the remainder of such provision or any remaining provisions of this Agreement, 19. GOVERNING LAW. This Agreement shall be governed by and construed in accordance with the laws of the state of California. Debtor warrants that its chief executive office (or personal residence, if applicable) is located at the following address: 4288 BODEGA AVENUE, PETALUMA, CA 94952 Debtor warrants that the Collateral (except goods in transit) is located or domiciled at the following additional addresses: 775 BAYWOOD DR., SUITE 213, PETALUMA, CA 94952 IN WITNESS WHEREOF, this Agreement has been duly executed as of MAY 15, 1999. VINIFERA, INC. BY /s/ J. Bouckaer - --------------------------------------------- Joseph Bouckaert Title: President - --------------------------------------------- By: /s/ Gilbert N. Milller - --------------------------------------------- Gilbert N. Miller Title: Executive VP/CFO - --------------------------------------------- EX-10.37 11 ACCOUNTS RECEIVABLE PURCHASE AGREEMENT SILICON VALLEY BANK 3003 Tasman Drive Santa Clara, Ca. 95054 (408) 654-1000 - Fax (408) 980-6410 ACCOUNTS RECEIVABLE PURCHASE AGREEMENT This Accounts Receivable Purchase Agreement (the "Agreement") Is made on this TWENTIETH day of MAY 1999, by and between Silicon Valley Bank ("Buyer") having a place of business at the address specified above and AGRITOPE, INC., a DELAWARE corporation, ("Seller") having its principal place of business and chief executive office at 16160 SW Upper Boones Ferry Road, Portland, Oregon 97224. 1. DEFINITIONS. When used herein, the following terms shall have the following meanings. 1.1. "Account Balance" shall mean, on any given day, the gross amount of all Purchased Receivables unpaid on that day. 1.2. "Account Debtor" shall have the meaning set forth In the California Uniform Commercial Code and shall Include any person liable on any Purchased Receivable, Including without limitation, any guarantor of the Purchased Receivable and any Issuer of a letter of credit or banker's acceptance. 1.3. "Adjustments" shall mean all discounts, allowances, returns, disputes, counterclaims, offsets, defenses, rights of recoupment, rights of return, warranty claims, or short payments, asserted by or on behalf of any Account Debtor with respect to any Purchased Receivable. 1.4. "Administrative Fee" shall have the meaning as set forth In Section 3.3 hereof. 1.5. "Advance" shall have the meaning set forth In Section 2.2 hereof. 1.6. "Collateral" shall have the meaning set forth In Section 8 hereof. 1.7. "Collections" shall mean all good funds received by Buyer from or on behalf of an Account Debtor with respect to Purchased Receivables. 1.8. "Compliance Certificate" shall mean a certificate, In a form provided by Buyer to Seller, which contains the certification of the chief financial officer of Seller that, among other things, the representations and warranties set forth in this Agreement are true and correct as of the date such certificate is delivered. 1.9. "Event of Default" shall have the meaning set forth in Section 9 hereof. 1.10. "Finance Charges" shall have the meaning set forth In Section 3.2 hereof. 1.11. "Invoice Transmittal" shall mean a writing signed by an authorized representative of Seller which accurately identifies the Receivables which Buyer, at its election, may purchase, and Includes for each such receivable the correct amount owed by the Account Debtor, the name and address of the Account Debtor, the invoice number, the invoice date and the account code. 1.12. "Obligations" shall mean all advances, financial accommodations, liabilities, obligations, covenants and duties owing, arising, due or payable by Seller to Buyer of any kind or nature, present or future, arising under or in connection with this Agreement or under any other document, Instrument or agreement, whether or not evidenced by any note, guarantee or other instrument, whether arising on account or by overdraft, whether direct or indirect (including those acquired by assignment) absolute or contingent, primary or secondary, due or to become due, now owing or hereafter arising, and however acquired; including, without limitation, all Advances, Finance Charges, Administrative Fees, interest, Repurchase Amounts, fees, expenses, professional fees and attorneys' fees and any other sums chargeable to Seller hereunder or otherwise. 1.13. "Purchased Receivables" shall mean all those accounts, receivables, chattel paper, Instruments, contract rights, documents, general Intangibles, letters of credit, drafts, bankers acceptances, and rights to payment, and all proceeds thereof (all of the foregoing being referred to as 'receivables'), arising out of the invoices and other agreements identified on or delivered with any Invoice Transmittal delivered by Seller to Buyer which Buyer elects to purchase and for which Buyer makes an Advance. 1.14. "Refund" shall have the meaning set forth in Section 3.7 hereof. 1.15. "Reserve" shall have the meaning set forth in Section 2.4 hereof. 1.16. "Repurchase Amount" shall have the meaning set forth in Section 4.2 hereof. 1.17. "Reconciliation Date" shall mean the last calendar day of each Reconciliation Period. 1.18. "Reconciliation Period" shall mean each calendar month of every year. 2. PURCHASE AND SALE OF RECEIVABLES. 2.1. OFFER TO SELL RECEIVABLES. During the term hereof, and provided that there does not then exist any Event of Default or any event that with notice, lapse of time or otherwise would constitute an Event of Default, Seller may request that Buyer purchase receivables and Buyer may, in its sole discretion, elect to purchase receivables. Seller shall deliver to Buyer an Invoice Transmittal with respect to any receivable for which a request for purchase is made. An authorized representative of Seller shall sign each Invoice Transmittal delivered to Buyer. Buyer shall be entitled to rely on all the Information provided by Seller to Buyer on or with the Invoice Transmittal and to rely on the signature on any Invoice Transmittal as an authorized signature of Seller. 2.2. ACCEPTANCE OF RECEIVABLES. Buyer shall have no obligation to purchase any receivable listed on an Invoice Transmittal. Buyer may exercise its sole discretion In approving the credit of each Account Debtor before buying any receivable. Upon acceptance by Buyer of all or any of the receivables described on any Invoice Transmittal, Buyer shall pay to Seller 80(%) percent of the face amount of each receivable Buyer desires to purchase. Such payment shall be the "Advance" with respect to such receivable. Buyer may, from time to time, In its sole discretion, change the percentage of the Advance. Upon Buyer's acceptance of the receivable and payment to Seller of the Advance, the receivable shall become a "Purchased Receivable." It shall be a condition to each Advance that 1 (i) all of the representations and warranties set forth In Section 6 of this Agreement be true and correct on and as of the date of the related Invoice Transmittal and on and as of the date of such Advance as though made at and as of each such date, and (ii) no Event of Default or any event or condition that with notice, lapse of time or otherwise would constitute an Event of Default shall have occurred and be continuing, or would result from such Advance. Notwithstanding the foregoing, in no event shall the aggregate amount of all Purchased Receivables outstanding at any time exceed FIVE HUNDRED THOUSAND AND NO/100******** Dollars ($500,000.00). 2.3. EFFECTIVENESS OF SALE TO BUYER. Effective upon Buyer's payment of an Advance, and for and in consideration therefor and in consideration of the covenants of this Agreement, Seller hereby absolutely sells, transfers and assigns to Buyer, all of Seller's right, title and interest In and to each Purchased Receivable and all monies due or which may become due on or with respect to such Purchased Receivable. Buyer shall be the absolute owner of each Purchased Receivable. Buyer shall have, with respect to any goods related to the Purchased Receivable, all the rights and remedies of an unpaid seller under the California Uniform Commercial Code and other applicable law, including the rights of replevin, claim and delivery, reclamation and stoppage In transit. 