-----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, CrbV0baxIGI4exqOrTIlOJde3H/2BNuaxDqmSBq742AXqQ6kE23+m6H9HNdbBq35 twLWFAk7+Ioe3lK+nUgNDQ== 0000892917-95-000233.txt : 19951228 0000892917-95-000233.hdr.sgml : 19951228 ACCESSION NUMBER: 0000892917-95-000233 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 8 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951227 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: EPITOPE INC/OR/ CENTRAL INDEX KEY: 0000801555 STANDARD INDUSTRIAL CLASSIFICATION: IN VITRO & IN VIVO DIAGNOSTIC SUBSTANCES [2835] IRS NUMBER: 930779127 STATE OF INCORPORATION: OR FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-10492 FILM NUMBER: 95604589 BUSINESS ADDRESS: STREET 1: 8505 SW CREEKSIDE PL CITY: BEAVERTON STATE: OR ZIP: 97005-7108 BUSINESS PHONE: 5036416115 MAIL ADDRESS: STREET 1: 8505 S W CREEKSIDE PLACE CITY: BEAVERTON STATE: OR ZIP: 97008 10-K 1 ANNUAL REPORT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________ FORM 10-K (Mark one) [X] Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended September 30, 1995 OR [ ] Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from ________ to ________ Commission File No. 1-10492 EPITOPE, INC. (Exact name of registrant as specified in its charter) Oregon 93-0779127 (State or other jurisdiction of (I.R.S. employer incorporation or organization) identification no.) 8505 S.W. Creekside Place Beaverton, Oregon 97008 (Address of principal executive offices) (Zip code) (503) 641-6115 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12(b) of the Act: Title of each class Name of each exchange on which registered Common Stock, no par value American Stock Exchange Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 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. [X] State the aggregate market value of voting stock held by non-affiliates of the registrant, as of November 30, 1995: $142,590,903 Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of November 30, 1995 Common Stock, no par value: 12,490,945 Documents Incorporated by Reference: Definitive Proxy Statement for 1995 Annual Shareholders' Meeting Part III Table of Contents PART I ITEM 1. Business ITEM 2. Properties ITEM 3. Legal Proceedings ITEM 4. Submission of Matters to a Vote of Security Holders PART II ITEM 5. Market for the Registrant's Common Stock and Related Stockholder Matters ITEM 6. Selected Financial Data ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations ITEM 8. Financial Statements and Supplementary Data ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure PART III ITEM 10. Directors and Executive Officers of the Registrant ITEM 11. Executive Compensation ITEM 12. Security Ownership of Certain Beneficial Owners and Management ITEM 13. Certain Relationships and Related Transactions PART IV ITEM 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K PART I Item 1. Business. Epitope, Inc. (the "Company"), is an Oregon corporation incorporated in 1981 that utilizes biotechnology to develop diagnostic tests and related devices for the detection of the Human Immunodeficiency Virus ("HIV"), the principal cause of Acquired Immune Deficiency Syndrome ("AIDS"), and other medical conditions and indications, and, through its agricultural biotechnology subsidiary Agritope, Inc. ("Agritope"), superior new plant varieties. The table below shows, for each of the last three fiscal years, the percentage of the Company's total revenue contributed by each of its principal products and by grants and contracts. In June 1995, the Company disposed of the operations involving sale of packaged fresh flowers and grape plants. See Note 3 to Consolidated Financial Statements.
Fiscal Year 1995 1994 1993 - ---------------------------------------------------------------------------- Percentage of Revenues from: OraSure . . . . . . . . . . . . . 20% 18% 33% HIV Confirmatory Tests. . . . . . 36% 35% 42% Packaged Fresh Flowers. . . . . . 39% 45% 15% Grape Plants. . . . . . . . . . . 2% 1% 1% Grants and Contracts. . . . . . . 3% 1% 9%
For data concerning the Company's revenues (including sales to other geographic areas), operating profit or loss, and identifiable assets attributable to the Company's industry segments, see Note 12 to Consolidated Financial Statements contained in this Annual Report on Form 10-K. An active research and development program is an essential element of the Company's business. Approximately one-third of the Company's Beaverton, Oregon, facilities is devoted solely to research and development activity. The Company's research and development efforts are concentrated in the areas of diagnostic tests for HIV infection and other medical conditions and indications, and new, agronomically superior varieties of plants. The Company incurred research and development expenses for fiscal 1995, 1994 and 1993, respectively, of $6.8 million, $6.1 million, and $7.0 million. Research and development expenses include the costs to prepare for, conduct, and compile the results of clinical studies and obtain other information to support applications for product licenses and marketing approval. EPITOPE MEDICAL PRODUCTS The Company develops and markets medical diagnostic products through its Epitope Medical Products Division ("Epitope Medical Products"). Products manufactured by Epitope Medical Products include an oral specimen collection device, OraSure{}, designed to allow diagnostic tests for HIV infection and other medical conditions and indications to be conducted without drawing a blood sample, and Epitope Medical Products' HIV-1 Western blot serum-based confirmatory test kit, EPIblot{}. The OraSure collection device, was approved by the Food and Drug Administration ("FDA") on December 23, 1994, for commercial distribution in the United States ("U.S.") for use in HIV-1 screening. The Company believes that the OraSure device is the only oral specimen collection device to undergo FDA-reviewed clinical trials for use in HIV-1 testing. Current Diagnostic Products Background. The World Health Organization and the Centers for Disease Control and Prevention have estimated that, as of June 30, 1995, as many as twenty million people worldwide are infected with HIV, and that 4.5 million of those cases have progressed to AIDS. Infection in the United States and Western Europe is estimated at more than 1.5 million, with over 500,000 people having progressed to AIDS. These agencies further expect that more than 50 percent of those Western Europeans and Americans currently infected, but displaying no symptoms of AIDS, will have clinical signs of AIDS by the year 2000. While many millions of dollars have been spent on AIDS research, it has become apparent that effective therapeutic drugs, cures or vaccines for AIDS and HIV infection may not be available in the near future. To respond to the rapid spread and high mortality rate of the disease, the Company has focused its efforts on developing tests for the diagnosis of HIV infection and safer, painless methods of collecting specimens for testing. Infection by HIV causes the formation of specific antibodies. Current testing techniques begin with a screening test that can detect these antibodies. If the screening test is positive, a more expensive and sophisticated confirmatory test is generally conducted in the U.S. Most laboratories use a Western blot test to confirm positive screening test results. Prior to the FDA's approval of the Company's OraSure device and a related screening test, all HIV tests licensed by the FDA involved analysis of a blood sample to detect the presence of HIV antibodies. While the available blood tests have a high degree of accuracy, they involve the use of syringes, needles or lancets, and therefore are unpleasant for many individuals and pose potential hazards to health care professionals. Blood-based tests may also not be feasible for certain individuals (e.g., intravenous drug users), in dentists' and other professional offices where a blood sample would not otherwise be drawn, and in non-office settings where blood drawing is difficult or impracticable. OraSure Oral Specimen Collection Device. Responding to the hazards and limitations of collecting samples for blood-based tests, the Company has developed its OraSure specimen collection device which collects oral fluid instead of blood. The patented OraSure collection device contains a combination of salts and preservatives to enhance the collection and stabilization of antibodies originating from the oral mucosae. OraSure specimen collection is simple. The OraSure device includes a small absorbent pad on a "lollipop" stick. The pad is placed between the subject's cheek and gum for two minutes. The pad is then put into a specimen vial containing a preservative solution and the sample is sent to a laboratory for testing. Use of the device is expected in many cases to eliminate the cost of having a specimen collected by a phlebotomist or other health care professional trained to take blood samples. Because the device uses a non- invasive, needle-free collection method, the Company believes that the device will be more acceptable to individuals being tested than blood-based specimen collection. In January 1991, the Company began manufacturing and distributing the OraSure collection device for laboratory use in testing applicants for insurance policies. The Company believed that distribution for this use did not require prior notification to or approval by the FDA. However, the Company halted distribution of the OraSure device in June 1991 when it received notice from the FDA that such distribution required prior FDA approval. In September 1991, with FDA concurrence, the Company began shipping OraSure to insurance companies in the United States for use in testing insurance applicants for cotinine, a nicotine derivative. In early 1995, following the December 1994 FDA approval of the commercial distribution of the device, the Company resumed distribution of the OraSure device to the insurance industry in the United States for use in testing insurance applicants for HIV-1 infection. The Company also intends to sell the device in this country for use in HIV screening in physician offices, emergency rooms, correctional institutions, sexually transmitted disease clinics and other appropriate settings. See "Business--Epitope Medical Products-- Marketing." As of September 30, 1995, the Company had firm orders totaling $488,000 calling for delivery of OraSure devices within 90 days. There were no firm orders for such devices as of September 30, 1994, other than orders which were contingent upon FDA approval of the device for HIV testing in the U.S. Several companies manufacture and market devices for the collection of saliva or other oral fluids. However, no such devices, other than OraSure, have yet been approved by the FDA for HIV testing, and the Company believes that at this time no such devices are undergoing FDA-reviewed clinical trials for the purpose of obtaining FDA approval for testing for HIV infection. HIV-1 Western Blot Serum-based Kits. The Company's Western blot HIV-1 test kit, EPIblot, is used to confirm the positive results of initial blood- based screening tests for HIV-1 infection. EPIblot test kits are sold in several formats to clinical laboratories, hospitals, and clinics. The kits contain materials to perform up to 20 tests. Two other U.S. companies manufacture FDA-approved Western blot confirmatory HIV tests and an Austrian company manufactures an FDA-approved immunofluorescent confirmatory HIV test. See "Business--Epitope Medical Products--Competition." As of the end of fiscal 1995, the Company had firm orders for EPIblot totaling $329,000 scheduled for delivery in the first quarter of fiscal 1996, as compared to firm orders of $479,000 as of September 30, 1994 for delivery in the first quarter of fiscal 1995. Products Under Development OraSure. OraSure specimens may be useful for the diagnosis of a variety of other infectious diseases, such as hepatitis and childhood diseases. Use of OraSure specimens may also allow physicians to diagnose diseases more readily in children without subjecting them to the discomfort of drawing a blood sample. Prior to FDA approval of the device for commercial distribution for use in screening for HIV-1 infection, OraSure was marketed in the U.S. to test for cotinine. OraSure may have applications relating to other substances and drugs, including the detection of the presence of drugs of abuse including cocaine, for which a 510(k) submission is currently undergoing FDA review. See "Business--Epitope Medical Products--Government Regulation--OraSure Collection Device." Physicians may also find the OraSure device useful for monitoring levels and adjusting medication dosages of therapeutic drugs, such as the asthma medication theophylline. Theophylline is toxic at levels only slightly above the level at which it is effective, requiring frequent blood samples to monitor drug concentration. Commercial distribution of the OraSure device to collect specimens for such uses will require FDA approval. See "Business-- Epitope Medical Products--Government Regulation." HIV-1 Western Blot Oral Specimen-based Kits. The Company has modified its Western blot HIV-1 serum-based test kit for use in the confirmation of the positive results of initial screening tests for HIV-1 infection using oral specimens obtained with the OraSure device. Approval for the commercial distribution and use of the modified test must be obtained from the FDA. In June 1995, the Company filed a Premarket Approval application for use of the modified test with the OraSure device. OraQuick System. Tests for HIV infection currently must be conducted in a laboratory setting and take from 2 to 18 hours to complete, although two blood-based tests are available in a more rapid format. Anticipating that a potential market may develop for oral specimen-based HIV testing in settings other than laboratories, the Company is engaged in the development of the OraQuick system, a test system utilizing an adaptation of the OraSure device, which will provide test results in approximately ten minutes. The Company has substantially completed initial research on a prototype version of the OraQuick system for HIV testing. The Company is also engaged in various stages of research and development for other potential applications of the system. The Company will market the OraQuick system in the United States only after receiving FDA approval, and outside the United States only after receiving necessary FDA export and foreign government approvals. Preliminary clinical trials for the OraQuick system were conducted in July and August 1993 and were partially funded by a grant awarded to the Company. Marketing The Company has historically marketed most of its products by collaborating with pharmaceutical and diagnostic companies and distributors. Epitope Medical Products seeks marketing partners who have expertise and distribution abilities appropriate for the product to be marketed. The Company employs a Vice President of Sales and Marketing who heads a medical products marketing team of three other employees. These employees spend the bulk of their time maintaining and establishing relationships with current and potential marketing partners. The Consumer Healthcare division of SmithKline Beecham, plc (SB) has an exclusive agreement to market the Company's oral specimen collection device worldwide, except in several foreign countries and to the insurance industry in the U.S., Canada and Japan. SB commenced sales under the agreement in October 1995. SB will fund further development of other diagnostic products and technology by the Company and, with respect to SB markets, assume responsibility for funding advertising, promotion, sales and distribution expenses, together with the cost of obtaining and maintaining regulatory approvals in its markets. A portion of SB's regulatory costs will be credited against royalties. Epitope will fund the regulatory costs of obtaining approval for over-the-counter use of OraSure for HIV diagnosis. In 1995, SB made an initial license fee payment of $1 million to the Company. SB also placed $5 million in escrow for future payment to the Company, of which $1 million will be disbursed to the Company to reimburse future research project work and $4 million will be paid as an additional license fee upon FDA approval of a pending request to amend the labeling of the Company's oral specimen collection device to indicate a two-year shelf life. If the requested amendment for extended dating is not approved by February 21, 1996, then royalty payments due from SB to the Company may be offset against the initial $1 million license fee until such time as the amendment is approved. The Company has also entered into four agreements for the use and distribution of the OraSure collection device in the United States insurance industry. The agreements are with LabOne, Inc. (formerly Home Office Reference Laboratory, Inc.), the leading provider of laboratory testing services to the insurance industry, and three other major U.S. insurance testing laboratories. FDA approval of the OraSure device for HIV-1 screening means that the approved product may be freely exported without further U.S. government approvals, although foreign government import approvals will in many cases still be required. Foreign shipments of the OraSure device for certain other indications may be made only after FDA export approval and any required foreign government import approvals are obtained. The Company has entered into marketing agreements with various foreign and domestic distributors for the OraSure collection device in the eight countries within the Epitope territory under terms of the SB agreement. The Company has sold OraSure in Canada, the United Kingdom, Spain, Australia, Indonesia, and Thailand. The Company owns a 60 percent interest in Epitope KK, a Japanese limited liability company formed as a joint venture with Sigma Seiki, Ltd., a privately held Japanese manufacturer of medical devices and equipment. In 1994, the Company decided to terminate its joint venture in China, Beijing Epitope Biotech Corporation, Ltd., a Chinese company owned equally with China National Biological Products Company, a unit of the Chinese Health Ministry. In 1994, the Company renewed its supply and distribution agreements with Organon Teknika Corporation ("Organon Teknika"), a member of the Pharma Division of Akzo, NV. The supply agreement provides that Organon Teknika will continue to supply the HIV-1 antigen used to manufacture EPIblot and the distribution agreement grants Organon Teknika the exclusive right to purchase EPIblot test kits from the Company and to market them worldwide. Akzo, NV is an international chemical and pharmaceutical manufacturer based in Arnhem, The Netherlands. Competition There are many companies engaged in medical and biotechnology research and product development activities. The Company's competitors include specialized biotechnology firms as well as pharmaceutical companies with biotechnology divisions and medical diagnostic companies, many of which have considerably greater financial, technical, and marketing resources than the Company. Competition may intensify as technological advances are made and become more widely known and as products reach the market in greater numbers. Cambridge Biotech Corporation and BioRad Laboratories, Inc., manufacture Western blot HIV confirmatory tests, and Waldheim Pharmazeutika manufactures immunofluorescent HIV confirmatory tests, distributed in the United States by Viral Testing Systems, Inc., that compete with the Company's EPIblot HIV-1 Western blot serum-based confirmatory test kits. Several other companies market or have announced plans to market oral- specimen collection devices and tests. The Company expects the number of devices competing with its OraSure device to increase as the benefits of oral specimen-based testing become more widely accepted. The Company expects that FDA approval of the OraSure device will also encourage potential competitors to develop oral diagnostic products. However, no such devices have yet been approved by the FDA for HIV testing. The Company believes that at this time no such devices are undergoing FDA-reviewed clinical trials for the purpose of obtaining FDA approval for HIV testing. See "Business--Epitope Medical Products--Government Regulation." Government Regulation General. Many of the Company's proposed and existing diagnostic products are subject to regulation by the FDA, other federal, state, and local agencies, and comparable bodies in foreign countries. Such regulation governs almost all aspects of development and marketing, including the introduction, advertising, promotion, manufacturing practices, labeling, distribution, and record keeping for the products. In the United States, different types of diagnostic products are regulated differently by the FDA, as discussed below. As part of the FDA clearance process, the Company often must demonstrate that its products are both safe and effective for a particular indication or application. Drugs and Biological Products. Generally, drugs and biological products require FDA approval before marketing. The steps required before a drug or biological product may be marketed in the United States include: (1) preclinical laboratory and animal tests; (2) submission of an application for an investigational new drug or biological product, which must become effective before human clinical trials may commence; (3) human clinical trials; (4) submission of a Product License Application ("PLA") for the biological product or a New Drug Application ("NDA") for most other new drug products; and (5) approval of the PLA or NDA. Preclinical safety and initial efficacy testing is usually undertaken in animals. Results of such preclinical and other laboratory tests are submitted to the FDA before human clinical trials can begin. Clinical trials are typically conducted in three phases. Phase I uses human subjects to determine safety and tolerance. Phase II uses a limited patient population to determine effectiveness and dosage and to identify side effects. Compounds found effective and safe in Phase II are further tested in Phase III with an expanded patient population at geographically dispersed clinical study sites. Each phase may last from one to two years or more. Most products are not approved because of the failure to demonstrate safety, effectiveness, or both. The FDA may suspend clinical trials at any time if it is felt that subjects or patients are being exposed to an unacceptable health risk. Obtaining FDA approval requires substantial time and effort. There can be no assurance that any approval will be granted to the Company on a timely basis, if at all. As part of the approval process, the FDA may require the Company to initiate post-approval marketing studies. Post-approval marketing studies are underway as required as part of the FDA's approval of the OraSure device. Medical Devices. All medical devices are classified either in Class I, Class II, or Class III. Class I devices are subject only to general control provisions of the Federal Food, Drug, and Cosmetic Act, as amended (the "FDC Act"). These provisions include requirements that a device not be adulterated or misbranded. Class II devices are those for which general controls are insufficient to provide a reasonable assurance of safety and efficacy and for which a "generic" performance standard or other special controls are appropriate. Devices that do not meet the criteria for Class I or II are placed in Class III. Class I and II devices, those Class III devices initially marketed prior to passage of the Medical Device Amendments of 1976 ("MDA") for which premarket approval applications ("PMAs") are not yet required, and devices substantially equivalent to such devices, may be marketed upon FDA clearance of a section 510(k) notification (a "510(k) Notice"). Other Class III devices may be commercially marketed only after FDA approval of a PMA. Generally, the process of obtaining FDA approval of a PMA is similar to that for obtaining approval of a biological or other drug product. Based upon the information provided in a 510(k) Notice regarding the device's intended use and technological features, the FDA will determine whether the device is "substantially equivalent" to a predicate device, i.e., a device legally marketed which did not require a PMA. If a device is found to be substantially equivalent to a predicate device, it may be freely marketed in the United States so long as the device is otherwise in compliance with the FDC Act. If it is not so found, it will be considered a Class III device requiring a PMA. Substantial equivalence means that the FDA has found that the device has the same intended use as the predicate device, and either has the same technological characteristics or has different characteristics, but there is information in the 510(k) Notice that shows the device is as safe and effective as the predicate and does not present different questions of safety and effectiveness. OraSure Collection Device. The OraSure collection device for applications involving the detection of HIV is regulated by the FDA as a Class III medical device requiring a PMA. In May 1991, the Company completed clinical trials for use of the OraSure device in HIV-1 screening and submitted a PMA to the FDA. The PMA was approved by FDA in December 1994. Until the pending PMA for the OraSure Western blot is approved, a definitive HIV- positive diagnosis will require that a blood sample be drawn. In February 1995, the Company submitted a 510(k) Notice for use of OraSure for cocaine testing. The submission is currently undergoing FDA review. See "Business--Epitope Medical Products--Products Under Development-- OraSure." In the meantime, the FDA has advised the Company that OraSure may be used for cocaine testing for the purposes of life insurance risk assessment while the 510(k) is undergoing final review. Western Blot Test Kits. The Company's HIV-1 Western blot serum-based confirmatory test kits are used to confirm whether individuals are infected with HIV-1. They are regulated by the FDA as biological products, unlike most other diagnostic tests which are regulated as medical devices. In March 1991, the FDA approved the EPIblot HIV-1 serum-based confirmatory test kit for commercial distribution. A PMA seeking permission to market an oral specimen- based HIV-1 confirmatory test kit was submitted to the FDA in June 1995. In December 1995, the FDA issued an approvable letter advising the Company that the agency would issue an approval order with regard to such PMA after additional information had been submitted, reviewed and deemed acceptable, and upon successful completion of a facilities inspection. See "Business--Epitope Medical Products--Products Under Development--HIV-1 Western Blot Oral Specimen-based Kits." An independent institutional review board recently concluded that the use of an OraSure Western blot confirmatory test on a research basis in the area of life insurance risk assessment represented a non-significant risk under current regulations provided that serum-based confirmation was used for diagnostic purposes. Manufacturing Regulations. Every company that manufactures drugs, biological products, or medical devices distributed in the United States is subject to inspections by the FDA and must comply with the FDA's Current Good Manufacturing Practices regulations. These regulations govern, among other matters, manufacture, testing, release, packaging, distribution, and documentation. Other. The Company is also subject to regulation by the Occupational Safety and Health Administration and may be subject to regulation by the U.S. Environmental Protection Agency ("EPA") under the Toxic Substances Control Act ("TSCA"), the Resource Conservation and Recovery Act, and other legislation. The Company is also subject to foreign regulations governing, for example, human clinical trials and marketing with respect to products distributed outside of the United States. Approval processes vary from country to country, and the length of time required for approval or to obtain other clearances may in some cases be longer than that required for U.S. governmental approvals. The extent of potentially adverse governmental regulation affecting the Company that might arise from future legislative or administrative action cannot be predicted. Supplies The HIV-1 antigen needed to manufacture the Company's EPIblot HIV confirmatory test kits is available from only a limited number of sources. Organon Teknika, the exclusive distributor of the test kits, is required to supply the Company's requirements for antigen for the term of its distribution agreement with the Company, which ends in March 1997. If for any reason Organon Teknika should no longer be able to supply the Company's antigen needs, management believes the Company would be able to obtain or produce its own supply of antigen at a competitive cost. The Company has obtained a license from the National Technical Information Service which is required for the production of the HIV-1 antigen currently used in the Company's EPIblot test kits. Other materials used by the Company in its manufacturing and research and development operations are widely available from a variety of sources. AGRITOPE, INC. Agritope, the Company's agricultural biotechnology subsidiary, has made progress toward genetic engineering of plants to control ripening and other processes. Agritope performs research and development with primary emphasis on improving the post-harvest shelf life of plants through genetic engineering. Agritope also has agreed to provide research support for the grape plant program and fresh flower and floral preservative programs of two former business units. Products Under Development Agritope has devoted substantial efforts to the genetic control of ethylene production in plants. Ethylene is a plant hormone present in all higher plants that causes fruits and vegetables to ripen, leaves to wilt, and flowers to fade. Unlike other plant hormones, ethylene is a gas and therefore affects surrounding plants as well as the plant that produces it. Technologies currently in use to control ethylene include controlled atmosphere storage, chemical treatments, and irradiation. These technologies are expensive and in some cases toxic, and can adversely affect flavor, texture, and firmness. Agritope is engaged in genetic engineering projects intended to develop new plant varieties in which ethylene production will be controlled. Agritope has identified a single gene which, after insertion into a plant, reduces ethylene production. Agritope has been granted a patent in the United States for the use of this gene and has a number of U.S. and foreign applications pending with respect to the technology. Agritope believes this gene can be inserted into virtually all higher plants and will have extensive commercial applications. Products that could be developed by successfully controlling ethylene production include fruits and vegetables with prolonged post-harvest storage life; fruits, vegetables, and flowers resistant to physical injury; fruits and vegetables that ripen synchronously; and flowers with an extended bloom life. Agritope conducted demonstration trials in winter 1994 and spring 1995 of a proprietary cherry tomato and large-fruited fresh market tomato varieties that contain the gene that inhibits production of ethylene. The trials, which were conducted in Florida and California, further demonstrated the ability of Agritope's technology to inhibit ethylene production. Agritope has conducted research pursuant to an agreement with Rogers N.K., a unit of Sandoz Seeds Ltd., for the evaluation of Agritope's ethylene control technology in several of Rogers' full-size tomato varieties. Agritope has also entered into a collaboration agreement with Calgene, Inc. Agritope is also continuing independent research and development in this technology. Sakata Seed America ("Sakata"), a major hybrid seed supplier, provided Agritope with funds in prior years to develop broccoli and cauliflower plants having an extended post-harvest storage life. Agritope has provided Sakata with transgenic cauliflower plants and broccoli to be tested for the production of hybrid seeds. However, it is impossible to predict when, if ever, the hybrid seeds could be produced for commercial distribution or whether plants produced from the seeds will have commercially valuable characteristics. See "Business--Agritope, Inc.