-----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, AQ3FgA+NIftHSSLjdIV8ftu5mNmyzoUqBsrbjX2XF3NcFH7wXBB03mX1Xv0osNw+ 3NneleBrJoBFAVKRa0mtQA== 0001144204-05-001757.txt : 20050120 0001144204-05-001757.hdr.sgml : 20050120 20050120161141 ACCESSION NUMBER: 0001144204-05-001757 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20041029 ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20050120 DATE AS OF CHANGE: 20050120 FILER: COMPANY DATA: COMPANY CONFORMED NAME: DYADIC INTERNATIONAL INC CENTRAL INDEX KEY: 0001213809 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMMERCIAL PHYSICAL & BIOLOGICAL RESEARCH [8731] IRS NUMBER: 450486747 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 333-102629 FILM NUMBER: 05538960 BUSINESS ADDRESS: STREET 1: 140 INTERNATIONAL POINTE DRIVE STREET 2: SUITE 404 CITY: JUPITER STATE: FL ZIP: 33477 BUSINESS PHONE: 561-743-8333 MAIL ADDRESS: STREET 1: 140 INTERNATIONAL POINTE DRIVE STREET 2: SUITE 404 CITY: JUPITER STATE: FL ZIP: 33477 FORMER COMPANY: FORMER CONFORMED NAME: CCP WORLDWIDE INC DATE OF NAME CHANGE: 20030110 8-K/A 1 form8k.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K/A AMENDMENT NO. 3 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): OCTOBER 29, 2004 ------------------------------ DYADIC INTERNATIONAL, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) DELAWARE 333-102629 45-0486747 - -------------------------------------------------------------------------------- (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 140 INTRACOASTAL POINTE DRIVE, SUITE 404 JUPITER, FLORIDA 33477 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (561) 743-8333 ---------------------------- CCP WORLDWIDE, INC., 6040-A SIX FORKS ROAD, SUITE 179, RALEIGH, NORTH CAROLINA 27609 - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report.) Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): |_| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |_| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |_| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) This Amendment No. 3 to Form 8-K/A Current Report is filed at the request of the staff of the Securities and Exchange Commission to refile in more readable form three exhibits that were filed with Amendment No. 1 to Form 8-K/A on November 15, 2004. SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS. (C) EXHIBITS. The following exhibits are furnished in accordance with the provisions of Item 601 of Regulation S-B: EXHIBIT NUMBER DESCRIPTION OF EXHIBIT 2.1 Agreement of Merger and Plan of Reorganization dated as of September 28, 2004 by and among Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.), Dyadic International, Inc. (f/k/a CCP Worldwide, Inc.) and CCP Acquisition Corp. (incorporated by reference from Form 8-K Current Report filed September 30, 2004) *2.2 Split-Off Agreement dated September 28, 2004, by and among Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.), Dyadic International, Inc. (f/k/a CCP Worldwide, Inc.) and Custom Craft Packaging, Inc. *3.1 Restated Certificate of Incorporation *3.2 Amended and Restated Bylaws *4.1 Form of Common Stock Certificate *4.2 Form of $5.50 Common Stock Purchase Warrant *4.3 Form of $3.33 Common Stock Purchase Warrants issued to Placement Agents *4.4 Form of Bridge Loan Warrants *4.5 Form of Stock Option representing aggregate right to purchase 65,000 shares of Common Stock *10.1 Cooperation and License Agreement dated August 12, 2003 between Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.) and TNO Nutrition and Food Research Institute (Confidential treatment requested) 2 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT **10.2 Development Agreement dated July 30, 2004 between Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.) and Bio-Technical Resources Division of Arkion Life Sciences LLC *10.3 Commercial Land Purchase and Sale Agreement dated July 31, 2004 between Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.) and F&C Holdings, LLC *10.4 Investors' Rights Agreement dated March 24, 2004 among the Mark A. Emalfarb Trust, the Francisco Trust, Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.) and other shareholders, as amended and assumed by Registrant *10.5 Employment Agreement dated April 1, 2001 between Mark A. Emalfarb and Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.), as assumed by Registrant *10.6 Employment Agreement dated May 26, 2000 between Ratnesh (Ray) Chandra and Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.), as assumed by Registrant *10.7.1 Confidential Information, Inventions Assignment and Non-Compete Agreement dated May 21, 2001 between Mark Emalfarb and Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.), as assumed by Registrant *10.7.2 Confidential Information, Inventions Assignment and Non-Compete Agreement dated May 21, 2001 between Ray Chandra and Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.), as assumed by Registrant *10.7.3 Confidential Information, Inventions Assignment and Non-Compete Agreement dated May 21, 2001 between Kent Sproat and Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.), as assumed by Registrant *10.7.4 Confidential Information, Inventions Assignment and Non-Compete Agreement dated September 4, 2001 between Richard Burlingame, Ph.D. and Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.), as assumed by Registrant 3 *10.7.5 Confidential Information, Inventions Assignment and Non-Compete Agreement dated March 27, 2003 between Thomas Bailey and Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.), as assumed by Registrant *10.7.6 Confidential Information, Inventions Assignment and Non-Compete Agreement dated May 21, 2001 between Alexander (Sasha) Bondar and Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.), as assumed by Registrant *10.8.1 Indemnification Agreement dated August 19, 2001 between Mark A. Emalfarb and Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.), as assumed by Registrant *10.8.2 Indemnification Agreement dated August 19, 2001 between Stephen J. Warner and Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.), as assumed by Registrant *10.9 Dyadic International, Inc. 2001 Equity Compensation Plan, as amended and assumed by Registrant *10.10 Subordinated Promissory Note dated May 30, 2001 made by Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.), as amended, payable to the order of the Mark A. Emalfarb Trust in the original principal amount of $750,766, as assumed by Registrant *10.11 Subordinated Promissory Note dated May 30, 2001 made by Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.), as amended, payable to the order of the Francisco Trust in the original principal amount of $664,838, as assumed by Registrant *10.12 Revolving Note dated May 29, 2003 made by Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.), as amended, payable to the order of the Mark A. Emalfarb Trust in the original principal amount of $3,000,000, as assumed by Registrant *10.13 Security Agreement dated May 29, 2003, between the Mark A. Emalfarb Trust and Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.), as amended 4 EXHIBIT NUMBER DESCRIPTION OF EXHIBIT *10.14 Inducement and Amending Agreement dated August 19, 2004 among the Mark A. Emalfarb Trust, the Francisco Trust and Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.) **10.15 Contract Manufacturing Agreement dated October 27, 1999 between Polfa Tarchomin, SA and Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.), as amended by Amendments dated May 8, 2000 and February 10, 2004 and letters dated February 11, 2004 *10.16 Indemnification and Escrow Agreement dated September 28, 2004 among Vitel Ventures, Mark Tompkins, Registrant and Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.) *10.17 Form of Subscription Agreement from investors in private placement Offering **10.18 Agreement dated October 21, 1998 among Geneva Investment Holdings Limited, a wholly-owned subsidiary of Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.), Robert B. Smeaton and Raymond Chih Chung Kwong, as amended by Agreements dated January 17, 2000 and July 8, 2002 *10.19 Lock-Up Agreements from each of the Mark A. Emalfarb Trust and Mark A. Emalfarb; the Francisco Trust; Mark Tompkins and IVC Group; Ratnash Chandra; Richard Burlingame; Rufus Gardner; Kent Sproat; Thomas Bailey; and Alexander Bondar *21 List of Subsidiaries - ----------------- * Previously filed. ** Filed herewith and confidential treatment requested. 5 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 hereunto duly authorized. DYADIC INTERNATIONAL, INC. Date: January 20, 2005 By: /s/ Mark A. Emalfarb -------------------------------------------- Name: Mark A. Emalfarb Title: President and Chief Executive Officer 6 INDEX TO EXHIBITS EXHIBIT NUMBER DESCRIPTION OF EXHIBIT *10.2 Development Agreement dated July 30, 2004 between Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.) and Bio-Technical Resources Division of Arkion Life Sciences LLC *10.15 Contract Manufacturing Agreement dated October 27, 1999 between Polfa Tarchomin, SA and Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.), as amended by Amendments dated May 8, 2000 and February 10, 2004 and letters dated February 11, 2004 *10.18 Agreement dated October 21, 1998 among Geneva Investment Holdings Limited, a wholly-owned subsidiary of Dyadic International (USA), Inc. (f/k/a Dyadic International, Inc.), Robert B. Smeaton and Raymond Chih Chung Kwong, as amended by Agreements dated January 17, 2000 and July 8, 2002 - --------------- *Filed herewith and confidential treatment requested. 7 EX-10.2 2 ex10_2.txt Exhibit 10.2 Confidential Treatment Requested indicates portions of this document have been redacted and have been separately filed with the Commission. DEVELOPMENT AGREEMENT THIS AGREEMENT is entered into and effective as of the 30th day of July 2004 (the "Effective Date"), by and between the Bio-Technical Resources Division of Arkion Life Sciences LLC, a Delaware limited liability company and their affiliates ("BTR") and Dyadic International Inc., a Florida corporation and their affiliates (the "COMPANY"). W I T N E S S E T H: WHEREAS, the Company is in the possession of systems for the discovery, over-expression, development and manufacturing of research and commercial quantities of enzymes, proteins, peptides and other biologically-produced molecules using their proprietary strains of microorganisms, including but not limited to their Chrysosporium lucknowense ("C1") fungal host, (hereinafter the "Systems"). WHEREAS, BTR has the capability, manpower and facilities to conduct research on using the Systems to express protein products, to evaluate the System's performance, to improve strains and scale-up processes to develop and produce protein products; WHEREAS, the Company wishes BTR to assist it in various research and development projects to be decided by the Company, including but not limited to work to demonstrate the capabilities of the Systems for producing research and commercial quantities of enzymes, proteins, peptides and other biologically-produced molecules of interest to pharmaceutical, agricultural, chemical, animal and human nutrition, starch, textile, pulp and paper and other industries; and WHEREAS, BTR already performs other research and development work for the Company pursuant to Development Agreements dated October 10, 1995, as amended, January 29, 1999, as amended July 29, 1999, as amended, November 24, 1999, as amended June 7, 2000, as amended January 1, 2001, as amended January 1, 2002, and as amended January 6, 2003 (the "Existing Agreements"), which shall remain in effect and be supplemented by this Agreement. NOW, THEREFORE, the parties agree as follows: ARTICLE I DEFINITIONS 1.1 The following terms when used in this Agreement shall have the meanings set forth below: (A) "AFFILIATE" means any U.S. or foreign entity that controls, is controlled directly by, or indirectly through one or more intermediaries, or is under common control with a Party. "Control" means ownership of greater than fifty percent (50%) of the voting equity interest of a corporation or greater than a fifty percent (50%) ownership interest in a partnership, corporation or other entity. ** CONFIDENTIAL TREATMENT REQUESTED 1 Confidential Treatment Requested indicates portions of this document have been redacted and have been separately filed with the Commission. (B) "EFFECTIVE DATE" means the date first set forth above. (C) "FIELD OF THIS AGREEMENT" means using the Systems to make strains expressing recombinant proteins, improving production of protein in the Systems and scaling-up the processes to develop and produce protein products expressed using the Systems. (D) "PARTY" or "PARTIES" means a party or the parties to this Agreement. (E) "SHARES" means shares of stock of Common Stock of the Company. ARTICLE II DEVELOPMENT PROGRAM 2.1 SCOPE OF WORK. BTR agrees to diligently pursue the research and development programs to assist the Company on projects selected by the Company within the Field of this Agreement. With respect to each project the Company shall designate the desired scope of work to be performed by BTR. Within thirty (30) days following receipt, BTR shall review the desired scope of the project to ensure that it does not conflict with other contractual commitments and shall discuss the effort level and timing of the project with the Company. BTR shall use its best efforts to accommodate the desired scope of work and timing requested by the Company. The parties shall reduce the final scope of work to writing which shall become a part of this Agreement (hereinafter the "Scope of Work"). 2.2 LEVEL OF WORK. The Company shall request from BTR and BTR shall provide the Company the following services: (A) BASE LEVEL. Pursuant to the terms of the Existing Agreements, BTR shall continue to provide services to the Company of no less than the current rate of as of the date of this Agreement (1.1 full time equivalent person ("FTE") per month) (the "Base Level"). All Base Level work shall be paid in cash pursuant to the terms of the Existing Agreements or their replacements. The Company shall purchase no less than the Base Level of services through September 30, 2006. (B) ADDITIONAL LEVEL. BTR shall provide services equal to ** ** full time equivalent person-months (the "Additional Level") at an average rate of ** FTE per month; provided, however that the total Additional Level services shall not exceed a value of One Million Two Hundred and Fifty Thousand U.S. Dollars ($1,250,000) based on the rates set forth in Section 2.3 below. If Additional Level services of less than ** per month are requested by the Company or provided by BTR in any month then such deficit shall be accumulated by the Company and the Company shall have the right to use such deficit in any subsequent month during the term of this Agreement, subject to availability of BTR scientists and the Company's approval of the scientific manpower assigned by BTR. Any remaining deficits at the completion or termination of the Additional Level services under this Agreement shall be carried over and applied to the Base Level projects at no cost to the Company. All Additional Level services shall be paid pursuant to the terms of Section 2.4 below. In the event services to the Company exceed the effort level in any month for the Additional Level and no carry over deficit remains then such additional services shall be paid in cash to BTR within thirty (30) days following invoice by BTR. ** CONFIDENTIAL TREATMENT REQUESTED 2 Confidential Treatment Requested indicates portions of this document have been redacted and have been separately filed with the Commission. 2.3 COST OF SERVICES. All services provided to the Company pursuant to this Agreement shall be at the rate of ** for each FTE-month of services provided by BTR during calendar year 2004, which rate shall be increased to ** FTE per month in 2005 and 2006. 2.4 PAYMENT. The Company agrees to pay BTR the following fees for the research work performed by BTR during the Development Program: (A) On or before June 28, 2004, the Company shall pay BTR a fee of Two Hundred and Fifty Thousand Dollars ($250,000) by wire transfer in immediately available funds to an account designated by BTR. Such payment shall be credited against the initial invoices issued by BTR for Additional Level services until a total of $250,000 in services has been provided. (B) For Additional Level services provided by BTR beyond the initial Two Hundred and Fifty Thousand Dollars ($250,000) (all such services being "Share Payment Services"), BTR shall be paid in Shares, which Shares the Company and BTR hereby mutually and expressly acknowledge and agree are worth $3.33 per Share (being the average per Share price (the "Per Share Value") fixed in that certain private placement offering of the Company's Shares made pursuant to a Private Placement Memorandum dated April 8, 2004 (the "PPM"), a copy of which (together with a Business Plan of the Company dated April, 2004) BTR expressly acknowledges it has heretofore received and reviewed). During the term of this Agreement, the Company agrees to reserve and allocate an aggregate of 300,300 Shares (the "Reserved Shares") for sole distribution to BTR in accordance with the terms of this Agreement generally, and the escrow provisions of Section 2.5 hereof, specifically, it being expressly agreed by the Company and BTR that all Share Payment Services shall be paid for by the Company by its issuance of Reserved Shares, valued at the Per Share Value. BTR shall invoice the Company monthly for all Additional Level services performed hereunder, and those invoices for Share Payment Services shall specifically so state, indicating the dollar value thereof and the number of Reserved Shares to be distributed to BTR pursuant to the provisions of Section 2.5 hereof. Notwithstanding anything herein to the contrary, the aggregate number of Shares issued to BTR pursuant to this Agreement shall not exceed 300,300 Shares. Reserved Shares which are distributed by the Escrow Agent to BTR are hereinafter referred to as "Already Distributed Shares" and Share Payment Services in respect of which Already Distributed Shares have been issued to BTR are referred to as "Already Paid Share Payment Services"). (C) All travel expense incurred by BTR personnel at the request of or with the permission of the Company shall be reimbursed at cost in cash to BTR. ** CONFIDENTIAL TREATMENT REQUESTED 3 Confidential Treatment Requested indicates portions of this document have been redacted and have been separately filed with the Commission. 