2.4. ESTABLISHMENT OF A RESERVE. Upon the purchase by Buyer of each Purchased Receivable, Buyer shall establish a reserve. The reserve shall be the amount by which the face amount of the Purchased Receivable exceeds the Advance on that Purchased Receivable (the "Reserve"); provided, the Reserve with respect to all Purchased Receivables outstanding at any one time shall be an amount not less than 20(%) percent of the Account Balance at that time and may be set at a higher percentage at Buyer's sole discretion. The reserve shall be a book balance maintained on the records of Buyer and shall not be a segregated fund. 3. COLLECTIONS, CHARGES AND REMITTANCES. 3.1. COLLECTIONS. Upon receipt by Buyer of Collections, Buyer shall promptly credit such Collections to Seller's Account Balance on a daily basis; provided, that if Seller is in default under this Agreement, Buyer shall apply all Collections to Sellers Obligations hereunder in such order and manner as Buyer may determine. If an item of collection is not honored or Buyer does not receive good funds for any reason, the amount shall be included in the Account Balance as if the Collections had not been received and Finance Charges under Section 3.2 shall accrue thereon. 3.2. FINANCE CHARGES. On each Reconciliation Date Seller shall pay to Buyer a finance charge in an amount equal to 2.00 (%) percent per month of the average daily Account Balance outstanding during the applicable Reconciliation Period (the "Finance Charges"). Buyer shall deduct the accrued Finance Charges from the Reserve as set forth In Section 3.7 below. 3.3. ADMINISTRATIVE FEE. On each Reconciliation Date Seller shall pay to Buyer an Administrative Fee equal to .65 (%) percent of the face amount of each Purchased Receivable first purchased during that Reconciliation Period (the "Administrative Fee"). Seller shall pay to Buyer an additional .50 (%) percent Administrative Fee on Purchased Receivables whose Account Debtors are Government Agencies. Buyer shall deduct the Administrative Fee from the Reserve as set forth in Section 3.7 below. 3.4. FACILITY FEE. A fully earned, non-refundable facility fee of $1,000.00 shall be due upon execution of this Agreement 3.5. PREPAYMENT FEE. A fully earned, non-refundable prepayment fee of $5,000.00 shall be due upon voluntary or involuntary payment in full of Seller's Obligations if the Obligations are paid in full within one year of the date of this Agreement. 3.6. ACCOUNTING. Buyer shall prepare and send to Seller after the close of business for each Reconciliation Period, an accounting of the transactions for that Reconciliation Period, including the amount of all Purchased Receivables, all Collections, adjustments, Finance Charges, and the Administrative Fee. The accounting shall be deemed correct and conclusive unless Seller makes written objection to Buyer within thirty (30) days after the Buyer mails the accounting to Seller. 3.7. REFUND TO SELLER. Provided that there does not then exist an Event of Default or any event or condition that with notice, lapse of time or otherwise would constitute an Event of Default, Buyer shall refund to Seller by check after the Reconciliation Date, the amount, if any, which Buyer owes to Seller at the end of the Reconciliation Period according to the accounting prepared by Buyer for that Reconciliation Period (the "Refund"). The Refund shall be an amount equal to: (A) (1) The Reserve as of the beginning of that Reconciliation Period, PLUS (2) the Reserve created for each Purchased Receivable purchased during that Reconciliation Period, MINUS (B) The total for that Reconciliation Period of: (1) the Administrative Fee; (2) Finance Charges; (3) Adjustments; (4) Repurchase Amounts, to the extent Buyer has agreed to accept payment thereof by deduction from the Refund; (5) the Reserve for the Account Balance as of the first day of the following Reconciliation Period in the minimum percentage set forth in Section 2.4 hereof; and 2 (6) all amounts due, including professional fees and expenses, as set forth In Section 12 for which oral or written demand has been made by Buyer to Seller during that Reconciliation Period to the extent Buyer has agreed to accept payment thereof by deduction from the Refund. In the event the formula set forth in this Section 3.7 results in an amount due to Buyer from Seller, Seller shall make such payment in the same manner as set forth in Section 4.3 hereof for repurchases. If the formula set forth in this Section 3.7 results in an amount due to Seller from Buyer, Buyer shall make such payment by check, subject to Buyer's rights under Section 4.3 and Buyer's rights of offset and recoupment. 4. RECOURSE AND REPURCHASE OBLIGATIONS. 4.1. RECOURSE. Buyer's acquisition of Purchased Receivables from Seller shall be with full recourse against Seller. In the vent the Obligations exceed the amount of Purchased Receivables and Collateral, Seller shall be liable for any deficiency. 4.2. SELLER'S AGREEMENT TO REPURCHASE. Seller agrees to pay to Buyer on demand, the full face amount, or any unpaid portion, of any Purchased Receivable: (A) which remains unpaid ninety (90) calendar days after the Invoice date; or (B) which is owed by any Account Debtor who has filed, or has had filed against it, any bankruptcy case, assignment for the benefit of creditors, receivership, or insolvency proceeding or who has become insolvent (as defined in the United States Bankruptcy Code) or who Is generally not paying its debts as such debts become due; or (C) with respect to which there has been any breach of warranty or representation set forth in Section 6 hereof or any breach of any covenant contained in this Agreement; or (D) with respect to which the Account Debtor asserts any discount, allowance, return, dispute, counterclaim, offset, defense, right of recoupment, right of return, warranty claim, or short payment; together with all reasonable attorneys' and professional fees and expenses and all court costs incurred by Buyer in collecting such Purchased Receivable and/or enforcing its rights under, or collecting amounts owed by Seller in connection with, this Agreement (collectively, the "Repurchase Amount"). 4.3. SELLER'S PAYMENT OF THE REPURCHASE AMOUNT OR Other AMOUNTS Due BUYER. When any Repurchase Amount or other amount owing to Buyer becomes due, Buyer shall Inform Seller of the manner of payment which may be any one or more of THE following IN Buyer's sole DISCRETION: (a) IN CASH LIYIIIIEDLATELY upon DEMAND therefor; (b) by dellvety of substitute Invoices and an Invoice Transmittal acceptable to Buyer which shall thereupon become Purchased Receivables; (c) by adjustment to the Reserve pursuant to Section 3.7 hereof; (d) by deduction from or offset against the Refund that would otherwise be due and payable to Seller-, (e) by deduction from or offset against the amount that otherwise would be forwarded to Seller In respect of any further Advances that may be made by Buyer; or (o by any combination of the foregoing as Buyer may from time to time choose. 4.4. SELLER'S AGREEMENT TO REPURCHASE ALL PURCHASED RECEIVABLES. Upon and after the occurrence of an Event of Default, Seller shall, upon Buyers demand (or, in the case of an Event of Default under Section 9(B), immediately without notice or demand from Buyer) repurchase all the Purchased Receivables then outstanding, or such portion thereof as Buyer may demand. Such demand may, at Buyer's option, Include and Seller shall pay to Buyer Immediately upon demand, cash In an amount equal to the Advance with respect to each Purchased Receivable then outstanding together with all accrued Finance Charges, Adjustments, Administrative Fees, attorney's and professional fees, court costs and expenses as provided for herein, and any other Obligations. Upon receipt of payment In full of the Obligations, Buyer shall Immediately Instruct Account Debtors to pay Seller directly, and return to Seller any Refund due to Seller. For the purpose of calculating any Refund due under this Section only, the Reconciliation Date shall be deemed to be the date Buyer receives payment In good funds of all the Obligations as provided in this Section 4.4. 