SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 1O-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the fiscal year ended December 31, 1997
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the transition period from __________ to ____________
Commission file number: 0-21489
INTERNATIONAL DISPENSING CORPORATION
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(Name of Small Business Issuer in Its Charter)
Delaware 13-3856324
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(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification No.)
2500 Westchester Avenue, Suite 304, Purchase, New York 10577
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(Address or Principal Executive Offices) (Zip Code)
(914) 251-0336
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(Issuer's Telephone Number, Including Area Code)
Securities registered under Section l2(b) of the Exchange Act: None
Securities registered under Section l2(g) of the Exchange Act:
Common Stock, $.001 par value per share
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(Title of Class)
Class A Redeemable Warrants
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(Title of Class)
Units (consisting of two shares of Common Stock and two Class A Warrants)
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(Title of Class)
Check whether the registrant: (1) filed all reports required to be filed by
Section 13 or l5(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [X]
The registrant did not have any revenues for the fiscal year ended December
31, 1997.
The aggregate market value of the registrant's voting stock held by
non-affiliates computed by reference to the average bid and asked price of such
stock as of March 20, 1998 as reported on the National Association of Securities
Dealers OTC Bulletin Board was approximately $8,238,049. (Aggregate market value
has been estimated solely for the purposes of this report. For the purpose of
this report it has been assumed that all officers and directors of the
registrant are affiliates of the registrant. The statements made herein shall
not be construed as an admission for determining the affiliate status of any
person.)
APPLICABLE ONLY TO CORPORATE REGISTRANTS
There were 9,566,668 shares of Common Stock outstanding as of March 27,
1998.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
Documents Incorporated by Reference: None
<PAGE>
Information contained or incorporated by reference in this report contains
"forward-looking statements" which can be identified by the use of
forward-looking terminology such as "believes," "expects," "may," "will,"
"should" or "anticipates" or the negative thereof or other variations thereon or
comparable terminology, or by discussions of strategy. See, e.g., "Management's
Discussion and Analysis or Plan of Operations" and "Description of
Business-Strategic Focus." No assurance can be given that the future results
covered by the forward-looking statements will be achieved. The following
matters include cautionary statements identifying important factors with respect
to such forward-looking statements, including certain risks and uncertainties,
that could cause actual results to vary materially from the future results
covered in such forward-looking statements. Other factors could also cause
actual results to vary materially from the future results covered in such
forward-looking statements.
PART I
ITEM 1. Description of Business.
General Description of Business
International Dispensing Corporation (the "Company") is the exclusive
worldwide sublicensee within a field of use encompassing the food and beverage
industries (as broadly defined) of certain proprietary and patented delivery and
dispensing technologies for maintaining the sterility, purity, freshness and
integrity of flowable products throughout the period of time in which they are
to be consumed (the "Technologies"). The Technologies consist of barrier
oriented, closed delivery and dispensing systems (the "Systems") composed of:
(i) self-adjusting reservoir bodies, (ii) patented, barrier capable,
unidirectional flow valves (the "Valve Assemblies"), and (iii) as required,
mechanisms to activate and facilitate the product delivery and flow functions
(the "Pump Assemblies"). The self-adjusting reservoir body of a System is
designed to shrink in proportion to the amount of the product being dispensed
through the Valve Assembly. The Valve Assemblies are designed to dispense a
product without letting either air or contaminants flow back into the internal
reservoir in which the remaining product is held. The Company believes that by
maintaining the purity of the product that remains in the container, the Systems
will provide higher levels of freshness for significantly longer periods of time
and, if preservatives are eliminated, the level of purity, of a wide array of
packaged flowable products.
Under an Amended and Restated License Agreement with an effective date of
October 10, 1995 (the "License Agreement") between the Company and ReSeal
International Corporation, a Florida corporation ("RIC"), which is the exclusive
worldwide licensee of the Technologies for all uses, the Company has been
granted the right to make, use, lease or distribute food and beverage dispensing
products utilizing the Technologies (the "License"). Since obtaining the
License, the Company has focused its activities upon the commercialization of
the Technologies. The Company is working to develop applications of the
Technologies within a number of potential markets, including but not limited to
the following: (i) beverages, which include milk/cream, coffee, tea (hot and
cold), hot chocolate, juices, sweeteners, baby formula, baby food (in puree
form), wines and water; (ii) foods, which include soups, liquid eggs, liquid
butter, sauces, yogurt, melted cheese (nachos), baby foods and hot toppings in
liquid form; and (iii) condiments, which include ketchup, barbecue sauce,
mayonnaise, salad dressings, oils and mustard.
The Company was incorporated under the laws of the State of Delaware in
October 1995 under the name of ReSeal Food Dispensing Systems, Inc. and changed
its name to International Dispensing Corporation in September 1996. Since its
inception, the Company has sought to form strategic alliances or direct
license/supply agreements with major food and beverage companies currently
generating substantial revenues from their existing markets. The Company intends
that these relationships will include co-development of new products in tandem
with the production of new dispensing systems which incorporate the
Technologies. Upon successful consummation of a strategic alliance or direct
license/supply relationship, of which there can be no assurance, the customer or
strategic partner will utilize the Technologies in conjunction with products
that have an existing market share, as well as the Systems associated with the
new products.
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The License Agreement
Pursuant to the License Agreement, the Company paid to RIC an aggregate of
$4,000,000 and issued to RIC an aggregate of 2,900,000 shares of the Company's
Common Stock, par value $.001 per share ("Common Stock"), in exchange for an
exclusive worldwide royalty-free license to (i) directly or indirectly make (or
subcontract to make), use, sell and otherwise commercially exploit the
Technologies, solely in the Field of Use (as defined below) and (ii) grant
sublicenses to affiliated and non-affiliated third parties, solely in the Field
of Use, provided, however, that the Company shall not be permitted to sublicense
the right to manufacture the Valve Assemblies. "Field of Use" means the use of
the Technologies to make, use, lease, sell or distribute (a) any food or
beverage dispensers or containers that embody the Technologies or the
manufacture, use, lease, sale or distribution of which uses the Technologies
(collectively, the "Product") intended for use in an industrial or commercial
place of business in the preparation of food or beverage at such place of
business, (b) any food or beverage Product intended for use in an industrial or
commercial place of business by a customer purchasing food or beverage at such
place of business for consumption on or off the premises of such place of
business, or (c) any food or beverage Product intended to be sold to or by food
or beverage wholesale price discounters, retailers and similar establishments
that sell food or beverage to consumers.
Under the License Agreement, the Company is primarily responsible for all
research and development activities necessary to exploit fully the commercial
possibilities of the Technologies. The research and development activities shall
include testing of proposed products and ongoing technical support for the
modification, improvement, enhancement, development or variation of existing
products and the development of new products. RIC is responsible for causing
ReSeal International Limited Partnership ("RILP"), RIC's licensor and parent
company, to manage all intellectual property associated with the Technologies,
including patents and trademarks, to maximize its commercial potential. This
obligation includes the prosecution of all patent and trademark applications,
subject to the Company's approval of budgets and expenditures in advance, and,
in the sole discretion of RIC (or upon receipt by RIC of the Company's
commitment to pay 100% of the related reasonable costs and expenses), all suits
against third parties for infringement of patents or trademarks. If RIC or RILP
is unwilling or unable to undertake such patent obligations, then the Company is
authorized to undertake such obligations on its own behalf.
The License Agreement may not be assigned by either party thereto without
the express written consent of the other party, except that the Company may
sublicense applications of the Technologies within the Field of Use at its own
discretion and may subcontract, but not sublicense, for the manufacturing of
components incorporating the Technologies in the Field of Use.
Strategic Focus
The Company has focused and will continue to focus its marketing activities
on the application of the Technologies to the food and beverage industries,
specifically the food service and consumer products markets.
First, the Company will continue to market the Technologies to the food
service industry, which purveys bulk foods and beverages such as milk, juices,
wine and condiments to restaurants, fast food chains and institutions. In this
industry, there is a trend, away from the traditional large tins for condiments
and the cartons for milk and juice, to one, two and three gallon plastic bags
that are shipped in corrugated boxes to the food outlet, where they are inserted
into a permanent counter-dispenser-unit for customer and/or kitchen food
preparation use. The Company intends to market the Valve Assemblies and the
Systems for application to the products mentioned above, on a worldwide basis.
The Company will attempt to form strategic alliances with companies that already
are marketing their products in a bag-in-a-box. The Company believes that the
Systems are ideal for the bag-in-a-box format since the bag is
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already a collapsible container and thus only minimum alterations in the
production line, if any, will need to be made to incorporate it into the
Systems.
In accordance with its business strategy, on October 1, 1997 the Company
entered into a Joint Systems Development Agreement with Packaging Systems,
L.L.C. ("Packaging"), which has certain rights to bag-in-a-box manufacturing
technology and bag-in-a-box integration technology. Pursuant to the agreement
the parties will attempt to develop for the United States market a variety of
bag-in-a-box delivery systems with unique valve/pump technology for the food and
beverage industries.
Second, the Company will continue to market the Technologies to companies
that sell food and beverage products directly to the consumer through
supermarkets, grocery stores and other retail outlets. For example, sellers of
wines and fruit juices in the bag-in-a-box format can utilize the Technologies
since these products tend to spoil quickly after being opened and exposed to air
and airborne contaminants, which is what the Systems are designed to prevent.
Also, the Systems would enable many consumer products to be marketed in larger,
economy sizes, which would otherwise spoil. While in many cases the bag-in-a-box
format would be used, the Systems can be used with a variety of tubes and
pouches, and thereby are applicable to condiments, salad dressings and baby
foods. The Company believes that the Systems also have the potential to be used
with concentrated liquid products (i.e., teas, coffees, juices, etc.) packaged
without the use of preservatives.
In addition, in many countries around the world, the milk market is
dominated by ultra high temperature ("UHT") milk, which if unopened will remain
fresh without refrigeration for up to one year. Once opened, UHT milk must be
refrigerated and has the same shelf-life as regular pasteurized milk, a number
of days. The Company believes that with the Systems, various bag-in-a-box sizes
of UHT milk can be sold, dispensed from, and still remain fresh, without
refrigeration, for a longer period of time.
The Company has engaged in preliminary marketing discussions with a number
of potential strategic alliance partners, licensees and end users of the
Technologies and has had preliminary discussions with a substantial dairy
company which supplies milk products in a food service capacity to the
restaurant industry, including fast food franchise operations and commercial
establishments throughout Canada. Management has also had discussions regarding
the use of Technologies in connection with a bag-in-a-box creamer for offices,
fast food outlets and coffee bars, as well as possible applications for yogurt
and the baby food industry. Based upon discussions that have taken place between
the Company and potential users, the Company intends to focus its initial
marketing efforts in the areas of wine, milk and condiments for the food service
industry.
Management anticipates that the Technologies will prove capable of
accomplishing these objectives at commercially viable cost structures. There can
be no assurance, however, that any agreement will be entered into between the
Company and any products provider, or that if such agreement is reached that the
products marketed utilizing the Technologies will ultimately obtain commercial
success.
To oversee product development, the Company has engaged the services of
Nologies, Inc. ("Nologies"), a product development engineering firm, to create
bag-in-a-box prototype systems for application in the wine, milk, condiment and
baby-bottle design industries (see "Research and Development"). These prototype
systems, which embody the fundamental approach to the Systems, have been
prepared in advanced prototypical form. The Company has solicited bid quotations
from three different suppliers for the fabrication of multi-cavity molds to be
used in the manufacture of the Valve Assemblies. Simultaneously, bid quotations
for the manufacture of a single cavity mold are being solicited. The single
cavity mold will allow for the manufacture of prototype tooling and refinement
for large production runs.
The Company plans to continue to enter into strategic alliances, supply
agreements, direct license agreements and joint ventures with leaders in the
food and beverage industry. Under such
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agreements, the Company anticipates that under some circumstances the
sublicensee will pay a license fee of a negotiated sum to the Company upon
entering into the sublicense. Thereafter, the Company would receive income from
sale of Valve Assemblies or other components of the Systems and, under certain
circumstances, royalties and profits from the sale of products employing the
Technologies. The Company may provide the relevant Technologies to its customers
and, with input from the customers, assist in transferring and adapting the
Technologies to specific product requirements. As some customers may choose to
take a more active role in adapting the Technologies to their specific product,
a portion of development and marketing costs and a portion of the costs of
adapting the Technologies to a particular application may be borne by the
sublicensees or supply partners. The particular relationship between the
customer and the Company will vary depending on each party's resources and
needs. Therefore, a variety of structuring and cost sharing alternatives may be
used by the Company in commercializing the Technologies.
All component parts of the Systems must be made of materials which are
compatible with the specific contents or formulation to be dispensed. Systems
must be adapted to meet the specific requirements of the particular product and
to the desired type of delivery to allow the dispensing of a flowable product in
accordance with such customer's needs. In light of the potentially undesirable
health effects of preservatives in certain products, other market factors and
the adaptability of the Technologies in the dispensing of non-preserved products
in a variety of applications, the Company believes that significant marketing
opportunities, such as that formed with Packaging, exist in the United States
and around the world for the establishment of strategic alliances involving
Systems for various applications and product categories. The Company will
endeavor to integrate other existing technology with Systems which can be
commercialized, marketed and manufactured in a wide variety of applications,
worldwide. The Company anticipates that, in many cases, the Technologies will
facilitate positive changes in the nature of product formulation, quality and
efficacy.
Competition and Opportunities in the Packaging Industry
Most competing dispensing technology is designed to inhibit the
contamination of various products, minimally. When a can, bottle or other
dispenser, such as a bag-in-a-box, is initially used and a portion of its
contents is dispensed, the remaining contents become contaminated as air is
drawn into the vessel to fill the space created by the displaced contents or the
dispensing mechanisms are simply not capable of functioning as an adequate
barrier. Air transports various types of contaminants which can lead to the
degradation of a product, as well as basic oxidation processes initiated or
accelerated by the air itself. In effect, a System dispenses in an outward
direction as product leaves the package, but the System seals itself closed when
the dispensing is completed. Thus, Systems are designed to maintain a product's
purity throughout the time it is being consumed by virtue of being closed and by
providing appropriate mechanical barriers to contamination while the product is
being dispensed. The Company believes that the Technologies provide the only
commercially viable closed delivery and dispensing system, which allows for
continuous delivery of a product in the desired metered or measured amounts
while maintaining the product's purity.
The Company's competitors are the manufacturers of all existing packages
and bottles that contain flowable food and beverage products. Typically, large
sizes of beverages and other flowable products, such as condiments, certain
fruit juices and wine, will remain fresh without refrigeration for a relatively
long period of time before being opened; however, once the container is opened,
the contents will spoil within a short period of time. In the case of containers
with general purpose valves, where the product is dispensed by applying pressure
with a finger, the product flows out at the same time air enters the container,
thereby accelerating the spoilage of the remainder of the product, and the
repeated use of fingers directly adjacent to the spout also can lead to
unsanitary conditions. There are several faucet-type valves that eliminate some
of the sanitary problems described above, but they are costly and not widely
used. Also, there are soda-fountain-type pumps utilized for various condiments
employing stainless steel or plastic containers into which the condiments are
poured and which may encounter spillage onto the
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dispensing mechanism during the course of a day and require frequent servicing.
To be sanitary, these pumps must be disassembled, cleaned and sterilized daily.
The Systems offer a distinct advantage over each of these other systems
because each System is designed to prohibit the flow of air and contaminants
back into it when product is being dispensed. It is anticipated that a System
will require no cleanup, since the product will always be contained in a bag or
a pouch and the entire system will be disposable and recyclable. A
self-contained system provides considerably more product purity and cleanliness.
The Systems are designed to keep products fresher and purer while being
consumed, potentially with less preservatives and sometimes without
refrigeration. In instances where available on premises, additional precise
temperature control in conjunction with the Systems will provide vendors with
the ability to serve and sell perishable products at their optimum temperature.
Patents, Trademarks and Other Intellectual Property
Under the License Agreement, RIC has granted to the Company a license to
use certain patents relating to the Systems and their component parts which RIC
in turn licenses from RILP, the owner of such patents. The License Agreement
includes a license to the Company to use certain trademarks RIC licensed from
RILP, which the Company believes to be immaterial. These patents encompass a
broad range of delivery and dispensing technologies and product applications for
food and beverages. The following sets forth a summary of certain key patents.
1. A valve assembly for a container permitting the easy dispensing of fluid
while preventing backflow of contaminants through the valve assembly into
the container holding the remaining fluid.
U.S. Patent No. Re. 34,243 (Expiration Date: July 11, 2006)
2. An enclosing sleeve for a one-way valve presses an elastomeric sheath
against the valve body to provide a seal between the sheath and the valve
body. In addition, the sleeve can form a closure over the outlet end of the
valve body protecting it from contamination or contact with contaminating
surfaces.
U.S. Patent No. 5,092,855 (Expiration Date: March 3, 2009)
3. An elastomeric sleeve stretched over the valve body with ring-shaped
enlargements on each end forming "molded o-rings" in tight sealed contact
to the valve body.
U.S. Patent No. 5,305,783 (Expiration Date: April 26, 2011)
4. A fluid dispensing unit includes a collapsible reservoir with a one-way
valve at its outlet for directing flow into a metering chamber. The
metering chamber has an outlet connected to another one-way valve which
prevents backflow of contaminants into the container after fluid is
dispensed. Both the collapsible reservoir and the metering chamber can be
completely collapsed to ensure that the dispensing unit is completely
empty.
U.S. Patent No. 5,279,447 (Expiration Date: January 18,
2011)
5. A disc shaped valve body enclosed circumferentially by an elastomeric
membrane. Fluid flows through separate passageways between the
circumferential edge of the valve body and the elastomeric membrane.
U.S. Patent No. 5,279,330 (Expiration Date: January 18,
2011)
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6. A one-way valve assembly with a cover member which encloses an expandable
elastomer sleeve and valve body and which presses the sleeve into
fluid-tight contact with the valve body at two axially spaced locations.
U.S. Patent No. 5,305,786 (Expiration Date: April 26, 2011)
7. A dispenser with two separate collapsible chambers, each holding a
component or substance to be mixed before use with at least one component
being in a flowable condition. A one-way valve permits flow of the flowable
component into the other chamber and prevents any backflow, thereby
providing the dispensing of a mixture having a short use lifetime where the
components of the mixture are capable of being stored separately for an
extended period.
U.S. Patent No. 5,353,961 (Expiration Date: October 11,
2011)
8. An embodiment that replaces the tubular or disc shaped valve core with a
flat valve platform more appropriate for higher speed and lower cost
manufacturing. The elastomeric sheath can be executed as a flat sheet from
roll stock. A housing component protects the sheath while providing the
necessary sealing and resistance needed for successful functioning.
U.S. Patent No. 5,613,517 (Expiration Date: March 25, 2014)
9. A one-way vacuum actuated sheath valve with a flat elastic membrane held in
tension over a convex valve platform under a conforming cover with inlet
and outlet channels. The cover includes an expansion area on the cover
surface adjacent to the membrane and between the inlet and outlet. Liquid
flows through the valve when it is drawn by a vacuum. The vacuum operates
on both the flow path exit, but also above the membrane, lifting it to open
the flow path. Discontinuance of the vacuum allows the membrane to seal the
inlet and outlet, thus again preventing any flow between them.
U.S. Patent No. 5,673,251 (Expiration Date: August 24, 2014)
Agreement with Well Men
On December 23, 1997, the Company entered into an agreement with Well Men
Industrial Company Limited, a Hong Kong registered corporation ("Well Men"),
pursuant to which Well Men granted to the Company an exclusive right to market
and sell in China certain products, including a water heater for showers, a
water pitcher and a filter for such water pitcher (collectively, the "Well Men
Products") manufactured by Well Men. Well Men also assigned to the Company for
the purpose of commercializing such Well Men Products, all of Well Men's patents
and patent applications relating to such Well Men products. Under the agreement
the Company has rights of first refusal to sell Well Men Products in any
territory outside of China and to market other products developed by Well Men in
China. The agreement is for an initial term of ten (10) years and shall continue
for successive periods of ten years unless terminated by either party by written
notice prior to the end of the existing term.
Pursuant to the agreement, the Company established a representative office
in Guangzhou, China, through which consultation and market research is being
provided. The Company has also established, with Well Men's assistance, a
Chinese licensed and registered corporation, which will exclusively sell,
promote, market, advertise and solicit orders for Well Men Products in China.
The Company is solely responsible for all costs and expenses of the Chinese
corporation until such time as it is profitable. However, the Company does not
have any equity interest in such corporation.
Although there is high demand for water heaters in China, the Company
believes that there are currently only the following three competing water
heating products in China: (i) water tanks,
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which are expensive and non-energy efficient, (ii) electric outlet heaters,
which are dangerous and do not sell well and (iii) natural gas, which is
expensive and involves complex installation procedures. The Company believes
that all of the competing products have numerous disadvantages, which renders
the Well Men water heater, with its simple design, its inexpensive manufacturing
costs and its safety features, more attractive.
The Company believes that its agreement with Well Men provides it with a
cost efficient means through which to enter into the Chinese market. The Company
believes that significant marketing opportunities exist in China and around the
world for the establishment of strategic alliances involving Well Men's
technology for various applications and product categories. The Company will
endeavor to integrate other existing technology with Well Men's technology,
including the Technologies licensed to the Company under the License, which can
be commercialized, marketed and manufactured in a wide variety of applications,
worldwide.
The Company believes that its relationship with Well Men will further its
overall business purpose of commercializing proprietary technologies that are
economically viable, commercially profitable and environmentally friendly.
Research and Development
The Company spent approximately $116,295 on research and development
activities during Fiscal 1997 and $39,386 during the fiscal year ended December
31, 1996.
