TECHNOLOGY LICENSE AGREEMENT

This Technology License Agreement (the “Agreement”) dated as of March 16, 2005
is entered into by and between Nostrum Pharmaceuticals, Inc., a Delaware
corporation (“Nostrum”), and Bionutrics, Inc., a Nevada corporation
(“Bionutrics”), and replaces in its entirety that certain Product Development
and License Agreement dated as of June 16, 2004, as amended, previously entered
into by the parties.

WHEREAS, Nostrum has developed, and is in the process of developing, certain
controlled release and other formulation technology for pharmaceutical products;
 
WHEREAS, Bionutrics is researching, developing, manufacturing, marketing and
selling pharmaceutical products; and

WHEREAS, Bionutrics desires to license from Nostrum the exclusive right to
employ Nostrum’s technology to research, develop, manufacture, market, sell and
otherwise commercialize certain pharmaceutical products, and Nostrum desires to
grant such license to Bionutrics, all on the terms and conditions hereinafter
set forth;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereby agree, as follows:

Article 1 - Definitions

The capitalized terms set forth below shall for the purposes of this Agreement
have the meanings ascribed as follows.

“Affiliate” means any Person which controls, is controlled by or is under common
control with a party. The term “control” means the ownership, directly or
indirectly, of more than fifty percent (50%) of the voting stock or equity
interest of a Person, or the right to receive over fifty percent (50%) of the
profits or earnings of a Person or any other relationship which in fact conveys
the power to control the management, business and affairs of a Person.

“Effective Date” means March 16, 2005.

“FDA” means the United States Food and Drug Administration or any successor
agency of the United States government.

“Formulation” means the design, creation, and production of a specific
pharmaceutical composition defined by dosage, method of release, strength and
attendant pharmacokinetics which uses the Nostrum Technology and includes a
Target Active Agent together with other components that, in the case of
505(b)(2) Products, produces unique functionality in the taste, solubility,
absorption, food-effect or other attributes that modify the Target Active
Agent’s pharmacokinetics or side-effects, and, in the case of Generic Products,
achieves bioequivalence with the Target Active Agent.

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“Functional Nutrition Products” shall have the meaning set forth in Section
2.3(b).

“Gross Profit”, for any Product, means, with respect to any period, Net Sales
for the Product in that period less Bionutrics’ cost of goods sold for the
Product, calculated in accordance with generally accepted accounting principles.
For purposes of this Agreement, the term “cost of goods sold” shall mean, as
applicable, (i) the purchase price paid by Bionutrics to the third party
manufacturer of the Product plus the costs of shipment paid by Bionutrics that
are associated therewith, or (ii) the fully allocated cost-of-goods of the
Product if manufactured by Bionutrics or an Affiliate of Bionutrics, as
calculated in accordance with generally accepted accounting principles;
provided, however, that no amount for selling or marketing expenses shall be
included and that amounts for general or administrative expenses or costs of
working capital shall be included only to the extent that those amounts are
directly attributable to the manufacture of the Product based upon the actual
use of the manufacturing facilities by Bionutrics or an Affiliate of Bionutrics
for that purpose. Notwithstanding any provision herein to the contrary, any
amounts accounted for in the calculation of Net Sales shall not also be included
in determining the cost of goods sold.

“Litigation Expenses” means out-of-pocket costs and expenses incurred by
Bionutrics (i) in connection with the defense of any claim, suit or other legal
action alleging that a Generic Product being developed, marketed and/or sold by
Bionutrics hereunder infringes upon or misappropriates a third party’s patent or
other intellectual property right, or (ii) in connection with the resolution of
any such claim, suit or other legal action, including any judgments or awards
against Bionutrics or any Affiliate of Bionutrics or subcontractor and any
amounts paid in settlement (including license fees and royalties).

“Net Sales”, for any Product, means, with respect to any period, the amounts
actually received by Bionutrics or its Affiliates from unaffiliated third
parties (whether an end-user, distributor or otherwise) for the sale of the
Product in the Territory, and exclusive of inter-company transfers or sales
between or among Bionutrics and its Affiliates, less the following reasonable
and customary deductions (without duplication) from such gross amounts:

 
(i)
normal and customary trade, cash and quantity discounts, allowances and credits;

 
(ii)
credits or allowances actually granted for damaged goods, returns or rejections
of Product and retroactive price reductions;

 
(iii)
sales or similar taxes (including duties or other governmental charges levied
on, absorbed or otherwise imposed on the sale of the Product including, without
limitation, value added taxes or other governmental charges otherwise measured
by the billing amount, when included in billing);

 
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(iv)
all charge back payments, discounts and rebates (whether mandated or otherwise)
granted to managed health care organizations or to federal, state and local
governments, their agencies, and purchasers and reimbursers or to trade
customers, including but not limited to, wholesalers and chain and pharmacy
buying groups and charge back payments, discounts and rebates (whether mandated
or otherwise) charged by national or local government;

 

 
(v)
commissions paid to third parties and sales agents other than Bionutrics’ sales
personnel and sales representatives; and

 

 
(vi)
freight, postage, shipping, customs duties and insurance charges, when included
in billing.

“Nostrum Technology” means all of Nostrum’s proprietary information, know-how,
materials and technology related to the Products (including without limitation,
manufacturing information) and any related patent applications or patents owned
or controlled by Nostrum or its Affiliates to the extent they cover the Products
or any such information, trade secrets, know-how, materials or technology as
applied to the Products.

“Person” means any natural person, corporation, unincorporated organization,
partnership, association, joint stock company, joint venture, limited liability
company, trust or government, or any agency or political subdivision of any
government, or any other entity.

“Pivotal Study” means, as applied to a Generic Product, the pivotal
pharmacokinetic biostudy or biostudies conducted by a fully licensed biostudy
facility mutually satisfactory to Bionutrics and Nostrum which is reasonably
expected to demonstrate, to the satisfaction of the FDA, the intended AB rated
bio-equivalence of the Generic Product with the Target Active Agent sufficient
to enable Bionutrics to submit to the FDA an acceptable ANDA for the manufacture
and commercial sale of the Generic Product.

“Prestudy” means a pharmacokinetic biostudy which is intended to indicate the
likelihood of demonstrating bio-equivalence of a Formulation with the Target
Active Agent, typically carried out in a smaller number of volunteers than those
required by FDA for pivotal pharmacokinetic biostudies.

“Product” means any 505(b)(2) Product (as defined below) or Generic Product (as
defined below) which meets all of the following criteria: During the Three-Year
Period, (i) Bionutrics notifies Nostrum that it has targeted the product for
development and commercialization pursuant to this Agreement and provides
Nostrum with a description of the product and the requested functionality
therefor and (ii) Nostrum informs Bionutrics in writing within sixty (60) days
following receipt of the notice that Nostrum believes, based on its preliminary
study of the proposed product, that it has the ability, using the Nostrum
Technology, to formulate the product with the functionality requested by
Bionutrics and that nothing has come to Nostrum’s attention that makes Nostrum
believe that the product or the Nostrum Technology as applied to the product
would infringe any third party patents, patent applications or other
intellectual property rights.

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“505(b)(2) Products” means certain brandable pharmaceutical products that
qualify for filing with the FDA under a “505(b)(2)” application, or a New Drug
Application (“NDA”), pursuant to the federal Food, Drug and Cosmetic Act (the
“Act”), using Formulations of Target Active Agents that are defined specifically
by dosage, method of release, strength and the attendant pharmacokinetic effect
resulting therefrom.

“Generic Products” means certain pharmaceutical products that are AB rated,
generic bio-equivalents of branded products which qualify for filing with the
FDA pursuant to an Abbreviated New Drug Application (“ANDA”) under the Act,
using Formulations of Target Active Agents that are defined specifically by
dosage, method of release, strength and the attendant pharmacokinetic effect
resulting therefrom.

“Target Active Agent” means a specific pharmaceutical compound, which has been
approved by the FDA as a branded drug for manufacture and sale to the public for
one or more specific disease indications, which Bionutrics targets for
development as a 505(b)(2) Product or a Generic Product.

“Territory” means the world.

“Three-Year Period” means three years from the Effective Date.

Article 2 - Grant of License

2.1 License Grant. (a) Nostrum hereby grants to Bionutrics, and Bionutrics
accepts, an exclusive license under the Nostrum Technology to develop, make,
have made, use, import, offer for sale, market, sell and otherwise commercialize
Products in the Territory. Subject to the terms of this Agreement, each Product
shall be owned by Bionutrics, and Bionutrics shall have exclusive rights
thereto.
 
(b) Technology License Grant Limit. Notwithstanding anything herein to the
contrary, the license grant provided in Section 2.1 shall be limited to no more
than ten (10) 505(b)(2) Products and no more than ten (10) Generic Products
which in all such cases shall have been designated by the parties as Products
(as defined in Article 1) within the Three-Year Period.
 
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 2.2 Retained Rights. Subject to the license granted to Bionutrics hereunder,
Nostrum shall remain the sole owner of all Nostrum Technology, including that
which Nostrum shall have furnished to Bionutrics in connection with the
performance of Nostrum’s obligations pursuant to this Agreement. Nostrum shall
retain all right, title and interest to use or license the Nostrum Technology in
connection with any Product, Formulation or process except for the Products.
 
2.3 Development of Other Products.
 
(a) Bionutrics shall not have any rights with respect to any products other than
the Products, as determined in accordance with the terms of Section 2.1.
 
(b) The parties shall within thirty (30) days of the date of this Agreement
execute a product license agreement for the development and commercialization of
functional foods, medical foods, dietary supplements and similar
non-pharmaceutical products based on Bionutrics’ compositions employing Nostrum
Technology for product formulation, pursuant to which (i) Bionutrics and Nostrum
shall act in good faith in the selection and approval of the products for
development and commercialization (“Functional Nutrition Products”); (ii)
Nostrum shall make reasonable efforts to develop these products; and (iii)
Nostrum shall receive no royalties for this license or for the performance of
its product development obligations thereunder. Subject to Nostrum’s retained
rights as the sole owner of any Nostrum Technology used or transferred in
connection with the product license agreement, Bionutrics shall have exclusive
rights with respect to all such Functional Nutrition Products.
 
(c) During the Three-Year Period, the parties shall negotiate in good faith one
or more agreements for Formulations and/or Prestudies with respect to Target
Active Agents jointly selected in good faith by the parties.
 
2.4 Effectiveness of License. Notwithstanding any other provision of this
Agreement, the license grant provided for in this Article 2 shall not be
effective and binding on either party for any purpose unless and until (i) all
notes and other indebtedness of Bionutrics convertible into common stock of
Bionutrics shall be paid, discharged or converted into common stock of
Bionutrics; (ii) Bionutrics has no indebtedness that is secured by property of
Bionutrics; (iii) Bionutrics has obtained agreement and signatures per a Lock-Up
Agreement (substantially in the form of Exhibit A hereto) from Bionutrics’
shareholders constituting a minimum 19,500,000 shares of Bionutrics’ outstanding
common stock; and (iv) Bionutrics has certified in writing to Nostrum that the
events described in clauses (i) through (iii) have occurred.

Article 3 - Research Program
3.1 Nostrum’s Obligations
 
(a) Bionutrics and Nostrum shall confer on a regular basis regarding the status
of Nostrum’s development of potential 505(b)(2) Products and Generic Products
and Bionutrics’ interest in licensing those Products pursuant to this Agreement;
provided, however, that Nostrum shall have no obligation to confer with, or
disclose information to Bionutrics regarding any product that Nostrum has
licensed, or concerning which it is negotiating a license with a third party
(collectively, “Exempt Products”).
 
