<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-SB
AMENDMENT NO. 3
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTIONS 12(b)
OR 12(g) OF THE SECURITIES EXCHANGES ACT OF 1934
Integrated Food Resources, Inc.
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(Name of Small Business Issuer in Its Charter)
State of Nevada 93-1255001
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
6700 S.W. Sandburg Street, Tigard, Oregon 97223
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(Address of Principal Executive Offices)
503-598-4375
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(Issuer's Telephone No.)
Securities to be registered pursuant to Section 12(b) of the
Act: None
Securities of be registered pursuant t Section 12(g) of the
Act:
Class A Voting Common Stock
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(Title of class)
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PART I
ITEM 1. DESCRIPTION OF THE BUSINESS
HISTORY
Integrated Food Resources, Inc. ("the Company") was originally organized in
the State of Oregon on September 12, 1966 under the name of The Oregon Trail
Company. Under the Company's management at that time, of which our current
management was not a part, the Company's original business was the development
of a family-oriented recreational theme park on the Oregon coast. In May 1968,
the Company's name was changed to Pixieland Corporation and the development of
the theme park continued under the new name. The theme park opened in 1968
and closed in October 1978. The closure was caused by poor attendance and lack
of public support of the theme park concept. At that time, the Company stopped
all of its operations and remained an inactive corporation until May 1989.
At various times since May 1989, the Company changed its name to American
Business Associates, Inc.; Cyberwin Corporation; and back to Pixieland
Corporation. The various name changes were a result of several efforts to
either acquire or merge with existing businesses, none of which developed. In
October 1996, the Company changed its state of incorporation to Nevada.
Pursuant to a renewed effort at a reorganization, on September 25, 1997
the Company changed its name to Integrated Food Resources, Inc. and installed
its current management team. On September 29, 1997, the Company signed a
Share Exchange Agreement with Seabourne Ventures, Inc. ("Seabourne"), a
newly formed Oregon corporation organized by the current management of the
Company. Seabourne was organized as a wholly-owned subsidiary of the Company
to operate its business of harvesting, processing and distributing seafood
and seafood-related food products.
On July 31, 1998, the Company signed an Asset Acquisition Agreement and
Plan of Reorganization with Clipper Cubed Corporation ("Clipper Cubed"), a
Nevada corporation whereby we purchased all of the assets of Clipper Cubed in
exchange for our common stock. As part of our agreement with Clipper Cubed, we
formed ClipperNet Corporation ("ClipperNet"), an Oregon corporation, and the
assets purchased from Clipper Cubed were transferred to ClipperNet. ClipperNet
is now a wholly-owned subsidiary of the Company and Clipper Cubed has stopped
doing business. ClipperNet has developed a proprietary high-speed wireless,
microwave communications technology with broad applications for the Internet
including Internet access, voice transmission, video-conferencing, document
sharing and audio and video streaming. The acquisition of ClipperNet is a
demonstration of the Company's strategic belief that technology will play an
increasingly important role in the global sourcing, procurement and distribution
of food products.
As used in this Registration Statement, whenever reference is made to the
Company, it shall include Seabourne and ClipperNet, if the context is
appropriate.
BUSINESS AND OPERATING PLAN
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The Company is engaged in the business of procuring, processing,
marketing and distributing private-label food products for large food retail
chains in the United States and Canada. We obtain our products from
affiliated and non-affiliated sources located throughout the world. We in
turn supply these food products to our retail food chain clients under a
relationship with International Trade Group, LLC ("ITG"), an affiliated
company.
ITG is an Oregon limited liability company of which Alain de la Motte, the
President, Chief Executive Officer and director of the Company, owns an 90%
controlling interest. ITG is a privately-held company that serves as the
central buying agent for several of the nation's largest food retailers, such as
The Kroger Company, Western Family Foods and Safeway. It coordinates and
manages the international procurement needs of these customers supplying them
with high quality, competitively priced private-label food products. ITG has
developed the expertise to facilitate the import and export of food products,
and food retailers find it more economical and efficient to entrust their
private-label food procurement activities to ITG who can, as the overseas
representative of the collective retailer group, negotiate advantageous supplier
contracts throughout the world. ITG qualifies the foreign supplier's production
capabilities, and it negotiates contracts specifying pricing levels, volume
commitments, quality control standards, product specifications and delivery
schedules. ITG also engages in the important functions of international banking
and financing administration, plant inspections, logistics management, U.S.
Customs clearance and U.S. Food and Drug Administration release. The Company
will be one of the suppliers from whom ITG will procure foreign produced
private-label food products. ITG's purchases of canned tuna and other products
from the Company are arms-length transactions reflecting market prices and
customary profit margins.
Seabourne is in the business of harvesting, processing, marketing and
distributing seafood products, principally canned tuna fish and tuna-related
products. Seabourne will use proprietary harvesting techniques for catching
tuna in the open seas and factory ships for initial processing of the tuna. The
harvesting and processing system to be used will allow Seabourne to offer canned
tuna fish and tuna-related products that are superior in quality and priced
below established national brands. Seabourne is a source of tuna and other
seafood-related products for the Company. Prior to being acquired by the
Company, Seabourne had entered into an Asset Acquisition Agreement with ITG on
July 1, 1997 whereby Seabourne, among other things, acquired certain tuna
processing equipment and other related assets.
In April 1998, the Company and the Republic of Guinea ("Guinea"), a
French-speaking, West African nation, entered into three separate Project
Development Agreements covering agricultural and aquacultural development.
One agreement deals with the establishment of prawn farms and a processing
facility. Another covers the development of tropical fruit plantations and a
processing facility. The third one covers the issuance fishing permits for
the country's territorial waters as well as the development of facilities for
fish processing and cold storage. On July 25, 1998, the government of Guinea
transferred to the Company approximately 35,000 acres of prime coastal
agricultural and aquacultural land for the purpose of implementing the
previously described Project Development Agreements. The land is owned by
the Company free of encumbrances and obligations, including the specific
obligations to develop the land as previously required by the Project
Development Agreements. The government of Guinea expects significant
economic benefits from the land grant to the Company such as employment
opportunities, infrastructure development and the generation of hard currency
reserves through the export of the food products processed by the Company.
The Company may begin
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development of the property in 1999 and will fund these activities through
additional debt or equity financing. With such financing, we expect to
create viable commercial operations to maximize the land use in these
agricultural and aquacultural farming projects.
The Company has planned a staged development of the property in Guinea.
The initial emphasis will be on establishing the infrastructure to support
Company projects. The funding requirement for this purpose is anticipated to be
approximately $10 million over the first two years of operation. The initial
development project will concentrate on shrimp farming and processing.
Construction of the tuna processing cannery and development of the tropical
fruit plantations fall in the stage of future projects. Their start-up dates
are still being planned. The anticipated funding requirements for these several
projects remain unchanged from the projections discussed in the Project
Development Agreements which are included in this Registration Statement as
Exhibit 10.4.
The Company has developed a form of structured financing as a means of
raising the capital required to finance its operations. The Company will
negotiate with major U.S. and international food retailers, wholesalers and
distributors to secure contracts for future delivery commitments of food
products from its global production operations. With regard to the shrimp and
tuna projects, the Company is confident its global experience and past business
relationships will be instrumental in the successful negotiation of forward
contracts for frozen shrimp, fresh-frozen tuna filets and steaks and canned
tuna.
The food retailers will issue clean irrevocable Standby Letters of
Credit ("SLOC") to support their forward purchase contracts. This bank
instrument of guarantee provides several benefits to the customer. The SLOC
guarantees the food retailer access to an on-going supply of
competitively-priced, private-label food products without the financial drain
of a large, up-front cash outlay. Subsequently, the Company may issue debt
and/or equity securities backed by the SLOC pursuant to a structured
financing negotiated on a case-by-case basis.
Food products are traded as a commodity item which limits the margins a
wholesaler can command in the U.S. marketplace. Competitive price pressures
also arise when a limited availability of raw materials, which are procured
from agricultural and aquacultural environments and therefore beyond control of
the producer, leads to a diminished supply of finished goods.
The diversity of food products traded in the global marketplace fragments
the market to such an extent that it is difficult to provide overall ranking
data for the several categories in which the Company intends to participate.
One category, however, that lends itself to ranking is canned tuna fish. This
category is dominated by the business activities of Starkist, Bumble Bee and
Chicken of the Sea. Based on available data, these nationally branded products
account for approximately 76% of U.S. retail sales. Private-label sales account
for the remaining 24% of market share. It is within this narrow market segment
that the Company is engaged.
The Company believes very strongly that information technology and business
to business electronic commerce will play an increasingly important role in the
global sourcing, procurement and distribution of food products. The acquisition
of ClipperNet is considered critical to our long-term objective, as it will
facilitate our growth and development in these areas with regard to the trading
of food products. ClipperNet has technically skilled employees whose
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development of Internet-based systems will serve as communications resources not
only between us and our customers but also between our various global locations,
especially in those foreign locations with underdeveloped infrastructure.
ClipperNet provides high-speed wireless Internet access services to
business and residential customers in Oregon's Willamette Valley and Central
Coast regions. The service is suited for video conferencing, Web hosting, Web
browsing, e-mail and Internet faxing. ClipperNet's service uses point-to-point
microwave technology as an alternative to traditional Internet access.
ClipperNet's microwave network technology can be installed quickly and
efficiently in the service area. A small antenna installed on the roof of an
office building or a home communicates with a small microwave transceiver which
is connected to a router which distributes incoming and outgoing data to and
from individual workstations.
In November 1998, ClipperNet purchased all of the assets of Netbridge
Internet Access Services ("Netbridge"), an Internet service provider serving the
Oregon coastal cities of Newport and Lincoln City. The Company has guaranteed
ClipperNet's obligations to the previous owners of Netbridge under the terms of
the Asset Purchase Agreement which is included in this Registration Statement as
Exhibit 10.6. Similar acquisitions involving other Internet service providers
are anticipated for 1999. However, there are no agreements, arrangements or
understandings at this time in connection with any business combination or
acquisition.
ClipperNet competes in the Internet access industry against three primary
delivery technologies:
Telecommunication Networks: Over the next 3-4 years, data transmissions
are expected to account for about 95% of the $192 billion annual
revenues of the U.S. local and long distance communication industry.
This delivery system is principally targeted at the business-user
segment. The industry is investing in fiber optics for its main trunk
systems, but there is still limited availability of this broadband
infrastructure at the user sites. Major players in this group include
AT&T (which owns TCI), MCI Worldcom, Sprint, Bell Atlantic and GTE.
Internet Service Providers: This market for service to U.S. homes is
estimated at an annual volume of $4.2 billion. Most providers have yet
to invest in broadband infrastructure, but this is expected to change as
the demand for high speed access grows. Major providers include AOL,
Microsoft Network, Mindspring/Netcom, Earthlink and the services
provided by companies such as AT&T and MCI.
Television Cable Companies: This market is estimated at an annual volume
of $30 billion. The revenue share derived from data transmissions is
expected to grow as the industry upgrades its network infrastructure
with high-speed two-way hybrid fiber optic coaxial cable which will
enable the home user market to make better use of this service. Major
cable companies include TCI (owned by AT&T), Time Warner, Comcast, Cox,
Cablevision and Media One.
ClipperNet is well situated to compete against these delivery technologies.
While the competition is hampered by the need to invest time and money to expand
its broadband cable networks, ClipperNet is poised to rapidly react to the
market opportunity. The deployment of its proprietary high-speed microwave
technology can be accomplished more quickly and with less
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expense.
The Company is committed to developing and marketing products that improve
upon the ways in which business is traditionally conducted. Project
Harvest-Registered Trademark- is an example of how the Company is marshalling
its resources, especially ClipperNet's ability to deliver a high-speed
communication system to the remotest parts of the world, to this goal.
The traditional model for global sourcing and distribution of food products
encompasses two approaches. In "cold calling", a company in one country
initiates an unsolicited offer to sell or buy a product to a company in another
country. The "brokered relationship" involves a buyer in one country, a seller
in another country and one or more intermediaries between the principals. Both
approaches necessarily bring inefficiencies to the marketplace. The former
requires a repetitive exchange of verbal and written communications to qualify
the performance capabilities of the separate parties and to verity the quality
and validity of the unsolicited offer. Occasionally, this approach leads to a
profitable transaction, but it typically becomes a draining investment of time
and effort that produces no lasting business relationship. In the latter,
product quality can become a secondary consideration to the spread created
between seller and buyer prices, and the intermediaries guardedly protect their
interests by withholding the identity of the principals.
Project Harvest-Registered Trademark- eliminates these inefficiencies. It
is a system that combines Internet technology with industry experience to
simplify the process of negotiating and consummating the global transaction.
Its engine is a proprietary, patents-pending software program the rights to
which have been obtained by the Company through a Technology and Trademark
License Agreement with Alain de la Motte dated January 25, 1999 which is
included in this Registration Statement as Exhibit 10.8.
Buyers and suppliers from throughout the world will be invited to
participate in Project Harvest-Registered Trademark-, and each one will be
required to submit specified information about itself to become registered in
the system. Pre-qualifying the buyers and sellers will ensure they are genuine
in their interest and capable of meeting their commitments. Registered buyers
and sellers can feel great confidence in the available pool of qualified
potential partners.
A buyer can use the supplier database to identify viable suppliers. The
available information will reveal a supplier's product specifications, product
ingredients, quality control procedures, labelling options, seasonal
availability, supplier contacts, factory locations and trade and banking
references. A supplier can rely on this tool to review similar information in
the buyer database. The databases are accurate, password protected and firewall
insulated, and they will enable buyers and sellers to quickly identify and
confidently qualify potential business partners throughout the world.
Project Harvest-Registered Trademark- facilitates open communication
between the global partners. Modules within the program automatically format
the buyer's product requirements into a clear and concise Request for Quotation
("RFQ") which is then sent directly to the potential supplier. Because it was
generated by Project Harvest-Registered Trademark-, the supplier knows the RFQ
has come from a genuinely interested, well-qualified buyer. The quote goes
directly back to the buyer, and the transaction can be completed with fewer
obstacles and in less time than under the traditional approaches.
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Language represents a frequent barrier in international commerce, and
Project Harvest-Registered Trademark- eliminates this concern. The software
includes a translator program that allows the users to communicate in one of
several languages in common commercial use. A buyer can create an RFQ in his
native language, and Project Harvest-Registered Trademark- will translate that
communication into the language of the recipient. In return, the supplier's
quote is prepared in his native language which is then translated for the buyer.
Should the parties choose not to consummate the transaction, the RFQ and
the quote are posted on the Project Harvest-Registered Trademark- trading floor.
Here other registered buyers and sellers can review the RFQ and the quote to
determine their interest in participating in the transaction. This market
making service extends the opportunity to consummate a transaction beyond the
initial contact to all registered participants in the Project Harvest-Registered
Trademark- system.
One of Project Harvest-Registered Trademark-'s most distinguishing features
is the assignment of factory ratings. Despite their similar appearances on the
shelf, it is very unlikely that the same food product from different suppliers
was produced under the same manufacturing conditions. These variances make it
necessary for a buyer's quality assurance authority to visit each potential
supplier and review critical sourcing criteria such as manufacturing processes,
sanitation standards, employee health practices, quality control procedures,
process engineering controls and regulatory requirement compliance. Given the
number of potential suppliers, a buyer's investment in time and money can be
considerable. This expenditure is compounded by the fact that the same supplier
is visited and reviewed by every buyer in the industry.
Project Harvest-Registered Trademark- simplifies factory evaluation and
approval by standardizing the rating process. The Company has drawn upon its
industry experience to develop a list of criteria which form the basis for the
factory rating standard. Each criterion is defined to exceed the standard set
by any single buyer. The Company is working with recognized authorities with
experience in global food processing and regulatory compliance who will use this
rating system to conduct on-site evaluations around the world. Once a rating
has been assigned to a facility, the buyers will be able to discern with
confidence a supplier's commitment to quality assurance, process control and
manufacturing procedures. Should a supplier choose not to become rated, Project
Harvest-Registered Trademark- will alert registered buyers to the facility's
unrated status.
Project Harvest-Registered Trademark- is an Internet based system, and any
buyer or seller with the ability to connect to the Internet can engage in global
business to business E-commerce transactions. The Company is confident that the
synergy of Project Harvest-Registered Trademark- and the ClipperNet technology
will give it a clear competitive advantage in the marketplace.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
REVIEW OF FINANCIAL CONDITION
Prior to and as of July 31, 1997, the Company had no significant operating
activities.
For the year ended July 31, 1998, the Company experienced a net loss of
$2,451,838 or $.15 per common share on sales of $5,378,691. Approximately 97%
of all sales revenues during 1998 were to ITG who resold the Company's tuna
products to large retail food chains
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throughout the United States. The cost of sales exceeded net sales for the
year ended July 31, 1998 by $559,541 largely due to the impact of the "El
Nino" effect on the tuna fishing industry and the relatively high production
costs incurred by the Company pursuant to its Toll Packing Agreement with
Rowen. Selling, general and administrative expenses of $2,094,051 and other
expenses of $357,787 contributed to a net loss for the year ended July 31,
1998 of $2,451,838. The Company's operating expenses of $2,094,051 included
significant expenditures to develop corporate agriculture and aquaculture
capabilities in Mexico and in Guinea, to complete the acquisition of Clipper
Cubed and to pursue the Company's long-term financing and growth strategies.
Other expenses were primarily comprised of interest expenses paid to a
related company that provided working capital financing during the year ended
July 31, 1998.
As of July 31, 1998, the Company had total assets of $6,649,806 comprised
of current assets of $1,040,965, goodwill of $4,411,434 and other assets of
$19,496. Current assets consisted primarily of cash and receivables and
inventories relating to tuna processing operations. Goodwill, which is being
amortized to expense over a 15 year period, was comprised of the excess of the
purchase price over assets acquired and liabilities assumed in the Company's
acquisition of Clipper Cubed and its Mexican fishing operations from ITG.
Included among the Company's assets as of July 31, 1998 was land held for
future development of $74,498,400 offset by an equal amount recorded as an
adjustment for foreign land grant. The land was acquired as a land grant from
Guinea, and it was recorded on the basis of appraised value. However, the value
of the land has been offset by the adjustment for foreign land grant in
accordance with international accounting standards. The adjustment balance will
be amortized to income in future years in amounts that will offset depreciation
or amortization expense arising from assets acquired or constructed for use in
conjunction with the foreign land grant. The land was received by the Company
free of encumbrance and without any commitment or obligation to Guinea.
Management believes development of properties in Guinea will require a
significant commitment of funds to realize their potential operating value.
Accordingly, the Company continues to pursue and evaluate viable sources of
long-term financing for future agricultural and aquacultural operations in
Guinea. There is, however, no assurance that such financing is or will become
available to the Company in the foreseeable future.
As of July 31, 1998, current assets were not sufficient to offset current
liabilities of $4,669,835 that resulted in a deficit working capital position of
$3,628,870. This deficit working capital position was supported by unsecured
related-party financing of $4,261,500 due in full December 31, 1998. The
Company remained confident that the related-party creditors, ITG and ITG
Finance, would continue to provide necessary operating support and, as of July
31, 1998, was in the process of negotiating conversion of the debt instruments
into equity at their maturity. As of July 31, 1998, the Company's leverage
ratio, calculated as the ratio of total debt to total equity, was 3.25-to-1. In
the opinion of the Company, this ratio represented an appropriate and manageable
level of internal and external financing of operations as of the fiscal year
then ended. Although related-party financing was necessary to augment its
operations through the period ended July 31, 1998, the Company continues to
pursue strategies that will provide an adequate, balanced and stable source of
financing for continuing operations.
For the three months ended October 31, 1998, the Company experienced a net
loss of $390,480 or $.02 per common share on sales of $167,089. This compares
to losses for the same period in the prior year of $397,938 on sales of
$1,021,892. The decline in sales is
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attributable entirely to the Company's temporary discontinuance of its tuna
processing business. An unfavorable market for raw materials has made it
unprofitable to continue processing tuna under these prevailing conditions.
During the first quarter of fiscal 1999, the focus of the Company's tuna
processing business has been on asserting firmer control of raw material
supply channels. During this time, the Company has also been focused on
building those portions of its business related to wireless Internet access
services. Essentially all sales and related expenses for the first quarter
of 1999 were comprised of activities in this segment of the Company's
operations.
As of October 31, 1998, the Company had consolidated total assets of
$6,081,387. Intangible assets, comprised of unamortized goodwill, represented
$4,433,153 or 72.8% of total assets with the remainder comprised of plant and
equipment of $1,171,866 and current assets of $476,368. As of October 31, 1998,
current assets exceeded current liabilities of $388,428 by $87,940. This
positive working capital position resulted from the conversion of related-party
notes payable to convertible preferred stock during the first quarter of fiscal
1999. As a result of converting these related-party notes, total shareholders'
equity as of October 31, 1998 increased to $5,323,953 and the Company's leverage
ratio declined significantly to .14-to-1.
REVIEW OF OPERATING RESULTS
SEABOURNE VENTURES, INC.
Seabourne began its business operation in July 1997, so there were no
operating results prior to the Company's fiscal year ended July 31, 1997. The
Company's revenue for fiscal year 1997-1998 was derived mainly from Seabourne's
tuna processing and marketing operations. ITG entered into a Toll Packing
Agreement for Canned Tuna ("Toll Packing Agreement") on September 5, 1996 with
Agroindustrias Rowen, S.A. de C.V. ("Rowen") of Ensenada, Mexico to process and
can tuna fish for the U.S. marketplace. The rights of ITG under the Toll
Packing Agreement was one of the assets acquired by Seabourne under the Asset
Acquisition Agreement included in this Registration Statement as Exhibit 10.1.
Essentially all of the production from the Rowen facility was sold to ITG
and eventually to ITG's previously mentioned customer network of major U.S. food
retailers. These sales produced $5,378,691 in gross revenue. Due to a limited
supply of dolphin-safe raw material in Mexico and difficult El Nino conditions,
Seabourne was able to fulfill less than 10% of the total demand for canned tuna
from the ITG members and other direct customers.
Under the Toll Packing Agreement, Seabourne contracted with Rowen to pack
canned tuna fish for Seabourne's U.S. customers. Seabourne has no current
direct or indirect ownership interest in the processing plant Rowen receives a
fixed cost per case to supply the means of production and the labor. To control
the costs, Seabourne has provided the fresh frozen whole tuna through contracts
with Mexican and U.S. tuna boat owners, and it supplied all direct manufacturing
materials (cartons, cans, lids, labels, hydrolyzed protein, pallets, etc.).
Seabourne hired a cadre of technical professionals to monitor the production
operation and to ensure compliance with quality specifications. None of the
individuals placed at the plant by Seabourne directly managed the operations of
the plant. This management function was performed by Rowen's employees.
Seabourne's staff was on site to perform the functions of fish acquisition,
quality control of finished product and process control engineering.
Improvements to the physical plant were required to ensure compliance with U.S.
Food and
<PAGE>
Drug Administration requirements, and when it became apparent Rowen could not
provide the necessary financing, Seabourne made the investments in new
equipment and plant upgrades. These investments totaled $918,617.