2.5 ESCROW. (A) Within thirty (30) days following the Effective Date, (i) the Company shall deliver a stock certificate evidencing all Reserved Shares registered in the name of Mark J. Gundersen, Esq., Klett, Rooney, Lieber and Schorling, PC, Suite 1410, 1000 West Street, Wilmington, DE 19898, not individually, but solely in the capacity of an escrow agent (the "Escrow Agent") to the Escrow Agent and (ii) BTR shall execute and deliver to the Escrow Agent a Subscription Agreement prepared by counsel to the Company substantially identical in form and content to the form of Subscription Agreement appended as an exhibit to the PPM, adjusted to reflect that such subscription is not being made pursuant to the offering described in the PPM, but rather pursuant to the terms of this Agreement (a "Subscription Agreement") providing for BTR's subscription for all Reserved Shares. Such stock certificate and Subscription Agreement shall be held in escrow by the Escrow Agent until released pursuant to the terms of this Section 2.5. (B) If, in BTR's sole opinion, contractual restrictions arising from agreements between BTR and third-parties (other than the Company under this Agreement) permit, then BTR may request the release and issuance of a stock certificate evidencing a number of Reserved Shares equal to the quotient of (x) the then aggregate unpaid cash value of Share Payment Services performed and invoiced by BTR (exclusive of Already Paid Share Payment Services) divided by (y) the Per Share Value (the "Requested Shares"), by delivering written notice thereof (each, a "Request Notice") to both the Escrow Agent and the Company at any time during the term of this Agreement and on or before the fifteenth (15th) day following the termination of this Agreement, but in any event, no later than thirty (30) days prior to the requested delivery date specified in such notice. In addition to the requested delivery date, each Request Notice shall specify (i) the aggregate unpaid cash value of the Share Payment Services performed and invoiced by BTR beyond the Already Paid Share Payment Services, and (ii) the resulting number of Requested Shares requested for release and issuance. (C) If, in respect of any Request Notice, the Company objects to the release of the applicable Requested Shares requested by BTR, the Company shall provide BTR and the Escrow Agent with a notice of objection stating the nature of the dispute and the number of Requested Shares affected by the dispute ("Notice of Objection") no later than seven (7) days prior to the requested delivery date (and Requested Shares, to the extent BTR's rights thereto are disputed by the Company are referred to as "Disputed Shares"). (D) If the Company timely issues a Notice of Objection, the Escrow Agent shall not distribute any of the Disputed Shares indicated in such Notice of Objection unless and until the Parties have resolved the dispute and submitted a mutually signed letter authorizing release or a decision of the arbitrator has been issued pursuant to Section 6.11 herein, with any such distribution being made in accordance with the terms of such letter or decision, as applicable. If the Company does not object to the release of the applicable Requested Shares, the Escrow Agent shall issue the Requested Shares in accordance with the provisions of subsections (e) and (f) below. ** CONFIDENTIAL TREATMENT REQUESTED 4 Confidential Treatment Requested indicates portions of this document have been redacted and have been separately filed with the Commission. (E) If the number of Requested Shares is less than the undistributed balance of the Reserved Shares, then, prior to the requested delivery date specified in a timely Request Notice: (i) the Company shall deliver to the Escrow Agent, in exchange for the return of the stock certificate(s) then held by the Escrow Agent, (A) a certificate in the name of BTR evidencing the number of Requested Shares and (B) a certificate in the name of the Escrow Agent evidencing the resulting balance of the Reserved Shares which are not Already Distributed Shares; and, (ii) BTR shall deliver to the Escrow Agent, in exchange therefore, the Subscription Agreement(s) then held by the Escrow Agent, except that once the Escrow Agent has distributed the Subscription Agreement to the Company, this requirement shall no longer apply to any subsequent issuances of Requested Shares. (F) If the number of Requested Shares is the undistributed balance of the Reserved Shares, then, prior to the requested delivery date specified in a timely Request Notice: (A) the Company shall deliver to the Escrow Agent, in exchange for the return of the stock certificate(s) then held by the Escrow Agent, a certificate in the name of BTR evidencing the undistributed balance of the Requested Shares, and (B) the Escrow Agent shall release and distribute (i) to BTR a stock certificate evidencing the Requested Shares and (ii) to the Company, the Subscription Agreement (if the Subscription Agreement had not theretofore been distributed to the Company). (G) Each stock certificate issued pursuant to this Section 2.5 shall bear the restrictive legend referred to in the Investors' Rights Agreement referred to in both the PPM and the Subscription Agreement. 2.6 COMMENCEMENT OF WORK. Services to be provided pursuant to the Additional Level shall commence no later than October 1, 2004 and shall terminate no later than September 30, 2006. 2.7 PROGRAM OBJECTIVES/PROGRESS REPORTS. BTR and the Company shall meet on a regular basis mutually acceptable to both Parties to review the progress of the research program and to establish program objectives for each project. The Company shall have the right to visit BTR's facility and review the research program on a reasonable basis during business hours. In the event the Company desires BTR to perform work beyond the Scope of Work, the Parties shall negotiate the additional costs for such work. BTR agrees to provide the Company with written monthly reports summarizing the progress of the research program at BTR. 2.8 NO ASSURANCE OF SUCCESS. The parties recognize that, due to the uncertainties inherent in research and development work of the nature undertaken under this Agreement, there is no assurance that work will be completed on schedule, or that research conducted will be successful. Each party agrees to use its reasonable efforts to complete any work undertaken by it within the established time schedule and in a successful manner, but none of the parties warrants or guarantees that it will in fact meet the schedule or that its work will be successful. In the event of delay, Dyadic will have the option, in its sole discretion, of extending this Agreement beyond the termination date mentioned in Article 2.6 at the FTE rate in Article 2.3, adjusted for inflation as necessary. ** CONFIDENTIAL TREATMENT REQUESTED 5 Confidential Treatment Requested indicates portions of this document have been redacted and have been separately filed with the Commission. ARTICLE III OWNERSHIP OF INVENTION AND PATENTS 3.1 (a) BTR INTELLECTUAL PROPERTY RIGHTS. All research results, biological and biochemical materials arising from this Agreement which lie outside of the provisions of the Company Intellectual Property Rights specified under Article 3.1 ( b ) below shall be the sole property of BTR. Nothing herein contained shall be deemed to be a grant from one Party to the other Party of any rights or licenses under any intellectual property rights, except as expressly set forth in this Agreement. (b) THE COMPANY INTELLECTUAL PROPERTY RIGHTS. All research results, biological and biochemical materials arising from this Agreement, including but not limited to, the Company's Systems, microorganisms including but not limited to C1 and their mutants, variations, clones, progeny, derivatives and parts thereof, ** assay systems, methodology, fungal high-throughput screening, and products produced thereby, reports, technical data, information, know-how, practical experience, procedures, methodology, specifications, formulae, charts, pictures and data, whether or not patentable, and any technology for research and development and/or the commercial production and use of said biological and biochemical materials which are conceived by or on behalf of the Company by BTR or any other party pursuant to this Agreement shall be the sole property of the Company. BTR acknowledges that the Company is and at all times will remain the sole owner of all Intellectual Property relating to the Company's Systems, microorganisms including but not limited to C1 and their mutants, variations, clones, progeny, derivatives and parts thereof, ** assay systems, methodology, fungal high-throughput screening, and products produced thereby for the work performed at BTR under this Agreement. Nothing herein contained shall be deemed to be a grant from one party to the other party of any rights or licenses under any intellectual property rights, except as expressly set forth in this Agreement. 3.2 PATENT APPLICATIONS. BTR and their representatives will expediently report any invention and discovery that arises from work performed pursuant to this Agreement and shall execute all papers and do all things reasonably requested by the Company to protect the rights of the Company with regard to the Company's Intellectual Property Rights as set forth in Section y3.1(b) above. The Company shall have responsibility and bear the cost for the preparation, filing, prosecution and maintenance for all patents based on such Intellectual Property Rights. BTR shall cooperate fully and provide to the Company all information and data reasonably necessary and requested for that purpose. ARTICLE IV CONFIDENTIALITY 4.1 The Company shall disclose to BTR only such technical information as relates to the Company's strains, research strategies and methods, process development manufacture and use of the Systems in the Field of this Agreement ("COMPANY INFORMATION"). BTR shall maintain all Company Information that it receives from the Company concerning work to be performed pursuant to this Agreement in confidence and shall not disclose such information to any third party, with the exception of consultants and agents who agree in writing to abide by the confidentiality obligations of this Agreement, for a period of five (5) years from the date it is received, provided that such Company Information is disclosed in writing marked confidential or is disclosed orally and confirmed in writing marked confidential within thirty (30) days of the oral disclosure. ** CONFIDENTIAL TREATMENT REQUESTED 6 Confidential Treatment Requested indicates portions of this document have been redacted and have been separately filed with the Commission. 4.2 BTR may disclose to the Company technical information during the term of the Agreement ("BTR Information"). The Company shall maintain all BTR Information that it receives from BTR in confidence and shall not disclose such information to any third party, with the exception of consultants and agents who agree in writing to abide by the confidentiality obligations of this Agreement, for a period of five (5) years from the date it is received, provided that such BTR Information is disclosed in writing marked "Confidential" or is disclosed orally and confirmed in writing marked confidential within thirty (30) days of the oral disclosure. 4.3 The obligations of secrecy set forth above relating to the Company Information and BTR Information shall not apply to information which: (A) is known to the public at the time of its disclosure, or becomes known to the public after the disclosure through no fault of the receiving Party; (B) the receiving Party can show was in its possession at the time of the disclosure and was not acquired from a third party under secrecy obligation to the disclosing Party; (C) the receiving Party can show came into its possession after the time of the disclosure from a third party not under an obligation of secrecy to the disclosing Party; (D) is necessarily disclosed to a third party pursuant to the commercial sale or use by either Party of Products incorporating Information exchanged hereunder; (E) is subsequently developed by the receiving party independent of the Information disclosed hereunder; or (F) is required to be disclosed by law. ARTICLE V TERMINATION 5.1 This Agreement shall commence on the Effective Date and continue in effect until September 30, 2006; provided that the indicated party may terminate this Agreement upon thirty (30) days prior written notice upon the occurrence of one of the following: (A) Either party may terminate this Agreement if the other Party has become insolvent, has sought protection under any provisions of the United States bankruptcy laws, or a petition for involuntary bankruptcy has been filed against it; or ** CONFIDENTIAL TREATMENT REQUESTED 7 Confidential Treatment Requested indicates portions of this document have been redacted and have been separately filed with the Commission. (B) Either party may terminate this Agreement if the other Party has committed a material breach of this Agreement and has failed to cure such breach within thirty (30) days following notification of such breach by the other party or such breach cannot be cured; provided, however, that there shall be no right of cure with respect to past due payments or issuance of Reserved Shares hereunder; and provided, further, that BTR may cease all further work under this Agreement pending resolution of any dispute arising under or related to this Agreement. 5.2 EFFECT OF TERMINATION. (A) Termination of this Agreement shall not relieve any Party of any obligation or liability accrued hereunder prior to such termination, except as expressly provided herein. (B) If this Agreement is terminated by the Company pursuant to Section 5.1 above prior to BTR's performance of all of the Share Payment Services, BTR shall pay to the Company (within fifteen (15) days following the effective termination date) an amount equal to the following: (I) if the aggregate cash value of Additional Level services performed by BTR hereunder as of the termination dated is less than $250,000, then $250,000; or (II) if the aggregate cash value of Additional Level services performed by BTR hereunder as of the termination date exceeded $250,000, the product of $250,000 multiplied by a fraction (A) having as its numerator an amount equal to the difference between $1,000,000 and the cash value of the Already Paid Share Payment Services performed by BTR as of the termination date and (B) having as its denominator the amount of $1,000,000. The foregoing amount payable by BTR to the Company shall represent the Company's liquidated damages and shall be the sole and exclusive remedy of the Company in lieu of all other damages that may be recoverable, except in the instance where the reason for the termination was on account of BTR's breach of its obligations to the Company created by the provisions of Articles III and IV hereof, in which case, in addition the Company's right to the foregoing payment, the Company shall be entitled to all other remedies available at law or in equity. ARTICLE VI GENERAL PROVISIONS 6.1 GOVERNING LAW. This Agreement shall be governed by and construed under the laws of the State of Delaware and the courts of the State of Delaware shall have exclusive jurisdiction over all disputes arising from or related to this Agreement. 6.2 NOTICE. Any notice required or permitted to be given hereunder shall be in writing and shall be deemed to be delivered on the day after it is placed in the mail if sent by overnight courier of national reputation, by facsimile confirmed by mail, or by registered or certified mail, postage prepaid, and addressed as follows: ** CONFIDENTIAL TREATMENT REQUESTED 8 Confidential Treatment Requested indicates portions of this document have been redacted and have been separately filed with the Commission. If to the Company: Dyadic International, Inc. 140 Intracoastal Pointe Drive Suite 404 Jupiter, Florida 33477-5064 Attn: President If to BTR: Bio-Technical Resources Division Arkion Life Sciences LLC 1035 South Seventh Street Manitowoc, WI 54220 Attn: President The address to which a Party's notices are to be sent may be changed by that Party by giving the other Party thirty (30) days advance written notice. 