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(b) Pursuant to Bionutrics’ reasonable request, Nostrum agrees that it will
conduct and complete (or will have conducted and completed, as provided below)
Formulations and Prestudies with respect to Products other than Exempt Products
to establish in vivo performance with respect to those Products (the sequence of
events in each case, a “Project”). Prior to the commencement of a Project, the
parties shall develop a written Project plan setting forth the subject matter of
the Project and an estimate of the costs and expenses that would be incurred by
Nostrum in connection with the Project. Nostrum shall have the right, in its
sole discretion, to contract with Enem Nostrum Remedies Pvt. Ltd. (“Enem”) or
any of their respective Affiliates or to use third-party contractors to conduct
Formulations and Prestudies in connection with the Projects as well as any other
work under this Section 3.1. Nostrum agrees that the services to be provided by
Nostrum, Enem, any of their Affiliates, or a third party shall be provided to
Bionutrics at cost to Nostrum.
 
(c) With respect to each Project, Nostrum and Bionutrics shall provide each
other with access to all information and copies of all records relating to the
Project and the results of any related Prestudies.
 
(d) Nostrum will cooperate with Bionutrics in all phases of the work to be
performed under Section 3.2, including, without limitation, the scale up, any
Pivotal Studies and process validation.
 
(e) Within thirty (30) days of Bionutrics’ receipt of Nostrum’s invoice
therefor, Bionutrics shall pay or reimburse Nostrum for its reasonable costs and
expenses incurred in connection with the performance of the obligations set
forth in this Section together with the costs and expenses that Nostrum may have
incurred in connection with any Project agreed upon by the parties prior to the
Effective Date.
 
3.2 Bionutrics Obligations.
 
(a) Bionutrics shall be responsible for all work preparatory to, and necessary
for, the performance of any clinical studies (including Pivotal Studies for
Generic Products) in connection with Projects initiated by Bionutrics with
respect to any Products. Bionutrics’ obligation to conduct such studies with
respect to any Product shall be contingent upon the Product’s successful
completion of a Prestudy as well as stability testing and successful manufacture
and release of finished product for use in the clinical studies.
 
(b) In the event that clinical studies conducted or arranged by Bionutrics on
any Products demonstrate efficacy and safety in accordance with applicable FDA
regulations, Bionutrics in cooperation with Nostrum shall prepare, submit and
prosecute an application (an NDA or an ANDA, as the case may be), with the FDA.
Bionutrics and Nostrum will each keep the other fully informed with respect to
the development and commercialization of these Products including the
preparation for, and the results of, any clinical studies and the prosecution of
any applications with the FDA. Upon request by Bionutrics or Nostrum, the other
party will provide the requesting party with copies of all documents and records
in its possession or control relating to these activities. In the case of
Generic Products, Bionutrics shall start the Pivotal Study within nine (9)
months of the completion the respective Prestudy. Following the completion of a
given Generic Product Pivotal Study, Bionutrics will within six (6) months file
an ANDA with the FDA on that Generic Product. All applications shall be filed in
the name of Bionutrics, which shall be responsible, at its own expense, for
continuing the post-clinical and stability testing of the Product necessary for
the approval thereof and for obtaining all governmental approvals for the
manufacture and commercial sale of the Product in the Territory. Bionutrics will
have full and complete ownership thereof.
 
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(c)  Bionutrics shall be responsible for all costs and expenses incurred by it
in connection with the performance of its obligations under this Section. Within
thirty (30) days of Bionutrics’ receipt of Nostrum’s invoice therefor,
Bionutrics shall pay or reimburse Nostrum for all reasonable costs and expenses
which it may incur in providing assistance to Bionutrics in the performance of
its obligations under this Section.

3.3 Diligence. Following Bionutrics’ receipt of FDA approval with respect to the
manufacture and commercial sale of any Product in the United States, Bionutrics
shall use diligent efforts to manufacture, market, distribute and sell the
Product.

3.4 Excused Performance. All of Bionutrics’ diligence obligations with respect
to the development and commercialization of a Product under this Agreement are
expressly conditioned upon the continuing absence of any adverse condition or
event relating to the safety or efficacy of the Product, or lack of regulatory
approval, which warrants a delay in the commercialization of the Product.

3.5 Ownership of Results. Subject to the provisions of Section 9.6, all data and
results obtained or generated by or on behalf of either Nostrum or Bionutrics in
the performance of any Prestudy, Pivotal Study or other development activities
related to the Products to be performed pursuant to this Agreement shall be the
sole property of Bionutrics and shall be treated as Bionutrics’ Confidential
Information pursuant to Article 5 of this Agreement. Nostrum will, at
Bionutrics’ expense, undertake, without undue delay, to provide any and all
documents deemed necessary to perfect this right, on an as-needed, as-requested
basis.

3.6 Manufacture/Supply. Bionutrics shall have the right to manufacture or supply
the Products or to have the Products manufactured and supplied by an Affiliate
of Bionutrics; provided that the cost of goods for Products manufactured by
Bionutrics or such Affiliate is competitive with the cost of goods for the
Product as and if manufactured by a qualified third party manufacturer.
Alternatively, Bionutrics shall have the right to contract with a suitable third
party to manufacture and supply Bionutrics’ requirements for commercial supplies
of the Products. Upon request Nostrum shall cooperate with Bionutrics in
transferring and implementing the Nostrum Technology and Formulations related to
the manufacture of the Products to the site Bionutrics chose for the manufacture
of the Products in accordance with FDA guidelines applicable to the proposed
transfer. Bionutrics shall reimburse Nostrum within thirty (30) days of
Bionutrics’ receipt of Nostrum’s invoices for all reasonable out-of-pocket
expenses which Nostrum may incur in connection with the performance of its
obligations pursuant to this Section.

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Article 4 - Payments

4.1 Stock Payment. In partial consideration for the license and other rights
granted to Bionutrics hereunder, Bionutrics has issued to Nostrum Six Million
(6,000,000) shares of its common stock in accordance with the provisions of a
certain Stock Purchase Agreement between the parties dated as of June 16, 2004
(the “First Stock Purchase Agreement”), a copy of which is attached hereto as
Exhibit B. The terms, conditions, representations and warranties contained in
the First Stock Purchase Agreement are incorporated herein by reference.
 
4.2 Additional Stock Payment.
 
(a) In partial consideration for the license and other rights granted to
Bionutrics hereunder, Bionutrics shall issue to Nostrum an additional Six
Million (6,000,000) shares of its common stock (the “Shares”) in accordance with
the provisions of that certain Stock Purchase Agreement between the parties
dated as of March 16, 2005 (the “Second Stock Purchase Agreement”), a copy of
which is attached hereto as Exhibit C. The terms, conditions, representations
and warranties contained in the Second Stock Purchase Agreement are incorporated
herein by reference.
 
(b) In the event that more than fifty percent (50%) of the Products tested
during the Three-Year Period fail Pivotal Studies or other applicable clinical
studies, and Bionutrics terminates the Projects relating to such Products by
reason of such failure, Nostrum shall be required at the conclusion of the
Three-Year Period to return to Bionutrics thirty-three percent (33%) of the
Shares received pursuant to the Second Stock Purchase Agreement (adjusted for
stock splits, stock dividends, reclassifications, recapitalizations,
combinations and exchanges of shares) (the “Return Shares”). In the case of
Nostrum’s failure to redeliver the Return Shares pursuant to this Section
4.2(b), Nostrum hereby authorizes Bionutrics to cancel the Return Shares.
Nostrum hereby irrevocably and unconditionally (and by way of security for the
performance of its obligations under this Section 4.2(b)) appoints any director
of Bionutrics from time to time (other than a person who is also an officer or
employee of Nostrum) its attorney in fact to execute in its name and on its
behalf all documents, and to do all acts and things which the attorney shall in
his discretion consider necessary or reasonable to effect the cancellation of
the Return Shares.

4.3 Royalties. Bionutrics agrees to pay to Nostrum royalties on Net Sales of
Generic Products in the Territory equal to fifty percent (50%) of Gross Profit
(“Royalties”). These Royalties shall not apply to, nor shall Nostrum be entitled
to Royalties on Net Sales of 505(b)(2) Products.
 
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4.4 Manner of Payment. Within thirty (30) days after the first commercial sale
of a Generic Product in the Territory, Bionutrics shall provide Nostrum with
written notice to that effect. Thereafter, Bionutrics shall furnish to Nostrum
within sixty (60) days following the close of each calendar quarter, a written
report for the calendar quarter showing the Net Sales and Gross Profits from the
sale of each Generic Product sold by Bionutrics and its Affiliates in the
Territory during the calendar quarter and the Royalties payable under this
Agreement for the calendar quarter. Simultaneously with the submission of the
written report, Bionutrics shall pay to Nostrum, for the account of Bionutrics
or the applicable Affiliate, as the case may be, a sum equal to the aggregate
Royalty due for the calendar quarter calculated in accordance with this
Agreement (reconciled for any previous overpayments or underpayments). All
payments to Nostrum hereunder shall be made by wire transfer of immediately
available funds to the account designated in writing by Nostrum.
 
4.5 Recordkeeping/Audits.
 
(a) Bionutrics and, to the extent applicable its Affiliates, shall keep complete
and accurate records in sufficient detail to enable the Royalties payable
hereunder to be determined. Upon the written request of Nostrum and not more
than twice in each calendar year, Bionutrics and, to the extent responsible for
the manufacture, sale or distribution of the Generic Products, its Affiliates,
shall permit an independent certified public accounting firm of nationally
recognized standing, which is bound by a confidentiality agreement in favor of
Bionutrics to have access, at Nostrum’s expense, during normal business hours to
those records of Bionutrics and such Affiliates which may be reasonably
necessary to verify the accuracy of the royalty reports hereunder for any twelve
(12) month period. Nostrum shall provide notice at least thirty (30) days prior
to the date of the intended audit. Nostrum shall have no right to audit any
records with respect to any twelve (12) month period which ended more than
ninth-six (96) months prior to the date of the request. The accounting firm
shall only disclose to Nostrum the relevant Net Sales, Gross Profits and cost of
goods sold information and whether the royalty reports are correct or incorrect
and the specific details concerning any discrepancies. No other information
shall be shared by the accounting firm with Nostrum. Nostrum’s audit rights
under this Section shall survive the expiration or termination of this Agreement
for a period of one (1) year.

(b) The cost of each audit conducted under this Section shall be borne by
Nostrum unless an audit correctly determines that Bionutrics underpaid the
Royalties due to Nostrum hereunder by more than five percent (5% ) during any
twelve (12) month period, in which case Bionutrics shall pay to Nostrum the
deficiency (as Bionutrics is required to do regardless of the amount thereof or
the results, requirement or pendency of any audit) within fifteen (15) days of
the date that a final audit report is issued, and shall also bear the cost of
the audit. In the event that an audit determines that Bionutrics overpaid the
Royalties due to Nostrum, Nostrum shall refund to Bionutrics the amount of the
overpayment within fifteen (15) days of the date that a final audit report is
issued.

(c) Nostrum shall treat all financial information subject to review under this
Agreement in accordance with the confidentiality provisions of this Agreement
and shall cause its accounting firm to enter into an acceptable confidentiality
agreement with Bionutrics, obligating it to maintain all such financial
information in confidence pursuant to the confidentiality agreement.