5. POWER OF ATTORNEY. Seller does hereby irrevocably appoint Buyer and its successors and assigns as Seller's true and lawful attorney in fact, and hereby authorizes Buyer, regardless of whether there has been an Event of Default, (a) to sell, assign, transfer, pledge, compromise, or discharge the whole or any part of the Purchased Receivables; (b) to demand, collect, receive, sue, and give releases to any Account Debtor for the monies due or which may become due upon or with respect to the Purchased Receivables and to compromise, prosecute, or defend any action, claim, case or proceeding relating to the Purchased Receivables, including the filing of a claim or the voting of such claims In any bankruptcy case, all in Buyer's name or Sellers name, as Buyer may choose; (c) to prepare, file and sign Seller's name on any notice, claim, assignment, demand, draft, or notice of or satisfaction of lien or mechanics' lien or similar document with respect to Purchased Receivables; (d) to notify all Account Debtors with respect to the Purchased Receivables to pay Buyer directly; (e) to receive, open, and dispose of all mail addressed to Seller for the purpose of collecting the Purchased Receivables; (f) to endorse Seller's name on any checks or other forms of payment on the Purchased Receivables; (g) to execute on behalf of Seller any and all instruments, documents, financing statements and the like to perfect Buyer's interests In the Purchased Receivables and Collateral; and (h) to do all acts and things necessary or expedient, in furtherance of any such purposes. If Buyer receives a check or item which is payment for both a Purchased Receivable and another receivable, the funds shall first be applied to the Purchased Receivable and, so long as there does not exist an Event of Default or an event that with notice, lapse of time or otherwise would constitute an Event of Default, the excess shall be remitted to Seller. Upon the occurrence and continuation of an 3 Event of Default, all of the power of attorney rights granted by Seller to Buyer hereunder shall be applicable with respect to all Purchased Receivables and all Collateral. 6. REPRESENTATIONS, WARRANTIES AND COVENANTS. 6.1. RECEIVABLES' WARRANTIES, REPRESENTATIONS AND COVENANTS. To induce Buyer to buy receivables and to render its services to Seller, and with full knowledge that the truth and accuracy of the following are being relied upon by the Buyer in determining whether to accept receivables as Purchased Receivables, Seller represents, warrants, covenants and agrees, with respect to each Invoice Transmittal delivered to Buyer and each receivable described therein, that: (A) Seller is the absolute owner of each receivable set forth in the Invoice Transmittal and has full legal right to sell, transfer and assign such receivables; (B) The correct amount of each receivable Is as set forth In the Invoice Transmittal and is not In dispute; (C) The payment of each receivable is not contingent upon the fulfillment of any obligation or contract, past or future and any and all obligations required of the Seller have been fulfilled as of the date of the Invoice Transmittal; (D) Each receivable set forth on the Invoice Transmittal is based on an actual sale and delivery of goods and/or services actually rendered, is presently due and owing to Seller, Is not past due or In default, has not been previously sold, assigned, transferred, or pledged, and Is free of any and all liens, security interests and encumbrances other than liens, security Interests or encumbrances In favor of Buyer or any other division or affiliate of Silicon Valley Bank; (E) There are no defenses, offsets, or counterclaims against any of the receivables, and no agreement has been made under which the Account Debtor may claim any deduction or discount, except as otherwise stated in the Invoice Transmittal; (F) Each Purchased Receivable shall be the property of the Buyer and shall be collected by Buyer, but if for any reason it should be paid to Seller, Seller shall promptly notify Buyer of such payment, shall hold any checks, drafts, or monies so received in trust for the benefit of Buyer, and shall promptly transfer and deliver the same to the Buyer; (G) Buyer shall have the right of endorsement, and also the right to require endorsement by Seller, on all payments received in connection with each Purchased Receivable and any proceeds of Collateral; (H) Seller, and to Seller's best knowledge, each Account Debtor set forth in the Invoice Transmittal, are and shall remain solvent as that term is defined In the United States Bankruptcy Code and the California Uniform Commercial Code, and no such Account Debtor has filed or had filed against it a voluntary or involuntary petition for relief under the United States Bankruptcy Code; (I) Each Account Debtor named on the Invoice Transmittal will not object to the payment for, or the quality or the quantity of the subject matter of, the receivable and is liable for the amount set forth on the Invoice Transmittal; (J) Each Account Debtor shall promptly be notified, after acceptance by Buyer, that the Purchased Receivable has been transferred to and is payable to Buyer, and Seller shall not take or permit any action to countermand such notification; and (K) All receivables forwarded to and accepted by Buyer after the date hereof, and thereby becoming Purchased Receivables, shall comply with each and every one of the foregoing representations, warranties, covenants and agreements referred to above in this Section 6.1. 6.2. ADDITIONAL WARRANTIES, REPRESENTATIONS AND COVENANTS. In addition to the foregoing warranties, representations and covenants, to induce Buyer to buy receivables and to render its services to Seller, Seller hereby represents, warrants, covenants and agrees that: (A) Seller will not assign, transfer, sell, or grant, or permit any lien or security interest in any Purchased Receivables or Collateral to or in favor of any other party, without Buyer's prior written consent; (B) The Sellers name, form of organization, chief executive office, and the place where the records concerning all Purchased Receivables and Collateral are kept is set forth at the beginning of this Agreement, Collateral is located only at the location set forth in the beginning of this Agreement, or, if located at any additional location, as set forth on a schedule attached to this Agreement, and Seller will give Buyer at least thirty (30) days prior written notice if such name, organization, chief executive office or other locations of Collateral or records concerning Purchased Receivables or Collateral is changed or added and shall execute any documents necessary to perfect Buyer's interest in the Purchased Receivables and the Collateral; (C) Seller shall (i) pay all of Its normal gross payroll for employees, and all federal and state taxes, as and when due, including without limitation all payroll and withholding taxes and state sales taxes; (ii) deliver at any time and from time to time at Buyers request, evidence satisfactory to Buyer that all such amounts have been paid to the proper taxing authorities; and (iii) If requested by Buyer, pay its payroll and related taxes through a bank or an Independent payroll s6rvice acceptable to Buyer. (D) Seller has not, as of the time Seller delivers to Buyer an Invoice Transmittal, or as of the time Seller accepts any Advance from Buyer, filed a voluntary petition for relief under the United States Bankruptcy Code or had filed against it an involuntary petition for relief; (E) If Seller owns, holds or has any interest in, any copyrights (whether registered, or unregistered), patents or trademarks, and licenses of any of the foregoing, such interest has been disclosed to Buyer and is specifically listed and identified on a schedule to this Agreement, and Seller shall immediately notify Buyer if Seller hereafter obtains any Interest In any additional copyrights, patents, trademarks or licenses that are significant in value or are material to the conduct of its business; and 4 (F) Seller shall provide Buyer with a Compliance Certificate (i) on a quarterly basis to be received by Buyer no later than the fifth calendar day following each calendar quarter, and; (ii) on a more frequent or other basis if and as requested by Buyer. 