--Government Regulation." Sweetbriar Development, Inc. ("Sweetbriar") has entered into a license agreement with Agritope under which the parties will collaborate to develop longer-lasting raspberries utilizing Agritope's proprietary ethylene control technology and selected breeding lines developed by Sweetbriar. Sweetbriar will partially fund Agritope's work under the agreement. Marketing Sakata will market any broccoli or cauliflower seeds produced by Agritope's ethylene control project and will pay the Company a royalty on seeds sold. Raspberries developed under the Sweetbriar agreement will be marketed by Sweetbriar's parent Driscoll Strawberry Associates; Sweetbriar will pay Agritope royalties based on the aggregate sales value of such transgenic raspberries. As additional plant varieties, such as tomatoes, are developed, Agritope expects to establish appropriate strategic alliances to market and distribute its products. Competition The Company believes that many companies, including companies with significantly greater financial resources, such as Calgene, Monsanto Co., Zeneca Seeds, and DNA Plant Technology Corporation, may be engaged in the development of mechanisms to control the ripening of agricultural products. The Plant Gene Expression Center, a joint venture of the U.S. Department of Agriculture and the University of California, Berkeley, announced in October 1991 the development of a genetically manipulated tomato that can be stored for two to three months without spoiling. Calgene has been engaged in genetic engineering work to delay tomato softening and commenced marketing the genetically modified tomatoes in May 1994. Government Regulation Agritope is devoting substantial effort to the development of "genetically engineered" plants using recombinant DNA methods. Many of Agritope's proposed agricultural products are subject to regulation by both the United States Department of Agriculture ("USDA") and the FDA and may be subject to regulation by the EPA and other federal, state, local and foreign authorities. The extent of regulation depends upon the intended uses of such products, how they are derived, and how applicable statutes and regulations are interpreted to apply to new genetic technologies and products thereof. The regulatory approaches of the USDA, FDA, EPA and other agencies are still evolving with respect to products of modern biotechnology, such as those derived from the use of recombinant DNA methods. No assurances exist that any regulatory approvals, exemptions, permits or other clearances, if required, can be obtained in a timely manner, if at all, either for research or commercial activities. Agritope has field-tested various plants that are genetically altered by use of recombinant DNA techniques. Tomato plants where ethylene production is controlled to delay ripening have been field-tested since 1992. These field trials have been authorized by the Animal and Plant Health Inspection Service ("APHIS") of the USDA. APHIS is responsible for reviewing both research and development work and commercialization of plants derived by recombinant DNA techniques that may pose plant pest risks. Some states also require authorization of field trials. To date, Agritope has not conducted any field tests in such states, although it may do so in the near future. Commercialization of delayed-ripening fruits developed through the use of recombinant DNA techniques, in contrast to research and development activities, will require a determination of non-regulated status by APHIS. In November 1995, Agritope submitted a petition requesting such a determination from APHIS with respect to a variety of tomatoes containing its ethylene control gene. The FDA regulates foods (including food ingredients) under the FDC Act. On May 29, 1992, the FDA issued a policy statement with respect to new food plant varieties or products thereof that provides guidance for developers to determine whether their new plant varieties are as safe as the traditional counterpart varieties. The FDA expects developers of whole foods derived from the use of recombinant DNA techniques to consult with the FDA prior to commercial marketing in order to assure that such foods are safe for public consumption. Agritope initiated consultation with the FDA in 1994 and will continue to consult with the FDA in 1996 regarding the commercialization of delayed-ripening tomatoes. A number of companies have successfully proceeded through the FDA consultation process, although the time period for doing so can vary significantly. Under the food additive provisions of the FDC Act, new food additives, which may include plants and plant products, require FDA clearances before marketing. The FDA has regulated as a food additive the enzyme product of the kan r (APH(3') Il) marker gene in tomatoes, cotton, and oilseed rape plants. Marker genes help identify the presence of desirable genes, such as the gene that inhibits the production of ethylene in Agritope's delayed-ripening tomatoes. Use of the kan r marker gene in plants other than tomatoes, cotton, and oilseed rape, such as raspberry plants, may require additional food additive clearances from the FDA. Other aspects of Agritope's use of recombinant DNA methods to genetically engineer food plants may require FDA food additive clearances before commercialization. The costs and time required to obtain such clearances could be significant. The EPA requires registration of pesticides under the Federal Insecticide, Fungicide, and Rodenticide Act ("FIFRA") and issues tolerance regulations for residues of pesticides in foods under the FDC Act. The EPA has proposed regulations dealing with "plant pesticides" and has asked for comment on whether that term should include plant hormones, such as ethylene, should be exempted from FIFRA. The EPA could also regulate plant products under TSCA. The EPA has published proposed regulations under TSCA which, depending on their final form, could require further regulatory approvals before Agritope commercializes some of its plant technologies. Federal and state labeling requirements pertaining to the commercialization of Agritope's products of modern biotechnology are still evolving. In April 1993, the FDA issued a request for data and information pertaining to the labeling of food derived from new plant varieties, including those plants produced by recombinant DNA methods. This request seeks information on various labeling issues, such as whether food products of modern biotechnological methods should be specifically labeled in some way. The FDA is not expected to require special labeling for recombinant DNA- derived foods, although so-called "negative labeling" for food products that do not result from the use of modern genetic techniques could denote, for example, that food products are not derived from the use of genetic engineering. Even if the FDA does not mandate special labeling, various states may pass legislation to require such labeling. If special labeling is permissible, if other labeling relating to the use of recombinant DNA is ultimately required by the FDA, other federal agencies, or certain states, or if "negative labeling" becomes prevalent, the commercialization of Agritope's products may be adversely affected. Some consumers may choose to buy only products that are not the result of new "genetic engineering" methods. VINIFERA, INC. Agritope has developed proprietary methods for propagating superior varieties of grapevines in commercial quantities. Vinifera, Inc. ("Vinifera") was formed in 1993 as a wholly owned subsidiary of Agritope, to commercialize this technology. In June 1995, Agritope agreed to sell its equity interest in Vinifera to VF Holdings, Inc. ("VF"), an affiliate of a Swiss investment group. VF agreed to pay a purchase price of $5.9 million and up to $5 million in earnout payments based on gross profits of Vinifera. VF also agreed to contribute $4 million of operating funds to Vinifera. Agritope has also agreed (1) to conduct research and diagnostic testing services for Vinifera, (2) to lease its Woodburn, Oregon, farm and greenhouse facilities to Vinifera for an interim period of at least one year until Vinifera relocates its operations nearer to its U.S. customer base in Northern California and (3) to provide administrative support services for a one-year transition period. VF has contributed over $600,000 to fund Vinifera cash requirements for operations since June 1995 when Agritope discontinued such funding, but has not made any other payments to Agritope or Vinifera. See Note 3 to Consolidated Financial Statements. AGRIMAX FLORAL PRODUCTS, INC. Agrimax, a Minnesota corporation, was acquired in 1992 by Agritope to distribute fresh cut flowers and proprietary floral preservatives. After commencement of marketing from a plant in the Minneapolis-St. Paul area, Agrimax increased its production capacity and product lines and extended its delivery areas to serve the eastern U.S. from a second, larger facility in Charlotte, North Carolina. In May 1995, Agrimax transferred control of its Charlotte facility to Universal American Flowers, Inc., a privately held importer of high quality fresh flowers engaged in distribution to customers in the eastern U.S. from facilities in Tampa, Florida and Hammond, Louisiana. As of October 27, 1995, Agrimax merged the Charlotte fresh flower operation with those of UAF in return for an equity interest of approximately 18% in the merged entity, UAF, L.P. In addition to tangible operating assets, Agrimax transferred to UAF, L.P., the rights to use its proprietary floral preservative as well as the Fresche Blossoms, Everguard and Fresche Blossoms Express trademarks. The St. Paul, Minnesota, facility of Agrimax ceased operations in June 1995. A Minneapolis investor has entered into a letter of intent to purchase the St. Paul assets. See Note 3 to Consolidated Financial Statements. GRANTS AND CONTRACTS The Company participates in United States Small Business Innovation Research ("SBIR") programs sponsored by either the Department of Health and Human Services or the Department of Agriculture. The SBIR programs have two phases. Phase I covers a six-month project period and a total award not to exceed $55,000. Phase II covers a two-year project period and a total award not to exceed $500,000. Agritope was awarded a Phase I grant of $50,000 in 1994 and a Phase II grant of $200,000 in 1995 for development of diagnostic tests for the detection of grapevine leafroll virus. The Company has also received funds in the past from the National Institute of Allergy and Infectious Diseases ("NIAID") for work in developing a rapid test to detect HIV antibodies in oral fluid specimens and from the National Cancer Institute ("NCI") to fund research for the treatment of cancer by exploiting a deficiency of certain compounds in cancer cells. Agritope has been awarded grant support in the past from the USDA, Oregon Strawberry Commission, and Oregon Raspberry and Blackberry Commission for antifungal biocontrol research. The Company intends to continue to participate in the SBIR programs as it deems appropriate. The Company regularly makes applications for new grants, but there is no assurance that grant support will be continued. PATENTS AND PROPRIETARY INFORMATION The Company has obtained patents in the United States and certain foreign countries for the OraSure and OraQuick devices and related technology. The Company has applied for additional patents, both in the United States and in certain foreign countries, on the OraSure collection device and a number of other technologies and products. In 1995, Agritope received a U.S. patent relating to its ethylene control gene. Agritope has also applied for additional U.S. and foreign patent protection for its ethylene control technology. The Company anticipates filing patent applications for protection on future products and technology. United States patents have a maximum term of 20 years from the date an application is filed or 17 years from issuance, whichever is longer. Much of the technology developed by the Company is subject to trade secret protection. To reduce the risk of loss of trade secret protection through disclosure, the Company requires its employees and consultants to enter into confidentiality agreements. Trade secret protection can continue indefinitely so long as the protected information is not disclosed on an unrestricted basis to third parties. The Company believes that patent and trade secret protection is important to its business. However, the issuance of a patent or existence of trade secret protection does not in itself ensure the Company's success. Competitors may be able to produce products competing with a patented Company product without infringing on the Company's patent rights. Issuance of a patent in one country generally does not prevent manufacture or sale of the patented product in other countries. The issuance of a patent to the Company or to a licensor is not conclusive as to validity or as to the enforceable scope of the patent. The validity or enforceability of a patent can be challenged by litigation after its issuance, and, if the outcome of such litigation is adverse to the owner of the patent, the owner's rights could be diminished or withdrawn. Trade secret protection does not prevent independent discovery and exploitation of the secret product or technique. PERSONNEL At September 30, 1995, the Company and its subsidiaries had 89 full-time employees, including 31 persons in research and product development, 23 in administration and marketing, 28 in manufacturing and production, and 7 in regulatory affairs and quality assurance. During fiscal 1994, the Company implemented a strategic plan to focus efforts on its core medical products and agricultural business units and to match personnel resources with current requirements. Employment was reduced by the divestiture of two business units and by a reduction in work force at the remaining business units. See Notes 2 and 3 to Consolidated Financial Statements. The Company considers its relations with its employees to be excellent. None of its employees are represented by labor unions. The Company employs 9 persons holding Ph.D. or M.D. degrees with specialties in the following disciplines: analytical chemistry, bacteriology and public health, biochemistry, biophysics, hematology and internal medicine, immunology, molecular biology, organic chemistry, plant biology and plant pathology. From time to time, the Company also engages the services of scientists as consultants to augment the skills of its scientific staff. Scientific Advisory Board. The Company also utilizes the services of a Scientific Advisory Board. The Scientific Advisory Board meets periodically to review the Company's research and development efforts and to apprise the Company of scientific developments pertinent to the Company's business. The Scientific Advisory Board is comprised of chair Eugene W. Nester, Ph.D., Professor and Chair, Department of Microbiology, University of Washington; Roger N. Beachy, Ph.D., Member, Scripps Family Chair, and Head, Division of Plant Biology, The Scripps Research Institute, and Co-Director of International Laboratory for Tropical Agricultural Biotechnology; Peter R. Bristow, Ph.D., Associate Plant Pathologist, Washington State University; J. Richard George, Ph.D., Vice President of Scientific Affairs of Epitope Medical Products; Lesley M. Hallick, Ph.D., Vice President for Academic Affairs, Oregon Health Sciences University; Daniel Malamud, Ph.D., Professor and Chair, Department of Biochemistry, University of Pennsylvania School of Dental Medicine; and James I. Mullins, Ph.D., Professor of Microbiology and Medicine, University of Washington. Item 2. Properties. Epitope Medical Products. The Company leases approximately 52,000 square feet of office, manufacturing, and laboratory space in Beaverton, Oregon, under three leases that terminate January 31, 2000. Each lease calls for fixed monthly payments over its term. The Company also entered into a five-year lease, effective October 1, 1991, for 2,265 square feet of warehouse space used to store inventory and equipment. Agritope. Agritope owns a 15-acre farm which it has agreed to lease to its former Vinifera unit through June 1996 for use in connection with Vinifera's grapevine micropropagation operations. Greenhouse capacity at the farm currently totals 60,000 square feet. Agritope also uses a portion of the Company's office space in Beaverton, Oregon. Agrimax. Agrimax entered into a six-year lease, effective January 1, 1994, for 76,000 square feet of space for administrative and production use in Charlotte, North Carolina. The Charlotte facility has been subleased to an affiliate, UAF, LP in which Agrimax has an 18% equity interest. In August 1994, Agrimax entered into a five-year lease covering 25,000 square feet of space for administrative and production use in St. Paul, Minnesota. Agrimax has entered into a letter of intent with a private investor who has proposed to sublease the facility and operate a successor to the fresh flower business which Agrimax formerly conducted at that location. See Note 3 to Consolidated Financial Statements. Item 3. Legal Proceedings. None. 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. The Company's Common Stock is listed for trading on the American Stock Exchange ("AMEX") under the symbol EPT. High and low sales prices reported by AMEX during the periods indicated are shown below.
Year ended September 30 1995 1994 - ------------------------------------------------------------------------------- Sales price per share High Low High Low First Quarter $ 26 $ 18-1/2 $ 24-1/4 $ 19-5/8 Second Quarter 21-7/8 13-5/8 21-5/8 13-1/4 Third Quarter 18-3/8 13-5/8 19-3/8 13-3/8 Fourth Quarter 18 13-3/4 22 15-3/8
On November 30, 1995, there were 1,203 holders of record of the Common Stock, and the closing price of the Common Stock was $11-3/4. The Company has never paid any cash dividends, and the Board of Directors does not anticipate paying cash dividends in the foreseeable future. The Company intends to retain any future earnings to provide funds for the operation and expansion of its business. Item 6. Selected Financial Data. The following balance sheet data at September 30, 1995 and 1994 and the operating results for the years ended September 30, 1995, 1994 and 1993 have been derived from audited consolidated financial statements and notes thereto appearing elsewhere in this Annual Report on Form 10-K. The balance sheet data at September 30, 1993, 1992 and 1991 and operating results for the years ended September 30, 1992 and 1991 have been derived from audited financial statements not required to be included in this Annual Report on Form 10-K.
COMPARATIVE FINANICAL DATA (In thousands, except net loss per share) Year ended September 30 1995 1994 1993 1992 1991 - ------------------------------------------------------------------------------------------- Operating results Revenues. . . . . . . . . . . . . $ 4,965 $ 4,819 $ 3,283 $ 3,043 $ 3,809 Operating costs and expenses. . . 24,383 20,593 16,707 11,102 9,423 Other income (expense), net . . . 922 141 (1,305) 293 234 Net loss. . . . . . . . . . . . . (18,496) (15,633) (14,729) (7,765) (5,380) Net loss per share. . . . . . . . (1.56) (1.56) (1.67) (.90) (.70) Shares used in per share calculations . . . . . . . . . . 11,886 10,050 8,828 8,628 7,631 Balance sheet data Working capital . . . . . . . . . $ 20,532 $ 17,184 $ 8,703 $ 9,623 $ 10,822 Total assets. . . . . . . . . . . 30,134 24,555 14,145 14,130 14,236 Long-term debt. . . . . . . . . . 22 38 57 - - Convertible notes, due 1997 . . . 3,620 4,070 4,630 5,495 - Accumulated deficit . . . . . . . (71,585) (53,090) (37,457) (22,728) (14,962) Shareholders' equity. . . . . . . 22,347 18,470 7,970 7,660 13,384
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations. Results of Operations Revenues increased 3% in the year ended September 30, 1995 to $ 4.97 million. Revenues increased 47% in 1994 and increased 8% in 1993 from the prior fiscal years. Product sales accounted for 97% of revenues in 1995, 99% in 1994 and 92% in 1993. EPIblot, the Company's Western blot HIV confirmatory test, produced 1995 revenues of $1.8 million, representing a 7% increase over the prior fiscal year, following an increase of 22% and an increase of 10% in 1994 and 1993, respectively. Sales volumes for EPIblot increased in 1995 and 1994 due to further penetration of the U.S. market and in 1993 due to intensified sales efforts in response to contract incentives. OraSure, the Company's oral specimen collection device, accounted for revenues of $981,000 in 1995, an increase of 11% from 1994; revenues in 1994 represented a decrease of 19% from levels attained in 1993. Prior to 1995, sales of OraSure were limited by the Food and Drug Administration ("FDA") to use for testing for cotinine, a nicotine derivative, in the U.S. and for pre- insurance testing for HIV in foreign countries approved for export by the FDA. The FDA approved the Company's Premarket Approval application ("PMA") for permission to market the device for use in the U.S. for screening for antibodies to the AIDS virus in December 1994. Shipments of OraSure for HIV screening of insurance applicants commenced in March 1995. Sales of Fresche Blossoms packaged fresh cut flowers by the Company's Agrimax Floral Products, Inc. subsidiary ("Agrimax") for 1995 amounted to $1.9 million during the first seven months of the year. Sales of flowers amounted to $2.1 million and $482,000 in 1994 and 1993, respectively. In May 1995, Agrimax combined its Charlotte, North Carolina operations with an affiliate of Universal American Flowers, Inc. ("UAF") of Tampa, Florida and suspended operation of its Minnesota facility. The Company subsequently merged its fresh flower operations with those of UAF in return for an equity interest in the merged entity of approximately 18%. (See Note 3 to Consolidated Financial Statements.) VitroGraft grape plants which are resistant to phylloxera, a plant louse that has infested U.S. vineyards, accounted for revenues of $84,000 through June 1995, when the Company agreed to sell its 100% equity interest in Vinifera, Inc. ("Vinifera") to a Swiss investment group. (See Note 3 to Consolidated Financial Statements.) Gross margins on product sales were negative for 1995 and 1994, as compared to positive gross margins (7%) in 1993. Margins for 1995 and 1994 were adversely affected by excess costs and inefficiencies encountered at the Agrimax unit which was operated at less than full capacity. Margin percentages for EPIblot were positive in 1995, 1994 and 1993. OraSure margins for 1995 and 1994 were negative due to charges for obsolete inventory accumulated prior to the December 1994 FDA approval of OraSure for use in HIV screening. OraSure achieved positive gross margins in 1993 due to the favorable effect of contracted outsourcing of manufacturing. Research and development costs of $6.8 million were incurred in 1995, representing an increase of 13% as compared to a decrease of 14% in 1994 and an increase of 38% in 1993. Medical products research costs totaled $4.6 million in 1995, a 25% increase, primarily for oral diagnostics products, which compares to a decrease of 12% and an increase of 18% in 1994 and 1993, respectively. The Company's agricultural subsidiaries incurred research and development costs of $2.2 million in 1995, a decrease of 7% from 1994. Research and development expenses in the Company's agricultural subsidiaries in 1994 were $2.4 million, down 17% from 1993 principally due to decreased development costs with regard to Agrimax Fresche Blossoms fresh cut flowers. Agricultural research project costs of $2.9 million in 1993 were almost double the amount incurred in 1992, as the Company increased its grape plant micropropagation activities, accelerated its genetic engineering research efforts to extend post-harvest shelf life of plants and vegetables, with emphasis on tomatoes, strawberries and raspberries, and developed improved floral preservatives and the packaging system for the Fresche Blossoms line of packaged fresh cut flowers. Selling, general and administrative expenses were $11.2 million in 1995, as compared to $7.8 million in 1994 and $6.9 million in 1993. Increases in 1995 were attributable to three major factors: (1) development of a larger infrastructure to support operations after FDA approval of OraSure, (2) divestiture of Vinifera and Agrimax operations and (3) restructuring at year end. 1995 expenses include charges of $607,000 for employee severance payments and other expenses related to the corporate restructuring program and $500,000 for disposition of the Company's Agrimax and Vinifera operations. (See Notes 2 and 3 to Consolidated Financial Statements.) Positions eliminated in the restructuring represent an annualized cost savings of approximately $2 million. General and administrative expenses increased $826,000 during 1994 primarily due to the establishment of the second Agrimax fresh flower packaging operation in North Carolina. Vinifera's general and administrative expenses decreased $201,000 primarily due to lower outside consulting costs during 1994 as compared to 1993. Corporate administration general and administrative expenses increased $180,000 to $3.6 million during 1994 resulting from increased premiums for directors and officers liability insurance as well as increased media consulting and investor relations expenses. In 1993, medical products sales and marketing expenses increased $559,000 as the Company expanded marketing activities to international markets. Vinifera was formed in 1993 as a wholly owned subsidiary to conduct the Company's grapevine technology business. In preparation for marketing its products as an independently financed entity, Vinifera incurred increased expenses totaling $956,000. Vinifera expanded promotional activities in the vineyard industry, formed a grape industry advisory board, engaged investment bankers to assist in a private placement of securities, and hired a new chief executive officer. Also, in 1993, Agrimax incurred $686,000 in additional sales and marketing expenses and $611,000 in additional general and administrative expenses in connection with establishing its first fresh flower packaging operation in Minnesota. Other income (expense) in 1995 and 1994 consisted primarily of interest income on temporary investments of excess funds, less interest expense on Agritope long-term debt. In 1993, other income (expense) included a non-cash charge of $1.4 million for settlement of a class action securities suit. (See Note 6 to Consolidated Financial Statements.) Liquidity and Capital Resources Cash, cash equivalents and marketable securities on hand as of year-end totaled $21.3 million in 1995 and $16.6 million in 1994. At September 30, 1995, the Company had working capital of $20.5 million, as compared to $17.2 million at September 30, 1994. Proceeds from the issuance of equity securities represent the primary source of funds for meeting the Company's requirements for operations, working capital and business expansion. During 1995, the Company received proceeds of $21.0 million from the exercise of warrants and options to purchase common stock. The Company also reduced cash requirements for operations with the divestiture of two agricultural business units. (See Note 3 to Consolidated Financial Statements.) With respect to its remaining agricultural business, Agritope, the Company is in the early stages of considering an initial public offering, a spin-off to shareholders, partnerships with strategic partners and similar financing alternatives. Investment in nonconsolidated subsidiaries includes the book value of the investment in Agrimax operating assets. Agrimax holds an equity interest of approximately 18% in UAF, L.P., a fresh flower distribution concern which operates the business formerly conducted at Charlotte, North Carolina. (See Note 3 to Consolidated Financial Statements.) Other accounts receivable include a $400,000 working capital loan which was extended to the newly formed flower business to fund initial working capital requirements. The line was paid in full in November 1995. Salaries, benefits and other accrued liabilities as of September 30, 1995, include a $500,000 accrual related to the disposition of Vinifera and Agrimax and $475,000 for unpaid expenses incurred in connection with the Company's reduction in work force. (See Notes 2 and 3 to Consolidated Financial Statements.) Item 8. Financial Statements and Supplementary Data. Information with respect to this Item is (i) set forth below and (ii) contained in the Company's Consolidated Financial Statements included in Item 14 of this Annual Report on Form 10-K. The following table presents summarized quarterly results of operations for each of the fiscal quarters in the Company's fiscal years ended September 30, 1995 and 1994. These quarterly results are unaudited, but, in the opinion of management, have been prepared on the same basis as the Company's audited financial information and include all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation of the information set forth therein. The data should be read in conjunction with the Company's Consolidated Financial Statements and related notes included in Item 14 of this Annual Report on Form 10-K.
QUARTERLY RESULTS OF OPERATIONS (UNAUDITED) (In thousands, except net loss per share) First Second Third Fourth Year ended September 30, 1995 Quarter Quarter Quarter Quarter Total - --------------------------------------------------------------------------------------------- Revenues........................ $ 1,135 $ 1,675 $ 1,569 $ 586 $ 4,965 Operating costs and expenses.... 5,571 6,721 6,025 6,066 24,383 Other income (expense), net..... 134 214 308 266 922 Net loss........................ (4,302) (4,832) (4,148) (5,214) (18,496) Net loss per share.............. (.39) (.41) (.34) (.42) (1.56) First Second Third Fourth Year ended September 30, 1994 Quarter Quarter Quarter Quarter Total - --------------------------------------------------------------------------------------------- Revenues........................ $ 872 $ 1,987 $ 1,359 $ 601 $ 4,819 Operating costs and expenses.... 3,826 6,344 5,246 5,177 20,593 Other income (expense), net..... 6 (10) 86 59 141 Net loss........................ (2,948) (4,367) (3,801) (4,517) (15,633) Net loss per share.............. (.32) (.46) (.36) (.42) (1.56)
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None. PART III The Company has omitted from Part III the information that will appear in the Company's definitive proxy statement for its annual meeting of shareholders to be held on February 20, 1996 (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 captions "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) Consolidated Financial Statements and Schedules. Report of Independent Accountants Consolidated Balance Sheets at September 30, 1995 and 1994 Consolidated Statements of Operations for years ended September 30, 1995, 1994, and 1993 Consolidated Statements of Changes in Shareholders' Equity for years ended September 30, 1995, 1994, and 1993 Consolidated Statements of Cash Flows for years ended September 30, 1995, 1994, and 1993 Notes to Consolidated Financial Statements Report of Independent Accountants To the Board of Directors and Shareholders of Epitope, Inc. In our opinion, the accompanying consolidated balance sheets and the related consolidated statements of operations, of changes in shareholders' equity, and of cash flows present fairly, in all material respects, the financial position of Epitope, Inc. and its subsidiaries at September 30, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 1995, 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 audits. We conducted our audits 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 audits provide a reasonable basis for the opinion expressed above. Price Waterhouse LLP Portland, Oregon October 30, 1995 Consolidated Balance Sheets
SEPTEMBER 30 1995 1994 - ------------------------------------------------------------------------------------------ Assets Current assets Cash and cash equivalents (Note 2)..................... $ 4,259,897 $11,024,997 Marketable securities (Note 2)......................... 17,080,246 5,603,414 Trade accounts receivable, net (Note 2)................ 367,487 348,312 Other accounts receivable.............................. 1,376,543 373,668 Inventories (Note 2)................................... 1,433,746 1,668,772 Prepaid expenses....................................... 159,463 141,855 -------------------------- Total current assets................................... 24,677,382 19,161,018 Property and equipment, net (Notes 2 and 4)............ 2,544,772 4,430,695 Patents and proprietary technology, net (Note 2)....... 555,767 411,238 Investment in nonconsolidated subsidiaries (Note 3).... 2,117,343 - Other assets and deposits (Note 5)..................... 238,758 552,302 -------------------------- $30,134,022 $24,555,253 Liabilities and Shareholders' Equity Current liabilities Current portion of installment notes payable........... $ 17,758 $ 17,758 Accounts payable....................................... 945,395 522,085 Salaries, benefits and other accrued liabilities (Notes 2 and 9)...................................... 3,182,516 1,437,142 -------------------------- Total current liabilities.............................. 4,145,669 1,976,985 Long-term portion of installment notes payable......... 21,749 37,886 Convertible notes, due 1997 (Note 5)................... 3,620,003 4,070,000 Commitments and contingencies (Notes 6, 8, 9, 10 and 11) - - Shareholders' equity (Note 6) Preferred stock, no par value - 1,000,000 shares authorized; no shares issued or outstanding........................ - - Common stock, no par value - 30,000,000 shares authorized; 12,485,130 and 10,926,551 shares issued and outstanding, respectively.............................. 93,931,947 71,559,900 Accumulated deficit..................................... (71,585,346) (53,089,518) -------------------------- 22,346,601 18,470,382 -------------------------- $30,134,022 $24,555,253 The accompanying notes are an integral part of these statements.
Consolidated Statements of Operations FOR THE YEAR ENDED SEPTEMBER 30 1995 1994 1993 - -------------------------------------------------------------------------------------------- Revenues Product sales.............................. $ 4,822,168 $ 4,760,540 $ 3,003,235 Grants and contracts....................... 143,042 58,202 279,905 -------------------------------------------- 4,965,210 4,818,742 3,283,140 Costs and expenses Product costs.............................. 6,398,687 6,716,468 2,791,784 Research and development costs............. 6,822,239 6,050,206 7,021,227 Selling, general and administrative expenses 11,162,358 7,826,115 6,894,447 -------------------------------------------- 24,383,284 20,592,789 16,707,458 Loss from Operations (19,418,074) (15,774,047) (13,424,318) Other income (expense), net................ 922,246 141,459 (1,305,031) -------------------------------------------- Net loss................................... $(18,495,828) $(15,632,588) $(14,729,349) Net loss per share......................... $ (1.56) $ (1.56) $ (1.67) Weighted average number of shares outstanding................................ 11,886,234 10,050,129 8,827,710 The accompanying notes are an integral part of these statements.