The Company has entered into an agreement, dated March 5, 1996, with
Nologies, under which Nologies will assist in (i) the directing and managing of
product and technology development, (ii) licensing and strategic alliance
pursuits, and (iii) other related services that the Company may request from
time to time, in the area of food and beverage dispensing and delivery systems.
The term of such agreement has been extended through February 28, 1999 and may
be terminated upon 30 days' written notice. The Company shall pay Nologies
$8,000 per month and reimburse it for reasonable documented business expenses.
Pursuant to the terms of such agreement, Nologies agrees (a) not to disclose, at
any time, any confidential business or technical information or trade secrets
acquired during its association with the Company and which relates to the
present or contemplated business of the Company, whether or not conceived of,
discovered, developed or prepared by Nologies, (b) during the term of the
agreement and for a one year period thereafter, it will not represent, consult,
serve, or be employed by any competing enterprise, and (c) never to divulge any
confidential information to any third party.
Employees
As of March 23, 1998, the Company employed four people on a full-time
basis, two as executive officers, one as an office manager and one as the
manager of its representative office in China.
ITEM 2. Description of Property.
The Company currently subleases, from a non-affiliated third party,
approximately 1,800 square feet of space for its principal executive office at
2500 Westchester Avenue, Purchase, New York 10577. The monthly rental on this
property is approximately $2,786. Management believes that this facility is
adequate for the Company's intended activities in the foreseeable future. The
sublease terminates on February 29, 2000. If this sublease is not renewed, the
Company does not anticipate any significant problems in finding suitable
alternative space.
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ITEM 3. Legal Proceedings.
None.
ITEM 4. Submission of Matters to a Vote of Security Holders.
During the fourth quarter of the Company's fiscal year ended December
31, 1997 ("Fiscal 1997"), no matter was submitted to a vote of securityholders
of the Company.
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PART II
ITEM 5. Market for the Company's Common Equity and Related Stockholder Matters.
Since the consummation of the Company's initial public offering on October
23, 1996 (the "IPO"), the Company's Common Stock has been traded and quoted
under the symbol IDND on the OTC Bulletin Board. The Company's Class A Warrants
and IPO Units are also traded and quoted on the OTC Bulletin Board under the
symbols IDNDW and IDNDU, respectively. Each IPO Unit consists of two shares of
Common Stock and two Class A Warrants. Each of the 3,241,668 outstanding Class A
Warrants entitles the holder thereof to purchase one share of Common Stock at
$7.00 per share (subject to adjustment) during the four year period commencing
October 3, 1997. The following table sets forth the high and low bid prices for
the Common Stock, Class A Warrants and IPO Units, as quoted on the OTC Bulletin
Board, for the periods indicated. Quotations are interdealer prices without
retail markup, markdown or commission, and may not necessarily represent actual
transactions.
Common Stock Class A Warrants IPO Units
------------ ---------------- ---------
High Low High Low High Low
---- --- ---- --- ---- ---
Quarter ended
December 31, 1996 ...... $11.25 $0.30 $5.25 $0.01 $30.50 $0.625
Quarter ended
March 31, 1997 ......... $ 0.69 $0.32 $0.125 $0.01 $ 1.45 $0.8125
Quarter ended
June 30, 1997 .......... $ 0.49 $0.34 $0.06 $0.03 $ 1.25 $0.8125
Quarter ended
September 30, 1997 ..... $ 0.39 $0.23 $0.03 $0.001 $ .98 $0.55
Quarter ended
December 31, 1997 ...... $ 1.22 $0.245 $0.625 $0.001 $ 5.375 $0.375
Quarter ending
March 31, 1998 ......... $ 2.75 $0.245 $0.625 $0.001 $ 6.375 $0.375
(through March 17, 1998)
As of March 23, 1998, the Company had 53 holders of record of its Common
Stock. The Company believes that there are a significant number of shares of the
Company's Common Stock in street name and, consequently, is unable to determine
the actual number of beneficial owners.
Since its inception, the Company has not paid any cash dividends on its
Common Stock. The Company intends to retain future earnings, if any, that may be
generated from the Company's operations to help finance the operations and
expansion of the Company and accordingly does not plan, for the reasonably
foreseeable future, to pay cash dividends to holders of the Common Stock. Any
decisions as to the future payment of dividends will depend on the earnings and
financial position of the Company and such other factors as the Company's Board
of Directors deem relevant.
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Recent Sales of Unregistered Securities
In October 1995, in connection with a settlement of actions and claims
against certain affiliates of RIC and RIC's officers and directors, the Company
issued (i) 2,900,000 shares of Common Stock to RIC as partial compensation under
the License Agreement, (ii) an aggregate of 1,500,000 shares of Common Stock
(the "Investor Shares") to certain investors in RILP, including Gregory Abbott
(422,000 shares) and George Kriste (130,000 shares), and (iii) an aggregate of
450,000 shares of Common Stock to certain individuals, including Joseph Koster
(58,000 shares), David Brenman (53,000 shares) and Jon Silverman (50,000 shares)
for services rendered.
Between October 1995 and April 1996, the Company (i) sold an aggregate of
525,000 shares of Common Stock to the certain non-affiliates of the Company (the
"Bridge Securityholders") for a total of $1,050,000 (the "Private Placement")
and (ii) entered into a loan with the Bridge Securityholders in the aggregate
amount of $1,050,000 (the "Bridge Loan"). Each Bridge Securityholder
participated in both the Private Placement and the Bridge Loan. The Bridge Loan
bore interest at the rate of eight (8%) percent per annum and was completely
repaid out of the proceeds received by the Company from the IPO. As further
consideration for the Bridge Loan, the Bridge Securityholders acquired 787,500
Units (the "Bridge Units") which are comprised of 1,575,000 shares of Common
Stock and 1,575,000 Class A Warrants. The Class A Warrants included in the
Bridge Units are identical to the Class A Warrants included in the Units issued
in the IPO (the "IPO Units," and together with the Bridge Units, the "Units").
Each Unit consists of two shares of Common Stock and two redeemable Class A
purchase warrants (the "Class A Warrants"). Each Class A Warrant entitles the
holder to purchase one share of Common Stock for $7.00 during the four year
period commencing October 3, 1997. The Class A Warrants are redeemable by the
Company at $.05 per warrant at any time after October 3, 1998, if certain
conditions are met.
The securities issued in connection with the Private Placement and the
Bridge Loan were issued pursuant to Section 4(2) of the Securities Act. The
Company will not receive any of the proceeds from the resale of the Bridge
Securities. Should the Class A Warrants offered by the Bridge Securityholders be
exercised, of which there is no assurance, the Company will receive the proceeds
therefrom aggregating up to $11,025,000.
In November and December 1995, the Company issued convertible notes in the
principal amounts of $100,000 (the "November Note") and $50,000 (the "December
Note"), respectively. The November Note and the December Note were issued
pursuant to Section 4(2) of the Securities Act. The notes bore interest at an
annual rate of 8%. The November Note came due on April 15, 1996 and the December
Note came due on December 20, 1996. Each of the notes was convertible into an
aggregate of 1,200,000 shares of Common Stock. On June 28, 1996, in accordance
with an agreement with the Company, the holder of the December Note agreed to
transfer such note to the Company for cancellation in return for the Company
agreeing to pay it $300,000. The amounts owed by the Company to the holders of
the convertible notes were paid out of the proceeds of the IPO.
ITEM 6. Management's Discussion and Analysis or Plan of Operations.
The following discussion and analysis should be read in conjunction with
the Company's financial statements, beginning on page F-1, included elsewhere in
this report.
10
<PAGE>
The Company was incorporated in Delaware in October 1995 under the name
ReSeal Food Dispensing Systems, Inc. and changed its name to International
Dispensing Corporation on September 12, 1996. The Company was formed primarily
for the purpose of commercializing and marketing the Technologies licensed from
RIC, which technologies consist of the Systems composed of: (i) self-adjusting
reservoir bodies, (ii) the Valve Assemblies, and (iii) as required, the Pump
Assemblies. When utilized in dispensing flowable food and beverage products like
milk, juice, wine, etc., Systems are designed to maintain the sterility, purity
and freshness of such products throughout its Use Life, with the possibility of
eliminating or reducing the need for adding preservatives to the product to keep
it fresh and/or refrigeration throughout its Use Life. The self-adjusting
reservoir body of a System is designed to shrink in proportion to the amount of
the product being dispensed through the Valve Assembly. The Valve Assemblies are
designed to dispense a product without letting either air or contaminants flow
back into the internal reservoir in which the remaining product is held. The
Company believes that by maintaining the purity of the product that remains in
the container, the Systems will provide higher levels of freshness for
significantly longer periods of time and, if preservatives are eliminated, the
level of purity, of a wide array of packaged flowable products.
The Company is focusing its marketing activities on the application of the
licensed technologies in the Field of Use as set forth in the License Agreement,
which encompasses the food and beverage industries as broadly defined. Within
such categories, the applications of the licensed technologies can be divided
into a number of potential markets, including but not limited to the following:
(a) beverages, which include milk/cream, coffee, tea (hot and cold), hot
chocolate, juices, sweeteners, baby formula, baby food (in puree form), wines
and water; (b) foods, which include soups, liquid eggs, liquid butter, sauces,
yogurt, melted cheese (nachos), baby foods and hot toppings in liquid form; and
(c) condiments, which include ketchup, barbecue sauce, mayonnaise, salad
dressings, oils and mustard.
The Company is undertaking the formation of strategic alliances or direct
license/supply agreements with major food and beverage companies, as well as
applicable equipment/bag-in-box manufacturers, currently generating substantial
revenues from their existing markets. The Company further intends that these
relationships will include co-development of new products in tandem with the
production of new dispensing systems which incorporate the Technologies. Upon
successful consummation of a strategic alliance or direct license/supply
relationship, of which there can be no assurance, the customer or strategic
partner will utilize the Technologies in conjunction with products that have an
existing market share, as well as the System associated with the introduction of
new products.
The Company has entered into a strategic alliance with Packaging on October
1, 1997. The resulting products of this Joint Systems Development Agreement will
be a variety of bag-in-a-box delivery systems with unique valve/pump technology
for the food and beverage industries. These new systems, when developed, will be
marketed throughout the United States. The Company believes that the development
of these new systems, utilizing the combined technologies, will open new markets
for bag-in-a-box applications.
The Company entered into an agreement with Well Men on December 23, 1997 to
commercialize certain proprietary and patented technologies relating to a shower
water heater and a filter for a water pitcher developed by Well Men (the "Well
Men Technologies"). The Company, without charge, has been assigned the rights,
title and interest in and to the Well Man Technologies, in addition to being
granted a right of first refusal with respect to future products developed by
Well Men. The Well Men Technologies have applications in the consumer durable
products market. The Company has opened a Representative Office in Guangzhou,
the People's Republic of China to promote the sales of these products, and to
establish the name of the Company. Operations commenced in March 1998.
11
<PAGE>
The Company is subject to a number of risks including the Company's lack of
prior operating history. The Company is also subject to the availability of
sufficient financing to meet its future cash requirements and the uncertainty of
future product development and regulatory approval and market acceptance of
existing and proposed products. In the event of bankruptcy of RIC, the status of
the continuing obligations of the various parties to and under the License
Agreement is unclear since a court in a bankruptcy proceeding may not enforce
such continuing obligations. Additionally, other risk factors such as loss of
key personnel, lack of manufacturing capabilities, difficulty in establishing
new intellectual property rights and preserving and enforcing existing
intellectual property rights as well as product obsolescence due to the
development of competing technologies could impact the future results of the
Company.
Results of Operations
The Company has not generated any revenues to date and must be considered
to be in the development stage. The activities of the Company since inception in
October 1995 have been primarily directed at formational activities, including
the completion of initial capitalization.
In addition, the Company has engaged in on-going marketing discussions with
a number of potential strategic alliance partners, licensees and end users of
the Technologies. In this regard, discussions have been conducted with major
companies in Canada, Europe, Australia and the United States to explore
opportunities in the product categories.
During 1995, two convertible promissory notes were issued for $100,000 and
$50,000, respectively. On April 15, 1996, the $100,000 note came due and was
paid by the Company. On June 28, 1996, in accordance with an agreement with the
Company, the holder of the $50,000 note, which would have come due on December
20, 1996 and contained the right to convert into 1.2 million shares of common
stock, agreed to transfer such note to the Company for cancellation in return
for the Company agreeing to pay it $300,000. The amounts owed by the Company to
the holders of the notes were paid out of the proceeds of the IPO. The Company
recorded an extraordinary loss on retirement of debt of $250,000 for the year
ended December 31, 1996.
From October 10, 1995 (inception) to December 31, 1997, the Company has
incurred a net loss from operations of approximately $2,447,570.
Financial Condition
As reflected in the financial statements, the Company has experienced
continuing net losses and negative cash flows from operations through December
31, 1997. The Company's continuing existence is dependent on its ability to
achieve and maintain profitable operations. The Company continues to be in the
development stage and does not foresee operating revenue until the end of the
first quarter of the fiscal year ending December 31, 1998. As of December 31,
1997, the Company had liquid assets of approximately $3,138,000.
In a private placement concluded in February 1996, the Company obtained
aggregate capital of $2,250,000 through the issuance by the Company of
convertible notes, options and the sale of Common Stock.
In October 1996, the Company sold, in the IPO, 833,334 IPO Units, each IPO
Unit consisting of two shares of Common Stock and two redeemable Class A
purchase warrants for $12.00 per IPO Unit. Each warrant entitles the holder to
purchase one share of Common Stock for $7.00 during the four year
12
<PAGE>
period commencing October 3, 1997. The warrants are redeemable by the Company at
$.05 per warrant any time after October 3, 1998, if certain conditions are met.
The net proceeds, which the Company received from the IPO, amounted to
approximately $8.8 million.
The Company does not foresee needing to raise additional funds in the next
12 months.
ITEM 7. Financial Statements.
See the financial statements and notes related thereto, beginning on page
F-1, following this page.
13
<PAGE>
INTERNATIONAL DISPENSING CORPORATION
(a development stage company)
INDEX TO FINANCIAL STATEMENTS
Page
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ................................... F-2
FINANCIAL STATEMENTS:
Balance Sheet as of December 31, 1997 ...................................... F-3
Statements of Operations for the Years Ended December 31, 1997 and ..... F-4
1996, and the Period from Inception (October 10, 1995) Through
December 31, 1997
Statements of Cash Flows for the Years Ended December 31, 1997 and ..... F-5
1996, and the Period from Inception (October 10, 1995) Through
December 31, 1997
Statements of Changes in Stockholders' Equity (Deficiency) for the ..... F-6
Period from Inception (October 10, 1995) Through December 31, 1995 and
the Years Ended December 31, 1997 and 1996
NOTES TO FINANCIAL STATEMENTS .............................................. F-7
F-1
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Stockholders of
International Dispensing Corporation:
We have audited the accompanying balance sheet of International Dispensing
Corporation (a Delaware corporation in the development stage) as of December 31,
1997, and the related statements of operations and cash flows for the years
ended December 31, 1997 and 1996, and for the period from inception (October 10,
1995) to December 31, 1997 and the statements of stockholders' equity
(deficiency) for the period from inception (October 10, 1995) through December
31, 1995 and for the years ended December 31, 1997 and 1996. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of International Dispensing
Corporation as of December 31, 1997, and the results of its operations and its
cash flows for the years ended December 31, 1997 and 1996, and for the period
from inception (October 10, 1995) to December 31, 1997, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
New York, New York
March 18, 1998
F-2
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL DISPENSING CORPORATION
(a development stage company)
BALANCE SHEET
DECEMBER 31, 1997
ASSETS
- ------
<S> <C>
CURRENT ASSETS:
Cash and cash equivalents ..................................................... $ 3,138,204
Prepaid expenses .............................................................. 46,333
Total current assets ..................................................... 3,184,537
FIXED ASSETS:
Leasehold improvements ........................................................ 7,270
Office equipment .............................................................. 4,350
Automobile .................................................................... 21,919
Accumulated depreciation and amortization ..................................... (6,558)
-----------
Net fixed assets ......................................................... 26,981
OTHER ASSETS ........................................................................... 57,786
Total assets .................................................................. $ 3,269,304
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIENCY)
- -------------------------------------------------
CURRENT LIABILITIES:
Accounts payable .............................................................. $ 12,255
Accrued expenses .............................................................. 49,766
-----------
Total current liabilities ................................................ 62,021
Total liabilities ........................................................ 62,021
-----------
COMMITMENTS AND CONTINGENCIES (Note 11)
STOCKHOLDERS' EQUITY (DEFICIENCY):
Preferred stock, $.001 par value; 2,000,000 shares authorized, no shares issued
or outstanding .............................................................. --
Common stock, $.001 par value; 40,000,000 shares authorized, 9,566,668
shares issued and outstanding ............................................... 9,567
Additional paid-in capital .................................................... 9,895,286
Deficit accumulated during the development stage .............................. (6,697,570)
-----------
Total stockholders' equity ............................................... 3,207,283
-----------
Total liabilities and stockholders' equity ............................... $ 3,269,304
===========
The accompanying notes are an integral part of this balance sheet.
</TABLE>
F-3
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL DISPENSING CORPORATION
(a development stage company)
STATEMENTS OF OPERATIONS
Cumulative
from Inception
(October 10, 1995)
Through
Years Ended December 31 December 31,
1997 1996 1997
----------- ----------- -----------
REVENUES $ -- $ -- $ --
<S> <C> <C> <C>
COSTS AND EXPENSES:
General and administrative ............................... 1,328,411 1,039,071 2,612,250
Depreciation and amortization ............................ 4,516 1,162 6,560
----------- ----------- -----------
Total costs and expenses .......................... 1,332,927 1,040,233 2,618,810
----------- ----------- -----------
Loss from operations .............................. (1,332,927) (1,040,233) (2,618,810)
INTEREST EXPENSE ........................................... -- (62,520) (66,665)
INTEREST INCOME ............................................ 187,836 50,069 237,905
Net loss before
extraordinary loss ................................ (1,145,091) (1,052,684) (2,447,570)
EXTRAORDINARY LOSS ON
RETIREMENT OF DEBT ....................................... -- (250,000) (250,000)
----------- ----------- -----------
Net loss .......................................... $(1,145,091) $(1,302,684) $(2,697,570)
=========== =========== ===========
BASIC LOSS PER SHARE BEFORE
EXTRAORDINARY ITEM ......................................... $ (.12) $ (.15)
BASIC EXTRAORDINARY LOSS
PER SHARE .................................................. $ -- $ (.03)
----------- -----------
BASIC LOSS PER SHARE ....................................... $ (.12) $ (.18)
=========== ===========
BASIC WEIGHTED AVERAGE
SHARES OUTSTANDING ......................................... 9,566,668 7,161,004
=========== ===========
DILUTED LOSS PER SHARE
BEFORE EXTRAORDINARY
ITEM ..................................................... $ (.12) $ (.15)
DILUTED EXTRAORDINARY
LOSS PER SHARE ........................................... $ -- $ (.03)
----------- -----------
DILUTED LOSS PER SHARE ..................................... $ (.12) $ (.18)
=========== ===========
DILUTED WEIGHTED AVERAGE ................................... 9,566,668 7,161,004
SHARES OUTSTANDING =========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
F-4
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL DISPENSING CORPORATION
(a development stage company)
STATEMENTS OF CASH FLOWS
Cumulative
from Inception
(October 10, 1995)
Through
Years Ended December 31 December 31,
1997 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss .......................................................... $(1,145,091) $(1,302,684) $(2,697,570)
Adjustments to reconcile net loss to net cash used
in operating activities --
Depreciation and amortization .............................. 4,514 1,162 6,558
Noncash compensation ....................................... -- -- 76,238
Loss on retirement of debt ................................. -- 250,000 250,000
Changes in operating assets and liabilities --
Decrease (increase) in prepaid expenses .................. 49,500 (95,833) (46,333)
Decrease (increase) in other assets ...................... 37,975 (81,084) (51,986)
(Decrease) increase in accrued expenses .................. (67,993) 71,953 49,766
Increase in accounts payable ............................. 12,255 -- 12,255
----------- ----------- -----------
Net cash used in operating activities ................. (1,108,840) (1,156,486) (2,401,072)
----------- ----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets .......................................... (21,919) (2,795) (33,539)
Purchase of license ............................................... -- (3,649,739) (4,000,000)
----------- ----------- -----------
Net cash used in investing activities ...................... (21,919) (3,652,534) (4,033,539)
----------- ----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from private placement ................................... -- 1,750,000 2,100,000
Proceeds from issuance of convertible debt ........................ -- -- 150,000
Repayment of promissory notes ..................................... -- (300,000) (300,000)
Repayment of bridge loans ......................................... -- (1,050,000) (1,050,000)
Repayment of convertible debt ..................................... -- (100,000) (100,000)
Proceeds from initial public offering ............................. -- 8,772,815 8,772,815
----------- ----------- -----------
Net cash provided by financing
activities ............................................... -- 9,072,815 9,572,815
----------- ----------- -----------
Net (decrease) increase in cash and
cash equivalents ......................................... (1,130,759) 4,263,795 3,138,204
CASH AND CASH EQUIVALENTS, beginning of
year .............................................................. 4,268,963 5,168 --
----------- ----------- -----------
CASH AND CASH EQUIVALENTS, end of year .............................. $ 3,138,204 $ 4,268,963 $ 3,138,204
=========== =========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid for interest ..................................... $ -- $ 66,665 $ 66,665
NONCASH INVESTING AND FINANCING
ACTIVITIES:
Issuance of common stock ................................... $ -- $ -- $ 5,800
Purchase of license from affiliate ......................... -- -- $ 4,000,000
The accompanying notes are an integral part of these statements.