Seabourne has a three year option to acquire 100% of the outstanding shares
of Rowen's stock. Rowen is a Mexican company owned by Sr. Alvaro Wendlandt
Romero that is currently operating under the Mexican bankruptcy protection laws
which are equivalent to Chapter 11 of the U.S. Bankruptcy Code. It is estimated
that Seabourne may be able to settle with Rowen's creditors for a fraction of
the outstanding debt, said settlement being made in cash or a combination of
cash and stock. Rowen was recently appraised by a qualified independent
appraiser at US $7 million.
During the 1st quarter of fiscal year 1999, the Company decided to refocus
its strategy for packing tuna in Mexico. Prices for high-quality, dolphin-safe
frozen tuna reached record high levels which pushed fully compensatory pricing
for finished goods beyond what the market would bear. Rather than continuing to
operate at a negative gross margin, the Company decided the interests of its
shareholders would be best served if the operations in Mexico under the Toll
Packing Agreement were suspended. The Company has further decided to hold in
abeyance its option to acquire the Rowen cannery until such time as it can
provide a dependable supply of competitively priced, dolphin-safe raw material
through its own fishing operations. The Company's plans to build and operate
its own fleet of fishing and processing vessels has been accelerated. The
design of super-efficient fishing vessels has been completed and negotiations
are underway to complete the financing and ship building contracts.
The Company is subject to certain risks from its foreign operations. These
risks include potential losses on foreign exchange transactions and possible
repatriation of land and facilities located in foreign countries. To mitigate
foreign exchange risks, the Company currently purchases products and services
and makes sales exclusively to U.S. customers in U.S. dollars. The Company
maintains no operating funds in foreign financial institutions. To mitigate
expatriation risk, the Company will consider acquiring country risk insurance
through OPIC, a division of the Export-Import Bank when management believes the
cost of coverage is justified by the insurable risk.
CLIPPERNET CORPORATION
In July 1998, the assets and liabilities of Clipper Cubed were acquired and
transferred to ClipperNet. For our fiscal quarter ended October 31, 1998,
ClipperNet had net revenues of $163,021 and a loss of $41,415. A significant
portion of the loss is attributed to additional staffing to meet requirements
for the Portland, Newport and Albany, Oregon business sites. Sales are expected
to grow at a very rapid pace during the next year through domestic and global
expansion of ClipperNet's existing network, licensing agreements, acquisition of
other Internet access companies and new product introductions.
In November 1998, the assets of Netbridge were purchased for $150,000. It
was agreed that $60,000 of that purchase price would be satisfied by the
issuance of 20,000 shares of the Company's common stock. ITG Finance, LLC ("ITG
Finance"), an affiliate of the Company, loaned ClipperNet $20,766 to complete
this acquisition. This acquisition will be accounted for as a purchase.
Accordingly, the acquired assets including accounts receivable, customer
deposits, prepaid expenses, furniture, fixtures, leasehold improvements and
intangible assets will be
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recorded at their fair market value as of the date of acquisition. For the
year ended December 31, 1997, Netbridge reported net income of approximately
$42,000. As of the date of acquisition, the fair value of the acquired
assets was approximately $50,000, which resulted in the recognition of
$100,000 in intangible assets. The Company believes the acquisition of
Netbridge expands its Internet expertise, allows further access to Oregon
markets and will provide a positive impact on operations, liquidity and cash
flow once all Internet access operations are fully integrated.
The Company believes that Internet usage will continue to grow for both
business and personal use, and users will introduce an ever increasing volume of
information into the same connection pipeline. While there may be sufficient
carrying capacity in the main trunks of the network's infrastructure, "curb to
door" bandwidth is limited. ClipperNet's proprietary high-speed wireless
microwave technology delivers curb to door broadband service to any home or
business without the expense of in-ground utility construction or telephone
carrier interconnect fees. ClipperNet's wireless services has been deployed in
Eugene, Oregon and other parts of the service region for twenty months, over
which time it has captured 25% of the local market share. We believe the
success of this model can be replicated nationwide in bringing new high-speed
service on line quickly, at lower installation costs and with lower subscription
rates. ClipperNet projects gross sales in fiscal year 1999 in excess of $2.5
million.
CAPITAL NEEDS AND FUTURE REQUIREMENTS
CAPITAL-INTENSIVE PROJECTS
During fiscal year 1998-1999, we intend to expand our food processing
operations in different parts of the world. The following major long-term
projects and their capitalization are anticipated to be undertaken:
Two modernized tuna processing facilities (Mexico, Indonesia and/or
Thailand). Total projected investment will approximate $30 million.
Plant acquisition is expected to be in the form of cash and stock.
Equipment will be financed through leases, equipment loans and outright
purchase. The Company's interest in acquiring processing facilities in
Indonesia and/or Thailand is still in the feasibility stage. No due
diligence has been completed for these facilities at this time.
Six new combination fishing/factory ships with an approximate cost of $180
million. Construction deposits and related expenses will amount to
approximately $40 million. The contract for construction of up to six
79-meter fishing vessels is being finalized between the Company and a
European shipyard. Construction financing for up to 90% of the total
contract will be provided primarily by the shipyard with the Company
providing the remainder either through a combination of government
grants and/or proceeds from equity or debt financing. The shipyard
will provide a performance bond to guarantee that the vessels are
delivered on time and constructed in accordance with Company
specifications. The completed ships will be financed primarily through
insured export-credit guaranteed loans, straight asset-backed loans,
grants and local government subsidies. The Company expects to finance
nearly 100% of the cost of the finished vessels with the ships
representing the sole collateral on the loan.
Twelve new bait boats for an estimated cost of $24 million. Construction
deposits and
<PAGE>
related expenses will amount to a maximum of $10 million. The balance
will be due when the ships are delivered. We expect to finance
70% of this asset through asset-backed loans. The balance will
be financed through cash and clean irrevocable bank instruments of
guarantee.
Tuna harvesting, processing and cold storage operations in Guinea at an
estimated cost of $118 million. Specific projects include the
construction of two tuna seiners, two factory trawlers and a tuna
cannery . Asset-backed loans are available to finance a significant
percentage of the capital cost related to these projects.
Shrimp processing operations in Guinea at an estimated cost of $107 million
plus $10 million for land development. The property on which the
Company intends to develop the shrimp operation is located in the
geographical region of Guinea known as Sakoba. Adjacent to our property
is a fully operational shrimp farm and processing facility called the
Sakoba Shrimp Company. SEPIA, a private French company, built this
facility in partnership with the government of Guinea. The Sakoba
Shrimp Company has recently ceased operations. Specific projects
include development of ten small prawn farms and a processing facility
for the Company shrimp operation in the region of Sakoba as well as the
possible purchase of the Sakoba Shrimp Company. F.E.S. Inc., a Los
Angeles-based company, has expressed an interest in partnering with the
Company to assume control of the Sakoba Shrimp Company. Nothing
definitive, however, has been concluded with F.E.S. Inc. in this matter.
Asset-backed loans are available to finance a significant percentage of
the capital cost related to these projects.
Tropical fruit canning operations in Guinea at an estimated cost of $60
million. Specific projects include a processing cannery, pineapple
plantation and other fruit plantations. Asset-backed loans are
available to finance a significant percentage of the capital cost
related to these projects
The plants and processing facilities in Guinea will be financed primarily
through asset-backed export-credit guaranteed loans and government to government
grants and subsidies. Note that the French Government has privileged
relationships with Guinea, a former French colony. COFACE, the export credit
insurance agency of the French Government, provides low interest asset-backed
loans for equipment exported from France and for projects that benefit a third
world country in terms of job creation and expanded exports. The land in Guinea
will be pledged as collateral to secure local working capital for the
contemplated projects. The Company expects to be able to borrow up to 40% of
the land value in U.S. dollar-denominated working capital loans.
The tuna-processing portion of the seafood-related projects are projected
to produce the following net after-tax earnings on net sales for each full year
of production:
<TABLE>
<CAPTION>
Full Year Of Production Net After-Tax Earnings (mill) Net Sales (mill)
- ----------------------- ----------------------------- ----------------
<S> <C> <C>
first $10.0 $57.5
second $32.3 $102.1
third $51.4 $145.1
fourth $72.1 $188.6
<PAGE>
fifth $82.7 $208.9
</TABLE>
These projections are based on forward-looking events and occurrences which
involve risks and uncertainties including, without limitation, demand and
competition for the Company's products, relations with suppliers, the ability of
the Company to control costs and expenses, the ability of the Company to
penetrate its chosen distribution channels, foreign currency risks,
international political and trade relations and general economic conditions.
There may be other factors not mentioned above that may cause actual results to
differ materially from any forward-looking information.
The Company is continuing its efforts to finalize an initial $15 million
debt financing. We originally anticipated this financing would be completed in
December 1998. Financing is expected to be completed in the 2nd calendar
quarter of 1999. At this time, there are no agreements or understandings with
any funding source.
As part of its agreement, the Company agreed with the L'Agence Autonome
d'Assistance Integree aux Entreprises (AAAIE), an agency of Guinean
government operating directly under the Ministry of Private Sector, Commerce
& Industry, that it would attempt to raise up to $400 million through the
sale of letter-of-credit backed commercial paper. The Company informed AAAIE
that it would be difficult for the Company's customers to bear the full risk
of issuing SLOC's to fund projects in a third-world country and that the
government might be called upon to provide the following credit enhancement
facilities in addition to the land grant:
(1) A sovereign guarantee of the Government of the Republic of Guinea
issued by the Ministry of Finance for the portion of the funding
involving capital assets and infrastructure development in Guinea.
(2) Facilitation of the hypothecation of the land owned by the Company so
as to enhance the credit support structure.
The Company has approached the Ministry of Finance to obtain these credit
enhancements. AAAIE asked to be indemnified from any and all claims that might
result from a default on any debt. The Company agreed to AAAIE's request and
issued the indemnification.
YEAR 2000 COMPLIANCE
The Company's reliance on the use of computers and automated systems in its
business operations creates a potential vulnerability to the effects of the Year
2000 issue ("Y2K"). The Company has made a preliminary determination that led to
the upgrading of software programs with recently-released Y2K compliant
versions. The Company also identified those assets in its hardware inventory
that required attention, and steps have been taken to upgrade or replace the Y2K
deficient components. Additional upgrades to its software programs and
automated systems are scheduled for completion by the third calendar quarter of
1999. The cost to upgrade existing software, convert to new software and
correct existing data records is estimated at $10,000.
By the end of the third fiscal quarter, the Company will have incurred
approximately $2,000 in Y2K compliance expenses. The Company believes its
compliance strategy will support timely reaction to new difficulties as they
manifest themselves and will enable effective implementation of the necessary
remedial actions.
<PAGE>
The Company has no control over the computer systems of its banks, vendors,
customers or other third parties, and disruptions to these systems could impair
the Company's ability to obtain product or to sell to or service its customers.
Information made available to the Company indicates these unrelated parties have
taken and are continuing to take the necessary steps to achieve Y2K compliance.
The Company's planning strategy also anticipates the potential effects of Y2K in
the third world countries in which it conducts its business. Where the Company
expands its foreign operations prior to the end of 1999, it will assess the host
country's state of Y2K preparedness. Should a country be deemed to lack the
technical expertise or financial capabilities to achieve Y2K preparedness, the
Company anticipates direct investment in or partnered financing for the
resources necessary to ensure it can effectively operate in the local
environment. The costs for such a contingency are included in the Company's
estimates listed above. The Company is engaged in an on-going effort to avoid
disruptions that may be caused by the computer programs or systems of third
parties, or that may arise from its foreign operations. However, should such
disruption occur, there can be no assurance that it will not have a material
adverse impact on the Company's financial condition and results of operations.
ITEM 3. DESCRIPTION OF PROPERTY
The Company's offices are located in the Western Family Foods Building at
6700 S. W. Sandburg Street., Tigard, Oregon 97223. Our space within this 36,000
square foot corporate environment is secured on a month-to-month lease at a rate
of $1,000 per month, and we have full access to all on-site facilities.
Seabourne also maintains an office in Seattle, Washington. ClipperNet rents
approximately 1800 square feet of office space at 2295 Coburg Rd., Suite 105,
Eugene, Oregon 97401. ClipperNet's network operations center occupies 400
square feet of leased office space at 2300 Oakmont Way, Eugene, Oregon 97401.
Management believes that its current office space is suitable for its intended
purpose. The Company's offices are adequately covered by insurance.
We also own approximately 35,000 acres of coastal land in the Guinea which
is located on the west coast of Africa. We intend to use that land and its
buildings and other improvements to develop and operate a tuna processing plant,
a shrimp farm and tropical fruit plantations.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
This table describes the current ownership of the Company's outstanding
Common Stock as of July 31, 1998 by (a) each of our officers and directors, (b)
each person who is known by us to own more than 5% of the Company's outstanding
Common Stock and (c) all of our officers and directors as a group:
<TABLE>
<CAPTION>
Name and Address of Amount and Nature of Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
- ------------- -------------------- -------------------- ---------
<S> <C> <C> <C>
Common Stock Alain de la Motte 2,642,708 18.0%
6700 SW Sandburg St.
<PAGE>
Tigard, OR 97223
Common Stock Brian Bittke (i) 583,020 3.6%
6700 SW Sandburg St.
Tigard, OR 97223
Common Stock James McKenzie 595,000 3.6%
9615 SW Allen Blvd.
Portland, OR 97005
Common Stock Hugh Latif 38,000 *
135 Park Ave.
Toronto, Ontario, Canada
Common Stock Alan Resnik 75,000 *
1016 SW Davenport St.
Portland, OR 97201
Common Stock Harald Kvalo 1,623,200 10.0%
2334 West Plymouth St.
Seattle, WA 98119
Common Stock International Trade Group, LLC (ii) 1,987,368 12.0%
6700 SW Sandburg St.
Tigard, OR 97223
Common Stock ITG Finance, LLC (iii) 2,000,000 12.0%
6700 SW Sandburg St.
Tigard, OR 97223
All officers and Directors as a group (5 persons) 3,933,728 24.5%
</TABLE>
- ------------------------------------
* refers to less than one percent
(i) Brian Bittke resigned as a director in April 1999. Ransom Southerland,
the President of ClipperNet, became a director of the Company in October 1998.
Mr. Southerland owns 317,550 shares (2.0%) of the Company's common stock.
(ii) International Trade Group, LLC is an Oregon limited liability company
organized in March 1994. Alain de la Motte is a member of this limited
liability company and directly and indirectly owns an 90% interest in it. The
remaining 10% is owned by Sower Ministries International, a tax-exempt religious
organization founded by Mr. de la Motte and for which Mr. de la Motte serves as
one of several directors.
(iii) ITG Finance, LLC is an Oregon limited liability company organized in
October 1997, of which Mr. Alain de la Motte is a managing member.
International Trade Group, LLC owns an 80% interest in ITG Finance, LLC.
<PAGE>
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTORS AND CONTROL PERSONS
This table describes our directors and executive officers, as of July 31,
1998:
<TABLE>
<CAPTION>
Name Age Title
- ---- --- -----
<S> <C> <C>
Alain de la Motte 49 President, Chief Executive Officer and Chairman
Brian Bittke 60 Executive Vice President and Director
James McKenzie 55 Secretary and Director
Hugh Latif 46 Director
Alan J. Resnik 53 Director
</TABLE>
Alain de la Motte has been Chief Executive Officer and Chairman of the
Board of Directors since the inception of the Company's current business
operations in July 1997. Mr. de la Motte is also Chief Executive Officer of ITG
which is involved in world-wide sourcing and procuring of food products for the
largest grocery chains in the United States. ITG has participated in this
business since 1992 when it operated as a partnership prior to its
reorganization as a limited liability company. ITG is a shareholder in the
Company. Prior to ITG, Mr. de la Motte served as founder, President and
chairman of TRADE, Inc. which amassed a proprietary database of all U.S.
imports. Mr. de la Motte was educated at L'Ecole Nationale de Commerce in Paris
and is fluent in English and French.
Brian E. Bittke has been Executive Vice President and a Director of the
Company from its inception. Since December 1993, Mr. Bittke has been
Executive Vice President of Sales and Marketing for ITG. Before joining ITG,
Mr. Bittke was President and Chief Operating Officer for Continental
Companies, a private-label frozen food procurement company. He was also
Executive Vice President of Western Family Foods and President of Shurfine
Central Corporation. Mr. Bittke was educated at the University of Southern
California in marketing.
James McKenzie has been corporate secretary and a director of the Company
since the inception of its current business operations in July 1997. Mr.
McKenzie is the President of CUI Stack, Inc., a joint venture with Stack
Electronics of Japan, which is involved in the distribution of electronic
components in the United States. He had been with CUI Stack since 1989. Mr.
McKenzie earned an MBA in finance from the University of Chicago.
Hugh Latif has been a director since the inception of the Company's current
business operations in July 1997. Since 1996, Mr. Latif has been President of
Hugh Latif & Associates, a management consulting firm. From 1992 to 1996, he
was managing director of A.C. Nielsen Co. of Canada Ltd., a marketing research
firm. Mr. Latif has also served as General Manager of Dunn & Bradstreet France
and Dun & Bradstreet Brazil. Mr. Latif holds a BA in economics from Cairo
University in Egypt.
Alan J. Resnik has been a director since the inception of the Company's
current business operations in July 1997. Dr. Resnik is currently a professor
of marketing in the School of Business Administration, Portland State
University, and since 1978 he has been the President of Market Insights, Inc., a
consulting firm. From 1994 to 1995, he was Executive Vice President of Widmer
Brewing Co. From 1995 to 1996, Dr. Resnik was Senior Vice President of Gentle
Dental, a dental services company. From 1992 to1996, he was a director of Gentle
Dental. Dr. Resnik received a BS degree in economics from the Wharton School of
the University of
<PAGE>
Pennsylvania, an MBA from Tulane University and his PhD from Arizona State
University.
Directors serve in their positions until the next annual meeting of
stockholders or until the directors' successors have been elected and
qualified. Our executive officers are appointed by our Board of Directors and
serve at the discretion of the Board.
ITEM 6. EXECUTIVE COMPENSATION
The Company has not paid any compensation to its executive officers since
it began its current business operations in July 1997. The Company does not
have any written employment agreements with its executive officers at this time.
The Company will enter into employment agreements with its executive officers
and key employees and begin paying appropriate salaries and other compensation
when it determines that its financial condition is such that it can pay such
salaries and compensation.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On July 1, 1997, our wholly-owned subsidiary, Seabourne purchased certain
assets from ITG for $1,765,000. These assets consisted of certain office
equipment, accounts receivable and cash. Seabourne also assumed the obligation
on two leases for solid pack tuna canning machines which ITG was leasing from an
unrelated party. Seabourne gave ITG a subordinated unsecured convertible
promissory note for $1,765,000 as payment for the assets. The note was payable
on December 31, 1998. The entire outstanding balance of the note was converted
into Series A Convertible Preferred Stock of the Company during the 1st quarter
of fiscal 1999.
On July 1, 1997, ITG Finance, a subsidiary of ITG, loaned $ 2,500,000 to
Seabourne for working capital purposes. Seabourne gave ITG Finance a
subordinated unsecured convertible promissory note for the amount of the loan.
The note is payable on December 31, 1998. A portion of the outstanding balance
of the note has been converted into Series A Convertible Preferred Stock during
the 1st quarter of fiscal 1999.
On July 15, 1998, ITG loaned $9,000 to Clipper Cubed. The obligation was
assumed by the Company as part of the Asset Acquisition Agreement and Plan of
Reorganization with Clipper Cubed. The obligation was subsequently assumed by
ClipperNet as part of its capitalization. This obligation is payable on July 15,
1999.
During our fiscal year ending July 31, 1998, Seabourne sold processed tuna
and tuna-related products to ITG in the amount of $ 5,378,691.
During our fiscal year ended July 31, 1998, total executive compensation of
$261,470 was paid by ITG on behalf of the Company and recorded as expense at
fair market value. This compensation has been recognized in the Company's
financial statements as administrative and consulting fees paid to ITG. All
expenses related to other services provided by ITG have been recorded at fair
value in the Company's financial statements.
On January 25, 1999, the Company entered into a Technology and
Trademark License Agreement with Alain de la Motte regarding the Project
Harvest-Registered Trademark- software technology and
<PAGE>
associated trademarks. The Company obtained a 20 year exclusive, world-wide
license to make and use the software for the food products industry. Under
the Agreement, the Company has agreed to pay Mr. de la Motte a one-time lump
sum license fee of $200,000 upon the occurrence of certain funding events and
a royalty payment of 7.5% of the gross profit margin that the Company
realizes from the commercial use of the software technology.
ITEM 8. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED
We are authorized to issue 50,000,000 shares of Class A Common Stock and
50,000,000 shares of Class B Common Stock. As of July 31, 1998, we have
16,084,643 shares of Class A Common Stock issued and outstanding. There are
no shares of Class B Common Stock issued and outstanding. Each share of
Class A Common Stock entitles the shareholder (a) to one non-cumulative vote
for each share held of record on all matters submitted to a vote of the
stockholders, (b) to participate equally and to receive dividends as may be
declared by the Board of Directors and (c) to participate pro rata in any
distribution of assets available for distribution upon liquidation of the
Company. Our stockholders have no preemptive rights to acquire additional
shares of Common Stock or any other securities. Our Common Stock is not
subject to redemption and carries no rights to purchase other securities of
the Company. Our Common Stock is non-assessable.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS
Our Common Stock has been thinly traded in the over-the-counter market and
prices for the Common Stock are published on the OTC Bulletin Board under the
symbol "IFGR". This market is extremely limited and the prices for our Common
Stock quoted by brokers is not a reliable indication of the value of the Common
Stock. The following is the range of high and low bid prices for our Common
Stock since trading began in January 1998.
<TABLE>
<CAPTION>
Quarter Ending High Low
-------------- ------ ------
<S> <C> <C>
April 30, 1998 $ 2.00 $ 2.00
July 31, 1998 $ 3.00 $ 1.125
</TABLE>
These prices reflect inter-dealer prices, without retail mark-up, mark-down
or commission and may not represent actual purchases and sales by investors.
We have never paid cash dividends on our Common Stock; however, we may pay
dividends in the future if our earnings justify it.
There are approximately 4,100 shareholders of the Company's common stock.
<PAGE>
ITEM 2. LEGAL PROCEEDINGS
We are not a party to any pending legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Our original accountant was J. Paul Kenote, P.C., Portland, Oregon. After
the effective date of the Share Exchange Agreement between the Company and
Seabourne MossAdams LLP, Portland, Oregon became our accountants. We had no
disagreements with J. Paul Kenote, P.C. on any matter of accounting principles
or practices, financial statement disclosure or auditing scope or procedure.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES
In January 1999, ITG and ITG Finance converted their promissory notes from
the Company in the principal amounts of $1,765,000 and $2,285,000 respectively
into 4,050,000 shares of the Company's Series A Convertible Preferred Stock.
ITG will be issued 1,765,000 shares of Series A Convertible Preferred Stock, and
ITG Finance will be issued 2,285,000. This transaction was exempt from
registration under the Securities Act of 1933 by virtue of Section 4(2) thereof.
ITG and ITG Finance are sophisticated investors. The nature of access to
corporate information was based on the existence of common controlling
interests.
In November 1998, we issued 20,000 shares of our Class A Common Stock to
the sellers of Netbridge in connection with the acquisition of that company. We
relied on the exemption from registration at Section 4(2) of the Securities Act
of 1933. The sellers of Netbridge are considered sophisticated investors as a
result of their representation by legal counsel in connection with this
transaction. The nature of access to corporate information was based on the
seller's due diligence examination of the business and financial condition of
the Company.