Consolidated Statements of Changes in Shareholders' Equity Common Stock Accumulated Shares Dollars deficit Total -------------------------------------------------------- Balances at September 30, 1992 8,712,533 $30,387,728 $(22,727,581) $ 7,660,147 Common stock issued upon exercise of options. . . . . . . . 36,173 368,545 - 368,545 Common stock issued as compensation. 11,298 189,281 - 189,281 Compensation expense for stock option grants. . . . . . . . . . . - 1,004,714 - 1,004,714 Common stock issued upon exercise of warrants . . . . . . . 287,060 3,818,143 - 3,818,143 Common stock issued upon exchange of convertible notes. . . 44,858 864,945 - 864,945 Warrants to purchase common stock. . - 9,388,750 - 9,388,750 Warrants to be issued in class action settlement. . . . . . . . . - 1,500,000 - 1,500,000 Equity issuance costs. . . . . . . . - (2,094,807) - (2,094,807) Net loss for the year. . . . . . . . - - (14,729,349) (14,729,349) -------------------------------------------------------- Balances at September 30, 1993 . . . 9,091,922 45,427,299 (37,456,930) 7,970,369 Common stock issued upon exercise of options. . . . . . . . 52,488 636,293 - 636,293 Common stock issued as compensation . . . . . . . . . . . 19,678 368,778 - 368,778 Compensation expense for stock option grants. . . . . . . . - 1,167,272 - 1,167,272 Common stock issued upon exercise of warrants . . . . . . . 618,291 9,718,259 - 9,718,259 Common stock issued upon exchange of convertible notes. . . 28,672 559,964 - 559,964 Common stock issued in private placement. . . . . . . . . 1,115,500 17,057,563 - 17,057,563 Equity issuance costs. . . . . . . . - (3,375,528) - (3,375,528) Net loss for the year. . . . . . . . - - (15,632,588) (15,632,588) -------------------------------------------------------- Balances at September 30, 1994 . . . 10,926,551 71,559,900 (53,089,518) 18,470,382 Common stock issued upon exercise of options. . . . . . . . 183,525 2,145,673 - 2,145,673 Common stock issued as compensation . . . . . . . . . . . 16,013 266,800 - 266,800 Compensation expense for stock option grants. . . . . . . . - 1,374,710 - 1,374,710 Common stock issued upon exercise of warrants . . . . . . . 1,336,000 18,892,750 - 18,892,750 Common stock issued upon exchange of convertible notes. . . 23,041 449,991 - 449,991 Equity issuance costs. . . . . . . . - (757,877) - (757,877) Net loss for the year. . . . . . . . - - (18,495,828) (18,495,828) -------------------------------------------------------- Balances at September 30, 1995 . . . 12,485,130 $93,931,947 $(71,585,346) $ 22,346,601 The accompanying notes are an integral part of these statements.
Consolidated Statements of Cash Flows FOR THE YEAR ENDED SEPTEMBER 30 1995 1994 1993 ------------------------------------------------------------------------------------------ Cash flows from operating activities Net loss....................................... $(18,495,828) $(15,632,588) $(14,729,349) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization................... 1,458,675 1,156,211 1,092,235 (Gain) loss on disposition of property.......... 819 75,671 (2,442) Warrants issued in lawsuit settlement........... - - 1,500,000 Warrants issued in exchange for technology transfer....................................... - - 270,000 Decrease (increase) in accounts receivable and other receivables............................. (1,022,050) (321,035) 67,667 Increase in inventories......................... (286,903) (658,207) (143,322) Decrease (increase) in prepaid expenses......... (17,608) 80,319 (105,241) Decrease (increase) in other assets and deposits (33,521) 335 (4,435) Increase in accounts payable and accrued liabilities.................................... 2,168,684 397,332 494,683 Common stock issued as compensation for services 266,800 368,778 189,281 Compensation expense for stock option grants and deferred salary increases...................... 1,374,710 1,259,273 1,004,714 ----------------------------------------- Net cash used in operating activities........... (14,586,222) (13,273,911) (10,366,209) Cash flows from investing activities Investment in marketable securities............. (16,194,994) (5,603,414) - Proceeds from sale of marketable securities..... 4,718,162 - 6,511,307 Additions to property and equipment............. (1,350,850) (2,590,751) (1,190,783) Proceeds from sale of property.................. 14,343 1,000 2,500 Expenditures for patents and proprietary technology..................................... (305,135) (185,670) (145,606) Investment in affiliated companies.............. 652,698 64,938 (250,000) ----------------------------------------- Net cash (used in) provided by investing activities..................................... (12,465,776) (8,313,897) 4,927,418 Cash flows from financing activities Installment purchase obligation................. - - 76,368 Principal payments under installment purchase and capital lease obligations...................... (16,137) (20,724) (2,010) Proceeds from issuance of common stock.......... 21,060,912 24,387,702 4,186,688 Cost of common stock issuance................... (757,877) (310,849) - Proceeds from issuance of warrants to purchase common stock.................................... - - 8,312,500 Cost of warrant issuance........................ - - (1,194,198) Proceeds from issuance of long-term debt........ - - - Cost of debt issuance........................... - - (17,526) ----------------------------------------- Net cash provided by financing activities....... 20,286,898 24,056,129 11,361,822 Net increase (decrease) in cash and cash equivalents.................................... (6,765,100) 2,468,321 5,923,031 Cash and cash equivalents at beginning of year.. 11,024,997 8,556,676 2,633,645 ----------------------------------------- Cash and cash equivalents at end of year........ $ 4,259,897 $ 11,024,997 $ 8,556,676
The accompanying notes are an integral part of these statements. Notes to Consolidated Financial Statements Note 1 The Company Epitope, Inc. (the Company or Epitope) is an Oregon corporation utilizing biotechnology to develop and market medical diagnostic products and, through its agricultural unit, superior new plants and related products. Note 2 Summary of Significant Accounting Policies CONSOLIDATION. The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. CASH AND CASH EQUIVALENTS; MARKETABLE SECURITIES. For purposes of the consolidated balance sheets and statements of cash flows, the Company considers all highly liquid investments with maturities at time of purchase of three months or less to be cash equivalents. At September 30, 1995, marketable securities consisted of commercial paper and U.S. Treasury securities with an original maturity period greater than three months. The Company's policy is to invest its excess cash in securities that maximize (a) safety of principal, (b) liquidity for operating needs, and (c) after-tax yields. Effective October 1, 1994, the Company adopted Financial Accounting Standards Board Statement No. 115 (SFAS 115), Accounting for Certain Investments in Debt and Equity Securities. Pursuant to SFAS 115, the Company has categorized all of its investments as available-for-sale securities and, accordingly, unrealized gains and losses on such investments, if material, will be carried as a separate component of shareholders' equity. Such unrealized gains and losses were immaterial as of September 30, 1995. INVENTORIES. Inventories are recorded at the lower of standard cost (which approximates actual cost on a first-in, first-out basis) or market. Inventory components are summarized as follows:
September 30 1995 1994 - ------------------------------------------------------------------------ Raw materials. . . . . . . . $ 657,568 $ 721,199 Work-in-process. . . . . . . 379,470 595,597 Finished goods . . . . . . . 295,032 293,674 Supplies . . . . . . . . . . 101,676 58,302 -------------------------------------------- $ 1,433,746 $ 1,668,772
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. Such expenditures amounted to $129,526, $72,836 and $81,433 for the years ended September 30, 1995, 1994 and 1993, respectively. 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 lives of the related assets (three to seven years). Leasehold improvements are amortized over the shorter of estimated useful lives or the terms of related leases. When assets are sold or otherwise disposed, cost and related accumulated depreciation or amortization are removed from the accounts and any resulting gain or loss is included in operations. PATENTS AND PROPRIETARY TECHNOLOGY. Direct costs associated with patent submissions are capitalized and amortized over their minimum estimated economic useful lives, generally five years. Amortization expense of such costs was $154,277, $114,826 and $88,911 for the years ended September 30, 1995, 1994 and 1993, respectively, and accumulated amortization was $486,466 and $332,189 at September 30, 1995 and 1994, respectively. REVENUE RECOGNITION. Product revenues are generally derived from the sale of products and are recognized as revenue when the related products are shipped. Grant and contract revenues include funds received under research and development agreements with various entities. Such revenues are recognized in accordance with contract terms. Accounts receivable are stated net of an allowance for doubtful accounts of $72,044 and $51,696 at September 30, 1995 and 1994, respectively. RESEARCH AND DEVELOPMENT. Research and development expenditures are comprised of those costs associated with the Company's own ongoing research and development activities including the costs to prepare for, obtain and compile clinical studies and other information to support product license applications. 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. ADVERTISING COSTS. The Company expenses all advertising and promotion costs as incurred. During the years ended September 30, 1995, 1994 and 1993, respectively, the Company expended $294,796, $210,661 and $212,071 for advertising and product promotion. 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. NET LOSS PER SHARE. Net loss per share is computed using the weighted average number of shares of common stock outstanding during the period. Unexercised stock options and warrants are excluded from such computations because their effect on net loss per share would be anti-dilutive. 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 1995 1994 1993 - -------------------------------------------------------------------------------------- Conversion of notes to equity (Note 5). . . . . $ 427,496 $ 600,231 $ 959,304 Discount on private placement of common stock . . - 3,024,413 - Fair value of warrants issued to placement agent. - - 806,250 Investment in nonconsolidated subsidiary. . . . . 2,584,979 - -
SUPPLEMENTAL PROFIT AND LOSS INFORMATION. In September 1995, management announced a company-wide reduction in work force whereby 48 employees were terminated. The Company charged $607,000 to results of operations for severance payments and related expenses for this program. As of September 30, 1995, $475,000 of these charges remain accrued and are included in the accompanying consolidated balance sheets under the caption "Salaries, benefits and other accrued liabilities." Note 3 Investment in Nonconsolidated Subsidiaries In June 1995, the Company's wholly owned subsidiary, Agritope, Inc. (Agritope), agreed to sell its equity interest in its grape plant propagation unit, Vinifera, Inc. (Vinifera), to VF Holdings, Inc. (VF) an affiliate of a Swiss investment group. VF agreed to pay a purchase price of $5.9 million and an additional $5.0 million in earnout payments based on subsequent gross profits of Vinifera. VF also agreed to contribute a total of $4.0 million of operating funds to Vinifera. Agritope agreed to (1) conduct research and perform diagnostic testing services for Vinifera, (2) lease its Woodburn, Oregon, greenhouse facilities to Vinifera for at least one year until Vinifera relocates its operations and (3) provide administrative support services for a one-year transition period. VF has contributed over $600,000 to Vinifera to fund operations subsequent to June 1995, but has not made any other payments to Agritope or Vinifera. Accordingly, the accompanying financial statements do not reflect any gain on disposition of Vinifera. Such gain will be recognized on the installment method of accounting as payments are received. Agritope discontinued funding of Vinifera operations in June 1995 upon execution of the agreements with VF. In May 1995, Agritope's wholly owned subsidiary, Agrimax Floral Products, Inc. (Agrimax), ceased operations as an independent entity. UAF, LP (UAF), in which Agrimax has an 18% interest, was formed to combine the Agrimax operations in Charlotte, North Carolina, with those of Universal American Flowers, Inc. in Tampa, Florida and Hammond, Louisiana. In connection with the UAF transaction, Agrimax contributed inventory, operating assets and the right to use its proprietory floral preservative and certain trademarks. A Minneapolis investment firm has entered into a letter of intent to purchase the remaining Agrimax business unit located in St. Paul, Minnesota. The investment in Vinifera and Agrimax is included, at cost, in the accompanying consolidated balance sheet as of September 30, 1995, under the caption "Investment in nonconsolidated subsidiaries." For the years ended September 30, 1995, 1994 and 1993, respectively, the accompanying financial statements include revenues of $2.0 million, $2.2 million and $0.5 million, and operating losses of $3.8 million, $6.4 million and $3.4 million attributable to the Agrimax and Vinifera business units. The accompanying statement of operations for the year ended September 30, 1995, includes the results of operations of Agrimax and Vinifera through May and also includes a charge of $500,000 attributable to the disposition of Agrimax and Vinifera which is included in the accompanying consolidated balance sheets as of September 30, 1995 under the caption "Salaries, benefits and other accrued liabilities." Note 4 Property and Equipment Property and equipment are summarized as follows:
SEPTEMBER 30 1995 1994 - ------------------------------------------------------------------------------------------- Land. . . . . . . . . . . . . . . . . . . . . . . $ 30,020 $ 30,020 Buildings and improvements. . . . . . . . . . . . 717,508 722,811 Research and development laboratory equipment . . 1,094,971 995,467 Manufacturing equipment . . . . . . . . . . . . . 1,296,416 1,422,602 Office furniture and equipment. . . . . . . . . . 2,137,235 2,175,762 Leasehold improvements. . . . . . . . . . . . . . 1,108,622 2,156,400 Construction in progress. . . . . . . . . . . . . 105,611 318,274 --------------------------------------- 6,490,383 7,821,336 Less accumulated depreciation and amortization. . (3,945,611) (3,390,641) --------------------------------------- $ 2,544,772 $ 4,430,695
Note 5 Long-Term Debt On June 30, 1992, Agritope completed a private placement with several European institutional investors pursuant to which $5,495,000 of convertible notes were issued. The notes are unsecured, mature on June 30, 1997 and bear interest at the rate of 4% per annum which is payable on each June 30 and December 31 until all outstanding principal and interest on the notes have been paid in full. The notes are convertible into common stock of the Company at a conversion price of $19.53 per share. In the event of an initial public offering of Agritope common stock, the notes would be automatically converted to shares of Agritope common stock at 90% of the public offering price. During the years ended September 30, 1995 and 1994, respectively, investors exchanged $449,991 and $559,964 principal amount of convertible notes for the Company's common stock at an average price of $19.53 per share. In conjunction with the exchanges, unamortized debt issuance costs of $22,495 and $40,267 related to such notes were recognized as equity issuance costs during 1995 and 1994, respectively. Debt issuance costs are included in other assets and are being amortized over the five-year life of the notes. Amortization expense of debt issuance costs for the years ended September 30, 1995, 1994 and 1993, respectively, totaled $96,136, $91,715 and $121,000, leaving an unamortized balance of $197,077 and $315,708 at September 30, 1995 and 1994, respectively. Note 6 Shareholders' Equity AUTHORIZED CAPITAL STOCK. The Company's amended articles of incorporation authorize 1,000,000 shares of preferred stock and 30,000,000 shares of common stock. The Company's Board of Directors has authority to determine preferences, limitations and relative rights of the preferred stock. COMMON STOCK RESERVED FOR FUTURE ISSUANCE. As of September 30, 1995, the following shares of the Company's common stock were reserved for future issuance, as more fully described below:
PURPOSE SHARES Outstanding warrants. . . . . . . . . . . . . . . 2,046,990 Outstanding stock options . . . . . . . . . . . . 3,636,103 Employee Stock Purchase Plan subscriptions. . . . 37,455 Conversion of notes (Note 5). . . . . . . . . . . 185,356 ----------------- 5,905,904
COMMON STOCK WARRANTS. As of September 30, 1995, the following warrants to purchase shares of common stock were outstanding:
DATE OF ISSUANCE Shares Price Expiration Date - ------------------------------------------------------------------------------ September 26, 1991. . . . . 171,500 $16.00 September 25, 1996 December 23, 1992 . . . . . 1,022,390 16.00 September 30, 1996 July 20, 1993 . . . . . . . 375,000 20.00 March 31, 1997 August 1, 1993. . . . . . . 200,000 18.50 March 31, 1997 October 17, 1994. . . . . . 50,000 18.50 March 31, 1997 November 22, 1994 . . . . . 228,100 18.50 March 31, 1997 -------------- 2,046,990
In March 1995, the Company modified the terms of the warrants issued in December 1992 and July and August 1993. The warrants had an initial expiration date of April 22, 1995, based on Food and Drug Administration approval of the Company's OraSure collection device for HIV screening in December 1994. The Company extended the periods during which the warrants could be exercised to the dates shown in the table above. The purchase price of the December 1992 warrants was increased to $16.00 per share effective April 23, 1995, and will be further increased to $18.50 per share on January 1, 1996. The purchase price of the August 1993 warrants was increased to $18.50 per share effective April 23, 1995. Under the modified terms, Common Stock purchased upon exercise of a warrant must be held for at least 60 days. In March 1993, the Company entered into a stipulation of settlement with respect to a civil class action suit. Under terms of the settlement, which received final court approval of the U.S. District Court of Oregon on June 14, 1993, the Company agreed to establish a cash settlement fund, which was funded by the Company's insurance carrier, and to issue warrants to purchase 700,000 shares of common stock at a price of $17-1/8 per share to eligible members of the class and their legal counsel. A charge of $1,400,000 for the settlement, representing the fair market value of the warrants less insurance proceeds, is included in the accompanying consolidated statements of operations for the year ended September 30, 1993 under the caption "Other income (expense), net." The settlement warrants were issued as of November 24, 1993 and had an original expiration date of March 11, 1994. In March 1994, the U.S. District Court of Oregon approved extension of the expiration date by 60 days to May 10, 1994. Upon exercise of certain settlement warrants, the Company issued 248,191 shares of common stock for proceeds of $4,249,809. The remaining warrants expired unexercised. STOCK AWARD PLANS. The Company's 1991 Stock Award Plan (the 1991 Plan) was approved by the shareholders during 1991, replacing the Company's Incentive Stock Option Plan (ISOP). The 1991 Plan provides for stock-based awards to employees, outside directors and members of scientific advisory committees or other consultants. Awards which may be granted under the 1991 Plan include qualified incentive stock options, nonqualified stock options, stock appreciation rights, restricted awards, performance awards and other stock- based awards. Under the terms of the 1991 Plan, qualified incentive stock options on shares of common stock may be granted to eligible employees, including officers, of the Company at an exercise price not less than the fair market value of the stock on the date of grant. The maximum term during which any option may be exercised is ten years from the date of grant. To date, options have been granted with four-year vesting schedules. Options issued to employees under the Incentive Stock Option Plan (ISOP) were issued at prices not less than the fair market value of a share of common stock on the date of grant. The options are exercisable after one year from the date of grant at the rate of 25% per year cumulatively and expire ten years from the date of grant. The Agritope, Inc. 1992 Stock Award Plan (the 1992 Plan) was adopted by Agritope and approved by the Company in 1992. The 1992 Plan, which has provisions similar to those of the Company's 1991 Plan, authorizes issuance of 2,000,000 shares of Agritope common stock. Until Agritope is no longer a wholly owned subsidiary of the Company, shares issued pursuant to exercise of options under the 1992 Plan will be converted into shares of the Company's common stock based on the ratio of the fair market value of the Company's common stock to the fair market value of Agritope common stock on the date of the grant. The 1991 Plan and 1992 Plan also provide that nonqualified options may be granted at a price not less than 75% of the fair market value of a share of common stock on the date of grant. The option term and vesting schedule of such awards may either be unlimited or have a specified period in which to vest and be exercised. For the discounted nonqualified options issued, the Company amortizes, on a straight-line basis over the vesting period of the options, the difference between the exercise price and the fair market value of a share of stock on the date of grant. Such amortization expense for the years ended September 30, 1995, 1994 and 1993, respectively, was $1,374,710, $1,167,272 and $1,004,714. As of September 30, 1995, 330,880 shares of Epitope common stock remain available for grant under the Company's stock award plans. Options granted and outstanding under the Company's stock option plans are summarized as follows:
1995 1994 1993 Shares Price Shares Price Shares Price - ---------------------------------------------------------------------------------------------------------------------------- Outstanding at beginning of period . . 3,483,432 $ 1.09-$24.94 3,052,653 $1.09-$24.94 2,299,350 $ 1.09-$24.94 Granted. . . . . . . . . 802,050 14.94-18.88 589,850 14.38-22.94 826,604 16.38-22.13 Exercised. . . . . . . . (183,525) 1.84-22.50 (52,488) 12.43-22.50 (36,173) 5.25-17.94 Canceled. . . . . . . . (465,854) 7.38-22.94 (106,583) 8.50-22.94 (37,128) 7.38-22.50 ---------- ---------- ---------- Outstanding at end of period . . . . . 3,636,103 1.09-24.94 3,483,432 1.09-24.94 3,052,653 1.09-24.94 Exercisable. . . . . . . 2,002,925 1.09-24.94 1,557,505 1.09-24.94 871,204 1.09-24.94
Pursuant to the 1991 Plan, 3,680, 11,741, and 666 shares of common stock were also awarded to consultants and members of the Company's scientific advisory committees during 1995, 1994 and 1993, respectively. EMPLOYEE STOCK PURCHASE PLANS. In 1991, the shareholders approved the Company's adoption of the 1991 Employee Stock Purchase Plan (1991 ESPP) covering a maximum of 100,000 shares of common stock for subscription over two offering periods. The purchase price for stock purchased under the 1991 ESPP for each of the two 24-month subscription periods was the lesser of 85% of the fair market value of a share of common stock at the commencement of the subscription period or the fair market value at the close of each subscription period. An employee may also elect to withdraw at any time during the subscription period and receive the amounts paid plus interest at the rate of 6%. During August 1993, 7,760 shares, at a purchase price of $15.67 per share, were issued to employees for the first 1991 ESPP purchase period which closed July 31, 1993. During April 1994, 676 shares, at a purchase price of $14.00 per share, were issued to employees for the second 1991 ESPP purchase period which closed March 31, 1994. The 1993 Employee Stock Purchase Plan (1993 ESPP), as amended and restated effective February 1, 1993, covers a maximum of 250,000 shares of common stock for subscription over established offering periods. The Company'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, provided that no more than three offering periods (other than Special Offering Subscriptions as described below) may be set during each fiscal year of the Company. Other provisions of the 1993 ESPP are similar to the 1991 ESPP. As of September 30, 1995, 29,572 shares of common stock were subscribed for during three offerings under the 1993 ESPP. Shares subscribed for under these 1993 ESPP offerings may be purchased over 24 months and have initial subscription prices of $15.36, $11.90 and $12.33 per share, respectively. The 1993 ESPP was amended to allow the Company, at its discretion, to provide Special Offering Subscriptions whereby an employee's annual increase in compensation could be deferred for a one-year period. At the end of the one- year period, the employee can elect to receive the deferred compensation amount in the form of cash or shares of the Company's common stock. The purchase price for stock issued under a Special Offering Subscription is the lesser of 85% of the fair market value of a share of common stock on the first day of the calendar month the employee's increase was effective or the fair market value at the close of the one-year subscription period. During 1995 and 1994, respectively, 5,569 and 2,314 Special Offering Subscription shares were issued to employees at an average price of $15.26 and $15.24 per share. As of September 30, 1995, 7,883 shares of common stock were subscribed for under outstanding 1993 ESPP Special Offering Subscriptions. Note 7 Income Taxes As of September 30, 1995, the Company had net operating loss carryforwards of approximately $68.5 million and $65.9 million, respectively, to offset federal and state taxable income. Such carryforwards will expire from 1997 to 2010 if not used by the Company to reduce income taxes payable in future periods. Approximately $4.7 million of the Company's net operating loss carryforwards were generated as a result of deductions related to the exercise of stock options. When utilized, such carryforwards, as tax effected, will be reflected in the Company's financial statements as an increase in shareholders' equity rather than a reduction of the provision for income taxes. As of September 30, 1995 the Company had total gross deferred tax assets of approximately $29.5 million, consisting primarily of $26.1 million of net operating loss carryforwards, $1.1 million of research and development tax credit carryforwards and $1.6 million of accrued deferred compensation costs. No benefit for these assets has been reflected in the accompanying consolidated financial statements as they do not satisfy the recognition criteria set forth in Statement of Financial Accounting Standards No. 109 (SFAS 109). Accordingly, a valuation allowance of $29.5 million, representing a $7.5 million increase since September 30, 1994, has been recorded. The expected tax benefit of approximately $6.5 million for the year ended September 30, 1995 is increased by approximately $900,000 and $100,000 for the effect of state and local taxes (net of federal impact) and research and experimentation credits, respectively, and is reduced by the $7.5 million increase in the valuation allowance. Note 8 Research and Development Arrangements In February 1995, the Company entered into a Development, License and Supply Agreement with SmithKline Beecham, plc (SB) pursuant to which the Company will conduct research and development projects funded by SB. Agritope also performed research work in 1995 with respect to raspberries which was partially funded by Sweetbriar Development, Inc. under a License Agreement dated October 18, 1994 and with respect to grapevine disease diagnostics funded by a Phase I grant from the U.S. Department of Agriculture under the Small Business Innovation Research Program. During 1994, the Company participated in a National Cancer Institute program whereby the Company received funding for research toward the treatment of cancer. The Company received funds in 1993 and 1992 from the National Institute of Allergy and Infectious Diseases for work in developing a rapid test to detect AIDS antibodies on oral samples. Agritope has also received grant support from the U.S. Department of Agriculture, Oregon Strawberry Commission, and Oregon Raspberry & Blackberry Commission for antifungal biocontrol research. Revenues from research and development arrangements are included in the accompanying consolidated statements of operations under the caption "Grants and Contracts." Note 9 Distribution and Supply Contracts The Company has entered into several contractual arrangements, including those discussed in the following paragraphs, for distribution of certain of its products to customers. The Company continues to maintain supply and distribution agreements with Organon Teknika Corporation (Organon Teknika), whereby Organon Teknika supplies the Company's antigen requirements and exclusively distributes the Company's EPIblot HIV confirmatory tests (EPIblot) on a worldwide basis. As of April 1, 1994, the Company renewed the agreements which have an initial termination date of March 31, 1997 (with successive one-year renewal periods thereafter) and include pricing incentives based on volumes purchased and penalties for failure to purchase specified minimum quarterly volumes. For the years ended September 30, 1995, 1994 and 1993, respectively, revenues generated from sales of EPIblot to Organon Teknika were $1,808,431, $1,688,200 and $1,382,200, including export sales of $72,369, $320,700 and $316,877. LabOne, Inc. (previously Home Office Reference Laboratory, Inc.) purchases oral specimen devices from the Company for use in insurance testing in return for non-exclusive distribution rights in the United States and Canada under an agreement which expires on March 13, 2000, with an automatic five-year renewal, unless either party notifies the other of intent to renew at least 180 days prior to the initial expiration date. For the years ended September 30, 1995, 1994 and 1993, respectively, revenue generated from product sales to LabOne, Inc. was $525,628, $477,186 and $907,446 including export sales of $58,500, $110,933 and $497,033. SB has an exclusive agreement to market the Company's oral specimen collection device worldwide, except in several foreign countries and to the insurance industry in the U.S., Canada and Japan. SB commenced sales under the agreement in October 1995. In 1995, SB made an initial license fee payment of $1 million to the Company. SB also placed $5 million in escrow for future payment to the Company, of which $1 million will be disbursed to the Company to reimburse future research project work and $4 million will be paid as an additional license fee upon FDA approval of a pending request to amend the labeling of the Company's oral specimen collection device to indicate a two-year shelf life. If the requested amendment for extended dating is not approved by February 21, 1996, then royalty payments due from SB to the Company may be offset against the initial $1 million license fee until such time as the amendment is approved. Accordingly, the initial $1 million license fee is included as deferred revenue under the caption "Salaries, benefits and other accrued liabilities" in the accompanying consolidated balance sheets as of September 30, 1995. The escrowed funds are not reflected in the Company's financial statements. Note 10 Commitments The Company leases office, manufacturing, warehouse and laboratory facilities under operating lease agreements which require minimum annual payments as follows:
YEAR ENDING SEPTEMBER 30 ---------------------------------------------------- 1996. . . . . . . . . . . . . . . $ 534,143 1997. . . . . . . . . . . . . . . 521,196 1998. . . . . . . . . . . . . . . 521,196 1999. . . . . . . . . . . . . . . 509,896 2000. . . . . . . . . . . . . . . 128,532 ----------- $ 2,214,963
Under the agreements for the lease of its office and laboratory facilities, the Company is obligated to the lessor for its share of certain expenses related to the use, operation, maintenance and insurance of the property. These expenses, payable monthly in addition to the base rent, are not included in the amounts shown above. Rent expense aggregated $749,530, $616,750 and $523,079 for the years ended September 30, 1995, 1994 and 1993, respectively. The Company is also contingently liable for the lease of property which has been subleased to UAF, L.P. in the following amounts:
YEAR ENDING SEPTEMBER 30 ----------------------------------------------------------- 1996. . . . . . . . . . . . . . . . . . $ 173,400 1997. . . . . . . . . . . . . . . . . . 193,353 1998. . . . . . . . . . . . . . . . . . 205,704 1999. . . . . . . . . . . . . . . . . . 222,804 ---------- $ 795,261
Note 11 Profit Sharing and Savings Plan The Company established a profit sharing and deferred salary savings plan in 1986 and restated the plan in 1991. All employees are eligible to participate in the plan. In addition, the plan permits certain voluntary employee contributions to be excluded from the employees' current taxable income under the provisions of Internal Revenue Code Section 401(k) and the regulations thereunder. Effective October 1, 1991, the Company replaced a discretionary profit sharing provision with a matching contribution (either in cash, shares of Epitope common stock, or partly in both forms) equal to 50% of an employee's basic contribution, not to exceed 2.5% of an employee's compensation. The Board of Directors has the authority to increase or decrease the 50% match at any time. During 1995, 1994 and 1993, respectively, the Company contributed $97,631 (5,562 shares totaling $97,607 and the remainder in cash), $79,981 (4,632 shares totaling $79,807 and the remainder in cash), and $53,762 (2,722 shares totaling $52,825 and the remainder in cash) to the plan. As of September 30, 1995, 14,217 shares are outstanding under the plan. Note 12 Segment Reporting The Company's products are included in the medical products and agricultural products industry segments. (See Note 1 for a description of the Company's business.) The Company's products are sold principally in the United States, Canada, and Europe geographic areas. Operating loss represents revenues less operating expenses. In computing operating loss, allocated corporate administration expenses have been included; however, other income and expense items such as interest expense, miscellaneous income, and other charges have not been added or deducted. Other assets primarily represent cash and cash equivalents, marketable securities, and prepaid insurance.