</TABLE>
F-5
<PAGE>
<TABLE>
<CAPTION>
INTERNATIONAL DISPENSING CORPORATION
(a development stage company)
STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIENCY)
FOR THE PERIOD FROM OCTOBER 10, 1995 (INCEPTION)
THROUGH DECEMBER 31, 1995 AND THE
YEARS ENDED DECEMBER 31, 1997 AND 1996
Deficit
Accumulated Total
Additional During the Stockholders'
Common Stock Paid in Development Equity
Shares Amount Capital Stage (Deficit)
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE, October 10, 1995
(inception) .............................. -- $ -- $ -- $ -- $ --
Issuance of common stock
pursuant to License
Agreement .............................. 2,900,000 2,900 -- -- 2,900
Issuance of common stock
pursuant to Settlement
Agreement .............................. 1,950,000 1,950 -- -- 1,950
Issuance of common stock to
management ............................. 950,000 950 76,238 -- 77,188
Purchase of License from
Affiliate .............................. -- -- -- (4,000,000) (4,000,000)
Issuance of common stock in
private placement ...................... 87,500 88 43,662 -- 43,750
Issuance of common stock
rights in private placement ............ -- -- 131,250 -- 131,250
Net loss ................................. -- -- -- (249,795) (249,795)
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1995 ................. 5,887,500 5,888 251,150 (4,249,795) (3,992,757)
Issuance of common stock in
private placement ...................... 437,500 437 218,313 -- 218,750
Issuance of common stock
rights in private placement ............ -- -- 656,250 -- 656,250
Issuance of common stock to
bridge lenders ......................... 1,575,000 1,575 (1,575) -- --
Issuance of common stock in
public offering, net of
issuance costs of $1,227,193 ........... 1,666,668 1,667 8,771,148 -- 8,772,815
Net loss ................................. -- -- -- (1,302,684) (1,302,684)
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1996 ................. 9,566,668 9,567 9,895,286 (5,552,479) 4,352,374
Net loss ................................. -- -- -- (1,145,091) (1,145,091)
----------- ----------- ----------- ----------- -----------
BALANCE, December 31, 1997 ................. 9,566,668 $ 9,567 $ 9,895,286 $(6,697,570) $ 3,207,283
=========== =========== =========== =========== ===========
The accompanying notes are an integral part of these statements.
</TABLE>
F-6
<PAGE>
INTERNATIONAL DISPENSING CORPORATION
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
1. THE COMPANY AND ORGANIZATION
International Dispensing Corporation, formerly known as ReSeal Food Dispensing
Systems, Inc. (the "Company"), was incorporated in the State of Delaware in
October 1995 and is in the development stage. The Company was formed primarily
for the purpose of commercializing and marketing certain proprietary and
patented delivery and dispensing technologies (the "Technologies") licensed from
ReSeal International Corporation ("RIC"). The Technologies are designed to
dispense a flowable product while maintaining the product's sterility, purity
and freshness without employing preservatives.
The Company is subject to a number of risks including the Company's lack of
prior operating history. The Company is also subject to the availability of
sufficient financing to meet its future cash requirements and the uncertainty of
future product development and regulatory approval and market acceptance of
existing and proposed products. In the event of bankruptcy of RIC, the status of
the continuing obligations of the various parties to and under the License
Agreement (Note 4) is unclear since a court in a bankruptcy proceeding may not
enforce such continuing obligations. Additionally, other risk factors such as
loss of key personnel, lack of manufacturing capabilities, difficulty in
establishing new intellectual property rights and preserving and enforcing
existing intellectual property rights as well as product obsolescence due to the
development of competing technologies could impact the future results of the
Company.
2. SIGNIFICANT ACCOUNTING POLICIES
Cash and Cash Equivalents
Cash and cash equivalents consist of cash in banks, as well as highly liquid
investments with original maturities of less than three months.
Fixed Assets
Furniture and equipment are recorded at cost and are depreciated on a
straight-line basis over their estimated useful lives, generally five years.
Leasehold improvements are recorded at cost and amortized over the term of the
lease or life of the asset, whichever is shorter.
Patents
Costs to develop patents are expensed when incurred.
Income Taxes
Income taxes are accounted for in accordance with Statement of Financial
Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Under this
method, deferred income taxes are determined based on differences between the
tax bases of assets and liabilities and their financial reporting amounts at
each year-end and are measured based on enacted tax rates and laws that will be
in effect when the differences are expected to reverse. Valuation allowances are
established, when necessary, to reduce deferred tax assets to the amount
expected to be realized.
F-7
<PAGE>
Net Loss Per Share
Effective for the year ended December 31, 1997, the Company adopted SFAS No.
128, "Earnings per Share." The adoption of SFAS No. 128 requires the
presentation of Basic Earnings per Share and Diluted Earnings per Share. Basic
Earnings per Share is based on the average number of common shares outstanding
during the year. Diluted Earnings per Share is based on the average number of
common shares outstanding during the year plus the common share equivalents
related to outstanding stock options and deferred contingent common stock
awards. There were no common share equivalents outstanding at December 31, 1997
and 1996, that would have a dilutive effect on earnings for those respective
years. As required by SFAS No. 128, the 1996 net loss per share amounts have
been restated to comply with the standard.
Use of Estimates
The presentation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the amounts reported in the financial statements and accompanying notes.
Although these estimates are based on management's knowledge of current events
and actions it may undertake in the future, they may ultimately differ from
actual results.
Recently Issued Accounting Standards
In June 1997, SFAS No. 130, "Reporting Comprehensive Income," and SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information," were
issued and are effective for periods beginning after December 15, 1997. SFAS No.
130 establishes standards for reporting comprehensive income and its components.
SFAS No. 131 establishes standards for reporting financial and descriptive
information regarding an enterprise's operating segments. These standards
increase financial reporting disclosures and will have no impact on the
Company's financial position or results of operations.
3. INITIAL PUBLIC OFFERING
In October 1996, the Company sold, in an initial public offering, 833,334 units
(the "Units"), each Unit consisting of two shares of Common Stock and two
redeemable Class A purchase warrants for $12.00 per Unit. Each warrant entitles
the holder to purchase one share of the Company's Common Stock for $7.00
commencing October 3, 1997 and expiring October 3, 2001. The warrants are
redeemable by the Company at $.05 per warrant any time after October 3, 1998, if
certain conditions are met. The net proceeds which the Company received from the
offering amounted to approximately $8,800,000.
4. LICENSE AGREEMENT
In October 1995, the Company entered into a License Agreement (the "Agreement")
with RIC, which was amended on June 17, 1996, pursuant to which the Company
obtained the right to commercialize and market the Technologies to third parties
for its implementation in the food and beverage industries. The Technologies are
licensed by RIC from its parent, Reseal International Limited Partnership
("RILP"). The Agreement is royalty free and allows the Company to grant
sublicenses to third parties. Pursuant to the Agreement, the Company issued
2,900,000 shares of its common stock to RIC and paid $750,000 upon the
completion of a private placement (Note 5) and the remaining balance of
$3,250,000 upon the completion of the initial public offering (Note 3). The cash
paid to RIC and the common stock issued for this acquisition were charged
directly to stockholders' equity and therefore not reflected as an asset on the
Company's Balance Sheet. The Agreement terminates at the end of the
Technologies' useful economic life.
F-8
<PAGE>
5. PRIVATE PLACEMENT
The Company was involved in a private placement ("Bridge Financing"). The Bridge
Financing consisted of promissory notes, common shares, and rights ("Bridge
Options") to acquire Units identical in form to the IPO Units. The promissory
notes bore interest at 8% per annum and were due and paid upon completion of the
IPO. Upon completion of the Bridge Financing, the Company had received an
aggregate of $2,100,000 in consideration for $1,050,000 in promissory notes,
525,000 common shares and rights to obtain 787,500 Units. In August 1996, the
Company amended the Bridge Financing agreements so that the 787,500 Units
underlying the Bridge Options were deemed outstanding. As part of the initial
public offering, the 787,500 Units issued in the Bridge Financing, which are
identical to those Units issued in the Company's IPO, were registered.
6. SETTLEMENT AGREEMENT
In October 1995, in connection with a settlement of actions and claims against
certain affiliates of RIC, the licensor of the Technologies, the Company agreed
to issue (i) 2,900,000 shares of common stock to RIC as partial compensation
under the License Agreement, (ii) an aggregate of 1,500,000 shares of common
stock (the "Investor Shares") to certain investors in RILP, and (iii) an
aggregate of 450,000 shares of common stock to certain individuals for services
rendered equal to the par value of such shares. Of the 1,500,000 shares issued,
552,000 were issued to individuals who are now members of the board of directors
and of the 450,000 shares issued, 161,000 were issued to current members of
management and the board of directors.
Pursuant to such settlement, the holders of the Investor Shares may require the
Company to file a Registration Statement under the Securities Act with respect
to 25% of such shares of common stock, commencing one year from the effective
date of the Company's IPO (Note 3), subject to certain conditions and
limitations. Further, if the Company proposes to register any shares of common
stock under the Securities Act other than pursuant to an initial public offering
or the previous sentence, then the holders of the Investor Shares are entitled
to include an additional 25% of their shares of common stock in such
registration.
7. CONVERTIBLE PROMISSORY NOTES
During 1995, two convertible promissory notes were issued for $100,000 and
$50,000 (the "Convertible Notes") and were due on April 15, 1996 and December
20, 1996, respectively. These notes bore interest at 8% and each was convertible
at any time prior to the maturity date of the notes into 1,200,000 common
shares, subject to adjustments. The $100,000 note (the "Portenoy Note") would
have converted at a price of $.084 per common share, subject to adjustments, and
the $50,000 note (the "ATG Note") would have converted at a price of $.042 per
common share, subject to adjustments.
On April 15, 1996, the Portenoy Note came due and was paid by the Company. On
June 28, 1996, in accordance with an agreement with the Company, the holder of
the ATG Note, which would have come due on December 20, 1996 and contained the
right to convert into 1.2 million shares of common stock, agreed to transfer
such note to the Company for cancellation in return for the Company agreeing to
pay it $300,000. The amounts owed by the Company to the holders of the
Convertible Notes were paid out of the proceeds of the IPO. The Company has
recorded an extraordinary loss on retirement of debt of $250,000 for the year
ended December 31, 1996.
8. MANAGEMENT SHARES
In 1995, the Company issued an aggregate of 950,000 shares to management at par
as compensation for services rendered in incorporating the Company. Such shares
were issued at fair market value of the
F-9
<PAGE>
Company's common stock, which was determined based upon the fair market value of
the private placement shares (Note 5) and the Convertible Notes. The statement
of operations for the period from inception through December 31, 1997 reflects
approximately $76,000 of compensation expense related to such shares.
9. RELATED PARTY TRANSACTIONS
Until June 1997, the Company shared office space with certain affiliated
companies, including RIC and RILP. The Company also paid certain operating
expenses, including compensation of key personnel, on behalf of RIC and RILP.
The Company was reimbursed for these expenses as an offset against the liability
related to the Agreement (Note 4) in the Company's balance sheet as of December
31, 1996. Beginning in May 1997, the Company began paying the entire cost of
obtaining and maintaining patents, a cost which was to be shared equally by the
Company and RIC, according to the Agreement. Until the Company is reimbursed by
RIC for 100% of these costs, RIC cannot utilize the patents for any purpose. If
RIC does not reimburse the Company within one year from the date each payment
was made, RIC must negotiate a fee with the Company for the use of such patents
for any purpose.
As of December 31, 1997, the Company has a receivable due from RIC related to
operating expenses, rent expense and patent costs in the amount of $111,199,
which has been fully reserved due to the inability of RIC to reimburse the
Company in the foreseeable future.
For the years ended December 31, 1997 and 1996, the Company paid consulting fees
to members of management in the aggregate amount of $73,000 and $209,000,
respectively.
10. INCOME TAXES
As a result of losses incurred since inception, there is no provision for income
taxes in the accompanying financial statements. As of December 31, 1997, the
Company has net deferred tax assets of approximately $1.1 million. The Company
has established a full valuation allowance against those net deferred tax assets
as realizability of such assets is predicated upon the Company achieving
profitability. In addition, the use of net operating loss carryforwards may be
limited as a result of ownership changes resulting from share issuances.
11. COMMITMENTS AND CONTINGENCIES
(a) Lease
The Company leases office space under a noncancelable operating lease,
expiring on February 29, 2000. Rental expense for the years ended December 31,
1997 and 1996 was $64,928 and $90,157, respectively. Future minimum lease
payments under this lease agreement are $63,510.
(b) Employment Agreements
The Company entered into an employment agreement with Jon Silverman,
President and CEO, dated January 17, 1997, for the period from October 3, 1996
(the effective date of the Company's registration statement) to December 31,
1999. Pursuant to such employment agreement, Mr. Silverman receives a monthly
salary of $15,000. In addition, the Company is obligated to pay the premium on
his $1,000,000 life insurance policy, to which Mr. Silverman will designate the
beneficiary. He is also entitled to customary benefits and perquisites. In the
case that Mr. Silverman's employment is terminated by the Company without cause
or for disability, or if Mr. Silverman leaves the employ of the Company for
"good reason" (defined in the agreement to include, among other things, a change
in control of the Company or the removal of Mr. Silverman from his position as
the Chairman of the Board, President and Chief Executive Officer), then Mr.
Silverman shall also be entitled to receive in cash within 10 days after such
F-10
<PAGE>
termination an amount equal to the greater of (i) one year's basic salary at the
highest rate paid to him during the term of his employment under the agreement
or (ii) the basic salary that would have been paid to him had the term of
employment ended on December 31, 1999 calculated at the highest rate paid to him
during the term of his employment under the agreement.
(c) Consulting Agreement
On March 5, 1996, the Company entered into an agreement with Nologies, Inc.
("Nologies") under which Nologies will assist in the directing and managing of
product and technology development, licensing and strategic alliance pursuits
and other related services in the areas of food and beverage dispensing systems.
The term of such agreement extends to February 28, 1999. The Company pays
Nologies $8,000 per month plus expenses.
12. SETTLEMENT OF LAWSUIT
In May 1996, in connection with the settlement of a lawsuit brought by Banco
Inversion, S.A. and Administratadora General de Patrimonios, S.A. (collectively,
"Banco") against certain affiliates of RIC, RIC entered into an agreement
pursuant to which it agreed, among other things, (i) to transfer an aggregate of
300,000 of its shares of common stock (the "Settlement Shares") to Banco, (ii)
to pay Banco $50,000 at the closing of such settlement and $150,000 out of the
licensing fees RIC receives from the proceeds of the IPO and (iii) to exchange
mutual releases with the parties of such lawsuit.
The number of Settlement Shares, subject to certain antidilution adjustments,
may be increased up to 600,000 shares in the event that 30 months after the
effective date of the registration statement the market value of the 300,000
Settlement Shares is less than $2,800,000.
The Company has granted to the holders of such Settlement Shares, the right to
register such shares along with shares registered by the Company in a public
offering, whether on behalf of the Company or other holders of common stock,
subject to customary market factor limitations. Such registration rights
terminate upon the earlier of (i) the date that all Settlement Shares have been
either registered or sold, or (ii) the date that all such shares may be sold
pursuant to Rule 144(k) under the Securities Act.
13. BUSINESS DEVELOPMENTS
In October 1997, a strategic alliance was formed with Packaging Systems, L.L.C.
(PSI), the parent company of Rapak, Inc. The resulting products of this Joint
Systems Development Agreement will be a variety of Bag-in-Box delivery systems
with unique Valve/Pump Technology for the food and beverage industries.
These systems will be marketed throughout the United States.
On December 23, 1997, the Company entered into an agreement with Well Men
Industrial Company Limited, a Hong Kong registered corporation ("Well Men"),
pursuant to which Well Men granted to the Company an exclusive right to market
and sell in China certain Well Men products. Well Men also assigned to the
Company for the purpose of commercializing such Well Men products, all of Well
Men's patents and patent applications relating to such Well Men products. The
agreement is for an initial term of ten years. The Company has opened a
representative office in China to promote the sales of these products and to
establish the name of the Company. Operations commenced in March, 1998. The
Company incurred $125,000 during fiscal 1997 in connection with the start up of
the representative office. These expenses have been included in general and
administrative expenses on the Company's statement of operations for the year
ended December 31, 1997.
F-11
<PAGE>
ITEM 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure.
Not applicable.
PART III
ITEM 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act.
As of March 23, 1998, the executive officers and directors of the
Company are as follows:
Name Age Position(s)
---- --- -----------
Jon D. Silverman 57 Chairman, President, Chief Executive
Officer and Director
Jeffrey D. Lewenthal 54 Chief Financial Officer, Executive Vice
President of Business Development,
Treasurer and Secretary
David W. Brenman 41 Director
George V. Kriste 50 Director
Gregory B. Abbott 47 Director
Jon D. Silverman has served as Chairman, President, Chief Executive Officer
and a director of the Company since November 1996, and prior thereto as a
consultant to the Company since its inception. Since 1980 he has served as the
principal of Tilis Products, Inc., his own specialized international business
consulting, mergers and acquisitions firm (including capital formation) in the
food, beverages and other consumer products and services industries. He has
served on the Board of Trustees of the United Hospital, Port Chester, New York,
for the past 15 years (he is currently an Honorary Trustee) and for a number of
years, prior to May 1995, had served as Vice Chairman thereof; is a director of
Pastificio Gazzola, Mondovi, Italy, a leading pasta exporter; and a past
director of Combined Moretti/Prinz Brau Breweries, a subsidiary of John Labatt,
Ltd.
Jeffrey D. Lewenthal has served as Executive Vice President of Business
Development and Chief Financial Officer of the Company since March 1997 and
Secretary and Treasurer of the Company since June 1997. From March 1996 until
joining the Company in March 1997 he was Vice President/Regional Director for
Westar Linen Services, Inc., a company providing linen services to the hospital
industry. From 1995 to 1996, Mr. Lewenthal was General Manager, Western Region,
for Brink's Incorporated, a company providing security services to financial
institutions. From 1993 to 1995, he was Region Chief Operating Officer for
Loomis Armored, Inc., a security service provider to financial and retail
customers. Prior to that, Mr. Lewenthal held various international senior
executive positions with PepsiCo and the Seven-Up division of Philip Morris.
David W. Brenman has been a director of the Company since its inception,
had served as President of the Company from its inception through November 1996
and Treasurer of the Company from its inception until June 1997. He also served
as a member of the Executive Committee, Chief Financial Officer and Treasurer of
RIC from May 1993 through September 1996 and has been a director of RIC since
May 1993. Mr. Brenman has been a self-employed attorney and financial consultant
since 1988.
14
<PAGE>
George V. Kriste has served as a director of the Company since October
1995. He has been the Chairman and Chief Executive Officer of New Century Media,
a radio station owner, since January 1992.
Gregory B. Abbott has served as a director of the Company since October
1995. Mr. Abbott has been a private investor and a writer for more than five
years.
No family relationship exists between any directors or executive officers
of the Company.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires the Company's directors and executive officers, and
persons who own more than ten (10%) percent of a registered class of the
Company's equity securities, to file with the Securities and Exchange Commission
(the "Commission") initial reports of ownership and reports of changes in
ownership of Common Stock and other equity securities of the Company. Reporting
persons are required by Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file.
To the Company's knowledge, based solely on review of the copies of such
reports furnished to the Company, no persons failed to file, on a timely basis,
reports required by Section 16(a) of the Exchange Act for any transactions
occurring during Fiscal 1997.
ITEM 10. Executive Compensation.
Summary Compensation Table
The following table sets forth for the three (3) fiscal years ended
December 31, 1997, information concerning the compensation paid or accrued to
the Chief Executive Officer of the Company. As of December 31, 1997, there were
no other persons serving as executive officers of the Company whose salary and
bonus for Fiscal 1997 exceeded $100,000.
<TABLE>
<CAPTION>
Annual Compensation Long-Term Compensation
----------------------------------------------- --------------------------------------
Other Annual
Name and Compen- Restricted Securities All Other
Principal Fiscal sation Stock Underlying Compensa-
Position Year Salary($) Bonus($) ($)(1) Awards($) Options(#) tion($)
<S> <C> <C> <C> <C> <C> <C> <C>
Jon Silverman 1997 $187,500 - - - - $4000(2)
Chairman, CEO 1996 $144,000 - - - - -
and President 1995 $ 36,000 - - - - -
<FN>
(1) The aggregate amount of perquisites and other personal benefits paid to
Mr. Silverman did not exceed the lesser of (i) 10% of such officer's
total annual salary and bonus for any given fiscal year and (ii)
$50,000. Thus, such amounts are not reflected in the table.
(2) Represents the premiums paid on a $1,000,000 term life insurance policy
as to which Mr. Silverman may designate the beneficiary.
</FN>
</TABLE>
15
<PAGE>
Employment and Non-Compete Agreements
The Company has entered into an employment agreement with Jon Silverman,
dated as of January 17, 1997, which expires on December 31, 1999. Pursuant to
such agreement, Mr. Silverman receives a base salary of $180,000. In addition,
if Mr. Silverman is insurable, the Company is obligated to pay the premium on a
$1,000,000 term life insurance policy, to which Mr. Silverman will designate the
beneficiary. Under the agreement, Mr. Silverman also is entitled to customary
benefits and perquisites.
Mr. Silverman's employment agreement may be terminated by the Company
sooner than December 31, 1999 in the case of his "disability" or "for cause" (as
such terms are defined in the agreement). If Mr. Silverman's employment is
terminated for any reason he shall receive his basic salary through the
effective date of termination. If his employment is terminated due to his
disability or without cause by the Company or if Mr. Silverman leaves the employ
of the Company for "good reason" (defined in the agreement to include, among
other things, a change in control of the Company or the removal of Mr. Silverman
from his position as the Chairman of the Board, President and Chief Executive
Officer), then Mr. Silverman shall also be entitled to receive in cash within 10
days after such termination an amount equal to the greater of (i) one year's
basic salary at the highest rate paid to him during the term of his employment
under the agreement or (ii) the basic salary that would have been paid to him
had the term of employment ended on December 31, 1999 calculated at the highest
rate paid to him during the term of his employment under the agreement.