On July 31, 1998, we issued 1,183,432 shares of our Class A Common Stock
to Clipper Cubed under the terms of the Asset Acquisition Agreement and Plan of
Reorganization. We relied on the exemption from registration at Section 4(2) of
the Securities Act of 1933 for non-public offerings. The selling shareholders
of Clipper Cubed were deemed to be sophisticated by virtue of their
representation by legal counsel through the negotiation of the acquisition. The
nature of access to corporate information was based on the selling shareholders'
due diligence examination of the business and financial condition of the
Company.
Effective June 3, 1998, we issued 11,736 shares of our Class A Common Stock
to two preferred shareholders upon the conversion of 5,868 shares of Series A
Convertible Preferred Stock.
In January 1998, we issued 30,000 shares of our Class A Common Stock to
Grady & Hatch and Company, Inc. as compensation for services rendered under a
Consulting Agreement dated August 4, 1997 under which Grady & Hatch and Company,
Inc. facilitated introductions between the Company and potential lenders. We
relied upon the exemption from
<PAGE>
registration at Section 4(2) of the Securities Act of 1933. Grady & Hatch
and Company, Inc. are considered accredited investors by virtue of their
status as a broker-dealer registered under the Securities Exchange Act of
1934.
Effective September 29, 1997, we issued 10,523,620 shares of our Class A
Common Stock to the shareholders of Seabourne under the terms of the Share
Exchange Agreement. We relied on the exemption from registration at Section
4(2) of the Securities Act of 1933 for non-public offerings. The shareholders
of Seabourne were considered sophisticated by virtue of their position as either
employees of the Company or directors and officers of the Company. Access to
corporate information was based on their affiliation with the Company.
On September 15, 1996, under our previous name of Cyberwin, Inc., we sold
4,000,000 shares of our Class A common stock to five purchasers for $50,000.
The offering was conducted under Regulation D Rule 504 of the Securities Act of
1933.
ITEM 5. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Company is permitted under the Nevada Revised Statutes to indemnify any
person named as a party to a legal proceeding because they are, or were, a
director, officer, employee or agent of the Company. The indemnification covers
expenses, judgments, fines and amounts paid by the director, officer, employee
or agent in any settlement of the legal proceeding if they acted in good faith
and in a manner which they reasonably believed to be in the best interest of the
Company and they had no reason to believe their conduct was unlawful.
The Company is required to indemnify a director, officer, employee or agent
of the Company who is successful in the defense of any legal proceeding in which
they are named as a party because they are, or were a director, officer,
employee or agent of the Company. The indemnification covers expenses incurred
by them in connection with the defense.
The Company's Articles of Incorporation eliminate the personal liability
of our directors, officers and stockholders for damages for breach of fiduciary
duty. However, the liability of a director or officer is not eliminated for (a)
actions or inactions which involve intentional misconduct, fraud or a knowing
violation of law, or for (b) the payment of distributions to stockholders in
violation of the applicable Nevada law.
The Company may make arrangements to pay the expenses of officers and
directors which are incurred in defending a civil or criminal proceeding,
either as the expenses are incurred and in advance of the final outcome of the
legal proceeding. If the Company pays these expenses, the director or officer
must agree to repay the amount if it is determined by the court that they are
not entitled to be indemnified by the Company.
Nevada law also permits the Company to buy and maintain liability insurance
or make other financial arrangements on behalf of any person who is or was a
director, officer, employee or agent of the Company to cover any liability
asserted against them and liability and expenses incurred by them in their
capacity as a director, officer, employee or agent, whether or not the Company
has the authority to indemnify them against such liability and expenses.
<PAGE>
PART F/S
Attached hereto are the following financial statements:
(1) Independent Auditor's Report of MossAdams LLP *
(2) Balance Sheet, Statement of Operations and Accumulated Deficit
Statement of Changes in Shareholders' Equity, Statement of Cash Flows, and
Notes to Consolidated Financial Statements for Integrated Food Resources, Inc.
for the year ended July 31, 1998. *
(3) Unaudited Consolidated Balance Sheet and Consolidated Income Statement
for the Three Months ended October 31, 1998.
PART III
ITEM 1 INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
- ------ ------------
<C> <S>
3.1 Articles of Incorporation of Integrated Food Resources, Inc. and
Amendments thereto.**
3.2 Articles of Incorporation of Seabourne Ventures, Inc.**
3.3 Articles of Incorporation of ClipperNet Corporation. **
3.4 Bylaws of Integrated Food Resources, Inc. **
3.5 Bylaws of Seabourne Ventures, Inc. **
3.6 Bylaws of ClipperNet Corporation **
4 Specimen Stock Certificate of Integrated Food Resources, Inc. **
10.1 Toll Packing Agreement dated September 5, 1996 between Agroindustrias
Rowen S.A. de C.V and International Trade Group, LLC.
10.2 Asset Acquisition Agreement dated July 1,1997 between International
Trade Group, LLC and Seabourne Ventures, Inc. **
10.3 Share Exchange Agreement dated September 29, 1997 between Pixieland
Corporation and Seabourne Ventures, Inc.**
10.4 Project Development Agreements each dated April 15, 1998 between
Integrated Food Resources, Inc. and L'Agence Autonome d'Assistance
Integree aux
<PAGE>
Enterprises, an official agency of the Republic of
Guinea. **
10.5 Certificate of Ownership dated July 25, 1998 from the Republic of
Guinea, Department of Promotion of the Private Sector and of
Commerce and Industry.
10.6 Asset Acquisition Agreement and Plan of Reorganization dated July 31,
1998 between Integrated Food Resources, Inc. and Clipper Cubed
Corporation. **
10.7 Asset Purchase Agreement and Security Agreement dated November 6, 1998
between ClipperNet Corporation and Netbridge Internet Access
Services. **
10.8 Technology and Trademark License Agreement dated January 25, 1999
between Alain de la Motte and Integrated Food Resources, Inc.
16 Letter from J. Paul Kenote, CPA, P.C.
21 Subsidiaries of Integrated Food Resources, Inc. **
27 Financial Data Schedule **
</TABLE>
* Filed with this Amendment No. 3, as revised.
** Previously filed with the Securities and Exchange Commission
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934, the
Registrant caused this Amendment No. 3 to be signed on its behalf by the
undersigned, thereunto duly authorized.
Integrated Food Resources, Inc.
Date: April 30, 1999 By /s/ Alain de la Motte
------------------------------
Alain de la Motte, President
<PAGE>
INTEGRATED FOOD RESOURCES, INC.
UNAUDITED CONSOLIDATED BALANCE SHEET
FOR THE THREE MONTHS ENDED OCTOBER 31, 1998
<TABLE>
<S> <C>
ASSETS
CURRENT ASSETS
Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 37,994
Accounts Receivable. . . . . . . . . . . . . . . . . . . . . . $ 66,757
Note Receivable. . . . . . . . . . . . . . . . . . . . . . . . $ 24,025
Inventory. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 213,643
Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . . . $ 127,996
Prepaid Interest . . . . . . . . . . . . . . . . . . . . . . . $ 5,953
-------------
TOTAL CURRENT ASSETS. . . . . . . . . . . . . . . . $ 476,368
-------------
FIXED ASSETS
Office and Factory Equipment . . . . . . . . . . . . . . . . . $ 324,098
Tuna Packing Plant . . . . . . . . . . . . . . . . . . . . . . $ 918,617
Less Accumulated Depreciation. . . . . . . . . . . . . . . . . $ (88,739)
Land Held for Development. . . . . . . . . . . . . . . . . . . $ 74,498,400
Valuation Adjustment-Foreign Land Grant. . . . . . . . . . . . $ (74,498,400)
Other Assets . . . . . . . . . . . . . . . . . . . . . . . . . $ 17,890
-------------
TOTAL FIXED ASSETS . . . . . . . . . . . . . . . . . $ 1,171,866
-------------
INTANGIBLE ASSETS
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,489,352
Less: Amortization . . . . . . . . . . . . . . . . . . . . . . $ (56,199)
-------------
TOTAL INTANGIBLE ASSETS. . . . . . . . . . . . . . . $ 4,433,153
-------------
TOTAL ASSETS . . . . . . . . . . . . . . . . . . $ 6,081,387
-------------
-------------
LIABILITIES
CURRENT LIABILITIES
Accounts Payable . . . . . . . . . . . . . . . . . . . . . . . $ 168,135
Accrued Liabilities. . . . . . . . . . . . . . . . . . . . . . $ 29,414
Notes Payable (Stockholder). . . . . . . . . . . . . . . . . . $ 81,879
Short Term Notes Payable . . . . . . . . . . . . . . . . . . . $ 109,000
-------------
TOTAL CURRENT LIABILITIES. . . . . . . . . . . . . . $ 388,428
-------------
LONG TERM LIABILITIES
Longterm Capital Lease. . . . . . . . . . . . . . . . . . . . $ 19,006
Long Term Note payable. . . . . . . . . . . . . . . . . . . . . $ 450,000
-------------
TOTAL LONG TERM LIABILITIES. . . . . . . . . . . . . $ 469,006
-------------
TOTAL LIABILITIES. . . . . . . . . . . . . . . . $ 857,434
-------------
EQUITIES
Preferred Stock, $.001 par value,
10,000,000 shares authorized,
4,050,800 issued and outstanding. . . . . . . . . . . . . $ 4,051
Additional paid-in Capital (Preferred). . . . . . . . . . . . $ 4,045,950
Common Stock, $.001 par value,
50,000,000 shares authorized,
16,084,643 issued and outstanding . . . . . . . . . . . . $ 16,080
Additional paid-in Capital (Common). . . . . . . . . . . . . . $ 4,054,084
Accumulated Deficit. . . . . . . . . . . . . . . . . . . . . . $ (2,505,732)
Net Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . $ (390,480)
-------------
TOTAL EQUITY ACCOUNTS. . . . . . . . . . . . . . . . $ 5,223,953
-------------
TOTAL LIABILITIES & OWNERS EQUITY . . . . . . . . $ 6,081,387
-------------
-------------
</TABLE>
UNAUDITED FINANCIALS
Prepared Internally
/s/ Alain de la Motte
- -----------------------
Alain de la Motte
Chairman/CEO
<PAGE>
INTEGRATED FOOD RESOURCES, INC.
UNAUDITED CONSOLIDATED INCOME STATEMENT
FOR THE THREE MONTHS ENDED OCTOBER 31
<TABLE>
<CAPTION>
1998 1997
---------- -----------
<S> <C> <C>
NET SALES. . . . . . . . . . . . . . . . . . . . . . . . . . . $ 167,089 $ 1,021,892
COST OF GOODS SOLD . . . . . . . . . . . . . . . . . . . . . . $ 63,278 $ 1,029,499
---------- -----------
$ 103,811 $ (7,607)
---------- -----------
SELLING, GENERAL AND ADMIN EXPENSES
Administrative/Consulting. . . . . . . . . . . . . . . . . . . $ 94,324 $ 260,125
Other selling and general. . . . . . . . . . . . . . . . . . . $ 185,002 $ 72,542
Depreciation & Amoritization . . . . . . . . . . . . . . . . . $ 108,181 $ 7,222
Interest Expense . . . . . . . . . . . . . . . . . . . . . . . $ 106,784 $ 50,440
Miscellaneous Expense. . . . . . . . . . . . . . . . . . . . . $ - $ -
---------- -----------
TOTAL OPERATING EXPENSES . . . . . . . . . . . . . . . . . $ 494,291 $ 390,329
---------- -----------
TOTAL INCOME. . . . . . . . . . . . . . . . . . . . . . $ (390,480) $ (397,936)
---------- -----------
---------- -----------
</TABLE>
UNAUDITED FINANCIALS
Prepared Internally
/s/ Alain de la Motte
- -----------------------
Alain de la Motte
Chairman/CEO
<PAGE>
INTEGRATED FOOD RESOURCES, INC.
UNAUDITED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED OCTOBER 31
<TABLE>
<S> <C>
CASH FLOWS RELATED TO OPERATING ACTIVITIES
NET LOSS . . . . . . . . . . . . . . . . . . . . . $ (390,480)
------------
ADJ TO RECONCILE NET LOSS TO CASH FROM OPERATING ACTIVITIES
Depreciation and Amortization. . . . . . . . . . . $ 108,181
Increase/Decrease in:
Receivables. . . . . . . . . . . . . . . . . . . . $ 525,446
Note Receivable. . . . . . . . . . . . . . . . . . $ (24,025)
Inventories. . . . . . . . . . . . . . . . . . . . $ 10,240
Prepaid Expenses . . . . . . . . . . . . . . . . . $ (124,167)
Accounts Payable . . . . . . . . . . . . . . . . . $ (86,522)
Accrued Liabilities. . . . . . . . . . . . . . . . $ (4,039)
------------
NET CASH FROM OPERATING ACTIVITIES . . . . . . $ 405,114
------------
CASH FLOWS RELATED TO INVESTING ACTIVITIES
Purchase of equipment. . . . . . . . . . . . . . . $ (28,047)
Tuna packing plant costs . . . . . . . . . . . . . $ -
Other Assets . . . . . . . . . . . . . . . . . . . $ 1,606
Goodwill . . . . . . . . . . . . . . . . . . . . . $ (77,918)
------------
NET CASH FROM INVESTING ACTIVITIES . . . . . . $ (104,359)
------------
CASH FLOWS RELATED TO FINANCING ACTIVITIES
Repayment of Related-party notes payable . . . . . $ (4,179,621)
Repayment of Third-party notes payable . . . . . . $ (11,225)
Proceeds from Long Term Capital Lease. . . . . . . $ 10,974
Proceeds from Long Term Notes Payable. . . . . . . $ 42,493
Issuance of Preferred Stock. . . . . . . . . . . . $ 4,050
Additional Paid-in-Capital (Preferred) . . . . . . $ 4,045,950
Issuance of Common Stock . . . . . . . . . . . . . $ -
Additional Paid-in-Capital (Common). . . . . . . . $ -
------------
NET CASH FROM FINANCING ACTIVITIES . . . . . . $ (87,379)
------------
NET INCREASE (DECREASE) IN CASH. . . . . . . . $ (177,104)
------------
CASH, BEGINNING OF PERIOD . . . . . . . . . . . $ 215,097
------------
CASH, END OF PERIOD . . . . . . . . . . . . . . $ 37,994
------------
------------
</TABLE>
UNAUDITED FINANCIALS
Prepared Internally
/s/ Alain de la Motte
- -----------------------
Alain de la Motte
Chairman/CEO
<PAGE>
INTEGRATED FOOD RESOURCES, INC.
------
INDEPENDENT AUDITOR'S REPORT
AND
CONSOLIDATED FINANCIAL STATEMENTS
------
JULY 31, 1998
<PAGE>
CONTENTS
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PAGE
<S> <C>
INDEPENDENT AUDITOR'S REPORT 1
CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheet 2-3
Statement of operations and accumulated deficit 4
Statement of changes in stockholders' equity 5
Statement of cash flows 6
Notes to consolidated financial statements 7-18
</TABLE>
------
<PAGE>
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors
Integrated Food Resources, Inc.
We have audited the accompanying consolidated balance sheet of Integrated
Food Resources, Inc., as of July 31, 1998, and the related consolidated
statements of operations and accumulated deficit, changes in stockholders'
equity, and cash flows for the year then ended. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit 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 estimated made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
Integrated Food Resources, Inc., as of July 31, 1998, and the results of its
operations and its cash flows for the year then ended, in conformiy with
generally accepted accounting principles.
Portland, Oregon
October 2, 1998
(except for Note 13 as to which
the date if January 18, 1999)
1
<PAGE>
INTEGRATED FOOD RESOURCES, INC.
CONSOLIDATED BALANCE SHEET
JULY 31, 1998
- -------------------------------------------------------------------------------
ASSETS
<TABLE>
<S> <C>
CURRENT ASSETS
Cash $ 215,097
Receivables:
Trade 63,458
Related-party 520,324
Employees 8,421
Inventory 223,883
Prepaid expenses 9,782
------------
Total current assets 1,040,965
------------
PLANT AND EQUIPMENT
Tuna packing plant 918,617
Equipment 296,051
Accumulated depreciation (36,757)
------------
1,177,911
------------
LAND HELD FOR FUTURE DEVELOPMENT 74,498,400
ADJUSTMENT FOR FOREIGN LAND GRANT (74,498,400)
------------
Land held for future development, net of adjustment --
------------
GOODWILL 4,411,434
OTHER ASSETS 19,496
------------
Total assets $ 6,649,806
------------
------------
</TABLE>
See independent auditor's report and accompanying notes.
2
- -------------------------------------------------------------------------------
<PAGE>
INTEGRATED FOOD RESOURCES, INC.
CONSOLIDATED BALANCE SHEET
JULY 31, 1998
- -------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C>
CURRENT LIABILITIES
Accounts payable $ 254,657
Accrued liabilities 33,453
Related-party notes payable 4,261,500
Current portion of long-term debt 113,800
Current portion of capital lease obligation 6,425
-----------
Total current liabilities 4,669,835
-----------
LONG-TERM LIABILITIES
Long-term debt, net of current portion 407,507
Long-term capital lease obligation 8,032
-----------
Total long-term liabilities 415,539
-----------
COMMITMENTS AND CONTINGENCIES (Notes 7 and 12)
STOCKHOLDERS' EQUITY
Preferred stock, $.001 par value, 10,000,000 shares authorized,
799 issued and outstanding 1
Class A common stock, $.001 par value, 50,000,000 shares authorized,
16,084,643 issued and outstanding 16,079
Class B common stock, $.001 par value, 50,000,000 shares authorized,
none issued and outstanding --
Additional paid-in capital 4,054,084
Accumulated deficit (2,505,732)
-----------
Total stockholders' equity 1,564,432
-----------
Total liabilities and stockholders' equity $ 6,649,806
-----------
-----------
</TABLE>
See independent auditor's report and accompanying notes.
3
- -------------------------------------------------------------------------------
<PAGE>
INTEGRATED FOOD RESOURCES, INC.
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
FOR THE YEAR ENDED JULY 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
NET SALES $ 5,378,691
COST OF SALES 5,938,232
-----------
Gross loss (559,541)
SELLING, GENERAL, AND ADMINISTRATIVE
EXPENSES
Administrative and consulting (1,118,832)
Other selling and general (415,678)
-----------
Operating loss (2,094,051)
-----------
OTHER EXPENSES
Depreciation and amortization (36,757)
Interest (321,030)
-----------
Total other expenses (357,787)
-----------
NET LOSS (2,451,838)
ACCUMULATED DEFICIT, beginning of year (53,894)
-----------
ACCUMULATED DEFICIT, end of year $(2,505,732)
-----------
-----------
Basic loss per share $ (0.15)
-----------
-----------
Diluted loss per share $ (0.15)
-----------
-----------
</TABLE>
See independent auditor's report and accompanying notes.
4
- -------------------------------------------------------------------------------
<PAGE>
INTEGRATED FOOD RESOURCES, INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED JULY 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK PREFERRED STOCK ADDITIONAL TOTAL
--------------------- ---------------- PAID-IN ACCUMULATED STOCKHOLDERS'
SHARES AMOUNT SHARES AMOUNT CAPITAL DEFICIT EQUITY
---------- ------- ------ ------ ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, July 31, 1997 4,335,855 $ 4,336 6,667 $ 7 $ 65,791 $ (53,894) $ 16,240
Issuance of shares to
Seabourne Ventures, Inc. 10,523,620 10,524 - - (10,524) - -
Issuance of common stock
for professional services 30,000 30 - - - - 30
Issuance of common stock
for acquisition of Clipper
Cubed Corporation 1,183,432 1,183 - - 3,998,817 - 4,000,000
Conversion of preferred
stock to common stock 11,736 6 (5,868) (6) - - -
Net loss - - - - - (2,451,838) (2,451,838)
---------- ------- --- --- ---------- ----------- -----------
BALANCE, July 31, 1998 16,084,643 $16,079 799 $ 1 $4,054,084 $(2,505,732) $ 1,564,432
---------- ------- --- --- ---------- ----------- -----------
---------- ------- --- --- ---------- ----------- -----------
</TABLE>
See independent auditor's report and accompanying notes.
5
- -------------------------------------------------------------------------------
<PAGE>
INTEGRATED FOOD RESOURCES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JULY 31, 1998
- -------------------------------------------------------------------------------
<TABLE>
<S> <C>
CASH FLOWS RELATED TO OPERATING ACTIVITIES
Net loss $(2,451,838)
Adjustments to reconcile net loss to cash from operating activities:
Depreciation and amortization 36,757
Increase in:
Receivables (530,004)
Inventories (223,883)
Prepaid expenses (9,782)
Other assets 14,931
Accounts payable 216,062
Accrued liabilities 12,560
-----------
Net cash from operating activities (2,935,197)
-----------
CASH FLOWS RELATED TO INVESTING ACTIVITIES
Purchase of equipment (187,348)
Tuna packing plant costs (918,617)
-----------
Net cash from investing activities (1,105,965)
-----------
CASH FLOWS RELATED TO FINANCING ACTIVITIES
Issuance of common stock 30
Proceeds from long-term borrowings 799
Proceeds from related-party notes payable 5,059,500
Repayment of related-party notes payable (798,000)
Repayment of capital lease obligation (6,070)
-----------
Net cash from financing activities 4,256,259
-----------
NET INCREASE IN CASH 215,097
CASH, beginning of period --
-----------
CASH, end of period $ 215,097
-----------
-----------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Interest paid $ 321,030
-----------
-----------
SCHEDULE OF NONCASH INVESTING AND FINANCING TRANSACTIONS
Purchase of Clipper Cubed Corporation's assets for 1,183,432 shares
of common stock $ 4,061,434
-----------
-----------
</TABLE>
See independent auditor's report and accompanying notes.
6
- -------------------------------------------------------------------------------
<PAGE>
INTEGRATED FOOD RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998
- -------------------------------------------------------------------------------
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
ORGANIZATION - Integrated Food Resources, Inc. (the Company) is a
Nevada corporation, headquartered in Tigard, Oregon. It is engaged
in food processing for private label companies in the food service
industry through its wholly-owned subsidiary, Seabourne Ventures,
Inc. (Seabourne), and in providing wireless Internet access services
through its wholly-owned subsidiary, ClipperNet Corporation
(ClipperNet). Substantially all of Seabourne's operations for the
year ended July 31, 1998, were derived from a tuna processing plant
located in Ensenada, Mexico (see Note 7). ClipperNet, based in
Eugene, Oregon and acquired by the Company in July 1998, has
provided wireless Internet access services since its inception in
1997 to customers located in Oregon's Willamette Valley. All
significant intercompany accounts and transactions have been
eliminated in the preparation of the consolidated financial
statements.
In July 1997, Seabourne Ventures, Inc., a newly organized company,
completed a Share Exchange Agreement with Pixieland Corporation, a
Nevada corporation and nonreporting public entity, pursuant to which
Seabourne exchanged 10,523,620 shares of its common stock
(representing 70.82% of then issued and outstanding common stock)
for an equal number of Pixieland common shares. Shortly thereafter,
Pixieland changed its name to Integrated Food Resources, Inc., and
completed a Share Exchange Agreement with Seabourne which then
became a wholly-owned subsidiary of the Company.