7. ADJUSTMENTS. In the event of a breach of any of the representations, warranties, or covenants set forth in Section 6.1, or In the event any Adjustment or dispute is asserted by any Account Debtor, Seller shall promptly advise Buyer and shall, subject to the Buyer's approval, resolve such disputes and advise Buyer of any adjustments. Unless the disputed Purchased Receivable is repurchased by Seller and the full Repurchase Amount is paid, Buyer shall remain the absolute owner of any Purchased Receivable which is subject to Adjustment or repurchase under Section 4.2 hereof, and any rejected, returned, or recovered personal property, with the right to take possession thereof at any time. If such possession is not taken by Buyer, Seller is to resell it for Buyer's account at Seller's expense with the proceeds made payable to Buyer. While Seller retains possession of said returned goods, Seller shall segregate said goods and mark them "property of Silicon Valley Bank." 8. SECURITY INTEREST. To secure the prompt payment and performance to Buyer of all of the Obligations, Seller hereby grants to Buyer a continuing lien upon and security interest in all of Settees now existing or hereafter arising rights and interest in the following, whether now owned or existing or hereafter created, acquired, or arising, and wherever located (collectively, the "Collateral"): (A) All accounts, receivables, contract rights, chattel paper, instruments, documents, letters of credit, bankers acceptances, drafts, checks, cash, securities, and general Intangibles (including, without limitation, all claims, causes of action, deposit accounts, guaranties, rights in and claims under insurance policies (including rights to premium refunds), rights to tax refunds, copyrights, patents, trademarks, rights in and under license agreements, and all other intellectual property); (B) All inventory, Including Seller's rights to any returned or rejected goods, with respect to which Buyer shall have all the rights of any unpaid seller, including the rights of replevin, claim and delivery, reclamation, and stoppage in transit; (C) All monies, refunds and other amounts due Seller, including, without limitation, amounts due Seller under this Agreement (including Seller's right of offset and recoupment); (D) All equipment, machinery, furniture, furnishings, fixtures, tools, supplies and motor vehicles; (E) All farm products, crops, timber, minerals and the like (including oil and gas); (F) All accessions to, substitutions for, and replacements of, all of the foregoing; (G) All books and records pertaining to all of the foregoing; and (H) All proceeds of the foregoing, whether due to voluntary or involuntary disposition, including insurance proceeds. Seller is not authorized to sell, assign, transfer or otherwise convey any Collateral without Buyer's prior written consent, except for the sale of finished Inventory In the Sellers usual course of business. Seller agrees to sign UCC financing statements, in a form acceptable to Buyer, and any other Instruments and documents requested by Buyer to evidence, perfect, or protect the Interests of Buyer In the Collateral. Seller agrees to deliver to Buyer the originals of all instruments, chattel paper and documents evidencing or related to Purchased Receivables and Collateral. 9. DEFAULT. The occurrence of any one or more of the following shall constitute an Event of Default hereunder. (A) Seller falls to pay any amount owed to Buyer as and when due; (B) There shall be commenced by or against Seller any voluntary or Involuntary case under the United States Bankruptcy Code, or any assignment for the benefit of creditors, or appointment of a receiver or custodian for any of its assets; (C) Seller shall become insolvent in that its debts are greater than the fair value of its assets, or Seller is generally not paying its debts as they become due or is left with unreasonably small capital; (D) Any involuntary lien, garnishment, attachment or the like is issued against or attaches to the Purchased Receivables or any Collateral; (E) Seller shall breach any covenant, agreement, warranty, or representation set forth herein, and the same is not cured to Buyers satisfaction within ten (10) days after Buyer has given Seller oral or written notice thereof; provided, that if such breach is incapable of being cured it shall constitute an immediate default hereunder; (F) Seller is not in compliance with, or otherwise is in default under, any term of any document, instrument or agreement evidencing a debt, obligation or liability of any kind or character of Seller, now or hereafter existing, in favor of Buyer or any division or affiliate of Silicon Valley Bank, regardless of whether such debt, obligation or liability is direct or Indirect, primary or secondary, joint, several or joint and several, or fixed or contingent, together with any and all renewals and extensions of such debts, obligations and liabilities, or any part thereof; (G) An event of default shall occur under any guaranty executed by any guarantor of the Obligations of Seller to Buyer under this Agreement, or any material provision of any such guaranty shall for any reason cease to be valid or enforceable or any such guaranty shall be repudiated or terminated, Including by operation of law; (H) A default or event of default shall occur under any agreement between Seller and any creditor of Seller that has entered into a subordination agreement with Buyer; or (I) Any creditor that has entered into a subordination agreement with Buyer shall breach any of the terms of or not comply with such subordination agreement. 10. REMEDIES UPON DEFAULT. Upon the occurrence of an Event of Default, (1) without implying any obligation to buy receivables, Buyer may cease buying receivables or extending any financial accommodations to Seller; (2) all or a 5 portion of the Obligations shall be, at the option of and upon demand by Buyer, or with respect to an Event of Default described in Section 9(B), automatically and without notice or demand, due and payable in full; and (3) Buyer shall have and may exercise all the rights and remedies under this Agreement and under applicable law, including the rights and remedies of a secured party under the California Uniform Commercial Code, all the power of attorney rights described in Section 5 with respect to all Collateral, and the right to collect, dispose of, sell, lease, use, and realize upon all Purchased Receivables and all Collateral in any commercial reasonable manner. Seller and Buyer agree that any notice of sale required to be given to Seller shall be deemed to be reasonable if given five (5) days prior to the date on or after which the sale may be held. In the event that the Obligations are accelerated hereunder, Seller shall repurchase all of the Purchased Receivables as set forth in Section 4.4. 