Industry Identifiable Segments Revenues Operating Loss Assets In thousands 1995 1994 1993 1995 1994 1993 1995 1994 1993 - -------------------------------------------------------------------------------------------- Medical products.... $2,855 $2,605 $2,759 $(11,608) $(6,284) $(6,617) $3,768 $3,464 $3,211 Agricultural products.... 2,110 2,214 524 (7,810) (9,490) (6,807) 3,923 4,050 2,091 ----------------------------------------------------------------------------- $4,965 $4,819 $3,283 (19,418) (15,774) (13,424) 7,691 7,514 5,302 Other income (expense), net and other assets..... 922 141 (1,305) 22,443 17,041 8,843 ----------------------------------------------------- Net loss and total assets.. $(18,496) $(15,633) $(14,729) $30,134 $24,555 $14,145 Industry Capital Depreciation/ Segments Expenditures Amortization In thousands 1995 1994 1993 1995 1994 1993 - -------------------------------------------------------------------- Medical products.... $1,112 $ 462 $ 511 $ 833 $ 651 $ 584 Agricultural products.... 239 2,129 680 626 505 508 ----------------------------------------------------- $1,351 $2,591 $1,191 $1,459 $1,156 $1,092 Geographic Identifiable Areas Revenues Operating Loss Assets In thousands 1995 1994 1993 1995 1994 1993 1995 1994 1993 - -------------------------------------------------------------------------------------------- United States.... $4,739 $4,276 $2,399 $(19,418) $(15,774) $(13,424) $7,691 $7,514 $5,302 Canada..... 78 111 497 -- -- -- -- -- -- Europe..... 72 329 326 -- -- -- -- -- -- Other...... 76 103 61 -- -- -- -- -- -- ----------------------------------------------------------------------------- $4,965 $4,819 $3,283 $(19,418) $(15,774) $(13,424) $7,691 $7,514 $5,302
No schedules are included with the foregoing Consolidated Financial Statements because the required information is inapplicable or is presented in the Consolidated Financial Statements or related notes thereto. (a)(3) Exhibits. See Index to Exhibits following the signature pages of this report. (b) Reports on Form 8-K. During the quarter ended September 30, 1995, the Company filed Current Reports on Form 8-K dated June 1, 1995 regarding the divestiture of Vinifera, Inc. and certain operations of Agrimax Floral Products, Inc.; September 16, 1995 regarding changes in directors of Vinifera, Inc. and failure of VF Holdings, Inc. to make certain payments to Agritope, Inc.; and September 28, 1995 regarding a restructuring of the Company. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized, on December 26, 1995. EPITOPE, INC. By/S/ADOLPH J. FERRO, PH.D. Adolph J. Ferro, Ph.D. President & Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on December 26, 1995, by the following persons on behalf of the Registrant and in the capacities indicated. SIGNATURE TITLE /S/ ADOLPH J. FERRO, PH.D. President, Chief Executive Officer Adolph J. Ferro, Ph.D. and Director (Principal Executive Officer) /S/ GILBERT N. MILLER Executive Vice President and Gilbert N. Miller Chief Financial Officer (Principal Financial Officer) /S/ TERRY J. PAULSEN Accounting Manager Terry J. Paulsen (Principal Accounting Officer) *W. CHARLES ARMSTRONG Director W. Charles Armstrong *RICHARD K. DONAHUE Director Richard K. Donahue *ANDREW S. GOLDSTEIN Director Andrew S. Goldstein *MARGARET H. JORDAN Director Margaret H. Jordan *R. DOUGLAS NORBY Director R. Douglas Norby *MICHAEL J. PAXTON Director Michael J. Paxton *ROGER L. PRINGLE Director Roger L. Pringle *G. PATRICK SHEAFFER Director G. Patrick Sheaffer By*/S/ ADOLPH J. FERRO, PH.D. Adolph J. Ferro, Ph.D. (Attorney-in-Fact) INDEX TO EXHIBITS Exhibit Number Exhibit - ------- ------- 2.1 Stock Purchase Agreement among Vinifera, Inc., Agritope, Inc., Epitope, Inc., and VF Holding, Inc., dated May 31, 1995. Incorporated by reference to Exhibit 2.1 to the Registrant's Current Report on Form 8-K dated June 1, 1995. 2.2 Operating and Transition Agreement dated as of May 1, 1995, among Agrimax Floral Products, Inc., William C. McClure, Gary W. Butler, Dorothea J. Owens, Timothy C. Finn, John W. Suber, and Anthony J. Wright. Incorporated by reference to Exhibit 2.2 to the Registrant's Current Report on Form 8-K dated June 1, 1995. 2.3 Agreement and Plan of Reorganization dated as of October 27, 1995, by and among Fresche Blossoms L.L.C., UAF, L.P., Agrimax Floral Products, Inc., Universal American Flowers, Inc., William C. McClure, Gary W. Butler, Dorothea J. Owens, Timothy C. Finn, John W. Suber, Jr., Anthony J. Wright, Doug Bauer, and Roxanne E. Bakula. 3.1 Restated Articles of Incorporation, as amended, of Registrant. Incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K dated May 29, 1991. 3.2 Restated Bylaws of Registrant. Incorporated by reference to Exhibit 3.2 to the Registrant's Annual Report on Form 10-K for the year ended September 30, 1993. 4.1 Stock Purchase Agreement dated November 9, 1990, between certain investors and Registrant. Copies of the agreements with individual investors shall be filed with the Commission upon request pursuant to Instruction 2 of Item 601 of Regulation S-K ("Item 601, Instruction 2"). Incorporated by reference to Exhibit 4.2 to the Registrant's Annual Report on Form 10-K for the year ended September 30, 1994 (the "1994 10-K"). 4.2 Unit Purchase Agreement dated September 1991 between certain investors and Registrant. Copies of the agreements with individual investors shall be filed with the Commission upon request pursuant to Item 601, Instruction 2. Incorporated by reference to Exhibits 4.1 and 4.2 to the Registrant's Current Report on Form 8-K dated September 17, 1991. 4.3 Note Purchase Agreement dated June 10, 1992, among Agritope, Inc., Registrant, and certain investors. Copies of the agreements with individual investors shall be filed with the Commission upon request pursuant to Item 601, Instruction 2. Incorporated by reference to Exhibit 4.2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarterly period ended June 30, 1992. 4.4 Warrant Purchase Agreement dated as of November 25, 1992, between certain investors and Registrant. Copies of the agreements with individual investors shall be filed with the Commission upon request pursuant to Item 601, Instruction 2. Incorporated by reference to Exhibit 4.5 to the Registrant's Annual Report on Form 10-K for the year ended September 30, 1992 (the "1992 10-K"). 4.5 1993 Technology Transfer Warrant Issuance Agreement dated as of June 15, 1993, between certain investors and Registrant. Copies of the agreements with individual investors shall be filed with the Commission upon request pursuant to Item 601, Instruction 2. Incorporated by reference to Exhibit 4.3 to the Registrant's Registration Statement on Form S-3 (No. 33-68510) ("Registration Statement No. 33-68510"). 4.6 Form of Letter dated August 1, 1993, from Registrant regarding modification of the terms of the 1993 Technology Transfer Warrants. Incorporated by reference to Exhibit 4.5 to Registration Statement No. 33-68510. 4.7 1993 Warrant Purchase Agreement dated as of July 6, 1993, between certain investors and Registrant. Copies of the agreements with individual investors shall be filed with the Commission upon request pursuant to Item 601, Instruction 2. Incorporated by reference to Exhibit 4.6 to Registration Statement No. 33-68510. 4.8 Forms of Notice to Warrantholders and Agreement Regarding Extension of Expiration Date. Incorporated by reference to Exhibit 4.1 to the Registrant's Current Report on Form 8-K dated March 29, 1995. 10.1 Incentive Stock Option Plan of Registrant, as amended. Incorporated by reference to Exhibit 10.1 to the 1994 10-K. 10.2 Amended and Restated Epitope, Inc., 1991 Stock Award Plan. Incorporated by reference to Exhibit 10.2 to the 1994 10-K. 10.3 Agritope, Inc., 1992 Stock Award Plan. Incorporated by reference to Exhibit 10.3 to the 1992 10-K. 10.4 Form of Nonqualified Stock Option Agreement to be issued to certain officers and directors of Registrant pursuant to Agritope, Inc., 1992 Stock Award Plan. Incorporated by reference to Exhibit 10.4 to the 1992 10-K. 10.5 Lease dated July 17, 1990, among Registrant, Koll Woodside Associates, a California general partnership, and Petula Associates, Ltd., an Iowa corporation. Incorporated by reference to Exhibit 10.5 to the 1994 10-K. 10.6 Fourth Amendment dated May 20, 1994, to Lease dated July 17, 1990, among Registrant, Koll Woodside Associates, a California general partnership, and Petula Associates, Ltd., an Iowa corporation. Incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarterly period ended June 30, 1994 ("June 1994 10-Q"). 10.7 Business Park Lease dated May 5, 1994, among Registrant, Koll Woodside Associates, a California general partnership, and Petula Associates, Ltd., an Iowa corporation. Incorporated by reference to Exhibit 10.2 to the June 1994 10-Q. 10.8 Business Park Lease dated as of December 16, 1994, among Registrant, Petula Associates Ltd., an Iowa corporation, and Koll Portland Associates, a California general partnership. Incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarterly period ended December 31, 1994. 10.9 Lease Agreement dated as of October 15, 1993, between Kathryne L. Brown and Agrimax Floral Products, Inc. Incorporated by reference to Exhibit 10.1 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarterly period ended December 31, 1993 ("December 1993 10-Q"). 10.10 Building Lease dated as of October 1, 1993, between Hermes Land Company and Agrimax Floral Products, Inc. Incorporated by reference to Exhibit 10.2 to the December 1993 10-Q. 10.11 Office/Warehouse Lease dated as of August 25, 1994, between Tonka Bay Associates as agent for M Corp. of Illinois and Agrimax Floral Products, Inc. Incorporated by reference to Exhibit 10.10 to the 1994 10-K. 10.12 Agreement dated November 23, 1987, between Registrant and Dr. Lyle Brown. Incorporated by reference to Exhibit 4.2 to the Registrant's Registration Statement on Form S-1 (No. 33-18722) (the "1988 S-1"). 10.13 Agreement dated December 9, 1987, between Registrant and Adolph Ferro, Ph.D. Incorporated by reference to Exhibit 4.3 to the 1988 S-1. 10.14 Agreement dated October 3, 1989, between Sakata Seed America, Inc. and Agritope, Inc. Incorporated by reference to Exhibit 10.13 to the 1994 10-K. 10.15 Distribution Agreement dated as of April 1, 1994, between Registrant and Organon Teknika Corporation. Incorporated by reference to Exhibit 10.3 to the June 1994 10-Q. 10.16 Supply Agreement dated as of April 1, 1994, between Registrant and Organon Teknika Corporation. Incorporated by reference to Exhibit 10.4 to the June 1994 10-Q. 10.17 Amended and Restated Employment Agreement dated January 8, 1991 between Andrew S. Goldstein and Registrant. Incorporated by reference to Exhibit 10.28 to the Registrant's Annual Report on Form 10-K for the year ended September 30, 1991 (the "1991 10-K"). 10.18 Amended and Restated Employment Agreement dated January 9, 1991, between Adolph J. Ferro, Ph.D., and Registrant. Incorporated by reference to Exhibit 10.29 to the 1991 10-K. 10.19 Employment Agreement dated January 28, 1990, between Gilbert N. Miller and Registrant. Incorporated by reference to Exhibit 10.19 to the 1994 10-K. 10.20 Employment Agreement dated July 1, 1990, between John H. Fitchen, M.D. and Registrant. Incorporated by reference to Exhibit 10.20 to the 1994 10-K. 10.21 Employment Agreement dated November 18, 1991, between Elaine J. Dubesa and Registrant. Incorporated by reference to Exhibit 10.20 to the 1992 10-K. 10.22 Employment Agreement dated June 1, 1992, between Kevin Crowley and Registrant. Incorporated by reference to Exhibit 10.21 to the 1992 10-K. 10.23 Employment Agreement dated July 15, 1995, between Byron A. Allen, Jr., and Registrant. 10.24 Employment Agreement dated August 31, 1993, between Charles E. Bergeron and Registrant. 10.25 Promissory Note dated August 29, 1995, made by Charles E. Bergeron to Registrant, and related Mortgage Deed dated December 22, 1995. 10.26 Development, License and Supply Agreement between Registrant and SmithKline Beecham plc dated February 24, 1995, as amended. Portions of this agreement have been granted confidential treatment. Incorporated by reference to Exhibit 10.1 to Amendment No. 2 to the Registrant's Quarterly Report on Form 10-Q for the fiscal quarterly period ended June 30, 1995. 21. The Registrant's subsidiaries are Agritope, Inc., an Oregon corporation, and Agrimax Floral Products, Inc., a Minnesota corporation. The Registrant also owns a 60 percent interest in Epitope KK, a Japanese limited liability company, and a 50 percent interest in Beijing Epitope Biotech Co., Ltd., a Chinese corporation. On June 1, 1995, Agritope, Inc., agreed to sell its equity interest in Vinifera, Inc., for which it has not yet received scheduled payments. 23. Consents of Price Waterhouse LLP. 24. Powers of Attorney. 27. Financial Data Schedules. EX-2.3 2 AGREEMENT AND PLAN OF REORGANIZATION DATED AS OF OCTOBER 27, 1995 EXHIBIT 2.3 AGREEMENT AND PLAN OF REORGANIZATION BY AND AMONG FRESCHE BLOSSOMS L.L.C., a Delaware limited liability company UAF, L.P., a Delaware Limited Partnership AGRIMAX FLORAL PRODUCTS, INC., a Minnesota corporation UNIVERSAL AMERICAN FLOWERS, INC., a Florida corporation AND Certain Other Persons Named in the Agreement AGREEMENT AND PLAN OF REORGANIZATION TABLE OF CONTENTS ARTICLE I DEFINITIONS Page 1.1 Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.2 Agreement of Limited Partnership of the Partnership. . . . . . . . . . . . . . . . . . . . . . . . . . . 1 1.3 AgriMax Equipment . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.4 AgriMax Equipment Bill of Sale. . . . . . . . . . . . . . . . . . . . 2 1.5 AgriMax Facilities. . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.6 AgriMax Intellectual Property . . . . . . . . . . . . . . . . . . . . 2 1.7 AgriMax Intellectual Property Assignment. . . . . . . . . . . . . . . 2 1.8 Assignment of Company Interests . . . . . . . . . . . . . . . . . . . 2 1.9 Certificate of Limited Partnership of the Partnership . . . . . . . . 2 1.10 Closing and Closing Date. . . . . . . . . . . . . . . . . . . . . . . 2 1.11 Competing Business. . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.12 Constituent Entities. . . . . . . . . . . . . . . . . . . . . . . . . 2 1.13 Effective Time. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 1.14 Encumbrance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.15 Financing Document. . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.16 Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . 3 1.17 Indemnitees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.18 Main Lease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.19 Merger. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.20 NewCorp . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.21 Non-Member Managers . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.22 Operating Agreement . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.23 Percentage Interest . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.24 Restricted Stock Purchase Agreement . . . . . . . . . . . . . . . . . 3 1.25 Shares. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.26 Sublease. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.27 Surviving Entity. . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.28 UAF Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.29 UAF Bill of Sale, Assignment, Assumption and General Conveyance. . . . . . . . . . . . . . . . . . . . . . . . . 3 1.30 UAF Members . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 1.31 UAF Common Stock. . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.32 UAF Value . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 ARTICLE II TRANSFER OF INTERESTS OF UAF MEMBERS IN COMPANY TO UAF Page 2.1 Transfer of Interests of UAF Members . . . . . . . . . . . . . . . . . 4 2.2 Acceptance of UAF as Substitute Member of the Company. . . . . . . . . 4 ARTICLE III CONVEYANCE AND ASSIGNMENT OF CERTAIN ASSETS TO PARTNERSHIP 3.1 Formation of Partnership . . . . . . . . . . . . . . . . . . . . . . . 4 3.2 Conveyance and Assignment of AgriMax Equipment and AgriMax Intellectual Property to Partnership . . . . . . . . . . 4 3.3 Conveyance and Assignment of Certain UAF Assets to Partnership. . . . . . . . . . . . . . . . . . . . . . . . 5 3.4 Transfer Taxes and Fees. . . . . . . . . . . . . . . . . . . . . . . . 5 3.5 Activities of UAF Following Closing. . . . . . . . . . . . . . . . . . 5 3.6 Agreements Relating to Competition With Partnership . . . . . . . . . 5 ARTICLE IV MERGER OF THE COMPANY INTO THE PARTNERSHIP 4.1 Merger and Effective Time. . . . . . . . . . . . . . . . . . . . . . . 6 4.2 Certificate of Limited Partnership of Surviving Entity . . . . . . . . 6 4.3 Agreement of Limited Partnership of Surviving Entity . . . . . . . . . 6 4.4 Partners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 4.5 Effect of the Merger . . . . . . . . . . . . . . . . . . . . . . . . . 7 4.6 Capital Accounts of and Percentage Interest in the Partnership . . . . 7 ARTICLE V OTHER MATTERS 5.1 Sale of UAF Common Stock to Bauer and Bakula . . . . . . . . . . . . . 7 5.2 Appointment of AgriMax Representative to Board of Directors of UAF. . . . . . . . . . . . . . . . . . . . . . 8 5.3 Financing Assistance . . . . . . . . . . . . . . . . . . . . . . . . . 9 5.4 Effect on Operating Agreement. . . . . . . . . . . . . . . . . . . . . 9 ARTICLE VI REPRESENTATIONS AND WARRANTIES Page 6.1 Representations and Warranties of UAF . . . . . . . . . . . . . . . .10 6.2 Representations and Warranties of AgriMax . . . . . . . . . . . . . .12 6.3 Representations and Warranties of UAF Members and Non-Member Managers. . . . . . . . . . . . . . . . . . . . . . .14 ARTICLE VII CLOSING; EFFECTIVE DATE 7.1 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 7.2 Simultaneous Transactions . . . . . . . . . . . . . . . . . . . . . .15 7.3 Post-Closing Actions. . . . . . . . . . . . . . . . . . . . . . . . .15 ARTICLE VIII INDEMNIFICATION BY AGRIMAX 8.1 Indemnification by AgriMax. . . . . . . . . . . . . . . . . . . . . .15 ARTICLE IX GENERAL PROVISIONS 9.1 Arbitration . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 9.2 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 9.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 9.4 Interpretation. . . . . . . . . . . . . . . . . . . . . . . . . . . .18 9.5 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 9.6 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . .18 9.7 No Transfer . . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 9.8 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . .18 9.9 Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . .19 9.10 Further Assurances. . . . . . . . . . . . . . . . . . . . . . . . . .19 9.11 Absence of Third-Party Beneficiary Rights . . . . . . . . . . . . . .19 9.12 Mutual Drafting . . . . . . . . . . . . . . . . . . . . . . . . . . .19 9.13 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 SIGNATURE PAGE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 Exhibits Exhibit 2.1 - Assignment of Company Interests Exhibit 3.2(a) - AgriMax Equipment Bill of Sale Exhibit 3.2(b) - AgriMax Intellectual Property Assignment Exhibit 3.3 - UAF Bill of Sale, Assignment, Assumption and General Conveyance Exhibit 5.1 - Restricted Stock Purchase Agreement Schedules Schedule 3.1 - List of Additional AgriMax Equipment Schedule 3.2(a) - Encumbrances Pertaining to AgriMax Equipment AGREEMENT AND PLAN OF REORGANIZATION This Agreement and Plan of Reorganization is entered into as of the 27th day of October, 1995, by and among Fresche Blossoms L.L.C., a Delaware limited liability company (the "Company"), UAF, L.P., a Delaware limited partnership (the "Partnership"), AgriMax Floral Products, Inc., a Minnesota corporation ("AgriMax"), Universal American Flowers, Inc., a Florida corporation ("UAF"), William C. McClure ("McClure"), Gary W. Butler ("Butler"), Dorothea J. Owens ("Owens"), Timothy C. Finn ("Finn"), John W. Suber, Jr. ("Suber"), Anthony J. Wright ("Wright"), Doug Bauer ("Bauer") and Roxanne E. Bakula ("Bakula"). WITNESSETH: WHEREAS, the Company was formed pursuant to an Operating and Transition Agreement dated as of May 1, 1995 (the "Operating Agreement") for the purpose, among other things, of operating a floral products business consisting of the combination of assets and resources described in the Operating Agreement; WHEREAS, the Operating Agreement provided procedures pursuant to which the members of the Company could determine whether or not the combination of assets and resources described in the Operating Agreement was desirable and whether or not the operations of the Company should be combined with the operations of UAF; WHEREAS, the parties deem such combination desirable but further desire to effect such combination on terms different from the terms provided for in the Operating Agreement; and WHEREAS, this Agreement sets forth the terms on which the parties desire to effect such combination. NOW, THEREFORE, in consideration of the premises and mutual covenants and agreements contained herein, the parties hereby agree as follows: ARTICLE I DEFINITIONS In addition to terms defined above or in subsequent sections of this Agreement, certain capitalized terms used herein have the respective meanings assigned below. 1.1 "Agreement" means this Agreement and Plan of Reorganization, as it may be amended or supplemented from time to time. 1.2 "Agreement of Limited Partnership of the Partnership" means the agreement described in Section 3.1, as may be amended or supplemented from time to time. 1.3 "AgriMax Equipment" means all equipment listed on Schedule 1.6 of the Operating Agreement which was located at the AgriMax Facilities and used by AgriMax in its packaged fresh flower and floral preservative distribution business as of May 1, 1995 and all other equipment listed on "Schedule 1.3" attached hereto which is located at the AgriMax Facilities as of the date hereof. 1.4 "AgriMax Equipment Bill of Sale" means a bill of sale substantially in the form attached hereto as "Exhibit 3.2(a)". 1.5 "AgriMax Facilities" means the buildings, offices, warehouses, improvements and other real property leased by AgriMax at 3821 Barringer Drive, Charlotte, North Carolina. 1.6 "AgriMax Intellectual Property" means the trademarks Fresche Blossoms(R), Everguard(R), and Fresche Blossoms Express (TM), the formula for the Everguard preservative, any AgriMax trade secrets existing on May 1, 1995 and all permits, licenses and franchises used by AgriMax in its packaged fresh flower and floral preservative distribution business as of May 1, 1995, to the extent transferable. 1.7 "AgriMax Intellectual Property Assignment" means an assignment in substantially the form attached hereto as "Exhibit 3.2(b)". 1.8 "Assignment of Company Interests" means an assignment in substantially the form attached hereto as "Exhibit 2.1". 1.9 "Certificate of Limited Partnership of the Partnership" means the certificate described in Section 3.1. 1.10 "Closing" and "Closing Date" mean the time and date, as set forth in Section 6.1 hereof, on which this Agreement and the related agreements and instruments referred to herein are executed and delivered by the respective parties hereto and thereto, and the Merger and the related transactions are consummated. 1.11 "Competing Business" means any business that is principally engaged in business activities that are in material competition with business activities in which the Partnership, NewCorp or any successor entity is engaged. 1.12 "Constituent Entities" has the meaning set forth in Section 4.1. 1.13 "Effective Time" has the meaning set forth in Section 4.1. 1.14 "Encumbrance" means any mortgage, claim, charge, lien, encumbrance, easement, limitation, restriction, commitment, or security interest, except statutory liens securing taxes, assessments, and payments not yet due, and liens incurred in the ordinary course of business (including liens in favor of mechanics or materialmen). 1.15 "Financing Documents" has the meaning set forth in Section 6.1(g). 1.16 "Financial Statements" mean the audited balance sheets of UAF at June 30, 1994 and at June 30, 1995, and audited statements of income and cash flows for the twelve-month period ended June 30, 1994 and the twelve-month period ended June 30, 1995, prepared in accordance with generally accepted accounting principles, consistently applied. 1.17 "Indemnitees" has the meaning set forth in Article XIII. 1.18 "Main Lease" has the meaning set forth in Section 6.2(h). 1.19 "Merger" means the merger of the Company into the Partnership as set forth in Section 4.1. 1.20 "NewCorp" has the meaning set forth in the Agreement of Limited Partnership of the Partnership. 1.21 "Non-Member Managers" means Bauer and Bakula. 1.22 "Operating Agreement" means the Operating and Transition Agreement dated as of May 1, 1995, among AgriMax, McClure, Butler, Owens, Finn, Suber and Wright, as it may be amended or supplemented from time to time. 1.23 "Percentage Interest" has the meaning set forth in the Agreement of Limited Partnership of the Partnership. 1.24 "Restricted Stock Purchase Agreement" means an agreement in substantially the form attached hereto as "Exhibit 5.1". 1.25 "Shares" has the meaning set forth in Section 6.1(f). 1.26 "Sublease" means the Sublease Agreement dated effective as of May 1, 1995 between AgriMax and the Company covering the AgriMax Facilities. 1.27 "Surviving Entity" has the meaning set forth in Section 4.1. 1.28 "UAF Assets" means all of the properties, rights and interests of UAF to be conveyed to the Partnership as set forth in the UAF Bill of Sale, Assignment, Assumption and General Conveyance. 1.29 "UAF Bill of Sale, Assignment, Assumption and General Conveyance" means an agreement in substantially the form attached hereto as "Exhibit 3.3". 1.30 "UAF Members" mean McClure, Butler, Owens, Finn, Suber and Wright. 1.31 "UAF Common Stock" means shares of the common stock, par value $1.00 per share, of UAF. 1.32 "UAF Value" means a dollar amount equal to eight (8) times UAF's income before interest, taxes, depreciation and amortization for the 12-month period ended June 30, 1995, calculated based on the Financial Statements for such period in accordance with generally accepted accounting principles consistently applied. ARTICLE II TRANSFER OF INTERESTS OF UAF MEMBERS IN COMPANY TO UAF 2.1 Transfer of Interests of UAF Members. Immediately prior to the Merger, each of the UAF Members shall assign and transfer such UAF Member's interests in the Company to UAF by executing and delivering an Assignment of Company Interests in substantially the form attached hereto as "Exhibit 2.1". The UAF Members shall receive no direct consideration for such assignment and transfer, and the UAF Members acknowledge that the consideration for such assignment and transfer shall be the increased value, if any, of the UAF Common Stock held by the UAF Members resulting from the transactions contemplated by this Agreement. 2.2 Acceptance of UAF as Substitute Member of the Company. Upon the assignment and transfer described in Section 2.1, UAF shall execute and deliver a counterpart signature page to the Operating Agreement, shall enter into an admission agreement with the Company as provided in Section 17.3 of the Operating Agreement and shall become a member of the Company. By executing and delivering this Agreement, AgriMax (as the only other remaining member of the Company following such assignment and transfer) hereby consents to the admission of UAF as a member of the Company. ARTICLE III FORMATION OF PARTNERSHIP; CONVEYANCE AND ASSIGNMENT OF CERTAIN ASSETS TO PARTNERSHIP 3.1 Formation of Partnership. On or prior to the Closing Date, UAF and AgriMax shall have entered into an Agreement of Limited Partnership in form and content acceptable to UAF and AgriMax providing for and establishing the Partnership pursuant to the laws of the State of Delaware. UAF shall be the general partner of the Partnership and AgriMax shall be the initial limited partner of the Partnership. In its capacity as general partner, UAF shall have caused a Certificate of Limited Partnership of the Partnership in form and content acceptable to UAF and AgriMax to be executed and filed with the Secretary of State of the State of Delaware. 3.2 Conveyance and Assignment of AgriMax Equipment and AgriMax Intellectual Property to Partnership. Immediately prior to the Merger, AgriMax shall (a) convey and assign all of its rights, title and interests in and to the AgriMax Equipment to the Partnership, free and clear of any and all Encumbrances (other than those set forth in "Schedule 3.2(a)"), by executing and delivering the AgriMax Equipment Bill of Sale in substantially the form attached hereto as "Exhibit 3.2(a)" and (b) shall convey and assign all of its rights, title and interests in and to the AgriMax Intellectual Property to the Partnership free and clear of any and all Encumbrances by executing and delivering the AgriMax Intellectual Property Assignment in substantially the form attached hereto as "Exhibit 3.2(b)". 3.3 Conveyance and Assignment of Certain UAF Assets to Partnership. Immediately prior to the Merger, UAF shall convey and assign all of its rights, title and interests in and to the UAF Assets to the Partnership by executing and delivering the UAF Bill of Sale, Assignment, Assumption and General Conveyance in substantially the form attached hereto as "Exhibit 3.3" and the Partnership shall assume the liabilities of UAF and any Encumbrances upon the UAF Assets as provided therein. 3.4 Transfer Taxes and Fees. The Partnership shall assume and pay all obligations for taxes and governmental fees incurred or imposed in connection with the transfer as provided in Sections 3.2 and 3.3 of the AgriMax Equipment, the AgriMax Intellectual Property and the UAF Assets to the Partnership, other than any taxes on AgriMax's or UAF's respective net income. 3.5 Activities of UAF Following Closing. From and after the Closing and for so long as UAF retains any interest in the Partnership, UAF shall not, without the prior written consent of AgriMax, engage in any business activities other than maintaining its corporate existence, holding its interests in the Partnership, and acting as general partner of the Partnership pursuant to the Agreement of Limited Partnership of the Partnership. 3.6 Agreements Relating to Competition With Partnership. The parties acknowledge that UAF or Affiliates of UAF may from time to time in the future desire to acquire one or more Competing Businesses. The provisions of this Section 3.6 set forth certain agreements of the parties concerning activities of UAF or its Affiliates regarding competition with the Partnership, NewCorp or any successor entity. For purposes of this Section 3.6, the determination as to whether a person or entity is an Affiliate of UAF shall be made at the time the proposed competing activity is to be conducted and not as of the date of this Agreement. (a) In the event a Competing Business is proposed to be acquired by the Partnership, NewCorp or any successor entity (and provided the acquisition requires the consent of AgriMax or any Affiliate of AgriMax pursuant to the Agreement of Limited Partnership of the Partnership or any other agreement or applicable law), and if the acquisition of the Competing Business is prevented as a result of the failure by AgriMax or any Affiliate of AgriMax to provide any necessary consent or approval, then UAF or its Affiliates shall be permitted to acquire the Competing Business and to engage in activities pursuant to such Competing Business as then being conducted that are in competition with the Partnership, NewCorp or any successor entity. (b) In the event a Competing Business is proposed to be acquired by UAF or any Affiliate of UAF, then UAF or its Affiliates shall offer or cause to be offered to AgriMax or its Affiliates the opportunity to participate in such Competing Business by acquiring (on terms not less favorable than the terms upon which UAF or its Affiliates propose to acquire the Competing Business) a percentage equity ownership interest in the Competing Business equal to the then percentage equity interest of AgriMax or its Affiliates in the Partnership, NewCorp or any successor entity. If AgriMax or its Affiliates decline to participate in such Competing Business by acquiring the full amount of equity ownership offered as provided in the preceding sentence, then UAF or its Affiliates shall be permitted to acquire the Competing Business and to engage in activities pursuant to such Competing Business as then being conducted that are in competition with the Partnership, NewCorp or any successor entity. (c) Except as otherwise provided in this Section 3.6, neither UAF nor its Affiliates shall acquire or engage in any Competing Business without the prior written consent of AgriMax. The restrictions in this Section 3.6 or the ability of UAF or its Affiliates to engage in competitive activities shall expire at such time as (i) UAF or its Affiliates cease to own any equity interest in the Partnership, NewCorp or any successor entity, (ii) AgriMax or its Affiliates cease to own any equity interest in the Partnership, NewCorp or any successor entity or (iii) the Partnership, NewCorp or UAF are required to file reports with the Securities and Exchange Commission pursuant to Sections 13 or 15(d) of the Securities Exchange Act of 1934, as amended. ARTICLE IV MERGER OF THE COMPANY INTO THE PARTNERSHIP 4.1 Merger and Effective Time. Subject to the terms and conditions of this Agreement and in accordance with the provisions of the laws of the State of Delaware, the Company shall be merged with and into the Partnership, which shall be and is herein sometimes referred to as the "Surviving Entity," and all of which entities sometimes hereinafter being referred to as the "Constituent Entities." A properly executed Certificate of Merger shall be filed with the Secretary of State of the State of Delaware in accordance with the laws of the State of Delaware on the Closing Date. The Merger shall become effective at the time of filing of the Certificate of Merger as provided above (hereinafter referred to as the "Effective Time.") 4.2 Certificate of Limited Partnership of Surviving Entity. At the Effective Time, the Certificate of Limited Partnership of the Partnership shall become the Certificate of Limited Partnership of the Surviving Entity. 