On July 28, 1998, the Company issued stock in exchange for all of
the assets and assumed the liabilities of Clipper Cubed Corporation,
a provider of wireless Internet access services (see Note 4). All
operations of the acquired business are currently provided through
the Companys wholly-owned subsidiary, ClipperNet Corporation.
SALES AND ACCOUNTS RECEIVABLE - As of July 31, 1998, and for the
year then ended, one customer, International Trade Group, LLC (ITG,
a related-party as explained in Note 7), accounted for approximately
99% of accounts receivable and 97% of sales. All products from sales
to ITG are shipped to retail food chains in the U.S. Sales are
recorded when product is shipped to third-party buyers from ITG.
INVENTORIES - Inventories consist of frozen tuna, canned tuna, and
packaging materials. Inventories are valued at the lower of cost or
market by the first-in, first-out (FIFO) method.
7
- -------------------------------------------------------------------------------
<PAGE>
INTEGRATED FOOD RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998
- -------------------------------------------------------------------------------
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES - (continued)
PLANT AND EQUIPMENT - Plant and equipment are stated at cost.
Depreciation on plant and equipment is computed by the straight-line
method over estimated useful lives ranging from five to seven years.
Expenditures for normal maintenance and repairs are charged to
operations as incurred.
LAND HELD FOR FUTURE DEVELOPMENT NET OF ADJUSTMENT FOR FOREIGN LAND
GRANT - As further discussed in Note 10, in 1998 the Company received
a foreign land grant from the Republic of Guinea. The grant has been
recorded as land held for future development at its appraised value
of $74,498,400. The appraisal was performed by an independent
international firm with expertise in appraisal valuations. An
adjustment in the same amount as the appraisal value has been
recorded as an offset to the land value consistent with
International Accounting Standard No. 20. The adjustment balance
will be recognized in the consolidated financial statements as
income over future periods in proportion to depreciation expense
recognized for assets acquired or constructed for use in conjunction
with the land received by grant.
GOODWILL - Goodwill is amortized by the straight-line method over a
15-year period. Management periodically reviews goodwill for
impairment and, if appropriate, will adjust the carrying value of
goodwill based upon their assessment.
INCOME TAXES - The Company follows the asset and liability method of
accounting for income taxes whereby deferred tax assets and
liabilities are recognized for the future tax consequences of
differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases.
EARNINGS (LOSS) PER SHARE - Basic earnings (loss) per common share
is computed by dividing net income (loss) by the weighted average
number of common shares outstanding. Diluted earnings per common
share assumes that convertible preferred shares outstanding at the
beginning of the year are converted on that date and outstanding
common shares are adjusted accordingly. Because the outstanding
preferred shares would be antidultive to the calculation, they were
not included in the 1998 diluted earnings per share calculation.
CASH AND CASH EQUIVALENTS - Cash and cash equivalents consist of
short-term, highly liquid investments with maturities of 90 days or
less.
8
- -------------------------------------------------------------------------------
<PAGE>
INTEGRATED FOOD RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998
- -------------------------------------------------------------------------------
NOTE 1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES - (continued)
USE OF ESTIMATES - Preparation of the consolidated financial
statements, in conformity with generally accepted accounting
principles, requires management to make estimates and assumptions
that effect the amounts reported in the consolidated financial
statements and accompanying notes. Significant estimates include the
appraisal for land granted by the Republic of Guinea (see Note 10)
and the value of goodwill recorded by the Company. Actual results
could differ from those estimates and require periodic re-evaluation
for impairment.
RECENTLY ISSUED ACCOUNTING STANDARDS - In June 1998 and October
1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities," and Statement of Financial
Accounting Standards No. 134 "Accounting for Mortgaged-Backed
Securities Retained after the Securitization of Mortgage Loans Held
for Sale by a Mortgage Banking Enterprise," respectively. Both
statements, when they become effective, are expected to have no effect
on the consolidated financial statements of the Company.
NOTE 2 - INVENTORIES
Inventories consisted of the following at July 31, 1998:
<TABLE>
<S> <C>
Finished goods $ 115,925
Raw material 860
Packaging material 107,098
----------
$ 223,883
----------
----------
</TABLE>
NOTE 3 - LONG-TERM LIABILITIES
Long-term debt consisted of the following at July 31, 1998:
<TABLE>
<S> <C>
Unsecured note payable to International Trade Group,
LLC, a related-party, payable in full including
interest of 10%, on December 31, 1998 $1,765,000
9
- -------------------------------------------------------------------------------
<PAGE>
INTEGRATED FOOD RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998
- -------------------------------------------------------------------------------
NOTE 3 - LONG-TERM LIABILITIES - (continued)
Unsecured note payable to ITG Finance, LLC, a
related-party, payable in full including interest
at 10.5%, on December 31, 1998 $2,487,500
Note payable to Pacific Continental Bank, secured by
inventory, chattle paper, accounts, equipment, and
general intangibles, payable in full including interest
of 11% per annum, on September 16, 1998 100,000
Unsecured note payable to Business Systems Group,
payable in monthly installments of $1,500, including
interest at 8% amortizing over 30 years, payable on
July 28, 2008 350,000
Unsecured note payable to International Trade Group,
LLC, a related-party, payable in full including interest
of 6% per annum, on July 15, 1999 9,000
Other unsecured notes of which $13,800 is payable
on October 7, 1998, including interest at 8% and
$57,707 is payable in full on December 8, 2002,
including interest at 8% 71,307
----------
4,782,807
Less current portion 4,375,300
----------
Long-term debt, net of current portion $ 407,507
----------
----------
</TABLE>
The aggregate maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
YEARS ENDING JULY 31,
---------------------
<S> <C>
1999 $ 4,375,300
2000 --
2001 --
2002 57,507
Thereafter 350,000
-----------
$ 4,782,807
-----------
-----------
</TABLE>
10
- -------------------------------------------------------------------------------
<PAGE>
INTEGRATED FOOD RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998
- -------------------------------------------------------------------------------
NOTE 4 - ACQUISITION OF CLIPPER CUBED CORPORATION
On July 28, 1998, the Company purchased certain assets and assumed
liabilities from Clipper Cubed Corporation for $4 million. The
purchase price was comprised of 1,183,432 shares of the Company's
common stock valued, based upon then current trades from
over-the-counter bulletin board transactions, at $3.38 per share in
exchange for the net liabilities assumed from Clipper Cubed
Corporation. The Company placed the acquired assets and assumed
liabilities into a newly formed subsidiary, ClipperNet Corporation.
The acquisition was accounted for as a purchase and resulted in the
recognition of goodwill which will be amortized to expense over 15
years unless earlier adjusted for impairment consistent with the
Company's accounting policies (see Note 1). The assets purchased and
liabilities assumed are as follows:
<TABLE>
<S> <C>
Accounts receivable $ 62,199
Equipment 108,703
Goodwill 350,000
Other assets 18,186
Accounts payable (38,595)
Accrued liabilities (20,893)
Notes payable (520,507)
Capital lease obligation (20,527)
-----------
Net liabilities assumed in excess of assets purchased 61,434
Purchase price 4,000,000
-----------
Goodwill $ 4,061,434
-----------
-----------
</TABLE>
The accompanying income statement does not include the results of
operations of ClipperNet as the results of its operations for the
three days from the date of acquisition to July 31, 1998, were not
significant. The pro forma effects for the year ended July 31, 1998,
had ClipperNet's operations been combined with those of the Company
would have been as follows:
<TABLE>
<S> <C>
Net loss
Integrated Food Resources, Inc. $(2,451,808)
ClipperNet (61,434)
-----------
Combined net loss $(2,513,242)
-----------
-----------
</TABLE>
11
- -------------------------------------------------------------------------------
<PAGE>
INTEGRATED FOOD RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998
- -------------------------------------------------------------------------------
NOTE 5 - INCOME TAXES
Deferred income taxes are recognized for all significant temporary
differences between tax and financial statement bases of assets and
liabilities. The classification of the resulting deferred tax assets
and liabilities is based upon the classification of the related
balance sheet asset or liability.
Deferred tax assets result principally from the Company's net
operating loss carryforward. The net operating loss carryforward of
approximately $830,000 for both federal and state income tax
purposes will expire in 2013 unless utilized in earlier years. The
Company's ability to utilize these net operating losses could be
severely limited under Section 382 of the Internal Revenue Code of
1986 if significant ownership changes occur in the future. In
addition, this limitation could result in the expiration of the net
operating losses prior to their utilization. A valuation allowance
is provided at July 31, 1998, since it is uncertain if the Company
will be able to utilize loss carryforwards and other deferred tax
assets in future periods.
As described in Note 1, the Company completed a Share Exchange
Agreement with Pixieland Corporation in July 1997. The share
exchange transaction resulted in the Company assuming all of the tax
attributes of Pixieland's assets and liabilities and all actual or
contingent tax liabilities previously incurred by Pixieland.
Management believes the tax effect of the share exchange transaction
was not significant and was immaterial to the consolidated
financial statements. However, as complete taxpayer records for
Pixieland Corporation are not available, it is uncertain if any
liability to local, state, or federal taxing authority exists.
Long-term deferred tax assets and liabilities as of July 31, 1998,
consisted of the following;
<TABLE>
<S> <C>
Deferred tax assets
Net operating loss carryforward $ 830,000
Valuation allowance (830,000)
---------
Net long-term deferred tax asset $ -
---------
---------
</TABLE>
12
- -------------------------------------------------------------------------------
<PAGE>
INTEGRATED FOOD RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998
- -------------------------------------------------------------------------------
NOTE 6 - PREFERRED STOCK RIGHTS AND PRIVILEGES
All holders of the Company's preferred stock have voting and dividend
rights equal to those of all common stockholders. In addition,
preferred shareholders enjoy liquidation preferences superior to
existing common shareholders and have rights to convert their
holdings into common stock. Preferred shares may be voluntarily
exchanged for common stock as a current rate of $2 per share, which
is subject to adjustment for changes in the Company's
capitalization. Mandatory conversion of preferred shares to common
stock will occur upon the earlier of a 30-day written notice from
the Company or immediately prior to the closing of a public offering
by the Company.
In July 1998, the Company converted 5,868 shares of preferred stock
at a 2-for-1 conversion rate for 11,736 common shares. Since the
preferred shares were not issued with "in the money" beneficial
conversion features, the conversion of preferred to common shares
has been recorded as transfer of existing preferred shareholder
interests to that of common shareholder interests based on the
exchange ratio.
NOTE 7 - RELATED-PARTY TRANSACTIONS
International Trade Group, LLC (ITG), a corporation controlled by
the Company's Chairman and Chief Executive, purchases substantially
all of the Company's tuna production for resale to its alliance of
large U.S. food retailers and private label distributors. ITG
Finance, LLC, also controlled by the Company's Chairman and Chief
Executive, provides short-term financing for the Company's tuna
packing operations.
As of July 31, 1998, and for the year then ended, the Company had
the following transactions with ITG and ITG Finance, LLC, which
are related parties:
<TABLE>
<S> <C>
Net sales to International Trade Group, LLC $5,378,691
Administrative expenses paid to International Trade Group, LLC $ 295,895
Accounts receivable due from International Trade Group, LLC $ 520,324
Notes payable (see Note 3) $4,261,500
</TABLE>
13
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<PAGE>
INTEGRATED FOOD RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998
- -------------------------------------------------------------------------------
Note 7 - RELATED-PARTY TRANSACTIONS - (continued)
Notes payable of $4,261,500 include two obligations due to ITG in
the original amount of $2,500,000 and $1,765,000. The $2,500,000
note supports the working capital requirements of the Company. The
$1,765,000 note payable resulted from an Asset Acquisition
Agreement between the Company and ITG through which the Company
acquired all tangible an intangible assets and assumed certain lease
obligations that arose from ITG's investment in tuna packing
operations in Ensenada, Mexico (see note 9). The effect of the
transaction was the transfer of all tuna packing operations from ITG
to the Company. Total assets acquired at fair value are summarized
as follows:
<TABLE>
<S> <C>
Cash $ 59,983
Accounts receivable 304,673
Inventory 429,519
Plant and equipment 927,383
Prepaid expenses 43,442
----------
$1,765,000
----------
----------
</TABLE>
NOTE 8 - LEASE AND LEASE COMMITMENTS
The Company rents certain office facilities and vehicles under
operating leases. The Company also assumed a capital lease for
equipment with the acquisition of ClipperNet Cubed Corporation.
Minimum lease payments for all noncancellable operating leases and
the capital lease for the following five years, are as follows:
14
- -------------------------------------------------------------------------------
<PAGE>
INTEGRATED FOOD RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998
- -------------------------------------------------------------------------------
NOTE 8 - LEASE AND LEASE COMMITMENTS - (continued)
<TABLE>
<CAPTION>
CAPITAL OPERATING
YEARS ENDING JULY 31, LEASE LEASES
--------------------- ------- ---------
<S> <C> <C>
1999 $ 9,123 $ 95,411
2000 9,123 95,411
2001 2,281 81,736
2002 -- 17,299
------- ---------
Total minimum lease payments 20,527 $ 289,857
------- ---------
---------
Less amount representing interest 6,070
-------
Present value of minimum lease payments 14,457
Less current obligation 6,425
-------
Long-term obligation $ 8,032
-------
-------
</TABLE>
Total rental expense incurred on all operating leases for the year
ended July 31, 1998, was $33,637.
NOTE 9 - PURCHASE OF MEXICAN TUNA PACKING PLANT
The Company's subsidiary, Seabourne, has entered into an agreement
that, if fulfilled, will result in the purchase of the outstanding
stock of Agroindustrias Rowen S.A. (Rowen), a Company that operates
a tuna processing facility in Ensenada, Mexico. Management believes
the tuna processing facility, which is currently in bankruptcy, may
be acquired in late 1998 or 1999 if conditions of bankruptcy and
terms of the purchase agreement are completed.
To complete the acquisition, which is dependent in part on
settlement of Rowen's outstanding debts of approximately $8.5
million, the Company has entered into a Consulting Agreement with
Alvaro Romero Wendlandt (Wendlandt), former owner and shareholder in
Rowen. Pursuant to the Consulting Agreement, the Company has engaged
Wendlandt to negotiate full and complete settlement of all of
Rowen's bankruptcy debts for an amount not to exceed $7 million. Of
this amount, and subject to shareholder approval, the Company will
pay Rowen's creditors up to $4 million in cash and a fee to
Wendlandt of up to $3 million in Company stock. In the event
Wendlandt negotiates settlement with Rowen creditors for less than
$4 million, his fee
15
- -------------------------------------------------------------------------------
<PAGE>
INTEGRATED FOOD RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998
- -------------------------------------------------------------------------------
NOTE 9 - PURCHASE OF MEXICAN TUNA PACKING PLANT - (continued)
will be increased by the amount of the difference. Conversely, in
the event Wendlandt negotiates settlement for an amount greater than
$4 million, but less than $7 million, his fee in Company stock will
be reduced by the difference. The Company will fund the tuna
facility acquisition, if completed, through the issuance of
additional debt or sale of its stock.
During the year ended July 31, 1998, Rowen processed and packed all
of the Company's tuna production pursuant to a Toll Packing Agreement
and the Company invested $918,617 in plant equipment. The Company's
ability to acquire the Mexican tuna packing plant currently in
bankruptcy is dependent upon both settlement of existing creditor
claims and its obtaining sufficient debt financing or additional
shareholder capital to meet settlement obligations. Should the
Company or its agent be unsuccessful in either of these endeavors,
the Company's ability to continue to process and pack tuna production
through the existing Mexican facility as well as to realize the
benefits of currently capitalized assets is uncertain.
Management believes that if the acquisition of the Rowen plant is
completed, no significant additional costs will be required for
plant improvements, equipment purchases, or other items to continue
operations. The Companys only substantive commitments to the
Republic in exchange for the land grant are to (1) use the land for
agricultural or aquacultural and (2) use its best efforts to create
jobs and market the products using the Companys distribution network.
NOTE 10 - ACQUISITION OF LAND IN THE REPUBLIC OF GUINEA
On July 25, 1998, the Company and the Republic of Guinea (the
Republic) entered into an agreement whereby the Republic deeded to
the Company 14,000 hectares (approx. 35,000 acres) of prime
agricultural and aquaculture land along its coastline. The parcels
of land which constitute the 14,000 hectares are spread throughout
the coastal region of the Republic and are not contiguous. The land
is best suited for shrimp farming, rice farming and/or tropical
fruit production. In addition, it is anticipated that a small
portion of the land will be used to construct a tuna processing
facility. The land, with a value of $74,498,400 based upon the
independent appraisal of an international firm with expertise in
appraisals, is owned by the Company free of encumbrances and
obligations.
16
- -------------------------------------------------------------------------------
<PAGE>
INTEGRATED FOOD RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998
- -------------------------------------------------------------------------------
NOTE 10 - ACQUISITION OF LAND IN THE REPUBLIC OF GUINEA - (continued)
The Company intends to establish farming projects on the property
during 1999 and anticipates it will fund these projects through the
acquisition of debt financing or the issuance of additional
shareholder capital. The value of the foreign land deeded to the
Company has been recorded at fair market value as land held for
future development and is offset by an adjustment in the same amount
(see Note 1).
With the acquisition of additional shareholder capital and/or debt
financing, the Company expects to create viable commercial farming
operations that will maximize land use in phased-in farming
projects. However, the Company's ability to develop the property for
its intended use and to create viable commercial operations is
dependent upon the successful acquisition of additional shareholder
capital and/or debt financing. Further, although the Republic has no
right to repatriate the land if the Company is unable to fulfill its
development commitments, this potential risk and uncertainty may
only be mitigated by the Company acquiring country risk insurance
through the OPIC (a division of Exim Bank), which the Company has
not obtained as of July 31, 1998.
NOTE 11 - BUSINESS SEGMENTS
The Company operates in two business segments: food processing and
Internet access services. The food processing segment harvests,
processes, and distributes food products to private label customers
nationwide. The Internet access services segment provides wireless
Internet access services to customers domestically. The following
table discloses these business segments.
<TABLE>
<CAPTION>
INTERNET
SEAFOOD ACCESS
PROCESSING SERVICES CONSOLIDATED
------------ --------- ------------
<S> <C> <C> <C>
Operating income $ (2,451,808) $ -- $ (2,451,808)
Identifiable assets $ 80,609,118 $ 539,088 $ 81,148,206
Capital expenditures $ 997,262 $ 108,703 $ 1,105,965
Depreciation $ 36,757 $ -- $ 36,757
</TABLE>
17
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<PAGE>
INTEGRATED FOOD RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1998
- -------------------------------------------------------------------------------
NOTE 12 - LIQUIDITY AND FUTURE OPERATIONS
As of July 31, 1998, the Company had current liabilities in excess
of current assets in the amount of $3,628,870, primarily as the
result of operating losses incurred during the year ended July 31,
1998, and requirement to fund long-term capital expenditures.
However, the Company has reached agreements with its primary
related-party creditors (see Notes 3 and 7) to defer, if necessary,
demand for repayment until at least August 1999, while the Company
seeks other financing sources. At July 31, 1998, the Company did not
have any commitments from third parties to provide significant
short-term or long-term funding.
Management believes the fiscal 1998 operating loss was primarily
attributable to the start-up of operations and unusual weather
patterns which affected the worldwide volume of tuna processed and
created adverse price conditions.
Management believes most conditions that required the use of cash in
fiscal 1998 have been modified for 1999 and that completion of the
acquisition of the plant in Mexico and commencement of operations in
the Republic of Guinea have the ability to create positive cash flow
in future periods and to assist in the Company obtaining the
necessary short-term and long-term funding for future operations.
However, a detailed operating plan has not yet been developed for
the Republic of Guinea operations; there remain uncertainties
regarding the acquisition of the Mexico plant; and, there is no
assurance that the Company will obtain necessary short-term or
long-term financing, although subsequent to July 31, 1998, financing
alternatives were under review by several financial institutions.
NOTE 13 - SUBSEQUENT EVENT: CONVERSION OF RELATED-PARTY NOTES
PAYABLE TO PREFERRED STOCK
Subsequent to July 3, 1998, the Company converted $4,050,000 of
related-party notes payable to International Trade Group LLC and ITG
Finance, LLC into 4,050,000 shares of the Companys Series A
convertible preferred stock. The Companys Series A preferred
shareholders are entitled to receive dividends on the same basis as
common shareholders; to vote as a single class on all matters with
each preferred share converted to two common stock shares for the
purpose of voting; to conversion privileges at two common shares for
each preferred share, and to distribution preferences in the event
of dissolution or liquidation of the Company.
18
- -------------------------------------------------------------------------------
<PAGE>
Registry Number: C21213-96
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
INTEGRATED FOOD RESOURCES, INC.
We the undersigned, Alain de la Motte, President, and James McKenzie,
Secretary, of Integrated Food Resources, Inc, do hereby certify:
That the Board of Directors of said corporation by unanimous consent action
without a meeting pursuant to NRS 78.315 on March 25th, 1999, adopted
resolutions to amend the original articles as follows:
ARTICLE 3 IS HEREBY AMENDED TO READ AS DESCRIBED IN THE ATTACHED EXHIBIT
"A" WHICH IS INCORPORATED BY THIS REFERENCE.
The number of shares of common stock of the corporation outstanding and
entitled to vote on the amendments to the Articles of Incorporation is
16,184,643. that the said changes and amendments have been consented to and
approved by the majority of the stockholders holding a least a majority of each
class of stock outstanding and entitled to
/s/ Alain de la Motte
----------------------
Alain de la Motte, President
James McKenzie, Secretary
State of Oregon
County of Washington
On March 31,1999, personally appeared before me, a Notary Public, Alain de la
Motte and James McKenzie, who acknowledged that they executed the foregoing
instrument.
OFFICIAL SEAL /s/ Orrie Olson
ORRIE H. OLSON ---------------
NOTARY PUBLIC - OREGON Notary Public for Oregon
COMMISSION NO. 047443
MY COMMISSION EXPIRES SEPT. 26, 1999
<PAGE>
Registry Number: C21213-96
CERTIFICATE OF AMENDMENT
OF ARTICLES OF INCORPORATION
(After Issuance of Stock)
INTEGRATED FOOD RESOURCES, INC.
We the undersigned, Alain de la Motte, President, and James McKenzie,
Secretary, of Integrated Food Resources, Inc, do hereby certify:
That the Board of Directors of said corporation by unanimous consent action
without a meeting pursuant to NRS 78.315 on March 25th, 1999, adopted
resolutions to amend the original articles as follows:
ARTICLE 3 IS HEREBY AMENDED TO READ AS DESCRIBED IN THE ATTACHED EXHIBIT
"A" WHICH IS INCORPORATED BY THIS REFERENCE.
The number of shares of common stock of the corporation outstanding and
entitled to vote on the amendments to the Articles of Incorporation is
16,184,643. that the said changes and amendments have been consented to and
approved by the majority of the stockholders holding a least a majority of each
class of stock outstanding and entitled to
Alain de la Motte, President
/s/ James McKenzie
------------------
James McKenzie, Secretary
State of Oregon
County of Washington
On March 31,1999, personally appeared before me, a Notary Public, James
McKenzie, who acknowledged that they executed the foregoing instrument.