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4.6 Withholding. If at any time, any jurisdiction within the Territory requires
the withholding of income taxes or other taxes imposed upon payments set forth
in this Article, Bionutrics shall make the withholding payments as required and
subtract the withholding payments from the payments set forth in this Article
or, if applicable, Nostrum will promptly reimburse Bionutrics or its designee
the amount of those payments. Bionutrics shall provide Nostrum with
documentation of the withholding and payment. Any withholdings paid when due
hereunder shall be for the account of Nostrum and shall not be included in the
calculation of Net Sales or Gross Profits, as applicable. In addition, if any
deficiency in the amount or failure to make any withholding payment is caused,
in whole or in part, by any intentional or negligent action or inaction on the
part of Nostrum, Nostrum shall be liable for any fine, assessment or penalty
imposed by any taxing authority in the Territory for the deficiency in the
amount of the withholding or the failure to make the withholding payment. If
Bionutrics is required to pay a deficiency, or any fine, assessment or penalty
for any deficiency, Nostrum shall promptly reimburse Bionutrics for those
payments for which Nostrum is liable in accordance with this Section, which
reimbursement shall not be included in the calculation of Net Sales or Gross
Profits.

4.7 Board Representation. In further consideration for the license granted
hereunder, Bionutrics agrees to use its best efforts to cause the Board of
Directors of Bionutrics (i) to be comprised of at least three (3) members and
(ii) to include at least one nominee of Nostrum; provided that Nostrum and its
Affiliates are beneficial owners as of the record date for the election of
directors of a minimum of two million shares of Bionutrics’ common stock
(adjusted for stock splits, stock dividends, reclassifications,
recapitalizations, combinations and exchanges of shares).

Article 5 - Confidentiality.

5.1 Confidentiality.
 
(a) During the term of this Agreement and for a period of ten (10) years after
its expiration or termination, each party shall maintain as confidential the
Nostrum Technology, any know-how relating to the Products, and any other
proprietary, technical or business information received from the other party
pursuant to this Agreement (“Confidential Information”) and shall only use the
Confidential Information in furtherance of this Agreement. Both parties agree
that any employees provided or given access to the other party’s Confidential
Information shall be bound by confidentiality obligations essentially the same
as those set forth herein. The foregoing obligations of confidentiality and use
restrictions shall not apply, however, to the extent that the Confidential
Information:

 
(i)
was known to the receiving party, as evidenced by its written records, prior to
receipt from the other party;

 
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(ii)
is in the public domain at time of receipt or subsequently enters the public
domain through no breach of this Agreement by the receiving party;

 
(iii)
after the date of receipt from the disclosing party, is received without secrecy
obligations from a third party with a bona fide right to disclose it without
violating any right of the disclosing party;

 
(iv)
is independently developed by the receiving party without the aid, application
or use of any of the disclosing party’s Confidential Information (and the
independent development can be properly documented by the receiving party);

 
(v)
is disclosed to governmental or other regulatory agencies in order to obtain
patents or to gain approval to conduct clinical trials or to market the Product
pursuant to this Agreement, but the disclosure may be only to the extent
reasonably necessary to obtain the patents or authorizations;

 
(vi)
is necessary to be disclosed to agents, consultants, Affiliates and/or other
third parties for the developing, making, using, selling or importing of Product
(or for the third parties to determine their interest in performing those
activities) in accordance with this Agreement on the condition that those third
parties agree to be bound by confidentiality obligations and use restrictions at
least as restrictive as those contained in this Agreement; or

 
(vii)
is required to be disclosed by law or court order, provided that notice is
promptly delivered to the disclosing party in order to provide the disclosing
party sufficient opportunity to seek a protective order or other similar order
with respect to the Confidential Information and the receiving party thereafter
discloses only the minimum information required to be disclosed in order to
comply with the request, whether or not a protective order or other similar
order is obtained by the disclosing party.

(b) Confidential information disclosed under this Agreement shall not be deemed
to be within the foregoing exceptions set forth in this Section merely because
the Confidential Information is embraced by more general information in the
public domain or in receiving party’s possession. In addition, any combination
of features shall not be deemed to be within the foregoing exceptions merely
because individual features are in the public domain or receiving party’s
possession, but only if the combination itself and its principle of operation
are in the public domain or in receiving party’s possession without having been
supplied by disclosing party.

5.2 No Publicity or Disclosure of Agreement Terms. Neither party may use the
name of the other party or its Affiliates in any publicity or advertising
without the prior written permission of the other party. Notwithstanding the
provisions of this Article, either party may disclose the terms of this
Agreement to the extent necessary to (a) actual or potential lenders or
investors; (b) actual or potential joint venture or merger partners; (c) the
party’s agents, consultants, Affiliates and/or other third parties necessary to
facilitate an actual or potential loan, investment, joint venture or merger with
those parties; or (d) the party’s accountants, consultants and attorneys, for
other corporate transactions and business, on a need to know basis. Bionutrics
may also disclose portions of this Agreement in an 8-K or similar disclosure
notice, as deemed necessary in its counsel’s sole discretion, to meet the public
company reporting requirements of the Securities and Exchange Commission and
applicable federal and state laws, rules and regulations.

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Article 6 - Patents

6.1 Infringement and Third Party Licenses.

(a) In the event that Bionutrics’, or its Affiliates’ making, having made,
using, offering for sale, selling or importing the Products infringes or
misappropriates, will infringe or misappropriate or is alleged by a third party
to infringe or misappropriate a third party’s patents or other intellectual
property rights, the party hereto becoming aware of any of the foregoing
situations shall promptly notify the other. The parties shall thereafter attempt
to agree upon a course of action with respect thereto.

(b) Bionutrics shall be responsible, at Bionutrics’ expense, for the defense of
any claims, demands, actions or proceedings arising from allegations that
development, making, having made, using, offering for sale, selling or importing
the Products infringes or misappropriates or will infringe or misappropriate a
third party’s patents or other intellectual property rights. Upon Bionutrics’
request and expense, Nostrum shall cooperate with Bionutrics in the defense;
provided that Bionutrics shall promptly reimburse Nostrum for reasonable
out-of-pocket costs and expenses incurred by Nostrum in providing that
cooperation.

(c) Notwithstanding anything to the contrary in this Agreement, Bionutrics shall
be entitled to offset against any royalties due Nostrum hereunder (but only to
the extent of reducing the royalties due Nostrum by up to fifty percent (50%) in
any calendar quarter) fifty percent (50%) of any Litigation Expenses which
Bionutrics may have incurred through the close of the calendar quarter for which
royalties are then payable.

6.2 Infringement of Nostrum’s Intellectual Property Rights by a Third Party.

(a) Bionutrics and Nostrum shall promptly notify each other of any infringement
of the patent rights included in the Nostrum Technology as applied to the
Products, and/or any misappropriation or unauthorized use of any of the Nostrum
Technology as applied to the Products, in the Territory which may come to their
attention. Bionutrics shall have three (3) months to undertake reasonable
efforts to obtain a discontinuance of the aforesaid infringement or unauthorized
use of the patent rights and the Nostrum Technology as applied to the Products,
and, if not successful, Bionutrics shall have the option, but is not required,
to bring suit, at Bionutrics’ expense, against the infringer or unauthorized
user. Nostrum may elect to join any suit initiated by Bionutrics.

(b) If Bionutrics fails or elects not to obtain a discontinuance of the
infringement or unauthorized use and elects not to bring suit against the third
party, then in that event Bionutrics shall give notice in writing to Nostrum of
its election not to bring suit, within thirty (30) days following that election,
and of the circumstances of the infringement or unauthorized use, including the
evidence of the infringing activities and/or misappropriation or unauthorized
use. Nostrum may, but is not required to (i) obtain a discontinuance of the
infringing operation or unauthorized use; or (ii) bring suit against the third
party. Any suit or action by Nostrum under this Section shall be conducted
either in the name of Nostrum, or jointly in the names of Bionutrics and
Nostrum, as may be required by the laws of the forum. Bionutrics shall, upon
request, reasonably cooperate with Nostrum in the conduct of the suit or action.
Nostrum shall, after reimbursing Bionutrics for Litigation Expenses, be entitled
to retain and keep any damages received whether by judgment, settlement or
otherwise, as a result of the suit or action.

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Article 7 - Representations and Warranties

7.1 Representations and Warranties by Each Party. Each of Bionutrics and Nostrum
hereby represents and warrants to the other party that:
 
(a) it is a corporation duly organized and validly existing under the laws of
the state or other jurisdiction of incorporation or formation
 
(b) the execution, delivery and performance of this Agreement by such party has
been duly authorized by all requisite corporate action;
 
(c) it has all requisite power and authority to execute and deliver this
Agreement and to perform its obligations hereunder;
 
(d) the execution, delivery and performance by such party of this Agreement and
its compliance with the terms and provisions hereof does not and will not
conflict with or result in a breach of any of the terms and provisions of or
constitute a default under (i) a loan agreement, guaranty, financing agreement,
agreement affecting a product or other agreement or instrument binding or
affecting it or its property; (ii) the provisions of its charter documents or
bylaws; or (iii) any order, writ, injunction or decree of any court or
governmental authority entered against it or by which any of its property is
bound;
 
(e) except for the governmental and regulatory approvals required to market the
Product in the Territory, the execution, delivery and performance of this
Agreement does not require the consent, approval or authorization of, or notice,
declaration, filing or registration with, any governmental or regulatory
authority and the execution, delivery or performance of this Agreement will not
violate any applicable law, rule or regulation;
 
(f) this Agreement constitutes such party’s legal, valid and binding obligation
enforceable in accordance with its terms, subject, as to enforcement, to
bankruptcy, insolvency, reorganization and other laws of general applicability
relating to or affecting creditors’ rights and to the availability of particular
remedies under general equity principles; and
 
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(g) it shall comply with all applicable material laws, rules and regulations
relating to the performance of its obligations relating to the Products under
this Agreement.
 
7.2 Representations and Warranties of Nostrum. Nostrum hereby represents and
warrants to Bionutrics that:
 
(a) it owns all right, title and interest in and to the Nostrum Technology as
applied to the Products, free and clear of all liens and other charges and
encumbrances;
 
(b) there are no adverse actions, suits or claims pending against Nostrum or any
of its Affiliates in or before any court or governmental or regulatory authority
with respect to the Products and/or the Nostrum Technology as applied to the
Products, and no such actions, suits or claims have been threatened against
Nostrum or any of its Affiliates;
 
(c) as of the Effective Date, to the best of Nostrum’s knowledge, there is no
reason (e.g., debarment under the Act) that would prevent Bionutrics from using
data and information supplied by Nostrum, as part of Bionutrics’ regulatory
submissions for the Product.
 
7.3 Representations and Warranties of Bionutrics. Bionutrics hereby represents
and warrants to Nostrum that it will make all filings required under applicable
federal and state laws, rules and regulations.
 
7.4 Continuing Representations. The representations and warranties of each party
contained in Sections 7.1, 7.2 and 7.3 shall survive the execution of this
Agreement.

7.5 No Inconsistent Agreements. As of the Effective Date, each party represents
to the other party that it has not and will not during the term of this
Agreement, enter into, any oral or written agreement or arrangement that would
be inconsistent with its obligations under this Agreement.

ARTICLE 8 - INDEMNIFICATION

8.1 Indemnification by Nostrum. Nostrum shall, at its sole cost and expense,
defend, indemnify and hold harmless Bionutrics and its Affiliates, and their
respective officers, directors, agents and employees from and against all
claims, liens, demands, damages, liability, actions, causes of action, losses,
judgments, costs and expenses (including, without limitation, reasonable
attorneys’ fees) (each a “Claim” and collectively “Claims”) to the extent the
Claims arise out of or in connection with, result from, or are caused by: (i)
any breach by Nostrum of its representations or warranties contained in Sections
7.1 or 7.2 of this Agreement; or (ii) the gross negligence or willful misconduct
of Nostrum in the performance of its obligations under this Agreement; provided,
however, that Nostrum shall have no liability or indemnification obligations
hereunder to the extent a Claim is caused by the gross negligence or willful
misconduct of Bionutrics, its Affiliates or their respective officers,
directors, agents and employees.