4.3 Agreement of Limited Partnership of Surviving Entity. At the Effective Time, the Agreement of Limited Partnership of the Partnership shall become the Agreement of Limited Partnership of the Surviving Entity. 4.4 Partners. The partners of the Partnership at the Effective Time shall be the partners of the Surviving Entity until such partners shall withdraw or be removed or additional or substituted partners shall be admitted as provided in the Agreement of Limited Partnership. The members of the Company shall cease to have any power or authority in such capacity with respect to any Constituent Entity at the Effective Time. 4.5 Effect of the Merger. At the Effective Time, the separate existence of each of the Constituent Entities other than the Surviving Entity shall cease, and in accordance with the terms of this Agreement, all of the rights, privileges and powers of the Constituent Entities and all property, real, personal and mixed, and all debts due to either of the Constituent Entities, as well as all other things and causes of action belonging to each of the Constituent Entities shall be vested in the Surviving Entity, and shall thereafter be the property of the Surviving Entity as they were of each Constituent Entity, and the title to any real property vested by deed or otherwise in either of the Constituent Entities shall not revert or be in any way impaired by reason of the Merger, but all rights of creditors and all liens upon any property of either of the Constituent Entities shall be preserved unimpaired. All debts, liabilities and duties of each Constituent Entity shall thenceforth attach to the Surviving Entity, and may be enforced against it to the same extent as if the debts, liabilities and duties had been incurred or contracted by it. 4.6 Capital Accounts of and Percentage Interest in the Partnership. At the Effective Time, UAF and AgriMax will be the only members of the Company and the only partners of the Partnership. In connection with and as a result of the Merger and the respective capital contributions to the Partnership provided for in Sections 3.2 and 3.3, (i) UAF and AgriMax shall be credited on the books of the Partnership with capital account balances in the amount of $8,715,158 for UAF (an amount equal to 82.19% of the sum of $2,000,000 plus the UAF Value) and $1,888,514 for AgriMax (an amount equal to 17.81% of the sum of $2,000,000 plus the UAF Value) and (ii) the initial Percentage Interest of UAF in the Partnership will be 82.19% and the initial Percentage Interest of AgriMax in the Partnership will be 17.81%. The relative rights of UAF and AgriMax pertaining to distributions from the Partnership and voting rights based on respective capital account balances and Percentage Interests as well as other matters pertaining to the operation and affairs of the Partnership shall be as provided in the Agreement of Limited Partnership of the Partnership. ARTICLE V OTHER MATTERS 5.1 Sale of UAF Common Stock to Bauer and Bakula. UAF shall issue and sell 3,959 shares of UAF Common Stock to Bauer and 3,959 shares of UAF Common Stock to Bakula. Each such purchase and sale shall be evidenced by and conducted in accordance with a Restricted Stock Purchase Agreement in substantially the form attached hereto as "Exhibit 5.1" to be executed and delivered by UAF and Bauer or Bakula, as the case may be. The consideration for the UAF Common Stock and other terms of the purchase and sale shall be as set forth in the applicable Restricted Stock Purchase Agreement. 5.2 Appointment of AgriMax Representative to Board of Directors of UAF. For so long as (i) UAF retains any interest in the Partnership and (ii) AgriMax, or its successors or assigns, retains any interest in the Partnership, each of McClure, Butler, Owens, Finn, Suber, Wright, Bauer and Bakula agree to vote all of the UAF Common Stock or other voting securities of UAF over which he or she has control and to take all other necessary actions within his or her control in order: (a) to cause the election to the Board of Directors of UAF of one (1) person designated by AgriMax (which person shall be acceptable to McClure in his reasonable discretion); (b) to cause the removal from the Board of Directors of the representative designated by AgriMax upon the express written request of AgriMax; (c) in the event that the representative designated by AgriMax ceases to serve as a member of the Board of Directors during his term of office, to cause the resulting vacancy on the Board to be filled by a representative designated by AgriMax (which person shall be acceptable to McClure in his reasonable discretion); and (d) to refrain from, and to cause the Company to refrain from, taking any action, without the prior written consent of AgriMax, to remove the Board representative designated by AgriMax. Each of McClure, Butler, Owens, Finn, Suber, Wright, Bauer and Bakula further agree that, for so long as the agreements set forth above with respect to the voting of certain shares by such persons remain in effect, he or she shall not, without the prior written consent of AgriMax, sell, transfer, assign or convey any of the shares that are subject to such agreements to any other person or entity unless such person or entity has agreed in writing to vote such shares and to take the other actions as set forth in clauses (a) through (d) above. In addition, for so long as (i) UAF retains any interest in the Partnership and (ii) AgriMax, or its successors or assigns, retains any interest in the Partnership, UAF shall not, without the prior written consent of AgriMax, issue any shares of UAF Common Stock or other voting securities of UAF to any person or entity unless such person or entity has first agreed in writing to vote such shares and to take the other actions as set forth in clauses (a) through (d) above. All certificates evidencing shares of UAF Common Stock or other voting securities of UAF shall bear a legend in substantially the following form: "The shares represented by this certificate are subject to certain transfer and other restrictions stated in that certain Agreement and Plan of Reorganization dated as of October 27, 1995 which is on file at the principal offices of the Corporation. By accepting this certificate, or any of the shares represented hereby, such transferee agrees automatically to be bound by and to accept the restrictions set forth in such Agreement and Plan of Reorganization." Each of McClure, Butler, Owens, Finn, Suber, Wright, Bauer and Bakula have pledged all of the UAF Common Stock owned by them to Sun Bank, National Association pursuant to a pledge agreement. Anything in this Section 5.2 to the contrary notwithstanding, the parties hereby agree that in the event of any foreclosure pursuant to such pledge agreement or other event giving Sun Bank, National Association, the right to vote the UAF Common Stock or other voting securities of UAF owned by the above-named persons, Sun Bank, National Association, and its successors or assigns, shall not be required to vote such shares or take the other actions set forth in clauses (a) through (d) above. 5.3 Financing Assistance. For so long as AgriMax, or any affiliate of AgriMax, hold any interest in the Partnership or any shares of capital stock of NewCorp, AgriMax shall cause its indirect parent, Epitope, Inc., to consult with the Partnership or NewCorp, as the case may be, and provide advisory assistance as reasonably requested by the Partnership or NewCorp, as the case may be, regarding financing of the Partnership's or NewCorp's operations. 5.4 Effect on Operating Agreement. The Merger and the other transactions contemplated by this Agreement are intended by the parties to effect the transactions referred to in the Operating Agreement as the "Combination," with such modifications as are set forth herein. This Agreement sets forth and shall control in all respects the agreements of the parties concerning the combination of certain assets of the Company and certain assets of UAF and AgriMax as set forth herein and, as a result, shall replace and supersede the provisions of the Operating Agreement pertaining specifically to the manner of effecting the "Combination" and the representations, warranties and agreements contained in the Operating Agreement that were to have been given or made as of the effective date of the "Combination." In this regard, it is understood and agreed that this Agreement shall replace and supersede the representations and warranties of the parties contained in the Operating Agreement that were to have been given as of the "Transition Effective Date" (as defined in the Operating Agreement) and that the representations and warranties contained in the Operating Agreement have not been and will not be given pursuant to the Operating Agreement as of any date other than the "Effective Date" under the Operating Agreement. Except to the extent specifically indicated in this Section 5.4, this Agreement and the transactions contemplated hereby shall not otherwise alter or affect the obligations, rights, duties or liabilities of the parties under the Operating Agreement relating to the formation and operation of the Company prior to the Merger, including, without limitation, the representations, warranties and agreements made or given as of the "Effective Date" under the Operating Agreement and the indemnifications by AgriMax set forth in Section 20 of the Operating Agreement. ARTICLE VI REPRESENTATIONS AND WARRANTIES 6.1 Representations and Warranties of UAF. UAF represents and warrants to AgriMax, as of the Closing Date, as follows: (a) Authority; Binding Effect. UAF has full right, power and authority to execute, deliver and perform this Agreement and the related agreements referred to herein that are to be executed, delivered and performed by UAF and to consummate the transactions contemplated hereby and thereby. This Agreement is, and the related agreements referred to herein that are to be executed and delivered by UAF are, the valid and binding agreements of UAF enforceable against UAF in accordance with their terms, except as such enforcement may be limited by the effect of bankruptcy, reorganization, insolvency and other similar creditors rights laws generally, and by equitable principles regardless of whether the preceding is brought at law or in equity. The execution, delivery and performance of this Agreement and the related agreements by UAF have been duly authorized by the board of directors and shareholders of UAF. No other proceedings on the part of UAF's board of directors or shareholders are necessary to authorize the execution, delivery and performance of this Agreement or the related agreement by UAF. (b) No Consents. Except for consents in connection with the transfer of the UAF Assets as provided herein that are required pursuant to the Financing Documents and other agreements pertaining to or included in the UAF Assets, no consent of, approval by, filing with, or notice to any governmental authority or other person or entity is required by UAF to execute, deliver and perform this Agreement or the related agreements referred to herein that are to be executed, delivered and performed by UAF or to consummate the transactions contemplated hereby or thereby. (c) No Violations. Neither the execution of this Agreement and the related agreements referred to herein that are to be executed and delivered by UAF nor the consummation of the transactions contemplated hereby and thereby will result in (i) a violation or conflict with any provision of UAF's articles of incorporation or bylaws, (ii) a breach of, or default under, any term or provision of any contract (including, without limitation, any Financing Document), indebtedness, lease, encumbrance, commitment, license, franchise, permit, authorization, or concession to which UAF is a party or by which its assets are bound (except for violations, breaches or defaults as a result of the failure to obtain any consents referred to in Section 6.1(b) in connection with the transfer of the UAF Assets), (iii) a violation by UAF of any law, rule, regulation or judicial or administrative order, or (iv) an imposition of any encumbrance, restriction or charge on the business of UAF or on any of its assets, except as contemplated by this Agreement. (d) Organization, Standing and Power. UAF is a validly existing corporation in good standing under the laws of the State of Florida. UAF has all requisite power and authority, corporate and other, to own and operate its properties and assets, to lease any leased properties and assets used in its business, and to carry on its business as it is now being conducted. UAF is duly qualified and licensed to do business in every jurisdiction in which such qualification or license is required. Complete and accurate copies of UAF's articles of incorporation and bylaws, as amended through the date hereof, have been delivered to AgriMax. (e) Compliance with Laws and Other Instruments. UAF is in compliance with its articles of incorporation and bylaws and with all laws, regulations and judicial and administrative orders applicable to it, to its assets, properties and rights, and to the conduct of its business, the noncompliance with which would have a material adverse effect on the financial condition or business of UAF, and UAF has not received any notice or claim of a violation of any such law, rule, regulation or order. (f) Capitalization. (i) Schedule 9.3.1(a) of the Operating Agreement contains a complete and accurate list of the outstanding shares of capital stock of UAF (the "Shares") showing the name of the issuer, the certificate number, the number of Shares represented thereby, and the name of the record holder. The authorized capital stock of UAF is as follows: 125,000 shares of common stock, par value $1.00 per share, of which 108,959 shares are issued and outstanding. (ii) Except as set forth on Schedule 9.3.1(b) of the Operating Agreement or as contemplated by this Agreement, the Shares constitute all the issued and outstanding shares of capital stock of UAF and no person or entity has any right to acquire any additional shares of such capital stock, any other security of UAF or, except as set forth in this Agreement, any interest in the Partnership. Except as set forth of Schedule 9.3.1(b) of the Operating Agreement or as contemplated by this Agreement, there are no outstanding proxies, subscriptions, options, warrants, rights, puts, calls, commitments, voting trusts or plans or other agreements of any character that restrict the transfer or voting rights of, require UAF to redeem or otherwise acquire, restrict the payment of dividends on, or otherwise relate to, capital stock of UAF. (iii) All the Shares have been duly authorized and are validly issued, fully paid and nonassessable, and none of the Shares have been issued in violation of any federal or state securities or other laws, preemptive rights of any past or present shareholder of UAF, or any stock purchase agreement or other agreement to which UAF or any holder of shares of its capital stock was or is a party or by which UAF or any holder of shares of its capital stock was or is bound. (g) Financing Documents. Schedule 9.3.3(b) of the Operating Agreement includes true and complete copies of all loan agreements, security agreements, mortgages, deeds of trust and other documents and instruments (collectively, "Financing Documents") pursuant to which UAF is indebted to others for borrowed money. (h) Financial Statements. UAF has maintained its books of account in accordance with generally accepted accounting principles consistently applied. The Financial Statements have been prepared in conformity with generally accepted accounting principles consistently applied, and fairly present the financial position and the results of operations of UAF at and for the year or periods indicated therein. (i) Absence of Undisclosed Liabilities. Without limiting the generality of Section 6.1(f) above, UAF does not have as of the Closing Date, any material liability or obligation, whether matured, accrued, absolute, contingent, direct or indirect, nor does there exist a set of circumstances that could reasonably be expected to result in any such material liability or obligation, other than as reflected in the Financial Statements. For the purposes of this section, "material liability or obligation" means any liability or obligation in excess of $10,000, unless the liability or obligation is incurred in the ordinary course of UAF's business. (j) UAF Assets. UAF has, and pursuant to the UAF Bill of Sale, Assignment, Assumption and General Conveyance will convey to the Partnership, good title to, or valid leasehold interests in, or rights to use all (except for $25,000 retained by UAF for general corporate purposes) properties and assets used or held for use in the conduct of its business and all goodwill associated therewith, subject to any Encumbrances. 6.2 Representations and Warranties of AgriMax. AgriMax represents and warrants to UAF and the UAF Members, as of the Closing Date, as follows: (a) Authority; Binding Effect. AgriMax has full right, power and authority to execute, deliver and perform this Agreement and the related agreements referred to herein that are to be executed, delivered and performed by AgriMax and to consummate the transactions contemplated hereby and thereby. This Agreement is, and the related agreements referred to herein that are to be executed and delivered by AgriMax are, the valid and binding agreements of AgriMax enforceable against AgriMax in accordance with their terms, except as such enforcement may be limited by the effect of bankruptcy, reorganization, insolvency and other similar creditors rights laws generally, and by equitable principles regardless of whether the preceding is brought at law or in equity. The execution, delivery and performance of this Agreement and the related agreements by AgriMax have been duly authorized by the board of directors and shareholders of AgriMax. No other proceedings on the part of AgriMax's board of directors or shareholders are necessary to authorize the execution, delivery and performance of this Agreement and the related agreements by AgriMax. (b) No Consents. Except for consents required pursuant to the Sublease in connection with the succession of the Partnership to the rights and duties of the Company under the Sublease, no consent of, approval by, filing with, or notice to any governmental authority or other person or entity is required for AgriMax to execute, deliver and perform this Agreement or the related agreements referred to herein that are to be executed, delivered and performed by AgriMax or to consummate the transactions contemplated hereby or thereby. (c) No Violations. Neither the execution and delivery of this Agreement and the related agreements referred to herein that are to be executed and delivered by AgriMax nor the consummation of the transactions contemplated hereby and thereby will result in (i) a violation or conflict with any provision of AgriMax's articles of incorporation or bylaws, (ii) the breach of, or default under, any term or provision of any contract, indebtedness, lease, encumbrance, commitment, license, franchise, permit, authorization, or concession to which AgriMax is a party or by which its assets are bound (other than a default or breach resulting from failure to obtain the consent of the lessor under the Main Lease to the extent required with respect to the transactions contemplated by this Agreement), (iii) a violation by AgriMax of any law, rule, regulation or judicial or administrative order, or (iv) an imposition of any Encumbrance on the business of AgriMax, the AgriMax Equipment or the AgriMax Intellectual Property, except as contemplated by this Agreement. (d) Organization, Standing and Power. AgriMax is a validly existing corporation in good standing under the laws of the state of Minnesota. AgriMax has all requisite power and authority, corporate and other, to own and operate its properties and assets, to lease any leased properties and assets used in its business, and to carry on its business as it is now being conducted. AgriMax is duly qualified and licensed to do business in every jurisdiction in which such qualification or license is required. (e) Compliance with Laws and Other Instruments. AgriMax is in compliance with its articles of incorporation and bylaws and with all laws, regulations and judicial and administrative orders applicable to it, to its assets, properties and rights and to the conduct of its business, and AgriMax has not received any notice or claim of a violation of any such law, rule, regulation or order. (f) Title to AgriMax Equipment. AgriMax has good and marketable title to the AgriMax Equipment, free and clear of all Encumbrances (other than as set forth in "Schedule 3.2(a)"), and upon execution and delivery of the AgriMax Equipment Bill of Sale, AgriMax shall convey good and marketable title to the AgriMax Equipment to the Partnership free and clear of all Encumbrances (other than as set forth in "Schedule 3.2(a)"). (g) Title or Right to Use AgriMax Intellectual Property. AgriMax owns or possesses the royalty free licenses or other rights to use all AgriMax Intellectual Property. To the best of AgriMax's knowledge, AgriMax's use of the AgriMax Intellectual Property does not infringe on or otherwise violate any copyrights, trademarks, trademark rights, service marks, service names, trade names, patents, patent rights, license, trade secrets or other proprietary rights owned by any other person or persons. There is no claim or action by any such person pending or, to AgriMax's knowledge, threatened against AgriMax with respect thereto. Upon execution and delivery of the AgriMax Intellectual Property Assignment, AgriMax shall convey good and marketable title or royalty free licenses or other rights to use the AgriMax Intellectual Property, together with all goodwill associated therewith, to the Partnership free and clear of all Encumbrances. (h) AgriMax Facilities Lease Agreement. The "Main Lease" (as defined in the Sublease) is in full force and effect, and AgriMax has not been notified by any other party thereto of such party's intention to terminate the Main Lease. Assuming the landlord's consent to the succession of the Partnership to the rights and duties of the Company under the Sublease is obtained, no event has occurred which constitutes or, with the giving of notice or passage of time, or both, would constitute a default by AgriMax or, to the best knowledge of AgriMax, by any other party under the Main Lease. No dispute, suit or proceeding is pending or, to the best knowledge of AgriMax, threatened in connection with the Main Lease. AgriMax has provided to UAF a complete and correct copy of the Main Lease. The AgriMax Facilities are located entirely on the premises covered by the Main Lease and AgriMax is not a party to any other lease for real property or similar agreement, whether written or unwritten, relating to the AgriMax Facilities. 6.3 Representations and Warranties of UAF Members and Non-Member Managers. Each UAF Member and each Non-Member Manager severally and not jointly, represents and warrants to UAF and AgriMax, as of the Effective Date, as follows: (a) The UAF Member or Non-Member Manager has full legal capacity to execute, deliver and perform this Agreement; and (b) The execution, delivery and performance of this Agreement by the UAF Member or Non-Member Manager will not conflict with any undertaking, agreement, indenture, decree, order or judgment by which such UAF Member or Non-Member Manager is bound, and will not violate any law, rule or regulation applicable to such UAF Member or Non-Member Manager. ARTICLE VII CLOSING 7.1 Closing. The Closing of the transactions contemplated by this Agreement shall take place at the offices of UAF, 6610 Anderson Road, Tampa, Florida on __________, 1995. At the Closing, this Agreement and each of the related agreements and instruments referred to herein that by the terms hereof are to be executed and delivered at the Closing shall be executed and delivered by the respective parties hereto and thereto. 7.2 Simultaneous Transactions. The execution of this Agreement and each of the related agreements and instruments referred to herein that by the terms hereof are to be executed and delivered at the Closing and the consummation of the transactions contemplated hereby and thereby shall occur simultaneously at or as of the Closing. The performance or tender of performance of all matters applicable to a party under this Agreement shall be deemed concurrent conditions and no party shall be required to perform, or tender performance of, the obligations of such party hereunder unless, coincident therewith, each other party from whom performance is required under this Agreement and the related agreements and instruments referred to herein performs or tenders performance of its obligations. 7.3 Post-Closing Actions. (a) AgriMax shall use its best efforts to obtain any consents from third parties required under the Sublease or the Main Lease in connection with the succession of the Partnership to the rights and duties of the Company under the Sublease. (b) UAF shall, to the extent reasonably requested by the Partnership or AgriMax, as provided in the UAF Bill of Sale, Assignment, Assumption and General Conveyance, use its best efforts to obtain any consents from third parties required in connection with the transfer of the UAF Assets to the Partnership and shall execute any instruments or documents necessary to evidence or reflect the transfer of the UAF Assets to the Partnership. ARTICLE VIII INDEMNIFICATION BY AGRIMAX 8.1 Indemnification by AgriMax. This Agreement provides for the contribution of the AgriMax Equipment and the AgriMax Intellectual Property to the Partnership and is not a sale of any stock in any entity comprising AgriMax. The Partnership is not assuming and shall not be responsible for the payment of any liabilities or obligations of AgriMax whatsoever, except as may be expressly set forth in this Agreement or any agreement which is an exhibit hereto. AgriMax shall indemnify and hold harmless the Partnership, UAF, any other partners of the Partnership, and the officers, advisors, representatives and shareholders of UAF or any such other partner of the Partnership (collectively, "Indemnitees") from and against any and all liabilities, obligations, losses, damages, judgments, claims, expenses, costs and legal fees and disbursements incurred by any of them to the extent resulting from, or arising out of, or related to (i) the ownership, use or operation of any of the AgriMax Equipment and the AgriMax Intellectual Property prior to May 1, 1995, or (ii) any other act or omission of AgriMax (including, without limitation, noncompliance with any applicable bulk transfer statutes and claims of employees and former employees of AgriMax of any kind whatsoever regarding their employment or termination by AgriMax). If any demand, action, suit, proceeding or investigation is commenced, as to which an Indemnitee proposes to demand indemnification, it shall notify AgriMax with reasonable promptness; provided, however, that any failure by an Indemnitee to notify AgriMax shall not relieve AgriMax from its obligations hereunder so long as its failure does not materially prejudice the rights of AgriMax. AgriMax shall assume the defense thereof and employ counsel of its own choosing. The Indemnitee shall have the right to employ separate counsel in any such demand, action, suit, proceeding or investigation and to participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of Indemnitee unless (a) the employment thereof has been specifically authorized in writing by AgriMax, (b) AgriMax has failed to assume the defense and employ counsel, or (c) the main parties to any such demand, action, suit, proceeding or investigation, include both the Indemnitee and AgriMax and Indemnitee has been advised in writing by independent counsel that the representation of Indemnitee and AgriMax by the same counsel would be inappropriate due to actual or potential differences between them, in each of which cases the reasonable fees and disbursements of counsel for Indemnitee shall be paid by AgriMax. In such event, AgriMax shall not have the right to assume the defense of such demand, action, suit, proceeding or investigation on behalf of Indemnitee. AgriMax shall not be liable for any settlement of any such demand, action, suit, proceeding or investigation effected without AgriMax's prior written consent. AgriMax shall not, without the prior written consent of Indemnitee, settle or compromise any such demand, action, suit, proceeding or investigation without such Indemnitee's prior written consent, which consent shall not be unreasonably withheld. ARTICLE IX GENERAL PROVISIONS 9.1 Arbitration. Any dispute between the parties concerning this Agreement shall be settled by arbitration conducted in Atlanta, Georgia, using the Commercial Arbitration Rules of the American Arbitration Association. The parties shall be entitled to conduct discovery in accordance with the Federal Rules of Civil Procedure, subject to limitation by the arbitrators to secure just and efficient resolution of the dispute. A party substantially prevailing in the arbitration shall also be entitled to recover such amount for its costs and attorney fees incurred in connection with the arbitration as shall be determined by the arbitrators. Judgment upon the arbitration award may be entered in any court having jurisdiction. Nothing herein, however, shall prevent either party from resort to a court of competent jurisdiction solely to seek injunctive relief. 9.2 Amendment. This Agreement may not be amended except by an instrument in writing signed on behalf of each of the parties hereto. 9.3 Notices. All notices and other communications hereunder shall be in writing and shall be deemed given if delivered personally, if mailed by registered or certified mail (return receipt requested), or if sent by telefacsimile confirmed in writing, to the parties at the following addresses (or at such other address for a party as shall be specified by like notice): (a) if to UAF or the Partnership: Universal American Flowers, Inc. 6610 Anderson Road Tampa, Florida 33634 Telephone No.: (813) 885-6936 Facsimile No: (813) 882-9918 Attn: President with a copy to: Crowe & Dunlevy 321 S. Boston Avenue 500 Kennedy Building Tulsa, Oklahoma 74103-3313 Telephone No.: (918) 592-9800 Facsimile No: (918) 592-9801 Attn: Lon Foster, III (b) if to AgriMax: AgriMax Floral Products, Inc. c/o Epitope, Inc. 8505 S.W. Creekside Place Beaverton, Oregon 97008 Telephone No.: (800) 234-3786 Facsimile No: (503) 641-8665 Attn: President with a copy to: Miller, Nash, Wiener, Hager & Carlsen 3500 U.S. Bancorp Tower 111 S.W. Fifth Street Portland, Oregon 97204-3699 Telephone No.: (503) 2244-5858 Facsimile No: (503) 224-0155 Attn: Erich Merrill (c) if to the Company: Fresche Blossoms, L.L.C. 3821 Barringer Drive Charlotte, North Carolina 28217 Telephone No.: (704) 529-0071 Facsimile No: (704) 525-2952 Attn: Chairman and Chief Executive Officer with copies to: Crowe & Dunlevy and Miller, Nash, Wiener, Hager & Carlsen at their respective addresses listed above (d) if to any other party, to the address of such party last shown on the records of UAF. 9.4 Interpretation. When a reference is made in this Agreement to Sections or Exhibits, such reference shall be to a Section or Exhibit to this Agreement unless otherwise indicated. The words "include," "includes" and "including" when used herein shall be deemed in each case to be followed by the words "without limitation." The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 9.5 Counterparts. This Agreement may be executed in two or more counterparts, all of which shall be considered one and the same agreement and shall become effective when all parties have executed a counterpart and delivered it to the other parties. At the Closing, facsimile signatures will be accepted, and the signing party shall promptly following the Closing forward to the other parties originally signed counterparts. 