OFFICIAL SEAL /s/ Mark E. Foster
MARK E. FOSTER ------------------
NOTARY PUBLIC - OREGON Notary Public for Oregon
COMMISSION NO. 310872
MY COMMISSION EXPIRES MARCH 24, 2002
<PAGE>
EXHIBIT A
3.1 Issuance of Common and Preferred Stock in Series
The Common Stock and Preferred Stock may be issued from time to time in one or
more series, the shares of each series to have such voting powers. lull or
limited. and such designations, preferences and relative. participating,
optional or other special rights and qualifications. limitations or restrictions
thereof as are stated and expressed herein or in the resolution or resolutions
providing for the issue of such series adopted by the board of directors.
3.1.1 Dividends
Subject to any preferential rights granted for any series of Preferred Stock,
the holders of shares of the Common Stock shall be entitled to receive dividends
out of the funds of the corporation legally available therefor at the rate and
at the time or times, whether cumulative or noncumulative, as may be provided by
the board of directors. The holders of shares of the Preferred Stock shall be
entitled to receive dividends to the extent provided herein or by the board of
directors in designating the particular series of Preferred Stock. The holders
of shares of the Common Stock shall not be entitled to receive any dividends
thereon other than the dividends referred to in this section.
3.1.2 Voting
To the extent provided herein or by resolution or resolutions of the board of
directors providing for the issue of a class or series of Common Stock or
Preferred Stock, the holders of each such class or series shall have the right
to vote for the election of members of the board of directors of the corporation
and the right to vote on all other matters, except those matters as to which
Nevada law or these Articles provide for a separate vote.
3.1.3 Issuance of Shares
The corporation may from time to time issue any authorized and unissued shares
of Common Stock or Preferred Stock for such consideration as may be fixed from
time to time by the board of directors, without action by the shareholders. The
board of directors may provide for payment therefor to be received by the
corporation in cash, property, services or such other consideration as is
approved by the board of directors. Any and all such shares of Common Stock or
Preferred Stock, the issuance of which has been so authorized, and for which
consideration so fixed by the board of directors has been paid or delivered,
shall be deemed fully paid stock and shall not be liable to any further call or
assessment thereon.
3.2 Designation of Class A Common Stock and Class B Common Stock
3.2.1 Designation
The series of Class A Common Stock, consisting of up to 50,000,000 shares, and
the
<PAGE>
series of Class B Common Stock, consisting of up to 50,000,000 shall be
designated herein as the "Class A Common Stock" and the "Class B Common
Stock", respectively. The Class A Common Stock and the Class B Common Stock
are sometimes collectively referred to herein as "Common Stock". The powers,
preferences, rights and qualifications, limitations and restrictions of the
Common Stock are as follows:
3.2.2 Dividends
Dividends shall be declared and set aside fi)r any shares of the Common Stock
only upon resolution of the Board of Directors.
3.2.3 Liquidation Rights
Upon the voluntary or involuntary dissolution, liquidation or winding up of the
corporation, the assets available for distribution to the Common Stock shall be
distributed in the order and amounts described in Section 3.3.8.
3.2.4 Voting Power
Each holder of Class A Common Stock shall be entitled to one vote for each share
of Common Stock held at the record date for the determination of Common
Stockholders entitled to vote on such matter or, if no such record date is
established, at the date on which notice of the meeting of shareholders at which
the vote is to be taken is marked, or the date any \written consent of
shareholders is solicited if the vote is not to be taken at a meeting. Class B
Common Stock shall carry no voting power.
3.3 Designation of Series A Convertible Preferred Stock
3.3.1 Designations
The series of Series A Convertible Preferred Stock, consisting of 5,00(),000
shares, authorized herein, shall be designated herein as the "Series A Stock."
The powers preferences and rights and the qualifications, limitations and
restrictions of the Series A Stock arc as follows:
3.3.2 Dividends
Dividends shall be declared and set aside for any shares of the Series A Stock
in the same manner as the Common Stock.
3.3.4 Voting Power
Each holder of Series A Stock shall be entitled to vote on all matters and shall
be entitled to that number of votes equal to the largest number of whole shares
of Common Stock into which such holder's shares of Series A Stock could be
converted at the record date for the determination of shareholders entitled to
vote on such matter or if no such record date is established, at the date on
which notice of the meeting of shareholders at which the vote is to be taken is
mailed, or the date any written consent of shareholders is solicited if the vote
<PAGE>
is not to be taken at a meeting. Except as otherwise expressly provided by the
Nevada Business Corporation Act the holders of shares of Series A Stock, any
other series of Preferred Stock, and Common Stock shall vote together as a
single class on all matters.
3.3.4 Liquidation Rights
Upon the voluntary or involuntary dissolution, liquidation or winding up of the
corporation, the assets of the corporation available for distribution to its
shareholders shall be distributed in the order and amounts described in Section
3.3.8.
3.3.5 Conversion Rights
The holders of the Series A Stock shall have the following rights with respect
to the conversion of Series A Stock into shares of Common Stock:
a. GENERAL.
(i) VOLUNTARY CONVERSION. Shares of the Series A Stock may, at the option
of the holder, be converted at any time into such number of fully paid and
nonassessable shares of Common Stock as are equal to the product obtained by
multiplying the Series A Conversion Rate (determined under Section 3.3.5b) by
the number of shares of Series A Stock being converted.
(ii) MANDATORY CONVERSION. Each share of Series A Stock shall be converted
automatically, without any further action by the holders of such shares and
whether or not the certificates representing such shares are surrendered to the
corporation or its transfer agent for the Common Stock, into the number of
shares of Common Stock into which such Series A Stock is convertible pursuant to
Section 3.3.5a(i) upon the earlier of. (A) immediately prior to the closing of a
firmly underwritten, public offering by the corporation of its Common Stock,
registered under the Securities Act of 1933, as amended, or (B) upon the demand
of the corporation upon thirty (30) day's written notice.
b. CONVERSION RATE. The conversion rate for Series A Stock in effect at
any time (the "Series A Conversion Rate") shall equal $2.00 divided by the
Series A Conversion Price, calculated as provided in Section 3.3.5c.
c. CONVERSION PRICE. The conversion price for Series A Stock shall
initially be $1.00 (the 'Series A Conversion Price"). The Series A Conversion
Price shall be adjusted from time to time in accordance with Section 3.3.5d.
d. CAPITAL REORGANIZATION OR RECLASSIFICATION. If the Common Stock
issuable upon the conversion of the Series A Stock shall be changed into the
same or different number of shares of any class or classes of stock of the
corporation, whether by capital reorganization, reclassification or otherwise
(other than an Extraordinary Common Stock Event provided for in Section
3.3.5d(l), then and in each such event the holders of each share of Series A
Stock shall have the right thereafter to convert such shares into the kind and
amount of shares of stock and other securities and property receivable upon such
reorganization. reclassification or other change by holders of the number of
shares of
<PAGE>
Common Stock into which such share of Series A Stock have been converted
immediately prior to such reorganization. reclassification or change, all
subject to adjustment as provided herein.
e. ACCOUNTANT'S CERTIFICATE AS TO ADJUSTMENTS NOTICE BY THE CORPORATION.
In each case of an adjustment or readjustment of the Series A Conversion Rate,
the corporation at its expense will famish each holder of Series A Stock with a
certificate, prepared by independent public accountants of recognized standing
if so required by such holder, showing such adjustment or readjustment and
stating in detail the facts upon which such adjustment or readjustment is based.
f. EXERCISE OF CONVERSION PRIVILEGE To exercise its conversion privilege,
each holder of Series A Stock shall surrender the certificate or certificates
representing the shares being converted to the corporation at its principal
office, and shall give written notice to (he corporation at that office that
such holder elects to convert such shares. Such notice shall also state the name
or names (with address or addresses) in which the certificate or certificates
for shares of Common Stock issuable upon such conversion shall be issued. The
certificate or certificates for shares of Series A Stock surrendered for
conversion shall be accompanied by proper assignment thereof to the corporation
or in blank. The date when such written notice is received by the corporal ion.
together with the certificate or certificates representing the shares of Series
A Stock being converted, shall be the "Series A Conversion Date." As promptly as
practicable after the Series A Conversion Date, the corporation shall issue and
shall deliver to the holder of the shares of Series A Stock being converted, or
on its written order such certificate or certificates as it may request for the
number of whole shares of Common Stock issuable upon the conversion of such
shares of Series A Stock in accordance with the provisions of this Section
3.3.5, cash in the amount of all declared and unpaid dividends on such shares of
Series A Stock up to and including the Series A Conversion Date. and cash, as
provided in Section 3.3.5g, in respect of any fraction of a share of Common
Stock issuable upon such conversion. Such conversion shall be deemed to have
been effected immediately prior to the close of business on the Series A
Conversion Date. and at such time the rights of the holder as holder of the
converted shares of Series A Stock shall cease and the person or persons in
whose name or names any certificate or certificates for shares of Common Stock
shall be issuable upon such conversion shall be deemed to have become the holder
or holders of record of the shares of Common Stock represened thereby.
g. CASH IN LIEU OF FRACTIONAL SHARES. No fractional shares of Common
Stock or scrip representing fractional shares shall be issued upon the
conversion of shares of Series A Stock, but the corporation shall pay to the
holder of such shares a cash adjustment in respect of such fractional shares in
an amount equal to the same fraction of the market price per share of the Common
Stock (as determined in a reasonable manner prescribed by the board of
directors) at the close of business on the Series A Conversion Date. The
determination as to whether or not any fractional shares are issuable shall be
based upon the total number of shares of Series A Stock being converted at any
one time by any holder thereof, not upon each share of Series A Stock being
converted.
h. PARTIAL CONVERSION. In the event some but not all of the shares of
Series A Stock represented by a certificate or certificates surrendered by a
holder are converted, the
<PAGE>
corporation shall execute and deliver to or on the order of the holder, at the
expense of the corporation, a new certificate representing the shares of
Series A Stock that were not converted.
i. RESERVATION OF COMMON STOCK. The corporation shall at all times
reserve and keep available out of its authorized but unissued shares of Common
Stock, solely for the purpose of effecting the conversion of the shares of the
Series A Stock, such number of its shares of Common Stock as shall from time to
time be sufficient to effect the conversion of all outstanding shares of the
Series A Stock and, if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of the Series A Stock, the corporation shall take such
corporate action as may be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.
j. NO IMPAIRMENT. The corporation will not, by amendment of its
certificate of incorporation or through any reorganization, transfer of assets
consolidation, merger.. dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms to be observed or performed hereunder by the corporal ion, but will at
all times in good faith assist in the carrying out of all the provisions of this
Section 3.4 and in the taking of all such action as may be necessary or
appropriate in order to protect the conversion rights of the holders of the
Series A Stock against impairment.
3.3.6 Reissuance of Stock
No share or shares of Series A Stock redeemed, converted, purchased or otherwise
acquired by the corporation shall be reissued, and all such shares shall be
canceled. retired and eliminated from the shares which the corporation shall be
authorized to issue. The corporation may from time to time take such appropriate
corporate action as may be necessary to reduce the authorized number of shares
of the Series A Stock accordingly.
3.3.7 Redemption
The corporation shall not have the right to call for redemption of all or ally
part of the Series A Stock. However, the corporation shall have the right to
purchase shares of Series A Stock pursuant to agreements within the holders
thereof when such purchases are approved by the board of directors.
3.3.8 Liquidation Rights
Upon the voluntary or involuntary dissolution, liquidation or winding up of the
corporation, the assets of the corporation available for distribution to its
shareholders shall be distributed in the following order and amounts:
a. GENERAL.
(i) SERIES A STOCK. Second, the holders of shares of Series A Stock shall
be entitled to receive $1.00 (appropriately adjusted for any stock dividend,
split or combination of such
<PAGE>
Series A Stock) for each outstanding share of Series A Stock held by them plus
any declared but unpaid dividends per share on such outstanding shares of
Series A Stock (the "Series A Liquidation Amount"). If upon the occurrence of
such event the assets of the corporation shall be insufficient to permit the
payment of the full Series A Liquidation Amount, then the assets of the
corporation available for distribution shall be distributed ratably among the
holders of the Series Stock in the same proportions as the aggregate of the
Series A Liquidation Amount each such holder would otherwise be entitled to
receive bears to the total Series A Liquidation Amount that would otherwise be
payable to all such holders, and no distribution to other shareholders of the
corporation shall be made. Upon the completion of the distribution of the full
Series A Liquidation Amount if assets remain in the corporation, such
remaining assets shall be distributed as set forth in Sections 3.3.8a(ii) and
3.3.8a(iii).
(ii) COMMON STOCK. Second, subject to payment in full of the Series A
Liquidation Amount, the holders of shares of Class A Common Stock shall be
entitled to receive $1.00, appropriately adjusted for any stock dividend, split
or combination of such Common Stock for each outstanding share of Common Stock
held by them (the "Class A Common Stock Liquidation Amount"). After payment of
the Class A Common Stock Liquidation Amount. the holder of Class B Common Stock
shall be entitled to receive $1.00, appropriately adjusted for any stock
dividend, split or combination of such Common Stock for each outstanding share
of Common Stock held by them. If upon the occurrence of such event, the assets
of the corporation shall be insufficient to permit the payment of the fall
Common Stock Liquidation Amount then the assets of the corporation available for
distribution shall be distributed ratably among the holders of the Common Stock
in the same proportions as the aggregate of the Common Stock Liquidation Amount
each such holder would otherwise be entitled to receive bears to the total
Common Stock Liquidation Amount that would otherwise be payable to all such
holders, and no farther distribution to other shareholders of the corporation
shall be made. Upon the completion of the preferential rights granted for any
subsequent series of Preferred Stock and the full Common Stock Liquidation
Amount, if assets remain in the corporation, such remaining assets shall be
distributed as set forth in Section 3.3 .8a(iii).
(iii) PARTICIPATION. Finally, subject to the payment in full of Series A
Liquidation Amount, any other preferred rights granted for any subsequent series
of Preferred Stock, and the payment in full or the Common Stock Liquidation
Amount as provided in Section 3.3.8a(ii), if assets remain in the corporation,
such remaining assets shall be distributed to the holders of shares of Common
Stock together, who shall each be entitled to receive their Pro Rata Amount;
PROVIDED, that the rights of the holders of shares of Common Stock are subject
to any preferential rights granted for any subsequent series of Preferred Stock.
"Pro Rata Amount" means that portion of remaining assets to which a group would
be entitled based on its percentage of the number of shares of Common Stock
outstanding and the number of shares of Common Stock into which the outstanding
shares of Series B Stock could then be converted.
TREATMENT OF SALES OF ASSETS OR ACQUISITIONS. The sale of all or substantially
all of the assets of the corporation or the acquisition of the corporation by
another entity by means of merger, consolidation or otherwise, resulting in the
exchange of the outstanding shares of the corporation for securities of or
consideration issued, or caused to be issued, by the
<PAGE>
acquiring entity or any of its affiliates, shall be regarded as a liquidation
within the meaning of this Section 3.3.8.
C. DISTRIBUTIONS OTHER THAN CASH. Whenever the distribution provided for
in this Section 3.3.8 shall be payable in property other than cash, the value of
such distribution shall be the fair market value of such property as determined
in good faith by the board of directors.
<PAGE>
TOLL-PACKING AGREEMENT FOR CANNED TUNA
This agreement is entered into this 5th day of September 1996, by and between:
AGROINDUSTRIAS ROWEN S.A. DE C.V. a company duly organized and existing under
the laws of Mexico, in the state of Baja, having its registered office at
Fabrica Km. 104, Carretera Tecate, Ensenada, Baja, CA, Mexico, (hereinafter
referred to as "SELLER"), represented by its Director General, Ing. Alvaro
Romero Wendlandt.
AND
INTERNATIONAL TRADE GROUP, LLC, a Limited Liability Company duly organized
and existing under the laws of the State of Oregon (USA), having its
registered office at 6700 S.W. Sandburg Road, Tigard, Oregon 97223,
(hereinafter referred to as "BUYER"), represented by its President/CEO, Alain
L. de la Motte.
WHEREAS
SELLER is a tuna cannery specializing in the processing and packing of
frozen tuna fish into canned tuna products for the Mexican market.
SELLER is prepared to convert its production plant in Ensenada into a 100%
dolphin-safe operation as soon as this Agreement is signed.
SELLER is licensed by the Mexican Customs authorities to import raw
material required to pack canned tuna, warehouse it in SELLER's own bonded
facilities, and process it into finished products that can be reexported without
import duty or export levies of any kind.
BUYER is an international buying consortium which purchases imported
private label food products for the account of its members/partners, including
some of the largest US and international food chains, food service companies and
private label distributors. BUYER is interested in importing various types,
sizes and quality of canned tuna to meet the needs of its members/partners.
BUYER and SELLER are willing to enter into a toll-packing arrangement for
canned tuna Products on the terms and conditions hereinafter set forth.
NOW, THEREFORE, THE PARTIES AGREE AS FOLLOWS:
1. DEFINITIONS
1.1. In this agreement:
1.1.1. The word "PRODUCT (s)" or "FINISHED PRODUCT (s)" shall mean processed
flesh of canned tuna cooked and packed in water from frozen Raw
Material, in accordance with BUYER's specifications for Finished
Products, and the US Food & Drug Administration ("FDA") (and their
Canadian counterpart) Standard of Identity as defined in the latest
available Almanac (Exhibit A).
1.1.2. "RAW MATERIAL" shall refer to one metric ton of frozen tuna fish of
the Skipjack (KATSUWONUS PELAMIS), Yellowfin (THUNNUS ALBACARES),
or Albacore (THUNNUS ALALUNGA) species, graded by weight in
accordance with the classifications defined in paragraph 1.1.8 below
for each specie. For the purpose of this agreement, the Cost of Raw
Material shall always be calculated based on an average frozen weight
of a particular specie. It will be SELLER's
<PAGE>
IGC/Rowen - Toll Packing Agreement for Canned Tuna, Cont'd. Page 2
and BUYER's joint responsibility to approve the quality of all
incoming Raw Material upon delivery at the dock and to ensure it
meets or exceeds BUYER's specifications. Once Raw Material has been
approved by SELLER and BUYER, the responsibility for the preservation
of such Raw Material in safe, secure and sanitary conditions in
SELLER's cold storage warehouses shall be that of SELLER.
1.1.3. "COST OF RAW MATERIAL" shall refer to the all-inclusive cost of Raw
Material delivered at the SELLER's packing plant in Ensenada, Baja CA,
Mexico, in units of one metric ton (1,000 kg). This price shall be
computed to include the cost of transporting the fish from the Ensenada
dock to SELLER's cannery, which cost shall not exceed $13.08 per ton,
including but not limited to the weighing of the fish, labor charges
to load the bins on the truck, securing the load, loading and unloading
supervision by SELLER, trucking. In the event savings can be achieved
by negotiating volume discounts, all such rebates shall accrue to BUYER
exclusively.
1.1.4. "CASE YIELD" shall refer to the number of cases of finished product
for a particular can size that SELLER agrees to deliver to BUYER for
each ton of Raw Material BUYER makes available to SELLER under this
Agreement. To calculate the Case Yield, the following formula shall
apply:
(Yield) X (1,000 grams)
------------------------------------ = No. of Cases per ton ("Case
(Fill Weight) X (# of Cans Per Case) Yield").
1.1.5. "COST OF RAW MATERIAL PER CASE" shall refer to the amount of Raw
Material used to produce one case of Finished Product, after processing
and cooking. To calculate the Cost of Raw Material per case, the
following formula shall apply:
(Cost of Raw Material Per ton)
------------------------------ = Cost of Raw Material Per Case
(Case Yield)
Unless otherwise specified, the word "Case of Finished Product" or
"Case" used in the calculation of the cost of Finished Product shall
specifically refer to a base unit of measurement consisting of 48
cans, 6 ounces each.
1.1.6. "FISH MEAL RECOVERY" shall refer to the cooked scrap byproduct
recovery that can be further processed into fish meal for each metric
ton of Raw Material. For calculation purposes, it is assumed that 27%
of the Raw Material weight shall be purchased by SELLER from BUYER for
further processing into fish meal. At BUYER's sole option, BUYER may
choose to sell scrap to SELLER or to require SELLER to process scrap
Raw Material into fish meal. In the latter case, BUYER shall pay
SELLER US $137 (one hundred thirty seven) per ton of finished fish
meal product delivered to BUYER, ex-factory. It is understood that it
will require 2.5 to 3 tons of scrap Raw Material to produce one ton
of fish meal with the following approximate specifications: 52%
protein, 12%-13% ash, 16% fat content, 8% to 9% water content.
1.1.7. "RAW MATERIAL COST AFTER RECOVERY" shall refer to the net cost per
metric ton of Raw Material after deducting US $5.40 per ton (27% of
$20 per ton of scrap) for revenue derived from Fish Meal Recovery.
1.1.8. The "YIELD" shall refer to the percentage derived by dividing the
total weight (in kilograms), of the longitudinal loins or other
striated muscular tissue of the fish ("Loins") which is usable to pack
Finished Products in accordance with BUYER's specifications, divided
by 1,000 kilograms. For calculation purposes the production Yields
guaranteed by SELLER for each fish variety and weight category shall
be as follow:
1.8/3.4 kg MORE THAN 3.4 kg
---------- ----------------
Skipjack (KATSUWONUS PELAMIS) 39% 41%
<PAGE>
IGC/Rowen - Toll Packing Agreement for Canned Tuna, Cont'd. Page 3
1.8/3.4 kg 3.4/9 kg MORE THAN 9 Kg
---------- -------- --------------
Yellowfin (THUNNUS ALBACARES) 39% 42.5% 45.2
LESS THAN 5 Kg 5/10 Kg MORE THAN 10 Kg
-------------- ------- --------------
Albacore (THUNNUS ALALUNGA) 48% 51.7% 54.1%
1.1.9. "FILL WEIGHT" shall refer to the weight of a cooked tuna Loin portion
that is placed in each can prior to the addition of water and/or
Hydrolyzed Protein, and prior to the sealing of the can. Such weights
shall be added at a future date based on BUYER's specifications and
test runs, and shall become part of this Agreement.
<TABLE>
<CAPTION>
Fill Weights by Pack Type Skipjack Yellowfin Albacore
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Fish Fill (CLW) grams/can (307 x 109) 100 100
Fish Fill (CLW) grams/can (307 x 205)-
Fish Fill (CLW) grams/can (401 x 204)-
Fish Fill (CLW) grams/can (6O3 x 408)
Fish Fill (SLW) grams/can (401 x 204)
Fish Fill (CWW) grams/can (603 x 408)
Fish Fill (SWW) grams/can (307 x 109)
Fish Fill (SWW) grams/can (211 x 106)-
Fish Fill (SWW) grams/can (401 x 204)
Fish Fill (SWW) grams/can (603 x 408)
</TABLE>
The above Fill Weights represent the fish weights prior to the
addition of HP. After the addition of HP, the resulting Pressed Weight
must be no less than that required by the FDA's Standard of Identity
and/or BUYER's specifications.
CLW = Chunk Light Tuna in Water (Skipjack or Yellowfin)
SLW = Solid Light Tuna in Water (Skipjack or Yellowfin)
CWW = Chunk White Tuna in Water (Albacore)
SWW = Solid White Tuna in Water (Albacore)
1.1.10. "PRESSED WEIGHT" shall refer to the average weight of the tuna in each
can after draining out all liquid from the can and pressing out any
liquid that has been absorbed by the fish, in accordance with
paragraph C (2) of the FDA's standard of Identity for Canned Tuna.