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8.2 Indemnification by Bionutrics. Bionutrics shall, at its sole cost and
expense, defend, indemnify and hold harmless Nostrum and its Affiliates, and
their respective officers, directors, agents and employees from and against all
Claims to the extent the Claims arise out of or in connection with, result from,
or are caused by: (i) any breach by Bionutrics of its representations or
warranties contained in Section 7.1 or Section 7.3 of this Agreement; (ii) the
gross negligence or willful misconduct of Bionutrics or its Affiliates in the
performance of its or their obligations under this Agreement; (iii) the
marketing, manufacture, use or sale of the Products in the Territory by or on
behalf of Bionutrics or its Affiliates; or (iv) allegations that the
manufacture, use or sale of the Products in the Territory by or on behalf of
Bionutrics or its Affiliates infringes third party patents; provided, however,
that Bionutrics shall have no liability or indemnification obligations hereunder
to the extent that the Claim is caused by the gross negligence or willful
misconduct of Nostrum, its Affiliates or their respective officers, directors,
agents and employees.

8.3 Conditions to Indemnification. The obligations of the indemnifying party
under Articles 8.1 and 8.2 are conditioned upon the delivery of written notice
to the indemnifying party of any potential Claim promptly after the indemnified
party becomes aware of the potential Claim. The foregoing notwithstanding, the
parties acknowledge and agree that failure of the indemnified party promptly to
notify the indemnifying party of a potential Claim shall not constitute a waiver
of, or result in the loss of, a party’s right to indemnification under Articles
8.1 or 8.2, except to the extent that the indemnifying party’s rights, and/or
its ability to defend against a Claim are materially prejudiced by the failure
to notify. The indemnifying party is hereby authorized to carry out the sole
management and defense of the potential Claim, and shall have the right to
assume the defense of any suit or claim related to the Claim if it has assumed
responsibility for the Claim in writing. However, if in the reasonable judgment
of the indemnified party, the Claim involves an issue or matter which could have
a materially adverse effect on the business operations or assets of the
indemnified party, the indemnified party may waive its rights to indemnity under
this Agreement and control the defense or settlement thereof. If the
indemnifying party defends the suit or claim, the indemnified party may
participate in (but not control) the defense thereof at its sole cost and
expense.

8.5 Limitation of Liability. With respect to any claim by one party against the
other arising out of the performance or failure of performance of the other
party under this Agreement, the parties expressly agree that the liability of a
party to the other party for the breach shall be limited under this Agreement or
otherwise at law or equity to compensatory damages only and in no event shall a
party be liable for punitive or exemplary damages. The foregoing limitation will
not prevent a party entitled to indemnification pursuant to this Agreement from
recovering all components of any judgment or award against a party by an
unaffiliated party.

 
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Article 9 - Term and Termination

9.1 Term and Expiration. This Agreement shall continue unless and until
terminated as provided herein and otherwise shall continue in effect for as long
as Bionutrics and/or any of its Affiliates are marketing any Product.

9.2 Rights of Bionutrics to Terminate. Bionutrics may, upon written notice,
terminate this Agreement with respect to a Product in the event that (i)
Bionutrics reasonably believes that use of any portion of the Nostrum Technology
as applied to the Product pursuant to the license granted hereunder would
infringe any patent, copyright, trademark or other intellectual property right
of a third party or misappropriate any trade secret of a third party; or (ii)
the Product loses substantially all of its commercial value for Bionutrics, due
to: (1) expected extraordinary competition or direct competition, or (2)
decrease in sales of any corresponding product in the Territory based on
International Marketing Service data or equivalent data relating to the market
for the Product in the Territory.

9.3 Rights of Nostrum to Terminate. Nostrum may, upon written notice, terminate
this Agreement in the event that any of the following conditions did not exist
as of June 30, 2005: (i) Bionutrics has no unpaid or undischarged notes or other
indebtedness that is convertible into common stock of Bionutrics; (ii)
Bionutrics has no indebtedness that is secured by property of Bionutrics; (iii)
Bionutrics has obtained agreement and signatures per a Lock-Up Agreement
(substantially in the form of Attachment A hereto) from Bionutrics’ shareholders
constituting a minimum 19,500,000 shares of Bionutrics’ outstanding common
stock; and (iv) Bionutrics has certified in writing to Nostrum that the events
described in clauses (i) through (iii) have occurred.

9.4 Termination for Cause. Either party shall have the right to terminate this
Agreement with respect to a Product in the event the other party breaches any
material covenant, representation or warranty of this Agreement relating to the
Product and fails to cure the breach within sixty (60) days following written
notice thereof.

9.5  Bankruptcy or Insolvency. Either party shall be entitled immediately to
terminate this Agreement with respect to a Product upon the filing or
institution of bankruptcy, reorganization (in connection with any insolvency),
liquidation or receivership proceedings, or upon an assignment of a substantial
portion of the assets for the benefit of creditors by the other party, or in the
event a receiver or custodian is appointed for the other party’s business, or if
a substantial portion of the other party’s business is subject to attachment or
similar process; provided, however, that in the case of any involuntary
bankruptcy proceeding or the attachment of a substantial portion of a party’s
assets the right to terminate shall only become effective if the proceeding or
attachment is not dismissed within sixty (60) days after the filing thereof.

9.6  Effect of Termination.

(a) In the event that this Agreement is terminated by Nostrum pursuant to
Section 9.3:

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(i) the license granted to Bionutrics hereunder shall terminate, Bionutrics
shall transfer to Nostrum all of the Formulations, processes and other
technology, approvals, applications and records related to the development and
commercialization of the Products, and Nostrum shall thereafter have the right
to develop, manufacture and otherwise commercialize the Products in the
Territory; and

(ii) the First and Second Stock Purchase Agreements shall be rescinded, and the
shares of common stock of Bionutrics issued to Nostrum thereunder shall be
returned to Bionutrics for cancellation.
 
(b) In the event that this Agreement is terminated pursuant to Section 9.2, 9.4
or 9.5 with respect to less than all of the Products hereunder, (i) the license
granted to Bionutrics under Section 2.1 shall terminate with respect to the
Products that are the subject of the termination; and (ii) Bionutrics shall
transfer to Nostrum all of (a) the Formulations, processes and other technology
relating to such Products; (b) the approvals and applications for such Products
(except any NDAs or ANDAs which Bionutrics obtained hereunder for such
Products), and (c) the records directly related to the development and
commercialization of the Products; and (iii) Nostrum shall thereafter have the
right to develop, manufacture and otherwise commercialize those Products in the
Territory.
 

 9.7 Surviving Terms. The provisions of Section 9.6, and of Articles 5, 8 and 11
and the other provisions of this Agreement which by their expressed terms are to
be performed or complied with subsequent to the termination or expiration of
this Agreement, shall survive the termination or expiration and shall continue
in full force and effect in accordance with their respective terms.

Article 10 - Force Majeure

10.1 No failure or omission by the parties in the performance of any obligation
under this Agreement shall be deemed a breach of this Agreement or create any
liability if the failure or omission shall arise from any cause or causes beyond
the control of the party, including, but not limited to, strikes, riots, war,
acts of God, invasion, fire, explosion, floods, delay of carrier, energy
shortages and acts of government or governmental agencies or instrumentalities.

Article 11 - Miscellaneous

11.1 No Waiver. No failure by a party to exercise any rights hereunder in the
event of a breach or violation hereof by the other party shall constitute a
waiver of any of those rights. No waiver by any party of any breach or violation
hereof by the other party, shall constitute a waiver of any rights in respect of
any other or subsequent breach or violation.

11.2 Notices. All notices given under this Agreement shall be in writing and
given by personal delivery, confirmed facsimile transmission, nationally
recognized overnight courier (prepaid) or registered or certified mail, postage
prepaid with return receipt requested. Notices shall be addressed:

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If to Nostrum:  505 Thornall Street, # 304     Edison, New Jersey 08837    
Attn: Nirmal Mulye, Ph.D.     Fax: (732) 635-0042         If to Bionutrics: 2415
East Camelback Road, Suite 700     Phoenix, Arizona 85022     Attn.: Ronald
Howard Lane, Ph.D.     Fax: (602) 508-0115  

 

A party may change its address by written notice given in accordance with this
Section.

11.3 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
choice or conflict of law principles thereof.

11.4 Independent Contractor. The parties shall be considered independent
contractors, and neither the making of this Agreement nor the performance of any
of the provisions hereof shall be construed to make either party an agent,
employee or legal representative of the other, nor shall this Agreement be
deemed to establish a joint venture or partnership.
 
11.5 Severability. In the event that any one or more of the provisions of this
Agreement should be held to be invalid, illegal or unenforceable in any respect
by reason of any law, statute or regulation existing now or in the future in any
jurisdiction by any court of competent authority or by a legally enforceable
directive of any governmental body, then the provision shall be deleted with
respect to that jurisdiction and the enforceability of the remaining provisions
of this Agreement shall not otherwise be affected or limited.

11.6 Effect of Assignment. This Agreement shall be binding upon, and inure to
the benefit of, each party and its permitted successors and assigns. Each party
shall be responsible for the compliance by any of its permitted assigns with the
terms and conditions of this Agreement.

11.7 Recording. Each party shall have the right, at any time, to record,
register, or otherwise notify this Agreement in appropriate governmental or
regulatory offices anywhere in the Territory, and Nostrum or Bionutrics, as the
case may be, shall provide reasonable assistance to the other in effecting the
recording, registering or notifying.

11.8 Further Actions. Each party agrees to execute, acknowledge and deliver the
further instruments and to do all the other acts, as may be necessary or
appropriate in order to carry out the purposes and intent of this Agreement.

11.9 Counterparts. This Agreement shall become binding when any one or more
counterparts hereof, individually or taken together, shall bear the signatures
of each of the parties hereto and is delivered to the other party. This
Agreement may be executed in any number of counterparts, each of which shall be
an original as against either party whose signature appears thereon, but all of
which taken together shall constitute but one and the same instrument. For
purposes of this Agreement, a facsimile signature shall be treated in all
respects as an original.

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11.10 Entire Agreement. This Agreement, together with the attached
exhibits,represents the entire agreement between the parties with respect to the
subject matter hereof and supersedes and replaces all prior agreements and
understandings, whether written or oral. No terms or provisions of this
Agreement shall be varied or modified and no subsequent alteration, amendment,
change or addition to this Agreement shall be binding upon the parties unless
reduced to writing and signed by an authorized officer of each party.

11.11 Interpretation and Headings. In this Agreement words in the singular shall
be deemed to include the plural and vice versa and words identifying gender
shall include the masculine, feminine and neuter, as the context requires. The
headings in this Agreement are for convenience of reference only and shall not
be used to interpret or define the provisions of this Agreement.

11.12. Dispute Resolution.

(a) Procedures Mandatory. The parties agree that any dispute arising out of or
relating to this Agreement shall be resolved solely by means of the procedures
set forth in this Section and that the procedures constitute legally binding
obligations that are an essential provision of this Agreement.

(b)  Dispute Resolution Procedures.

(i) Negotiation. In the event of any claim, controversy or dispute arising out
of or relating to this Agreement, or the breach thereof, either party shall
notify the other party, and the parties shall attempt in good faith to resolve
the matter within thirty (30) days after the date of the notice (the "Dispute
Notice Date").

(ii) Mediation. If the matter remains unresolved forty-five (45) days after the
Dispute Notice Date, either party may initiate mediation upon written notice to
the other party, whereupon both parties shall be obligated to engage in a
mediation proceeding administered and conducted by the American Arbitration
Association (“AAA”) in New York City under its Commercial Mediation Rules,
except that specific provisions of this Section shall override inconsistent
provisions of the AAA Commercial Mediation Rules. The parties shall attempt to
resolve the dispute through mediation until one of the following occurs: (i) the
parties reach a written settlement; (ii) the mediator notifies the parties in
writing that they have reached an impasse; (iii) the parties agree in writing
that they have reached an impasse; or (iv) the parties have not reached a
settlement ninety (90) days after the Dispute Notice Date.