11. ACCRUAL OF INTEREST. IF any amount owed by Seller hereunder Is not paid when due, Including, without limitation, amounts due under Section 3.7, Repurchase Amounts, amounts due under Section 12, and any other Obligations, such amounts shall bear Interest at a per annum rate equal to the per annum rate of the Finance Charges until the earlier of (I) payment in good funds or (ii) entry of a final judgment thereof, at which time the principal amount of any money judgment remaining unsatisfied shall accrue interest at the highest rate allowed by applicable law. 12. FEES, COSTS AND EXPENSES; INDEMNIFICATION. The Seller will pay to Buyer immediately upon demand all fees, costs and expenses (including fees of attorneys and professionals and their costs and expenses) that Buyer incurs or may from time to time impose in connection with any of the following: (a) preparing, negotiating, administering, and enforcing this Agreement or any other agreement executed in connection herewith, Including any amendments, waivers or consents In connection with any of the foregoing, (b) any litigation or dispute (whether instituted by Buyer, Seller or any other person) In any way relating to the Purchased Receivables, the Collateral, this Agreement or any other agreement executed In connection herewith or 'Herewith, (d) enforcing any rights against Seller or any guarantor, or any Account Debtor, (e) protecting or enforcing Its Interest in the Purchased Receivables or the Collateral, (f) collecting the Purchased Receivables and the Obligations, and (g) the representation of Buyer in connection with any bankruptcy case or Insolvency proceeding Involving Seller, any Purchased Receivable, the Collateral, any Account Debtor, or any guarantor. Seller shall Indemnify and hold Buyer harmless from and against any and all claims, actions, damages, costs, expenses, and liabilities of any nature whatsoever arising in connection with any of the foregoing. 13. SEVERABILITY, WAIVER, AND CHOICE OF LAW. In the event that any provision of this Agreement is deemed Invalid by reason of law, this Agreement will be construed as not containing such provision and the remainder of the Agreement shall remain in full force and effect. Buyer retains all of its rights, even if it makes an Advance after an Event of Default. If Buyer waives an Event of Default, it may enforce a later Event of Default. Any consent or waiver under, or amendment of, this Agreement must be in writing. Nothing contained herein, or any action taken or not taken by Buyer at any time, shall be construed at any time to be indicative of any obligation or willingness on the part of Buyer to amend this Agreement or to grant to Seller any waivers or consents. This Agreement has been transmitted by Seller to Buyer at Buyers office in the State of California and has been executed and accepted by Buyer in the State of California. This Agreement shall be governed by and interpreted in accordance with the internal laws of the State of California. 14. ACCOUNT COLLECTION SERVICES. Certain Account Debtors may require or prefer that all of Seller's receivables be paid to the same address and/or party, or Seller and Buyer may agree that all receivables with respect to certain Account Debtors be paid to one party. In such event Buyer and Seller may agree that Buyer shall collect all receivables whether owned by Seller or Buyer and (provided that there does not then exist an Event of Default or event that with notice, lapse or time or otherwise would constitute an Event of Default, and subject to Buyer's rights In the Collateral) Buyer agrees to remit to Seller the amount of the receivables collections it receives with respect to receivables other than Purchased Receivables. It is understood and agreed by Seller that this Section does not Impose any affirmative duty on Buyer to do any act other than to turn over such amounts. All such receivables and collections are Collateral and In the event of Seller's default hereunder, Buyer shall have no duty to remit collections of Collateral and may apply such collections to the obligations hereunder and Buyer shall have the rights of a secured party under the California Uniform Commercial Code. 15. NOTICES. All notices shall be given to Buyer and Seller at the addresses or faxes set forth on the first page of this Agreement and shall be deemed to have been delivered and received: (a) if mailed, three (3) calendar days after deposited in the United States mail, first class, postage pre-paid, (b) one (1) calendar day after deposit with an overnight mail or messenger service; or (c) on the same date of confirmed transmission if sent by hand delivery, telecopy, telefax or telex. 16. JURY TRIAL. SELLER AND BUYER EACH HEREBY (a) WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL ON ANY CLAIM OR ACTION ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT, ANY RELATED AGREEMENTS, OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREBY OR THEREBY; (b) RECOGNIZE AND AGREE THAT THE FOREGOING WAIVER CONSTITUTES A MATERIAL INDUCEMENT FOR IT TO ENTER INTO THIS AGREEMENT; AND (c) REPRESENT AND WARRANT THAT IT HAS REVIEWED THIS WAIVER, HAS DETERMINED FOR ITSELF THE NECESSITY TO REVIEW THE SAME WITH ITS LEGAL COUNSEL, AND KNOWINGLY AND VOLUNTARILY WAIVES ALL RIGHTS TO A JURY TRIAL. 17. TERM AND TERMINATION. The term of this Agreement shall be for one (1) year from the date hereof, and from year to year thereafter unless terminated in writing by Buyer or Seller. Seller and Buyer shall each have the right to terminate this Agreement at any time. Notwithstanding the foregoing, any termination of this Agreement shall not affect Buyers security interest in the Collateral and Buyer's ownership of the Purchased Receivables, and this Agreement shall continue to be effective, and Buyer's rights and remedies hereunder shall survive such termination, 6 until all transactions entered Into and Obligations Incurred hereunder or in connection herewith have been completed and satisfied in full, 18. TITLES AND SECTION HEADINGS. The titles and section headings used herein are for convenience only and shall not be used in interpreting this Agreement. 19. OTHER AGREEMENTS. The terms and provisions of this Agreement shall not adversely affect the rights of Buyer or any other division or affiliate of Silicon Valley Bank under any other document, instrument or agreement. The terms of such other documents, instruments and agreements shall remain in full force and effect notwithstanding the execution of this Agreement. In the event of a conflict between any provision of this Agreement and any provision of any other document, Instrument or agreement between Seller on the one hand, and Buyer or any other division or affiliate of Silicon Valley Bank on the other hand, Buyer shall determine In Its sole discretion which provision shall apply. Seller acknowledges specifically that any security agreements, liens and/or security interests currently securing payment of any obligations of Seller owing to Buyer or any other division or affiliate of Silicon Valley Bank also secure Seller's obligations under this Agreement, and are valid and subsisting and are not adversely affected by execution of this Agreement. Seller further acknowledges that (a) any collateral under other outstanding security agreements or other documents between Seller and Buyer or any other division or affiliate of Silicon Valley Bank secures the obligations of Seller under this Agreement and (b) a default by Seller under this Agreement constitutes a default under other outstanding agreements between Seller and Buyer or any other division or affiliate of Silicon Valley Bank. IN WITNESS WHEREOF, Seller and Buyer have executed this Agreement on the day and year above written. SELLER: AGRITOPE, INC. By /s/ Gilbert N. Miller - ------------------------------------------ Gilbert N. Miller Title Executive Vice President - ------------------------------------------ BUYER: SILICON VALLEY BANK By /s/ Don Chandler - ------------------------------------------ Don Chandler Title Vice President - ------------------------------------------ EX-21.1 12 LIST OF SUBSIDIARIES Vinifera, Inc., an Oregon corporation (57 percent interest owned) Agrimax Floral Products, Inc., a Minnesota corporation ACTTAG, Inc., a Delaware corporation Superior Tomato Associates, L.L.C., a Delaware limited liability company (66 2/3 percent interest owned) Agrinomics LLC, a Delaware limited liability company (50 percent interest owned) EX-23.1 13 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS EXHIBIT 23.1 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report dated October 29, 1999, included in this Form 10-K, into the Agritope, Inc. and subsidiaries previously filed Form S-8 Registration Statement File No. 333-46371. /s/ ARTHUR ANDERSEN LLP Portland, Oregon December 29, 1999 EX-23.2 14 CONSENT OF INDEPENDENT ACCOUNTANTS Exhibit 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS ---------------------------------- We hereby consent to the incorporation by reference in the