Compensation of Directors
Non-employee directors of the Company are reimbursed for reasonable travel
and lodging expenses incurred in attending meetings of the Board of Directors
and any committees on which they may serve. Directors do not presently receive
any fees for attendance or participation at Board or committee meetings.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information known to the Company
regarding beneficial ownership of the Common Stock as of March 23, 1998, for (i)
each person or group that is known by the Company to be a beneficial owner of
more than 5% of the outstanding shares of Common Stock, (ii) the Chief Executive
Officer and each director of the Company, and (iii) all directors and executive
officers of the Company as a group. Except as otherwise indicated, the Company
believes that such beneficial owners, based on information furnished by such
owners, have sole investment and voting power with respect to such shares,
subject to community property laws, where applicable. No directors or officers
own any Class A Warrants or IPO Units, nor, to the knowledge of the Company,
does any person hold more than 5% of such securities.
Name and Address Percent of
Of Beneficial Owner (1) Number of Shares Class (2)(3)
------------------- ---------------- -----
Reseal International Corporation 2,225,000 23.3%
c/o The ReSeal Companies
599 Lexington Avenue, 23rd Floor
New York, New York 10022
16
<PAGE>
Jon Silverman 600,000 6.3%
c/o International Dispensing
Corporation
2500 Westchester Avenue
Suite 304
Purchase, New York 10577
Gregory Abbott 1,000,927 10.5%
1200 Kessler Drive
Aspen, CO 81611
David Brenman 253,000(3) 2.6%
George Kriste 280,000 2.9%
All directors and executive officers 2,133,927(3) 22.3%
as a group (5 persons)
(1) Address provided for beneficial owners of more than 5% of the Common Stock.
(2) For purposes of computing the percentage of outstanding shares of Common
Stock held by each person or group of persons named above, any security
which such person or persons have or have the right to acquire within 60
days is deemed to be outstanding but is not deemed to be outstanding for
the purpose of computing the percentage ownership of any other person.
(3) Includes 200,000 shares of Common Stock owned of record by Venture
Financial Limited Partnership, a limited partnership. David Brenman is the
sole shareholder of Venture Financial, Inc., the General Partner of such
limited partnership.
ITEM 12. Certain Relationships and Related Transactions.
In October 1996, Stratton Oakmont, Inc. ("Stratton Oakmont") acted as the
underwriter of the IPO pursuant to an underwriting agreement with the Company
(the "Underwriting Agreement"). On January 29, 1997, the United States District
Court Judge for the Southern District of New York, entered an order which, inter
alia, appointed Harvey R. Miller, Esq. (the "Trustee") to liquidate the business
of Stratton Oakmont pursuant to the Securities Investor Protection Act of 1970
(the "Liquidation Proceeding"). As part of such Liquidation Proceeding, the
Trustee and the Company entered into a Sale and Assignment Agreement dated as of
November 19, 1997 (the "Sale and Assignment Agreement").
Pursuant to the Sale and Assignment Agreement the Trustee agreed to sell to
the Company or to no more than ten qualified designees of the Company (the
"Designees"), (a) on the closing date an aggregate number of shares of Common
Stock of the Company equal to or greater than 995,705 shares minus (1) 176,778
shares, retained by another person pursuant to a certain settlement agreement
with the Trustee and (2) 200,000 shares and (b) all of the remaining shares of
Common Stock held by the Trustee on or prior to the first business day that is
180 days after the closing date. The Trustee also agreed to assign to the
Company on the closing date all of Stratton Oakmont's right, title and interest
in, to and under the Underwriting Agreement, including, without limitation, (i)
all of its right, title and interest in, to and under its option to purchase up
to an aggregate of 83,333 IPO Units for a purchase price of $.001 per underlying
IPO Unit (the "Underwriter's Purchase Option"), (ii) its rights to enforce an
agreement by certain stockholders not to sell Common Stock for a period of two
years after the effective date of the registration statement relating to the IPO
(the "Effective Date"), and (iii) its rights to enforce the agreement by the
Company not to issue new stock (except in connection with dividends or similar
17
<PAGE>
transactions) for a period of two years after the Effective Date. The
Underwriter's Purchase Option was exercisable for a term of twelve months after
the Effective Date. Pursuant to the Sale and Assignment Agreement, Mr. Jon
Silverman, the Chairman, President and Chief Executive Officer of the Company,
and Messrs. Gregory Abbott and George Kriste, each of whom is a director of the
Company, purchased from the Trustee for $0.60 per share, 100,000, 367,927, and
150,000 shares of Common Stock, respectively. Each of such persons has agreed
not to sell the shares he purchased for a period of two years.
ITEM 13. Exhibits, List and Reports on Form 8-K.
Exhibits
Exhibit No.
3.1 Restated Certificate of Incorporation of the Registrant, as amended
(incorporated herein by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form SB-2 (Registration No. 333-7915) (the
"Form SB-2")).
3.2 Certificate of Amendment to the Certificate of Incorporation
(incorporated herein by reference to Exhibit 3.2 to the Form SB-2).
3.3 By-laws of the Registrant, as amended (incorporated herein by
reference to Exhibit 3.3 to the Form SB-2).
4.1 Specimen Common Stock Certificate (incorporated herein by reference to
Exhibit 4.1 to the Form SB-2).
4.2 Form of Class A Warrant Agreement (incorporated herein by reference to
Exhibit 4.2 to the Form SB-2).
10.1 License Agreement by and between the Registrant and RIC, dated as of
October 10, 1995, as amended (incorporated herein by reference to
Exhibit 10.1 to the Form SB-2).
10.2 Agreement by and between the Registrant and Nologies, dated as of
March 5, 1996 (incorporated herein by reference to Exhibit 10.5 to the
Form SB-2).
10.3 Form of Bridge Loan Agreement and Promissory Note (incorporated herein
by reference to Exhibit 10.3 to the Form SB-2).
10.4 Form of Amendment to Bridge Loan Agreement (incorporated herein by
reference to Exhibit 10.4 to the Form SB-2).
10.5 Settlement Agreement, dated as of October 10, 1995, by and among
Hardee Capital Partners, L.P., Louis Simpson, Gregory Abbott, George
Kriste, David Brenman, Gerald Gottlieb, Marc Gottlieb, Joseph Koster,
Greg Pardes, Linda Poit, ReSeal Food Dispensing Systems, Inc., ReSeal
International Limited Partnership, Technologies & Advancements, Inc.,
ReSeal International Corporation, ReSeal Pharmaceutical Systems, Ltd.,
Milton Stanson, Hilda Brown, Ann Hoopes, Townsend Hoopes, Robin Smith
and Eugene Sumner (incorporated herein by reference to Exhibit 10.6 to
the Form SB-2).
18
<PAGE>
10.6 Amendment to the Agreement by and between the Registrant and Nologies,
Inc., dated January 14, 1998.*
10.7 Employment Agreement, dated as of January 17, 1997, between the
Registrant and Jon Silverman (incorporated herein by reference to
Exhibit 10.9 to the Form 10-K for 1997).
10.8 Registration Rights Agreement dated May 8, 1996 by and between Banco
Inversion, S.A., and the Company.*
10.9 Joint Systems Development Agreement entered into as of October 1,
1997, between the Company and Packaging.*
10.10 Sale and Assignment Agreement dated as of November 19, 1997 between
the Trustee and the Company.*
10.11 Agreement entered into as of December 23, 1997 between the Company and
Well Men.*
10.12 Sublease dated November 5, 1997 between General Motors Corporation and
the Company, together with Consent to Sublease dated as of November
12, 1997 between East Ridge Properties I Corporation and General
Motors Corporation.*
27 Financial Data Schedule*
- ----------------------------
* Filed herewith
Reports on Form 8-K
No Form 8-K was filed by the Company within the fourth quarter of Fiscal
1997.
19
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Dated: March 31, 1998 INTERNATIONAL DISPENSING
CORPORATION
By: /s/ Jon Silverman
-------------------------
Jon Silverman
Chairman, President and Chief
Executive Officer
In accordance with the Exchange Act, this report has been signed below by
the following persons on behalf of the registrant and in the capacities and on
the dates indicated:
Signature Title Date
/s/ Jon Silverman Chairman, President, Chief March 31, 1998
- ---------------------- Executive Officer and Director
Jon Silverman (Principal Executive
Officer)
/s/ Jeffrey Lewenthal Chief Financial March 31, 1998
- ---------------------- Officer, Executive Vice President
Jeffrey Lewenthal of Business Development (Princi-
pal Accounting and Financial Of-
ficer), Treasurer and Secretary
- ---------------------- Director
David Brenman
/s/ Gregory Abbott Director March 31, 1998
- ----------------------
Gregory Abbott
/s/ George Kriste Director March 31, 1998
- ----------------------
George Kriste
20
<PAGE>
INTERNATIONAL DISPENSING CORPORATION
ANNUAL REPORT ON FORM 10-KSB
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
EXHIBITS INDEX
Description of Exhibits
Exhibit No.
3.1 Restated Certificate of Incorporation of the Registrant, as amended
(incorporated herein by reference to Exhibit 3.1 to the Registrant's
Registration Statement on Form SB-2 (Registration No. 333-7915) (the
"Form SB-2")).
3.2 Certificate of Amendment to the Certificate of Incorporation
(incorporated herein by reference to Exhibit 3.2 to the Form SB-2).
3.3 By-laws of the Registrant, as amended (incorporated herein by
reference to Exhibit 3.3 to the Form SB-2).
4.1 Specimen Common Stock Certificate (incorporated herein by reference to
Exhibit 4.1 to the Form SB-2).
4.2 Form of Class A Warrant Agreement (incorporated herein by reference to
Exhibit 4.2 to the Form SB-2).
10.1 License Agreement by and between the Registrant and RIC, dated as of
October 10, 1995, as amended (incorporated herein by reference to
Exhibit 10.1 to the Form SB-2).
10.2 Agreement by and between the Registrant and Nologies, Inc., dated as
of March 5, 1996 (incorporated herein by reference to Exhibit 10.5 to
the Form SB-2).
10.3 Form of Bridge Loan Agreement and Promissory Note (incorporated herein
by reference to Exhibit 10.3 to the Form SB-2).
10.4 Form of Amendment to Bridge Loan Agreement (incorporated herein by
reference to Exhibit 10.4 to the Form SB-2).
10.5 Settlement Agreement, dated as of October 10, 1995, by and among
Hardee Capital Partners, L.P., Louis Simpson, Gregory Abbott, George
Kriste, David Brenman, Gerald Gottlieb, Marc Gottlieb, Joseph Koster,
Greg Pardes, Linda Poit, ReSeal Food Dispensing Systems, Inc., ReSeal
International Limited Partnership, Technologies & Advancements, Inc.,
ReSeal International Corporation, ReSeal Pharmaceutical Systems, Ltd.,
Milton Stanson, Hilda Brown, Ann Hoopes, Townsend Hoopes, Robin Smith
and Eugene Sumner (incorporated herein by reference to Exhibit 10.6 to
the Form SB-2).
21
<PAGE>
10.6 Amendment to the Agreement by and between the Registrant and Nologies,
Inc., dated January 14, 1998.*
10.7 Employment Agreement, dated as of January 17, 1997, between the
Registrant and Jon Silverman (incorporated herein by reference to
Exhibit 10.9 to the Form 10-K for 1997).
10.8 Registration Rights Agreement dated May 8, 1996 by and between Banco
Inversion, S.A., and the Company.*
10.9 Joint Systems Development Agreement entered into as of October 1,
1997, between the Registrant and Packaging Systems, LLC.*
10.10 Sale and Assignment Agreement dated as of November 19, 1997 between
Harvey R. Miller, Esq., as trustee, for the liquidation of Stratton
Oakmont, Inc. and the Registrant.*
10.11 Agreement entered into as of December 23, 1997 between the Company and
Well Men Industrial Company Limited.*
10.12 Sublease dated November 5, 1997 between General Motors Corporation and
the Company, together with Consent to Sublease dated as of November
12, 1997 between East Ridge Properties I Corporation and General
Motors Corporation.*
27 Financial Data Schedule*
- ----------------------------
* Filed herewith
22
Exhibit 10.6
International Dispensing Corporation
2500 Westchester Avenue
Suite 304
Purchase, New York 10577
January 14, 1998
Mr. Michael Handler
President
Nologies, Inc.
P.O. Box 5224
Brookfield, Connecticut 06804
Dear Mr. Handler:
International Dispensing Corporation, the successor of ReSeal Food
Dispensing Systems, Inc., wishes to extend for a twelve (12) month period,
effective March 1, 1998, under the same terms and conditions the Agreement
currently in place between our companies. Said Agreement stipulates that
Nologies, Inc. will assist in (d) the directing and managing of product and
technology development, (e) licensing and strategic alliance pursuits, and (f)
other related services that IDC may request from time to time, in the area of
food and beverage dispensing and delivery systems.
If you are in accord with the extension, please sign and return this
document.
Respectfully yours,
/s/ Jeffrey D. Lewenthal
-------------------------
Jeffrey D. Lewenthal
International Dispensing Corporation
Executive Vice President
Nologies, Inc.
Michael Handler, President
/s/ Michael Handler Dated: January 14, 1998
- --------------------------
Exhibit 10.8
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made and entered
into as of May 8, 1996, by and between Banco Inversion, S.A., a Spanish
corporation ("Banco"), and ReSeal Food Dispensing Systems, Inc., a Delaware
corporation (the "Company").
W I T N E S S E T H:
In consideration of the premises and of the mutual covenants and
obligations hereinafter set forth, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Commission" means the Securities and Exchange Commission or any
other federal agency at the time administering the Securities Act.
(b) "Common Stock" means the common stock, par value $.001, of the
Company.
(c) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to
time.
(d) "Holders" means holders of Other Shares.
(e) "Other Shares" means shares of Common Stock of the Company
(including shares of Common Stock issued or issuable upon conversion of
warrants or options of the Company) having registration rights, other than
the Shares.
(f) "Participating Rightsholder" means any Rightsholder requesting
inclusion of his Shares in a Registration, pursuant to Section 2(b).
(g) "Registration" refers to a registration effected by preparing and
filing a registration statement or statements or similar documents as shall
comply with the Securities Act and the declaration or ordering of
effectiveness of such registration statement or document by the Commission.
(h) "Registration Expenses" means all expenses incurred in effecting
any Registration pursuant to this Agreement, including, without limitation,
all registration, qualification and filing fees, printing expenses, escrow
fees, fees and disbursements of counsel for the Company, blue sky fees and
expenses, and expenses of any regular or special audits incident to or
required by any such Registration, but shall not include Selling Expenses
and fees and disbursements of counsel for the Holders.
<PAGE>
(i) "Registration Notice" means a notice delivered by the Company to
the Rightsholders pursuant to Section 2(a).
(j) "Rightsholders" means Banco and each subsequent transferee of the
Shares from Banco or another Rightsholder.
(k) "Securities Act" means the Securities Act of 1933, as amended, or
any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(l) "Selling Expenses" means all underwriting discounts and selling
commissions applicable to the sale of Shares and all fees and disbursements
of counsel for the Rightsholders.
(m) "Shares" means that certain number of shares of Common Stock
acquired by Banco (and its designated nominees) from RIC.
2. Registration of Shares. Upon the Company's determination to register any
of its shares of Common Stock either for its own account or the account of any
Holder (not including the initial public offering of the Common Stock (the
"Public Offering") or the registration of any of the Bridge Units issued by the
Company in connection with certain loans it received (the "Bridge Units") and
the underlying securities of such Bridge Units), the Company will: (a) promptly
give written notice thereof to each of the Rightsholders (a "Registration
Notice"); and (b) use its best efforts to effect the Registration of such shares
of Common Stock and include in such Registration (and any qualification under
blue sky laws or other compliance), except as set forth in Sections 4 and 5, all
the Shares specified by the Participating Rightsholders in written requests to
the Company given within twenty (20) days after the Registration Notice is
received. Such written requests may specify for inclusion in such Registration
all or only a portion of the Shares held by a Rightsholder.
3. Underwriting. If the Registration referred to in a Registration Notice
is for a registered public offering involving an underwriting, the Company shall
so advise the Rightsholders in the Registration Notice. In such event, each of
the Participating Rightsholders' respective rights to registration pursuant to
Section 2 shall be conditioned upon such Participating Rightsholder's
participation in such underwriting and the inclusion of his or her Shares in the
underwriting to the extent provided herein. Each Participating Rightsholder
shall, together with the Company and the Holders intending to offer Other
Shares, enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected by the Company (the
"Representative").
4. Limitation on Number of Shares.
(a) Notwithstanding any other provision hereof, if the Representative
advises the Company in writing that marketing factors require a limitation
on the number of shares to be underwritten, the Representative may (subject
to the limitations set forth below) limit the number of Shares to be
included in the Registration and underwriting. The Company shall so advise
each of the Participating Rightsholders, and the number of
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<PAGE>
shares of Common Stock that are entitled to be included in the Registration
and underwriting shall be allocated to the Company, the Holders and the
Participating Rightsholders in accordance with Section 5. Subsequent to any
such reduction, if any Participating Rightsholder does not agree to the
terms of any such underwriting, such Participating Rightsholder shall be
excluded therefrom by written notice from the Company or the underwriter.
Any Shares excluded or withdrawn from such underwriting shall be withdrawn
from such Registration.
(b) If Shares are so withdrawn from the Registration, the Company
shall then offer to all Participating Rightsholders who have not so
withdrawn from the registration or whose number of Shares included in the
Registration have been reduced as a result of marketing factors, the right
to include additional Shares in an aggregate amount equal to the number of
shares so withdrawn, with such shares to be allocated among the persons
requesting additional inclusion in accordance with Section 5 hereof.
5. Allocation of Shares. In any circumstance in which the Participating
Rightsholders and the other Holders want to register Shares and Other Shares and
the aggregate number of such Shares and Other Shares cannot be so included as a
result of limitations imposed by the underwriters, the number of Shares and
Other Shares that shall be included shall be allocated among the Participating
Rightsholders and the other Holders pro rata on the basis of the aggregate
number of Shares and Other Shares. The Company shall not limit the number of
Shares to be included in a Registration, in order to include in such
Registration shares held by stockholders with no registration rights, in an
offering in which the number of Shares included in such offering is limited in
any way or allocated pursuant to Sections 4 or 5.
6. Restrictions on Public Sales by Rightsholders. To the extent not
inconsistent with applicable law, each Rightsholder that is timely notified in
writing by the Company or the Representative, shall not effect any public sale
or distribution (including a sale pursuant to Rule 144) of any issue being
registered in an underwritten offering, any securities of the Company similar to
any such issue or any securities of the Company convertible into or exchangeable
or exercisable for any such issue, during the 10-day period prior to, and during
the 90-day period beginning on, the effective date of the applicable
Registration Statement, except as part of such Registration.
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<PAGE>
7. Company Obligations. In effecting the Registration described in Section
2(b), the Company shall:
(a) prepare and file with the Commission a registration statement on
such form as the Company may determine in its sole discretion (provided
that such form may be used by the Company in accordance with the Securities
Act) (such registration statement and all amendments and supplements
thereto are referred to herein as the "Registration Statement") with
respect to the Shares and thereafter use its best efforts to cause the
Registration Statement to become effective as promptly as possible;
(b) furnish promptly to each Participating Rightsholder such number of
copies of the prospectus used in connection with the Registration
Statement, including a preliminary prospectus, and all amendments and
supplements thereto (collectively, the "Prospectus"), in conformity with
the requirements of the Securities Act, and such other documents as each
Participating Rightsholder may reasonably request in order to facilitate
the disposition of its Shares;
(c) use its best efforts to register or qualify the Shares under the
securities or "blue sky" laws of such jurisdictions as shall be reasonably
requested by each Participating Rightsholder and to keep such registration
or qualification in effect for as long as the Registration Statement
remains in effect; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (i) qualify
generally to do business or to file a general consent to service of process
in any such jurisdictions, (ii) provide any undertaking as to which the
Board of Directors of the Company shall reasonably object or (iii) make any
change in its charter or bylaws;
(d) promptly notify each of the Participating Rightsholders, at any
time when a Prospectus is required to be delivered under the Securities
Act, (i) of the happening of any event as a result of which the Prospectus,
as then in effect, includes an untrue statement of a material fact or omits
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading in light of the circumstances then
existing or (ii) of the Company's reasonable determination that a
post-effective amendment to the Registration Statement is appropriate; and
the Company shall promptly amend or supplement the Registration Statement
and Prospectus to correct any such untrue statement or omission so that, as
thereafter delivered by any Participating Rightsholder to the purchasers of
such securities, the Registration Statement and Prospectus as so
supplemented or amended, shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances under which they were made; and promptly furnish to
each Participating Rightsholder a reasonable number of copies of the
supplement to or the amendment of the Prospectus as may be necessary;
(e) promptly notify the Participating Rightsholders of (i) when the
Registration Statement, or any post-effective amendments thereto, shall
have become effective, or any supplement to the Prospectus or any amended
Prospectus shall have been filed; (ii) the receipt of any comments from the
Commission concerning the Registration Statement and the Company's
responses thereto; (iii) the issuance by the Commission of any stop order
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<PAGE>
suspending the effectiveness of the Registration Statement or the
initiation of any proceedings for that purpose; or (iv) the issuance by any
state securities commission or other regulatory authority of any order
suspending the qualification or the exemption from qualification of any of
the Shares under state securities or Blue Sky laws or the initiation of any
proceeding for that purpose. The Company will use its commercially
reasonable efforts to prevent the issuance of any stop order and, if any
stop order is issued, to obtain the lifting thereof at the earliest
possible time;
(f) permit a single firm of counsel designated as selling
stockholder's counsel by Banco to review the Registration Statement and
Prospectus and all amendments and supplements thereto for a period of three
(3) business days prior to the filing of such documents with the
Commission; and
(g) use its best efforts to cause the Shares to be, and to continue to
be, listed on a recognized automated trading market or a securities
exchange.