<TABLE>
<CAPTION>
Pressed Weights by Pack Type Skipjack Yellowfin Albacore
----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
P.W. (CLW) grams/can (307 x 109)
P.W. (CLW) grams/can (307 x 205)-
P.W. (CLW) grams/can (401 x 204)-
P.W. (CLW) grams/can (603 x 408)
P.W. (SLW) grams/can (401 x 204)
P.W. (CWW) grams/can (603 x 408)
P.W. (SWW) grams/can (307 x 109)
P.W. (SWW) grams/can (211 x 106)-
P.W. (SWW) grams/can (401 x 204)
P.W. (SWW) grams/can (603 x 408)
</TABLE>
CLW = Chunk Light in Water
SLW - Solid Light in Water
CWW = Chunk White in Water
SWW = Solid White in Water
<PAGE>
ITG/Rowen - Toll Packing Agreement for Canned Tuna, Cont'd. Page 4
1.1.12. "CHUNK(s)" or "CHUNK PACK(s)" shall refer to tuna packed in accordance
with paragraph 3 (ii) of the FDA's Standard of Identity and according
to specifications supplied by BUYER.
1.1.13. "FLAKES" shall refer to tuna packed in accordance with
paragraph 3 (iii) of the FDA's Standard of Identity.
1.1.14. "HYDROLYZED PROTEIN" or "HP" shall refer to the solution derived from
adding Exelpro's 12% E-Pro-SB solution to the packing medium, in
accordance with Wescotek, Inc.'s specifications and recommendations.
1.1.15. The word "CAN(s)" shall refer to a two-piece or three-piece metal can
normally used to pack tuna. The following retail and food service can
sizes shall be available to BUYER AS SOON AS SELLER installs the Luthi
solid-packing machines, but no later than five months from the date of
signature of this Agreement: 6oz Cans (2 piece), 3 oz Cans (2 piece),
12 oz Cans (2 piece), 9 oz Cans (2 piece) and, at a later date,
66.6 oz Cans (3 piece).
1.1.16. The word "CARTONS" OR "CASE" shall refer to a case of the following
can sizes as follows:
(a) Retail: 48 cans of 6 oz ("48/6 oz"), or 24 cans of 6 oz
("24/6 oz")
(b) Retail: 16 (3 Pack) 3 oz ("16/3/3 oz")
(c) Retail: 24 cans of 12 oz ("24/12 oz")
(d) Retail: 24 cans of 9 oz ("24/9 oz")
(e) Production at a later date: Food Service: 6/66.6 oz (6/66.6 oz")
1.1.17. "DIRECT MATERIAL" shall refer to all material used to produce the
finished product, including, cans, lids, salt, spring water,
hydrolyzed protein, printed labels, and cartons, including reject
allowance, but excluding the frozen Raw Material. Unless otherwise
specified it shall specifically refer to the unit cost of one case of
Finished Product.
1.1.18. "SELLER'S FEE" shall refer to the fully-loaded, all-inclusive,
toll-packing cost charged by SELLER to BUYER to produce one Case of
48/6oz cans of Finished Product, on an ex-factory basis (loaded in the
container/ truck). Unless otherwise specified it shall specifically
refer to the unit cost of one case of finished product, regardless of
the specie of the fish, or the pack type. This fee includes all direct,
and indirect labor, administrative costs, factory overhead, interest,
depreciation and amortization. In the event BUYER is required to
guarantee of cost of the Luthi solid-packing machines and to pay the
manufacturer directly a per Case fee, SELLER's fee shall automatically
be reduced by that amount, which is currently $0.12 per Case, plus any
duties or taxes that must be paid to the authorities of Mexico or the
United States of America.
1.1.19. "CASES PER CONTAINER" shall refer to the maximum number of cases that
can be loaded on a 20' container or truck while remaining within the
maximum weight limit for the trade route in question.
1.1.20. "FIRST IN, FIRST OUT" shall refer to the accounting method used to
account for inventory. In this Agreement it shall also refer to the
inventory rotation of frozen raw material that is used to pack the
finished product.
2. AGREEMENT TO SELL AND PURCHASE
2.1. SELLER agrees to toll-pack canned tuna products exclusively for BUYER,
and BUYER agrees to purchase from SELLER, Finished Products upon the
terms and conditions set forth in this agreement.
2.2. SELLER shall allocate no less that 60% of its total capacity (measured
in either tons of Raw Material processed per day or in Cases of
Finished Products produced per day or per month) to produce Products
for BUYER. During the term of this Agreement or any renewal thereof,
<PAGE>
ITG/Rowen - Toll Packing Agreement for Canned Tuna. Cont'd. Page 5
SELLER shall produce Products for BUYER on an exclusive basis, it
being understood however that SELLER shall be free to use the
remainder of its capacity (up to a maximum of 40%) to continue
packing for its own brand (Lamar) and for other private label
distributors in Mexico, so long as such products are exclusively
for consumption within Mexico. In this respect, SELLER is
specifically prohibited from manufacturing, selling, trading,
exporting or supplying Raw Material or Finished Products to any
export market, directly or indirectly, and all export inquiries
shall be turned over to BUYER by SELLER when received. Furthermore,
SELLER shall not during the term of this Agreement and any renewal
thereof supply Products to Wal-Mart International in Mexico,
directly or indirectly, under the Wal-Mart's label, brand or mark
("Great Value") or any other brand or Trademark directly owned by
Wal-Mart, Inc or Wal-Mart International, Inc.
2.3. SELLER is prohibited from co-mingling BUYER's Raw Material with its
own during production. To that end and to ensure a clear separation of
assets, SELLER shall process and pack BUYER's Raw Material in
production units of one full shift or day of production at a time. In
no event can SELLER pack products for its own account at the same time
as BUYER's Products.
3. TERM, VALIDITY AND EXCLUSIVITY
3.1. This agreement shall come into force ("Effective Date") the later of
any of the following events occurring:
3.1.1 The date this Agreement is signed by both parties, or
3.1.2 The date the Judge in charge of the "Suspension de Pagos"
authorizes SELLER to enter into this transaction and SELLER
provides BUYER with an official certificate attesting to the
fact that this Agreement has been registered in Mexico with
the appropriate authorities in accordance with paragraph 19.5.
below, or
3.1.3 The date SELLER's factory is removed from the US Food and
Drug Administration "Automatic Detention" list, or
3.1.4 The date PhF issues a certificate that the plant has been
brought up to full BUYER and FDA standards, or
3.1.5 The date Ed Townsend, BUYER's consulting engineer, attests
in writing that SELLER's plant and equipment is up to
operating standard and that SELLER is capable of producing
products that meet or exceed BUYER's specifications, or
3.1.6 The date the Mexican Government's Fisheries division grants
the US flag fishing boats that are under contract with BUYER
the right to off load Raw Material in the ports of Ensenada
or San Carlos, Baja, Mexico.
It shall remain in force for a period of five years as of the
Effective Date. Thereafter it shall be automatically renewed for
additional equal terms, unless terminated by either party in
writing not less than 6 (six) months prior to its expiration or
any renewal/s thereof.
3.2. SELLER shall grant BUYER exclusive packing privileges encompassing
100% (one hundred percent) of SELLER's capacity made available for the
export market during the term of this Agreement and any renewal
thereof. BUYER shall have a 60 (sixty) day right of first refusal to
purchase any additional manufacturing capacity made available by
SELLER, at any time during the term of this Agreement and any renewal
thereof. In this respect, SELLER shall offer to BUYER any excess
capacity in writing at least two months prior to the anticipated time
when the excess capacity is scheduled to become available. In the
event BUYER fails to take-up the additional capacity, SELLER shall be
free to offer such additional capacity to buyers in markets other than
the United States of America or Canada, including Wal-Mart
International, their agents or representatives.
<PAGE>
ITG/Rowen - Toll Packing Agreement for Canned Tuna. Cont'd. Page 6
4. BUYER'S DUTIES
4.1. BUYER shall procure all Raw Material and Direct Material needed for
toll-packing. SELLER shall be responsible for the loading of bins onto
the truck, and transportation to SELLER's cold storage warehouse under
safe, sanitary and secure conditions, so as to prevent theft or
shortages in transit. All costs associated with the pick-up and
transportation of the Raw Material to the cold storage warehouse shall
be in accordance with paragraph 1.1.3 above.
4.2. BUYER shall procure and ship from the United States all Direct
Material needed for production at SELLER's custom-bonded facilities in
Ensenada, Mexico. BUYER shall pay for all costs of direct material and
its transport from the United States to SELLER's manufacturing plant.
4.3. BUYER shall communicate information monthly to SELLER regarding its
sales activities and inventory levels. Such information shall be kept
by SELLER in the strictest confidence and shall only be made available
to those within its organization specifically responsible for the
implementation of this Agreement.
4.4. BUYER shall immediately inform SELLER of any observation/s or
complaint/s received from customers in respect of the Products and
SELLER shall promptly correct its manufacturing processes to correct
such problem/s. Repeated failure to correct a problem in a timely
fashion shall constitute sufficient reason for early termination of
this Agreement by BUYER.
4.5. BUYER shall keep SELLER informed of (i) the laws and regulations
applicable to the importation of canned tuna and to the Products
including, INTER ALIA, import regulations, labeling & packing
specifications, food safety requirements, etc.
5. SELLER'S DUTIES
5.1. SELLER shall communicate information monthly to BUYER regarding the
current market price and market trends for Raw Material costs (low,
average and high) in Mexico, as well as information regarding
competitive activities.
5.2. SELLER shall pack tuna for and on behalf of BUYER in accordance with
BUYER's specifications and directives. SELLER shall handle all Direct
Material and Raw Material supplied by BUYER under this Toll Packing
Agreement with care and shall maintain safe and sanitary warehousing,
processing and canning facilities at all times in accordance with
established standards for Good Manufacturing Practices ("GMP"). SELLER
shall be responsible for the implementation without delay, of any
changes, modifications or processes required by BUYER's representative
on site to bring the packing in line with established GMP, FDA or
BUYER's guidelines. SELLER agrees to implement a Hazard Analysis
Critical Control Point ("HACCP") program as soon as deemed practical
and reasonable by BUYER, but no later than one year from the date this
Agreement is signed.
5.3. SELLER shall receive and hold at SELLER's Cold Storage warehouse at
the plant ("Cold Storage"), BUYER's Raw Material inventory in a secure
and locked part of the facility. SELLER guarantees that products will
only be stored in metal bins in secure rooms at an ambient temperature
of no more than -10 DEG C (minus ten degrees centigrade) and that all
generators shall be maintained in good working order at all times in
order to prevent power outages that could affect the quality of
BUYER's Raw Material. SELLER shall clearly mark the bins of Raw
Material that belong to BUYER and prevent BUYER's Raw Material from
being intermingled with other fish belonging to SELLER or that of any
other third party, both in cold storage and during the manufacturing
process. SELLER agrees that the approximately 900 square meters of cold
storage warehouse that contains BUYER's Raw Material shall be secured
by a double pad lock, with the keys for the first padlock held at all
times by BUYER's representative on site, and the key to the second
padlock by SELLER's employee.
<PAGE>
ITG/Rowen - Toll Packing Agreement for Canned Tuna, Cont'd. Page 7
5.4. SELLER shall receive and warehouse in its bonded warehouse, at no cost
to BUYER, all Direct Materials needed for toll-packing. SELLER shall
be responsible for all import and reexport formalities in Mexico so as
to enable materials to enter Mexico and to be reexported duty free.
Any custom brokerage costs associated with the importation of Direct
Material into Mexico shall be borne by BUYER.
5.5. SELLER shall submit to BUYER or to BUYER's representative on site, on
the Friday of each week, a form duly filled and signed by SELLER
showing the Raw Material receipt for each delivery, broken down by
fish specie and weights. The form shall contain specific annotation
relative to the quality of incoming Raw Material together with copies
of laboratory reports for histamine and salt content tests.
5.6. SELLER shall furnish BUYER at least once a week, on each Monday, for
the preceding week, a complete accounting of Raw Material, Direct
Material and rejects used in production, as well as an
inventory-on-hand report using the First-in First-out accounting
method. SELLER shall perform physical inventories at its own expense at
least once every two months. SELLER shall be responsible for the cost
of any inventory shortage after Direct and/ or Raw Materials are
received at SELLER's warehouse.
5.7. SELLER shall provide BUYER with proof of insurance, covering all
risks, no later than 30 (thirty) days prior to the first scheduled
pack time. The insurance policy shall be issued by an international
carrier with a AAA rating, and shall cover the full value Plus 10%
(ten percent) of Direct Material and Raw Material belonging to BUYER
while the product is under SELLER's control. BUYER shall be provided
with a certificate of endorsement issued by the insurance company
showing BUYER as the beneficiary. Upon expiration of the policy SELLER
shall cause a new one to be reissued without any time gap during which
BUYER's assets are unprotected.
5.8. SELLER shall inform BUYER immediately concerning any event that could
potentially affect production, capacity, delivery timing, or shipment
of Products purchased under this Agreement, as well as with any
information needed by BUYER for carrying out its obligations under
this Agreement
5.9. SELLER shall only process at its facilities dolphin-safe tuna as
currently defined by the US Maritime Fisheries, United States laws and
the environmental groups active in dolphin preservation.
6. ANNUAL VOLUMES AND CAPACITY
6.1. During the term of this agreement and any renewal thereof, BUYER
undertakes to purchase from SELLER, not less than 850,000 Cases of
Finished Products within a calendar year, subject to the availability
of Raw Material, and SELLER undertakes to manufacture for BUYER all of
BUYER's requirements up to an aggregate of 850,000 cases of Finished
Products per calendar year. This quantity may be increased or
decreased at any time by written agreement of the parties.
6.2. SELLER shall make available to BUYER a production capacity of no less
than 50 tons of Raw Material per day, per eight hour shift, based on
an average fish size of 5 kilos and up.
6.3. BUYER shall endeavor to provide steady production orders to SELLER
to ensure maximum capacity utilization, however it is clearly
understood that such orders will be subject to market conditions,
availability of frozen Raw Material, and the competitiveness of Raw
Material costs at any one point in time. For this reason, SELLER shall
work closely with BUYER to provide a flexible manufacturing schedule
to fit BUYER's needs and opportunities.
7. ORDERS
<PAGE>
ITG/Rowen - Toll Packing Agreement for Canned Tuna, Cont'd. Page 8
7.1. SELLER shall pack, label and warehouse Finished Products packed for
BUYER in accordance with BUYERS' written orders, instructions and
specifications.
7.2. Purchase Orders ("P/O") and Shipping Instructions ("S/I") shall be
submitted to SELLER on a regular basis by BUYER. Such S/I (Exhibit
"C") shall be submitted with as long a lead time as possible, but
shall only be binding upon BUYER when both the following documents
have been issued: (a) BUYER has issued a P/0 (Exhibit "D"), and (b)
BUYER has issued a S/I which contains specific shipping and delivery
instructions in support of the P/O for each container or truck load.
7.3. SELLER shall inform BUYER in writing within 48 hours of receipt of a
P/O or S/I if, for whatever reason, it is unable to meet the specified
delivery date. SELLER may not unreasonably reject or postpone delivery
of orders transmitted by BUYER. Any refusal of order/s contrary to
good faith shall be considered as a breach of contract. Furthermore
SELLER agrees that it shall not subcontract, farm out or assign any
part of the manufacturing process to outside vendors without BUYER'S
written approval.
7.4. SELLER shall make the first containers available for shipment to BUYER
during the Second week of October, 1996. BUYER shall issue Purchase
Orders and Shipping Orders no later than one month prior to the first
shipment.
7.5. SELLER undertakes, in good faith, to fill all orders placed by BUYER
within 10 (ten) days of receipt of a signed Purchase Order submitted
by fax or by mail.
7.6. BUYER agrees to order and take delivery of minimum quantities of one
truck or container load at a time, or in multiples thereof. It is
expressly agreed however that BUYER will be allowed to mix different
Products, labels and can sizes within the same container.
8. PRICES AND COST ACCOUNTING
8.1. BUYER shall pay SELLER a fee of US $3.75 (three dollars and seventy
five cents) net per Case of Finished Product ("Seller's Fee").
8.2. SELLER shall invoice BUYER monthly for Cold Storage at an all-inclusive
rate of US$ 28 per ton, per month, calculated based on the actual
average daily inventory held in cold storage. This cost shall include
all in and out, metal bin rental, and insurance for the greater of 125%
of the value of the Raw Material held in cold storage, or the actual
replacement cost.
8.3. At the end of each week, SELLER shall furnish to BUYER written records
of each lot of raw material ("Raw Material Inventory") used in
production and the production yields achieved for each lot in
accordance with BUYER's reporting format. Each lot shall indicate the
weight category per specie, total weight per category, the achieved
Yield based on fish size and specie, and the actual number of Cases of
Finished Products manufactured from each lot of raw material, by
applying the following formula:
(# of tons) X (Cost of Raw Material Per Ton) No. of Cases of
-------------------------------------------- = Finished Product
Case Yield
SELLER shall use the First In, First Out method to account for
BUYER's Raw Material used in manufacturing and to calculate the
Cost of Raw Material Per Case of Finished Product. An Excel
spreadsheet shall be maintained by SELLER and transmitted to BUYER
weekly to show the inventory movements of incoming raw material and
outgoing finished products.
The Cost of Raw Material Per Case shall be determined weekly and
applied to the calculation of the Finished Product. Even though BUYER
will source and procure the fish raw material, SELLER shall declare
the value of fish used on all invoices to BUYER in accordance with
the above formula.
<PAGE>
ITG/Rowen - Toll Packing Agreement for Canned Tuna, Cont'd. Page 9
8.4. BUYER shall be responsible for the cost of all Direct Material used in
production. BUYER and SELLER shall agree on an acceptable percentage
of rejects for each material and SELLER shall be responsible for the
accounting of all material used in production as well as for rejects.
Rejects shall be kept for BUYER's verification and only disposed of
after BUYER's representative has signed-off on it. In the event the
production rejects exceed mutually agreed threshold, SELLER shall
reimburse BUYER for the cost of excess material used in production,
and BUYER shall be free to deduct the fully-loaded value of such
excesses from any and all amounts owed SELLER by BUYER.
8.5. SELLER shall purchase from BUYER 100% (one hundred percent) of the
fish scrap for processing into fish meal. BUYER shall invoice SELLER
US $20 (twenty) per ton of fish scrap used in production. At BUYER's
sole option, BUYER may request a separate payment or request SELLER to
issue a credit note in favor of BUYER.
8.6. In the event actual production Yields are better than those specified
in paragraph 1.1.8 above, it is expressly agreed that one hundred
percent of the benefit of those improvements shall accrue to BUYER. In
this event SELLER shall deliver to BUYER a greater number of Cases per
ton of Raw Material than anticipated under this contract.
9. PAYMENT TERMS & METHODS
9.1. SELLER shall ship Products to BUYER weekly or bi-monthly in units of no
less than one truck load (1,960 cases) at a time. SELLER's Fee shall
be due and payable 30 days from receipt of invoice. BUYER shall pay
all invoices in US dollars by wire transfer or by check made payable
to SELLER.
9.2. BUYER agrees to help fund SELLER's cash flow for a period of up to six
months from the Effective Date of this Agreement, by opening in favor
of SELLER an irrevocable and transferable Letter of Credit covering
SELLER's Fees in connection with Finished Products manufactured for
BUYER and exported to BUYER.
9.3. SELLER's Fees shall be due and payable only after Products have been
approved by the US Food and Drug Administration for entry in the
United States. In the event that the US FDA rejects a particular
shipment, SELLER shall immediately reimburse BUYER all costs
associated with the production of the rejected shipment based on
BUYER's fully-loaded costs. Such payments shall be due and payable in
full within 70 days of BUYER's invoice to SELLER, on the understanding
that BUYER shall charge SELLER a financing cost of 11% per annum over
and above the fully-loaded cost, during the period the debt is
outstanding. Upon receipt of payment by BUYER, SELLER shall be free to
sell rejected Products in the Mexican market, after such Products have
been relabelled with the SELLER's own labels. All transport costs,
import fees, warehousing and tests associated with the delivery of a
rejected container shall be borne by SELLER.
9.4. At BUYER's sole option, BUYER shall either cause:
(a) an irrevocable letter of credit to be opened in favor of SELLER
in the amount of US$ 350,000, which SELLER shall use as collateral
to finance plant and capital improvements as well as new equipment
needed to: (a) bring SELLER's facilities up to BUYER's quality
standards and, (b) finance the implementation of a HACCP quality
assurance program, and (c) finance a Yield improvement program
("Capital Improvements"). The letter of credit shall allow SELLER
to draw an amount of US $0.10 (ten cents) per Case of Finished
Product exported to BUYER. This fee shall be payable over and above
the Seller's Fee. Drawings shall be in amounts of no less than
$5,000 at a time.
or
<PAGE>
ITG/Rowen - Toll Packing Agreement for Canned Tuna, Cont'd. Page 10
(b) payments to be made directly to suppliers of equipment and
services needed for the Capital Improvements. In this event, BUYER
shall be the sole owner of all Capital Improvements and no payment
will be due SELLER in connection with the use of such equipment.
9.5. SELLER may not at any time during the term of this Agreement or any
renewal thereof use or process for its own account, take possession
of, dispose of, or transfer BUYER's Direct Materials and/or Raw
Materials to satisfy any of BUYER's obligations or SELLER's claim
against BUYER.
9.6. SELLER shall keep all BUYER-financed Capital Improvements, Direct
Material and Equipment free and clear of any lien, encumbrances,
hypothecation or charge of any kind during the term of this Agreement
and any renewal thereof. It shall the the responsibility of SELLER to
cause BUYER's lien on Equipment and Direct Material to be registered
in the Official Registry in Ensenada within seven days of the
signature of this Agreement, and to provide BUYER with a copy of such
registration.
9.7. In the event this Agreement is terminated prematurely for any reason
whatsoever, or upon its expiry, SELLER shall have the option of either
(a) returning to BUYER all Capital Improvements belonging to BUYER, or
(b) reimbursing BUYER for all payments made, directly or indirectly,
by BUYER to finance such Capital Improvements and to pay for
inventoried Raw Material and Direct Material. At BUYER's sole option,
BUYER may convert SELLER's indebtedness toward BUYER into SELLER's
voting shares of preferred or common at the then prevailing book
value.
10. WARRANTIES AND INDEMNIFICATION
10.1. SELLER hereby guarantees that no Product shipped to BUYER shall be, as
of the date of such shipment or delivery, adulterated or misbranded or
unsafe within the meaning of the US Federal Food, Drug and Cosmetic
Act with all revisions and amendments pertaining thereto (including
the Pesticide and Food Additive Amendments of 1958) or within the
meaning of any substantially similar state law.
SELLER hereby agrees to defend, pay, indemnify and hold BUYER
harmless from and against any and all claims, demands, fines,
suits, actions, proceedings, orders, decrees and judgments of any
kind or nature by or in favor of anyone whomsoever and from and
against any and all costs and expenses, including reasonable
attorneys fees, resulting from or in connection with liability or
loss arising from use, distribution and marketing of any Products
furnished by SELLER.