(iii) Arbitration. If and to the extent that the parties fail to resolve the
dispute through mediation, or if neither party elects to initiate mediation,
then all the claims, controversies and disputes shall be settled by arbitration
administered and conducted by the AAA in New York City under its Commercial
Arbitration Rules, and judgment on the award rendered by the arbitrators therein
may be entered in any court having jurisdiction thereof.

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(c) Preservation of Rights Pending Resolution.

(i) Performance to Continue. Each party shall continue to perform its
obligations under this Agreement pending final resolution of any dispute arising
out or relating to this Agreement; provided, however, that a party may suspend
performance of its obligations during any period in which the other party fails
or refuses to perform its obligations.

(ii) Provisional Remedies. Although the procedures specified in this Section are
the sole and exclusive procedures for the resolution of disputes arising out of
relating to this Agreement, either party may seek a preliminary injunction or
other provisional equitable relief if, in its reasonable judgment, that action
is necessary to avoid irreparable harm to itself or to preserve its rights under
this Agreement.

(d) Statute of Limitations. The parties agree that all applicable statutes of
limitation and time-based defenses (e.g., estoppel and laches) shall be tolled
while the procedures set forth in this Section are pending. The parties shall
take all actions necessary to effectuate this result.

IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
 

NOSTRUM PHARMACEUTICALS, INC.    BIONUTRICS, INC.             By:  /S/ NIRMAL
MULYE, Ph.D.   By: /S/ RONALD HOWARD LANE, Ph.D.
Nirmal Mulye, Ph.D.
 
Ronald Howard Lane, Ph.D.
President
 
President

 

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Exhibit “A”
Form of Lock-Up Agreement

BIONUTRICS, INC.
LOCK-UP AGREEMENT
 
THIS AGREEMENT (“Agreement”) is made as of March __, 2005, by and among
Bionutrics, Inc., a Nevada corporation (“Company”) and individuals or entities
which prior to the date have acquired and as of the date hereof own shares of
common stock, par value $0.001 (“Common Stock”) of the Company (“Stockholders”).
Each Stockholder is referred to herein individually as a “Stockholder.” For
purposes of this Agreement, the term “Common Stock” shall include both vested
and non vested shares.

WHEREAS, on the date hereof, each of the Stockholders owns certain shares of
Common Stock (“Stockholder Shares”),
 
WHEREAS, on the date hereof, certain of the Stockholders have certain rights,
warrants, options or arrangements, which allow a person to acquire or require
the Company to issue to a Stockholder shares of Common Stock (“Options”).
 
WHEREAS, the Company and the Stockholders desire to enter into this Agreement
for the purposes, among others, of limiting the manner and terms by which the
Stockholder Shares and/or Options may be transferred.
 
NOW, THEREFORE, in consideration of the mutual covenants contained herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
 
1. Restrictions on Transfer; Termination Date. The restrictions set forth in
this Section shall apply to all of the Stockholder Shares and/or Options for a
period which shall terminate on the earlier of (i) eighteen (18) months from the
date hereof or (ii) the termination of this Agreement by the Company, in its
sole discretion, prior to the Termination Date (“Lock-Up Period”). This
Agreement shall terminate on the earlier of the two dates (“Termination Date”).
 
(a) Lock-Up Period. The Stockholder agrees that he, she or it will not, during
the Lock-Up Period, sell, transfer, grant an option or other interest in, or
otherwise dispose of in a public national exchange or market (collectively, a
“Public Transfer”) any interest in any Stockholder Shares and/or Options except
(i) as permitted under Section 1(b) hereof, (ii) pursuant to the provisions of
Section 1(d) hereof, or (iii) upon a sale of the Company to an unaffiliated
third party in a transaction approved by the Board of Directors and Stockholders
holding a majority of shares outstanding; provided, however, that after the
passage of nine (9) months from the date hereof, the Stockholder may sell an
amount up to eleven percent (11%) per month (calculated on a non-cumulative
basis) of the Stockholder Shares and/or Options that were owned by the
Stockholder as of the date hereof. This Lock-Up Period shall apply to
Stockholder Shares whether or not they are governed by Rule 144 of the
Securities Act of 1933 (the “1933 Act”) or have been registered under the 1933
Act.
 
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 (b) Private Sales; Company Right of First Refusal.
 
(i) Private Sales. A Stockholder who transfers Stockholder Shares and/or Options
(a “Transferring Stockholder”) may transfer Stockholder Shares and/or Options in
a private sale or by gift to an individual or entity in a transaction that does
not involve a Public Transfer, and is in compliance with Rule 144 of the 1933
Act and other applicable federal and state securities laws (“Private Sale”). The
Transferring Stockholder must comply with the provisions of this Section 1(b)
and must deliver an opinion of counsel satisfactory to the Company that the
transfer complies with Rule 144 and other applicable federal and state
securities laws. In the case of any Private Sale, the transferees shall have
agreed by execution of a copy of this Agreement to be bound by the provisions of
this Agreement with respect to the Stockholder Shares so transferred.
 
(ii) Right of First Refusal. At least thirty (30) days prior to making any
transfer of any Stockholder Shares or Options (other than pursuant to a
“Permitted Transfer”, as defined in Section 1(d)), the Transferring Stockholder
shall deliver an “Offer Notice” to the Company. The Offer Notice shall be in
writing and shall contain, at a minimum, (i) the number of Stockholder Shares
and/or Options that the Stockholder proposes to sell; (ii) the name and address
of the proposed transferee; (iii) the proposed purchase price, terms of payment
and other material terms and conditions of the proposed transfer; and (iv) an
estimate, in the Transferring Stockholder’s reasonable judgment, of the fair
value of any non-cash consideration offered by the proposed transferee. The
Offer Notice shall be deemed to be an offer to sell the Transferring
Stockholder’s Stockholder Shares and/or Options to the Company on the same terms
and conditions as proposed by the third party. The Company may elect to purchase
all or none of the Stockholder Shares and/or Options specified in the Offer
Notice at the price and on the terms specified therein by delivering written
notice of election to the Transferring Stockholder within twenty (20) days after
the delivery of the Offer Notice (the “Election Period”). The purchase of the
Transferring Stockholder’s Stockholder Shares and/or Options subject to the
Notice shall be made in accordance with Section 1(c) hereof. This Right of First
Refusal shall not apply to Stockholder Shares and/or Options (a) permitted to be
sold following the initial nine (9) months of this Lock-Up Agreement in
accordance with Section 1(a) or (b) Permitted Transfers in accordance with
Section 1(d) hereof.
 
(c) Procedures for Acquiring Stockholder Shares and/or Options. If the Company
has elected timely to purchase Stockholder Shares and/or Options from the
Transferring Stockholder, the purchase shall be consummated as soon as
practicable after the delivery of the election notice, but in any event within
fifteen (15) days after the expiration of the Election Period. To the extent
that the Company has not timely elected to purchase all of the Stockholder
Shares and/or Options being offered, the Transferring Stockholder may, within
ninety (90) days after the expiration of the Election Period, transfer any
remaining vested Stockholder Shares and/or Options to one or more third parties
at a price no less than the price per share specified in the Offer Notice and on
other terms no more favorable to the transferee than offered to the Company in
the Offer Notice, and such purchases shall be conditioned upon all purchasers of
Stockholder Shares and/or Options executing a copy of this Agreement. In the
event the Offer Notice provides for any noncash consideration for the
Stockholder Shares and/or Options or includes terms that differ from a direct
purchase of the Stockholder Shares and/or Options, the Company and the
Transferring Stockholder shall negotiate in good faith to determine the all cash
purchase equivalent of the consideration and terms proposed in the Offer Notice.
The Company shall only be required to pay cash for the Stockholder Shares and/or
Options acquired from the Transferring Stockholder. At the closing of the
purchase of Stockholder Shares and/or Options, the Transferring Stockholder
shall provide representations and warranties as to title and that there are no
liens or encumbrances on the Stockholder Shares and/or Options and shall sign
all stock powers, releases and other documents as may reasonably be requested by
the Company.
 
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(d) Permitted Transfers. The restrictions contained in this Section shall not
apply to the transfer of Stockholder Shares and/or Options by a Stockholder (a)
pursuant to applicable laws of descent and distribution, or (b) to any person
who directly or indirectly controls, is controlled by or is under common control
with the Stockholder (“Permitted Transfer”).
 
(e) Involuntary Transfers. Prior to the Termination Date, any event which would
cause a Stockholder’s Stockholder Shares and/or Options, or any interest
therein, to be sold, awarded, or otherwise transferred, for consideration or
otherwise, to any person, whether voluntarily, involuntarily or by operation of
law shall be deemed to constitute an offer by that Stockholder to sell the
Stockholder Shares and/or Options pursuant to Section 1(b). Upon the occurrence
of any event specified in Section 1(d), the Company shall have the right to
purchase such Stockholder Shares at their fair market value which shall mean the
value determined by multiplying the number of Stockholder Shares subject to
purchase in Section 1(e) by the average closing sales price per share of Common
Stock for the ten (10) most recent trading days immediately following the date
of receipt of the Offer Notice, or if no Offer Notice, the date upon which the
Company became aware of the event set forth in Section 1(d). Upon the Company’s
becoming aware of any of the events set forth in Section 1(d), the Company shall
have the right, but shall not be obligated, to purchase all of the Stockholder
Shares subject to transfer on the same terms and conditions as set forth in
Sections 1(b) at a price equal to their fair market value. In the event the
Company does not provide the Transferring Stockholder timely notice of its
election to purchase pursuant to Section 1(b) after receipt of written notice by
the Transferring Stockholder (or the proposed transferee if the Transferring
Stockholder has not done so), the Transferring Stockholder or his transferee
upon the occurrence of the event specified in Section 1(d) may retain the
Stockholder Shares and/or Options, which shall remain subject to this Agreement.
 
2. Legend. Each certificate issued in exchange for or upon the transfer of any
Stockholder Shares (if transferred shares remain Stockholder Shares after a
transfer) shall be stamped or otherwise imprinted with a legend in substantially
the following form:
 
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER AND OTHER AGREEMENTS SET FORTH IN A LOCK-UP AGREEMENT. A COPY OF THIS
AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE COMPANY’S PRINCIPAL PLACE
OF BUSINESS WITHOUT CHARGE.
 
The legend set forth above shall be removed from certificates evidencing shares
which cease to be subject to this Lock-Up Agreement.
 
4. Transfers in Violation of Agreement. Any transfer or attempted transfer of
any Stockholder Shares in violation of any provision of this Agreement shall be
void, and the Company shall not record that transfer on its books or treat any
purported transferee of those Stockholder Shares as the owner of the shares for
any purpose.
 
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5. Amendment and Waiver. Except as otherwise provided herein, no modification,
amendment or waiver of any provision of this Agreement shall be effective
against the Company unless the modification, amendment, termination or waiver is
approved in writing by the Company. The failure of any party to enforce any of
the provisions of this Agreement shall in no way be construed as a waiver of
those provisions and shall not affect the right of a party thereafter to enforce
each and every provision of this Agreement in accordance with its terms.
 
6. Severability. In the event that any one or more of the provisions of this
Agreement should be held to be invalid, illegal or unenforceable in any respect
by reason of any law, statute or regulation existing now or in the future in any
jurisdiction by any court of competent authority or by a legally enforceable
directive of any governmental body, then the provision shall be deleted with
respect to that jurisdiction and the enforceability of the remaining provisions
of this Agreement shall not otherwise be affected or limited.
 