6.3 WAIVER. Failure by either Party hereto at any time to require performance by the other Party or to claim a breach of any provision of this Agreement shall not be construed as a waiver of any right arising under this Agreement, including the right to require subsequent performance or contest any subsequent breach. 6.4 FORCE MAJEURE. Non-performance of either Party shall be excused to the extent that performance is rendered impossible by strike, fire, flood, governmental acts, failure of suppliers to perform, orders or restrictions, or any other reason where failure to perform is beyond the control and not caused by the negligence of the non-performing Party. 6.5 ASSIGNMENT. Neither this Agreement nor any of the rights and obligations thereto shall be assignable or otherwise transferable by a Party to anyone other than an Affiliate without the prior written consent of the other Party which consent will not be unreasonably withheld. Subject to the foregoing condition, this Agreement shall be binding upon and inure to the benefit of the Parties hereto, their successors and assigns. 6.6 SEVERABILITY. If any provision of this Agreement is held to be invalid by a court of competent jurisdiction, then the remaining provisions shall nevertheless remain in full force and effect. 6.7 COUNTERPARTS. This Agreement may be executed in two counterparts, each of which shall be deemed an original. 6.8 HEADING. All captions, titles and subheadings are for convenience only and shall not be considered in construing or interpreting the provisions of this Agreement. ** CONFIDENTIAL TREATMENT REQUESTED 9 Confidential Treatment Requested indicates portions of this document have been redacted and have been separately filed with the Commission. 6.9 RELATIONSHIP OF THE PARTIES. The Parties shall at all times remain independent and one Party shall not be considered the agent of the other Party. Nothing in this Agreement shall be construed as creating a partnership, joint venture or other similar relationship between the Parties or their respective parents or subsidiaries. 6.10 NO WARRANTIES. BTR does not warrant or guarantee that any results will be achieved during the Development Program of this Agreement and makes no representation or warranty regarding the technology developed pursuant to this Agreement including, without limitation, implied warranties of merchantability or fitness for a particular purpose. Neither BTR, nor its owners, affiliates, representatives nor employees shall be liable to the Company, its Affiliates, contractors or sublicensees because of any failure in the use of technical information developed or disclosed by BTR hereunder or in the operations of the Company, its Affiliates, contractors or sublicensees. Consistent with the foregoing, the Company shall hold BTR harmless from any loss, claim, damage, illness or injury to persons or property whatever the cause may be arising out of or pertaining to commercialization, use or disclosure of the technical information. 6.11 ARBITRATION. All disputes arising under or related to this Agreement shall be resolved by final and binding arbitration by three (3) arbitrators selected by the parties under the rules of the American Arbitration Association. The location of the arbitration shall be New York, New York. 6.12 ENTIRETIES. This Agreement together with the Existing Agreements, as amended, represents the entire agreement between the Parties with respect to the subject matter hereof. No amendments or modifications to this Agreement shall be effective unless reduced to writing and signed by both parties. ** CONFIDENTIAL TREATMENT REQUESTED 10 Confidential Treatment Requested indicates portions of this document have been redacted and have been separately filed with the Commission. IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed by their duly authorized representatives as of the date and year indicated below. DYADIC INTERNATIONAL, INC. ARKION LIFE SCIENCES LLC BIO-TECHNICAL RESOURCES DIVISION By: /s/ M. Emalfarb By: /s/ T. Jerrell --------------------------- -------------------------------------- Title: M. Emalfarb, President Title: T. Jerrell, President Date: 8-2-2004 Date: July 30, 2004 11 EX-10.15 3 ex10_15.txt Exhibit 10.15 Confidential Treatment Requested indicates portions of this document have been redacted and have been separately filed with the Commission. AMENDMENT TO CONTRACT MANUFACTURING AGREEMENT This is an amendment to the Contract Manufacturing Agreement entered into and effective October 27, 1999 between Tarchominskie Zaklady Farmaceutyczne "Polfa" Spolka Akcyjna having its principal business at.: ul. A. Fleming 2, 03-176 Warsaw, Poland ("Polfa") and Dyadic International, Inc. a Florida corporation having a permanent place of business at 140 Intracoastal Pointe Drive - Suite 404, Jupiter, Florida 33477 USA ("Dyadic"). Whereas the Parties now recognize that in preparing the original agreement with regard to Section 8 Equipment Responsibility that the original estimate by Polfa for the modifications to the equipment **. Whereas the Parties agree to amend the agreement in regard to Section 8 as follows: Section 8.1 will be replaced with the following: 8.1 The financial responsibility for any modifications to the equipment to achieve the agreed upon baseline productivity is borne by Polfa, The costs of investments and modifications of equipment and their installation borne by Polfa to adjust its facilities in order to produce Product(s) shall be amortised for seven years (7). Improvements or modifications to equipment or facilities in order to ** The parties confirm that above mentioned costs are estimated costs and final settlements will be made after completion of each stage of modernisation ** CONFIDENTIAL TREATMENT REQUESTED Confidential Treatment Requested indicates portions of this document have been redacted and have been separately filed with the Commission. The ** will commence after the equipment and facilities are fully capable of producing product within the agreed Product Specifications. A interest factor may be added to the monthly charge based on the current month end **. The interest will be for one month calculated on the balance of the allowable costs minus the cumulative monthly charge paid by Dyadic excluding the interest or any credits for uses by other parties, If the equipment or facilities included in the allowable costs is used for production of either Polfa's own Products or a third parties Products then a suitable credit based on the number of fermentation days will be given to Dyadic. Likewise if the Ultra Filtration equipment supplied by Dyadic is used in the same manner then Polfa will pay to Dyadic for the usage based on a suitable formula. Each group of fermentors being modified must be approved in writing by Dyadic before committing to the modifications as per section 8.3. Both parties agree to immediately order equipment and begin modifications in order to as expediently as possible complete the first step of modifying two fermentors and the required recovery equipment. The parties agree that the goal is to be able to manufacture commercial product in the ** . Tarchominskie Zaklady Farmaceutyczne Dyadic International, Inc. "Polfa" Spulka Akcyjna By: /s/ By: /s/ Mark A. Emalfarb -------------------------------- ---------------------- ** Mark A. Emalfarb Member of Board President By: /s/ -------------------------------- --------------------- ** Member of Board Date: 08 05 2000 Date: May 8, 2000 ------------------------------ ** CONFIDENTIAL TREATMENT REQUESTED Confidential Treatment Requested indicates portions of this document have been redacted and have been separately filed with the Commission. AMENDMENT TO CONTRACT MANUFACTURING AGREEMENT entered into and effective on October 27, 1999 between TARCHOMINSKIE ZAKLADY FANNACEUTYCZNE "POLFA" SPO1KA AKCYJNA and DYADIC INTERNATIONAL, INC. concluded on February 10,2004 Hereby, the parties agreed the following changes to the Contract Manufacturing Agreement: 1. Point 1.2. shall be replaced with the following: "Industrial Enzymes" shall mean all non-pharmaceutical enzymes used as a processing aid in production, or non-pharmaceutical enzymes used as an active ingredients including but not limited to the following industries: animal feed, alcohol, brewing, cheese making, ethanol, fruit juice, food, fructose, household & industrial detergents, starch processing, personal care products, pulp & paper and textile. 2. Point 10 Confidentiality shall has the following wording: This Agreement shall maintain the terms .and conditions of the Secrecy Agreement entered between Dyadic, Inc. and Polfa, concluded on April 15, 1999, attached hereto as Appendix 2. The terms and conditions of the Secrecy Agreement will be extended to include the duration of this Agreement including any extensions and ** thereafter. Polfa specifically agrees that it will not at any time during the Term of this Agreement or any extensions of thereof or for ** years following the termination by Polfa, or ** following the termination by Dyadic, or by Polfa due to Dyadic's fault, provided that the fault is not rectified as specified in point 13.2, manufacture directly or indirectly for itself, or others, any Industrial Enzymes. 3. Point 13.4 shall be changed as follows: Upon termination of this Agreement all Confidential Information, strains, documentation and technology are to be immediately returned to Dyadic and the strains and related know-how will not be used by Polfa, or any Polfa's affiliated companies, or for the benefit of any third party during and after the termination of this Agreement. 4. Section 5 of Amendment to Contract Manufacturing Agreement signed by the parties on May 8, 2000 now shall have the following wording: An interest factor shall be added to the monthly charge based on the current month end ** rate. The interest will be for one month calculated on the balance of the allowable costs minus the cumulative monthly charges paid by Dyadic excluding interest or any credits for uses by other parties. Tarchominskie Zaklady Farmaceutyczne Dyadic International, Inc. "Polfa" Spulka Akcyjna /s/ /s/ Mark A. Emalfarb - -------------------------------------- ------------------------------- ** Mark A. Emalfarb - President President - General Manager /s/ - -------------------------------------- ------------------------------- ** - Member of the Board Date: 10.02.04 Date: 2-10-2004 - -------------------------------------- ------------------------------- ** CONFIDENTIAL TREATMENT REQUESTED Confidential Treatment Requested indicates portions of this document have been redacted and have been separately filed with the Commission. CONTRACT MANUFACTURING AGREEMENT This contract manufacturing agreement (the "Agreement") is made and entered into as on the Effective Date, by and between: TARCHOMINSKIE ZAKLADY FARMACEUTYCZNE"POLFA" SPOLKA AKCYJNA having its principal of business at: ul. A. Fleming 2, 03-176 Warsaw, Poland ("Polfa") represented by: Pawel Rakowski -Member of Board Jan Marszalek - Member of Board and DYADIC INTERNATIONAL, INC. ("Dyadic") a Florida corporation having a permanent place of business at 140 Intracoastal Pointe Drive - Suite 404, Jupiter, Florida 33477 USA. represented by: Mark Emalfarb - President WHEREAS, Dyadic is engaged in development, marketing and production of Enzymes, and WHEREAS, Dyadic desires to engage Polfa to produce Industrial Enzymes in large scale quantities, and Polfa has represented to Dyadic that it has expertise in large scale manufacturing of fermentation products; and WHEREAS, Dyadic and Polfa desire to set forth in writing the terms and conditions of their agreements and understandings; Now therefore, in consideration of the statements set forth above, which shall be deemed to be a substantive part of this Agreement, and the mutual promises, covenants, agreements, representatives and warranties contained herein, in the parties hereto agree to the following: The terms and conditions of this Agreement are as set forth below: 1. DEFINED TERMS 1.1. "EFFECTIVE DATE" shall mean the date of the last signature to execute this Agreement; 1.2. "INDUSTRIAL ENZYME(S)" shall mean all non pharmaceutical enzymes used as a processing aids in production or active ingredients including but not limited to the following industries: animal feed, alcohol, brewing, cheese making, ethanol, fruit juice, food, fructose, household & industrial detergents, starch processing, personal care products, pulp & paper and textile. ** CONFIDENTIAL TREATMENT REQUESTED 1.3. "FERMENTOR BROTH" shall mean the fermentor contents, including cell mass, at the completion of a fermentation batch (including batch and fed batch fermentations and all withdrawals). 1.4. "FERMENTATION BATCH" shall mean the fermentation process resulting in fermentation broth from a fermentor. 1.5. "PARTY" shall mean either POLFA or DYADIC as the context requires, and "Parties" shall mean, collectively, POLFA and DYADIC, 1.6. "PRODUCT(S)" shall mean final (liquid) concentrate(s) of Enzyme as per DYADIC specifications. Final liquid concentrates include but are not limited to formulated liquid Product(s) and formulated or unformulated liquid concentrates intended for further processing inside and/or outside the POLFA facility. 1.7. "PRODUCT SPECIFICATIONS" shall mean the specifications for the production and quality control of the "Products", each specific product will have its specification sheet. 1.8. "FERMENTOR DAY", shall mean a twenty four-hour period after a fermentor has been charged with media and inoculated from the seed tank until the fermentor has ceased to be supplied with agitation, aeration and substrates. 1.9. "FERMENTATION DAYS" shall be the number of Fermentor Days required for a Product after the fermentor has been charged with media and inoculated from the seed tank until the fermentation protocol is complete. It will also include up to 24 hours as the amount of time agreed between the parties for clean up, change over, media loading, sterilisation and inoculation. The Fermentation Days shall be expressed to the nearest tenth (1/10th) of a Fermentor Day. Thus for a total fermentation the total Fermentation Days could be **. 2. RELATIONSHIP The Parties hereby establish a contract manufacturing relationship, whereby Polfa will conduct contract production of the Product(s) for Dyadic, utilising Dyadic's cultures and technology. Dyadic's cultures and technology. Dyadic's cultures and technology are defined for the purposes of this Agreement as those cultures and technologies that are owned by or licensed to Dyadic. The production process will be conducted by POLFA at its facilities, properly equipped and staffed, to produce the Product(s), meeting Product Specifications. Dyadic shall provide Polfa with all technical and technology information, instructions and procedures available to Dyadic and necessary for the production packing and testing of the Product(s) including the strain(s) and procedures of the strain(s) handling as well as technical and technology assistance and training of Polfa's staff to enable Polfa to reach the highest level of capacity of production process for each Product. The parties desire to establish a new common Polish company with ownership and other details to market the Product(s) produced under this Contract Manufacturing Agreement according to the terms and conditions to be consistent with the Letter of Intent signed by duly authorised representatives of the parties. ** CONFIDENTIAL TREATMENT REQUESTED 3. MANUFACTURE PROCESS 3.1. Polfa will operate its facility using qualified staff in a manner to ensure the efficient production of the Product(s) meeting the Product Specifications. 3.2. Polfa will provide fermentation production process for the efficient production of the Product(s) with similar processing requirements as the ** and ** processes provided by Dyadic meeting Product Specifications. Additional Product(s) with process requirements that require additional resources i.e. use of additional labour, energy, equipment, maintenance services, step processing, will be negotiated with the Charges for Product produced being adjusted by the appropriate cost. Fermentation production processes are to include all necessary equipment, instrumentation and controls, and analytical services for the culture maintenance and propagation, fermentation (including fed batch with partial broth withdrawals), recovery (Including primary separation and flocculation of fermentor broth), concentration, formulation, Packaging, warehousing and shipment of the Product(s). The disposal of the biomass wastes will be provided by Polfa. The currently suggested method as done for Polfa's own production would be by land application. All direct third party costs of the waste disposal for land application shall be borne by Dyadic. The parties upon signing this agreement will with all diligence and speed work toward the approval ` this methodology of disposal of the waste. This approval of land application or an alternative disposal method with its costs must be known before any modifications are made to the fermentor equipment or ultrafiltration equipment is ordered. If the documented estimates of an alternative method grossly exceed the land application the land estimates and make the Manufacturing costs of this enzyme uneconomical, then Dyadic can decide not to manufacture that enzyme at Polfa. If the waste can be disposed of by land application but Polfa wishes to dispose of it in another method which may include additional Polfa effort not included in the Tooling Fee then the actual cost to Polfa will be borne by Dyadic but not to exceed land application Costs. If the waste cannot be disposed by land application then the total cost of the other method including any additional effort by Polfa not included in the tooling fee will be borne by Dyadic. It is anticipated that the production of the Product(s) will require at minimum the Services identified in Appendix 1. 