SELLER agrees to indemnify and hold BUYER harmless from liability,
suits or actions of any kind arising from the use, distribution and
marketing of any products furnished by SELLER, however SELLER
shall not indemnify and hold BUYER harmless from any loss or
liability arising out of the negligent acts or omissions of BUYER,
its agents or employees.
10.2. BUYER and SELLER shall carry separately and at their own expense an
insurance policy providing INTER ALIA, product liability coverage in
an amount of at least US$1,000,000 (one million US dollars). SELLER
undertakes to name BUYER an additional insured party under SELLER's
policy no later than thirty (30) days from the date this Agreement is
signed, SELLER shall furnish BUYER with the original policy or
policies or duly executed certificates for the same together with
satisfactory evidence of payment of the premium thereof.
10.3. SELLER guarantees that at all times, during the term of this Agreement
and any renewal thereof, any Direct Material, Raw Materials, or
equipment belonging to BUYER (BUYER's Assets") shall at all times be
held in storage at SELLER's own facilities, free and clear of any
lien, encumbrances, hypothecation or charge of any kind. In this
respect, SELLER shall cause no later than 30 days from the date of this
agreement a filing to be made with the appropriate Mexican
authorities, a lien in favor of BUYER on all Direct Material and Raw
Material shipped by BUYER to SELLER for use in production.
<PAGE>
ITG/Rowen - Toll Packing Agreement for Canned Tuna, Cont'd. Page 11
11. QUALITY CONTROL
11.1. SELLER shall, at any time during performance of its obligations
hereunder, permit BUYER to maintain a representative in those areas of
the plant where Raw Material, ingredients, Direct Materials, or
Finished Products are stored, handled or processed, and to enable
BUYER to inspect said facilities and assess the procedures followed by
SELLER to assure that said plants, facilities and procedures are
consistent with BUYER's quality standards and with any other
requirement which may be agreed upon from time to time by and between
the parties.
11.2. SELLER shall provide at no cost to BUYER a furnished office, a phone
line and a fax line (overseas calls charged to BUYER) to permit
BUYER's full time representative to fulfill his duties relative to
quality assurance and production monitoring.
11.3. SELLER shall permit BUYER's representative to inspect each lot of
Finished Products prior to accepting the lot, in accordance with
BUYER's standard sampling procedures as defined in BUYER's or BUYER's
Specifications. In the event BUYER's representative rejects a
particular lot that is found to be sub-standard, it will be the
SELLER's responsibility to segregate rejected Products in its
warehouse and to maintain a separate accounting for rejected Products.
It is expressly agreed that BUYER's representative shall refrain from
giving orders to SELLER's employees and shall discuss quality issues
strictly with SELLER's Supervisor.
12. DELIVERY AND STORAGE
12.1. SELLER shall deliver Finished Products to BUYER on an ex-factory
basis, loaded and braced in the truck or container.
12.2. Container/truck loading inspection procedures shall be the sole
responsibility of SELLER. In this respect SELLER will undertake to
inspect every container/truck for leaks, damage or defects that could
result in damage to the Products in transit. SELLER shall only accept
from shipping lines and freight forwarders, containers or trucks that
meet or exceed BUYER's requirements for water-proofing and quality.
Any containers that does not meet BUYER's requirements shall be
replaced before loading. SELLER will load all containers in accordance
with BUYER's loading instructions and cause appropriate bracing to be
placed within the container in order to prevent cargo damage caused by
load shifts in transit.
12.3. SELLER shall store and warehouse Products in a moisture-free
environment, in accordance with generally accepted standards, so as to
minimize the risk of Product deterioration or contamination that could
render the Product unfit for consumption. SELLER's warehouse shall be
secure against theft and shall be free of rodent infestation.
12.4. All finished Products shall be warehoused by SELLER based on generally
accepted principles of stock rotation using the first-in, first-out
method, and no charge shall be made to BUYER for warehousing of Direct
Materials or Finished Products.
13. INSPECTION ACCEPTANCE CLAIMS
13.1. All Products shall be received at its final destination subject to
BUYER's inspection and acceptance. Claims regarding defective Products
shall be made in writing to SELLER no later than ninety (90) days
after delivery of the goods at its final destination.
13.2. All claims for shortage shall be reported in writing to SELLER within
30 (thirty) days of the arrival of the container/truck at its final
destination. SELLER shall correct shortages at no cost to BUYER or
refund BUYER within 10 days for the full cost of Product. SELLER and
BUYER shall cooperate with each other in presenting claims for bill of
lading shortages or for merchandise damaged in transit.
<PAGE>
ITG/Rowen - Toll Packing Agreement for Canned Tuna, Cont'd. Page 12
13.3. In the event that certain Product codes are found to be defective
after delivery at its final destination and such codes have been
inspected by BUYER's quality assurance employees as part of BUYER's
pre-shipment organoleptic inspection, it is agreed that BUYER shall
bear the responsibility only for defects that can be detected during
the course of a normal organoleptic inspection involving a randomly
selected sample. However, any defects, whether hidden or not and/or
not otherwise easily identifiable during the course or a normal
pre-shipment organoleptic inspection of randomly selected samples (e.g.
honey combing, vacuum loss, or microbiological contamination), shall
automatically be the sole responsibility of SELLER.
14. PACKAGING AND LABELING
14.1. All preparation, packaging, containerization and loading necessary to
preserve quality and to ensure safe transportation of the Products to
the US shall be the SELLER's sole responsibility.
14.2. Unless otherwise agreed in writing, SELLER and BUYER shall cooperate to
identify and obtain the lowest freight rates for each shipment. All
shipping contracts shall be the responsibility of BUYER.
15. TERMINATION
15.1. Each party may terminate this agreement with immediate effect, by
notice given in writing by registered mail, in case of a substantial
breach by the other part of the obligations arising out of the
contract or in case of exceptional circumstances, as defined below,
justifying the earlier termination.
15.2. Any failure by a party to carry out all or part of its obligations
under the contract resulting in such detriment to the other party as
to substantially deprive it of what it is entitled to expect under the
contract, shall be considered as a substantial breach for the purpose
of article 15.1. above.
15.3. Any violation of the provisions under articles 4.4, 5, 6, 8, 9.4, 9.5,
9.6, 10, 11, 12, 13, 17, 18 and 19.5 of the present agreement shall
also be regarded as a substantial breach of contract.
15.4. Any violation of the contractual obligations may be considered as a
substantial breach, if such violation is repeated notwithstanding a
written request by the other party to fulfill the contract
obligations.
15.5. The parties further agree that the following situations shall be
considered as exceptional circumstances that justify the earlier
termination by the other party: unavailability of Raw Material at a
competitive price, unforeseen hikes in import duties, unforeseen
governmental regulations or trade barriers, withdrawal of Mexican
Government permits to off load fish in Baja, Mexico, bankruptcy,
moratorium, receivership, liquidation or any kind of composition
between the debtor and the creditors or any circumstances that are
likely to affect substantially one party's ability to carry out its
obligations under this contract.
15.6. In the event of termination, for any reason whatsoever, SELLER shall
immediately release to BUYER, or BUYER's representatives or agents,
all BUYER's Assets in its possession at the time of termination.
SELLER shall permit BUYER's representatives to enter and remove
BUYER's Assets from SELLER's facilities. In this respect, SELLER shall
make every effort to facilitate the immediate and efficient return of
BUYER's Assets and the loading of such assets in a container or truck.
16. FORCE MAJEURE
16.1. Either party may be released from its obligations hereunder in the
event that governmental regulations or any other causes beyond the
parties' control renders performance impossible. Such
<PAGE>
ITG/Rowen - Toll Packing Agreement for Canned Tuna, Cont'd. Page 13
release shall, however, be exclusively limited to that period of time
when performance is made impossible.
16.2. Should performance by either party be prevented for more than six
consecutive months, then the damaged party shall be entitled to
terminate this agreement by written notice 30 (thirty) days before
effective termination.
17. ASSIGNMENT
17.1. The present agreement may not be assigned without the other party's
prior written consent.
17.2. In the event this contract is assigned to a third party, the new party
will be required to abide by all the terms and conditions of this
Agreement.
18. CONFIDENTIALITY
Both parties agree to keep all information exchanged during the term
of this agreement or any subsequent renewal thereof as strictly
confidential, including but not limited to information regarding
volume of sales, pricing, market intelligence, competitive offers,
systems and procedures, suppliers names and addresses, bills of
lading, financial information and Product specifications.
19. MISCELLANEOUS PROVISIONS
19.1. This contract supersedes any other preceding agreement between the
parties on the subject.
19.2. No addition or modification to this contract shall be valid unless
made in writing and signed by each party's legal representative.
19.3. The nullity of a particular clause of this contract for whatever
reason shall not entail the nullity of the whole agreement, unless the
clause is of such importance that the party to the benefit of which it
was made would not have entered into the contract had it known that
the clause would not have been valid.
19.4. In the event this Agreement is translated into Spanish, it is agreed
that only the English version shall be admissible in any arbitration
or court proceedings.
19.3 SELLER shall be responsible to register this Agreement with the
appropriate authorities in Mexico within seven days of its signature.
In this respect, SELLER shall undertake, at its sole expense, to cause
whatever legal steps or registration are required with the Federal,
State or City Government or the courts, to cause this Agreement to
become valid and binding in Mexico.
20. APPLICABLE LAW:
This contract shall be interpreted and construed in accordance with
the laws of the State of Oregon in the United States of America and
shall be governed by said law.
21. ARBITRATION
21.1. Any dispute arising out of or in connection with the present agreement
shall be finally settled in accordance with the Rules of Conciliation
and Arbitration of the International Chamber of Commerce by one or
more arbitrators appointed in accordance with said Rules. The venue of
proceedings shall be Portland, Oregon, in the United States, the
language of the arbitration shall be English and the substantive law
applicable shall be that of the United States. The
<PAGE>
ITG/Rowen - Toll Packing Agreement for Canned Tuna, Cont'd. Page 14
ruling of the arbitration panel shall be final and binding upon the
parties and may be enforced in any court of law deemed appropriate.
21.2. In the event the present Agreement has been translated into other
languages, it is expressly agreed that only the original English
version shall constitute the official contract. Arbitration
proceedings shall be based on the English version of the Agreement and
no other translation shall be admissible during such proceedings.
22. ANNEXES
The following annexes constitute an integral part of the present
agreement:
(i) Exhibit A....... FDA Almanac - Standard of Identity for Canned Tuna
(ii) Exhibit B....... Sample Purchase Order
(iii) Exhibit C....... Sample Shipping Instruction
Agro Industrial Rowen, S.A. de C.V. International Trade Group, LLC.
/s/ Alvaro Romero Wendlandt /s/ Alain L. de la Motte
- -------------------------------- -----------------------------
Ing. Alvaro Romero Wendlandt Alain L. de la Motte
General Manager President/CEO
<PAGE>
"Appendix A"
Page 1 of 7
Section 161.190 CANNED TUNA
PROMULGATED 2/7/57. REVISED 10/31/90, CORRECTED 2/15/91. REVISED 1/6/93.
*IDENTITY
(a)(1) Canned tuna is the food consisting of processed flesh of fish of
the species enumerated in paragrah (a)(2) of this section, prepared in one of
the optional forms of pack specified in paragraph (a)(3) of this section,
conforming to one of the color designations specified in paragraph (a)(4) of
this section, in one of the optional packing media specified in paragraph
(a)(5) of this section, and may contain one or more of the seasonings and
flavorings specified in paragraph (a)(6) of this section. For the purpose of
inhibiting the development of struvite crystals, sodium acid pyrophosphate
may be added in a quantity not in excess of 0.5 percent by weight of the
finished food. It is packed in hermetically sealed containers and so
processed by heat as to prevent spoilage. It is labeled in accordance with
the provisions of paragraph (a)(8) of this section.
(2)(AS REVISED 55 FR 45795. 10/31/90: EFFECTIVE 12/31/90: CORRECTED
2/15/91) The fish included in the class known as tuna fish are:
THUNNUS THYNNUS (Linnaeus. 1758)--
Northern bluefin tuna
THUNNUS MACCOYII (Casteinau. 1872)--
Southern bluefin tuna
THUNNUS ALALUNGA (Bonnaterre. 1788)--
Albacore
THUNNUS ATLANTICUS (Lesson. 1830)--
Blackfin tuna
THUNNUS OBESUS (Lowe. 1839)--
Bigeye tuna
THUNNUS ALBACARES (Bonnaterre. 1788)--
Yellowfin tuna
THUNNUS TONGGOL (Bleeker. 1851)--
Longtail tuna
KATSUWONUS PELAMIS (Linnaeus. 1758)--
Skipjack tuna
EUTHYNNUS ALLETTERATUS (Rafinesque. 1810)--
Spotted tunny
EUTHYNNUS LINEATUS Kishinouye. 1920--
Black skipjack tuna
EUTHYNNUS AFFINIS (Cantor. 1849)--
Kawakawa
ALLOTHUNNUS FALLAI Serventy. 1948--
Slender tuna
AUXIS ROCHEI (Risso. 1810)--
Bullet tuna
AUXIS THAZARD (Lacepede. 1800)--
Frigate tuna
STYLES
(3) The optional forms of processed tuna consist of loins and other
striated muscular tissue of the fish. The loin is the longitudinal quarter of
the great lateral muscle freed from skin, scales, visible blood clots, bones,
gills, viscera and from the nonstriated part of such muscle, which part
(known anatomically as the median superficial muscle) is highly vascular in
structure, dark in color because of retained blood, and granular in form.
Canned tuna is prepared in one of the following forms of pack, the identity
of which is determined in accordance with the methods prescribed in paragraph
(c)(2) of this section.
(i) Solid or solid pack consists of loins freed from any surface tissue
discolored by diffused hemolyzed blood, cut in transverse segments to which
no free fragments are added. In containers of 1 pound or less of net
contents, such segments are cut in lengths suitable for packing in one layer.
In containers of more than one pound net contents, such segments may be cut
in lengths suitable for packing in one or more layers of equal thickness.
Segments are placed in the can with the planes of their transverse cut ends
parallel to the ends of the can. A piece of segment may be added if necessary
to fill a container. The proportion of free flakes broken from loins in the
canning operations shall not exceed 18 percent.
(ii) Chunk, chunks, chunk style consists of a mixture of pieces of tuna in
which the original muscle structure is retained. The piecess may vary in
size, but not less than 50 percent of the weight of the pressed contents of a
container is retained on a 1/2 inch mesh screen.
___________
*FDA announced (49 FR 23769, 7/16/84) a temporary permit issued to Ralston
Purina Co. to market test, for a period of 15 months, beginning no later than
10/15/84, canned tuna in vegetable oil and canned tuna in water which
contains a blend of sodium tripolypnosonate and sodium hexametaonosonata. In
the processing steps prior to canning these ingredients will be used to
reduce loss of natural fluids and protein during cooking, to prevent
oxidative changes during product cool-down, and to facilitate separation of
loin meat. Ingredients will be used to prevent struvite crystal formation
during storage.
Name of the permit holder changed (50 FR 12/17/35) to Van Camp Seafood
Co., Inc. and expiration date of the permit changed to coincide with the
effective date of final rule resulting from a proposal to amend the standard
or 30 days after termination of such proposal.
FDA announced (54 FR 40245, 10/13/89) a temporary market test permit
issued to Starkist Seafood Co. for 300,000 cases of 48/6oz. canned tuna
products containing added natural smoke flavor. At FR 4/13/91 FDA announced
extension of the expiration date to coincide with the effective date of final
rule resulting from a proposal to amend the standard or 30 days after
termination of such proposal.
FDA announced (56 FR 48212, 9/24/91) a temporary market test permit issued
to Bumble Bee Seafoods, Inc. for 300,000 24/6 1/8 oz. cases each of canned
tuna with jalapeno peppers in spring water, and canned tuna with jalapeno
peppers in soybean oil. At FR 7/21/92 FDA announced amendment to the permit
to increase the distribution area, and increase the quantity of chunk light
tuna with jalapeno in oil to 400,000 cases.
416
THE ALAMANAC--Volume 1--1993
<PAGE>
Page 2 of 7
STANDARDS OF IDENTITY, FILL--CANNED TUNA FISH--Continued
(iii) Flake or flakes consist of a mixture of pieces of tuna in which
more than 50 percent of the weight of the pressed contents of the container
will pass through a 1/2 inch mesh screen, but in which the muscular structure
of the flesh is retained.
(iv) Grated consists of a mixture of particles of tuna that have been
reduced to uniform size, that will pass through a 1/2 inch mesh screen, and
in which the particles are discrete and do not comprise a paste.
(v) Any of the specified forms of pack of canned tuna may be smoked.
Canned smoked tuna shall be labeled in accordance with the provisions of
paragraph (a)(8)(v) of this section.
COLOR DESIGNATIONS
(4) Canned tuna, in any of the forms of pack specified in paragraph
(a)(3) of this section, falls within one of the following color
designations, measured by visual comparison with matte surface neutral
reflectance standards corresponding to the specified Munsell units of value,
determined in accordance with paragraph (a)(7) of this section.
(i) WHITE. This color disignation is limited to the species Thunnus
alalunga (albacore), and is not darker than Munsell value 6.3.
(ii) LIGHT. This color designation includes any tuna not darker than
Munsell value 5.3.
(iii) DARK. This color designation includes all tuna darker than Munsell
value 5.3.
(iv) BLENDED. This color designation may be applied only to tuna flakes
specified in paragraph (a)(3)(iii) of this section, consisting of a mixture
of tuna flakes of which not less than 20 percent by weight meet the color
standard for either white tuna or light tuna, and the remainder of which fall
within the color standard for dark tuna. The color designation for blended
tuna is determined in accordance with paragraph (a)(7) of this section.
PACKING MEDIA
(5) (AS REVISED 58FR 2850. 1/6/93) Canned tuna is packed in one of the
following optional packing media.
(i) Any edible vegetable oil other than olive oil, or any mixture of such
oils not containing olive oil.
(ii) Olive oil.
(iii) Water.
(6) Canned tuna may be seasoned or flavored with one or more of the
following:
(i) Salt.
(ii) Monosodium glutamate.
(iii) Hydrolyzed protein declared in accordance with the applicable
provisions of Section 101.22.
(iv) Spices or spice oils or spice extracts.
(v) Vegetable broth in an amount not in excess of 5 percent of the
volume capacity of the container, such broth to consist of a minimum of 0.5
percent by weight of vegetables: Beans, cabbage, carrots, celery, garlic,
onions, parsley, peas, potatoes, green bell peppers, red bell peppers,
spinach, and tomatoes.
(vi) Garlic.
(vii) Lemon flavoring to be prepared from lemon oil and citric acid
together with safe and suitable carriers for the lemon oil which are present
at nonfunctional and insignificant levels in the finished canned food. When
lemon flavoring is added, a safe and suitable solubilizing and dispersing
ingredient may be added in a quantity not exceeding 0.005 percent by weight
of the finished food. A substance used in accordance with this paragraph is
deemed to be suitable if it is used in an amount no greater than necessary
to achieve the intended flavor effect, and is deemed to be safe if it is not
a food additive as defined in section 201(s) of the Federal Food, Drug, and
Cosmetic Act (the act), or if it is a food additive as so defined, it is used
in conformity with regulations established pursuant to section 409 of the
act.
(viii) Edible vegetable oil or partially hydrogenated vegetable oil,
excluding olive oil, used alone or in combination in an amount not to exceed
5 percent of the volume capacity of the container, with or without any
suitable form of emulsifying and suspending ingredients that has been
affirmed as GRAS or approved as a food additive to aid in dispersion of the
oil, as seasoning in canned tuna packed in water.
DETERMINING COLOR
(7) For determination of the color designations specified in paragraph
(a)(4) of this section, the following method shall be used: Recombine the
separations of pressed cake resulting from the method prescribed in paragraph
(c)(2) of this section. Pass the combined portions through a sieve fitted
with woven-wire cloth of 1/4-inch mesh complying with the specifications of
such cloth set forth in "Official Methods of Analysis of the Association of
Official Analytical Chemists," 13th Ed. (1980), Table 1. "Nominal Dimensions
of Standard Test Sieves (U.S.A. Standard Series)," under the heading
"Definitions of Terms and Explanatory Notes," which is incorporated by
reference(1). Mix the sieved material and place a sufficient quantity into a
307 x 113 size container (bearing a top seam and having a false bottom
approximately 1/2 inch deep and painted flat black inside and outside) so
that after tamping and
- --------
(1) For availability of reference materials see beginning of Part 146, this
Almanac.
THE ALMANAC--Volume 1-- 1993 417
<PAGE>
Page 3 of 7
STANDARDS OF IDENTITY, FILL--CANNED TUNA FISH--Continued
smoothing the surface of the sample the material will be 1/8 inch to 1/4
inch below the top of the container. Within 10 minutes after sieving through
the 1/4 inch mesh wire-woven cloth, determine the Munsell value of sample
surface.
(i) Determine the Munsell value of the sample surface so prepared. The
following method may be used, employing an optical comparator, consisting of
a lens and prism system which brings two beams of light, reflected from equal
areas of sample surface and standard surface, respectively, together, within
an eyepiece, so as to show an equally divided optical field. The scanned
areas of sample and standard surface are not smaller than 2 square inches.
Light reaching the eye is rendered sufficiently diffuse, by design of
eyepiece and comparator, so that detail of the sample surface will remain
undefined, to a degree such as to avoid visual confusion in observation of a
match of over-all intensity of reflected light. The eyepiece contains a color
filter centering at a wave-length between 550 microns and 560 microns. The
filter does not pass appreciable visible radiation of wavelengths below 540
microns or above 570 microns. The passed wavelength band is of a
monochromaticity sufficient to cause a sample and a neutral standard of equal
reflectance to appear of the same hue. The comparator is rigidly mounted on a
vertical stand attached to the base in which arrangement is provided for
securely and accurately positioning two cans of size 307 x 113 in the two
fields of view. Mounted on the base are two shaded lamps, which direct the
center of their beams of light at about a 45 degree angle to the plane of the
sample and standard surfaces. The lamps are so positioned that light from one
bears mainly upon the sample surface and light from the other mainly on the
standard surface, and are so placed in relation to sample and standard that
no shadows, as from the can rims, appear in the fields of view. The lamps are
strong enough to furnish adequate and convenient illumination through
eyepiece and filter. Means is provided to alter the light intensity of one
lamp in relation to the other, as may conveniently be achieved by using a 100
watt tungsten filament bulb in one lamp and using, in the other, a similar
150-watt bulb connected with the power source through a suitable rheostat.
The stand is equipped with nonglossy black curtains on the side of the
observer, to exclude variation in extraneous light reflected from the person
of the observer.
(ii) To adjust the comparator, place a pair of matte surface standards
of Munsell value 5.3, mounted as described in paragraph (a)(7)(iv) of this
section, in position in the comparator base, and adjust the intensity of the
variable lamp until the two halves of the optical field, viewed through the
eyepiece, are of equal brightness. Then remove one of the standards and
replace it with the prepared sample. Without altering any other adjustments,
observe through the eyepiece whether the sample appears lighter or darker
than the standard. In case of examination of albacore designated "white",
conduct the procedure using standards of Munsell value 6.3.