Registration Statement on Form S-8 (No. 333-46371) of Agritope, Inc. of our report dated October 31, 1997 relating to the financial statements appearing in this Form 10-K. /s/ PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP Portland, Oregon December 29, 1999 EX-24.1 15 POWER OF ATTORNEY Exhibit 24.1 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned, whose signatures appear below, constitute and appoint Adolph J. Ferro and Gilbert N. Miller, or either of them as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign Form 10-K for the fiscal year ended September 30, 1999, and any amendments thereto, pursuant to the requirements the Securities and Exchange Act of 1934, as amended, and to file the same with the United States Securities and Exchange Commission and the Nasdaq Stock Market. DATED this 5th day of November 1999. /s/ W. Charles Armstrong ------------------------------- W. Charles Armstrong /s/ Michel de Beaumont ------------------------------- Michel de Beaumont /s/ James T. King ------------------------------- James T. King /s/ Roger L. Pringle ------------------------------- Roger L. Pringle EX-24.2 16 POWER OF ATTORNEY Exhibit 24.2 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned, whose signature appears below, constitutes and appoints Adolph J. Ferro and Gilbert N. Miller, or either of them as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign Form 10-K for the fiscal year ended September 30, 1999, and any amendments thereto, pursuant to the requirements the Securities and Exchange Act of 1934, as amended, and to file the same with the United States Securities and Exchange Commission and the Nasdaq Stock Market. DATED 8th day of November 1999. ----- /s/ Nancy L. Buc --------------------------------- Nancy L. Buc EX-24.3 17 POWER OF ATTORNEY Exhibit 24.3 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the undersigned, whose signature appears below, constitutes and appoints Adolph J. Ferro and Gilbert N. Miller, or either of them as his true and lawful attorney-in-fact and agent, with full power of substitution and resubstitution for him and in his name, place and stead, in any and all capacities, to sign Form 10-K for the fiscal year ended September 30, 1999, and any amendments thereto, pursuant to the requirements the Securities and Exchange Act of 1934, as amended, and to file the same with the United States Securities and Exchange Commission and the Nasdaq Stock Market. DATED 8th day of November 1999. ----- /s/ Pierre Lefebvre ------------------------------ Pierre Lefebvre EX-27 18 FDS FOR ARTICLE 5 OF REGULATION S-X
5 This schedule contains summary financial information extracted from the condensed consolidated financial statements included herein and is qualified in its entirety by reference to such financial statements. 1 12-MOS SEP-30-1999 SEP-30-1999 4,203,937 0 663,809 24,054 5,053,888 9,971,020 6,446,341 (2,934,517) 15,471,182 4,184,636 0 0 7,143 40,706 9,274,694 15,471,182 2,503,377 3,551,469 2,333,673 2,333,673 6,790,474 0 21,446 (4,675,406) 0 (4,675,406) 0 0 0 (4,675,406) (1.15) 0
EX-99 19 CERTAIN FACTORS TO CONSIDER Certain Factors to Consider in Connection with Forward-Looking Statements December 1999 From time to time, Agritope, Inc. ("Agritope" or the "Company"), through its management, may make forward-looking public statements with respect to the Company regarding, among other things, expected future revenues or earnings, projections, plans, future performance, product development and commercialization, and other estimates relating to the Company's future operations. Forward-looking statements may be included in reports filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), in press releases or in oral statements made with the approval of an authorized executive officer of Agritope. The words or phrases "will likely result," "are expected to," "intends," "is anticipated," "estimates," "projects" or similar expressions are intended to identify "forward-looking statements" within the meaning of Section 21E of the Exchange Act and Section 27A of the Securities Act of 1933, as amended, as enacted by the Private Securities Litigation Reform Act of 1995. Forward-looking statements are subject to a number of risks and uncertainties. The Company cautions you not to place undue reliance on its forward-looking statements, which speak only as of the date on which they are made. Agritope's actual results may differ materially from those described in the forward-looking statements as a result of various factors, including those listed below. The Company does not intend to update its forward-looking statements. Pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995, Agritope hereby files the following cautionary statements identifying certain factors that could cause its actual results to differ materially from those described in its forward-looking statements. LIMITED INDEPENDENT OPERATING HISTORY; HISTORY OF LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY. From 1987 to December 1997, the Company operated as a wholly owned subsidiary of Epitope, Inc. ("Epitope"). In December 1997, Epitope distributed all of the outstanding capital stock of the Company to Epitope shareholders as a dividend (the "Spin Off"). Accordingly, Agritope has a limited operating history as an independent company. Agritope has experienced significant operating losses since its incorporation (and since the Spin Off). As of September 30, 1999, it had an accumulated deficit of $51.1 million. Agritope may continue to experience significant operating losses as it continues its research and development programs. Agritope's ability to increase revenues and achieve profitability and positive cash flows from operations will depend in part on successful completion of the development and commercialization of its genetically engineered products. Agritope has not, at this time, achieved commercialization of any of its products other than grapevines sold by its majority owned subsidiary, Vinifera, Inc. There can be no assurance that Agritope's development efforts will result in commercially viable genetically engineered products, that Agritope's products will obtain required regulatory clearances or approvals or that any such products will achieve a significant level of market acceptance. As a result, there can be no assurance that Agritope will ever achieve profitability. FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING. The Company believes that its funds on hand will be sufficient to finance its operations for its 2000 fiscal year. However, because the Company's belief is based on a number of factors, many of which are beyond its control, it cannot be certain that its belief will prove accurate. The actual future liquidity and capital requirements of Agritope will depend on numerous factors, including: the costs and success of its development efforts; the costs and timing of its establishment of sales and marketing activities; the success of its current strategic collaborations; its success in securing additional strategic partners; the extent to which its products gain market acceptance; competing technological and market developments; its product sales and royalties; the costs involved in preparing, filing, prosecuting, maintaining, enforcing and defending patent claims and other intellectual property rights; and the availability of third party funding for its research projects. In any event, Agritope may seek or be required to raise substantial additional funds through public or private financings, collaborative relationships or other arrangements. There can be no assurance that financing will be available to the Company on satisfactory terms, if at all. Any additional equity financing may be dilutive to Agritope's stockholders, and debt financing, if available, may involve significant interest expense and restrictive covenants. In addition, subsequent changes in ownership due to future equity sales could adversely affect Agritope's ability to utilize existing net operating losses. Collaborative arrangements, if necessary to raise additional funds, may require that Agritope relinquish its