4. PROCEDURES In performing the production process pursuant to this Agreement, Polfa shall use its best efforts to comply with the operating protocols for the Production and formulation of the Enzymes agreed to between the Parties. POLFA agrees not to implement process changes to the procedures without the prior written approval of Dyadic. Polfa will maintain and supply (in English) to Dyadic up to date written procedures as being used for the processing of the Product(s) including the process from culture handling through packaging. Polfa will maintain a record of changes to the procedures with dates and explanation of changes included in the record; such records will be available to Dyadic upon request. 5. CAPACITY AND PRODUCTION VOLUMES 5.1. Polfa agrees to provide full time to Dyadic for production of Enzymes up to ** fermentors as required by Dyadic. During the initial production, the parties agree that ** fermentors can be utilised for production of the Product(s) in place of ** fermentor. The Tolling Fee for the use of ** fermentor will be at the agreed upon Tolling Fee in 7.1. ** CONFIDENTIAL TREATMENT REQUESTED Currently one of the ** fermentor being presented has a ** than the other two and if prorated from that used on the **. It is agreed that if yields of the other ** fermentors cannot be achieved in the ** fermentor that Polfa ** fermentors. If during the agreed trial run ** fermentor, Polfa is unable to achieve a ** then Dyadic can elect to not utilise the ** fermentors. If agreed between the parties, **. Dyadic will provide Polfa with a forecast of planned production volumes by Product(s). Dyadic shall provide Polfa with a rolling forecast of requirements for the next twelve months every quarter end. Dyadic shall provide Polfa with firm orders for volumes of Product(s) 45 days in advance of production. Dyadic should give Polfa notification of a new Product(s) or the need to expand to another fermentor three months in advance provided that no additional investments are required. 5.2. The parties agreed that at the initial time of co-operation to confirm the possibilities of transfer of Industrial Enzyme production to Polfa's facilities, five pilot plant scale trials shall be performed. If the results of these trials are a success then one trial in ** fermentor shall be performed. For the first trial ** the scope of modification made by Polfa will be the minimum requirements necessary for such process. The cost of raw materials and packaging needed for the trial shall be borne by Dyadic and Dyadic shall not pay Polfa any Tolling Fee. If the results of the industrial trial are successful Polfa shall start to adjust its facilities to Industrial Enzyme production requirements and Dyadic shall provide Polfa with UF equipment per Section 8. 1. 5.3. Under this agreement Polfa is required to make modification in their fermentation area in order to be able to produce the Product(s) ("required changes"). If Dyadic does not produce Product at Polfa per this Agreement within six months after completion of the required changes then Dyadic will reimburse Polfa for the documented cost of these changes. The total reimbursement is not to exceed Polfa's estimate of **. Both parties agree to use their maximum, efforts and recognise that time is of the essence in completing the pilot plant studies, commercial level demonstration trial fermentation, installing the modification and recovery equipment and starting commercial production of Industrial Enzymes. 6. PRODUCT SPECIFICATIONS The Parties shall agree upon Production and Quality Control Specifications ("Product Specifications"). 7. CHARGES FOR PRODUCT PRODUCED 7.1. Dyadic shall pay to Polfa for Product(s) produced meeting Product Specifications per each Fermentation Batch at a Product Price which shall be calculated on the following formula: ** ** CONFIDENTIAL TREATMENT REQUESTED Secondly **. The result is ** 7.2. Charges. 7.2.1 A tolling fee of ** for the total Fermentation Days used (the "Tolling Fee"). 7.2.2 It is understood that Tolling Fee specified above is equal with ** 7.2.3 ** 7.2.4 ** 7.2.5 The above mentioned Tolling Fee shall be valid for the period of twelve months from the date of the first commercial production provided that such commercial production shall be started within six months from the Effective Date, excluding delay caused by Polfa's fault. For the following twelve (12) month period the Tolling Fee shall be adjusted and agreed using the following formula: Adjustments: ** The parties agree that the increase of the Tolling Fee in EURO cannot be greater ** . If the Parties do not reach settlement on the annually adjusted Tolling Fee, the new Tolling Fee shall be referred for binding arbitration to an independent Chartered Accountant firm located in Poland. This firm would do their own calculations based on the methodology and limitations stated in 7.2.5. The costs for the work done by Chartered Accountant shall be borne by the party in error or if both are in error equally between the parties. In case of dispute until a new Tooling Fee is established by independent Chartered Accountant a previous Tooling Fee is utilised. After the new Tooling Fee is agreed upon, the fermentation charges in dispute will be recalculated with the new Tooling Fee and the difference will be immediately remitted by Dyadic. 7.3. The calculation of total toll charges per fermentation batch of Product(s) shall be ** . 7.4. Charges for Product produced set forth in this Article 7 is inclusive of all normal production phases including all but not limited to those items covered in App. 1, and shall include raw materials and packaging supplies, necessary for performance under this agreement: such Raw Materials and Packaging supplies shall be included at cost at the actual usage per Fermentation Batch in the Product Price charge in Section 7.1. Polfa will supply documented evidence of actual cost and usage of Raw Materials and Packaging to Dyadic. Dyadic will agree to maintain a deposit of ** with Polfa in order to aid in the carrying of Raw Materials and Packaging Inventory. In keeping with the other costs the Raw Material and Packaging Costs will be translated into EURO at a translation rate of PLN/EURO published by Polish National Bank for the date of invoice issued by Polfa. ** CONFIDENTIAL TREATMENT REQUESTED Dyadic will provide Polfa with a stand by Letter of Credit, of value of approximately a ** . The conditions of Letter of Credit are defined in Appendix 3 to this Agreement. The costs of the Letter of Credit shall be divided into two parties, i.e. the costs of it in Poland shall be borne by Polfa and the costs outside of Poland shall be borne by Dyadic. 7.5. Dyadic and Polfa agree that baseline productivity for each Enzyme production shall be calculated as follows: 7.5.1 Dyadic shall give to Polfa the level of productivity based on Dyadic's contract manufacturer's experience in the case of commercial products or pilot plant data for non-commercial products. ** 7.5.2 A productivity baseline (on-going baseline) will be determined for each Product to be produced by Polfa for Dyadic. This productivity baseline is to only and exclusively be used in the case where the production level is impacted by a fermentor contamination, mechanical failure, operational error or where product is produced not in specification (the aforementioned to be defined as "Problem Fermentation(s)"). ** ** ** The in specification product will be agreed to be either measured in volume or weight of a specific activity product or in total activity units. Prior to completion of the required **. This baseline will be used to calculate the prorated total fermentation charges for any fermentation where the production level is impacted by a fermentor contamination, mechanical failure, operational error or where product is produced not in specification. After the agreed upon ** the ongoing baseline can be calculated and agreed upon, all batches where the total fermentation charges have been prorated before the on-going baseline could be calculated will be reviewed. This review will be to determine the prorated total fermentation charges based on the on-going baseline and determine if any credits are due to Dyadic or additional payments are due to Polfa. 7.5.3 All batches where the production level is not impacted by a fermentor contamination, mechanical failure, operational error or where product is produced in specification irrespective of obtained production level shall be paid per agreed total charges for all Product produced as it is defined in point 7. 7.6. All product manufactured by Polfa must meet the Product Specifications. Dyadic is not obligated to take possession of Product(s) not meeting the Product Specifications and Polfa will reimburse Dyadic the documented evidence of the costs, if any, borne by Dyadic for manufacture of such batch of Product, provided that it is no fault of Dyadic, 8. EQUIPMENT RESPONSIBILITY 8.1. The financial responsibility for any modifications to the equipment to achieve the agreed upon the baseline productivity is borne by Polfa. ** CONFIDENTIAL TREATMENT REQUESTED The costs of investments and modification of equipment and their installation borne by Polfa to adjust its facilities in order to produce Product(s) shall be amortised for ten years (10) and the annual amortisation is to be added to the Tolling Fee, as per point 7. 1. 8.2. Dyadic has agreed for the initial fermentor used to provide the Ultra filtration equipment that Polfa would install at their cost. The Ultra filtration equipment would remain the property of Dyadic over the initial ten-year term of the agreement. After the initial term Dyadic would have the option to either sell the equipment to Polfa for an agreed upon value or remove the equipment. Dyadic shall be responsible for the ** . 8.3. The responsibility for any additional investments, if any, to adjust Polfa's facilities for a new Product(s) shall be agreed upon by the parties. 9. PAYMENT TERMS 9.1. Polfa will send a regular invoice to Dyadic and such invoices shall be issued by Polfa on Release Date. 9.2. Dyadic shall make payments to Polfa within 30 days from the date of invoice issued by Polfa. Payment will be made directly to Polfa by Dyadic. If Dyadic does not pay within the given time then Polfa may draw on the stand by Letter of Credit. The Parties may agree that payments of Euro denominated invoices may be made in Polish Zlotys at the translated rate of PLN/EURO per the Polish National Bank for the day of settlement (according to Polish law). 9.3. All billings in this agreement will be subject where applicable to the applicable Polish Government VAT. 10. CONFIDENTIALITY This Agreement shall maintain the terms and conditions of the Secrecy Agreement entered between Dyadic, Inc. and Polfa, concluded on April 15, 1999, attached hereto as Appendix 2. The terms and conditions of the Secrecy Agreement will be extended to include the duration of this agreement including any extensions and 5 (five) years thereafter. Polfa specifically agrees that it will not at any time during the Term of this Agreement or for five (5) years following the termination by Polfa or two (2) years following termination by Dyadic or termination by Polfa due to Dyadic's fault or any extension thereof manufacture directly or indirectly for itself, or others, any Industrial Enzymes as it is defined in point 1.2. 11. OWNERSHIP AND DELIVERY 11.1. Ownership of the Product and the risk of loss shall transfer to Dyadic upon Quality Control certification for the Product(s) meets Product Specifications on the Release Date. Polfa agrees to warehouse the full quantity of Product obtained from each ** liters fermentation batch in cold storage for a period of up to ** free of charge. Dyadic agrees to take physical possession of said Product within ** period from the date of Release Date or pay Polfa a warehousing fee to be agreed upon by the Parties. All out of pocket costs related to shipments shall be borne by Dyadic. Dyadic agrees to schedule shipments of not less than a minimum of **. In the event, Dyadic requires shipment of Product in quantities less than the amount stated above, the Parties agree that such shipment will incur an additional service charge agreed upon by both Parties. ** CONFIDENTIAL TREATMENT REQUESTED 11.2. All improvements in Dyadic's technology (processes or strains) either by Dyadic or Polfa are the sole property of Dyadic. 12. FERMENTATION USAGE AND CANCELLATION 12.1.1 All fermentors allocated to Dyadic may be used by Polfa at any time they are not used by Dyadic for manufacturing products allowed in this agreement. This is provided the manufacturing of these products is not detrimental to the production or scheduling of Dyadic production. 12.1.2 Cancellation of any rights to any fermentor Dyadic has produced in during the previously three months requires six months notification by Polfa. 12.1.3 In cancellation utilisation percentage the capacity fermentor days per period is ** of workdays. Workdays exclude any plant shutdowns such as vacation, equipment breakdowns or scheduled maintenance. 12.1.4 Cancellation can only be for each fermentor independent of the other. Cancellation of a fermentor must begin with the last added fermentor to actual production. If the total fermentor days of all fermentations produced in the previous three months is 75% of the total of all fermentors days activated for Dyadic then there can be no cancellation of any fermentors. 12.1.5 In the case of cancellation of any fermentor Polfa may purchase the installed equipment owned by Dyadic (see point 8. 1.) if Dyadic does not wish to keep it for use at another location. The purchase price would be **. The formula to be used would be **. FIRST FERMENTOR 12.2.1 The First Fermentor can be ** . 12.2.2 In the first twelve months of use after the initial commercial production in this fermentor no cancellation can be made for any production level. 12.2.3 In the second and third year of use Polfa may cancel the right to this fermentor if Dyadic is utilising less than **. 12.2.4 After the third year of use Polfa. may cancel the right to this fermentor if Dyadic is utilising less than **. SECOND FERMENTOR 12.3. 12.3.1 Dyadic will have a guaranteed option to increase production to the second ** years providing the first fermentor has not been cancelled. 12.3.2 After Dyadic has begun utilising the second Fermentor there is no utilisation requirement for the **. 12.3.3 After the ** of production Polfa can cancel Dyadic's rights to this fermentor if Dyadic is utilising ** days in the previous **. ** CONFIDENTIAL TREATMENT REQUESTED THIRD AND FOURTH FERMENTOR 12.4.1 Dyadic has the right of first refusal on the third and fourth fermentor for ** years. If Polfa have a bonafide offer or requirement for production in the third or fourth fermentor, then Dyadic has ** to provide production requirements to Polfa to fill ** of this fermentor's capacity days. If Dyadic is not utilising the previous fermentor at this point, (i.e., Polfa wishes to permanently contract for using the fourth fermentor while Dyadic is only using the first and second fermentors) then the right of first refusal is only valid for **. 12.4.2 If Dyadic begins production in the third or fourth fermentor, other than for exercising the preceding option in 12.4.1, there will be no performance level requirement for the first year of use. 12.4.3 After the second year of production cancellation can occur if Dyadic is utilising ** the previous ** for the third or fourth fermentor. 13. TERM AND TERMINATION 13.1. This Agreement shall continue in effect from the Effective Date for ten (10) years from effective date, with options for ** extensions each lasting for a minimum of an additional ten (10) years, unless extended by mutual written agreement of the Parties, or terminated pursuant to the provisions of Article 13.2. 13.2. In the event of default of a material term of this Agreement, the aggrieved Party shall provide written notice of such a breach, and may terminate this Agreement if such default is not cured within ninety (90) days of such written notice. 13.3. In the event of the sale and/or transfer by the Parties or by its successors of such of both Parties' assets which are necessary to implement this Agreement, both Parties (or its successors) will require any such sale and/or transfer to include an agreement by the Acquiring party to assume this Agreement on the same terms and conditions set forth herein. 13.4. Upon termination of this agreement all Confidential Information, strains, documentation, and technology are to be Immediately returned to DYADIC. 