7. Entire Agreement. This Agreement sets forth the complete agreement and
understanding among the parties hereto with respect to the subject matter hereof
and supersedes any prior understandings or agreements, oral or written, between
the parties which may relate to the subject matter hereof.
 
8. Successors and Assigns. Except as otherwise provided herein, this Agreement
shall bind and inure to the benefit of and be enforceable by the Company and its
successors and assigns and the Stockholders and any permitted subsequent holders
of Stockholder Shares and the respective successors and permitted assigns of
each of them, so long as they hold Stockholder Shares.
 
9. Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be an original and all of which taken together shall
constitute but one and the same agreement.
 
10. Remedies. The Company and the Stockholder shall be entitled to enforce their
rights under this Agreement specifically, to recover damages by reason of any
breach of any provision of this Agreement and to exercise all other rights
hereunder. The parties acknowledge and agree that money damages may not be an
adequate remedy for any breach of the provisions of this Agreement and that the
Company and the Stockholder may in their sole discretion apply to any court of
law or equity of competent jurisdiction for specific performance and/or
injunctive relief (without posting a bond or other security) in order to enforce
or prevent any violation of the provisions of this Agreement.
 
11. Notices. Any notice provided for in this Agreement shall be in writing and
shall either be deemed delivered when delivered personally, mailed first class
(postage prepaid) three days after deposit in the U.S. mail or when sent by
reputable overnight courier service (charges prepaid) to the Company at the
address set forth below one day after deposit with a reputable courier service
to any other recipient at the address indicated on Exhibit “A” hereto and to any
subsequent holder of Stockholder Shares subject to this Agreement at such
address as indicated in the Company’s records, or at the address or to the
attention of any other person the recipient party may specify by written notice
pursuant hereto.
 
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If to the Company at: Bionutrics, Inc.   2415 East Camelback Road, Suite 700  
Phoenix, AZ, 85016   Attn: Ronald Howard Lane, Ph.D.   Tel: (602) 508-0112  
Fax: (602) 508-0115      

  
12. Governing Law. This Agreement will be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
choice or conflict of law principles thereof.
 
13. WAIVER OF JURY TRIAL. THE COMPANY AND THE STOCKHOLDER HEREBY IRREVOCABLY
WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF
OR RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
 
14. Consent to Jurisdiction and Service of Process. All judicial proceedings
brought by the parties with respect to this Agreement or the Stockholder Shares
and/or Options hereunder may be brought in any state or federal court of
competent jurisdiction in the State of New York and by execution and delivery of
this Agreement the parties accept, generally and unconditionally, the
jurisdiction of the aforesaid courts, and irrevocably agree to be bound by any
judgment rendered thereby in connection with this Agreement. The parties hereby
waive personal service of process and consent that service of process may be
made by certified or registered mail, return receipt requested, as provided
herein, and service so made shall be deemed completed on the third (3rd)
Business Day after mailing.

IN WITNESS WHEREOF, the parties hereto have executed this Stockholder Agreement
on the day and year first above written.
 

 

  BIONUTRICS, INC.           By:     Its            STOCKHOLDER           Name:
    Address:    

 
 
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THE SHARES BEING SUBSCRIBED FOR HEREIN HAVE NOT BEEN REGISTERED WITH THE UNITED
STATES SECURITIES AND EXCHANGE COMMISSION UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED, (THE “1933 ACT”) OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY
STATE SECURITIES LAW. THEY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM
REGISTRATION PURSUANT TO SECTION 4(2) OF THE 1933 ACT. THE SHARES MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE SHARES ARE REGISTERED UNDER
THE 1933 ACT AND APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL IS
OBTAINED WHICH IS REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH OFFERS, SALES
AND TRANSFERS MAY BE MADE PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
 

 
STOCK PURCHASE AGREEMENT
 

 
THIS STOCK PURCHASE AGREEMENT (the “Agreement”) is made as of June 16, 2004, by
and between Bionutrics, Inc., a Nevada corporation (the “Company”), and Nostrum
Pharmaceuticals, Inc., a Delaware corporation (the “Investor”).
 
THE PARTIES HEREBY AGREE AS FOLLOWS:
 
1. Purchase and Sale of Stock.
 
1.1 Sale and Issuance of Stock. On the basis of the representations, warranties
and agreements contained herein and subject to the terms and conditions herein
set forth, the Company agrees to issue six million (6,000,000) shares of its
Common Stock, $.001 par value, and the Investor hereby subscribes for and agrees
to purchase the Shares upon acceptance of this Agreement by the Company.
 
1.2 Payment. Investor is delivering with this Agreement a certain Product
Development and License Agreement, dated as of June 16, 2004 (the “License
Agreement”), setting forth an exclusive worldwide license under certain
specified technology to develop, make, have made, use, import, offer for sale,
market and sell the products specified in the License Agreement, as
consideration, subject to its terms and conditions, for the Shares as a
condition for the Closing of the offering.
 
1.3 Closing. The closing of the transaction contemplated by this Agreement (the
“Closing”) shall be deemed to have occurred when this Agreement has been
executed by both the Investor and the Company and payment shall have been made
as set forth in Section 1.2 above in consideration for the Company's promise and
agreement to delivery within fifteen (15) days certificates representing the
Shares subscribed for. If at the Closing any of the conditions specified in
Article 6 hereof shall not have been fulfilled to the reasonable satisfaction of
Investor, then Investor shall, at its election, be relieved of all of its
obligations under this Agreement, without thereby waiving any other rights it
may have by reason of such failure or unfulfillment. If at the Closing any of
the conditions specified in Article 5 hereof shall not have been fulfilled to
the reasonable satisfaction of the Company, the Company shall, at its election,
be relieved of all of its obligations under this Agreement, without thereby
waiving any other rights it may have by reason of such failure or unfulfillment.
 
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2. Representation and Warranties of the Company. The Company hereby represents
and warrants to the Investor as follows:
 
2.1 Organization, Good Standing and Qualification. The Company is a corporation
validly existing and in good standing under the laws of the State of Nevada and
has all requisite power and authority to own or lease and operate its properties
and assets and to carry on its business as now conducted. The Company is duly
qualified to transact business and is in good standing in each jurisdiction in
which the failure to so qualify would have a material adverse effect on its
business, operations, prospects, condition (financial or other), or properties.
 
2.2 Capitalization. The authorized capital of the Company consists of:
 
(i) Common Stock. 45,000,000 shares of common stock (“Common Stock”), par value
$.001, of which 8,302,600 shares are issued and outstanding as of March 31,
2004.
 
(ii) Preferred Stock. 5,000,000 shares of preferred stock (“Preferred Stock”),
par value $.001, 591,685 shares of which are outstanding and convertible into
118,370 of common stock at the election of the Company or shareholder. Further
Preferred Stock may be issued from time to time in one or more series and the
Board of Directors is authorized to fix the rights and terms relating to
dividends, conversion, voting, redemption, liquidation preferences and any other
rights, preferences, privileges and restrictions applicable to each such series.
 
(iii) Warrants, Options and Other Rights. There are no preemptive rights or
rights of first refusal for the purchase or acquisition from the Company of any
shares of its capital stock. As of March 31, 2004, there were outstanding
warrants and options to purchase up to 986,500 shares of Common Stock.
 
2.3 Subsidiaries, Etc. The Company’s direct or indirect ownership in any other
corporation, partnership, joint venture association or other business
enterprise, are stated in its Form 10-K for the year ended October 31, 2001, has
not materially changed from that date, and the Investor can rely upon that
information as being true and correct as of the date of this transaction.
 
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2.4 Valid Issuance of Shares. All of the outstanding shares of the Company's
stock have been duly and validly authorized and issued, are fully paid and
nonassessable, and no further approval or authority of the stockholders or the
directors of the Company will be required by the Company for the issuance of the
Shares. The Shares when issued and paid for in accordance with the terms of this
Agreement will be duly authorized, validly issued and outstanding, fully paid
and nonassessable, free from preemptive rights and will be free from any pledge,
lien, encumbrance or restriction on transfer other than restrictions on transfer
under applicable state and federal securities laws and issued in compliance with
all state and federal securities laws.
 
2.5 Financial Statements.
 
(a) The Company has delivered to Investor true and correct copies of (i) its
Form 10-K for the year ended October 31, 2001, (ii) the unaudited consolidated
balance sheets of the Company and its subsidiaries for the years ended October
31, 2002 and October 31, 2003 and the six-month period ended March 31, 2004 and
(iii) the related unaudited consolidated statements of income, stockholders’
equity and cash flows of the Company and its subsidiary as of October 31, 2002,
October 31, 2003 and March 31, 2004, respectively (collectively, the “Balance
Sheets”). Except as otherwise stated in the notes thereto, the Balance Sheets
have been prepared in conformity with United States generally accepted
accounting principles (and except that the unaudited Balance Sheets may not
contain all notes) applied, except as stated therein, on a consistent basis. The
Balance Sheets are true and correct and fairly present the financial position,
result of operations and cash flows and changes in financial position of the
Company as of the dates and for the periods indicated. If and when filed by the
Company with the Securities and Exchange Commission the “SEC”) the financial
statements in the annual reports on Form 10-K for the years ended October 31,
2002 and 2003 including Form 10-Q for each three-month period subsequent to the
year ended October 31, 2001 will not be materially different to the Balance
Sheets for the respective periods and only be subject to non-material year-end
adjustments in case of any Balance Sheets for a three-month period subsequent to
the year ended October 31, 2003. The Company, within 120 days, intends to obtain
a certified public accountant to conduct an audit for the Company’s fiscal years
2002 and 2003, and to review quarterly filings of the Company to bring it
current with the SEC. The Investor can rely upon the unaudited financials noted
above and supplied by the Company as being a true and correct reflection of the
Company’s financial condition for the respective dates, and as such will be
similarly reflected in the Company’s forthcoming audit.
 
(b) Except as reflected in the Balance Sheets, the Company has no liabilities,
absolute or contingent, material to the operations, business, prospects, assets,
properties or condition (financial or other) of the Company, other than (i)
ordinary course liabilities incurred since the last date of such Balance Sheets
in connection with the conduct of the business of the Company, and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under United States generally accepted accounting
principles to be reflected in the Balance Sheets, which, in both cases,
individually or in the aggregate, are not material to the financial condition or
operating results of the Company.
 
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2.6 Tax Returns and Audits. The Company last filed a tax return with respect to
fiscal year 2000. Segal Miller McClain has prepared returns for 2001, 2002, 2003
and 2004, which will be filed upon receipt of certain information from InCon
Processing, LLC. The Company owes no taxes for those years as expenses exceeded
revenues. The Company is not delinquent in the payment of any such tax or in the
payment of any assessment or governmental charge. The Company has not received
notice of any tax deficiency proposed or assessed against it, and it has not
executed any waiver of any statute of limitations on the assessment or
collection of any tax. None of the Company’s tax returns has been audited by
governmental authorities in a manner to bring such audits to the Company’s
attention. The Company does not have any tax liabilities except those reflected
on the Balance Sheets or incurred since the Balance Sheet Date in the ordinary
course of business.
 
2.7 Licenses. The Company possesses from the appropriate agency, commission,
board and government body and authority, whether state, local or federal, all
material licenses, permits, authorizations, approvals, franchises and rights
that are necessary for it to engage in the business currently conducted by it.
The Company has no reason to believe that it will not be able to obtain all
licenses, permits, authorizations, approvals, franchises and rights that may be
required for any business the Company proposes to conduct.
 