8. Termination of Registration Rights. Each Rightsholder's right to
registration of the Shares or inclusion of the Shares in any Registration
pursuant to this Agreement shall terminate upon the earlier of: (a) such time as
all (but not less than all) of such Rightsholder's Shares have been either
registered pursuant to this Agreement or sold, or (b) such time as each of such
Shares may be sold pursuant to Rule 144(k).
9. Representations of the Company. The Company hereby represents and
warrants as of the date hereof that:
(a) Organization; Good Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation and each jurisdiction in which it operates
its business.
(b) Capitalization. The Company has a total authorized capitalization
consisting of 40,000,000 shares of Common Stock and 2,000,000 shares of
Preferred Stock. As of the date hereof, there are (i) 6,325,000 shares of
Common Stock issued and outstanding, (ii) promissory notes issued by the
Company that are convertible into an aggregate of 2,400,000 shares of
Common Stock (the "Convertible Notes"), and (iii) bridge units consisting
of an aggregate of 1,575,000 shares of Common Stock and warrants to
purchase an aggregate of 1,575,000 additional shares of Common Stock (the
"Bridge Units"). As of the date hereof, there are no shares of Preferred
Stock issued and outstanding. There are no other classes of capital stock
of the Company. All of the shares of Common Stock have the same rights
and/or preferences with respect to voting and dividends. There are no
agreements in effect which (i) affect the voting rights of any shares of
Common Stock, (ii) restrict the transfer of shares of Common Stock, other
than those imposed by federal and state securities laws, or (iii) provide
the holder of any shares of Common Stock any rights with respect to the
sale or registration of any of such shares, other than (A) the Convertible
Notes, (B) the Bridge Units and its underlying securities, (C) this
Agreement, (D) the Settlement Agreement, dated October 10, 1995, among the
Company and the other parties listed therein, and (E) the Subscription
Agreements entered into in connection with the $1,050,000 private placement
of Common Stock.
5
<PAGE>
(c) Authorization; Enforceability. The Company has the full right,
power and authority (i) to enter into, execute and deliver this Agreement,
and (ii) to perform all of its obligations hereunder. This Agreement and
all other agreements, certificates, documents and instruments contemplated
hereby, to which the Company is a party, will be legal, valid and binding
obligations of the Company, and will be enforceable in accordance with
their respective terms.
(d) No Violations of Law or Order. The execution, delivery and
performance of this Agreement by the Company will not violate or contravene
(i) any agreements to which it is a party, (ii) any orders, judgments or
decrees or (iii) to the Company's knowledge, any laws or regulations.
(e) No Litigation. There is no litigation pending, or to the knowledge
of the Company threatened, against the Company.
(f) Financial Statements. The Company will deliver to Banco copies of
all audited financial statements prepared by or for the Company upon
availability.
(g) Underwriting Commitment. The Company has obtained a letter of
intent from Stratton Oakmont, Inc. ("Underwriter") to underwrite the Public
Offering (or any class of stock of the Company of which Banco will own
shares). The Company has provided to Banco copies of all letters of intent
and agreements which directly relate to the Public Offering. Such
commitment has not been withdrawn by Underwriter as of the date hereof.
10. Covenants of the Company. The Company covenants and agrees that it will
use its best efforts to carry out each of its duties and obligations under this
Agreement and to conduct the Public Offering.
11. Financial Information. The Company covenants and agrees to furnish the
following reports to each Rightsholder:
(a) as soon as practicable after the end of the each fiscal year of
the Company, and in any event within ninety (90) days thereafter, a
consolidated balance sheet of the Company and its subsidiaries, if any, as
at the end of such fiscal year, and consolidated statements of income and
cash flows of the Company and its subsidiaries, if any, for such year,
prepared in accordance with generally accepted accounting principles
consistently applied and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable detail and
certified by independent public accountants of recognized national standing
selected by the Company, and a capitalization summary setting forth in
reasonable detail all issued and outstanding securities of the Company
including all warrants, options and rights with respect to same, as of the
end of such fiscal year;
(b) as soon as practicable after the end of the first, second, and
third quarterly accounting periods in each fiscal year of the Company, and
in any event within forty-five (45) days thereafter, a consolidated balance
sheet of the Company and its subsidiaries, if any, as at the end of each
such quarterly period, and consolidated statements of income
6
<PAGE>
and cash flows of the Company and its subsidiaries, if any, for such period
and for the current fiscal year to date, prepared in accordance with
generally accepted accounting principles consistently applied and setting
forth in comparative form the figures for the corresponding periods of the
previous fiscal year, subject to changes resulting from normal year-end
audit adjustments, all in reasonable detail, except that such financial
statements need not contain the notes required by generally accepted
accounting principles; and
(c) from the date the Company becomes subject to the reporting
requirements of the Exchange Act, and in lieu of the financial information
required pursuant to Sections 11(a) and (b), copies of its annual reports
on Form 10-K and its quarterly reports on Form 10-Q, respectively.
12. Restrictions on the Participating Rightsholders. In the event the
Company gives a notice to the Participating Rightsholders pursuant to subsection
7(d) or subsection 7(e)(iii) or (iv) hereof (any such notice, a "Discontinuance
Notice"), each Participating Rightsholder will forthwith discontinue disposition
of registered Shares pursuant to the Registration Statement until, as
applicable, (i) each Participating Rightsholder receives from the Company the
supplemented or amended Prospectus contemplated by subsection 7(d) hereof,
including any additional or supplemental filings that are incorporated by
reference in the supplemented or amended Prospectus, or (ii) each Participating
Rightsholder is advised in writing by the Company that any stop order has been
lifted. If so directed by the Company, each Participating Rightsholder will
deliver to the Company (at the Company's expense) all copies, other than
permanent file copies then in such Participating Rightsholder's possession, of
the Prospectus covering such registered Shares that was current at the time the
Participating Rightsholders received the Discontinuance Notice.
13. Other Securities. A Registration Statement filed pursuant to this
Agreement may include other securities of the Company with respect to which
registration rights have been or may be granted and may include securities of
the Company being sold for its own account, and nothing contained in this
Agreement shall be construed as limiting or restricting the Company's ability to
file additional registration statements under the Securities Act to register
securities for selling stockholders or for its own account.
14. Changes in Common Stock. If, and as often as, there are any changes in
the Common Stock by way of stock split, stock dividend, combination or
reclassification, or through merger, consolidation, reorganization or
recapitalization, or by any other means, appropriate adjustment shall be made in
the provisions hereof, as may be required, so that the rights and privileges
granted hereby shall continue with respect to the Shares as so changed.
15. Furnishing Information. Each Participating Rightsholder shall furnish
to the Company at such time as the Company shall reasonably request, such
information regarding such Participating Rightsholder, its Shares, and the
intended method of disposition of such securities as shall be reasonably
required to effect the registration of the Shares. Each Participating
Rightsholder shall execute such documents in connection with such registration
as the Company may reasonably request.
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<PAGE>
16. Expenses of Registration. All Registration Expenses incurred in
connection with this Agreement shall be borne by the Company.
17. Indemnification.
(a) The Company will indemnify each Rightsholder, each of its
officers, directors and partners, legal counsel, and accountants, as
applicable, and each person controlling such Rightsholder within the
meaning of Section 15 of the Securities Act, against all expenses, claims,
losses, and liabilities (or actions, proceedings, or settlements in respect
thereof) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any Registration Statement,
Prospectus, offering circular, or other document, or based on any omission
(or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
or any violation by the Company of the Securities Act or any rule or
regulation thereunder applicable to the Company and relating to action or
inaction required of the Company in connection with any such registration,
qualification, or compliance, and will reimburse such Rightsholder, each of
its officers, directors, partners, legal counsel, and accountants and each
person controlling such Rightsholder, for any legal and any other expenses
reasonably incurred in connection with investigating and defending or
settling any such claim, loss, damage, liability, or action, provided that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability, or expense arises out of or is based on any
untrue statement or omission based upon written information furnished to
the Company by such Rightsholder and stated to be specifically for use
therein. It is agreed that the indemnity agreement contained in this
Section 17 shall not apply to amounts paid in settlement of any such loss,
claim, damage, liability, or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably
withheld.)
(b) Each Rightsholder will, if Shares are included in the securities
as to which such registration, qualification, or compliance is being
effected, indemnify the Company, each of its directors, officers, partners,
legal counsel, and accountants, as applicable, each person who controls the
Company within the meaning of Section 15 of the Securities Act, each other
Rightsholder, and each of their officers, directors, and partners, as
applicable, and each person controlling such Rightsholders, against all
claims, losses, damages and liabilities (or actions in respect thereof)
arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular, or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, and
will reimburse the Company and such Rightsholder, directors, officers,
partners, legal counsel, accountants, or control persons for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability, or action, in each case
to the extent, but only to the extent, that such untrue statement (or
alleged untrue statement) or omission (or alleged omission) is made in such
registration statement, prospectus, offering circular, or other document in
reliance upon and in conformity with written information furnished to the
Company by such Rightsholder and stated to be specifically for use therein,
provided, however, that the obligations of such
8
<PAGE>
Rightsholder hereunder shall not apply to amounts paid in settlement of any
such claims, losses, damages, or liabilities (or actions in respect
thereof) if such settlement is effected without the consent of such
Rightsholder (which consent shall not be unreasonably withheld).
(c) Each party entitled to indemnification under this Section 17 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified
Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of
such claim or any litigation resulting therefrom, provided that counsel for
the Indemnifying Party, who shall conduct the defense of such claim or any
litigation resulting therefrom, shall be approved by the Indemnified Party
(whose approval shall not be unreasonably withheld), and the Indemnified
Party may participate in such defense at such party's expense, and provided
further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this Section 17, to the extent such failure is not prejudicial. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
Indemnified Party of a release from all liability in respect to such claim
or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 17 is held by
a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall contribute to the amount paid or payable
by such Indemnified Party as a result of such loss, liability, claim,
damage, or expense, in such proportion as is appropriate to reflect the
relative fault of the Indemnifying Party on the one hand and the
Indemnified Party on the other in connection with the statements or
omissions that resulted in such loss, liability, claim, damage, or expense
as well as any other relevant equitable considerations. The relative fault
of the Indemnifying Party and of the Indemnified Party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the Indemnifying Party or
by the Indemnified Party and the parties' relative intent, knowledge,
access to information, and opportunity to correct or prevent such statement
or omission.
(e) Notwithstanding the foregoing, to the extent that the provisions
on indemnification and contribution contained in the underwriting agreement
entered into in connection with the underwritten public offering are in
conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
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<PAGE>
18. Transfer or Assignment of Registration Rights. The rights of each
Rightsholder granted under this Agreement to cause the Company to register the
Shares may be transferred or assigned by such Rightsholder to a transferee or
assignee of his or her Shares, provided, that the transferee or assignee of such
rights assumes the obligations of such Rightsholder under this Agreement and,
provided further, that the Company is given written notice at the time of or
within a reasonable time after said transfer or assignment, stating the name and
address of the transferee or assignee and identifying the Shares with respect to
which such registration rights are being transferred or assigned. If a
Rightsholder (other than Banco) owns less than 100,000 Shares (as presently
constituted and subject to subsequent adjustments for stock splits, stock
dividends, reorganizations, reclassifications and the like), such Rightsholder
may only exercise the registration rights provided in this Agreement through
Banco as its agent.
19. Notices. Any notice required or permitted under this Agreement shall be
given in writing and shall be deemed effectively given and received upon
personal delivery to the party to be notified, on the next business day
following delivery to a nationally recognized overnight courier service, upon
the transmission of a facsimile or five days after deposit with the United
States Post Office, by registered or certified mail, postage prepaid, and
addressed to the party to be notified at the address or facsimile number
indicated below for such party, or at such other address as such party may
designate upon written notice to the other parties (except that notice of change
of address shall be deemed given upon receipt).
If to the Company:
ReSeal Food Dispensing Systems, Inc.
342 Madison Avenue, Suite 1034
New York, NY 10173
Facsimile No.: 212-682-4720
Attention: David Brenman
With a copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, NY 10022
Facsimile No.: 212-715-8000
Attention: Scott Rosenblum, Esq.
If to Banco:
Felipe IV
28014 Madrid
SPAIN
Facsimile No.: 011-34-1-522-6821
Attention: Raphael Nunez
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<PAGE>
With a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
399 Park Avenue
22nd Floor
New York, NY 10022
Facsimile No.: 212-872-1002
Attn: Alan Siegel, Esq.
If to a Rightsholder other than Banco, to the last known address of such
Rightsholder.
20. Entire Agreement. This Agreement constitutes the entire agreement among
the parties with respect to the subject matter hereof and thereof, supersedes
all prior agreements and understandings, written or oral, among the parties with
respect thereto, and no party shall be liable or bound to any other party in any
manner by any promises, conditions, warranties, representations, or covenants
except as specifically set forth herein or therein.
21. Amendments and Waivers. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only by an
instrument in writing and signed by the party against whom such amendment or
waiver is sought to be enforced.
22. Successors and Assigns. The Company may not assign any of its rights or
liabilities under this Agreement without the prior written consent of Banco. The
rights granted to Banco pursuant to this Agreement may be assigned without the
prior written consent of the Company. The terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
permitted 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 permitted assigns any rights, remedies, obligations,
or liabilities under or by reason of this Agreement, except as expressly
provided in this Agreement.
23. Governing Law. This Agreement, including the validity hereof and the
rights and obligations of the parties hereunder, and all amendments and
supplements hereof and all waivers and consents hereunder, shall be construed in
accordance with and governed by the domestic substantive laws of the State of
New York without giving effect to any choice of law or conflicts of law
provision or rule that would cause the application of the domestic substantive
laws of any other jurisdiction.
24. Severability. If any provisions of this Agreement as applied to any
party or to any circumstance shall be adjudged by a court to be invalid or
unenforceable, the same shall in no way affect any other provision of this
Agreement, the application of such provision in any other circumstances or the
validity or enforceability of this Agreement.
25. Further Assurances. Each of the parties agrees to execute and deliver
such additional documents and/or instruments, and to take such further actions,
as may reasonably be required from time to time to carry out the intent, purpose
and provisions of this Agreement.
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26. Section Headings. The Section headings contained herein are for
convenience of reference only, are not part of this Agreement and shall not
limit or otherwise affect the meaning of this Agreement.
27. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned have caused this Agreement to be duly
executed as of the date first above written.
RESEAL FOOD DISPENSING SYSTEMS, INC.
By: /s/ David Brenman
-------------------------
Name: David Brenman
Title: President
BANCO INVERSION, S.A.
By: /s/ Rafael Nunez
-------------------------
Name: Rafeal Nunez
Title:
13
Exhibit 10.9
JOINT SYSTEMS DEVELOPMENT AND MARKETING AGREEMENT
THIS AGREEMENT is entered into as of October 1, 1997, between INTERNATIONAL
DISPENSING CORPORATION, a Delaware corporation with principal offices at 342
Madison Ave., Suite 1034, New York, NY 10173 ("IDC"), and PACKAGING SYSTEMS,
LLC, an Illinois limited liability company with principal offices at 737
Oakridge Drive, Romeoville, Illinois 60446 ("PSL").
BACKGROUND
A. IDC develops and markets and has rights in certain technologies with
respect to one-way valve/pump applications in the food and beverage product
industry;
B. PSL develops, owns, markets and has rights in certain technologies with
respect to container applications in the food and beverage product industry;
C. IDC and PSL desire to develop, promote and market potential applications
combining their technologies in the Territory.
IN CONSIDERATION OF THE MUTUAL PROMISES AND COVENANTS CONTAINED HEREIN, AND
OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND ADEQUACY OF WHICH IS
HEREBY ACKNOWLEDGED, THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS
1.1 "Amortization Amount" shall mean with respect to each Component of a
Developed Packaging System, the amount attributed by each of IDC and PSL for:
(i) all development costs incurred by each of IDC and PSL and (ii) the
amortization of the cost of machinery and equipment used in the production of
such component. The Amortization Amount for each Component of each Developed
Packaging System shall be set forth on a schedule for each Developed Packaging
System which schedule shall be signed by an authorized representative of each
party and be attached to this Agreement.
1.2 "Component Profit Margin" shall mean, with respect to each Component of
a Developed Packaging System sold to a particular Customer, the amount
attributed to such Component in excess of the Direct Manufacturing Expenses and
Amortization Amount and as set forth on a schedule which schedule shall be
signed by an authorized representative of each party and be attached to this
Agreement. Component Profit Margins may vary depending on the Customer.
<PAGE>
1.3 "Component" shall mean the valve, pump, bag or container component of a
Developed Packaging System.
1.4 "Customers" shall mean existing or new customers of IDC or PSL that are
makers, users, lessors, sellers or distributors of (a) any food or beverage
product intended to be sold to or by food or beverage wholesale price
discounters, retailers and similar establishments that sell food or beverage to
consumers, including, but not limited to, those who solicit by mail order, door
to door or multi-level marketing; (b) any food or beverage product intended for
use in an industrial or commercial place of business in the preparation of food
or beverage at such place of business; or (c) any food or beverage product
intended for use in an industrial or commercial place of business by a customer
purchasing food or beverage at such place of business for consumption on or off
the premises of such place of business. Customers may include such "Bag-in-Box"
manufacturers as are jointly agreed upon by IDC and PSL. Customers explicitly do
not include any medical or pharmaceutical companies or any other companies or
industries as are mutually agreed to in writing by the parties.
1.5 "Developed Packaging Systems" shall have the meaning ascribed thereto
in Section 2.1 hereof.
1.6 "Development Project" shall mean the development of any Developed
Packaging System.
1.7 "Direct Manufacturing Expenses" shall mean the itemized direct expenses
for each of IDC and PSL associated solely with the manufacturing, including,
without limitation, costs of materials, of any Developed Packaging System to be
set forth on a schedule which schedule shall be signed by an authorized
representative of each party and be attached to this Agreement.
1.8 "Gravity Feed Valve" shall mean a dispensing valve configured to allow
for a continuous flow of product when actuated, due to the force of gravity
acting upon the product/container, and automatically stop flow when actuation
ceases.
1.9 "Gross Sales Revenues" shall mean the price received by either IDC or
PSL directly from the end user or distributor, as the case may be, on the sale
of any Developed Packaging System.
1.10 "IDC Patents" shall mean the patents listed on Exhibit A annexed
hereto.
1.11 "IDC Valve" shall mean any one-way valve including a Gravity Feed
Valve or Vacuum Actuated Feed Valve owned by, patented by, whose patent has been
applied for by, assigned to, or under development by IDC or which has been
licensed or sublicensed to IDC.
1.12 "Quick Discharge Pump" shall mean a mechanical pump configured to push
a dose of product through a valve and then directly or indirectly draw a
replenishment of product out of an attached container in preparation for the
next dispensing cycle.
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1.13 "PSL Patents" shall mean the patents listed on Exhibit B annexed
hereto.
1.14 "Vacuum Actuated Vacuum Feed Valve" shall mean patented structures
that define the ability to use a pressure reduction to open a basic valve
structure to allow flow and integrally or separately use a pressure reduction to
draw product through and out of a valve structure. These structures can be
configured to function in a new and discrete type of valve (i.e. post-mix
system) or integral with a Gravity Feed Valve or Quick Discharge Pump.
1.15 "Territory" shall mean the United States of America or any other
territory that is mutually agreed to in writing by the parties.
2. DEVELOPMENT
2.1 Subject to the terms and conditions herein, IDC and PSL shall work with
one another to jointly develop food packaging systems (the "Developed Packaging
Systems"). IDC agrees to provide the information, materials and technology,
owned or controlled by or under license to IDC necessary to design and develop
the Developed Packaging Systems including, without limitation, the following
technologies (the "IDC Contributed Technologies"): Gravity Feed Valve, Quick
Discharge Pump and Vacuum Actuated Vacuum Feed Valve. PSL agrees to provide the
information, materials and technology, owned or controlled by or under license
to PSL necessary to design and develop the Developed Packaging Systems
including, without limitation, the following technologies (the "PSL Contributed
Technologies"): Filler technology, bag manufacturing technology, and Bag-in-Box
system integration technology. Each party grants to the other a limited,
royalty-free, non-exclusive, non-transferable license or sublicense to use the
contributed technologies solely in order for the parties to prepare the Develop
Packaging Systems during the term of this Agreement. Each party shall be
responsible for all expenses, materials, equipment, amortization and costs of
sales incurred by it in connection with each Development Project.
Notwithstanding the foregoing, this Agreement does not imply nor does it grant
to PSL or any other person any right, license or sublicense to manufacture the
IDC Valve.
2.2 Subject to Section 2.3, IDC and PSL shall jointly own the rights to the
Developed Packaging Systems (provided, however, that no joint ownership shall be
implied in the IDC Patents or the PSL Patents). The rights to the Developed
Packaging Systems may not be transferred, encumbered or pledged as collateral by
either party, except as is permitted under the provisions of this Agreement
relating to assignments.
2.3 Notwithstanding the foregoing Section 2.2, PSL shall be the sole owner
of all rights to any and all patents and patent applications worldwide covering
any Developed Packaging System (the "DPS Patents"). PSL and IDC shall share
equally the responsibility for (including the obligation to pay all costs and
expenses related to) the application, prosecution and maintenance of the DPS
Patents.