14. WARRANTY 14.1. Polfa warrants that the Product(s) shall meet the Product Specifications" upon Quality Control clearance, but Polfa is not responsible for any quality changes of Product(s) which appear during the storage of Product(s) in cooling store at temperature 10(0)C. 14.2. Polfa will maintain insurance for Dyadic's final Product(s) to the same extent that Polfa maintains its own products for a period of five days from the date of Release Date. 15. BATCH SAMPLES, REPORTS AND QUALITY CONTROL 15.1. Polfa agrees to provide Dyadic with periodic reports (including, but not limited to fermentation records showing all details of each fermentation and recovery records) and samples as agreed to by the Parties as it is specified in Appendix 4 to this Agreement. ** CONFIDENTIAL TREATMENT REQUESTED 15.2. The Parties agree that the quality control approval of the final Product(s) - QC Release (Release Date) - shall be made by Polfa according to the specification and procedures supplied by Dyadic for each Product(s). Dyadic may amend this process at any time upon Polfa's prior written consent, which consent shall not be unreasonably withheld. 16. ENTIRE AGREEMENT This Agreement set forth the entire agreement of the Parties relating to the subject matter hereof. All prior agreements, understandings and representations are superseded by such Secrecy Agreement and this Agreement, and are without further effect. This Agreement may be amended only by written agreements signed by both Parties. Polfa acknowledges that only the President of Dyadic or his written designee may on behalf of Dyadic modify or enter into any agreements with Polfa. 17. NOTICE All notices and other communications required or permitted by this Agreement shall be in writing and shall be deemed to have been given when delivered by hand or mailed, certified or registered mail return receipt requested and postage prepaid. (a) If to Dyadic: Mark Emalfarb President Dyadic International, Inc. 140 Intracoastal Pointe Drive - Suite 404 Jupiter, Florida 33477; USA and to: Robert S. Levin Levin & Ginsburg Ltd. 180 N. LaSalle Street, 22nd Floor Chicago, Illinois 60601 - 2794 (b) If to Polfa: ** Polfa Tarchomin S.A. 2, A. Fleming Str. 03 -0176 Warsaw, Poland Either Party may change the address or designee to which notice shall sent by giving written notice of such change to the other Party. 18. GOVERNING LAW It is understood and agreed that the laws of Austria shall at all times and in all respects govern the construction and interpretation of this Agreement. All papers, agreement documents and instruments shall however be executed in English, which shall be the controlling language of this Agreement. The both Parties will do their best efforts to resolve all matters and disputes in the amicably way. ** CONFIDENTIAL TREATMENT REQUESTED All disputes arising from the interpretation of this Agreement - if not settled amicably - shall be referred to the settlements to the Arbitration Court at the International Chamber of Commerce in Vienna, Austria. The arbitration including appointment of arbitrators shall be carried out in accordance with the valid rules of the International Chamber of Commerce Rules of Arbitration. The arbitration shall be conducted in the English language. The award of Arbitration shall be final and binding for both parties. The parties bind themselves to carry out the awards of the arbitrators. 19. INDEMNIFICATION 19.1. Dyadic shall indemnify and hold Polfa harmless against all claims and expenses, including legal expenses arising out of the death of or injury and disease to any person or persons or out of any damages to property, whether during or after termination of this Agreement, resulting from the use of the "Products" produced and delivered in accordance herewith and accepted by Dyadic which is not attributable to the negligence of Polfa or its employee to follow the process and the "Product Specification". 19.2. Polfa, will recognise that the strains and know-how are the sole property of Dyadic and will use this technology and any other information to fulfil the purpose of this Agreement and no other. Polfa recognises that the technology revealed to Polfa by Dyadic contains certain Trade Secret information and Polfa agrees to maintain the same degree of confidentiality and protection with regard to the Trade Secrets of Dyadic as Polfa would maintain with regard to its own Trade Secrets. Polfa agrees that it will not use this Trade Secret information for its benefit or to the detriment of Dyadic except as needed for the satisfactory performance of this Agreement. 19.3. For all purposes hereunder, the Parties hereto agree to act as, and acknowledge, that each is an independent contractor to the other, with no capacity to legally bind the other Party nor to act at its agent, employee, joint venture or partner expect as specifically set forth herein, if at all, or in a separate writing executed by the Party to be bound. 19.4. Dyadic represent to the best of its knowledge and belief that production process(es) of Product(s) shall not infringe any third parties property rights. Nevertheless, in case Polfa would be sued by reason of an infringement of third parties property rights, Polfa shall promptly inform Dyadic thereof. Dyadic shall then conduct itself any defence of such suit at its own expense and hold Polfa harmless from and against any loss, claim, damage, expense or liability resulting from such infringement. Polfa agrees to assist Dyadic, without, however, assuming any monetary obligation. 20. FORCE MAJEURE The Parties hereto shall not be liable for any failure to perform. as required by this Agreement, to the extent such failure to perform is due to circumstances reasonably beyond their control, such as labour disturbances or labour disputes of any kind, accidents, failure of any governmental approval required for full performance, civil disorders of commotion, acts of aggression, acts of God, energy or other conservation measures, explosion, failure of utilities, mechanical breakdowns, material shortages disease, or other such occurrences. ** CONFIDENTIAL TREATMENT REQUESTED 21. SEVERABILITY If any part or provision of this Agreement is found to be invalid or unenforceable, such part or provision will be deemed and amended so as to achieve, as nearly as possible, the same economic affect as the original part or provision and the remainder of this Agreement shall remain in full force and effect. 22. HEADINGS/GENDER Paragraph headings or the use of a particular gender in this Agreement are for convenience and do not affect its construction or interpretation. ** ** CONFIDENTIAL TREATMENT REQUESTED APPENDIX 1 ** 1. ** 2. ** 3. ** 4. ** 5. ** 6. ** 7. ** 8. ** 9. ** 10. ** 11. ** 12. ** 13. ** ** CONFIDENTIAL TREATMENT REQUESTED 14. ** 15. ** ** CONFIDENTIAL TREATMENT REQUESTED APPENDIX 3 TERMS AND CONDITIONS OF STANDBY LETTER OF CREDIT ** ** CONFIDENTIAL TREATMENT REQUESTED APPENDIX 4 SAMPLES OF PRODUCTION REPORTS ** ** CONFIDENTIAL TREATMENT REQUESTED APPENDIX 4. 1. ** ** CONFIDENTIAL TREATMENT REQUESTED APPENDIX 4.2. ** ** CONFIDENTIAL TREATMENT REQUESTED APPENDIX 4.3. RUN PARAMETERS REPORT ** ** CONFIDENTIAL TREATMENT REQUESTED Confidential Treatment Requested indicates portions of this document have been redacted and have been separately filed with the Commission POLFA TARCHOMIN(R) S.A. - -------------------------------------------------------------------------------- Centrala tel. 811 00 61, 811 80 1 TARCHOMINSKIE ZAKLADY Sekretariat tel. 811 03 51, fax 614 52 80 FARMACEUTYCZNE "POLFA" Dzial Sprezedazy tel. 811 95 00, 811 66 67 SPOLKA AKCYJNA Fax 811 04 66, tel/fax 811 18 23 ul. Fleminga 2, 03-176 Warszawa Dzial Eksportu tel/fax 811 18 09 Warsaw, February 11, 2004 MR. MARK EMALFARB PRESIDENT & CHIEF EXECUTIVE OFFICER DYADIC INTERNATIONAL, INC. 140 Intracoastal Pointe Drive Jupiter, Florida 33477 USA Hereby, Polfa Tarchomin S.A. having its business seat at: 2, A.Fleminga Street; 03-176 Warsaw; Poland presents and confirms that it recognizes the existing terms and conditions of the Contract Manufacturing Agreement concluded by and between Polfa Tarchomin S.A. and Dyadic International, Inc. on October 27, 1999 and it will provide Dyadic International, Inc. with required fermentation capacity according to the following time schedule: - **; - **; - **. Preliminary schedule will contain the following information: - the scope of modernization, i.e. required investments and works; - duties and responsibilities of each party; - preliminary time table required to realize the whole project; - period of time to be necessary to start this modernization from the date of Dyadic's order to beginning of the works, Polfa Tarchomin S.A. will secure the funds to carry out these modernizations. /s/ [Illegible] - ------------------------ President, General Manager Date: 11/02/04 ----------------------- ** CONFIDENTIAL TREATMENT REQUESTED LETTER OF UNDERTAKING Hereby, Dyadic International, Inc. having its business seat at: 140 Intracoastal Pointe Drive - Suite 404, Jupiter, Florida 33477, USA represented by: Mr. Mark Emalfarb - President, Chief Executive Officer confirms and presents that this letter provides the Board of Directors of Polfa Tarchomin S.A. with Dyadic International, Inc.' guarantee which Polfa Tarchomin S.A. can utilize to support Polfa Tarchomin S.A. application for credit. According to the terms and conditions of this guarantee agreement, upon completion of each step of modernization, Dyadic International, Inc. shall be obliged to provide Polfa Tarchomin S.A. with orders as is customary for toll-manufacturing of Industrial Enzymes and to take back manufactured Industrial Enzymes in amount equal to production, made utilizing not less ** capacity fermenters days during the whole period of the return of agreed modernization costs by Dyadic International, Inc. to Polfa Tarchomin S.A. provided that Polfa Tarchomin S.A. will make available to Dyadic International, Inc. required fermentation capacity according to the time schedule outline in Polfa Tarchomin's letter dated February 11, 2004, ** Dyadic International, Inc. agrees and accepts the time schedule of realization of modernization by Polfa Tarchomin S.A. This letter is enclosure to the Contract Manufacturing Agreement and it constitutes the integral part of this Agreement. /s/ Mark Emalfarb - -------------------------------- Mark Emalfarb - President of Dyadic International, Inc. 2-1-2004 - -------------------------------- date: ** CONFIDENTIAL TREATMENT REQUESTED EX-10.18 4 ex10_18.txt Exhibit 10.18 Confidential Treatment Requested indicates portions of this document have been redacted and have been separately filed with the Commission Dated 21st day of October 1998 ROBERT ALBERT SMEATON RAYMOND CHIH CHUNG KWONG collectively as Vendors and GENEVA INVESTMENT HOLDINGS LIMITED as Purchaser ----------------------------------------- AGREEMENT relating to the sale and purchase of 70% of the entire issued share capital of ** ------------------------------------------ EDE CHARLTON 13/F Wing On Centre 111 Connaught Road Central Hong Kong Tel: 852 2905 7888 Fax: 852 2854 9596 (Ref: C/ECC193.01/GN/NT) ** CONFIDENTIAL TREATMENT REQUESTED THIS AGREEMENT is made on 21st day of October, 1998 BETWEEN: (1) ROBERT ALBERT SMEATON of Blocks C-D, 2nd Floor, G. Lee Industrial Building, 77-81 Chai Wan Kok Street,, New Territories, Hong Kong; (2) RAYMOND CHIH CHUNG KWONG of Blocks C-D, 2nd Floor, G. Lee Industrial Building, 77-81 Chai Wan Kok Street, New Territories, Hong Kong; and Robert Albert Smeaton and Raymond Chih Chung Kwong shall hereinafter be collectively referred to as the "VENDORS". (3) GENEVA INVESTMENT HOLDINGS LIMITED a company incorporated in the British Virgin Islands whose registered office is situate at Craigmuir Chambers, PO Box 71, Road Town, Tortola, British Virgin Islands ("PURCHASER"). RECITALS: A. ** is a company incorporated in Hong Kong. B. The Vendors together are the legal and beneficial owners of 95% of the entire issued share capital of **. C. The Vendors together wish to sell and the Purchaser wishes to purchase 70% of the entire issued share capital of ** subject to, and on the terms of, this Agreement. D. ** has on even date entered into a business acquisition agreement ("BUSINESS ACQUISITION AGREEMENT") as the purchaser with the Vendors, Tsang Kwok Kwong and ** ("PURIDET HONG KONG") together as the vendors under which ** agreed to acquire the Business Assets (as defined in the Business Acquisition Agreement) including the Capital Contribution in ** (as defined in the Business Acquisition Agreement) so that after the acquisition, ** would (i) carry on the Business (as defined in the Business Acquisition Agreement) as a going concern in succession to the Vendors and ** with effect from the opening of the business on 19 October 1998; and (ii) wholly own the Subsidiary (as defined in clause 1,1 hereinbelow). E. Whilst technically all of the issued shares of ** carry the same voting rights, the parties have agreed that as regards a portion of the shares being purchased by the Purchaser hereunder, in respect of which immediate payment will not be made, the Purchaser shall not exercise voting rights in respect of such shares unless and until, and to the extent, that such shares are paid for in the manner as stipulated in this Agreement. ** CONFIDENTIAL TREATMENT REQUESTED NOW IT IS HEREBY AGREED as follows: 1. INTERPRETATION 1.1 In this Agreement unless the context otherwise requires: (a) the following expression shall have the following meanings: Expression Meaning. ---------- ------- "Companies Ordinance" the Companies Ordinance (Chapter 32, as amended, of the Laws of Hong Kong) "Company" **, a company incorporated in Hong Kong under the Companies Ordinance certain basic information about which is set out in Schedule I Part B "Completion" completion of the sale and purchase of the Sale Shares in accordance with the terms and conditions of this Agreement "Completion Date" the date on which Completion occurs "Conditions" the conditions set out in Clauses 2.1 and 2.2 "Consideration" the consideration for the sale of the Sale Shares payable by the Purchaser to the Vendor pursuant to clause 4 "disclosed" any matter fairly and properly disclosed in this Agreement or any document expressly referred to and identified in this Agreement or provided or made available or otherwise disclosed in writing to the President or Chief Operating Officer of ** (and/or any of their agents) and any fact or matter contained or referred to in (or which could be reasonably deduced from) this Agreement or such document or written disclosure "Group" the Company and the Subsidiary "HK$" Hong Kong dollars "Non-Voting Shares" 90 shares of HK$1.00 each of the Company which are legally and beneficially owned by the Vendors free of encumbrances and registered in the names of the Vendors and form part of the Sale Shares ** CONFIDENTIAL TREATMENT REQUESTED 2 "PRC" or "China" the People's Republic of China but excluding for the purpose of this Agreement Hong Kong, Macau and Taiwan "Property" Blocks C-D, 2nd Floor, G. Lee Industrial Building, 77-81Chai Wan Kok Street, New Territories, Hong Kong "SaleShares" 140 shares of HK$1.00 each of the Company which are legally and beneficially owned by the Vendors (which for the avoidance of doubt include the first subscriber shares of the Company) and registered in the names of the Vendors as set out in Schedule I Part A "Subsidiary" **, a wholly-foreign-owned-enterprise established under the laws of the PRC certain basic information about which is set out in Schedule I Part C "Tenancy Agreement" or tenancy agreement in respect of the "Tenancy" Property "Warranties" the representations, warranties and undertakings set out in Schedule II "US$" United States dollars (b) words and expressions defined in the Companies Ordinance shall bear the same respective meanings herein; (c) references to any statute or statutory provision shall include any statute or statutory provision which amends or replaces, or has amended or replaced, it and shall include any subordinate legislation made under the relevant statute; (d) a body corporate shall be deemed to be associated with another body corporate if it is a holding company or a subsidiary of that other body corporate or as subsidiary of a holding company of that body corporate; (e) references to clauses and sub-clauses and Schedules are to clauses and sub-clauses of and Schedules to this Agreement; (f) references to writing shall include typewriting, printing, lithograph, photography, telecopier and telex messages and any mode of reproducing words in a legible and non-transitory form; (g) words importing the singular include the plural and vice versa, words importing a gender include every gender and references to persons include bodies corporate or unincorporate; and ** CONFIDENTIAL TREATMENT REQUESTED 3 (h) any document expressed to be "in the approved form" means a document approved by the parties hereto and (for the purpose of identification) signed on behalf of the Vendors and the Purchaser. 1.2 Headings are for convenience only and shall not affect the construction of this Agreement. 1.3 In construing this Agreement:- (i) the rule known as the ejusdem generis rule shall not apply and accordingly general words introduced by the word "other" shall not be given a restrictive meaning by reason of the fact that they are preceded by words indicating a particular class of acts, matters or things; (ii) general words shall not be given a restrictive meaning by reason of the fact that they are followed by particular examples intended to be embraced by the general words; and (iii) reference to "the Vendors" shall where the context permits be deemed to include also a reference to each of them. 1.4 Unless otherwise expressly provided to the contrary, all representations, warranties, undertakings, indemnities, covenants, agreements, obligations given or entered into by the Vendors are deemed to be given and entered into by the Vendors jointly and severally and the Vendors' liabilities thereunder shall also be joint and several. 