9.6 Entire Agreement. This Agreement and the documents and instruments and other agreements among the parties delivered pursuant hereto constitute the entire agreement among the parties with respect to the subject matter hereof and supersede all prior agreements and understandings, both written and oral, among the parties with respect to the subject matter hereof and are not intended to confer upon any other person any rights or remedies hereunder except as otherwise expressly provided herein. 9.7 No Transfer. This Agreement and the rights and obligations set forth herein may not be transferred or assigned by operation of law or otherwise without the consent of each party hereto. This Agreement is binding upon and will inure to the benefit of the parties hereto and their respective successors and permitted assigns. 9.8 Severability. If any provision of this Agreement, or the application thereof, will for any reason and to any extent be invalid or unenforceable, the remainder of this Agreement and application of such provision to other persons or circumstances will be interpreted so as reasonably to effect the intent of the parties hereto. The parties further agree to replace such void or unenforceable provision of this Agreement with a valid and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of the void or unenforceable provision. 9.9 Other Remedies. Except as otherwise provided herein, any and all remedies herein expressly conferred upon a party will be deemed cumulative with and not exclusive of any other remedy conferred hereby or by law or equity on such party, and the exercise of any one remedy will not preclude the exercise of any other. 9.10 Further Assurances. Each party agrees to cooperate fully with the other parties and to execute such further instruments, documents and agreements and to give such further written assurances as may be reasonably requested by any other party to evidence and reflect the transactions described herein and contemplated hereby and to carry into effect the intents and purposes of this Agreement. 9.11 Absence of Third-Party Beneficiary Rights. No provision of this Agreement is intended, nor will be interpreted, to provide to create any third party beneficiary rights or any other rights of any kind in any client, customer, affiliate, stockholder, employee, partner or any other person or entity unless specifically provided otherwise herein, and, except as so provided, all provisions hereof will be personal solely between the parties to this Agreement. 9.12 Mutual Drafting. This Agreement is the joint product of the parties hereto and each provision hereof has been subject to the mutual consultation, negotiation and agreement of such parties and shall not be construed for or against any such parties. 9.13 Governing Law. This Agreement shall be governed in all respects, including validity, interpretation and effect, by the laws of the State of Delaware (without giving effect to its choice of law principles). IN WITNESS WHEREOF, the parties have caused this Agreement to be signed as of the date first written above. UNIVERSAL AMERICAN FLOWERS, INC. By: William C. McClure Name: William C. McClure Title: President AGRIMAX FLORAL PRODUCTS, INC. By: Gilbert N. Miller Name: Gilbert N. Miller Title: Executive Vice President Date: October 27, 1995 UAF, L.P. By: UNIVERSAL AMERICAN FLOWERS, INC., General Partner By: William C. McClure Name: William C. McClure Title: President FRESCHE BLOSSOMS, L.L.C. By: William C. McClure Name: William C. McClure Title: Chairman and Chief Executive Officer William C. McClure WILLIAM C. MCCLURE Gay W. Butler GARY W. BUTLER Dorothea J. Owens DOROTHEA J. OWENS Timothy C. Finn TIMOTHY C. FINN John W. Suber, Jr. JOHN W. SUBER, JR. Anthony J. Wright ANTHONY J. WRIGHT Doug Bauer DOUG BAUER Roxanne E. Bakula ROXANNE E. BAKULA Epitope, Inc., an Oregon corporation, the indirect parent corporation of AgriMax, hereby unconditionally and irrevocably guarantees the due and punctual payment when due of all sums which may be payable by AgriMax, and the due and punctual performance of each and every obligation of AgriMax to be performed, under this Agreement and under all agreements which are exhibits to this Agreement. EPITOPE, INC. By: Gilbert N. Miller Name: Gilbert N. Miller Title: Executive Vice President Date: October 27, 1995 Exhibit 2.1 Assignment of Company Interests ASSIGNMENT OF COMPANY INTERESTS For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, _____________ ("Assignor"), does hereby assign, transfer and convey to Universal American Flowers, Inc., a Florida corporation ("UAF"), all of Assignor's right, title and interest in and to the interests of Assignor in the Company (the "Company Interests"), including, without limitation, (i) any and all rights to receive a distributive share of the income and losses of the Company (regardless of when earned or incurred), (ii) any and all rights to receive a distributive share of the Company's assets, (iii) any and all rights to participate in the management and affairs of the Company (if any), (iv) any and all rights to vote on certain matters, and (v) all other rights of the Assignor with respect to the Company as set forth in the Operating Agreement of the Company and applicable law, free and clear of any and all Encumbrances. This Assignment is being executed and delivered by Assignor pursuant to the terms of the AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") dated as of __________, 1995, among UAF, the Company, Assignor and certain other parties named therein. All capitalized terms used in this Assignment shall have the meanings as in the Agreement. Assignor agrees that Assignor shall take such additional action as may be reasonably requested by UAF to effect the assignment and transfer of all the Company Interests and to assist and cooperate with UAF in any proceedings involving the Company Interests. Requested action shall be taken at UAF's expense. IN WITNESS WHEREOF, the undersigned has executed in and delivered this Assignment as of the __ day of ____________, 1995. ___________________________________ (Signature) ___________________________________ (Print Name) Exhibit 3.2(a) AgriMax Equipment Bill of Sale EQUIPMENT BILL OF SALE For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, AgriMax Floral Products, Inc., a Minnesota corporation ("AgriMax"), does hereby grant, bargain, transfer, sell, assign, convey and deliver to UAF, L.P., a Delaware limited partnership, all of AgriMax's right, title and interest in and to the AgriMax Equipment free and clear of any and all Encumbrances. This Bill of Sale is being executed and delivered by AgriMax pursuant to the terms of the AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") dated as of _______________, 1995 among UAF, L.P., AgriMax, Fresche Blossoms, L.L.C., a Delaware limited liability company, Universal American Flowers, Inc., a Florida corporation, and certain other persons named in the Agreement. All capitalized terms used in this Bill of Sale shall have the same meanings as in the Agreement. EXCEPT AS EXPRESSLY PROVIDED IN THE AGREEMENT, THIS CONVEYANCE OF THE AGRIMAX EQUIPMENT BY AGRIMAX TO UAF, L.P. IS "AS-IS, WHERE-IS," WITHOUT ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION, REPRESENTATIONS OR WARRANTIES WITH RESPECT TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR VALUE). Executed in Beaverton, Oregon, on _____________, 1995. AGRIMAX FLORAL PRODUCTS, INC. By: _________________________ Name: _______________________ Title: ______________________ Exhibit 3.2(b) AgriMax Intellectual Property Assignment INTELLECTUAL PROPERTY ASSIGNMENT For good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, AgriMax Floral Products, Inc., a Minnesota corporation ("AgriMax"), does hereby assign and transfer to UAF, L.P., all of AgriMax's right, title and interest in and to the AgriMax Intellectual Property (as defined below) free and clear of any and all Encumbrances (as defined below), together with all goodwill associated therewith. This Assignment is being executed and delivered by AgriMax pursuant to the terms of the AGREEMENT AND PLAN OF REORGANIZATION ("Agreement") dated as of __________, 1995, among UAF, L.P., AgriMax, Fresche Blossoms, L.L.C., a Delaware limited liability company, Universal American Flowers, Inc., a Florida corporation, and certain other persons named in the Agreement. For purposes of this Assignment, the following terms shall have the following meanings: (i) "AgriMax Intellectual Property" means the trademarks Fresche Blossoms(R) (U.S. Reg. No. - 1,815,566; Reg. Date - January 4, 1994) and Everguard(R) (U.S. Reg. No. - 1,792,277; Reg. Date - September 14, 1993) and Fresche Blossoms Express(TM), the formula for the Everguard preservative, any AgriMax trade secrets existing on May 1, 1995 and all permits, licenses and franchises used by AgriMax in its packaged fresh flower and floral preservative distribution business as of May 1, 1995, to the extent transferable); and (ii) "Encumbrance" means any mortgage, claim, charge, lien, encumbrance, easement, limitation, restriction, commitment, or security interest, except statutory liens securing taxes, assessments, and payments not yet due, or liens incurred in the ordinary course of business (including liens in favor of mechanics or materialmen). EXCEPT AS EXPRESSLY PROVIDED IN THE AGREEMENT, THIS ASSIGNMENT OF THE AGRIMAX INTELLECTUAL PROPERTY BY AGRIMAX TO UAF, L.P. IS "AS-IS, WHERE-IS," WITHOUT ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION, REPRESENTATIONS OR WARRANTIES WITH RESPECT TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR VALUE). Agrimax agrees that it shall take such additional action as may be reasonably requested by UAF, L.P. to effect the assignment and transfer of all the AgriMax Intellectual Property, to cause the same to be made of record where required, and to assist and cooperate with UAF, L.P. in any proceedings involving the AgriMax Intellectual Property. Requested action shall be taken at UAF, L.P.'s expense. Executed in Beaverton, Oregon, on ___________, 1995. AGRIMAX FLORAL PRODUCTS, INC. By: __________________________ Name: ________________________ Title: _______________________ Exhibit 3.3 UAF Bill of Sale, Assignment, Assumption and General Conveyance BILL OF SALE, ASSIGNMENT, ASSUMPTION AND GENERAL CONVEYANCE AGREEMENT THIS BILL OF SALE, ASSIGNMENT, ASSUMPTION AND GENERAL CONVEYANCE AGREEMENT ("Agreement") dated as of __________, 1995 is entered into by and between Universal American Flowers, Inc., a Florida corporation (the "Corporation"), and UAF, L.P. a Delaware limited partnership (the "Partnership"). W I T N E S S E T H: WHEREAS, the Corporation and the Partnership are parties to an Agreement and Plan of Reorganization dated as of __________, 1995 (the "Reorganization Agreement"); and WHEREAS, pursuant to the Reorganization Agreement the Corporation has agreed to sell, assign and convey all of its assets to the Partnership and the Partnership has agreed to assume all of the liabilities of the Corporation; NOW, THEREFORE, in consideration of the premises contained herein and in the Reorganization Agreement and for other good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties agree as follows: 1. Sale, Assignment and Conveyance of Assets. Subject to the terms and conditions herein set forth, the Corporation hereby sells, transfers, conveys, assigns and delivers to the Partnership to have and to hold forever, and the Partnership hereby accepts, all of the Corporation's right, title and interest in and to any and all of the assets of the Corporation of whatever kind or nature, real, personal, mixed, tangible, intangible, contingent or vested, as the same shall exist on the date hereof, including, but without limiting the generality of the foregoing, all machines and machinery, tools, appliances, fixtures, vehicles and equipment; all inventories of raw materials, work in process, finished products and stock in trade; all furniture, fixtures, furnishings, office equipment and supplies; all investments and securities; the business of the Corporation as a going concern together with the good will attaching thereto; all letters patent, patent rights, inventions, processes, formulae, trademarks, trade secrets and applications thereof; all contracts, claims, notes, accounts receivable, rights and choses in action; all moneys, cash (except as specifically indicated below), bank credits or deposits, all duties and taxes recoverable; all policies of insurance of whatsoever nature (life, group life, fire, public liability, business interruption, and every other type); all fidelity, contract and other bonds; all memberships, agencies and permits, all deferred charges, advance payments, prepaid items, advance receipts, and other deferred and prepaid assets and credits of all kinds; all equitable interests in property whether standing in the name of the Corporation or in the name of any other person, firm or corporation for the use and benefit of the Corporation; all copyrights, trade names, trade brands, drawings and engineering plans, customer lists and directory listings; all contracts for the purchase of raw materials and supplies, for the sale of goods, for service or employment whether professional or non-professional, technical or non-technical; all restrictive covenants and obligations of present and former officers and employees of the Corporation and of individuals and corporations from whom the Corporation acquired property; all agreements with sales agents, representatives and dealers; all other contracts, arrangements or agreements of the Corporation of any kind whatsoever; all books of account, files, papers and records; and any and all other things of value (all of the foregoing being collectively referred to herein as the "UAF Assets"); provided, however, the properties and assets transferred hereby shall not include (i) the corporate minute books and stock transfer records of the Corporation and (ii) $25,000 in cash to be retained by the Corporation for general corporate purposes. 2. Assumption of Liabilities and Obligations. Subject to the terms and conditions herein set forth, the Partnership hereby assumes and agrees to perform, observe, satisfy and fulfill all of the duties, liabilities and obligations of the Corporation, whether direct or indirect, contingent or otherwise, now existing or hereafter arising, under, pursuant to or in connection with all contracts, agreements, arrangements, debts, covenants, accounts, indemnities, claims, charges, taxes, suits, actions, damages, executions, judgments, assessments or other liabilities or obligations of any nature whatsoever of or affecting the Corporation in existence as of the date hereof or arising from or relating to actions or omissions of the Corporation prior to the date hereof. 3. Power of Attorney. The Corporation hereby constitutes and appoints the Partnership the true and lawful attorney of the Corporation, with full power of substitution, in the name of the Corporation or otherwise, to demand and receive any and all of the UAF Assets, and any part thereof, and from time to time to institute and prosecute, for the benefit of the Partnership, any and all proceedings at law, in equity or otherwise, which the Partnership may deem proper for the collection or reduction to possession of any of the UAF Assets or for the collection and enforcement of any claim or right of any kind hereby sold, conveyed, transferred or assigned, or intended so to have been, and to do all acts and things in relation to the UAF Assets which the Partnership shall deem advisable. 4. Further Assurances. The parties agree to execute and deliver all documents and instruments, and to perform or cause to be performed such further acts or things, as may be reasonably necessary to carry out the intended assignments, assumptions and other transactions contemplated by this Agreement. In furtherance of the foregoing, the Corporation agrees, to the extent reasonably requested by the Partnership or AgriMax Floral Products, Inc., to obtain any consents from third parties required in connection with the conveyance of the UAF Assets, to execute any instruments or documents necessary to evidence or reflect the conveyance of the UAF Assets to the Partnership, to cause the same to be made of record, and to assist and cooperate with the Partnership in any proceedings involving the UAF Assets or the liabilities and obligations assumed hereunder by the Partnership. Any requested action shall be at the expense of the Partnership. 5. Disclaimer of Warranties. EXCEPT AS EXPRESSLY PROVIDED IN THE REORGANIZATION AGREEMENT, THIS CONVEYANCE OF THE UAF ASSETS BY THE CORPORATION TO THE PARTNERSHIP IS "AS-IS, WHERE-IS," WITHOUT ANY REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED, OF ANY NATURE WHATSOEVER (INCLUDING, WITHOUT LIMITATION, REPRESENTATIONS OR WARRANTIES WITH RESPECT TO MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, OR VALUE). THE PARTNERSHIP ACCEPTS THE UAF ASSETS SUBJECT TO ANY AND ALL MORTGAGES, CLAIMS, CHARGES, LIENS, EASEMENTS, LIMITATIONS, RESTRICTIONS, COMMITMENTS, SECURITY INTERESTS AND OTHER ENCUMBRANCES OF ANY NATURE WHATSOEVER. 6. Amendment. This Agreement shall not be amended, except pursuant to a writing executed by all of the parties hereto. 7. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute a single instrument. 8. Entire Agreement. This Agreement and the Reorganization Agreement set forth the entire understanding and agreement between the parties as to the matters covered herein and supersedes and replaces any prior understanding, agreement or statement (written or oral) of intent. Except as expressly provided for herein, no provision of this Agreement shall be construed to confer any rights, or remedies on any person other than the Corporation or the Partnership. 9. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 10. Governing Law. This Agreement shall be construed in accordance with, and governed by, the laws of the State of Delaware. IN WITNESS WHEREOF, this Agreement has been executed and delivered as of the date first written above. UNIVERSAL AMERICAN FLOWERS, INC., a Florida corporation By: ________________________________ Name: ______________________________ Title:_______________________________ UAF, L.P., a Delaware limited partnership By: Universal American Flowers, Inc., General Partner By: ________________________________ Name: ______________________________ Title:_______________________________ Exhibit 5.1 Restricted Stock Purchase Agreement RESTRICTED STOCK PURCHASE AGREEMENT THIS RESTRICTED STOCK PURCHASE AGREEMENT ("Agreement") is made and entered into effective as of the ____ day of _______, 1995 by and between Universal American Flowers, Inc., a Florida corporation (the "Company") and _________________ (the "Purchaser"). WITNESSETH: WHEREAS, Purchaser is an employee of UAF, L.P., a limited partnership organized under the laws of Delaware (the "Employer"); WHEREAS, the Company is the general partner of the Employer and has significant interests in the growth and financial success of the Employer; WHEREAS, Purchaser's continued employment by Employer is considered by the Company to be important for the growth and financial success of Employer; and WHEREAS, in order to encourage the continued participation of Purchaser in the business of Employer, the Company is willing to sell to Purchaser and Purchaser desires to purchase shares of the common stock, par value $1.00 per share ("Common Stock"), of the Company. NOW, THEREFORE, in consideration of the premises and the mutual covenants contained in this Agreement, the parties agree as follows: 1. Purchase of Shares by Purchaser. 1.1 Purchase of Shares; Consideration. The Company hereby sells to Purchaser and Purchaser hereby purchases from the Company 3,959 shares of the Company's Common Stock (the "Shares") in consideration of the payment by Purchaser to the Company, simultaneously with the execution and delivery hereof, of $100, an amount which, together with services previously performed for Employer by Employee have been determined by the Board of Directors of the Company to constitute adequate consideration for the issuance of the Shares within the meaning of Section 621(3) of the Florida Business Corporation Act. 1.2 Delivery of Certificates. The certificates representing the Shares shall be held in escrow as provided in Section hereof. 2. Restrictions on Transfer of Shares by Purchaser. For so long as the Shares remain subject to the Purchase Option (as defined in Section 3.2), Purchaser shall not sell, assign, donate, transfer, pledge, hypothecate or otherwise dispose of (collectively, "Transfer"), or enter into any agreement for the Transfer of, any of the Shares, without the express prior written consent of the Company in its sole discretion. 3. Repurchase Option of the Company. 3.1 Trigger Event. Each of the following events shall constitute a "Trigger Event": (a) the termination of employment of Purchaser by Employer, or any parent or subsidiary of Employer, in a full- time capacity, for any reason, with or without cause including, without limitation, involuntary termination, permanent disability or death of the Purchaser; (b) Purchaser becomes a debtor under the United States Bankruptcy Code (voluntarily or involuntarily); (c) Purchaser makes a general assignment for the benefit of creditors or permits any of the Shares to be attached or levied upon or to become subject to judicial sale or execution of judgment; or (d) Purchaser would, but for this Agreement, be required to involuntarily Transfer any of the Shares as a result of any other event. 3.2 Purchase Option. Upon the occurrence of a Trigger Event, Purchaser shall be deemed, immediately before such Trigger Event occurs, to have made an offer to the Company to repurchase all of the Shares, and the Company shall have the right and option ("Purchase Option") to repurchase all of such Shares as set forth in this Section 3 at an aggregate purchase price of $100 (the "Option Purchase Price"). 3.3 Exercise of Purchase Option. Within thirty (30) days after the date of any termination of employment of Purchaser as provided in Section 3.1 (a), the Company shall notify Purchaser as to whether the Company wishes to purchase all of the Shares pursuant to the Purchase Option. Immediately upon the occurrence of a Trigger Event other than termination of employment as described in Section 3.1(a), Purchaser (or Purchaser's heirs at law or legal representatives) shall deliver written notice to the Secretary of the Company of the occurrence of such Trigger Event. Within twenty (20) days following receipt of such notice from Purchaser (or Purchaser's heirs at law or legal representatives), the Company shall notify Purchaser (or Purchaser's heirs at law or legal representatives) whether the Company wishes to purchase all of the Shares pursuant to the Purchase Option. If the Company elects to exercise the Purchase Option, the closing of the purchase and the payment of the purchase price shall be as provided in Section 4. 3.4 Effect of Non-Exercise of Purchase Option. If the Purchase Option becomes exercisable as a result of the occurrence of a Trigger Event described in Section 3.1 and the Purchase Option is not exercised by the Company within the time period allotted in Section 3.3 after proper notice from Purchaser (or Purchaser's heirs at law or legal representatives), the Purchase Option shall expire. 3.5 Expiration of Purchase Option. If not earlier terminated pursuant to the provisions of this Agreement, the Purchase Option shall expire at 5:00 p.m., Eastern Time, on the tenth anniversary of the date hereof. 4. Closing. The closing of any purchase of the Shares by the Company pursuant to this Agreement shall be held at the principal place of business of the Company on a date determined by the Company but not more than fifteen (15) days following the date upon which the Company shall have exercised the Purchase Option, or at such other place and such other time as the parties may agree. At any such closing, certificates representing the Shares being purchased, duly endorsed, free and clear of all liens and encumbrances, and ready for transfer, shall be delivered to the Company in exchange for the Option Purchase Price. 5. Effect of Certain Corporate Transactions. In the event of any of a merger, consolidation, reorganization or acquisition in which the Company is not the surviving entity, the Purchase Option shall remain in effect and, to the extent applicable, this Agreement and the Purchase Option hereunder shall be deemed to be assigned to the surviving or successor entity, unless prior to or in connection with such Transaction the Board of Directors of the Company shall determine that the Purchase Option shall lapse. 6. Capital Changes and Adjustments. If, from time to time during the term of this Agreement: (i) there is any stock dividend, stock split, dividend of property other than cash, reclassification or other change in the character or amount of any of the outstanding securities of the Company; or (ii) there is any reorganization, consolidation or merger of the Company with another corporation or other entity; then, except as otherwise expressly provided in Section 5, in such event, any and all new, substituted or additional securities, or other property, other than cash, to which Purchaser is entitled by reason of Purchaser's ownership of the Shares shall be immediately subject to this Agreement, shall be deposited with the Escrow Agent and shall be included in the word "Shares" for all purposes with the same and force and effect as the Shares then subject to the Purchase Option. While the aggregate Option Purchase Price shall remain the same after each such event, the applicable Option Purchase Price per Share payable upon exercise of the Purchase Option shall be appropriately adjusted. 7. Shareholders Agreement. 7.1 Shareholders Agreement. The Company and/or its holders of fifty percent (50%) or more of the Company's Common Stock are parties to any shareholder agreement or other agreement affecting generally dispositions of common stock by shareholders, (a "Shareholders Agreement") then, if requested by the Company, Purchaser shall be bound by and subject to the terms of the Shareholders Agreement as a shareholder thereunder. 7.2 Transfer of Shares to Third Parties. In the event that any or all of the Shares are proposed to be transferred to any party other than to the Company pursuant to the Purchase Option, under any circumstances whatsoever (including, without limitation, any Transfer, whether voluntary or involuntary, resulting from a Trigger Event pursuant to which the Company elected not to exercise the Purchase Option), then any such Transfer shall be conducted in accordance with the provisions of any Shareholders Agreement then in effect as if Purchaser were then a party thereto (including, without limitation, all rights of first refusal for the benefit of other shareholders and other provisions thereof) and any transferee shall acquire the Shares subject to the Shareholders Agreement and shall become a party thereto and be bound by the terms thereof. 8. Tax Matters. 8.1 Valuation of Shares. Purchaser understands that the Shares have been valued by the Board of Directors for the purpose of sale pursuant to this Agreement, and that the Company believes such valuation represents a fair attempt at reaching an accurate appraisal of their worth. Purchaser also understands, however, that the Company can give no assurances that such price is in fact the fair market value of the shares and that it is possible that the Internal Revenue Service would successfully assert that the value of the Shares on the date of purchase is substantially greater than so determined. If the Internal Revenue Service were to succeed in a determination that the Shares had value greater than the purchase price, the additional value could constitute ordinary income to Purchaser as of the date of its receipt. Additional taxes (and interest) due could be payable by Purchaser, and there is no provision for the Company to reimburse Purchaser for that tax liability. Purchaser assumes all responsibility for such potential tax liability. 8.2 Section 83(b) Election. Purchaser understands that Section 83 of the Internal Revenue Code of 1986, as amended (the "Code"), taxes as ordinary income the difference between the amount paid for the Shares and the fair market value of the Shares as of the date any restrictions on the Shares lapse. In this context, "restriction" means the right of the Company to repurchase the Shares pursuant to the Purchase Option. Purchaser understands that Purchaser may elect to be taxed at the time the Shares are purchased rather than when the Purchase Option expires by filing an election under Section 83(b) of the Code with the Internal Revenue Service within thirty (30) days after the date of purchase. Even if the fair market value of the Shares equals the amount paid for the Shares (and thus no tax is payable), the election must be made to avoid adverse tax consequences in the future. Purchaser understands that failure to make this filing in a timely manner will result in the recognition of ordinary income by Purchaser, when the Purchase Option lapses, on the amount, if any, by which the fair market value of the Shares at the time such restrictions lapse exceeds the purchase price of the Shares. PURCHASER ACKNOWLEDGES THAT IT IS PURCHASER'S SOLE RESPONSIBILITY AND NOT THE COMPANY'S TO TIMELY FILE THE ELECTION UNDER SECTION 83(b) EVEN IF PURCHASER REQUESTS THE COMPANY OR ITS REPRESENTATIVES TO MAKE THIS FILING ON PURCHASER'S BEHALF. 8.3 Notice of Tax Election. If Purchaser makes any tax election relating to the tax treatment of the Shares under the Code, at the time of such election Purchaser shall promptly notify the Company of such election. 9. Escrow. As security for the faithful performance of the terms of this Agreement and to insure the availability for delivery of the Shares upon exercise of the Purchase Option, Purchaser hereby delivers for deposit with the Secretary of the Company, or such other person designated by the Company, as escrow agent in this transaction ("Escrow Agent"), two stock assignments duly endorsed (with date and number of shares blank) together with the certificate or certificates evidencing the Shares. Such documents are to be held by the Escrow Agent and delivered by the Escrow Agent pursuant to the following instructions of the Company and Purchaser: (a) In the event the Company exercises the Purchase Option, Purchaser and the Company hereby irrevocably authorize and direct the Escrow Agent to execute the transaction contemplated by any notice of exercise of the Purchase Option in accordance with the terms of such notice and this Agreement. (b) In connection with such transaction the Escrow Agent is directed to (i) to date the stock assignment necessary for the transfer in question, (ii) to fill in the number of shares being transferred, and (iii) to deliver such assignment, together with the certificate evidencing the Shares to be transferred, to the Company against the delivery of the Option Purchase Price. (c) Purchaser irrevocably authorizes the Company to deposit with the Escrow Agent any certificates evidencing the Shares to be held by the Escrow Agent hereunder and any additions and substitutions to said Shares as described in this Agreement. Purchaser irrevocably constitutes and appoints the Escrow Agent as Purchaser's attorney-in-fact and agent for the term of this escrow to execute all documents appropriate to make such securities negotiable and to complete any transaction herein contemplated. (d) Upon the expiration or termination of the Purchase Option as to the Shares as provided in this Agreement, the Escrow Agent will deliver to Purchaser the certificate or certificates representing such Shares and the escrow shall thereafter terminate as to such Shares. (e) If at the time of termination of this escrow the Escrow Agent has possession of any documents, securities, or other property belonging to Purchaser, the Escrow Agent shall deliver such property to Purchaser, and be discharged of all further obligations hereunder. (f) The responsibilities of the Escrow Agent hereunder shall terminate if the Secretary of the Company shall cease to be the Secretary or if the Escrow Agent shall resign by written notice to each party. In the event of any such termination, the Company shall appoint a successor Escrow Agent. In the absence of such appointment, the President of the Company shall be the Escrow Agent. (g) It is understood and agreed that should any dispute arise with respect to the delivery, ownership, or right of possession of the Shares held by the Escrow Agent hereunder, the Escrow Agent is authorized to retain without liability to anyone all or any part of said Shares until such disputes shall have been settled either by mutual written agreement or by a court order, decree, or judgment, if applicable, but the Escrow Agent shall be under no duty whatsoever to institute or defend such proceedings. (h) By signing this Agreement, the Escrow Agent becomes a party hereto only for the purpose of executing the instructions set forth in this Section 10 and does not otherwise become a party to this Agreement. 