2.4 Prior to beginning work on a proposed Developed Packaging System, IDC
and PSL shall agree that such system (a) is cost effective, (b) has a viable
commercial application
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and (c) has an end use designed for a targeted Customer. Each Development
Project shall have a schedule agreed to in writing by IDC and PSL in advance (a
"Project Time Schedule"). Periodically, but not less than once each quarter, the
representatives of the parties shall review the performance of the development
work compared to the Project Time Schedule.
2.5 IDC and PSL will engage in joint development, manufacturing, marketing
and sales activities with respect to the Developed Packaging Systems. No third
party shall have or be granted any right or permission to make, manufacture,
use, sell, reproduce, modify, distribute, display, import or export or otherwise
commercially exploit any Developed Packaging System. In the event that IDC and
PSL mutually agree to license any Developed Packaging System, the terms of such
license shall be determined by the parties hereto and licensing fees or
royalties generated thereby would be equally shared by IDC and PSL.
2.6 This Agreement contemplates a collaborative effort and each party shall
provide the personnel and technical expertise and to make its employees
reasonably available to consult with the other party.
2.7 This Agreement does not cover the sales of (i) any IDC Valve, pump
(including the Quick Discharge Pump) or any other IDC product or any IDC
Contributed Technology which is not integrated into a Developed Packaging System
or (ii) any PSL bags, Bag-in-Box or any other PSL products or any PSL
Contributed Technology which is not integrated into a Developed Packaging
System.
3. MARKETING
3.1 IDC and PSL shall each have the right to market and sell the Developed
Packaging Systems jointly developed pursuant to this Agreement in the Territory
to Customers. Such right shall be exclusive to IDC and PSL. IDC and PSL shall
jointly develop a marketing and promotional protocol and strategy for any
Developed Packaging System, including pricing, billing, order fulfillment and
standard warranties.
3.2 In the event that either party proposes to enter into an agreement or
other arrangement regarding a Developed Packaging System with a proposed
Customer with respect to a country or countries outside the Territory, then such
party may enter into such agreement or other arrangement with the proposed
Customer with respect to such country or countries only if it has offered to the
other party the right to participate in such agreement or arrangement. If the
right to participate is declined, then the party declining to participate shall
not be entitled to any revenue sharing with respect to sales of Developed
Packaging Systems to the proposed Customer in the location outside of the
Territory with respect to which the party has declined to participate.
4. REVENUE SHARING
4.1 PSL and IDC agree to be compensated on the sales of any Developed
Packaging System as follows:
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(a) from the Gross Sales Revenue of each unit of any Developed
Packaging System, each party shall first be entitled to reimbursement of
its (i) Direct Manufacturing Expenses and (ii) Amortization Amount with
respect to each such unit; and
(b) on the balance remaining after deduction of Direct Manufacturing
Expenses and Amortization Amount, the parties shall share revenues as
follows:
(i) on any Component Profit Margin relating to a IDC Contributed
Technology, 55% of such Component Profit Margin to IDC and 45% of such
Component Profit Margin to PSL; and
(ii) on any Component Profit Margin relating to a PSL Contributed
Technology, 55% of such Component Profit Margin to PSL and 45% of such
Component Profit Margin to IDC.
4.2 Each of IDC and PSL shall be responsible for keeping and maintaining
the books and records related to the sales to its Customers of the Developed
Packaging Systems developed pursuant to this Agreement according to generally
accepted accounting principles. In the event of a dispute over the payments due
one party which cannot be resolved by the parties, both parties will mutually
agree upon an accounting firm to monitor compliance with this Agreement. Such
accounting firm will have access to the books and records of both parties, but
only to the extent necessary, and only for the purpose of determining,
compliance with the revenue sharing provisions of this Agreement. Either party
may request such a determination at any time. The cost of making the
determination will be borne by the party making the request.
4.3 The party receiving payment from a Customer from the sale of Developed
Packaging Systems shall remit, by check, to the other party the amount required
by Section 4.1 within thirty days of receipt of such Customer's payment.
4.4 No Component Profit Margin payments shall be made pursuant to this
Agreement with respect to revenue from a Customer until any and all warranty
claims made by such Customer are satisfied.
5. TERM AND TERMINATION
5.1 The obligations of each party with respect to any Developed Packaging
System developed and marketed hereunder shall continue in full force and effect
until the later of (a) the expiration date of any IDC Patent with respect to any
Component; (b) the expiration date of any PSL Patent with respect to any
Component; or (c) the expiration date of any DPS Patent with respect to any
Developed Packaging System.
5.2 Any Developed Packaging System in the market and being sold to
Customers at the time of termination of this Agreement shall continue to be sold
pursuant to appropriate purchase orders. In such case, the obligations of the
parties under Section 4 shall continue until all purchase orders are fulfilled
with respect to such Customer.
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<PAGE>
5.3 (a) Unless earlier terminated pursuant to Section 5.1 above, no later
than eighteen months from the Effective Date (the "Outside Review Date"), the
parties hereto shall conduct a business review and evaluation to determine in
good faith whether to terminate this Agreement. Either IDC or PSL may, within 60
days after the Outside Review Date, cancel this Agreement by giving written
notice to other party.
(b) Unless earlier terminated pursuant to Section 5.1 or 5.3(a) above,
this Agreement shall continue in effect for an additional term of two years from
the Outside Review Date (the "Original Renewal Term") and this Agreement shall
automatically renew itself for additional two year periods (the "Renewal Terms")
thereafter unless either IDC or PSL cancels this Agreement by giving written
notice to the other within 60 days prior to the expiration of the Original
Renewal Term and each Renewal Term thereafter.
5.4 Either party may terminate this Agreement at any time for cause upon
giving sixty (60) days notice of a material breach by the other hereunder,
provided that such breach will not have been remedied during such period.
5.5 This Agreement will terminate, without notice, (i) upon the institution
by either party of insolvency, receivership or bankruptcy proceedings or any
other proceedings for the settlement of either party's debts, (ii) upon the
institution by a third party of insolvency, receivership or bankruptcy
proceedings or any other proceedings for the settlement of debts (which is not
dismissed within 60 days after commencement), (iii) upon either party's making
an assignment of substantially all of its assets for the benefit of creditors,
or (iv) upon either party's dissolution or cessation of business.
5.6 Each party's Confidential Information (as defined below), customer
lists, customer contact information, trademarks, trade names, patents,
copyrights, designs, drawings, or other data, photographs, literature,
demonstration units and sales aids of every kind will remain the property of
that party. In the event of termination of this Agreement for any reason
whatsoever, each party agrees promptly to destroy or to surrender and deliver to
the other party all records, materials, equipment, drawings, and documents
provided to it by the other party containing any Confidential Information, and
all other materials belonging to the other party, including demonstration units
and sales materials provided by the other party. Neither party will make or
retain any copies of any items containing Confidential Information of the other
party that may have been entrusted to it.
5.7 The provisions of Sections 5.6, 5.7, 6, 7 and 9 will survive the
expiration or termination of this Agreement for any reason. Except as provided
in Section 5.1, all other rights and obligations of the parties will cease upon
expiration or termination of this Agreement.
6. LIMITATION OF LIABILITY
IN NO EVENT WILL EITHER PARTY HAVE ANY LIABILITY FOR ANY LOST PROFITS, OR
FOR ANY SPECIAL, INDIRECT, OR CONSEQUENTIAL DAMAGES ARISING OUT OF THIS
AGREEMENT, UNDER ANY CAUSE OF ACTION INCLUDING,
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WITHOUT LIMITATION, THOSE RESULTING FROM THE USE OF THE DEVELOPED PACKAGING
SYSTEMS, OR THE FAILURE OF THE PRODUCTS TO PERFORM, OR FOR ANY OTHER REASON. THE
PARTIES ACKNOWLEDGE THAT THIS SECTION 6 REPRESENTS A REASONABLE ALLOCATION OF
RISK.
7. CONFIDENTIALITY
7.1 "Confidential Information" shall mean any trade secrets, confidential
data (including, but not limited to, customer lists and customer contact
information) or other confidential information relating to or used in the
business of either party or any of its affiliates or customers, that a party may
produce, obtain or otherwise acquire during the term of this Agreement (the
"Confidential Information"), except as herein provided, and, except for customer
lists and customer contact information) that is marked "Confidential",
"Proprietary" or in some other manner to indicate its confidential nature.
Confidential Information may also include oral information disclosed pursuant to
this Agreement, provided that such information is designated as confidential at
the time of disclosure and confirmed in writing as confidential within thirty
(30) days after its oral disclosure and delivered to the receiving party.
7.2 Each party agrees to treat the other party's Confidential Information
with the same degree of care as it maintains its own information of a similar
nature. Without limiting the foregoing, each party shall use at least the same
procedures and degree of care which it uses to protect the confidentiality of
its own confidential information of like importance, and in no event less than
reasonable care.
7.3 The foregoing restrictions will not apply to information that (i) is
known to the receiving party at the time of disclosure by the disclosing party;
(ii) is or becomes publicly known through no wrongful act of the receiving
party; (iii) is rightfully received from a third party without restriction; (iv)
is independently developed by the receiving party; (v) has been approved for
release by written authorization of the disclosing party; (vi) is not marked or
similarly designated as confidential, and is provided for a purpose or in a
manner that reasonably contemplate, or would naturally be understood to
contemplate, disclosure or use by others; and (vii) is disclosed pursuant to a
valid order of any governmental authority provided that the party intending to
make disclosure in such circumstances has given the other party prompt notice
prior to making such disclosure so that such party may seek a protective order
or other appropriate remedy prior to such disclosure.
8. REPRESENTATIONS AND WARRANTIES
Each party warrants and represents to the other that it has the legal
rights and power to enter into this Agreement, and to fully perform its
obligations hereunder, and that neither has made nor will make any commitments
to others in conflict with or in derogation of such rights or this Agreement.
Each party further represents to the other that it is not aware of any legal
obstacles, including patent rights of others, which could prevent either party
from carrying out the provisions of this Agreement. IDC represents that it is
the sole sublicensee of all right, title and interest in the IDC Contributed
Technology and the IDC Patents in the food and beverage
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product industry and said right, title and interest is free and clear of any
material liens, claims, mortgages and other encumbrances. Except for security
interests granted in favor of its senior lender, PSL represents that it has full
right, title and interest in the PSL Contributed Technology and the PSL Patents
and said right, title and interest is free and clear of any material liens,
claims, mortgages and other encumbrances. Each party also represents that to the
best of its knowledge, its patents and technologies do not infringe, and neither
party has received any notice that such patents infringe, on the proprietary
rights of any third party.
9. INDEMNIFICATION
Subject to Section 6 hereof, each party, upon receipt of prompt notice and
opportunity to defend, shall indemnify and hold the other party harmless, and
hereby forever releases and discharges the other party from and against all
claims, demands, liabilities, damages and expenses (including attorneys' fees)
arising out of the negligence of the indemnifying party or its affiliates in
connection with the work performed in connection with this Agreement.
10. GENERAL PROVISIONS
10.1 The relationship of IDC and PSL established by this Agreement is that
of independent contractors, and nothing contained in this Agreement will be
construed to (i) give either party the power to direct and control the day-today
activities of the other, (ii) constitute the parties as partners, joint
venturers, co-owners or otherwise as participants in a joint undertaking, or
(iii) allow either party to create or assume any obligation on behalf of the
other for any purpose whatsoever. All financial and other obligations associated
with a party's business are the sole responsibility of that party.
10.2 This Agreement will be governed by and construed under the laws of the
State of New York without reference to conflict of laws principles.
10.3 Any controversy or claim arising out of or relating to this Agreement,
or the breach thereof shall be settled by arbitration to be held in New York,
New York, in accordance with the commercial arbitration rules (including, where
applicable, the expedited procedure rules) then in effect of the American
Arbitration Association or any successor thereto. The decision of the
arbitrators shall be final, conclusive and binding on the parties. Judgment upon
the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. The arbitrator must also award to the party who received a
favorable determination upon the arbitration of any dispute submitted, the
expenses incurred by such party, including reasonable counsel fees and
accountants' fees and disbursements.
10.4 This Agreement sets forth the entire agreement and understanding of
the parties relating to the subject matter herein and merges all prior
discussions between them. No modification of or amendment to this Agreement, nor
any waiver of any rights under this Agreement, will be effective unless in
writing signed by the party to be charged. This Agreement shall constitute the
legal, valid, binding and enforceable agreement of the parties.
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10.5 Any notice required or permitted by this Agreement will be deemed
given if sent by registered mail, postage prepaid, addressed to the other party
at the address set forth below or at such other address for which such party
gives notice hereunder. Delivery will be deemed effective three (3) days after
deposit with postal authorities.
If to IDC: International Dispensing Corp.
342 Madison Avenue
Suite 1034
New York, New York
Att: Jon Silverman
with a copy to: Lowenthal, Landau, Fischer & Bring, P.C.
250 Park Avenue
New York, New York 10177
Att: Martin R. Bring, Esq.
If to PSL: Packaging Systems, Inc.
737 Oakridge Drive
Romeoville, Illinois 60446
Att: John H. Schwan, President
with a copy to: James T. Easterling, Esq.
3500 Three First National Plaza
Chicago, Illinois 60602
Att: James T. Easterling, Esq.
Facsimile: (312) 977-4405
10.6 Nonperformance of either party will be excused to the extent that
performance is rendered impossible by strike, fire, flood, governmental acts,
orders or restrictions, or any other reason where failure to perform is beyond
the control and not caused by the negligence of the non-performing party.
10.7 This Agreement may not be assigned or transferred, nor, except as
expressly provided herein, may any right or obligation hereunder be assigned or
transferred, to a third party by either party without the prior written consent
of the other party hereto. Notwithstanding the foregoing, either party may
transfer or assign its rights and obligations under this Agreement to a
successor to all or substantially all of its business or assets relating to this
Agreement whether by sale, merger, operation of law or otherwise. Subject to the
foregoing, this Agreement will be binding upon and inure to the benefit of the
parties hereto, their successors and assigns.
10.8 No modification of or amendment to this Agreement, nor any waiver of
any rights under this Agreement, will be effective unless in writing signed by
the party to be charged, and the waiver of any breach or default will not
constitute a waiver of any other right hereunder or any subsequent breach or
default.
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10.9 In the event that it is determined by a court of competent
jurisdiction as part of a final nonappealable ruling, government action or
binding arbitration, that any provision of this Agreement (or part thereof) is
invalid, illegal, or otherwise unenforceable, such provision will be enforced as
nearly as possible in accordance with the stated intention of the parties, while
the remainder of this Agreement will remain in full force and effect and bind
the parties according to its terms. To the extent any provision (or part
thereof) cannot be enforced in accordance with the stated intentions of the
parties, such provision (or part thereof) will be deemed not to be a part of
this Agreement.
10.10 This Agreement may be executed in two or more counterparts, each of
which will be deemed an original.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the day and year first above written.
PACKAGING SYSTEMS, LLC
By:/s/ John H. Schwan
------------------------
John H. Schwan, President
INTERNATIONAL DISPENSING CORPORATION
By:/s/ Jon Silverman
------------------------
Jon Silverman, President
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Exhibit A
International Dispensing Corp.
Patents
U. S. Patent No. Expiration Date
34,243 July 11, 2006
5,092,855 March 3, 2009
5,305,783 April 26, 2011
5,279,447 January 18, 2011
5,279,330 January 18, 2011
5,305,786 April 26, 2011
5,353,961 October 11, 2011
5,613,517 March 24, 2014
5,673,251 August 4, 2014
<PAGE>
Exhibit B
Packaging Systems LLC
Patents
Patent Number Title Date Issued
- ------------- ----- -----------
1) 4,981,374 Plastic Bags Carried in a 01/01/91
Continuous Web
2) 5,115,626 Plastic Bags Carried in a 05/26/92
Continuous Web
3) 4,948,014 Two Piece Valved Fluid 08/14/90
Dispenser
4) 4,322,018 Fluid Dispenser 03/30/82
5) 4,360,996 Method and Apparatus for 11/30/82
Filling and Sealing Plastic
Bag Fluid Containers
6) 4,475,670 Fluid Dispenser 10/09/84
7) D286,005 Combined Fluid Dispensing 10/07/86
Tap and Clip-On Tubing
Connector
8) 4,574,559 Flexible Bag Automatic 03/11/86
Filling and Capping
Apparatus
9) 4,598,529 Method and Apparatus for 07/08/86
Forming, Filling and
Sealing Flexible Plastic Bags
<PAGE>
Exhibit B continued
Packaging Systems LLC
Patents
Patent Number Title Date Issued
- ------------- ----- -----------
10) 4,700,744 Flexible Shut-Off Fluid 10/20/87
Dispenser Element
11) 5,111,970 Fluid Dispenser Having a 05/12/92
Removable Sealing
Diaphragm
12) 5,143,278 Reinforced Bulk Material 09/01/92
Box
13) 5,427,306 Reinforced Bulk Material 06/27/95
Box
14) 5,419,485 End Opening Reinforced 05/30/95
Bulk Material Box
15) 5,417,341 Box and Packaging System 11/29/94
for Containing elongated fragile objects
Exhibit 10.10
SALE AND ASSIGNMENT AGREEMENT
SALE AND Assignment AGREEMENT, dated as of November 19, 1997 (the
"Agreement"), by and between HARVEY R. MILLER, AS TRUSTEE FOR THE LIQUIDATION OF
STRATTON OAKMONT, INC. under the Securities Investor Protection Act (the
"Trustee") and INTERNATIONAL DISPENSING CORPORATION, a Delaware corporation
("IDC").
R E C I T A L S:
A. On January 29, 1997, in the SIPA liquidation proceeding of Stratton
Oakmont, Inc. ("Stratton Oakmont"), pending in the United States Bankruptcy
Court for the Southern District of New York (the "Bankruptcy Court") SIPA
Proceeding No. 97-8074A(TLB) (the "SIPA Proceeding"), the Trustee was appointed
pursuant to the provision of the Securities Investor Protection Act of 1970, 15
U.S.C. ss.78aaa et seq. ("SIPA"), to administer the liquidation of Stratton
Oakmont; and
B. As trustee for Stratton Oakmont, the Trustee is the owner of 995,705
shares of the common stock of IDC (the "shares"), subject to a pledge of the
Shares (the "Pledge") by Stratton Oakmont in favor of Joseph Daniel Card
("Card") to secure certain obligations of Stratton Oakmont to Card; and
C. The Shares are currently registered in the name of Card solely for
purposes of perfection of the Pledge; and
D. The Trustee has entered into a settlement agreement with Card (the "Card
Agreement", the form of which is annexed hereto as Exhibit "1") providing for,
inter alia, the release by Card of all right, title, and interest in the Shares,
and providing further, that in consideration for such release, the Trustee may
allow Card to retain in lieu of a cash settlement payment by the Trustee,
certain of the Shares (the "Card Shares") as are equal in value to $200,000, all
as more fully set forth in the Card Agreement; and
E. The Trustee has been advised that Stratton Oakmont and Reseal Food
Dispensing Systems, Inc. ("RFDS") entered into an underwriting agreement
pursuant to which Stratton Oakmont agreed to serve as underwriter for the sale
of certain common stock and common stock purchase warrants to be used by RFDS to
the public (the "Underwriting Agreement," the form of which is annexed hereto as
Exhibit "2"); and
F. The trustee has been advised that RFDS subsequently changed its name to
IDC; and
G. The Trustee desires to sell to IDC, or to no more than ten designees of
IDC, subject to the qualification of such designees as provided herein (the "IDC
Designees" and, collectively with IDC, the "IDC Purchasers"), some or all of the
Shares, and the IDC purchaser
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desire to purchase from the Trustee, such Shares free and clear of all liens,
claims, encumbrances, and interests upon the terms and conditions hereinafter
set forth; and
H. The Trustee desires to assign to IDC, and IDC desires to acquire from
the Trustee, all of Stratton Oakmont's rights and interests in the Underwriting
Agreement (the transferred Shares and the Underwriting Agreement are hereinafter
referred to as the "Transferred Assets") free and clear of all liens, claims,
encumbrances, and interests, upon the terms and conditions hereinafter set
forth;
NOW, THEREFORE, IN CONSIDERATION OF THE PROMISES, CONDITIONS, AND COVENANTS
STATED HEREIN, THE PARTIES, INTENDING TO BE LEGALLY BOUND, HEREBY AGREE AS
FOLLOWS:
1. Transfer of Shares - Upon the terms and subject to the conditions
contained herein:
(a) On the Closing Date (as such term is hereinafter defined), the
Trustee shall convey to the IDC purchasers the first delivery (the "First
Delivery") of the Shares, which number of Shares shall be equal to or
greater than the total amount of Shares (995,705) minus: (i) the Card
Shares, and (ii) 200,000 of the Shares.
(b) On the Final Date (as such term is hereinafter defined), the
Trustee shall convey to the IDC Purchasers all of the remaining Shares then
held by the Trustee (the "Final Delivery").