rights to certain of its technologies, products or marketing territories. The failure of Agritope to raise any required capital likely would cause it to scale back, delay or eliminate certain of its programs and have a material adverse effect on its business, financial condition and results of operations. COMPETITION AND TECHNOLOGICAL CHANGE. The plant biotechnology industry is highly competitive. Competitors include independent companies that specialize in biotechnology; chemical, pharmaceutical and food companies that have biotechnology laboratories; universities; and public and private research organizations. Agritope believes that many companies, including companies with significantly greater financial resources such as Monsanto Company, Binova Holding Corporation and Zeneca Plant Sciences, are engaged in the development of mechanisms to control the ripening and senescence of fruit and vegetable products. Technological advances by others could render Agritope's products less competitive. The Company believes that, despite barriers to new competitors such as its interest in various patents and substantial research and development lead-time, competition will intensify, particularly from agricultural biotechnology firms and major agrochemical, seed and food companies with biotechnology laboratories. There can be no assurance that such competition will not have an adverse effect on Agritope's business, financial condition and results of operations. GOVERNMENT REGULATION. Regulation by U.S. federal, state and local and by foreign governments will be a significant factor in the future production and marketing of Agritope's genetically engineered fruit and vegetable products. The extent of regulation depends on the intended uses of the products, how they are derived, and how applicable statutes and regulations are interpreted to apply to new genetic technologies and the products thereof. The U.S. federal government has implemented a coordinated policy for the regulation of biotechnology research and products. The U.S. Department of Agriculture ("USDA") has primary federal authority for the regulation of specific research, product development and commercial applications of certain genetically engineered plants and plant products. The USDA regulates the growing and transportation of most genetically engineered plants and plant products. The U.S Food and Drug Administration ("FDA") has principal jurisdiction over plant products that are used for human or animal food. The U.S. Environmental Protection Agency ("EPA") has jurisdiction over the field testing and commercial application of plants genetically engineered to contain pesticides. Other U.S. federal agencies have jurisdiction over certain other classes of products or laboratory research. In May 1992, the FDA announced its policy on foods developed through genetic engineering (the "FDA Policy"). The FDA Policy provides that the FDA will apply the same regulatory standards to foods developed through genetic engineering as applied to foods developed through traditional plant breeding. Under the FDA Policy, the FDA will not ordinarily require premarket review of genetically engineered plant varieties of traditional foods unless their characteristics raise significant safety questions, such as elevated levels of toxicants or the presence of allergens or food additives. Currently, the FDA Policy does not require that genetically engineered products be labeled as such, provided that such products are as safe and have the same nutritional characteristics as conventionally developed products. However, there can be no assurance that the FDA will not reconsider its position, or that local, state or foreign authorities will not enact labeling requirements, any of which could have a material adverse effect on the marketing of products derived using the tools and techniques of genetic engineering. The FDA is considering modifying its policy on foods developed through genetic engineering to include a Premarket Notification ("PMN") procedure. This policy modification could require a company that develops genetically engineered foods to inform the FDA that its safety evaluation of an engineered food is complete and that the company intends to commercialize the product. The objective of the PMN is to make the FDA and the public aware of all new genetically engineered food products entering the market. Agritope believes that a PMN procedure, if enacted, should not delay its plans to commercialize its genetically engineered fruit and vegetable products. Agritope's complete range of agribusiness and plant biotechnology activities are subject to general FDA food regulations and are, or may be, subject to regulation under various other U.S. laws and regulations. These include, but are not limited to, the Occupational Safety and Health Act, the Toxic Substances Control Act, the National Environmental Policy Act, other U.S. federal water, air and environmental quality statues and import/export control legislation. At the present time, most states generally defer to federal agencies (USDA or EPA) for the approval of genetically engineered plant field trials, although states are provided a review period prior to the issuance of a federal field trial permit. Failure to comply with applicable regulatory requirements could result in enforcement action, including withdrawal of marketing approval, seizure or recall of products, injunction or criminal prosecution. International regulatory policies for genetically engineered plants and plant products are not complete. Consequently, it is possible that additional data, labeling or other requirements will be required in countries where Agritope intends to grow and/or commercialize its genetically engineered products. Foreign regulatory authorities could require Agritope to conduct further safety assessments and potentially delay its product development programs or the commercialization of any resulting products. No assurance can be given that Agritope can obtain in a timely manner, if at all, any required regulatory approvals, exemptions, permits or other clearances either for its research or commercial activities. DEPENDENCE ON STRATEGIC PARTNERS. Agritope relies on its strategic partners for access to proprietary plant varieties. In addition, Agritope does not have or plan to have the capability to grow and distribute genetically engineered products in commercial quantities. Agritope expects some or all of the development, manufacturing and marketing of certain of its products to be performed or paid for by other parties, primarily agricultural companies, through license agreements, joint ventures or other arrangements. Commercialization of Agritope's products will require the assistance of Agritope's current strategic partners and may require that Agritope enter additional strategic partnerships with businesses experienced in the breeding, development, production, marketing and distributing of agricultural products. Agritope's future revenues will be dependent on the success of products developed pursuant to such collaborative relationships. There can be no assurance that Agritope will be able to establish additional strategic relationships or maintain its current strategic relationships, or that such relationships will be on terms sufficiently favorable to permit Agritope to operate profitably. Furthermore, conflicts may arise between the Company and its partners or among these third parties that could discourage them from working cooperatively with the Company. Agritope's commercial success will be dependent in part upon the performance of its strategic partners. UNCERTAINTIES RELATING TO PATENTS AND PROPRIETARY INFORMATION. Agritope has obtained certain patents, has license rights under other patents, and has filed a number of patent applications. Agritope anticipates filing patent applications for protection of its future products and technology. There can be no assurance that Agritope will obtain any patent for which it applies, that existing patents to which Agritope has rights will not be challenged, or that the issuance of a patent will give Agritope