10. Securities Law Compliance. 10.1 Absence of Registration. Purchaser is aware that the Shares have not been registered under the Securities Act of 1933, as amended (the "Act"), or applicable state securities laws and have been issued to Purchaser in reliance upon exemptions from the registration requirements of the Act and applicable state securities laws. 10.2 Investment Representations. In connection with the Purchaser's acquisition of the Shares from the Company pursuant to this Agreement, Purchaser hereby represents and warrants to the Company as follows: (a) Investment Intent. Purchaser is aware of and familiar with the Company's business affairs and financial condition and has acquired sufficient information about the Company to reach a knowledgeable and informed decision to acquire the Shares. Purchaser is acquiring the Shares for investment for his own account, not for resale, without any intention of or view toward or for participating, directly or indirectly, in a distribution of the Shares or any portion thereof. (b) Representatives. Purchaser has consulted with such professional advisors (the "Representatives"), if any, as Purchaser has seen fit in connection with this proposed investment. (c) Experience. Purchaser and Purchaser's Representatives, if any, have such knowledge and experience in financial and business matters that Purchaser is capable of evaluating the merits and risks of investment in the Shares. (d) Risks. Purchaser understands that an investment in the Company is speculative, that any possible profits therefrom are uncertain, and that Purchaser must bear the economic risks of the investment in the Company for an indefinite period of time. Purchaser is able to bear these economic risks and to hold the Shares for an indefinite period. (e) Information. Purchaser and Purchaser's Representatives, if any, have received all information and data with respect to the Company which Purchaser or Purchaser's Representatives have requested and have deemed relevant in connection with an evaluation of the merits and risks of this investment in the Company, and do not desire any further information or data with respect to the Company or the purchase of the Shares. (f) Legends. Purchaser understands and agrees that (i) the legends set forth in Section 12 will be placed on the certificate(s) evidencing the Shares and on, as applicable, certificate(s) issued to transferees; (ii) the stock records of the Company will be noted with respect to such restrictions; and (iii) the Company will not be under any obligation to register the Shares or to comply with any exemption available for resale of the Shares without registration. (g) Restrictions on Resale. Purchaser understands that, under relevant securities law requirements, the Shares must be held indefinitely unless they are subsequently registered under the Act or an exemption from such registration is available. The Company is under no obligation to so register the Shares. Purchaser understands that Rule 144 of the Securities and Exchange Commission permits limited public resale of securities acquired in a non-public offering subject to satisfaction of certain conditions. Purchaser understands that the Company may not be satisfying, and is not obligated to satisfy, any requirement of Rule 144 at such time as Purchaser might wish to sell any of the Shares, and, if so, Purchaser might be precluded from selling any of the Shares under Rule 144. 10.3 Further Limitations on Disposition. Without in any way limiting the representations set forth above, Purchaser further agrees that Purchaser shall in no event make any disposition of any portion of the Shares unless and until: (i)(A) there is in effect a registration statement under the Act covering such proposed disposition and such disposition is made in accordance with said registration statement; or, (B)(1) Purchaser shall have notified the Company of the proposed disposition and shall have furnished the Company with a detailed statement of the circumstances surrounding the proposed disposition, (2) Purchaser shall have furnished the Company with an opinion of the Purchaser's counsel to the effect that such disposition will not require registration of such shares under the Act and (3) such opinion of the Purchaser's counsel shall have been concurred in by counsel for the Company and the Company shall have advised Purchaser of such concurrence; and (ii) there has been compliance with all requirements of this Agreement. 10.4 Disclosures Pursuant to State Securities Laws. Purchaser is aware of and understands the following: (i) IN MAKING AN INVESTMENT DECISION PURCHASER MUST RELY ON PURCHASER'S OWN EXAMINATION OF THE ISSUER AND THE TERMS OF THE OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THE SHARES HAVE NOT BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. (ii) THE SHARES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. PURCHASER SHOULD BE AWARE THAT PURCHASER WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME. (iii) UNDER THE FLORIDA SECURITIES AND INVESTOR PROTECTION ACT Section 517.061(11)(a)(5), SUBSCRIPTIONS FOR THE SHARES BY EACH PERSON WHO IS A RESIDENT OF THE STATE OF FLORIDA (A "FLORIDA PURCHASER") MAY (IF THE REQUIREMENTS OF SUCH ACT ARE SATISFIED) BE VOIDABLE BY EACH SUCH FLORIDA PURCHASER FOR A PERIOD EXPIRING ON THE THIRD DAY AFTER THE FLORIDA PURCHASER'S TENDER OF CONSIDERATION FOR THE SHARES. If a Florida Purchaser exercises the right to void his or her purchase, the purchase price paid shall be returned to the Florida Purchaser by the Company and such Florida Purchaser shall thereafter cease to have any interest in the Shares. 11. Legends on Shares. Each certificate representing the Shares shall have conspicuously printed on it the following legends: (i) "THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR THE SECURITIES LAWS OF THE VARIOUS STATES, AND HAVE BEEN ISSUED AND SOLD PURSUANT TO AN EXEMPTION FROM THE ACT, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED BY THE HOLDER THEREOF AT ANY TIME EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT FILED UNDER THE ACT COVERING THESE SHARES, OR (2) UPON DELIVERY TO THE CORPORATION OF AN OPINION OF COUNSEL SATISFACTORY TO THE CORPORATION THAT THESE SHARES MAY BE TRANSFERRED WITHOUT REGISTRATION." (ii) "THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN RESTRICTIONS UPON TRANSFER AND RIGHTS OF REPURCHASE AS SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER OR HIS PREDECESSOR IN INTEREST, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE CORPORATION." (iii) Any legend required to be placed thereon by any state securities commissioner or the applicable blue sky laws of any state. 12. Improper Disposition of Shares. If any of the Shares shall be disposed of otherwise than in accordance with the terms and conditions of this Agreement, such disposition shall be of no force, effect or validity. Alternatively, at the option of the Company, instead of treating such transfer as a nullity, the Company shall have the right, exercisable at any time prior to the expiration of six (6) months after the Company received written or other notice of such disposition, to purchase such Shares as if a notice of offer had been timely given as provided in Section 3. In enforcing such rights, the Company may hold and refuse to transfer any stock, or any certificate therefor, tendered to it for transfer, in addition to, and without prejudice to, any and all other rights or remedies which may be available to the Company. 13. Employment at Will. The parties acknowledge that Purchaser's employment relationship with Employer is at the will of either party, unless otherwise agreed in writing, and that nothing in this Agreement shall affect in any manner whatsoever the right or power of Purchaser or Employer, or a parent or subsidiary of Employer, to terminate Purchaser's employment. 14. Rights as a Shareholder. Subject to the provisions and limitations hereof, Purchaser shall be entitled to exercise all rights and privileges of a shareholder of the Company with respect to the Shares. 15. Miscellaneous Provisions. 15.1 Additional Actions. The parties will execute such further instruments and take such further action as may reasonably be necessary to carry out the intent of this Agreement. 15.2 Notices. Any notice required or permitted hereunder shall be given in writing and shall be deemed effectively given upon personal delivery or upon deposit in the United States Post Office, by regular or certified mail with postage and fees prepaid, addressed, if to Purchaser, at Purchaser's address set forth on the signature page hereto and, if to the Company, at the address of its principal corporate offices (Attention: President) or at such other address as such party may designate by ten days' advance written notice to the other party. 15.3 Assignment. Rights and obligations under this Agreement may not be assigned without the written consent of each of the parties hereto, except that the Company may assign its rights and delegate its duties under this Agreement in connection with any certain Transaction as provided in Section 5 without the prior consent of Purchaser. Subject to the foregoing, this Agreement shall inure to the benefit of and be binding upon heirs, executors, administrators, successors and assigns of the parties. 15.4 No Waiver. No waiver of any breach or condition of this Agreement shall be deemed a waiver of any other or subsequent breach or condition, whether of like or different nature. 15.5 Cancellation of Shares. If the Company shall make available, at the time and place and in the amount and form provided in this Agreement, the consideration for the Shares to be repurchased in accordance with the provisions of this Agreement, then from and after such time, the person from whom such Shares are to be repurchased shall no longer have any rights as a holder of such Shares (other than the right to receive payment of such consideration in accordance with this Agreement), and such Shares shall be deemed purchased in accordance with the applicable provisions hereof and the Company shall be deemed the owner and holder of such shares, whether or not the certificates therefor have been delivered as required by this Agreement. 15.6 Entire Agreement. This Agreement constitutes the entire contract between the parties hereto with regard to the subject matter hereof. 15.7 Governing Law. This Agreement shall be governed by, and construed in accordance with, the laws of the State of Florida, as such laws are applied to contracts entered into and performed in such State. 15.8 Counterparts. This Agreement may be executed in counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one and the same instrument. 15.9 Severability. If any provision of this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable, the remaining provisions shall nevertheless continue in full force and effect without being impaired in any way and shall be construed in accordance with the purpose and terms of this Agreement. 15.10 Amendments. This Agreement may not be amended, modified or supplemented except by a writing executed by both parties. 15.11 Headings. The section headings contained in this Agreement are included for convenience of reference only and are not intended by the parties to be a part of or to affect the meaning or interpretation of this Agreement. 15.12 Jurisdiction, Venue and Waiver of Jury Trial. Any suit, action or proceeding with respect to this Agreement shall be brought exclusively in the Florida state courts of competent jurisdiction in Hillsborough, County, Florida or in the United States District Court in which the City of Tampa is located. ALL PARTIES HEREBY IRREVOCABLY WAIVE ANY OBJECTIONS WHICH THEY MAY NOW OR HEREAFTER HAVE TO THE PERSONAL JURISDICTION OR VENUE OF ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT BROUGHT IN SUCH COURT AND HEREBY FURTHER IRREVOCABLY WAIVE ANY CLAIM THAT SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. THE PARTIES HEREBY FURTHER IRREVOCABLY WAIVE ANY RIGHT TO A JURY TRIAL IN ANY ACTION ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT. 15.13 Specific Performance and Injunctive Relief. The parties hereto declare that it may be impossible to measure in money the damages which will accrue to a party hereto or to their heirs, personal representatives, or assigns by reason of a failure to perform any of the obligations under this Agreement and agree that the terms of this Agreement shall be specifically enforceable and that injunctive relief shall be available. If any party hereto or his heirs, personal representatives or assigns institutes any action or proceeding to specifically enforce the provisions hereof, any person against whom such action or proceeding is brought hereby waives the claim or defense therein that such party or such personal representative has an adequate remedy at law, and such person shall not urge in any such action or proceeding the claim or defense that such remedy at law exists. 15.14 Remedies Cumulative. All remedies available to the parties or herein expressly conferred shall be deemed cumulative with and not exclusive of any other remedies expressly conferred hereby or available to any party, and the exercise of any one remedy shall not preclude the exercise of any other. 15.15 Attorneys' Fees. The prevailing party in any legal action arising out of this Agreement shall be entitled, in addition to any other rights and remedies such party may have, to reimbursement for its expenses, including costs and reasonable attorneys' fees. 16. Pledge of Shares to Bank. The parties acknowledge that the Purchaser has pledged the Shares to Sun Bank, National Association ("Bank") pursuant to a Pledge Agreement by and among Purchaser, Bank and certain other parties named therein (the "Pledge Agreement"). Anything to the contrary in this Agreement notwithstanding, the parties agree that the Shares shall be subject in all respects to the Pledge Agreement and that the rights of the parties pursuant to this Agreement shall be subordinate to the rights of Bank under the Pledge Agreement. The parties further agree not to exercise any right pursuant to this Agreement in a manner that would violate the provisions of the Pledge Agreement. In furtherance of the foregoing, certificates evidencing the Shares shall be held by Bank pursuant to the Pledge Agreement and only upon release by Bank shall be deposited with the Escrow Agent pursuant to this Agreement. [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written. PURCHASER: COMPANY: ____________________________ UNIVERSAL AMERICAN FLOWERS, INC. (Signature) By: _______________________ _____________________________ (Print Name) Name: _____________________ ___________________________ Title:_____________________ ____________________________ _____________________________ _____________________________ (Address) WITH RESPECT TO SECTION 9 ONLY: ESCROW AGENT ____________________________ (Signature) ____________________________ (Print Name) CONSENT The undersigned spouse of Purchaser agrees that the spouse's interest in the Shares subject to this Agreement shall be irrevocably bound by this Agreement and further understands and agrees that any community property interest, if any, shall be similarly bound by this Agreement. Date: _________________________ ________________________ Spouse of Purchaser Schedule 1.3 List of Additional AgriMax Equipment 1. Haworth systems furniture. 2. AccPac accounting software. 3. AST portable computer. 4. Telemagic marketing software. 5. Illinois Instruments headspace analyzer (Model 3600) 6. Gage marketing stands. Schedule 3.2(a) Encumbrances Pertaining to AgriMax Equipment 1. Interest of Northstate International Trucks in 1994 Mitsubishi truck evidenced by Retail Installment Contract dated August 24, 1993. EX-10.23 3 EMPLOYMENT AGREEMENT EXHIBIT 10.23 EMPLOYMENT AGREEMENT This Employment Agreement is entered into as of July 15, 1995, between Byron A. Allen, Jr. ("Employee") and Epitope, Inc., an Oregon corporation (the "Company"). 1. Services. 1.1 Employment. The Company agrees to employ Employee as the Vice President of Corporate Communications of the Company, and Employee hereby accepts such employment in accordance with the terms and conditions of this Agreement. Employment shall continue until terminated pursuant to the terms of this Agreement. 1.2 Duties. Employee shall have the position named in Section 1.1 with such powers and duties appropriate to that office (a) as may be provided by the bylaws of the Company, (b) as otherwise set forth on Schedule 1.2 attached to this Agreement (the absence of which shall indicate that no additional specific duties are so provided for), and (c) as determined by the president of the Company from time to time. Subject to the provisions of Section 5.2 hereof, Employee's position and duties may be changed from time to time during the term of this Agreement, including that Employee's place of work may be relocated at the sole discretion of the Company's board of directors. 1.3 Outside Activities. Employee shall obtain the consent of the board of directors before he engages, either directly or indirectly, in any other professional or business activities that may require an appreciable portion of Employee's time or effort to the detriment of the Company's business. Such consent will not be unreasonably withheld. 1.4 Direction of Services. Employee shall at all times discharge his duties in consultation with and under the supervision and direction of the Company's president, any duly designated representative of the president, and board of directors. 2. Compensation and Expenses. 2.1 Salary. As compensation for services under this Agreement, the Company shall pay to Employee a regular salary to be established each year by the President of the Company. Such salary may be adjusted from time to time unless the board of directors in its discretion determines not to do so. Payment shall be made on a bi-weekly basis, less all amounts required by law to be withheld or deducted, at such times as shall be determined by the board of directors. 2.2 Additional Employee Benefits. Employee shall also have the right to receive or participate in (a) any additional benefits, including, but not limited to, insurance programs, profit sharing or pension plans, and medical reimbursement plans, which may from time to time be made available by the Company to corporation officers as a group, and (b) any additional benefits set forth in Schedule 2.2 attached to this Agreement (the absence of which shall indicate that no additional specific benefits are so provided for). 2.3 Expenses. The Company shall reimburse Employee for all reasonable and necessary expenses incurred in carrying out his duties under this Agreement. Employee shall present to the Company from time to time an itemized account of such expenses in such form required by the Company. 3. Confidential Information. 3.1 Access to Information. Employee acknowledges that in the course of his employment he will have access to proprietary information, trade secrets, and other confidential information, that such information is a valuable asset of the Company, and that its disclosure or unauthorized use will cause the Company substantial harm. As used in this Agreement, the term "Confidential Information" means: (a) proprietary information and trade secrets of the Company and (b) information designated by the Company as confidential or which Employee knows or should know is confidential. 3.2 Ownership. Employee acknowledges that all Confidential Information shall continue to be the exclusive property of the Company, whether or not prepared in whole or in part by Employee and whether or not disclosed to Employee or entrusted to his custody in connection with his employment by the Company. 3.3 Nondisclosure and Nonuse. Unless authorized or instructed in writing by the Company, or required by legally constituted authority, Employee will not, except as required in the course of the Company's business, during or after his employment, disclose to others or use any Confidential Information, unless and until, and then only to the extent that, such items become available to the public, other than by his act or failure to prevent accidental or negligent loss or release to any unauthorized person of the Confidential Information. 3.4 Return of Confidential Information. Upon request by the Company during or after his employment, and without request upon termination of employment pursuant to this Agreement, Employee will deliver immediately to the Company all Confidential Information; Employee will thereafter retain no excerpts, notes, photographs, reproductions, or copies thereof. 3.5 Work Made for Hire. Employee agrees that all creative work, including without limitation designs, drawings, specifications, techniques, models, and processes, prepared or originated by Employee for the Company, or during or within the scope of employment by the Company, whether or not subject to protection under federal copyright or other law, constitutes work made for hire, all rights to which are owned by the Company; and, in any event, Employee assigns to the Company all rights, title, and interest, whether by way of copyright, trade secret, or otherwise, in all such work, whether or not subject to protection by copyright or other law. 3.6 Duration. The obligations set forth in this Section 3 will continue beyond the term of employment of Employee by the Company and for so long as Employee possesses Confidential Information. 4. Noncompetition. 4.1 Covenant. Employee covenants that Employee will not, throughout the United States, either individually or as a director, officer, partner, employee, agent, representative, or consultant with any business, directly or indirectly during the term of employment and for one year thereafter: 4.1.1 Engage or prepare to engage in any business that competes with the Company; 4.1.2 Induce or attempt to induce any person who is an employee of the Company during the term of this covenant to leave the employ of the Company; or 4.1.3. Solicit, divert, or accept orders for products or services that are substantially competitive with the products or services sold by the Company from any customer of the Company. 4.2 Enforcement. Employee acknowledges and agrees that the time, scope, and other provisions of this Section 4 have been specifically negotiated by sophisticated parties with the advice and consultation of counsel and specifically hereby agrees that such time, scope, and other provisions are reasonable under the circumstances. Employee further agrees that if, at any time, despite the express agreement of the parties hereto, a court of competent jurisdiction holds that any portion of this Section 4 is unenforceable for any reason, the maximum restrictions reasonable under the circumstances, as determined by such court, will be substituted for any such restrictions held unenforceable. 5. Termination. 5.1 Voluntary Resignation. Employee may terminate his employment under this Agreement by 90 days' written notice to the Company. 5.2 Termination by the Company. The Company may terminate Employee's employment under this Agreement with or without cause by 90 days' written notice to Employee. If the Company shall substantially diminish Employee's salary, duties, or title, or shall relocate the principal place where Employee's duties are performed to a place outside of the Portland metropolitan area, then Employee may elect (but shall not be required) to treat such event as a termination without cause. This Agreement shall terminate immediately upon employee's death. In the event of the termination of the employment of Employee by the Company without cause, Employee (a) shall continue to be paid the salary provided in Section 2.1 for 6 months from the date of notice of termination of employment in the manner and at the times at which regular compensation was paid to Employee during the term of his employment under the Agreement and (b) shall be reimbursed for reasonable expenses to accommodate relocation back to the East Coast. 6. Remedies. The respective rights and duties of the Company and Employee under this Agreement are in addition to, and not in lieu of, those rights and duties afforded to and imposed upon them by law or at equity. Employee acknowledges that breach of Sections 3, 4.1, or 4.2 of this Agreement will cause irreparable harm to the Company and agrees to the entry of a temporary restraining order and permanent injunction by any court of competent jurisdiction to prevent breach or further breach of this Agreement. Such remedy shall be in addition to any other remedy available to the Company at law or in equity. 7. Severability of Provisions. The provisions of this Agreement are severable, and if any provision hereof is held invalid or unenforceable, it shall be enforced to the maximum extent permissible, and the remaining provisions of the Agreement shall continue in full force and effect. 8. Attorney Fees. In the event a suit or action is filed to enforce Sections 3, 4.1, or 4.2 of this Agreement, the prevailing party shall be reimbursed by the other party for all costs and expenses incurred in connection with the suit or action, including without limitation reasonable attorney fees at trial or on appeal. 9. Nonwaiver. Failure of the Company at any time to require performance of any provision of this Agreement shall not limit the right of the Company to enforce the provision. No provision of this Agreement or breach thereof may be waived by either party except by a writing signed by that party. A waiver of any breach of a provision of this Agreement shall be construed narrowly and shall not be deemed to be a waiver of any succeeding breach of that provision or a waiver of that provision itself or of any other provision. 10. Arbitration. 10.1 Claims Covered. All claims or controversies, except for those excluded by Section 10.2 ("claims"), whether or not arising out of Employee's employment (or its termination), that Company may have against the Employee or that Employee may have against the Company or against its officers, directors, employees or agents, in their capacity as such or otherwise, shall be resolved as provided in this Section 10. Claims covered by this Agreement include, but are not limited to, claims for wages or other compensation due; claims for breach of any contract or covenant (express or implied); tort claims; claims for discrimination (including, but not limited to, race, sex, sexual orientation, religion, national origin, age, marital status, or medical condition, handicap or disability); claims for benefits (except where an employee benefit or pension plan specifies that its claims procedure shall culminate in an arbitration procedure different from this one), and claims for violation of any federal, state, or other governmental law, statute, regulation, or ordinance, except as provided in Section 10.2. 10.2 Non-covered Claims. Claims arising out of Sections 3, 4.1, or 4.2 of this Agreement and workers' compensation or unemployment compensation benefits are not covered by this Agreement. Non-covered claims include but are not limited to claims by the Company for injunctive and/or other equitable relief for unfair competition and/or the use and/or unauthorized disclosure of trade secrets or confidential information, as to which Employee understands and agrees that the Company may seek and obtain relief from a court of competent jurisdiction. 10.3 Required Notice of All Claims and Statute of Limitations. Company and Employee agree that the aggrieved party must give written notice of any claim to the other party within one year of the date the aggrieved party first has knowledge of the event giving rise to the claim; otherwise the claim shall be void and deemed waived even if there is a federal or state statute of limitations which would have given more time to pursue the claim. The written notice shall identify and describe the nature of all claims asserted and the facts upon which such claims are based. 10.4 Hearing or Mediation. Prior to any arbitration proceeding taking place pursuant to this Section, Company or Employee may, at its respective option, elect to submit the claim to non-binding mediation before a mutually agreeable mediation tribunal or mediator, in which event both parties shall execute a suitable confidentiality agreement and abide by the procedures specified by the mediation tribunal or mediator. 10.5 Arbitration Procedures. Any arbitration shall be conducted in accordance with the then-current Model Employment Arbitration Procedures of the American Arbitration Association ("AAA"), modified to substitute for AAA actions, the United States Arbitration and Mediation Service ("USA&MS"), before an arbitrator who is licensed to practice law in the State of Oregon ("the Arbitrator"). The arbitration shall take place in or near Portland, Oregon. 10.5.1 Selection of Arbitrator. The USA&MS shall give each party a list of 11 arbitrators drawn from its panel of labor- management dispute arbitrators. Each party may strike all names on the list it deems unacceptable. If only one common name remains on the lists of all parties, that individual shall be designated as the Arbitrator. If more than one common name remains on the lists of all parties, the parties shall strike names alternately until only one remains. The party who did not initiate the claim shall strike first. If no common name remains on the lists of all parties, the USA&MS shall furnish an additional list or lists until an Arbitrator is selected. 10.5.2 Applicable Law. The Arbitrator shall apply the substantive law (and the law of remedies, if applicable) specified in this Agreement or federal law, or both, as applicable to the claim(s) asserted. The Oregon Rules of Evidence shall apply. The Arbitrator, and not any federal, state, or local court or agency, shall have exclusive authority to resolve any dispute relating to the interpretation, applicability, enforceability or formation of this Agreement, including but not limited to any claim that all or any part of this Agreement is void or voidable. The arbitration shall be final and binding upon the parties, except as provided in this Agreement. 10.5.3 Authority. The Arbitrator shall have jurisdiction to hear and rule on pre-hearing disputes and is authorized to hold pre-hearing conferences by telephone or in person as the Arbitrator deems necessary. The Arbitrator shall have the authority to entertain a motion to dismiss and/or a motion for summary judgment by any party and shall apply the standards governing such motions under the Federal Rules of Civil Procedure. The Arbitrator shall render an award and opinion in the form typically rendered in labor arbitrations. 10.5.4 Representation. Any party may be represented by an attorney or other representative selected by the party. 10.5.5 Discovery. Each party shall have the right to take the deposition of one individual and any expert witness designated by another party. Each party also shall have the right to make requests for production of documents to any party. The subpoena right specified below shall be applicable to discovery pursuant to this paragraph. Additional discovery may be had only where the Arbitrator selected pursuant to this Agreement so orders, upon a showing of substantial need. At least 30 days before the arbitration, the parties must exchange lists of witnesses, including any experts, and copies of all exhibits intended to be used at the arbitration. Each party shall have the right to subpoena witnesses and documents for the arbitration. 10.5.6. Reporter. Either party, at its expense, may arrange for and pay the cost of a court reporter to provide a stenographic record of proceedings. 10.5.7 Post-Hearing Briefs. Either party, upon request at the close of hearing, shall be given leave to file a post-hearing brief. The time for filing such a brief shall be set by the Arbitrator. 