2. Assignment of Rights - Upon the terms and subject to the conditions
contained herein, on the Closing Date (as such term is hereinafter defined) the
Trustee shall assign to IDC all of Stratton Oakmont's right, title, and interest
in its agreement with IDC evidenced by the Underwriting Agreement, including,
without limitation, provisions that (i) Stratton Oakmont has an option to
acquire certain securities of IDC (the Underwriter's Purchase Option as defined
in the prospectus annexed hereto as Exhibit "2"); (ii) shareholders of IDC are
barred from selling or otherwise trading in their stock in IDC without the prior
written consent of IDC for the two years after the Effective Date as such term
is defined in the Underwriting Agreement (Underwriting Agreement at P. 3(1)(1));
(iii) IDC is barred from issuing new stock (except in connection with a divided
or similar transaction) for the two years after the Effective Date (Underwriting
Agreement at P. 3(1)(2)); (iv) Stratton Oakmont has the right to appoint an
observer to attend meetings of IDC's board of directors for the three years
after the Effective Date (Underwriting Agreement at P. 3(t)); (v) a finder's fee
of 5% for the first $3 million, 4% for the next $3 million, 3% for the next $2
million, 2% for the next $2 million and 1% of the excess, if any, over $10
million will be paid to Stratton Oakmont by IDC if Stratton Oakmont introduces a
merger partner (or partner to a similar transaction) to IDC for the five years
after the Effective Date (Underwriting Agreement at P. 3(u)); (vi) IDC must pay
Stratton Oakmont a warrant solicitation fee of 4% of the exercise price of IDC's
warrants exercised at least one year after the Effective Date, subject to
certain conditions and restrictions (Underwriting Agreement at P. 3(v)); (vii)
Stratton Oakmont and IDC each indemnify the other against misrepresentations
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made in connection with the registration or the prospectus (Underwriting
Agreement at P. 6); and (viii) for a period of 24 months from the date the
offering under the prospectus was complete neither IDC nor shareholders of IDC
may offer or dispose of shares of IDC common stock without the prior written
consent of Stratton Oakmont (Underwriting Agreement P. 3(1)). Such sale and
transfer of the Transferred Assets shall be free and clear of all liens, claims,
encumbrances, and interests.
3. Payments for Transferred Assets - In consideration for the agreements
contained herein, the IDC Purchasers shall pay the Trustee sixty cents ($0.60)
(the "Purchase Price") for each Share tendered by the Trustee pursuant to the
terms of this Agreement. In the event of the failure of an IDC Designee to
tender the Purchase Price, IDC shall be obligated to tender such price
immediately.
4. Qualification of IDC Designees - In order to qualify as an IDC Designee
entitled to act as an IDC Purchaser hereunder, each IDC Designee shall enter
into an agreement with the Trustee pursuant to which such IDC Designee shall
represent, acknowledge and agree as follows: (a) such IDC Designee is acquiring
the Shares for its own account, for investment purposes only and not with a view
to the distribution (as such term is used in Section 2(11) of the Securities Act
of 1933, as amended (the "Securities Act")) thereof; (b) such IDC Designee
understands that such Shares have not been registered under the Securities Act
and cannot be sold unless subsequently registered under the Securities Act and
any applicable state securities laws, or an exemption from such registration is
available; (c) such IDC Designee is an "accredited investor" within the meaning
of subparagraph (a) of Rule 501 under the Securities Act; (d) such IDC Designee
is aware that it may be required to bear the economic risk of an investment in
such Shares for an indefinite period of time, and it is able to bear such risk
for an indefinite period; (e) such IDC Designee has received adequate
information, and has had an opportunity to ask questions of IDC, concerning the
legal, business, and financial condition of IDC in order to make an informed
decision regarding an investment in the Shares; and (f) such IDC Designee will
provide such other information as is requested by the Trustee to enable the
Trustee to conclude that the sale of Shares by the Trustee to such person or
entity will be exempt from the registration provisions of the Securities Act and
any applicable state securities laws. The IDC Designees amy appoint one entity
to act as their nominee for the purpose of receiving the Shares purchased by the
IDC Designees hereunder and making payment therefor, and the IDC Designees shall
provide the Trustee with a written representation as to such appointment with an
acknowledgment by such nominee.
5. Releases - Effective upon the transfer of the First Delivery of Shares,
the payment of the Purchase Price therefor by the IDC Purchasers, and the
assignment of the Underwriting Agreement (a) the Trustee hereby waives,
releases, and relinquishes any and all claims, rights or causes of action that
the Trustee or Stratton Oakmont may have against IDC, its agents, principals,
and affiliates, whether known or unknown, arising after January 29, 1997 through
and including the date hereof, except claims arising under this Agreement; and
(b) IDC hereby waives, releases, relinquishes any and all claims, rights, or
causes of action that IDC may have against the Trustee or Stratton Oakmont, or
their respective agents, principals, and
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affiliates, whether known or unknown, arising after January 29, 1997 through and
including the date hereof, except claims arising under this Agreement.
Notwithstanding anything in the preceding sentence to the contrary, the Trustee
waives, releases, and relinquishes all claims, rights, or causes of action
arising under the Underwriting Agreement and/or the remaining Transferred Assets
from the date of such agreement through and including the date hereof.
6. Conditions Precedent - This Agreement is subject to approval by the
Bankruptcy Court, and shall be of no force or effect unless and until such
condition is satisfied. The Trustee shall apply to the Bankruptcy Court for
approval of this Agreement as soon as is practicable following execution by both
parties. In the event that the Bankruptcy Court does not approve this Agreement,
this Agreement (except for this paragraph) shall be null and void and shall not
be binding upon the parties hereto, and the parties reserve their rights,
claims, and defenses without prejudice by reason of this Agreement or any
statement made, or action or position taken, document prepared or executed in
connection herewith or at the hearing, if any, before the Bankruptcy Court to
consider authorization of this Agreement (none of which, in such event, be
referred to, or relied upon, by any party for any purpose except as shall be
specifically agreed to in writing by the parties).
7. Closing Date - Upon the satisfaction of the conditions herein and the
receipt by the Trustee of the qualification documentation set forth in section 4
herein, the Trustee shall, on a business day (the "Closing Date") as soon as
practicable following the entry by the Bankruptcy Court of an order approving
this Agreement, tender the First Delivery of Shares and execute documentation
evidencing the assignment of the Underwriting Agreement as provided for herein,
and the IDC Purchasers shall tender the Purchase Price provided herein. The
payment of the Purchase Price shall be made by wire transfer of funds to the
Trustee's account.
8. Outside Date and Final Date - On, or at any time prior to, the first
business day (the "Outside Date") that is 180 days after the Closing Date, the
Trustee may tender the Final Delivery of Shares and the IDC Purchasers shall
tender the Purchase Price provided herein, provided, however, that if the
Trustee proposes to tender the Final Delivery on a date prior to the Outside
Date, he shall give the IDC Purchasers notice of such proposed tender no fewer
than twenty days prior to such tender. Notwithstanding the foregoing, the
Trustee shall tender the Final Delivery on the Outside Date if not tendered
prior to such date. The payment of the Purchase Price shall be made by wire
transfer of funds to the Trustee's account. The date of the Final Tender shall
be the "Final Date" hereunder.
9. Representations - General - Each party to this Agreement hereby
represents and warrants to the other parties to this Agreement that (a) such
party has all power and authority necessary to enter into this Agreement, to
bind all parties, persons, or entities for whom such party acts, and to carry
out and perform this Agreement according to its terms; (b) this Agreement is
binding and enforceable upon such party; (c) no consent, approval,
authorization, or order of, and no notice to, or filing with, any court,
governmental authority, person, or entity is required for the execution,
delivery, and performance by such party of this Agreement that has not been
obtained; (d) the execution, delivery, and performance of this
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Agreement will not conflict or contravene any contract obligations that such
party has; (e) such party is not relying on, and expressly disclaims the
existence of or any reliance upon any oral or written representation, promise,
statement, opinion, or other act or omission made to such party other than those
expressly set forth in writing in this Agreement, such party has received all
information that is material to such party related to this Agreement, and such
party has had the benefit of counsel of such party's own choice and has been
afforded the opportunity to independently review and understand this Agreement,
with such party's chosen counsel; (f) the parties have entered into this
Agreement freely and without duress after having independently consulted with
their own counsel; and (g) this Agreement has been actually negotiated by and
between the parties, is jointly drafted by their respective counsel, and shall
not be construed against any party hereto.
10. Representations - Other (a) The Trustee represents that, as of the date
of the execution of this Agreement, he is unaware of any claims or causes of
action held by Stratton Oakmont against IDC, its predecessors and successors, or
its officers, representatives, and agents that arose on or before January 29,
1997. (b) IDC represents that, as of the date of the execution of this
Agreement, (i) no amounts are currently due, owing, or payable to Stratton
Oakmont under the Underwriting Agreement in respect of finders' fees,
solicitation fees, or otherwise, and (ii) IDC has no plans or intention as of
the date of the execution of this Agreement to undertake a merger or similar
transaction with a person or entity introduced by Stratton Oakmont as would have
given rise to a finders' fee payable to Stratton Oakmont under the Underwriting
Agreement.
11. Rule 144(c) Reporting - From the date this Agreement is approved by the
Bankruptcy Court through the Final Date, IDC agrees to use its best efforts to
make and keep adequate public information regarding IDC available (as those
terms are used in Rule 144(c) under the Securities Act) and file with the
Securities and Exchange Commission in a timely manner all reports and other
documents required of IDC under the Securities Act and the Securities Exchange
Act of 1934, as amended.
12. Governing Law - This Agreement is made and performable in New York
County, New York. This Agreement will be governed and construed in accordance
with the laws of the State of New York, without giving effect to the conflict of
laws rules of New York.
13. Venue and Jurisdiction - All actions against any party to this
Agreement arising under or relating in any way to this Agreement shall be
brought exclusively in the United States Bankruptcy Court for the Southern
District of New York. Each of the parties agrees to submit to the personal
jurisdiction of, and to waive any objection to venue in, such court.
14. Waiver of Jury Trial - TO THE FULL EXTENT PERMITTED BY LAW, EACH OF THE
PARTIES KNOWINGLY, VOLUNTARILY, AND INTENTIONALLY WAIVES ANY RIGHT IT MAY HAVE
TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED ON THIS AGREEMENT, OR
ARISING OUT OF, UNDER, OR IN CONNECTION WITH THIS AGREEMENT, OR ANY COURSE OF
CONDUCT, COURSE
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OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF ANY
PARTY. THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES' ENTRY
INTO THIS AGREEMENT.
15. Successors and Assigns - This Agreement shall continue perpetually and
shall be binding upon the parties hereto and their respective heirs, personal
representatives, administrators, successors and assigns (collectively,
"Successors") and shall inure to the benefit of the Parties' respective
Successors.
16. Good Faith Cooperation - The parties to this Agreement agree to
cooperate in good faith to take all necessary steps to effectuate all terms and
conditions of this Agreement.
17. Counterparts - This Agreement may be executed by the parties hereto in
separate counterparts, each of which, when so executed and delivered by one or
more parties shall be deemed an original, and all of which counterparts shall
together constitute one and the same instrument.
18. Entire Agreement - This Agreement represents the entire agreement of
the parties hereto and the terms are contractual and not mere recitals. This
Agreement may not be amended, altered, or modified or changed in any way except
in a writing signed by each of the parties to this Agreement. The parties hereto
further agree that in the event of any subsequent litigation, controversy, or
dispute concerning any of the terms, conditions, or provisions of this
Agreement, neither party shall be permitted to offer or introduce any oral
evidence concerning other oral promises or oral agreements between the parties
relating to the subject matter of this Agreement not included or referred to
herein and not reflected by a writing signed by each of the parties.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first written above.
/s/ Harvey R. Miller /s/ Jon Silverman
- ---------------------------- ------------------------
Harvey R. Miller, International Dispensing Corp.
As Trustee for Stratton Oakmont, Inc. By: Jon Silverman
Title: President
6
Exhibit 10.11
AGREEMENT
THIS AGREEMENT is entered into as of December 23, 1997, between
INTERNATIONAL DISPENSING CORPORATION, a Delaware corporation with principal
offices at 342 Madison Ave., Suite 1034, New York, NY 10173 ("IDC"), and WELL
MEN INDUSTRIAL COMPANY LIMITED, a Hong Kong registered company with principal
offices at Wah Ha Industrial Building, 16F, 8 Shipyard Lane, Quarry Bay, Hong
Kong ("Well Men").
BACKGROUND
A. IDC is engaged in international marketing of new products;
B. Well Men, directly or through its subsidiary, the Dongguan Well Men
Family-Use Electrical Appliance Co. Limited manufactures consumer products for
both the Chinese and overseas markets;
C. IDC and Well Men have entered into a Provisional Agreement dated
November 7, 1997 which outlines their desire to develop, promote and market Well
Men products in the Chinese and other overseas markets;
D. IDC and Well Men desire to transform the Provisional Agreement into a
formal agreement pursuant to the terms hereof;
IN CONSIDERATION OF THE MUTUAL PROMISES AND COVENANTS CONTAINED HEREIN, AND
OTHER GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND ADEQUACY OF WHICH IS
HEREBY ACKNOWLEDGED, THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS
1.1 "Chops" shall mean the chops, seals or other instruments which legally
bind or obligate the Chinese Corporation.
1.2 "Patents" shall mean the patents listed on Exhibit A annexed hereto,
including all applications therefor, and all other patents relating to the
Products and granted to Well Men whether issued in the United States or other
countries.
1.3 "Products" shall mean the following items manufactured by Well Men: (i)
water heater; (ii) filter pitcher; and (iii) filters for the filter pitcher.
1.4 "Shareholders" shall mean Mr. Pan, Mr. Cai and Mr. Ling.
<PAGE>
1.5 "Territory" (i) for the Products (as defined in Section 1.3 above),
shall mean the People's Republic of China and a right of first refusal to IDC
for any other territory and (ii) for any other products shall mean the People's
Republic of China or any other territory that is mutually agreed to in writing
by the parties.
2. ESTABLISHMENT OF REPRESENTATIVE OFFICE OF IDC
2.1 IDC agrees to establish and register a Representative Office in
Guangzhou, People's Republic of China. IDC agrees to use its best efforts to
establish and obtain a Registration Certificate for such Representative Office
no later than December 31, 1997. Well Men agrees to assist IDC in all aspects of
establishing the Representative Office including without limitation preparation
of any necessary documentation, applications, authorizations or registration
forms. In addition, Well Men shall act as authorized host and sponsor for IDC's
Representative Office. Notwithstanding the foregoing, IDC shall be solely
responsible for all costs, fees and expenses related to the establishment of the
Representative Office, including without limitation the payment of registration
fees, if necessary, to the local foreign economic and trade committee, the local
state administration for industry and commerce, the public security bureau, the
local customs authority and the local tax bureau. The parties acknowledge that
the Representative Office may not directly generate income or execute contracts
that generate income. The Representative Office may provide consultation and
market research relating to this Agreement.
3. FORMATION OF CHINESE CORPORATION
3.1 Simultaneously with the establishment of the Representative Office,
Well Men shall assist in the establishment of a corporation registered and
licensed in China (the "Chinese Corporation"). The name of the Chinese
Corporation shall be IDC Guangzhou Trading Corporation. The business of the
Chinese Corporation may be conducted under such other names as is necessary to
comply with the laws of any particular jurisdiction in which the Chinese
Corporation does business.
3.2 The principal place of business of the Chinese Corporation shall be the
same location of the Representative Office in Suite 2808 Peace World Plaza,
Guangzhou, People's Republic of China.
3.3 The purpose and scope of the Chinese Corporation (with the guidance,
advice and consultation of the Representative Office) shall be to sell, promote,
market, advertise, and
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solicit orders for the Products in the territory of China. The Chinese
Corporation shall use its best efforts and facilities, and shall make adequate
advertising expenditures, to promote and secure the maximum sale and
distribution of the Products in the People's Republic of China. Well Men gives
IDC and the Chinese Corporation all rights to its trade name and trademarks for
use in connection with the sale of the Products in the People's Republic of
China. The Chinese Corporation shall be responsible for all commercial efforts
regarding the sales of the Products within the People's Republic of China.
3.4 The initial ownership interests in the Chinese Corporation shall be:
Percentage Capital
of Corp. # of Shares Contribution
Mr. Pan 50% ___ $32,500 USD
Mr. Cai 30% ___ $19,500 USD
Mr. Ling 20% ___ $13,000 USD
Notwithstanding any other provision of this Agreement to the contrary, at
all times commencing on the date hereof and throughout the term of this
Agreement, the percentage interests of the Shareholders shall remain unchanged.
3.5 The initial capital contributions described above shall be made by each
of the Shareholders with the proceeds of a loan by IDC to each of the
Shareholders in the amounts shown in Section 3.4 above. Such loan shall be
evidenced by a Demand Note made payable by the Shareholder to the order of IDC.
In order to secure the payment and performance by each of the Shareholders of
such loan and Demand Note, each Shareholder shall grant to IDC a first lien and
security interest in the outstanding shares of the Shareholder in the Chinese
Corporation by pledging to IDC all of the outstanding shares of the capital
stock of the Chinese Corporation owned by him. The Shareholders shall execute
and deliver to IDC a Pledge Agreement together with the certificates evidencing
the capital stock pledged by them accompanied by stock powers and proxies or
other transfer documents endorsed in blank to be held by IDC. IDC shall have
recourse only against the pledged shares of the Chinese Corporation and shall
not have recourse against any other assets of the Shareholders nor against the
Shareholders individually for the loan or the obligations under the Demand Note.
3.6 The overall management and control of the day-to-day business and
affairs of the Chinese Corporation shall be vested in a board of directors (the
"Board"). The Board may exercise all such powers of the Chinese Corporation and
do all such lawful acts as permitted by law and by this Agreement. The Board
shall be composed solely of Mr. Jeff Lewenthal, Mr. Don Crowley and Mr. Pan. Mr.
Pan's title shall be Vice President. Mr. Jeff Lewenthal shall be Chairman.
3.7 The Chinese Corporation shall directly recruit all personnel, employees
and agents required to carry out its business. The Chinese Corporation shall
open accounts at the same bank and branch as the accounts for the Representative
Office of IDC. The authorized signatory
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for the handling of the Chinese Corporation's bank accounts shall be Mr. Pan.
All Chops shall at all times be under the exclusive control of Mr. Don Crowley
or IDC's designee.
3.8 IDC shall be solely responsible for all costs and expenses of the
Chinese Corporation until such time as the Chinese Corporation is profitable.
4. RIGHTS AND OBLIGATIONS OF WELL MEN AND IDC
4.1 Well Men grants to IDC the exclusive right to market and sell the
Products in the Territory as contemplated by this Agreement. IDC accepts its
exclusive appointment to market and sell the Products in the Territory as
contemplated by this Agreement. IDC shall resell the Products solely to the
Chinese Corporation for purposes of selling and marketing in the People's
Republic of China. IDC may resell the Products to any affiliate or other entity
for purposes of selling and marketing in the Territory other than the People's
Republic of China. IDC shall not market or sell any products similar to or
competitive with the Products. Sales of the Products may not be made in the
Territory except as contemplated by this Agreement.
4.2 As an initial order pursuant to this Agreement, IDC shall purchase from
Well Men the following: 2,750 Water Heater units and 11,000 Pitcher units. The
purchase price shall be $60.00 per Water Heater Unit F.O.B. Hong Kong and $6.00
per Pitcher unit F.O.B. Hong Kong. Payment shall be made by irrevocable,
transferable Letter of Credit for the benefit of Well Men or any assignee of
Well Men.
4.3 All future orders that IDC places with Well Men for the People's
Republic of China will be in sufficient quantities and based primarily on actual
orders received by IDC from the Chinese Corporation. The form of payment for
such future orders shall be either by (i) irrevocable, transferable Letter of
Credit established by IDC for the benefit of Well Men or any assignee of Well
Men or (ii) on open account supported by a Standby Letter of Credit in an amount
to be mutually agreed upon. The prices per Product for such future orders will
also be mutually agreed upon and set forth in written sales orders.
4.4 Well Men (or MK Wong) assigns and transfers to IDC, without charge but
only for the purpose of marketing the products in the Territory, the entire
right, title and interest in and to the Patents, including but not limited to
all reissues, divisions, continuations and extensions of the Patents and all
rights of action arising from the Patents, all claims for damages by reason of
past infringement of the Patents and the right to sue and collect damages for
such infringement to be held and enjoyed by IDC for its own use and benefit and
for its successors and assigns as the same would have been held by Well Men had
this assignment not been made. Well Men and MK Wong agree to execute all such
further instruments, documents or agreements to further evidence the foregoing
assignment of Patents.
4.5 Well Men grants to IDC a right of first refusal for exclusive rights in
the Territory to all new products developed by Well Men and not covered by this
Agreement.
4.6 Well Men hereby warrants that the Products will conform to the
applicable specifications for the Products for a period of five (5) years after
delivery to any customer or
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enduser. In the event any of the Products fail to perform as warranted within
the warranty period, Well Men shall without charge replace such Product with a
new one which is free of defects or correct the defect. Well Men agrees to
provide full support on after sales service for the products sold to IDC and
resold by the Chinese Corporation in the People's Republic of China.
5. TERM AND TERMINATION
5.1 This Agreement shall continue for a term of ten years from the date
hereof and for successive periods of ten years thereafter unless terminated by
either party by written notice sent at least sixty days prior to the expiration
of any ten year period.
6. REPRESENTATIONS
Each party represents to the other that it has the legal rights and power
to enter into this Agreement, and to fully perform its obligations hereunder,
and that neither has made nor will make any commitments to others in conflict
with or in derogation of such rights or this Agreement. Each party further
represents to the other that it is not aware of any legal obstacles, including
patent rights of others, which could prevent either party from carrying out the
provisions of this Agreement. Well Men represents that it has (or will have )
the exclusive rights to all Patents for the Products.
7. INDEMNIFICATION
Each party, upon receipt of prompt notice and opportunity to defend, shall
indemnify and hold the other party harmless, and hereby forever releases and
discharges the other party from and against all claims, demands, liabilities,
damages and expenses (including attorneys' fees) arising out of the negligence
of the indemnifying party or its affiliates in connection with the work
performed in connection with this Agreement. Well Men agrees to save IDC
harmless and indemnify IDC against any loss by way of infringement claims with
respect to any products of Well Men.
8. GENERAL PROVISIONS
8.1 Except for Section 2 which shall be governed by Chinese law, this
Agreement will be governed by and construed under the laws of the State of New
York, United States of America.