2.8 Books and Records. The Company maintains a system of internal accounting
controls sufficient to provide reasonable assurances that (i) transactions are
executed in accordance with management’s general or specific authorization, (ii)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets, (iii) access to assets is permitted only in
accordance with management’s general or specific authorization and (iv) the
recorded accountability for assets is compared with existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences.
 
2.9 No Conflict with Other Instruments. Neither the authorization, issuance and
sale of the Shares, nor the execution, delivery and performance by the Company
of this Agreement nor the consummation of the transactions herein contemplated,
will: (i) contravene or conflict with or constitute a breach of, permit the
termination of, constitute a default under, or violation of (A) the Articles of
Incorporation, as amended, or bylaws of the Company, (B) any material agreement,
indenture, mortgage, deed of trust or other material instrument or agreement or
undertaking by which the Company is bound or to which any of its properties or
assets is subject, or, (C) to the knowledge of the Company, a violation of any
law, administrative regulation, or court decree to which the properties or
assets of the Company is subject; or (ii) result in the creation or imposition
of any material Lien upon the property or assets of the Company. For purposes of
this Agreement, “Lien” means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest, encumbrance or restriction of any kind in
respect of such asset.
 
2.10 Authorization. The Company has the corporate power and authority to enter
into this Agreement and to perform all of its obligations hereunder. The
execution, delivery and performance of this Agreement by the Company have been
duly authorized by all necessary corporate actions, and this Agreement
constitutes a legal, valid, binding and enforceable obligation of the Company.
No consent, approval, authorization or order of any court or governmental agency
or board or any other third party, or registration, qualification, designation
or filing with any Federal, state or local authority is required to consummate
the transactions contemplated by this Agreement.
 
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2.11 Disclosure. The Company has not knowingly withheld from Investor any
material facts relating to the assets, business, operations, financial condition
or prospects of the Company. No representation or warranty in this Agreement or
in any certificate, schedule, statement or other document furnished or to be
furnished to Investor pursuant hereto or in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact required to be stated
herein or therein or necessary to make the statements herein or therein not
misleading.
 
2.12 No Brokers or Finders. No person, firm or corporation has or will have, as
a result of any act or omission of the Company, any right, interest or valid
claim against the Company for any commission, fee or other compensation as a
finder or broker in connection with the transactions contemplated by this
Agreement.
 
3. Representations and Warranties of Investor. By executing this Agreement,
Investor hereby represents and warrants to and covenants with the Company as
follows:
 
3.1 Authorization. Investor has the power and authority to enter into this
Agreement and to perform all of its obligations hereunder and this Agreement
constitutes a valid, binding and enforceable obligation of Investor.
 
3.2 Legal Investment and Compliance with Laws. The purchase of the Shares by
Investor is legally permitted by all laws and regulations to which Investor is
subject and all consents, approvals, authorizations of or designations,
declarations, or filings in connection with the valid execution and delivery of
this Agreement by Investor or the purchase of the Shares by Investor has been
obtained, or will be obtained. Investor hereby represents that it has satisfied
itself as to the full observance of the laws of its jurisdiction in connection
with any invitation to subscribe for the Shares or any use of this Agreement,
including (i) any foreign exchange restrictions applicable to such purchase, and
(ii) the income tax and other tax consequences, if any, which may be relevant to
the purchase, holding, redemption, sale, or transfer of the Shares. Such
Investor's subscription and payment for, and its continued beneficial ownership
of the Shares, will not violate any applicable securities or other laws of its
jurisdiction.
 
3.3 Access to Information. Investor acknowledges that it has received the
Company's Form 10-K for the period ended October 31, 2001, the Forms 10-Q filed
subsequent thereto and the Balance Sheets (the “Offering Documents”), and is
familiar with and understands the operations of the Company.
 
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(a)  Investor understands and acknowledges that the Offering Documents provided
in connection with this investment have been prepared by the Company.
Accordingly, Investor understands and acknowledges that no independent
investment banking firm or legal counsel have passed upon or assumed any
responsibility for the accuracy, completeness or fairness of the information
contained in the Offering Documents.
 
(b)  Investor understands and acknowledges that any financial projections
provided in connection with this investment have not been prepared by
independent accountants and are based on numerous assumptions regarding sales,
revenues and expenses and other factors which may not be realized in the future.
 
(c)  Investor acknowledges that it has been encouraged to rely upon the advice
of its legal counsel and accountants or other financial advisers with respect to
the financial, tax and other considerations relating to the purchase of the
Shares and has been offered, during the course of discussions concerning the
purchase of the Shares, the opportunity to ask such questions and inspect such
documents concerning the Company and its business and affairs as Investor has
requested so as to understand more fully the nature of the investment and to
verify the accuracy of the information supplied.
 
(d)  Investor represents and warrants that, in determining to purchase the
Shares, it has relied solely upon the documents provided and the advice of its
advisors with respect to the tax, foreign and U.S., and other con-sequences
involved in pur-chasing the Shares.
 
3.4 Acquisition for Investment and Unregistered Nature of the Shares.
 
(a)  Investor represents and warrants that the Shares being acquired are being
acquired for its own account without a view to public distribution or resale and
that Investor has no contract, understanding, agreement or arrangement to sell
or otherwise transfer or dispose of the Shares or any portion thereof to any
other person, except that as many as 1,050,000 of such Shares may be transferred
to Investor’s advisor and attorneys as compensation for their services in
connection with this and other transactions.
 
(b)  Investor represents and warrants that it (i) is experienced in evaluating
and investing in securities of companies in the developmental stage and
acknowledges that it can fend for itself, (ii) can bear the eco-no-mic risk of
the purchase of the Shares including the total loss of its in-vest-ment, and
(iii) has such knowledge and experience in business and financ-ial mat-ters as
to be capable of evaluat-ing the merits and risks of an invest-ment in the
Shares.
 
(c)  Investor understands that the Shares have not been registered under the
Securities Act of 1933, as amended (the “1933 Act”), or the securities laws of
any state and are sub-ject to substantial restrictions on resale or transfer.
 
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(d)  Investor agrees that it will not sell or otherwise trans-fer or dispose of
the Shares or any portion thereof unless such Shares are registered under the
1933 Act and any applicable state securities laws, or unless Investor obtains an
opinion of counsel which is reasonably satisfactory to the Company that such
Shares may be sold in reliance on an exem-ption from such registration
requirements.
 
(e)  Investor understands that (i) the Company may place a legend on any
certificates representing the Shares indicating that the Shares may not be
transferred except in accordance with an exemption from the 1933 Act; (ii) the
Company will not register a transfer not made in accordance with an exemption
from the 1933 Act; and (iii) Investor therefore may be precluded from selling or
otherwise transferring or dis-pos-ing of any of the Shares or any portion
thereof for an indefinite period of time or at any par-ticular time.
 
3.5 Further Representations and Understandings.
 
(a)  Investor understands that no federal or state agency including the SEC, the
Arizona Corporation Commission or the securi-ties commission or author-ities of
any other state has approved or disapproved the Shares, passed upon or endorsed
the merits of the offering or the accuracy or adequacy of the documents, or made
any finding or determination as to the fairness of the Shares for public
investment and any representation to the contrary is a criminal offense.
 
(b)  Investor understands that the Shares are being offered and sold in
reli-ance on specific exemptions or exclusions from the registration
requirements of federal and state laws and that the Company is relying upon the
truth and accuracy of the representations, warranties, agreements,
acknowledgments and understandings set forth herein in order to determine the
suitability of Investor to acquire the Shares.
 
(c)  Investor represents and warrants that the information set forth herein
concerning Investor is true and correct.
 
3.6 No Brokers or Finders. No person, firm or corporation has or will have, as a
result of any act or omission by Investor, any right, interest or valid claim
against the Company for any commission, fee or other compensation as a finder or
broker, or in any similar capacity, in connection with the transactions
contemplated by this Agreement.
 
4. Registration Rights.
 
4.1 Registration Statement. The Company shall upon the Investor’s request (i)
prepare and file with the SEC a Registration Statement under the 1933 Act
covering the Shares or shall include the Shares in any other Registration
Statement it is obligated to file subsequent to the date hereof, (ii) use its
best efforts to have such Registration Statement rendered effective under the
1933 Act as soon as practicable thereafter, and (iii) take such action as may be
necessary to have such Registration Statement remain effective under the 1933
Act, free of material misstatements or omissions, for the period during which
Investor is subject to the time, volume restrictions, or manner of sale
limitations under Rule 144 of the 1933 Act (“Rule 144”), or any successor rule
or regulation (the “Effective Period”). The Company shall bear all fees,
disbursements and out-of-pocket expenses incurred in connection with the
preparation and filing of such Registration Statement, including any amendment
or supplement thereto necessary to cause the same to remain free of material
misstatements or omissions during the period the Registration Statement remains
effective under the 1933 Act, except as provided in Section 4.6 hereof.
 
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4.2 Black-out Period. Any period within the Effective Period during which the
Company fails to keep the Registration Statement effective and usable for
resales of the Shares, or requires pursuant to this Section 4.2 that the
Investor not effect sales of the Shares pursuant to the Registration Statement,
is hereafter referred to as a “Suspension Period.” A Suspension Period shall
commence on the date set forth in a written notice by the Company (with respect
to which the Company shall use good faith efforts (consistent with legal and
contractual obligations) to deliver to the Investor (not less than two Business
Days in advance of any proposed or anticipated Suspension Period) that the
Registration Statement is no longer effective or that the prospectus included in
the Registration Statement is no longer usable for resales of Shares or, in the
case of a suspension pursuant to this Section 4.2 the date specified in the
notice delivered by the Company pursuant to this Section 4.2, and shall end on
the date when the Investor either receives the copies of the supplemented or
amended prospectus or is advised in writing by the Company that use of the
prospectus or sales may be resumed, provided, however, that (i) there shall be
no Suspension Period for the period of time commencing on the Closing Date and
ending one-hundred twenty (120) days thereafter; (ii) no Suspension Period shall
last more than 60 days, such that notwithstanding anything else in this
Agreement, such Suspension Period shall expire, if it has not expired earlier
pursuant to the terms hereof, on its 60th day, and (iii) each Suspension Period
shall extend the Effective Period by the same length of time, and the Company
shall take all necessary actions to cause the same as promptly as possible. Upon
each such extension, the Company shall notify the Investor of the extended
expiration date of the Effective Period.
 