any material advantage over its competitors in connection with any of its products. Competitors may be able to produce products which compete with a patented Agritope product without infringing on Agritope's patent rights. The issuance of a patent to Agritope or to a licensor is not conclusive as to validity or the enforceable scope of the claims of the patent. The validity and enforceability of a patent can be challenged by litigation after its issuance and, if the outcome of the litigation is adverse to the owner of the patent, the owner's rights could be diminished or withdrawn. The patent laws of other countries may differ from those of the U.S. as to the patentability of Agritope's products and processes. Moreover, the degree of protection afforded by foreign patents may be different from that of U.S. patents. The technologies used by Agritope may infringe the patents or proprietary technology of others. The cost of enforcing Agritope's patent rights in lawsuits that it may bring against infringers or of defending itself against infringement charges by other patent holders may be high and could interfere with Agritope's operations. Trade secrets and confidential know-how are important to Agritope's scientific and commercial success. Although Agritope seeks to protect its proprietary information through confidentiality agreements and appropriate contractual provisions, there can be no assurance that others will not develop independently the same or similar information or otherwise gain access to the Company's proprietary information. DEPENDENCE ON KEY PERSONNEL. Agritope depends to a large extent on the abilities and continued participation of its principal executive officers and scientific personnel. The loss of key personnel could have a material adverse effect on Agritope's business and results of operations. Competition for management and scientific staff in the agricultural biotechnology field is intense. No assurance can be given that Agritope will be able to continue to attract and retain personnel with sufficient experience and expertise to satisfy its needs. UNCERTAINTY OF PRODUCT DEVELOPMENT. Agritope's genetically engineered products are at various stages of development. There are difficult scientific objectives to be achieved in certain product development programs before the technological or commercial feasibility of the products can be demonstrated. Even the more advanced programs could encounter technological problems that may significantly delay or prevent product development or product introduction. There can be no assurance that any of Agritope's products under development, if and when fully developed and tested, will perform in accordance with its expectations, that it will obtain necessary regulatory approvals in a timely manner, if at all, or that its products can be successfully and profitably produced, distributed and sold. UNCERTAIN CONSUMER ACCEPTANCE OF GENETICALLY ENGINEERED PRODUCTS. The commercial success of Agritope's genetically engineered products will depend in part on public acceptance of the cultivation and consumption of genetically engineered plants and plant products. Public attitudes may be influenced by claims that genetically engineered plant products are unsafe for consumption or pose unknown risks to the environment. Securing consumer confidence in genetically engineered products poses numerous challenges, both in the United States and in other countries. The market success of Agritope's products developed through biotechnology could be delayed or impaired because of such factors. VOLATILITY OF SHARE PRICE. The market price of the Company's Common Stock is volatile. Announcements regarding technical innovations, the development of new products, the status of corporate collaborations and supply arrangements, public concern as to the safety or other implications of products, regulatory approvals, patent or proprietary rights or other developments by the Company or its competitors could have a significant impact on the market price of the Common Stock. Further, due to one or more of the foregoing or other factors, the Company's results of operations in any future quarter may not meet the expectations of securities analysts or investors. In such event, the market price of the Company's Common Stock could be materially and adversely affected. In addition, the stock markets have recently experienced significant price and volume fluctuations seemingly unrelated to the performance of individual companies. Broad market fluctuations as well as general economic and political conditions may also adversely affect the market price of the Common Stock. NO ASSURANCE AS TO CONTINUED LISTING OF COMMON STOCK ON NASDAQ SMALLCAP MARKET. In order to maintain the listing of its Common Stock on The Nasdaq SmallCap Market, Agritope is required to comply with certain Nasdaq listing maintenance standards including minimum tangible asset value amounts, public float requirements and minimum stock prices. There can be no assurance that Agritope will continue to comply with the listing maintenance standards of The Nasdaq SmallCap Market as in effect from time to time. PRODUCT LIABILITY AND RECALL RISK. Agritope could be subject to claims for personal injury or other damages resulting from its products or services or product recalls. Agritope carries liability insurance against the negligent acts of certain of its employees and a general liability insurance policy that includes coverage for product liability, but not for product recall. In addition, Agritope may require increased product liability coverage as its products are commercially developed. Such insurance is expensive and, in the future, may not be available on acceptable terms, if at all. No assurance can be given that any product liability claim or product recall will not have a material adverse effect on Agritope's business, financial condition and results of operations. POSSIBILITY OF SUBSTANTIAL SALES OF COMMON STOCK. Any sales of substantial amounts of Common Stock in the public market, or the perception that such sales might occur, could materially adversely affect the market price of the Common Stock. ANTI-TAKEOVER CONSIDERATIONS. Agritope's Certificate of Incorporation and Bylaws may have the effect of making an acquisition of control of Agritope in a transaction not approved by the Company's board of directors more difficult. For example, the Certificate of Incorporation and Bylaws provide for a classified board, prohibit the removal of directors except for "cause," limit the ability of the stockholders and directors to change the size of the board, and require advance notice before stockholders are permitted to nominate directors or submit other proposals at stockholder meetings. In November 1997, the Company's board of directors adopted a stockholder rights plan, which may limit the unsolicited acquisition of the Company's Common Stock. In addition, subject to limitations prescribed by Delaware law, the board has the authority to issue up to 10 million shares of Agritope Preferred and to fix the rights, preferences, privileges and restrictions of those shares, and to issue up to a total of 30 million shares of the Company's Common Stock, all without any vote or action by Agritope's stockholders, except as may be required by law or any stock exchange or automated securities interdealer quotation system on which the Common Stock may then be listed or quoted. Agritope is also subject to Delaware statutory provisions governing business combinations with persons deemed to be "interested stockholders." Finally, awards made under the Company's 1997 Stock Award Plan may vest in full immediately in the event of a change in control of Agritope or similar event. The potential issuance of additional shares of Agritope capital stock and other considerations referenced above may have the effect of delaying or preventing a change in control of Agritope, may discourage offers for the Common Stock, and may adversely affect the market price of, and the voting and other rights of the holders of the Common Stock. -----END PRIVACY-ENHANCED MESSAGE-----