8.2 All disputes arising in connection with the present contract shall be
finally settled under the Rules of Conciliation and Arbitration of the
International Chamber of Commerce in Paris, France by one or more arbitrators
appointed in accordance with the said Rules.
8.3 Each party represents that it and its affiliates are, and further
covenants that all times during the term of this Agreement each shall remain, in
full compliance with all applicable laws, rules, and regulations governing its
and their activities and conduct, including, but not limited to, any such laws,
rules and regulations requiring registration with appropriate government
agencies.
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8.4 This Agreement sets forth the entire agreement and understanding of the
parties relating to the subject matter herein and merges all prior discussions
between them. No modification of or amendment to this Agreement, nor any waiver
of any rights under this Agreement, will be effective unless in writing signed
by the party to be charged. This Agreement shall constitute the legal, valid,
binding and enforceable agreement of the parties.
8.5 Nonperformance of either party will be excused to the extent that
performance is rendered impossible by strike, fire, flood, governmental acts,
orders or restrictions, or any other reason where failure to perform is beyond
the control and not caused by the negligence of the non-performing party.
8.6 This Agreement may not be assigned or transferred, nor, except as
expressly provided herein, may any right or obligation hereunder be assigned or
transferred, to a third party by either party without the prior written consent
of the other party hereto. Notwithstanding the foregoing, either party may
transfer or assign its rights and obligations under this Agreement to a
successor to all or substantially all of its business or assets relating to this
Agreement whether by sale, merger, operation of law or otherwise. Subject to the
foregoing, this Agreement will be binding upon and inure to the benefit of the
parties hereto, their successors and assigns.
8.7 No modification of or amendment to this Agreement, nor any waiver of
any rights under this Agreement, will be effective unless in writing signed by
the party to be charged, and the waiver of any breach or default will not
constitute a waiver of any other right hereunder or any subsequent breach or
default.
8.8 In the event that it is determined by a court of competent jurisdiction
as part of a final nonappealable ruling, government action or binding
arbitration, that any provision of this Agreement (or part thereof) is invalid,
illegal, or otherwise unenforceable, such provision will be enforced as nearly
as possible in accordance with the stated intention of the parties, while the
remainder of this Agreement will remain in full force and effect and bind the
parties according to its terms. To the extent any provision (or part thereof)
cannot be enforced in accordance with the stated intentions of the parties, such
provision (or part thereof) will be deemed not to be a part of this Agreement.
8.9 This Agreement may be executed in two or more counterparts, each of
which will be deemed an original.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of
the day and year first above written.
WELL MEN INDUSTRIAL COMPANY LIMITED
By:/s/ M.K. Wong
---------------------
Name: M.K. Wong
Title: Chairman
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INTERNATIONAL DISPENSING CORPORATION
By:/s/ Jon Silverman
---------------------
Name: Jon Silverman
Title: President
As to Section 4.4, agreed to and Acknowledged:
/s/ M.K. Wong
- ---------------------
M.K. Wong
7
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Exhibit A
Well Men Industrial Company Limited Patents
Patents covering USA, China and other countries for the following products, are
being applied for by Well Men:
1. Water Heater
2. Filter Pitcher with Filter
Exhibit 10.12
THIS SUBLEASE, dated November 5, 1997, between GENERAL MOTORS CORPORATION, a
Delaware corporation, with its principal address at 3044 West Grand Boulevard,
Detroit, Michigan 48202, hereinafter referred to as Sublessor, and INTERNATIONAL
DISPENSING CORPORATION, a Delaware corporation, with its principal address at
342 Madison Avenue, Suite 1034, New York, New York 10173, hereinafter referred
to as Sublessee,
W I T N E S S E T H:
Sublessor hereby lets to the Sublessee and Sublessee hires from the Sublessor
the following described premises:
Approximately 2,832 rentable square feet of third floor space
known as Suite 304, together with five (5) unreserved and
uncovered parking spaces, located at 2500 Westchester Avenue,
Purchase, new York,
to be used only for sales and administrative offices, for a term commencing
November 15, 1997, and expiring February 29, 2000, at the yearly rent of
TWENTY-NINE THOUSAND THREE HUNDRED TWELVE AND 00/100 DOLLARS ($29,312.00),
payable in equal installments of $2,442.66 in advance on the first business day
of each and every month during the term, together with a monthly charge of
$343.50 for electricity calculated at the rate of $2.25 per rentable square foot
for a total monthly rental of $2,786.16. It is agreed that the first month of
the first and second year of the Sublease shall be rent free.
THE PARTIES HERETO COVENANT AND AGREE WITH EACH OTHER AS FOLLOWS:
FIRST - PAYMENT OF RENT: Sublessee shall pay the rent at the times and in the
manner aforesaid to General Motors Corporation, c/o Worldwide Facilities
Financial, Mail Code 482-309-904, Argonaut Building, 485 West Milwaukee Avenue,
Detroit, Michigan 48202. A three (3) month security deposit in the amount of
$8,358.48 together with the first monthly rental payment of $2,786.16 for a
total payment of $11,144.64 shall be deposited with the Sublessor upon the
execution of this Sublease which may be used at Sublessor's option to cure any
breach of the Sublease by Sublessee.
SECOND - REPAIRS: Sublessee accepts the premises in an "as is" condition except
that Sublessor shall have the carpeting cleaned prior to November 15, 1997.
Thereafter Sublessee at Sublessee's expense shall keep the premises in good
repair, ordinary wear and tear, repairs to the roof, exterior of the building
and structural repairs excepted, unless such repairs are made necessary by the
act or negligence of the Sublessee and at the expiration of the term to remove
its goods and effects and peaceably yield up the premises to the Sublessor in as
good condition as when delivered to Sublessee, ordinary wear and tear, damage by
fire, the elements, act of the public enemy or casualty excepted; all notices to
quit or vacate being hereby expressly waived, any law, usage or custom to the
contrary notwithstanding.
<PAGE>
THIRD - COMPLIANCE WITH LAWS, ORDINANCES, AND ENVIRONMENTAL: Sublessee
shall promptly comply with all laws, ordinances, requirements, and regulations
of the federal, state, county, municipal, and other authorities, the fire
insurance underwriters, and any insurance organizations or associations; except
that Sublessee shall not be required to make any alterations to the exterior of
the building, or alterations of a structural nature. Sublessee represents and
warrants that it will comply with all specifically applicable Environmental Laws
in connection with its use of or operations at the property, and that Sublessee
warrants and agrees that it will indemnify and hold Sublessor harmless from any
claim to which Sublessor may be subjected to the extent such claim results from
Sublessor's breach of any of its representations or warranties.
FOURTH - VIEWING PREMISES: Sublessee shall use the premises exclusively for the
purpose set forth herein and during the last three (3) months of this Sublease,
or any extension thereof, and permit the Sublessor to display the usual "To Let"
signs and to show the premises to prospective tenants. Sublessee further agrees
that at any time during the term Sublessor, Sublessor's landlord, or their
agents, may enter the premises for the purpose of examining the condition
thereof, or to make repairs in any part of the building, but in making such
reservation, Sublessor does not assume any liability for the care or supervision
of the premises or appurtenances.
FIFTH - ALTERATIONS AND ASSIGNMENT: Sublessee will not make or permit to be made
any alterations or additions to said premises, nor assign, mortgage, or pledge
this Sublease, nor sublet the whole or any part of the premises without
Sublessor's written consent or as otherwise set forth in the underlying Sublease
dated March 21, 1994. Consent by Sublessor shall apply solely to the particular
transaction consented to and shall not constitute a waiver by Sublessor of the
provisions of this Sublease.
SIXTH - INSURANCE: Sublessee will not leave the premises unoccupied during the
term, nor by any act of commission or omission cause an increase in the rate of
insurance or the cancellation of any insurance policy. In the event of any
increase in the rate of insurance caused by Sublessee's occupancy, Sublessee
agrees to pay on demand the amount of any such increase, and in default of such
payment, such amount may be added to the next installment of rent as additional
rent. Sublessee shall, at its sole cost and expense, obtain and maintain during
the term of the Sublease, Comprehensive General Liability insurance, including
Blanket Contractual Liability coverage, with limits of not less than Two Million
Dollars ($2,000,000) Combined Single Limit for Personal Injury and Property
Damage; Comprehensive Automobile Liability Insurance covering all owned,
non-owned and hired vehicles with limits of not less than One Million Dollars
($1,000,000) Combined Single Limit for Personal Injury and Property Damage; and
Statutory Workers Compensation and Employers Liability coverage with limits of
not less than $250,000. Sublessee shall deliver to Sublessor upon request a
certificate evidencing such coverages. Such insurance policies shall provide for
no cancellation or material alteration without thirty (30) days prior written
notice to Sublessor.
SEVENTH - SIGNS AND SIDEWALKS: Sublessee shall not install any awnings,
advertisements, or signs on any part of the premises without Sublessor's written
consent and will keep the sidewalks free from ice, snow, and all obstructions.
EIGHTH - UTILITIES: Sublessee will be furnished those services set forth in
Article 18.01 Services and Equipment of the underlying Sublease from 8:00 a.m.
to 6:00 p.m. Monday through Friday
2
<PAGE>
excepting federal, state, or contract holidays of the AFL-CIO. Sublessee
otherwise shall be permitted access to the building seven (7) days per week,
twenty-four (24) hours per day.
NINTH- INDEMNIFICATION: Sublessor shall not be responsible for any defect or
change of condition in said premises, nor for any damage thereto, not to any
person, nor to goods or things contained therein due to any cause whatsoever
except the act or negligence of the Sublessor, and Sublessee will indemnify
Sublessor from any claims, demands, and actions arising in connection with
Sublessee's use of the property, or the use by any person occupying said
premises during the term hereof, or by reason of any breach or non-performance
of any covenant herein, or the violation of any law or regulation by Sublessee.
TENTH - FIRE AND CASUALTY: If the premises shall be so damaged by fire, other
casualty, or act of the public enemy so as to be substantially destroyed, then
this Sublease shall terminate and any unearned rent paid in advance by Sublessee
shall be apportioned and refunded to it, but in case the premises are not
substantially destroyed, Sublessor will endeavor to have its Lessor restore the
premises and a just proportion of the rent shall abate according to the extent
to which premises have been rendered untenantable until the premises have been
restored. The Sublessee agrees to give the Sublessor immediate notice of any
damage to the premises.
ELEVENTH - CANCELLATION: In the event Sublessee fails to perform or observe any
of the covenants contained herein on its part to be observed and performed for
ten (10) days after notice by Sublessor, (a) Sublessor may forthwith terminate
or cancel this Sublease by notifying Sublessee as hereinafter provided, and upon
such termination or cancellation, Sublessee shall be liable to Sublessor for all
damages Sublessor sustains by reason of Sublessee's breach of covenant and of
such termination or cancellation; or (b) Sublessor may forthwith re-enter the
premises without notice and upon re-entry may let the premises or any part
thereof as agent for Sublessee and receive the rent therefor, applying the same
first to the payment of such expense as Sublessor may be put to in entering and
letting the premises and then to the payment of the rent and the fulfillment of
Sublessee's covenants hereunder; and Sublessee agrees to pay and shall be liable
for amounts equal to the several installments of rent as they would, under the
terms of this Sublease, become due if no default had occurred, whether the
demised premises be re-let or remain vacant in whole or in part for a period
less than the remainder of the term, or for the whole thereof, but Sublessee
shall be entitled to be credited at the end of each month with any net amounts
actually received by Sublessor during such months for the use or occupancy of
the demised premises or any part thereof; provided, however, that all sums paid
and liabilities incurred by Sublessor for any of the purposes aforesaid (which
Sublessee also agrees to pay and shall be liable for) shall have been first paid
in full to Sublessor, either directly by Sublessee or out of moneys actually
received for renting said demised premises after Sublessor shall have received
undisputed possession thereof, and the maintenance of any action or proceeding
to recover possession of the premises or any installment or installments of rent
or any other moneys that may be due or become due from Sublessee to Sublessor
shall not preclude Sublessor from thereafter instituting and maintaining
subsequent actions or proceedings for the recovery of possession of the premises
or of any subsequent payment or payments of rent or any other moneys that may be
due or become due from Sublessee or Sublessor. A waiver by Sublessor of any
breach or breaches by Sublessee of any one or more of the covenants or
conditions hereof shall not bar forfeiture of any other rights or remedies of
Sublessor for any subsequent breach of any such or other covenants and
conditions.
3
<PAGE>
TWELFTH - ADDITIONAL RENT: If Sublessor shall make any expenditure for which
Sublessee is responsible, or if Sublessee shall fail to make any payment which
Sublessee is obliged to make hereunder, then the amount thereof may, at
Sublessor's option, be added to any installment of rent then due or thereafter
becoming due. It is understood and agreed that Sublessee shall pay its pro rata
share (7%) of real estate taxes and costs of operation over the base year of
1994 as set forth in Articles 19 and 20 of the underlying Sublease dated March
21, 1994.
THIRTEENTH - CONDEMNATION: In the event the premises or any part thereof are
taken or condemned for a temporary or permanent public of quasi-public use,
Sublessor may, at its option, terminate this Sublease and in such event any
unearned rent paid in advance shall be returned to Sublessee.
FOURTEENTH - DEMOLITION: If any authority having jurisdiction shall decide that
the building or buildings should be demolished and removed, then forthwith upon
such decision being made, the Sublessee shall vacate the premises and this
Sublease shall cease and come to an end and any unearned rent paid in advance by
Sublessee shall be apportioned and refunded to it.
FIFTEENTH - NOTICES: That all notices to be given hereunder by either party
shall be in writing and given by personal delivery to the Sublessee or to one of
the executive officers of the Sublessor or shall be send by registered mail
addressed to the party intended to be notified at the post office address of
such party last known to the party giving such notice and notice given as
aforesaid shall be a sufficient service thereof. Provided, however, that it is
mutually agreed that the Sublessor appoints the Executive Director of Worldwide
Facilities Group and the Director of Worldwide Real estate, General Motors
Corporation, Mail Code 482-309-939, 485 West Milwaukee Avenue, Detroit, Michigan
48202, as its agents, and that either of them may give or receive all notices to
be given hereunder, and notices shall be sent to either of them and not
otherwise. The right is hereby reserved by the Sublessor to countermand such
appointments and make others consistent herewith, due notice of which shall be
given by the Sublessor to the Sublessee.
SIXTEENTH - TERMINATION: If at any time proceedings in bankruptcy, or pursuant
to any other act for the relief of debtors, shall be instituted by or against
Sublessee, or if Sublessee shall compound Sublessee's debts or assign over
Sublessee's estate or effects for payment thereof, of if any execution shall
issue against Sublessee or any of Sublessee's effects whatsoever, of or if a
receiver or trustee shall be appointed of Sublessee's property, or if this
Sublease shall by operation of law, devolve upon or pass to any person or
persons other than Sublessee personally, then and in each of said cases,
Sublessor may terminate this Sublease forthwith by notifying Sublessee as herein
provided. Upon such termination all sums due and payable or to become due an
payable by Sublessee shall at once become due and payable.
SEVENTH - SUBLEASE: This is a Sublease and the Sublessor's interest in the
premises is as Lessee under an underlying Lease made by SMLP I, Limited
Partnership, as Lessor, and General Motors Corporation, as Lessee, dated March
21, 1994, a copy of which, initialed for identification, is attached hereto.
This Sublease is expressly made subject to all the terms and conditions of said
underlying Lease and the Sublessee agrees to use the premises in accordance with
the terms of said underlying Lease and not do or omit to do anything which will
breach any of the terms thereof. If said underlying
4
<PAGE>
Lease is terminated, this Sublease shall terminate simultaneously and any
unearned rent paid in advance shall be refunded to the Sublessee.
EIGHTEENTH - QUIET POSSESSION: Sublessor hereby covenants that Sublessee, upon
paying the rent as herein reserved and performing all the covenants and
agreements herein contained on the part of the Sublessee, may quietly enjoy the
premises, except as herein otherwise provided, and subject, however, to the
terms of the Sublease to Sublessor, and to the terms of any mortgages which may
now or hereafter affect the premises.
NINETEENTH - WAIVER OF SUBROGATION: Sublessor and Sublessee waive all rights,
each against the other, for damages caused by fire or other perils covered by
insurance where such damages are sustained in connection with the occupancy of
the leased premises.
The covenants and agreements contained in the foregoing Sublease are binding
upon the parties hereto and their respective heirs, executors, administrators,
successors, legal representatives and assigns.
IN WITNESS WHEREOF, the Sublessor has signed and sealed this instrument this
11th day of November , 1997, and the Sublessee has signed and sealed this
instrument this 12th day of November , 1997.
In the presence of GENERAL MOTORS CORPORATION
/s/ M.J. Ansley By:/s/ M.P. Cullen
- ------------------------- ---------------------------
ATTEST/s/ Bernice Heady
------------------------
Assistant Secretary
In the presence of INTERNATIONAL DISPENSING
CORPORATION
By:/s/ Jon Silverman
- ------------------------- ---------------------------
President
/s/ Alida Rivera ATTEST/s/ Jeffrey Lewenthal
- ------------------------- ------------------------
5
<PAGE>
CONSENT TO SUBLEASE
EASTRIDGE PROPERTIES I CORPORATION, a New York corporation, acting herein
by ALBERT B. ASHFORTH, INC., duly authorized, with an office at 925 Westchester
Avenue, White Plains, New York 10604 ("Landlord"), hereby consents to the
sublease by GENERAL MOTORS CORPORATION ("Tenant"), to INTERNATIONAL DISPENSING
CORPORATION, with a office at 342 Madison Avenue, New York, New York
("Subtenant"), of the premises located at 2500 Westchester Avenue, Purchase, New
York 10577, and described in the sublease between Tenant and Subtenant, dated as
of 11/5/97 ("Sublease"), upon the terms and conditions set forth therein, which
premises are now leased to Tenant pursuant to a lease dated August 31, 1995, as
amended (the "Lease"), upon the following terms and conditions:
(a) Nothing herein contained shall be construed to modify, waive, impair or
affect any of the covenants, agreements, terms, provisions or conditions
contained in the Lease. This Consent does not and shall not be construed or
implied to be a consent to any other matter for which Landlord's consent is
required under the Lease including any other or further subletting or assignment
by either Tenant or Subtenant.
(b) Upon the expiration or any earlier termination of the Lease or in case
of the surrender of the Lease by Tenant to Landlord, the Sublease and the term
and estate thereby granted shall, at the option of the Landlord, terminate as of
the effective date of such expiration, termination or surrender, and Subtenant
shall vacate such portion of the premises on such date.
(c) (a) Tenant and Subtenant hereby agree that if Subtenant shall be in
default of any obligation of Subtenant under the Sublease, which default also
constitutes a default by Tenant under the Lease, the Landlord shall
simultaneously provide Tenant and Subtenant with a notice of such
6
<PAGE>
default and in the event the default shall continue beyond the applicable cure
period in the Lease, Landlord shall be permitted to avail itself of all of the
rights and remedies available to Tenant.
(b) Tenant expressly acknowledges and agrees that the exercise by
Landlord of any of the foregoing rights and remedies shall not in any way impair
Landlord's entitlement to pursue other rights and remedies directly against
Tenant.
(d) A true and complete copy of the Sublease is attached hereto and a true
and complete copy of each and every amendment thereto shall be delivered to
Landlord within ten (10) days after the execution and delivery thereof by the
parties thereto; it being understood that any amendment to the Sublease shall
require the Landlord's consent as provided in the Lease. It is understood that
Landlord shall not be deemed to be party to the Sublease or any such amendment
nor bound by any of the covenants, agreements, terms, provisions or conditions
thereof and that neither the execution and delivery of this Consent nor the
receipt by Landlord of a copy of any such amendment shall be deemed to change
any provision of this Consent or to be a consent to, or an approval by the
Landlord of, any provision contained in any such amendment.
(e) In consideration of this Consent, throughout the term of the Sublease,
Subtenant shall include Landlord and Albert B. Ashforth, Inc. as additional
insureds, each to the extent of its interest in the Premises and the Building,
under Subtenant's general liability insurance policy or policies. Subtenant
shall provide Landlord with a certificate verifying insurance coverage in
amounts not less than Two Million ($2,000,000.00) Dollars.
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused these presents to be
duly executed as of the 12th day of November, 1997.
LANDLORD
EASTRIDGE PROPERTIES I CORPORATION
WITNESS: By Albert B. Ashforth, Inc.
Its Agent and Authorized Signatory
By:/s/ Michael J. Siatyk
- -------------------------- ----------------------------
Michael J. Siatyk
Its Senior Vice President
TENANT
WITNESS: GENERAL MOTORS CORPORATION
/s/ M.J. Ansley By:/s/ M.P. Cullen
- -------------------------- ----------------------------
M.P. Cullen
Its Director of Worldwide
Real Estate
SUBTENANT
WITNESS: INTERNATIONAL DISPENSING
CORPORATION
/s/ By:/s/ Jon Silverman
- -------------------------- ----------------------------
Jon Silverman
Its President
8
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS AS OF AND FOR THE PERIOD ENDED DECEMBER 31, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001016739
<NAME> INTERNATIONAL DISPENSING CORPORATION
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-1-1997
<PERIOD-END> DEC-31-1997
<CASH> 3,138,204
<SECURITIES> 0
<RECEIVABLES> 111,199
<ALLOWANCES> 111,199
<INVENTORY> 0
<CURRENT-ASSETS> 3,184,537
<PP&E> 33,539
<DEPRECIATION> 6,558
<TOTAL-ASSETS> 3,269,304
<CURRENT-LIABILITIES> 62,021
<BONDS> 0
0
0
<COMMON> 9,567
<OTHER-SE> 3,197,716
<TOTAL-LIABILITY-AND-EQUITY> 3,269,304
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,221,728
<LOSS-PROVISION> 111,199
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (1,145,091)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,145,091)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,145,091)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