1.5 The Schedules form part of this Agreement and shall have the Same force and effect as if expressly set out in the body of this Agreement and any reference to this Agreement shall include the Schedules. 2. CONDITIONS 2.1 Subject to any written waiver pursuant to clause 2.4, this Agreement is conditional upon the completion of the Business Acquisition Agreement in accordance with the terms thereof in all material respects. 2.2 Without prejudice to clause 2.1, this Agreement is further conditional upon nothing coming to the Purchaser's attention prior to Completion indicating that any of the Warranties do not remain true and accurate in all material respects up to Completion. 2.3 The Vendors will use all reasonable endeavors to ensure that the Conditions in cause 2.1 is fulfilled within 10 business days after signing hereof. In the event that the Conditions are not fulfilled (or waived by the Purchaser) within the time stipulated aforesaid, then the Purchaser shall be entitled to (but not obliged to) forthwith rescind this Agreement in writing to the Vendors and this Agreement shall become null and void and of no further effect, in which event the parties hereto shall be released from all their obligations hereunder without liability but without prejudice to the rights accrued to the parties prior to such rescission for any antecedent breach. ** CONFIDENTIAL TREATMENT REQUESTED 4 2.4 The Purchaser reserves the right to waive (to such extent as it may think fit) compliance with the Conditions or any part thereof but without prejudice to any other right which the Purchaser may have under this Agreement. The Purchaser shall be deemed to have waived the compliance with the Conditions or accepted the Conditions as having been satisfied in all aspects if the Purchaser shall proceed with Completion. 3. SALE AND PURCHASE 3.1 On the terms set out in this Agreement and subject to the Conditions: (a) each of the Vendors shall sell as beneficial owner the number of Sale Shares (including for the avoidance of doubt the proportion thereof which are Non-Voting Shares) set opposite his name in Schedule I Part A to the Purchaser free from all liens, charges, encumbrances, equities and adverse interests and with all rights attached or accruing thereto at 19 October 1998 (including the right to receive all dividends and other distributions declared, made or paid on or after such dates) with effect as of and from 19 October 1998 but subject to clause 4.3 with respect to the Non-Voting Shares; and (b) the Purchaser relying on the representations, warranties, undertakings and indemnities of the Vendors contained or referred to herein shall purchase the number of Sale Shares set opposite each of the Vendors' names in Schedule I Part A with effect as of and from 19 October 1998. The transfer of all Sale Shares shall take effect from 19 October 1998. For avoidance of doubt, with effect as of and from 19 October 1998, the Purchaser shall be entitled, as beneficial owner of the Sale Shares to (i) receive all dividends and other distributions declared, made or paid in or after 19 October 1998 in respect of the Sale Shares; (ii) exercise all voting powers and rights in respect of the Sale Shares (subject however to the Purchaser's undertaking in clause 4.3(a) not to vote the Non-Voting Shares except to the extent such shares are fully paid for) and (iii) enjoy all such other rights, powers and benefits as shall be conferred on the registered holder of the Sale Shares under the articles of association of the Company or otherwise. 3.2 The Vendors hereby irrevocably waive and undertake to procure the waiver of all rights of pre-emption and all other restrictions whatsoever on transfer over or in respect of the Sale Shares or any of them to which they or any other person may be entitled under the articles of association of the Company or otherwise. 4. CONSIDERATION AND PAYMENT 4.1 The Consideration shall be ** Provided that of this amount ** shall not be paid at Completion and any payments in respect of this retained amount shall be governed by the provisions of clause 4.3. Each Vendor's share of entitlement to the Consideration (in percentage) is set against his respective name in Schedule I Part A. ** CONFIDENTIAL TREATMENT REQUESTED 5 4.2 The Purchaser shall pay to the Vendors US$500,000 (Five Hundred Thousand US Dollars) as a fixed non-adjustable first stage payment of the Consideration ("INITIAL PAYMENT") at Completion. 4.3 Voting in respect of the Non-Voting Shares and payment for the Non-Voting Shares shall be governed by the following provisions: (a) the Purchaser undertakes to the Vendors not to exercise the voting rights in respect of or attached to any of the Non-Voting Shares unless and until, and to the extent, such shares have been paid for pursuant to the provisions of sub-clause (b) below; (b) For every US$20,000 of Consideration paid by the Purchaser subsequent to the payment of US$500,000 of the Consideration paid pursuant to clause 4.2 above, the Purchaser shall be totally released from its undertaking in sub-clause (a) in respect of two (2) Non-Voting Shares (for the purpose of identification, the share numbers of which the Purchaser may choose at its discretion). Any such subsequent Consideration which is paid shall be paid by the Purchaser by delivering a cheque to each Vendor respecting such Vendor's share of entitlement to such Consideration. (c) To the extent the Non-Voting Shares have not already been paid for pursuant to sub-clause (b), the Vendors may by notice in writing require the Purchaser forthwith to pay for any Non-Voting Shares which have not by then been paid for, once the accumulated realised net profits (i.e., income minus expenditure (including but without limitation to all taxes, salaries and expenses paid to the Vendors and all expenses incurred in connection with the Business)) after tax since 19 October, 1998 (after taking into account any losses since 19 October, 1998 and adding back any fees or remuneration payable and paid by the Company to the directors nominated by the Purchaser and other expenses incurred by the Purchaser on account of the Company without the consent of the Vendors), as audited by an independent public auditor of the Company, equals or exceeds US$900,000 (Nine Hundred Thousand US Dollars) Provided only that the assessment of whether this target has been reached may only be made following preparation of financial statements of the Company in respect of any year-end (i.e. March 31) or half year period (i.e. September 30). For the avoidance of doubt, the accumulated realised net profits aftertax aforesaid are before dividends and other distributions declared, made or paid, if any. The Purchaser shall pay for the Non-Voting Shares which have not been paid for forthwith upon receiving the notice of the Vendors issued in accordance with this sub-clause(c) except in the case of manifest error. 4.4 The Vendors and the Purchaser agree and undertake with each other that unless and until one shareholder obtains voting rights to at least 50.01 percent of the entire issued share capital of the Company, unanimous consent of all shareholders shall be required for any matter that under general law or the Company's constitutional documents requires a majority vote of votes cast by shareholders. Without prejudice to the Purchaser's undertaking in clause 4.3(a), given that technically the Non-Voting Shares do not represent a formal class of shares without voting rights, for the purpose of this clause 4.4, the Purchaser shall be deemed not to have any voting rights in respect of any Non-Voting Shares for which payment has not been made pursuant to clause 4.3 as if such Non-Voting Shares did constitute such a class of shares. ** CONFIDENTIAL TREATMENT REQUESTED 6 4.5 The Vendors and the Purchaser further agree that they shall endeavour to promote the business of the Company and maximize its profits and the business of the Company shall be conducted in substantially the same manner as that prior to Completion, in each case until the Non-Voting Shares have been paid for. In particular, the Purchaser agrees that to the extent practicable and reasonable, it shall: (a) supply the Company with ** enzymes at reasonably competitive prices; and (b) promote the Company's non-enzyme products through its affiliates and distribution channels; and Provided That the Vendors are aware of and fully understand and agree that ** has other customers with which it deals directly in relation to the same business of the Company and ** will and shall be entitled to continue to deal directly with these customers in any manner in the future as it deems fit at its sole discretion. 4.6 The Vendors and the Purchaser further agree to procure that the Company shall not reduce or increase its share capital on or before 18 October 2000 except with the prior consent of the Vendors and the Purchaser. 5. COMPLETION 5.1 Completion of the sale and purchase of the Sale Shares shall take place at such time as may be agreed between the parties hereto within three business days of the fulfillment of the Conditions at the office of Ede Charlton at 13th Floor, Wing On Centre, 111 Connaught Road Central, Hong Kong, when all (but not part only) of the following business shall be transacted: (a) the Vendors shall confirm to the Purchaser of the fulfillment of the Conditions; (b) the Vendors shall deliver to or to the order of the Purchaser:- (i) duly executed sold notes in a form complying with the Stamp Duty Ordinance in favour of the Purchaser and/or its nominee(s) in respect of the Sale Shares, together with a cheque drawn on an account with a licensed bank in Hong Kong in favour of the "Government of the Hong Kong Special Administrative Region" for an amount equal to the ad valorem stamp duty payable under the Stamp Duty Ordinance in respect of the said sold notes; ** CONFIDENTIAL TREATMENT REQUESTED 7 (ii) instruments of transfer in respect of the Sale Shares duly executed by or on behalf of the Vendors and their nominees (as the registered holders and transferors of the Sale Shares) in favour of the Purchaser and/or its nominee; (iii) all share certificates in respect of the Sale Shares; (iv) a written letter from Tsang Kwok Kwong irrevocably waive all rights of pre-emption and all other restrictions whatsoever vis-a-vis the Purchaser on transfer over or in respect of the Sale Shares and the Option Shares (as defined in clause 6) or any of them to which he may be entitled under the articles of association of the Company or otherwise; and (v) such other documents as may be reasonably required by the Purchaser which are necessary according to law to give a good title to the Sale Shares and to enable the Purchaser and/or its nominee to be registered as the holders thereof; (c) the Vendors shall deliver to or to the order of the Purchaser the statutory books (which shall be written up to but not including the Completion Date), certificate of incorporation and each certificate of incorporation on change of name; (d) the Vendors shall procure a board meeting of the Company to be held at which:- (i) the Purchaser and/or its nominee shall be approved for registration as the holder(s) of the Sale Shares subject only to the relevant instruments of transfer being duly stamped and presented for registration; (ii) signed resignation in approved form from Tsang Kwok Kwong as secretary of the Company shall be tendered and approved, such resignation to take effect on Completion Date; (iii) The President and Chief Operating Officer of ** shall each be appointed directors of the Company, and such person as they shall nominate shall be appointed as secretary, such appointments to take effect (in the case of the directors) on the Completion Date; and (e) the Purchaser shall: (i) pay the Initial Payment in accordance with clause 4.2 by delivering to each Vendor a cheque representing such Vendor's share of entitlement to the Initial Payment; and (ii) deliver to the Vendors a certified true copy of the resolution of the sole director of the Purchaser approving the purchase and the related transactions contemplated herein and the execution and completion of this Agreement and all other associated deeds and documents. ** CONFIDENTIAL TREATMENT REQUESTED 8 5.2 The Purchaser shall not be obliged to complete this Agreement or perform any obligations under this clause 5 unless theVendors demonstrate that they are able to comply fully with the requirements of clause 5.1 and the Vendors shall not be obliged to complete this Agreement or perform any obligations under this Clause 5 unless the Purchaser demonstrates that it is able to comply fully with the requirements of Clause 5.1(e). 6. TRANSFER OF SHARES 6.1 Each of the Vendors hereby agrees and undertakes not to sell, transfer, charge, encumber, grant options over or otherwise dispose of or create encumbrances over, or of any beneficial interest in, any of his shares in the capital of the Company now owned or hereafter acquired by him under or pursuant to the articles of association of the Company or otherwise within the Option Period except with the prior written consent of the President of the Purchaser given at his sole discretion. 6.2 For a period of twenty (20) years after the Completion Date ("OPTION PERIOD") and so long as any of the Vendors shall beneficially own any shares in the capital of the Company, the Purchaser shall have a call option over each of such shares exercisable at any time and from tune to time after the Consideration has been fully paid and in any event not earlier than two (2) years after the Completion Date, to purchase the Option Shares at the Prescribed Price (as defined in clause 6 9) ("OPTION"). The Purchaser may exercise the Option by serving a written notice ("OPTION NOTICE") on the relevant Vendor ("SELLER") requiring him to transfer all or such number of shares he beneficially owns in the capital of the Company ("OPTION SHARES") to the Purchaser and/or its nominee at the Prescribed Price. 6.3 Upon service of the Option Notice, the Seller shall be bound to sell the Option Shares to the Purchaser and/or its nominee at the Prescribed Price. 6.4 Completion of the sale and purchase of the Option Shares shall take place at the Company's registered office on a date to be appointed by [its board of directors] whereupon: (a) the Seller shall, if requested by the Purchaser, resign as a director of the Company; (b) the Seller shall deliver or procure to be delivered to the Purchaser and/or its nominee duly executed transfer documents to effect the sale of the Option Shares together with the respective share certificate(s) relating thereto; and (c) the Purchaser shall pay the Prescribed Price to the Seller. 6.5 The Option Shares shall be sold and transferred with all rights and benefits attaching thereto at the date of the Option Notice and free from all charges, liens, encumbrances, claims and other third party rights whatsoever. Any stamp duty or other tax payable on the transfer of the Option Shares shall be borne by the Purchaser. ** CONFIDENTIAL TREATMENT REQUESTED 9 6.6 If the Seller shall make default in transferring any of the Option Shares pursuant to this clause 6, the Company may receive the purchase money on behalf of the Seller and the Seller hereby appoints any one director of the Company as his attorney to execute the relevant transfer documents pursuant to sub-clause 6.4(b) and upon execution of such documents, the Company shall hold the purchase money in trust for the Seller. The receipt of the purchase money shall be good discharge to the Purchaser (who shall not be concerned with the application thereof) and, after the names of the transferee(s) has or have been entered in the register of members of the Company, the validity of the proceedings as respect such transferee(s) shall not be questioned by any person except on the ground of breach of this Agreement on the part of the Purchaser. 6.7 The Vendors shall exercise and procure the exercise of all voting and other rights available to them to ensure the implementation of the foregoing provisions of this clause 6 and any provisions contained in the articles of association of the Company restricting transfers of the Option Shares shall be waived or suspended to allow such sales and purchases to proceed as provided above. 6.8 For a period of twenty-four months commencing eighteen (18) months after the Completion Date, each Vendor shall have a put option exercisable against the Purchaser over all (but not part only) of the shares ("OPTION SHARES") beneficially owned by him in the capital of the Company ("PUT OPTION"). The Put Option shall be exercisable at any time during the said twenty-four months period at the Prescribed Price (as defined in clause 6.9) by serving a written notice on the Purchaser ("OPTION NOTICE"). Upon service of the Option Notice the Purchaser (and/or its nominee(s)) shall be bound to purchase and the Vendor serving the Option Notice ("SELLER") shall be bound to sell the Option Shares at the Prescribed Price and clauses 6.4 to 6.7 (both inclusive) shall apply, mutatis mutandis. 