4.3 Registration Procedure. To effect the registration of the Shares under the
1933 Act, the Company shall:
 
(i) prepare and file with the SEC a registration statement with respect to such
securities, and use its best efforts to cause such registration statement to
become and remain effective for such period as may be reasonably necessary to
effect the sale of such securities;
 
(ii) prepare and file with the SEC such amendments to such registration
statement and supplements to the prospectus contained therein as may be
necessary to keep such registration statement effective for such period as may
be reasonably necessary to effect the sale of such securities;
 
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(iii) furnish to Investor such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other documents as
Investor and underwriters may reasonably request in order to facilitate the
public offering of such securities;
 
(iv) use its best efforts to register or qualify the securities covered by such
registration statement under such state securities or blue sky laws of the State
of Nevada, Arizona, New York and five other states, except that Investor may
request such other states in which the Company will register and bear such fees
and expenses in connection with such registration, as Investor may reasonably
request within twenty (20) days following the original filing of such
registration statement, except that the Company shall not for any purpose be
required to execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified;
 
(v) notify Investor participating in such registration, promptly after it shall
receive notice thereof, of the time when such registration statement has become
effective or a supplement to any prospectus forming a part of such registration
statement has been filed;
 
(vi) notify Investor promptly of any request by the SEC for the amending or
supplementing of such registration statement or prospectus or for additional
information;
 
(vii) prepare and file with the SEC, if necessary, promptly upon the request of
Investor, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for Investor (and concurred in by
counsel for the Company), is required under the 1933 Act or the rules and
regulations thereunder in connection with the distribution of the Shares by
Investor;
 
(viii) prepare and promptly file with the SEC, if necessary, and promptly notify
Investor of the filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such securities is
required to be delivered under the 1933 Act, any event shall have occurred as
the result of which any such prospectus or any other prospectus as then in
effect would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading;
 
(ix) advise Investor, promptly after it shall receive notice or obtain knowledge
thereof, of the issuance of any stop order by the SEC suspending the
effectiveness of such registration statement or the initiation or threatening of
any proceeding for that purpose and promptly use its best efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order should
be issued;
 
(x) not file any amendment or supplement to such registration statement or
prospectus to which Investor shall have reasonably objected on the grounds that
such amendment or supplement does not comply in all material respects with the
requirements of the 1933 Act or the rules and regulations thereunder, after
having been furnished with a copy thereof at least five business days prior to
the filing thereof, unless in the opinion of counsel for the Company the filing
of such amendment or supplement is reasonably necessary to protect the Company
from any liabilities under any applicable federal or state law and such filing
will not violate applicable law; and
 
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(xi) at the request of Investor, furnish on the effective date of the
registration statement and, if such registration includes an underwritten public
offering, at the closing provided for in the underwriting agreement: (a)
opinions, dated such respective dates, of the counsel representing the Company
for the purposes of such registration, addressed to the underwriters, if any,
and to Investor making, covering such matters as such underwriters and Investor
may reasonably request, in which opinion such counsel shall state (without
limiting the generality of the foregoing) that (1) such registration statement
has become effective under the 1933 Act; (2) to the best of such counsel’s
knowledge no stop order suspending the effectiveness thereof has been issued and
no proceedings for that purpose have been instituted or are pending or
contemplated under the 1933 Act; (3) the registration statement and each
amendment or supplement thereto comply as to form in all material respects with
the requirements of the 1933 Act and the applicable rules and regulations of the
SEC thereunder (except that such counsel need express no opinion as to financial
statements contained therein); (4) to the best of the knowledge of such counsel
neither the registration statement nor any amendment nor supplement thereto
contains any untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading (except that such counsel need express no opinion as to financial
statements contained therein); (5) the description in the registration statement
or any amendment or supplement thereto of legal and governmental proceedings and
contracts are accurate and fairly present the information required to be shown;
and (6) such counsel does not know of any legal or governmental proceedings,
pending or threatened, required to be described in the registration statement or
any amendment or supplement thereto which are not described as required nor of
any contracts or documents or instruments of the character required to be
described in the registration statement or amendment or supplement thereto or to
be filed as exhibits to the registration statement, which are not described or
filed as required; and (b) letters, dated such respective dates, from the
independent certified public accountants of the Company, addressed to the
underwriters, if any, and to Investor making such request, covering such matters
as such underwriters and Investor may reasonably request, in which letters such
accountants shall state (without limiting the generality of the foregoing) that
they are independent certified public accountants within the meaning of the 1933
Act and that in the opinion of such accountants the financial statements and
other financial data of the Company included in the registration statement or
any amendment or supplement thereto comply in all material respects with the
applicable accounting requirements of the 1933 Act
 
4.4 Cooperation with Company. Investor will cooperate with the Company in all
respects in connection with this Article 4, including timely supplying all
information reasonably requested by the Company (which shall include all
information regarding the Investor and proposed manner of sale of the Shares
required to be disclosed in the Registration Statement) and executing and
returning all documents reasonably requested in connection with the registration
and sale of the Shares and entering into and performing its obligations under
any underwriting agreement, if the offering is an underwritten offering, in
usual and customary form, with the managing underwriter or underwriters of such
underwritten offering
 
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4.5 Termination of Registration Rights. The Company's obligation under Article 4
to register the Shares held by Investor shall terminate upon the earlier of (i)
the date that all of the Shares have been sold pursuant to the Registration
Statement, (ii) the date the Investor receives an opinion of counsel to the
Company, which opinion shall be reasonably acceptable to the Investor, that the
Shares may be sold under the provisions of Rule 144 without limitation as to
volume, (iii) the date when all Shares have been otherwise transferred to
persons who may trade such Shares without restriction under the 1933 Act, and
the Company has delivered a new certificate or other evidence of ownership for
such securities not bearing a restrictive legend, or (iv) the date when all
Shares may be sold without any time, volume or manner limitations pursuant to
Rule 144(k) or any similar provision then in effect under the 1933 Act in the
opinion of counsel to the Company, which counsel shall be reasonably acceptable
to the Investor.
 
4.6 Indemnification. The Company agrees to indemnify and hold harmless the
Investor against any and all losses, claims, damages, liabilities and expenses,
which Investor may suffer arising out of any untrue statement of a material fact
in a Registration Statement filed in connection with the registration rights
granted by this Article 4, or arising out of any omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading; provided, however, that the Company will not be liable to the
extent that such losses, claims, damages, liabilities or expenses arise out of
any untrue statement or omission which has been made therein or omitted
therefrom in reliance upon information relating to the Investor furnished in
writing to the Company by the Investor for use in connection therewith.
 
4.7 Fees and Commissions. All underwriting and/or brokerage discounts, fees and
commissions in respect of the registration of the Shares under this Article 4
and applicable transfer taxes payable upon sale of the Shares, and any counsel
fees or disbursements for counsel for Investor and out-of-pocket expenses of
Investor in connection with the registration of Shares under this Article 4
shall be paid and borne by Investor.
 
4.8 Registration Rights of Transferees. The registration rights granted to
Investor pursuant to this Article 4 shall also be for the benefit of, and
enforceable by, any subsequent holder of the Shares, whether or not any express
assignment of such rights to any such subsequent holder is made, so long as such
subsequent holder acquires at least fifteen percent (15%) of the Shares then
outstanding.
 
5. Conditions to Obligations of the Company. The obligations of the Company
under this Agreement are subject to satisfaction of the following conditions at
or prior to the Closing, any of which may be waived by the Company:
 
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5.1 Representations and Warranties Correct. All of the representations and
warranties of Investor contained in this Agreement shall be true and correct in
all material respects as of the Closing with the same effect as if made on the
date of Closing.
 
5.2 Performance of Covenants and Agreements. All of the covenants and agreements
of Investor contained in this Agreement and required to be performed on or
before the date of Closing shall have been performed in all material respects to
the reasonable satisfaction of the Company.
 
5.3 Legal Action.
 
(a)  There shall not have been instituted any material legal proceeding seeking
to prohibit the consumma-tion of the transactions contemplated by this
Agreement.
 
(b)  None of the parties hereto shall be prohibited in any order, writ,
injunction or decree of any governmental body of competent jurisdiction from
consummating the transactions contemplated by this Agreement, and no material
action or proceeding shall then be pending which questions the validity of this
Agreement, any of the transactions contemplated hereby or any action which has
been taken by any of the parties in connection herewith or in connection with
any of the transactions contemplated hereby.
 
6. Conditions to Obligations of Investor. The obligations of Investor under this
Agreement are subject to satisfaction of the following conditions at or prior to
the Closing, any of which may be waived by Investor.
 
6.1 Representations and Warranties Correct. All of the representations and
warranties of the Company contained in this Agreement shall be true and correct
in all material respects as of the Closing with the same effect as if made on
the date of Closing.
 
6.2 Legal Action.
 
(a)  There shall not have been instituted or threatened any legal proceedings
seeking to prohibit the consummation of the transactions contemplated by this
Agreement, or to obtain damages from Investor with respect thereto.
 
(b)  None of the parties hereto shall be prohibited by any order, writ,
injunction or decree of any governmental body of competent jurisdiction from
consummating the transactions contemplated by this Agreement, and no action or
proceeding shall then be pending which questions the validity of this Agreement,
any of the transactions contemplated hereby or any action which has been taken
by any of the parties in connection herewith or in connection with any of the
transactions contemplated hereby.
 
7. Legends. The certificates evidencing any of the Shares shall be endorsed with
the legend set forth below, and Investor covenants that Investor shall not
transfer the shares represented by any such certificate without complying with
the restrictions on transfer described in the legend endorsed on such
certificate:
 
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THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED WITH THE UNITED STATES
SECURITIES AND EXCHANGE COMMISSION UNDER THE U.S. SECURITIES ACT OF 1933, AS
AMENDED, (THE “1933 ACT”) OR THE SECURITIES COMMISSION OF ANY STATE UNDER ANY
STATE SECURITIES LAW. THEY WERE OFFERED PURSUANT TO AN EXEMPTION FROM
REGISTRATION PURSUANT TO SECTION 4(2) OF THE 1933 ACT. THE SHARES MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED UNLESS THE SHARES ARE REGISTERED UNDER
THE 1933 ACT AND APPLICABLE STATE SECURITIES LAWS, OR AN OPINION OF COUNSEL IS
OBTAINED WHICH IS REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH OFFERS, SALES
AND TRANSFERS MAY BE MADE PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
 
8. Miscellaneous.
 
8.1 Notices. All notices or other communications given or made hereunder shall
be in writing and shall be deemed delivered personally to the party being given
notice or by facsimile, overnight courier service or by registered or certified
mail, return receipt requested, postage prepaid if to Investor at its address
set forth herein or if to the Company at 2415 East Camelback Road, Suite 700,
Phoenix, Arizona 85016 or at such other address as may have been furnished by
the Company to Investor.
 
8.2 Construction. Notwithstanding the place where this Agreement may be executed
by any of the parties hereto, the parties expressly agree that all terms and
provisions hereof shall be construed in accordance with and governed by the laws
of the State of Arizona without giving effect to principles of conflicts of law.
 
8.3 Entire Agreement; Amendments and Waiver. This Agreement and the License
Agreement set forth the entire understanding of the parties with respect to the
transactions contemplated hereby, and neither party shall be bound by nor deemed
to have made any representations and/or warranties except those contained herein
or therein or incorporated herein or therein by reference. The provisions of
this Agreement may be amended and the Company may take any action herein
prohibited, or omit to perform any act herein required to be performed by it,
only if the Company has obtained the written consent of Investor.
 
8.4 Successors and Assigns. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective heirs, estate, successors and assigns of the parties. Nothing in
this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.
 
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8.5 Nominees for Beneficial Owners. In the event that any Shares are held by a
nominee for the beneficial owner thereof, the beneficial owner thereof may, at
its election, be treated as the Investor for purposes of any request or other
action by the Investor or pursuant to this Agreement or any determination of any
number or percentage of shares of Shares held by the Investor contemplated by
this Agreement. If the beneficial owner of any Shares so elects, the Company may
require assurances reasonably satisfactory to it of such owner’s beneficial
ownership of such Shares.
 
8.6 Headings. The terms used in this Agreement shall be deemed to include the
masculine and the feminine in the singular and the plural as the context
requires. The headings in this Agreement are for reference purposes only and
shall not be deemed to have any substantive effect.
 
8.7 Survival of Representations and Warranties. All representations and
warranties contained herein will survive the execution and delivery of this
Agreement and delivery of and payment for the Shares regardless of any
investigation made by or on behalf of the parties.
 
8.8 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
 
8.9 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.
 

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IN WITNESS WHEREOF, the parties hereby have executed this Agreement as of the
date indicated above.
 

NOSTRUM PHARMACEUTICALS, INC.     203 Somerset Court     Princeton, New Jersey
08540           /S/ NIRMAL MULYE, Ph.D.     By: Nirmal Mulye, Ph.D.     Its:
President           BIONUTRICS, INC.           /S/ RONALD H. LANE, PhD.     By:
Ronald H. Lane, Ph.D.     Its: President    

 
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