Document:

Filed by Filing Services Canada Inc. 403 717-3898

Thank you once again for requesting information and for your interest in Micron Enviro Systems, Inc.  (Symbol: MSEV-OTCBB). There are many exciting things happening with the company and when you factor in the current price of oil and gas, along with our major new oil discovery, we merit your attention. 

We are an emerging junior oil and gas company that is focused on high reward, low risk oil and gas exploration and production in North America. Our goal is to become a mid-range oil and gas producer. We have working interests in multiple projects in Alberta, one in Saskatchewan, and three separate projects in Texas. We currently earn oil and gas revenue from sixteen independent sources located on four separate fields, two of which are located in Texas and two are in Canada. 

We are extremely pleased to announce that we have been informed that the Enchant Well in Alberta has been put on line.  This well is currently flowing and due to our substantial 50% working interest, this well will increase our daily oil and gas revenue.  There are plans being devised to fully exploit this field in the near future.

One current drill program, the Martex Prospect, is located in Jack and Palo Pinto Counties, Texas. We now have five oil and gas discoveries on this prospect.  One well, the Ima #2 flowed as high as 252 barrels of oil and 701 thousand cubic feet ("mcf") of gas. Another well, the Henderson #3, flowed at a rate as high as 300 mcf per day without having to be fraced.  The Wimberley #3 well was put on line at 125 mcf.  We have announced two more wells, the Wimberley #5 and Wimberley #7 which have been put on line for sales, making the success rate on this prospect five for five so far. There are three more wells yet to be completed on this prospect and all costs for these wells have been paid.  The first of these three wells is scheduled to be fraced on March 18, 2005.  

Another multi-well project in Texas is the Green Ranch Prospect. This is a proposed 15 well program, at this time we have one well on line for sales.  This well tested with rates as high as 1.5 million cubic feet of gas per day and 77 barrels of oil per day.

We have a working interest in the Manahuilla Creek Prospect in Goliad County, Texas. An estimated 7,000 foot test well will be located on approximately 1,265 continuous acres of oil and gas leases covering the expanded Yegua trend. The Middle Eocene Sands of the expanded Yegua trend of the onshore Gulf Coast basin have been a prolific over pressured gas-condensate producer. Total gas production to date exceeds 800 billion cubic feet with an estimated trend recovery close to 2 trillion cubic feet of gas. This well is scheduled to be fraced in the second quarter of 2005.

Another multi-well drill program is the Kerrobert Prospect located in Saskatchewan, Canada. This is a proposed 50 well oil program. There have been 9 wells successfully drilled out of 9 on this prospect. We have the right to participate in the remaining 41 wells. Flow rates were as high as 84 barrels of oil a day per well. The oil is comparable with West Texas No. 1.  The experience by other oil companies in the area suggests an approximate 15 year life for the shallow oil wells.

We recently announced an agreement to participate on a new gas prospect in Alberta, Canada, named the Redwater Prospect.  The prospect calls for one initial well, with the potential to drill multiple wells if the first well is successful.  The formation of primary interest on this property is the Viking Sands, which is gas productive throughout the immediate area.  Recently, the Viking zones have been tested and produced gas in a number of wells in the immediate are of the prospect.  According to geological reports, drill stem tests have resulted in flows over 12,000,000 feet of gas per day.  This prospect is expected to commence operations in the second quarter of 2005.

All our financials statements, working interests and previous news releases can be found at the SEC website.

We are also currently conducting due diligence on multiple, large potential oil and/or gas projects located in Canada and Texas.

We have a market capitalization of just over $3 million and currently have 16 independent sources of oil and gas revenue from four separate oil and gas fields. When you consider that oil and gas prices are currently trading near historic highs, this could bode well for our future growth.  We have fully met all our cash obligations at this time on our on-going drill programs. With the current projects we have and the projects that we are conducting due diligence on, we are poised to capture significant interest within the North American oil and gas industry.

Please feel free to call anytime.  Thank you for your time and consideration.

info@micronenviro.com

Phone 604-646-6903

Fax 604-689-1733

www.micronenviro.comTECHNOLOGY
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. 

“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);
      

 

2

	 	
      (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.

3

“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.

 

4

 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”).

 

5

(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.

 

6

(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.

7

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.

 

8

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.

9

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;

 

10

 

 

	 	
      (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. 

11

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.

12

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

 

13

(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.

14

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.

 

15

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:

16

(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:

17

 

 

	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.

18

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. 

19

(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

 

20

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.

 

21

 (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.

 

22

(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. 

 

23

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. 

 

24

 

	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:  	 

 

 

25

 

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.

 

26

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.

 

27

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.

 

28

 

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.

 

29

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.

 

30

(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.

 

31

(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.

 

32

 

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;

 

33

(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

 

34

(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

 

35

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:

 

36

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:

 

37

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.

 

38

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.

 

39

 

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	 	 

 

40

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