6.9 For the purposes of this clause 6, the Prescribed Price for the Option Shares shall be: (a) if at the date of the Option Notice, the Seller shall have terminated his service agreement with the Company (other than by reason of death or physical incapacity or termination by and on the default of the Company) before the expiration of eighteen (18) months from the commencement of his employment under the service agreement, One Hong Kong Dollar (HK$1); or (b) if at the date of the Option Notice, the Seller shall have terminated his service agreement with the Company (other than by reason of death or physical incapacity or termination by and on the default of the Company) before the expiration of two years but after the expiration of eighteen months from the commencement of his employment under the service agreement, then: (i) the Prescribed Price of 25% of the Option Shares shall be One Hong Kong Dollar (HK$1); and (ii) the Prescribed Price of 75% of the Option Shares shall be a percentage of the then entire issued share ** CONFIDENTIAL TREATMENT REQUESTED 10 capital of the Company represented by 75% of the Option Shares times a sum in US$ equivalent to one and a half (1.5) times the before tax operative profit of the Company for the twelve months proceeding the date of the Option Notice. ("RELEVANT PROFIT"); or (c) in any other circumstances, a percentage equivalent to the percentage of the then entire issued share capital of the Company represented by the Option Shares times a sum in US$ equivalent to one and a half (1.5) times the Relevant Profit For the purposes of this clause 6.9, the auditor of the Company is hereby irrevocably instructed to determine the Relevant Profit (or, if he refuses to act, a person nominated by the President of the Hong Kong Society of Accountants); taking into account all such circumstances as shall seem to him relevant. The auditor or such person nominated by the President of the Hong Kong Society of Accountants as the case may be is hereby instructed to act as expert and not as arbitrator and his decision shall (save in respect of manifest error) be final and binding on the Seller and the Purchaser for all purposes and his costs shall be borne by the Company. 7. WARRANTIES 7.1 The Vendors hereby jointly and severally: (a) represent, warrant and undertake to the Purchaser in the terms set out in Schedule II and accepts that the Purchaser is entering into this Agreement and each part thereof in reliance upon each of the Warranties. (b) undertake to indemnify the Purchaser against any reasonable costs (including all reasonable legal costs), expenses or other liabilities, which it may incur in connection with any of the Warranties being untrue or misleading or having been breached. No information relating to the Business of which the Purchaser has knowledge (actual or constructive) save only for the information disclosed shall prejudice any claim made by the Purchaser under the Warranties or operate to reduce any covenant herein. 7.2 Without prejudice to any other remedy available to the Purchaser or its ability to claim damages on any basis which is available by reason of any of the Warranties being untrue or misleading or being breached, the Vendors jointly and severally undertake to pay to the Purchaser or (in the case of a liability to another person which has not been discharged) to the person to whom the liability has been incurred an amount equal to any deficiency or liability of the Company and/or the Subsidiary which arises from any of the Warranties being untrue, misleading or breached and which would not have existed or arisen if the Warranty in question had not been untrue, misleading or breached. 7.3 Each of the Warranties shall be construed as a separate Warranty and (save as expressly provided to the contrary) shall, not be limited or restricted by reference to or inference from the terms of any other Warranty. ** CONFIDENTIAL TREATMENT REQUESTED 11 7.4 The Vendors hereby jointly and severally undertake that they will from time to time and within a period of 24 months after Completion, forthwith disclose in writing to the Purchaser any event, fact or circumstance which may become known to either of the Vendors after the date hereof and which is materially inconsistent with any of the Warranties or which could reasonably be expected materially to affect a purchaser for value of any of the Sale Shares or which may entitle the Purchaser to make any claim under this Agreement. 8. ANNOUNCEMENTS 8.1 Subject to any applicable statutory or regulatory rules, or otherwise as may be required, none of the parties hereto shall make any public announcement in relation to the transactions the terms is of which are set out in this Agreement or the transactions or arrangements hereby contemplated or herein referred to or any matter ancillary hereto or thereto without the prior consent of the other parties (which consent shall not be unreasonably withheld or delayed). 9. COSTS 9.1 Each party shall pay its own costs in relation to the negotiations leading up to the sale and purchase of the Sale Shares and to the preparation, execution and carrying into effect of this Agreement. 9.2 Notwithstanding anything herein provided, the Vendors shall pay all ad valorem stamp duty on the sale of the Sale Shares and the Purchaser shall pay all ad valorem stamp duty on the purchase of the Sale Shares. 10. FURTHER ASSURANCE 10.1 Each of the parties hereto undertakes to the other parties that it will do all such acts and things and execute all such deeds and documents as may be necessary or desirable to carry into effect or to give legal effect to the provisions of this Agreement and the transactions hereby contemplated. 10.2 At all times (whether before or after Completion (so long as the relevant Vendor is under a service contract with the Company)) the Vendors shall at their own cost and expense provide or procure to be provided to the Purchaser all such information relating to the Business and/or the affairs of the Company and/or the Subsidiary as they may have in their possession or under their control as the Purchaser shall from time to time reasonably require and, for this purpose, shall give the Purchaser and its representatives, agents and advisers full access to, and permit them to copy, all such information. 11. ACCESS TO INFORMATION As from the date of this Agreement until Completion the Vendors shall give and. shall procure that the Purchaser and any persons authorised by it will be given all such information relating to the Group and such access to the premises and copies of all books, title deeds, records, accounts and other documentation of the Group as the Purchaser may reasonably request and be permitted to take copies of any such books, deeds, records, accounts and other documentation and that the officers and employees of the Group shall be instructed to give promptly all such information and explanations to any such persons as aforesaid as may be requested by it or them. ** CONFIDENTIAL TREATMENT REQUESTED 12 12. MISCELLANEOUS 12.1 Any provision of this Agreement which is capable of being performed after but which has not been performed at or before Completion and all warranties and indemnities and other undertakings contained in or entered into pursuant to this Agreement shall remain in full force and effect notwithstanding Completion. 12.2 The Vendors shall not assign or transfer, or purport to assign or transfer, any of their rights or obligations arising under this Agreement without the prior written consent of the Purchaser but the Purchaser may assign or transfer all or any part of its rights and obligations arising under this Agreement to any associated company which is a subsidiary or parent company of the Purchaser or a company under the control of the Purchaser or of the same person as is the Purchaser (and for the purposes of this clause 12.2 "control" shall have the same meaning as defined in Section 2(2) of the Inland Revenue Ordinance (Cap.112 of the Laws of Hong Kong)). 12.3 This Agreement shall be binding on and enure for the benefit of the successors of each of the parties but shall not be assignable. 12.4 Any remedy conferred on a party for breach of this Agreement (including the breach of any Warranty) shall be cumulative, in addition and without prejudice to all other rights and remedies available to it and the exercise of or failure to exercise any remedy shall not constitute a waiver by a party of any of its rights or remedies. 12.5 This Agreement constitutes the whole agreement between the parties relating to the transactions hereby contemplated (no party having relied on any representation or warranty made by any other party which is not a term of this Agreement) and no future variation and/or waiver shall be effective unless made in writing and signed by each of the parties. 12.6 This Agreement shall supersede all and any previous agreements or arrangements between the parties hereto or any of them relating to the Company or to any other matter referred to in this Agreement and all or any such previous agreements or arrangements (if any) shall cease and determine with effect from the date hereof. 12.7 If at any time any provision of this Agreement is or becomes illegal, invalid or unenforceable in any respect, the remaining provisions hereof shall in no way be affected or impaired thereby. 12.8 The provisions of clause 14.12 of the Business Acquisition Agreement shall be deemed to be repeated herein, mutatis mutandis (for the avoidance of doubt, including cross-references to other provisions in that agreement relating to "Regular Warranties" and "Special Warranties" and so that cross-references to this Agreement and the parties shall be deemed to be repeated but with references to the Business Acquisition Agreement and the parties thereto). ** CONFIDENTIAL TREATMENT REQUESTED 13 13. NOTICES (a) Any notices (which term shall include any other communication) required to be given under this Agreement or in connection with the matters contemplated by it shall, except where otherwise specifically provided, be in writing in the English language. (b) Any such notice shall be addressed as provided in clause 13.1(c) and may be: (i) personally delivered, in which case it shall be deemed to have been given upon delivery at the relevant address; or (ii) sent by pre-paid post in which case it shall be deemed to have been given 7 days after the date of posting; or (iii) sent by facsimile, in which case it shall be deemed to have been given when dispatched, subject to confirmation of uninterrupted transmission by a transmission report. (c) The addresses and other details of the parties referred to in clause 13.1(b): Name: Robert Albert Smeaton Address: ** Fax No.: ** Name: Raymond Chih Chung Kwong Address: ** Fax No.: ** Name: Geneva Investment Holdings Limited Address: c/o Deacons Graham & James 3-6/F., Alexandra House, Chater Road, Central, Hong Kong Fax No.: (852) 2810-0431 14. TIME OF THE ESSENCE Time shall be of the essence of this Agreement. 15. LAW AND ARBITRATION 15.1 This Agreement shall be governed by, and construed in accordance with, the laws of the Hong Kong Special Administrative Region. ** CONFIDENTIAL TREATMENT REQUESTED 14 15.2 Any dispute, controversy or claim arising out of or relating to this Agreement, or the breach termination or invalidity thereof, shall be settled by arbitration in accordance with the UNCITRAL Arbitration Rules as at present in force and as may be amended by the rest of this clause upon application by any party hereto to the Hong Kong International Arbitration Centre ("HKIAC"). The arbitration shall be conducted in the English language and the place of arbitration shall be in Hong Kong at the Hong Kong International Arbitration Centre. Any such arbitration shall be administered by HKIAC in accordance with HKIAC Procedures for Arbitration Rules as are therein contained. The decision of the arbitrators (by rule of majority) shall be final and binding on the parties (including any decision on their fees). IN WITNESS whereof this Agreement has been entered into the day and year first above written. ** CONFIDENTIAL TREATMENT REQUESTED 15 SCHEDULE I PART A (THE VENDORS)
Name No. of Sale Shares Held % of Entitlement of Consideration Robert Albert Smeaton 63 45% Raymond Chih Chung Kwong 77 55% Total 140 100% === ====
PART B (THE COMPANY) 1. Name ** 2. Date of incorporation: 19 June 1998 3. Place of incorporation: Hong Kong 4. Registered Office: ** 5. Authorised share capital: HK$10,000 divided into 10,000 ordinary shares of HK$1.00 each 6. Issued share capita/: 200 ordinary shares of HK$1.00 each 7. Directors: Robert Albert Smeaton and Tsang Kwok Kwong 8. Secretary: Tsang Kwok Kwong 9. Auditors: Paul W. C. Ho & Company, Certified Public Accountants 10. Registered and Beneficial Shareholders: Robert Albert Smeaton (88 shares) Raymond Chih Chung Kwong (102 shares) Tsang Kwok Kwong (10 shares) ** CONFIDENTIAL TREATMENT REQUESTED 16 PART B (THE SUBSIDIARY) 1. Company Name: (in Chinese) ** (in English) ** 2. Nature: wholly-foreign-owned enterprise established under the laws of the PRC 3. Total Investment: ** 4. Registered Capital: ** 5. Scope of Business: Production of laundering and dyeing auxiliary (70% export) 6. Date of Approval: 27 November 1995 7. Term of Operation: 12 years (29 November 1995 to 28 November 2007) 8. Address: ** 9. Legal Representatives: Tsang Kwok Kwong ** CONFIDENTIAL TREATMENT REQUESTED 17 SCHEDULE II 1. Preliminary (A) The representations, warranties and undertakings contained in Schedule V to the Business Acquisition Agreement (including the Regular Warranties and the Special Warranties, as defined in the Business Acquisition Agreement) shall be deemed to be repeated (and with equivalent provisions as to timing for claims) by the Vendors mutatis mutandis in relation to the Business and Business Assets (both as defined in the Business Acquisition Agreement) of the Company and the Subsidiary. (B) Where any of the Warranties is qualified as being "to the information, knowledge or belief of the Vendors" or "so far as the Vendors are aware" or by other similar expression, the Vendors shall be deemed to be giving such Warranty to the best of their knowledge, belief and information. 2. Information (A) All information given in this Agreement, including the Schedules, is true, complete and accurate at the date hereof. (B) To the knowledge of the Vendors all information given to the Purchaser and its professional advisers by the Vendors, the officers and employees of the Company, the Vendors' professional advisers and the Company's advisers was when given and is at the date hereof true, and accurate in all material respects and there is no fact, matter or circumstance known to the Vendors which has not been disclosed to the Purchaser or its professional advisers which renders any such information untrue, inaccurate or misleading and this Agreement has been entered into by the Vendors in good faith. (C) The copy of the memorandum and articles of association of the Company produced to the Purchaser is complete and accurate in all respects, has attached to it copies of all resolutions and other documents required by law to be so attached and fully sets out the rights and restrictions attaching to each class of share capital of the Company. 3. Sale Shares (A) The Vendors are the sole beneficial owners of the Sale Shares, each Vendor owning the number of Sale Shares set out in Schedule I Part A and are entitled to sell and transfer the full legal and beneficial ownership of the same to the Purchaser. The Vendors are the sole beneficial owners of a total of 190 shares in the capital of the Company. Tsang Kwok Kwong is the sole beneficial and registered owner of 10 shares in the capital of the Company representing 5% of the entire issued share capital of the Company. The shares beneficially owned by the Vendors and Tsang Kwok Kwong in the Company collectively constitute the Company's entire issued share capital. (B) There is no option, right to acquire, mortgage, charge, pledge, lien or other form of security or encumbrance on, over or affecting any of the Sale Shares or any other issued shares of the Company or any part of the unissued share capital of the Company and there is no agreement or commitment to give or create any of the foregoing and no claim has been made by any person to be entitled to any of the foregoing which has not been waived in its entirety or satisfied in full. ** CONFIDENTIAL TREATMENT REQUESTED 18 (C) The Sale Shares represent 70% of the entire issued share capital of the Company and are fully paid up and rank pari passu in all respects. (D) There is no agreement or commitment outstanding which calls for the allotment or issue of or accords to any person the right to call for the allotment or issue of any shares or debentures in the Company. (E) No consent of any third party is required for the sale of any of the Sale Shares save as provided in the articles of association of the Company. 