10.6 Enforcement. Either party may bring an action in any court of competent jurisdiction to compel arbitration under this Agreement and to enforce an arbitration award. Except as otherwise provided in this Agreement, both the Company and Employee agree that neither shall initiate or prosecute any lawsuit or administrative action (other than for a non-covered claim) in any way related to any claim covered by this Agreement. A party opposing enforcement of an award may not do so in an enforcement proceeding, but must bring a separate action in any court of competent jurisdiction to set aside the award, where the standard of review will be the same as that applied by an appellate court reviewing a decision of a trial court sitting without a jury. 10.7 Arbitration Fees and Costs. Company and Employee shall equally share the fees and costs of the Arbitrator. Each party will deposit funds or post other appropriate security for its share of the Arbitrator's fee, in an amount and manner determined by the Arbitrator, 10 days before the first day of hearing. Each party shall pay for its own costs and attorneys' fees, if any, provided that the Arbitrator, in its sole discretion, may award reasonable fees to the prevailing party in a proceeding. 11. General Terms and Conditions. The parties acknowledge that the Company is engaged in transactions involving interstate commerce and that Employee's employment involves such commerce. This Agreement constitutes the entire understanding of the parties relating to the employment of Employee by the Company, and supersedes and replaces all written and oral agreements heretofore made or existing by and between the parties relating thereto. This Agreement shall be construed in accordance with the laws of the state of Oregon, without regard to any conflicts of laws rules thereof. This Agreement shall inure to the benefit of any successors or assigns of the Company. All captions used herein are intended solely for convenience of reference and shall in no way limit any of the provisions of this Agreement. IN WITNESS HEREOF, the parties have executed this Employment Agreement as of the date first hereinabove written. EPITOPE, INC. Bryon A. Allen, Jr. By: Adolph J. Ferro, Ph.D. Byron A. Allen, Jr. Adolph J. Ferro, Ph.D. Title: President EX-10.24 4 EMPLOYMENT AGREEMENT EXHIBIT 10.24 EMPLOYMENT AGREEMENT This Employment Agreement is entered into as of August 31, 1993, between Charles E. Bergeron ("Employee") and Epitope, Inc., an Oregon corporation ("Epitope"). 1. Services. 1.1 Employment. Epitope agrees to employ Employee as the President and Chief Executive Officer of Agrimax, Inc., a Minnesota corporation ("Agrimax") and a subsidiary of Epitope, and Employee hereby accepts such employment in accordance with the terms and conditions of this Agreement. Employment shall continue until terminated pursuant to the terms of this Agreement. 1.2 Duties. Employee shall have the position named in Section 1.1 with such powers and duties appropriate to that office (a) as may be provided by the bylaws of Agrimax, (b) as otherwise set forth on Schedule 1.2 attached to this Agreement (the absence of which shall indicate that no additional specific duties are so provided for), and (c) as determined by the board of directors of Agrimax from time to time. Subject to the provisions of Section 5.2.1 hereof, Employee's position and duties may be changed from time to time during the term of this Agreement at the sole discretion of Agrimax's board of directors. Except while on temporary assignment to other locations, Employee's principal place of business shall be Beaverton, Oregon. 1.3 Outside Activities. Employee shall obtain the consent of the board of directors of Agrimax before he engages, either directly or indirectly, in any other professional or business activities that would require an appreciable portion of Employee's time and effort to the detriment of the Agrimax's business. Such consent will not be unreasonably withheld. 1.4 Direction of Services. Employee shall at all times discharge his duties in consultation with and under the supervision and direction of the board of directors of Agrimax. 2. Compensation and Expenses. 2.1 Salary. As compensation for services under this Agreement, Epitope shall pay to Employee a regular salary of $105,000 per year. Effective January 1 of each year that this Agreement is in effect, such salary may be adjusted unless the board of directors of Epitope in its discretion determines not to do so. Payment shall be made on a bi-weekly basis, less all amounts required by law to be withheld or deducted, at such times as shall be determined by the board of directors of Epitope. 2.2 Additional Employee Benefits. Employee shall also have the right to receive or participate in (a) any additional benefits, including, but not limited to, insurance programs, profit sharing or pension plans, and medical reimbursement plans, which may from time to time be made available by Epitope to its employees, and (b) any additional benefits set forth in Schedule 2.2 attached to this Agreement (the absence of which shall indicate that no additional specific benefits are so provided for). 2.3 Extraordinary Compensation. Employee shall have the right, in addition to all other compensation provided for in this Section 2, to additional extraordinary compensation in accordance with the terms set forth in Schedule 2.3 attached to this Agreement (the absence of which shall indicate that no additional extraordinary compensation is so provided for). 2.4 Fees. All compensation earned by Employee, other than pursuant to this Agreement, as a result of services performed on behalf of Agrimax or as a result of or arising out of any work done by Employee in any way related to the scientific or business activities of Agrimax, Epitope, or Epitope's other subsidiaries (collectively, the "Companies") shall belong to Epitope. Employee shall pay or deliver such compensation to Epitope promptly upon receipt. For the purposes of this provision, "compensation" shall include, but is not limited to, all professional and nonprofessional fees, lecture fees, expert testimony fees, publishing fees, royalties, and any related income, earnings, or other things of value; and "scientific or business activities of the Companies" shall include, but not be limited to, any project or projects in which the Companies are involved and any subject matter that is directly or indirectly researched, tested, developed, promoted, or marketed by the Companies. 2.5 Expenses. Epitope shall reimburse Employee for all reasonable and necessary expenses incurred in carrying out his duties under this Agreement. Employee shall present to Epitope from time to time an itemized account of such expenses in such form required by Epitope. 3. Confidential Information. 3.1 Access to Information. Employee acknowledges that in the course of his employment he will have access to proprietary information, trade secrets, and other confidential information, that such information is a valuable asset of the Companies, and that its disclosure or unauthorized use will cause the Companies substantial harm. As used in this Agreement, the term "Confidential Information" means: (a) proprietary information of the Companies and (b) information designated by the Companies as confidential or which Employee knows or should know is confidential. 3.2 Ownership. Employee acknowledges that all Confidential Information shall continue to be the exclusive property of the Companies, whether or not prepared in whole or in part by Employee and whether or not disclosed to Employee or entrusted to his custody in connection with his employment. 3.3 Nondisclosure and Nonuse. Unless authorized or instructed in writing by Epitope, or required by legally constituted authority, Employee will not, except as required in the course of the Companies' business, during or after his employment, disclose to others or use any Confidential Information, unless and until, and then only to the extent that, such items become available to the public, other than by his act or failure to prevent accidental or negligent loss or release to any unauthorized person of the Confidential Information. 3.4 Return of Confidential Information. Upon request by Epitope during or after his employment, and without request upon termination of employment pursuant to this Agreement, Employee will deliver immediately to the Companies all Confidential Information thereof; Employee will thereafter retain no excerpts, notes, photographs, reproductions, or copies thereof. 3.5 Work Made for Hire. Employee agrees that all creative work, including without limitation designs, drawings, specifications, techniques, models, and processes, prepared or originated by Employee during or within the scope of employment, whether or not subject to protection under federal copyright or other law, constitutes work made for hire, all rights to which are owned by Epitope; and, in any event, Employee assigns to Epitope all rights, title, and interest, whether by way of copyright, trade secret, or otherwise, in all such work, whether or not subject to protection by copyright or other law. 3.6 Duration. The obligations set forth in this Section 3 will continue beyond the term of employment of Employee and for so long as Employee possesses Confidential Information. 4. Noncompetition. 4.1 Covenant. Subject to the provisions of Section 4.3, Employee covenants that Employee will not, throughout the United States, either individually or as a director, officer, partner, employee, agent, representative, or consultant with any business, directly or indirectly during the term of employment and for one year thereafter: 4.1.1 Engage or prepare to engage in any business that competes with the Companies; 4.1.2 Induce or attempt to induce any person who is an employee of the Companies during the term of this covenant to leave the employ of the Companies; or 4.1.3 Solicit, divert, or accept orders for products or services that are substantially competitive with the products or services sold by the Companies from any customer of the Companies. 4.2 Enforcement. Employee acknowledges and agrees that the time, scope, and other provisions of this Section 4 have been specifically negotiated by sophisticated parties with the advice and consultation of counsel and specifically hereby agrees that such time, scope, and other provisions are reasonable under the circumstances. Employee further agrees that if, at any time, despite the express agreement of the parties hereto, a court of competent jurisdiction holds that any portion of this Section 4 is unenforceable for any reason, the maximum restrictions reasonable under the circumstances, as determined by such court, will be substituted for any such restrictions held unenforceable. 4.3 Release from Obligation. In the event that Employee shall be entitled to extraordinary compensation pursuant to the provisions of Section 2.3, Employee may elect to waive all rights to receive such compensation from and after the date of such waiver in exchange for the release of Employee from the obligations of Sections 4.1.1 and 4.1.3. Such waiver shall be in writing, shall state that it is in consideration for the release of Employee from the obligations of Sections 4.1.1 and 4.1.3 of this Agreement, and shall be effective when delivered to Epitope. In the event of such a waiver, the amounts payable pursuant to the provisions of Section 2.3 shall be prorated through the period commencing on the date of termination of employment and ending on the date of delivery of the written notice of waiver to Epitope. For example, if such waiver is delivered to Epitope six months after the commencement of the 12-month period set forth in paragraph 1 of Schedule 2.3, Employee shall be paid one-half of the amounts otherwise payable pursuant to the provisions of Section 2.3; in the event that Employee shall have received more than such pro rata share of such compensation, it shall be a condition of Employee's rights under this Section that he shall have returned to Epitope any amounts in excess of such pro rata share with the delivery of the waiver notice to Epitope. 5. Termination. 5.1 Voluntary Resignation. Employee may terminate his employment under this Agreement by 90 days' written notice to Epitope. 5.2 Termination by Epitope. 5.2.1 Epitope may terminate Employee's employment under this Agreement without cause by 90 days' written notice to Employee. 5.2.2 Epitope may terminate Employee's employment under this Agreement by 90 days' written notice given at any time within six months after Epitope determines that Employee (a) has committed a material breach of his obligations under this Agreement, and failed to cure such breach promptly after receipt of written notice thereof from the board of directors of Epitope, (b) has willfully and continuously failed or refused to comply with the policies, standards, and regulations of Epitope, (c) has been guilty of fraud, dishonesty, or other acts of misconduct in rendering services on behalf of Epitope, or (d) has failed to otherwise comply with the standards of behavior that an employer has the right to expect of an employee. 5.2.3 In the event that the board of directors of Epitope shall determine that Employee has become physically or mentally disabled such that Employee shall be unable to render services to the same nature and extent as such services were rendered immediately prior to the disability, the board of directors of Epitope may terminate Employee's employment under this Agreement by 15 days' written notice effective any time after the date 13 weeks following the determination of disability. 5.3 Compensation Upon Termination. 5.3.1 In the event of a termination under Section 5.1 or 5.2.2, Employee shall not be entitled to receive any compensation otherwise payable pursuant to Sections 2.2 or 2.3 of this Agreement, and Employee's regular compensation pursuant to Section 2.1 shall be prorated and payable until the date of termination, except to the extent expressly provided to the contrary in writing in any insurance policy covering Employee or any employee benefit plan in which Employee participates. 5.3.2 In the event of a termination under Section 5.2.1, Employee shall be entitled to receive compensation payable pursuant to Section 2.3, if applicable, and Employee's compensation pursuant to Section 2.1 or 2.2 shall be prorated and payable until the date of termination, except to the extent expressly provided to the contrary in writing in any insurance policy covering Employee or any employee benefit plan in which Employee participates. 5.3.3 In the event of a termination under Section 5.2.3, Employee's compensation pursuant to Sections 2.1 and 2.2 shall be prorated and payable until the date of termination, except to the extent expressly provided to the contrary in writing in any insurance policy covering Employee or any employee benefit plan in which Employee participates. 6. Remedies. The respective rights and duties of Epitope and Employee under this Agreement are in addition to, and not in lieu of, those rights and duties afforded to and imposed upon them by law or at equity. Employee acknowledges that breach of this Agreement will cause irreparable harm to Epitope and agrees to the entry of a temporary restraining order and permanent injunction by any court of competent jurisdiction to prevent breach or further breach of this Agreement. Such remedy shall be in addition to any other remedy available to Epitope at law or in equity. 7. Severability of Provisions. The provisions of this Agreement are severable, and if any provision hereof is held invalid or unenforceable, it shall be enforced to the maximum extent permissible, and the remaining provisions of the Agreement shall continue in full force and effect. 8. Attorney Fees. In the event of a default under this Agreement, the defaulting party shall reimburse the nondefaulting party for all costs and expenses reasonably incurred by the nondefaulting party in connection with the default, including without limitation attorney fees. Additionally, in the event a suit or action is filed to enforce this Agreement or with respect to this Agreement, the prevailing party shall be reimbursed by the other party for all costs and expenses incurred in connection with the suit or action, including without limitation reasonable attorney fees at trial or on appeal. 9. Nonwaiver. Failure of Epitope at any time to require performance of any provision of this Agreement shall not limit the right of Epitope to enforce the provision. No provision of this Agreement or breach thereof may be waived by either party except by a writing signed by that party. A waiver of any breach of a provision of this Agreement shall be construed narrowly and shall not be deemed to be a waiver of any succeeding breach of that provision or a waiver of that provision itself or of any other provision. 10. General Terms and Conditions. This Agreement constitutes the entire understanding of the parties relating to the employment of Employee by Epitope, and supersedes and replaces all written and oral agreements heretofore made or existing by and between the parties relating thereto. This Agreement shall be construed in accordance with the laws of the state of Oregon, without regard to any conflicts of laws rules thereof. This Agreement shall inure to the benefit of any successors or assigns of Epitope. All captions used herein are intended solely for convenience of reference and shall in no way limit any of the provisions of this Agreement. IN WITNESS HEREOF, the parties have executed this Employment Agreement as of the date first hereinabove written. EPITOPE, INC. Charles E. Bergeron By: Adolph J. Ferro, Ph.D. Charles E. Bergeron Adolph J. Ferro, Ph.D., President Schedule 2.3 to Employment Agreement Extraordinary Compensation 1. Termination. In the event of the termination of the employment of Employee pursuant to Section 5.2.1 of the Agreement, Employee shall continue to be paid the salary provided in Section 2.1 for 12 months in the manner and at the times at which regular compensation was paid to Employee during the term of his employment under the Agreement. 2. Termination After Change in Control. At any time after the common stock of the Company has been registered pursuant to the terms of the Securities Exchange Act of 1934, in the event that the termination of the employment of Employee pursuant to Section 5.2.1 of the Agreement either (a) occurs within 12 months following a change in control, within the meaning of the Securities Exchange Act of 1934, or sale of substantially all the assets of Epitope or Agrimax, or (b) is contingent upon such a change in control or sale of assets, Employee shall continue to be paid the salary provided in Section 2.1 for 24 months; provided, however, that the present value of the stream of payments to be made to Employee shall not exceed 295 percent of Employee's Annualized Includable Compensation (in which event the payments shall be reduced pro rata such that the present value thereof does not exceed such amount). 3. Definitions. The term Annualized Includable Compensation shall mean the average annual compensation payable by Epitope that was includable in the gross income of Employee for the taxable years in the Base Period. The term Base Period shall mean the period consisting of the most recent five taxable years ending before the date on which the change in ownership or control occurs. Present value shall be determined by using a discount rate equal to 120 percent of the applicable Federal Rate (determined under Section 1274(d) of the Internal Revenue Code of 1986, as amended) compounded semiannually. 4. Change in Law. The parties agree that in the event Section 280G or Section 4999 of the Internal Revenue Code is amended after the date hereof with the effect that any of the compensation payable to Employee by Epitope pursuant to the foregoing provisions either (i) is not deductible for tax purposes from the gross income of Epitope, or (ii) subjects Employee to a federal excise tax thereon, then, unless the parties otherwise agree, the foregoing provisions may be modified at the discretion of the board of directors in order to comply with the amended provisions of the Internal Revenue Code in order that, to the greatest extent possible, such compensation shall be so deductible by Epitope and Employee shall not be subject to an excise tax thereon. EX-10.25 5 PROMISSORY NOTE Exhibit 10.25 PROMISSORY NOTE Principal amount $ 173,000 Date: August 29, 1995 FOR VALUE RECEIVED, the undersigned hereby jointly and severally promise to pay to the order of Epitope, Inc. the sum of One Hundred Seventy-Three Thousand Dollars ($173,000), together with interest thereon at the rate of 6% per annum on the unpaid balance commencing on October 28, 1995. Said sum shall be paid upon closing of sale of former residence in Charlotte, North Carolina. All payments shall be first applied to interest and the balance to principal. This note may be prepaid, at any time, in whole or in part, without penalty. This note shall at the option of any holder thereof be immediately due and payable upon the occurrence of any of the following: 1) Failure to make any payment due hereunder within 10 days of its due date. 2) Breach of any condition of any security interest, mortgage, loan agreement, pledge agreement or guarantee granted as collateral security for this note. 3) Breach of any condition of any loan agreement, security agreement or mortgage, if any, having a priority over any loan agreement, security agreement or mortgage on collateral granted, in whole or in part, as collateral security for this note. 4) Upon the death, incapacity, dissolution or liquidation of any of the undersigned, or any endorser, guarantor to surety hereto. 5) Upon the filing by any of the undersigned of an assignment for the benefit of creditors, bankruptcy or other form of insolvency, or by suffering an involuntary petition in bankruptcy or receivership not vacated within thirty (30) days. In the event this note shall be in default and placed for collection, then the undersigned agrees to pay all reasonable attorney fees and costs of collection. All payments hereunder shall be made to such address as may from time to time be designated by any holder. The undersigned and all other parties to this note, whether as endorsers, guarantors or sureties, agree to remain fully bound until this note shall be fully paid and waive demand, presentment and protest and all notices hereto and further agree to remain bound, notwithstanding any extension, modification, waiver, or other indulgence or discharge or release of any obligor hereunder or exchange, substitution, or release of any collateral granted as security for this note. No modification or indulgence by any holder hereof shall be binding unless in writing; and any indulgence on any one occasion shall not be an indulgence for any other or future occasion. Any modification or change in terms, hereunder granted by any holder hereof, shall be valid and binding upon each of the undersigned, notwithstanding the acknowledgment of any of the undersigned, and each of the undersigned does hereby irrevocably grant to each of the others a power of attorney to enter into any such modification on their behalf. The rights of any holder hereof shall be cumulative and not necessarily successive. This note shall take effect as a sealed instrument and shall be construed, governed and enforced in accordance with the laws of the State of Oregon. Witnessed: Nancy Jameson-Davis C. E. Bergeron Witness Borrower MORTGAGE DEED This Mortgage is given by Charles E. Bergeron, hereinafter called Borrower, of Lake Oswego, Oregon to Epitope, Inc., hereinafter called Lender, which term includes any holder of this Mortgage, to secure the payment of the PRINCIPAL SUM of $173,000 together with interest thereon computed on the outstanding balance, all as provided in a Note having the same date as this Mortgage, and also to secure the performance of all the terms, covenants, agreements, conditions and extensions of the Note and this Mortgage. In consideration of the loan made by Lender to Borrower and for the purpose expressed above, the Borrower does hereby grant and convey to Lender, with MORTGAGE COVENANTS, the land with the building situated thereon and all the improvements and fixtures now and hereafter a part thereof, being more particularly described in Exhibit A attached hereto and made a part hereof and having a street address of: 5385 Denton Drive, Lake Oswego, Oregon Borrower further covenants and agrees that: 1. In the event that Borrower fails to carry out the covenants and agreements set forth herein, the Lender may do any pay for whatever is necessary to protect the value of and the Lender's rights in the mortgaged property and any amounts so paid shall be added to the Principal Sum due the Lender hereunder. 2. In the event that any condition of this Mortgage or any senior mortgage shall be in default for fifteen (15) days, the entire debt shall become immediately due and payable at the option of the Lender. Lender shall be entitled to collect all costs and expenses, including reasonable attorney's fees incurred. 3. In the event that the Borrower transfers ownership (either legal or equitable) or any security interest in the mortgaged property, whether voluntarily or involuntarily, the Lender may as its option declare the entire debt due and payable. 4. Borrower shall maintain adequate insurance on the property in amounts and form of coverage acceptable to Lender and the Lender shall be a named insured as its interest may appear. 5. Borrower shall not commit waste or permit other to commit actual, permissive or constructive waste on the property. This mortgage is upon the STATUTORY CONDITION and the other conditions set forth herein, for breach of which lender shall have the STATUTORY POWER OF SALE to the extent existing under State Law. Executed under seal this 22nd day of December, 1995. C. E. Bergeron Borrower STATE OF OREGON ) COUNTY OF WASHINGTON ) On 22 December 1995 before me, Mary Hagen, personally appeared Charles Bergeron, personally known to me (or proved to me on the basis of satisfactory evidence) to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument. WITNESS with my hand and official seal. Signature Mary Hagen My commission expires October 21, 1998 (Seal) EX-23 6 CONSENT OF INDEPENDENT ACCOUNTANTS EXHIBIT 23 Consent of Independent Accountants We hereby consent to the incorporation by reference in the Prospectus constituting part of the Registration Statements on Form S-3 (Numbers 33- 68510, 33-67618, 33-57246, 33-52920, 33-42841, 33-39166 and 33-32673) and Form S-8 (Numbers 33-63220, 33-63106, 33-63218, 33-41712, 33-13416, 33-21545, 33- 82788 and 33-60789) of Epitope, Inc. of our report dated October 30, 1995 appearing under Item 14 of this Form 10-K. PRICE WATERHOUSE LLP Portland, Oregon December 26, 1995 EX-24 7 POWER OF ATTORNEY EXHIBIT 24 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears below constitutes and appoints ADOLPH J. FERRO, Ph.D., and GILBERT N. MILLER and each of them his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place, and stead, in any and all capacities, to sign the Annual Report on Form 10-K of Epitope, Inc., for its fiscal year ended September 30, 1995, and any and all amendments to the report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or each of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this power of attorney has been signed by the following persons in the capacities indicated effective as of December 12, 1995. Name Title President, Chief Executive Adolph J. Ferro Officer, and Director Adolph J. Ferro, Ph.D. (Principal executive officer) Executive Vice-President, Chief Financial Officer, and Gilbert N. Miller Treasurer Gilbert N. Miller (Principal financial officer) Accounting Manager T.J. Paulsen (Principal accounting officer) T.J. Paulsen Andrew S. Goldstein Director Andrew S. Goldstein POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears below constitutes and appoints ADOLPH J. FERRO, Ph.D., and GILBERT N. MILLER and each of them his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place, and stead, in any and all capacities, to sign the Annual Report on Form 10-K of Epitope, Inc., for its fiscal year ended September 30, 1995, and any and all amendments to the report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or each of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this power of attorney has been signed by the following person in the capacity indicated effective as of December 12, 1995. Name Title W. Charles Armstrong Director W. Charles Armstrong POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears below constitutes and appoints ADOLPH J. FERRO, Ph.D., and GILBERT N. MILLER and each of them his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place, and stead, in any and all capacities, to sign the Annual Report on Form 10-K of Epitope, Inc., for its fiscal year ended September 30, 1995, and any and all amendments to the report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or each of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this power of attorney has been signed by the following person in the capacity indicated effective as of December 12, 1995. Name Title Richard K. Donahue Director Richard K. Donahue POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears below constitutes and appoints ADOLPH J. FERRO, Ph.D., and GILBERT N. MILLER and each of them his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place, and stead, in any and all capacities, to sign the Annual Report on Form 10-K of Epitope, Inc., for its fiscal year ended September 30, 1995, and any and all amendments to the report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or each of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this power of attorney has been signed by the following person in the capacity indicated effective as of December 12, 1995. Name Title Margaret H. Jordan Director Margaret H. Jordan POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears below constitutes and appoints ADOLPH J. FERRO, Ph.D., and GILBERT N. MILLER and each of them his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place, and stead, in any and all capacities, to sign the Annual Report on Form 10-K of Epitope, Inc., for its fiscal year ended September 30, 1995, and any and all amendments to the report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or each of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this power of attorney has been signed by the following person in the capacity indicated effective as of December 12, 1995. Name Title R. Douglas Norby Director R. Douglas Norby POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears below constitutes and appoints ADOLPH J. FERRO, Ph.D., and GILBERT N. MILLER and each of them his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place, and stead, in any and all capacities, to sign the Annual Report on Form 10-K of Epitope, Inc., for its fiscal year ended September 30, 1995, and any and all amendments to the report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or each of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this power of attorney has been signed by the following person in the capacity indicated effective as of December 12, 1995. Name Title Roger L. Pringle Director Roger L. Pringle 12/20/95 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears below constitutes and appoints ADOLPH J. FERRO, Ph.D., and GILBERT N. MILLER and each of them his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place, and stead, in any and all capacities, to sign the Annual Report on Form 10-K of Epitope, Inc., for its fiscal year ended September 30, 1995, and any and all amendments to the report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or each of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this power of attorney has been signed by the following person in the capacity indicated effective as of December 12, 1995. Name Title G. Patrick Sheaffer Director G. Patrick Sheaffer POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS that the person whose signature appears below constitutes and appoints ADOLPH J. FERRO, Ph.D., and GILBERT N. MILLER and each of them his true and lawful attorneys-in-fact and agents, with full power of substitution and resubstitution for him and in his name, place, and stead, in any and all capacities, to sign the Annual Report on Form 10-K of Epitope, Inc., for its fiscal year ended September 30, 1995, and any and all amendments to the report and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or each of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, this power of attorney has been signed by the following person in the capacity indicated effective as of December 12, 1995. Name Title Michael J. Paxton Director Michael J. Paxton EX-27 8 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-30-1995 OCT-01-1994 SEP-30-1995 4,259,897 17,080,246 1,816,074 72,044 1,433,746 24,677,382 2,544,772 3,945,611 30,134,022 4,145,669 0 93,931,947 0 0 (71,585,346) 30,134,022 4,822,168 4,965,210 6,398,687 24,383,284 (922,246) 0 0 (18,495,828) 0 0 0 0 0 (18,495,828) (1.56) 0
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