4. Corporate Matters (A) The Company has been duly incorporated and is validly existing under the laws of Hong Kong and has full power, authority and legal right to own its assets and carry on its business. (B) Save for the Subsidiary, the Company has no interest in the share capital of any company or in any partnership or joint venture. (C) The copies of the memorandum and articles of association of the Company is accurate, complete and up to date in all material respect as at the date of this Agreement. The Company has complied with its memorandum and articles of association in all material respects and none of the activities, agreements, commitments or rights of the Company is ultra vires or unauthorised. (D) The register of members and other statutory books of the Company have been properly kept by the company secretary and the Company has maintained proper and consistent accounts, books and records of its business, assets and activities (including all accounts, books and records required to be kept by the law) and all such registers and records contain a true, accurate, up to date and complete record of the matters which should be dealt with therein, are in the possession of the Company and no notice or allegation that any of the same is incorrect or should be rectified has been received. (E) All returns and forms required to be filed with the Companies Registry have been properly filed within any applicable time limit and compliance has been made in all material respects with all legal, filing and procedural requirements and other formalities in connection with the Company concerning: (a) its memorandum and articles of association or other constitutional documents (including all resolutions passed or purported to have been passed); (b) the filing of all documents required by the Companies Ordinance or other appropriate legislation to be filed with the Registrar of Companies or other appropriate regulatory bodies; ** CONFIDENTIAL TREATMENT REQUESTED 19 (c) issues of shares debentures or other securities; (d) payments of interest and dividends and making of other distributions; and (e) directors and other officers. (F) The Vendors are not aware of any material breach by the Company or any of its officers (in his capacity as such) of any legislation or regulations affecting it or its business. 5. Litigation and Insolvency (A) The Company is not engaged whether as plaintiff, defendant or otherwise in any material litigation or arbitration, administrative or criminal or other proceeding and no litigation or arbitration, administrative or criminal or other proceedings against the Company is pending, threatened or expected and so far as the Vendors are aware, there is no fact or circumstance likely to give rise to any such litigation or arbitration, administrative or criminal or other proceedings or to any proceedings against any director, officer or employee (past or present) of the Company in respect of any act or default for which the Company might be vicariously liable. (B) So far as the Vendors are aware no receiver has been appointed of the whole or any part of the assets or undertaking of the Company. (C) So far as the Vendors are aware no petition has been presented, no order has been made and no resolution has been passed for the winding up or dissolution of the Company. (D) The Company has not stopped payment nor is insolvent or unable to pay its debts within the meaning of section 178 of the Companies Ordinance. (E) No unsatisfied judgment is outstanding against the Company. (F) The Company has not committed nor is liable for any criminal, illegal, unlawful act imposed by or pursuant to statute. 6. Powers of attorney and Guarantees (A) The Company has not given any power of attorney or other express authority and the Vendors are not aware of any implied or ostensible authority which is outstanding or effective to any person to enter into any contract or commitment on its behalf other than to its employees to enter into routine trading contracts in the normal course of their duties. (B) The Company has not given any guarantee or warranty or made any representation in respect of services, articles or trading stock sold, hired or leased or contracted to be sold, hired or leased by it save for all such guarantees or warranties as are usually implied by Hong Kong law and (save as aforesaid) has not accepted any liability or obligation to service, repair, maintain, take back or otherwise do or not do anything in respect of any services, articles or stock had been delivered by it. ** CONFIDENTIAL TREATMENT REQUESTED 20 7. Loans and other obligations (A) No loan made by the Company has been made in breach of the Companies Ordinance (Cap 32 of the Laws of Hong Kong), the Banking Ordinance (Cap 155 of the Laws of Hong Kong) or any regulations made thereunder, or the Money Lender Ordinance (Cap 163 of the Laws of Hong Kong). (B) No person other than the Company has given any guarantee of or security for any overdraft, loan or loan facility granted to the Company or any other obligation imposed on or incurred by the Company. (C) There are no liens, guarantees, indemnities, pledges, mortgages, charges, debentures or encumbrances or unusual liabilities given, made or incurred by or on behalf of the Company. 8. Tenancy Agreement (A) The Company does not own and has not owned (whether jointly or singly) any real property in Hong Kong or elsewhere. The Property is the only real property anywhere used or occupied by the Company or in respect of which the Company has any estate, interest, right or liability. The Property is occupied by the Company under and pursuant to the Tenancy Agreement. (B) In relation to the Tenancy: (i) the Tenancy is good valid and subsisting and in no way has become void or voidable; (ii) all rent and other charges payable under the Tenancy have been promptly paid as and when due and there is no overdue rent payable as at Completion; (iii) there has been no breach in any material respect of the covenants, conditions, obligations or restrictions imposed upon the Company under the Tenancy and there is no circumstances under which (with or without the taking of any other action) would entitle the landlord of the Property or any other third party to exercise the right or power of entry to or to take possession of or which would in any other way affect or restrict the continued possession, quiet enjoyment or present use of the Property by the Company pursuant to the terms of the Tenancy Agreement; (iv) on the Completion Date there will be a written tenancy agreement in respect of the Property for a term of three years from the Transfer Date at the current rate of rental entered into between the landlord of the Property and the Company and references to the "Tenancy" and the "Tenancy Agreement" herein shall be deemed to include such new arrangement. Such tenancy agreement will be properly and adequately stamped; ** CONFIDENTIAL TREATMENT REQUESTED 21 (v) the term of the Tenancy, the rental payment and deposits paid or payable in respect of the Tenancy are fully and correctly set out in the Tenancy Agreement; (vi) there is no review of the rent payable by the Company in respect of the Tenancy in the course of being determined; (vii) the Company has not received or been served on any notice to quit, Form CRI01 and other notice of termination of the Tenancy required to be served upon the Company so as to terminate the Tenancy or entitle the landlord of the Property to recover possession of the Property prior to the end of the term of the Tenancy; and (viii) so far as the Vendors are aware there has been no deduction by the landlord of the Property from the deposit pursuant to the terms of the Tenancy Agreement and the entire amount of deposit paid to the landlord will be returned to the Company upon termination of the Tenancy. (C) A true and complete copy of the Tenancy Agreement has been provided to the Purchaser. 9. No Assets and Liability Since its incorporation, the Company has not entered into any contract or agreement (whether or not legally binding) or transacted any business or acquired or owned any assets or assumed any liability whatsoever save for its execution of the Business Acquisition Agreement 10. Repetition at Completion All warranties and representations contained in the foregoing provisions of this Schedule shall be deemed to be repeated immediately before Completion and to relate to the facts then existing. ** CONFIDENTIAL TREATMENT REQUESTED 22 SIGNED by ROBERT ALBERT ) SMEATON in the presence of: ) /s/ Robert Albert Smeaton SIGNED BY RAYMOND CHIH CHUNG ) KWONG in the presence of: ) /s/ Raymond Chih Chung Kwong SIGNED ) for and on behalf of GENEVA ) /s/ Illegible INVESTMENT HOLDINGS LIMITED ) ** CONFIDENTIAL TREATMENT REQUESTED 23 Confidential Treatment Requested indicates portion of this document have been redacted and have been separately filed with the Commission. THIS AGREEMENT is made on the 8th day of July, 2002. BETWEEN: (1) RAYMOND CHIH CHUNG KWONG OF ** ** ("Raymond") (2) GENEVA INVESTMENT HOLDINGS LIMITED a company incorporated in the British Virgin Islands whose registered office is situated at Craigmuir Chambers, ** ** ("Geneva") (3) ** a company incorporated in Hong Kong whose registered office is at ** ** (4) ROBERT ALBERT SMEATON of ** ** ("Robert"); and WHEREAS: (i) Raymond made payments on behalf of ** to a trade vendor October 18, 1998 and entered into a Promissory note with ** dated November 17, 1998, for the amount of HK$748,583.54 at a simple interest rate of 6% per annum. This is still outstanding and per the Promissory note Raymond can only be paid any portion at the same time the three other Promissory notes entered into by Geneva, Robert Albert Smeaton ("Robert") and Kwok Kwong Tsang ("Tsang") are paid and in proportion to Raymond's outstanding amount to the total of the outstanding Promissory notes. (ii) (a) By an agreement dated 21 October 1998 ("Sales Agreement"), Raymond and Robert sold to Geneva the total of 140 shares of ** which represented 70% of the outstanding shares of ** in the following proportion: Name No. of Sale Shares % of Entitlement of Consideration - ---- ------------------ --------------------------------- Robert 63 45% Raymond 77 55% -- --- 140 100% (b) By clause 4.3 of the Sales Agreement, the voting rights of 90 of these shares are restricted. Of those 90 shares, 50 were attributable to Raymond and 40 to Robert. (c) Under the Sales Agreement there remains a secondary payment of US$900,000.00 to be paid upon ** accumulating profit net of taxes of the same amount. Upon payment or a portion of this the shares or a portion would no longer be restricted. ** CONFIDENTIAL TREATMENT REQUESTED (iii) ** paid to Raymond Automobile expenses of HK$111,335.00 (US$14,385.00) which was paid in error and has not been repaid. (iv) By an agreement dated 21 October, 1998 (Service Agreement), Raymond agreed to provide service to **. Now it is hereby agreed as follows: 3. In consideration that as at 1 July, 2002 ** shall pay the agreed sum of US$100,000.00 (One Hundred Thousand US dollars) to Raymond, in the manner of US$20,000.00 or HK$156,000.00 (Twenty thousand US dollars or One Hundred and Fifty Six Thousand HK dollars) upon execution of this agreement, and thereafter by eight (8) equal calendar monthly payments of US$10,000.00 or HK$78,000.00 (Ten thousand US dollars or Seventy Eight Thousand HK dollars) commencing on the 15 July, 2002. Raymond, Geneva, ** and Robert agree as follows: (a) That Raymond hereby releases unto ** all rights and benefits charged or assigned unto ** under the said Promissory Note to hold the same unto ** absolutely free and absolutely discharged of and from the said Promissory Note and of the from all principal interest (other than that set out in this Clause) and other monies thereby secured and all claims and demands for or in respect of the same or in anyway relating thereto. (b) Raymond hereby releases ** from all current contractual responsibilities. (c) ** and Geneva hereby release Raymond from all previous and current contractual responsibilities and any debts owing to ** including past automobile expenses (US$14,365.80) in exchange for Raymond waving outstanding interest (US$18,100.48) due under the Promissory note up to and including 31 December, 2001. (d) The restrictions imposed by Clause 4.3 of the Sales Agreement on the Raymond Non-Voting Shares shall be removed immediately; Raymond shall have no other financial or other claims against Geneva or its Parent Company Dyadic International, Inc. or **. This eliminates any obligations of Geneva in the Sale Agreement. Raymond releases all his rights under the Sales Agreement and specifically his right to any payment that could be due from Geneva in the future under Clause 4.3(c) of the Sales Agreement. (e) Any and all rights and claims of Raymond to his prior or present shares and interest in ** shall be relinquished. (f) Any obligations of the Purchaser under Clause 4.3 of the Sales Agreement are deemed as settled in full. ** CONFIDENTIAL TREATMENT REQUESTED (g) Any of Raymond's rights to any further consideration under the Sales Agreement is relinquished. (h) The Non-Voting Shares sold by Robert are reserved and remain subject to the Sales Agreement and are unaffected by this agreement. Fur the avoidance of doubt, all Robert's rights under the Sales Agreement remain unaffected including the restrictions on the Non-Voting Shares sold by Robert. (i) ** and Geneva jointly and severally release Raymond from any restrictive covenant arisen from the Service Agreement. It is acknowledged that Raymond has had no influence in running ** since 17 January, 2000. (j) **Geneva and Robert jointly and severally release Raymond from any restrictive covenant arisen from the Sales Agreement. (k) Upon execution of this agreement, Raymond will have no past, present and future obligations or responsibilities under the Sales Agreement and Service Agreement. 2. Each of the parties hereto undertakes to the other parties that it will do all such acts and things and execute all such deeds and documents as may be necessary or desirable to carry into effect or to give legal effect to the provisions of this Agreement and the transactions hereby contemplated. 3. Served as the aforesaid provisions, all provisions of the Sales Agreement and Service Agreement are deemed to be fully complied with by all parties and all outstanding interests and responsibilities are incorporated and substituted by this agreement. 4. This Agreement constitutes the whole agreement between the parties relating to the transactions hereby contemplated (no party having relied on any representation or warranty made by any other party which is not a term of this Agreement) and no future variation and/or waiver shall be effective unless made in writing and signed by each of the parties. 5. If at any time any provisions of this Agreement is or becomes illegal, invalid or unenforceable in any respect, the remaining provisions hereof shall in no way be effected or impaired thereby. 6. This Agreement will be construed in accordance with and governed by the laws of Hong Kong SAR and each party hereby submits to the non-exclusive jurisdiction of the courts of Hong Kong as regards any claim or matter arising under this Agreement. ** CONFIDENTIAL TREATMENT REQUESTED In witness whereof this agreement has been entered into the [ ] SIGNED by RAYMOND CHIH CHUNG KWONG ) ) /s/ Raymond Chih Chung Kwong In the presence of ) /s/ C. Neyland ) 18-7-02 CARMEL DENISE NEYLAN ) Justice of the Peace (Qualified) ) Department of Justice Queensland ) Signed by ) ) /s/ Illegible, as President for and on behalf of GENEVA INVESTMENT ) ) July 11, 2002 HOLDINGS LIMITED ) ) in the presence of: ) /s/ Laura L. Morse ) Laura L. Morse ) Commission #CC959142 ) Expires Sep. 19, 2004 ) Bonded Thru Atlantic Bonding Co., Inc. ) SIGNED by ** ) ) For and on behalf of for and on behalf of ** ) ** ) /s/ Illegible in the presence of ) Authorized Signature(s) /s/ H. Wong ) 8-7-2002 Henry Wong ) SIGNED by ROBERT ALBERT SMEATON ) ) /s/ Robert Albert Smeaton in the presence of ) /s/ H. Wong ) 8-07-02 Henry Wong ) ** CONFIDENTIAL TREATMENT REQUESTED Confidential Treatment Requested indicates portion of this document have been redacted and have been separately filed with the Commission. THIS AGREEMENT is made on the 17th day of January 2000 Between: (1) **, a company incorporated in Hong Kong and having its registered office situated at **, **, (the "Company"); and (2) RAYMOND CHIH CHUNG KWONG of ** ** ("the Manager"); and WHEREAS: A. The Company and Manager have entered into a Service Agreement dated October 21, 1998 ("Service Agreement") B. The Company and Manager have agreed to terminate the Service Agreement on the terms hereinafter contained. NOW IT IS AGREED as follows: 1. The Service Agreement is terminated effective from January 17th, 2000 and shall thereafter have no further effect whatsoever. 2. The Manager confirms that he has no claim against the Company whatsoever for the loss of office whether in respect of fees remuneration, compensation or otherwise. 3. The Manager shall forthwith transfer all or such number of shares he beneficially owns in the capital of the Company to the Geneva Investment Holdings Limited and/or its nominee at the price of HK $1.00. 4. Neither the Manager nor the Company shall have any further claim whatsoever against the other for or on account of the Service Agreement. IN WITNESS WHEREOF the parties have hereto set their hands the day and year first above written. SIGNED by ROBERT ALBERT SMEATON ) For and on behalf of ** ) /s/ Robert Albert Smeaton ** in the presence of ) SIGNED by RAYMOND CHIH CHUNG ) KWONG in the presence of ) /s/ Raymond Chih Chung Kwong ** CONFIDENTIAL TREATMENT REQUESTED WITNESSED by the Board of Directors Of ** TSANG KWOK KWONG ) Director ) /s/ Tsang Kwok Kwong In the presence of ) ROBERT ALBERT SMEATON ) Director ) /s/ Robert Albert Smeaton In the presence of ) MARK AARON EMALFARB ) Director ) /s/ Mark Aaron Emalfarb In the presence of ) ** CONFIDENTIAL TREATMENT REQUESTED -----END PRIVACY-ENHANCED MESSAGE-----