(iii) The standards with which comparisons are made are essentially
neutral matte-finish standards, equivalent in luminous reflectance of light
of 555 microns wavelength to 33.7 percent of the luminous reflectance of
magnesium oxide (for Munsell value 6.3) and 22.6 percent of the luminous
reflectance of magnesium oxide (for Munsell value 5.3), as given by the
relationship between Munsell value and luminous reflectance derived by a
subcommittee of the Optical Society of America and published in the "Journal
of the Optical Society of America" Volume 33, page 406 (1943), which is
incorporated by reference.(1)
(iv) These standards shall be cut in circles 3-1/4 inches in diameter and
shall be mounted in 307 x 113 size containers, bearing a top seam and painted
flat black inside and outside, so that the surfaces of the standards are 3/16
inch below the top of the containers in which they are mounted.
(v) In the case of blended tuna, the foregoing method shall be varied by
first separating the tuna flakes of the two different colors before passing
them through the 1/4 inch mesh sieve, then proceeding with each portion
separately for the determination of its color value, employing, if necessary,
a sample container with false bottom greater than 1/2 inch deep.
LABELING
(8)(i) The specified names of the canned tuna for which definitions and
standards of identity are prescribed by this section, except where water is
the packing medium or where the tuna is smoked, are formed by combining the
designation of form of pack with the color designation of the tuna; for
example, "Solid pack white tuna", "Grated dark tuna", etc. In the case of
blended tuna, there shall be used both applicable color designations of the
blended flakes, in precedence determined in accordance with the predominating
portion found in the container; for example, "Blended white and dark and tuna
flakes", "Blended dark and light tuna flakes".
(ii) The specified name of canned tuna when water is used as the packing
medium is
THE ALMANAC -- Volume 1 -- 1993
418
- ---------------
(1) For availability of reference materials see beginning of Part 145,
this Almanac.
418
<PAGE>
Page 4 of 7
STANDARDS OF IDENTITY, FILL--CANNED TUNA FISH--Continued
formed as described in paragraph (a)(8)(i) of this section, followed by the
words "in water"; for example, "Grated light tuna in water".
(iii) When the packing medium is vegetable oil or olive oil, the label
shall bear the name of the optional packing medium used, as specified in
paragraph (a)(5) of this section, preceded by the word "in" or the words
"packed in". In case of the optional ingredient specified in paragraph
(a)(5)(i) of this section, the name or names of the oil used may be stated,
or the general term "vegetable oil" may be used.
(iv) In case solid pack tuna is packed in olive oil, the designation
"Tonno" may also appear.
(v) In case any of the specified forms of canned tuna are smoked, the
word "smoked" shall appear as a part of the name on the label; for example,
"Smoked light tuna flakes".
+(vi) (AS REVISED 58 FR 2850, 1/6/93) Where the canned tuna contains one
or more of the ingredients provided for in paragraph (a)(6) of this section,
the label shall bear the statement "Seasoned with _______", the blank being
filled in with the name or names of the ingredient or ingredients used,
except that if the ingredient designated in paragraph (a)(6)(v) of this
section is used, the blank shall be filled in with the term "vegetable
broth", and if the ingredients designated in paragraph (a)(6)(viii) of this
section are used, the blank may be filled in with the term "oil", and if the
ingredient designated in paragraph (a)(6)(iv) of this section is used alone,
the label may alternatively bear either the statement "spiced" or the
statement "with added spice"; and if salt is the only seasoning ingredient
used, the label may alternatively bear any of the statements "salted", "with
added salt", or "salt added". If the flavoring ingredients designated in
paragraph (a)(6)(vii) of this section are used, the words "lemon flavored" or
"with lemon flavoring" shall appear as part of the name on the label; for
example, "lemon flavored chunk light tuna". Citric acid and any optional
solubilizing and dispersing agent used as specified in paragraph (a)(6)(vii)
of this section in connection with lemon flavoring ingredients or emulsifying
and suspending ingredients used as specified in paragraph (a)(6)(viii) of
this section shall be designated on the label by their common or usual name.
(vii) Where the canned tuna contains the optional ingredient sodium acid
pyrophosphate as provided in paragraph (a)(1) of this section, the label
shall bear the statement "pyrophosphate added" or "with added pyrophosphate".
(viii) Wherever the name of the food appears on the label so
conspicuously as to be easily seen under customary conditions of purchase,
the names of the optional ingredients used, as specified in paragraphs
(a)(8)(iii), (vi), and (vii) of this section (except if lemon flavoring is
added, this subparagraph applies only to the terms "lemon flavored" or "with
lemon flavoring", not to the constituent ingredients of that flavoring or to
any optional solubilizing or dispersing ingredient used in connection with
lemon flavoring ingredients), shall immediately and conspicuously precede or
follow such name without intervening, written, printed, or graphic matter,
except that the common name of the species of tuna fish may so intervene; but
the species name "albacore" may be employed only for canned tuna of that
species which meets the color designation "white" as prescribed by paragraph
(a)(4)(i) of this section.
(ix) Statements of optional ingredients present required by paragraph
(a)(8)(vi) of this section, but not subject to the provisions of paragraph
(a)(8)(vii) of this section shall be set forth on the label with such
prominence and conspicuousness as to render them likely to be read and
understood by the ordinary individual under customary conditions of purchase.
(b) (Reserved)
FILL OF CONTAINER
(c)(1) The standard of fill of container for canned tuna is a fill such
that the average weight of the pressed cake from 24 cans, as determined by
the method prescribed by paragraph (c)(2) of this section, is not less than
the minimum value specified for the corresponding can size and form of tuna
ingredient in the following table:
<TABLE>
<CAPTION>
I. II.
Can size and Minimum value for
form of tuna weights of pressed cake
ingredient (average of 24 cans)
OUNCES
<S> <C>
211 x 109:
Solid.......................................................... 2.25
Chunks......................................................... 1.98
Flakes......................................................... 1.98
Grated......................................................... 2.00
307 x 113:
Solid.......................................................... 4.47
Chunks......................................................... 3.92
Flakes......................................................... 3.92
Grated......................................................... 3.96
401 x 206:
Solid.......................................................... 8.76
Chunks......................................................... 7.58
Flakes......................................................... 7.58
Grated......................................................... 7.76
603 x 408:
Solid.......................................................... 43.2
Chunks......................................................... 37.9
Flakes......................................................... 37.9
Grated......................................................... 38.3
</TABLE>
- ----------
+See copy regarding FDA's proposed revision immediately following this
standard.
THE ALMANAC--Volume 1--1993 419
<PAGE>
Page 5 of 7
STANDARDS OF IDENTITY, FILL--CANNED TUNA FISH--Continued
If the can size in question is not listed, calculate the value for column II
as follows: From the list select as the comparable can size that one having
nearest the water capacity of the can size in question, multiply the value
listed in column II for the same form of tuna ingredient by the water
capacity of the can size in question, and divide by the water capacity of the
comparable can size. Water capacities are determined by the general method
provided in Section 130.12(a) of this chapter. For the purposes of this
section, cans of dimensions 211 x 109 shall be deemed to have a water
capacity of 68 degrees Fahrenheit of 3.55 avoirdupois ounces of water; cans of
dimensions 307 x 113, a water capacity of 7.05 avoirdupois ounces of water,
cans of dimensions 401 x 206, a water capacity of 13.80 avoirdupois ounces of
water; and cans of dimensions 603 x 408, a water capacity of 68.15
avoirdupois ounces of water.
TESTING METHODS
(2) The methods referred to in paragraph (c)(1) of this section for
determining the weight of the pressed cake and referred to in paragraph
(a)(3)(i) of this section for determining the percent of free flakes and the
percent of pieces that pass through a 1/2 inch mesh sieve are as follows:
(i) Have each of the 24 cans and contents at a temperature of 75 degrees
Fahrenheit within equals 5 degrees Fahrenheit. Test each can in turn as
follows:
(ii) Cut out the top of the can (code end), using a can opener that does
not remove nor distort the double seam.
(iii) With the cut top held on the can contents, invert the can, and
drain the free liquid by gentle finger pressure on the cut lid so that most
of the free liquid drains from the can.
(iv) With the cut lid still in place, cut out the bottom of the can with
the can opener, then turn the can upright and remove the cut can top (code
end). Scrape off any adhering tuna particles into the tuna mass in the can.
(v) Place the proper size of press cylinder as provided in paragraph
(c)(3)(i) of this section in a horizontal position on a table; then, using
the cut bottom of the can as a pusher, gently force the can contents from the
can into the cylinder so that the flat side of the can contents lies in
contact with the bottom of the cylinder. Remove the bottom of the can that
was used as the pusher and scrape any adhering particles from the can body
and bottom of the can, and put them in the cylinder.
(vi) Place the cylinder plunger on top of the can contents in the
cylinder. Remove the eyebolt and put the cylinder and plunger in position on
the press (paragraph (c)(3)(iii) of this section).
(vii) Begin the operation of the press and as soon as liquid is observed
coming from the cylinder start timing the operation. Apply pressure to the
plunger slowly and at a uniform rate, so that a full minute is used to reach
a pressure of 384 pounds per square inch of plunger face in contact with the
can contents. Hold this pressure for 1 additional minute and then release the
pressure and disengage the plunger from the press shaft. Tip the press
cylinder so that any free liquid is drained out.
(viii) Remove press cylinder with plunger from the press, insert eyebolt
in plunger and withdraw it from the cylinder. Loosen the pressed cake from
the cylinder with a thin blade and remove the entire press cake as gently as
possible, to keep the mass in a single cake during this operation. Place the
pressed cake and any pieces that adhered to the plunger and cylinder in a
tared receiving pan and determine the weight of the pressed material.
(ix) For cans larger than 401 x 206, cut out the top of the can and
drain off free liquid from the can contents as in operations described in
paragraphs (c)(2)(ii) and (iii) of this section. Determine the gross weight of
the can and remaining contents. Using a tared core cutter as provided for in
paragraph (c)(3)(ii) of this section, cut vertically a core of the drained
material in the can. Determine the weight of the core. With a thin spatula
transfer the core to the pressing cylinder for 401 x 206 cans. Determine the
weight of the pressed cake as in the operations described in paragraphs
(c)(2)(v) through (viii) of this section. Remove the remaining drained
contents of the can, reserving the contents for the determination of free
flakes (paragraph (c)(2)(xi) of this section), weigh the empty can, and
calculate the weight of the total drained material. Calculate the weight of
pressed cake on the entire can basis by multiplying the weight of the pressed
cake of the core by the ratio of the weight of the drained contents of the
can to the weight of the core before pressing.
(x) Repeat the determination of weight of pressed cake on the remainder
of the 24 cans and determine the average weight of pressed cake for the
purpose of paragraph (c)(1) of this section.
(xi) Determination of free flakes: If the optional form of tuna
ingredient is solid pack, determine the percent of free flakes. Any flakes
resulting from the operations described in this paragraph (c)(2)(xi) or in
other parts of this paragraph are to be weighed as free flakes. Only
fragments that were broken in the canning procedure are considered to be free
flakes. If the can is of such size that its entire drained contents were
pressed as described in paragraphs (c)(2)(i) to (viii) of this section,
inclusive, examine the pressed
420 THE ALMANAC--Volume 1--1993
<PAGE>
Page 6 of 7
STANDARDS OF IDENTITY. FILL--CANNED TUNA FISH--Continued
cake carefully for free flakes. Using a spatula, scrape free flakes gently
from the outside of the cake. Weigh the aggregate free flakes that were
broken from the loin segments in the canning procedure and calculate their
percentage of the total weight of pressed cake. If the can is of such size
that a core was cut for pressing as described in paragraph (c)(2)(ix) of this
section, make the examination for free flakes on a weighted portion of the
drained material remaining after the core was removed. The weight of the
portion examined should be approximately equal the weight of the core before
pressing. Calculate the weight of the free flakes that were broken from the
loins in the canning procedure as a percentage of the weight of the portion
examined.
(xii) Determination of particle size: If the optional form of tuna
ingredient is chunks, flakes, or grated, the pressed cake resulting from the
operations described in paragraphs (c)(2)(i) to (ix) of this section,
inclusive, is gently separated by hand, care being taken to avoid breaking
the pieces. The separated pieces are evenly distributed over the top sieve of
the screen separation equipment described in paragraph (c)(3)(iv) of this
section. Beginning with the top sieve, lift and drop each sieve by its open
edge three times. Each time, the open edge of the sieve is lifted the full
distance permitted by the device. Combine and weigh the material remaining on
the three top sieves (1-1/2 inch, 1 inch, 1/2 inch screens), and determine
the combined percentage retention by weight in relation to the total weight
of the pressed cake.
TESTING EQUIPMENT
(3)(i) The press cylinder and plunger referred to in paragraph (c)(2) of
this section are made of stainless steel. The press cylinders are made with a
lip to facilitate drainage of the liquid. Plungers have a threaded center
hole, about half as deep as the thickness of the plunger, for receiving a
ringbolt to assist in removing the plunger from the press cylinder.
Dimensions for press cylinders and plungers are as follows:
FOR CAN SIZE 211 X 109
Press cylinder:
Inside depth, approximately 3-3/4 inches.
Inside diameter, 2.593 inches.
Wall thickness, approximately 3/8 inch.
Plunger:
Thickness, approximately 1 inch.
Diameter, 2.568 inches.
FOR CAN SIZE 307 X 113
Press cylinder:
Inside depth, approximately 4 inches.
Inside diameter, 3.344 inches.
Wall thickness, approximately 3/8 inch.
Plunger:
Thickness, approximately 1-1/4 inches.
Diameter, 3.319 inches.
FOR CAN SIZE 401 X 206
Press cylinder:
Inside depth, approximately 4-1/8 inches.
Inside diameter, 3.969 inches.
Wall thickness, approximately 1/2 inch.
Plunger:
Thickness, approximately 1-1/4 inches.
Diameter, 3.944 inches.
For can sizes where the diameter is greater than 401, the core cutter
described in paragraph (c)(3)(ii) of this section shall be used and the
resulting core pressed in the press cylinder for can size 401 x 206. For can
sizes differing from those specified in this paragraph (c)(3)(i), special
press cylinders and plungers may be used. Special press cylinders have inside
diameters 1/10 inch less than the outside diameters, at the double seam, for
the can sizes for which the cylinders are used; plunger diameters are 0.025
inch less than the inside diameters of the press cylinders.
(ii) The core cutter referred to in paragraph (c)(2)(ix and (xi) of this
section and paragraph (c)(3)(i) of this section is made from a previously
sealed 300 x 407 can. The cover, including the top seam, is cut out. The edge
is smoothed and sharpened. A small hole to permit passage of air is made in
the bottom.
(iii) The hydraulic press referred to in paragraph (c)(2)(vi) to (x) of
this section, inclusive, is made by so mounting a hydraulic jack, in a strong
frame, that it will press horizontally against the center of the plunger in
the press cylinder used. The frame is so braced that it does not change shape
when pressure is applied. The gauge on the hydraulic jack is so calibrated
that it will indicate, for the plunger being used, when the plunger is
pressing against the contents of the press cylinder with a pressure of 384
pounds per square inch of plunger face.
(iv) The sieving device referred to in paragraph (c)(2)(xii) of this
section consists of three sieves, each approximately 1 foot square, loosely
mounted, one above the other, in a metal frame. The mesh in the top sieve
complies with the specifications for 1-1/2 inch woven-wire cloth as set forth
in "Standard Specifications for Sieves," as published March 1, 1940, in L.C.
584 of the U.S. Department of Commerce, National Bureau of Standards, which
is incorporated by reference(1). The meshes in the sieves below comply with
similar specifications for 1 inch and 1/2 inch woven-wire cloth as set forth
in the same pub-
- ----------------
(1) For availability of reference materials see beginning of Part 145, this
Almanac.
THE ALMANAC--Volume 1--1993
421
<PAGE>
Page 7 of 7
STANDARDS OF IDENTITY, FILL--CANNED TUNA FISH--(Continued)
lication. The sides of each sieve are formed, in a raised rim, from 3/4
inch x 1/8 inch metal strap. The frame has tracks made of 3/8 inch angle
metal to support each sieve under each side. The tracks are so positioned as
to permit each sieve a free vertical travel of 1-3/4 inches.
(4) If canned tuna falls below the applicable standard of fill of
container prescribed in paragraph (c)(1) of this section, the label shall
bear the general statement of substandard fill provided in Section 130.14(b)
of this chapter, in the manner and form therein specified.
- -------------------------------------------------------------------------------
FDA PROPOSAL
TUNA INGREDIENT LABELING
At 58 FR 2950, 1/6/93 FDA proposed to add two sentences to the end of Section
161.190(a)(8)(vi) to read as follows:
(vi) * * * If the vegetable extractives used in manufacturing the
vegetable broth include extractives of soybeans, the designation of vegetable
broth in the ingredient statement shall be followed by a parenthetical
listing as follows: "vegetable broth (includes soybeans)." Alternatively, if
vegetable broth containing soybean extractives serves as a flavor and has no
flavor enhancing function, it may be listed in the ingredient statement as:
"flavoring (includes soybeans)."
FDA'S PROPOSED EFFECTIVE DATE FOR A FINAL RULE IS 5/8/94.
- -------------------------------------------------------------------------------
<PAGE>
<TABLE>
<S> <C> <C> <C>
International Trade Group, LLC PURCHASE ORDER P. 1 of 1
[LOGO] 6700 SW Sandburg Rd Note: purchase order number must appear on all packages, Print Date: 9/4/96
Tigard, OR 97223 invoices, correspondence and bills of lading.
USA
Ph: (503) 598-9884 Fax: (503)
598-4391
</TABLE>
<TABLE>
<S> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Supplier Vendor No. 177 Ship To Purchase Order #
Tuna Packers Extraordinaire, S.A. de C.V. W.T. Young Storage B6-1398-A
Ensanada, Mexico The Kroger Company -----------------------------
1850 Mercer Road Date
Lexington, Kentucky 40511 September 4, 1996
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
Ordered Via Confirming To Ship Via Requisitioner
ITQ Plant Manager Overland Carrier w/Interchange at Border Dal Norris
- -----------------------------------------------------------------------------------------------------------------------------------
Minimum Cases per Container Terms of Sale Payment Terms Buyer
1800 C&F West Coast Draft Acceptance at 60 days from BOL Date Brian Brackinreed
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
1. 5400 24/6 oz 11110-22222 24/6 oz Chunk Light Tuna in Water, Kroger label US$ 15.000 US$81,000.00
3. 60 Empty Cartons Please inlclude 20 empty cartons per container for US$ 0.000 US$ 0.00
repackaging damaged cases
4. ((NOTE: THIS IS EXHIBIT B, NOT A VALID PURCHASE ORDER.))
5.
</TABLE>
<TABLE>
<S> <C> <C>
FOR PRE-SHIPMENT INSPECTION, CONTACT:
DAL NORRIS PHONE: (503) 598-9884
6700 SW SANDBURG ROAD
TIGARD, OR 97223 Total Cost > US$81,000.00
</TABLE>
PURCHASE ORDER CONDITIONS:
Products should be manufactured, packed and labelled in accordance with
attached specifications and meet US FDA standards of identity typical of this
product. Labelling should be under the label mentioned in each Shipping
Instructions for the specified item number found on the bar code. Each
shipment is to be inspected by our agent prior to delivery to the carrier.
Purchase order is subject to our standard Product and Packaging Agreement
with the Supplier mentioned above. Draft acceptance and documentation should
be addressed immediately after shipment in one lot by express courier to our
bank: U.S. National Bank of Oregon, Attn: Robert North, International
Banking, 111 S.W. Fifth Avenue, T-16, Portland, Oregon 97204.
AUTHORIZED SIGNATURE: [ILLEGIBLE]
IMPORTANT:
This purchase order and Seller's acceptance hereof is subject to and is
expressly limited to the terms and conditions set forth on the front and back
side of this purchase order. Any additional or different terms in Seller's
acceptance or confirmation forms must be approved in writing by Purchaser or
authorized agent thereof.
<PAGE>
Exhibit "C"
International Trade Group, LLC Shipping Instruction S6-1387B
6700 SW Sandburg Road
[LOGO] Tigard, OR 97223 Page 1 of 1
USA
Ph: (503) 598-9884 FAX: (503) 598-4391
<TABLE>
<S> <C>
CONTAINER TYPE: 20 Foot Dry PREFERRED CARRIER: Shipper's preferred carrier
PORT OF LOADING: Haimen CARRIER's CONTRACT:
PLACE OF DELIVERY: Louisville, Kentucky FREIGHT TERMS: C&F Louisville, KY
Shipper pays FAF, etc.
</TABLE>
<TABLE>
<S> <C> <C>
CONSIGNEE FOREIGN SHIPPER
- --------- ---------------
International Trade Group Dal Norris Jinhua Import & Export Corporation (L7)
6700 SW Sandburg Road Phone: (503) 598-9884 60 Hong Hu Road
Tigard, OR 97223 Fax: (503) 598-4391 Jinhua, Zhejiang PRC
TO ARRANGE PICK-UP CONTACT NOTIFY PARTY
- -------------------------- ------------
International Trade Group, LLC International Trade Group
Liu Yong-Ping 6700 SW Sandburg Road
Phone: 22-368-5812 Tigard, OR 97223
Fax: 22-368-2194
SEND ORIGINAL DOCUMENTS TO REQUIRED DOCUMENTS
- -------------------------- ------------------
Star Bank International Trade Group Please refer to Draft Acceptance for required
Attn: International Banking 6700 SW Sandburg Road documents.
425 Walnut Street Tigard, OR 97223
Cincinnati, OH 45201
SPECIAL SHIPPING AND LOADING INSTRUCTIONS
- -----------------------------------------
Arrange for delivery to Louisville, Kentucky via US West Coast Port. Check
container for water-leaking holes. Floor-load cases in interlocking and
overlapping pattern to avoid in-transit damage.
</TABLE>
--THE FOLLOWING ITEMS MUST BE SHIPPED--
<TABLE>
<S> <C> <C> <C> <C>
Earliest Latest Arrival
Order# Ship Date Date at POD UPC Code Commodity Description
- ------------------------------------------------------------------------------------------------------------------------
1387B-01 Jun 15, 1996 Jul 21, 1996 11110-8548 4800 cases of 12/8 oz Sliced Waterchestnuts, Kroger label
- ------------------------------------------------------------------------------------------------------------------------
1387B-02 Jun 15, 1996 Jul 21, 1996 11110-85481 4800 cases of 12/8 oz Whole Waterchestnuts, Kroger label
</TABLE>
Issue Date: May 24, 1996
NOTE: PURCHASE ORDER MUST APPEAR ON ON ALL CASES,
INVOICES, CORRESPONDENCE AND BILLS OF LADING
Authorized
Signature: [illegible] IMPORTANT: This order is subject to price quotations
and terms received from seller. Seller's acceptance
of this order constitutes an acknowledgment that
transport will be arranged as specified within
established price guidelines.
<PAGE>
[LETTERHEAD]
FAX MESSAGE
TO: (FIRM) I.T.G. FAX NO. 1-503-598-4391
- --------------------------------------------------------------------------------
LOCALE: OREGON DATE: 4 September 1996
- --------------------------------------------------------------------------------
ATTENTION: MR. ALAIN DE LA MOTTE TOTAL PAGES: 4
- --------------------------------------------------------------------------------
DEAR ALAIN:
FURTHER TO OUR TELEPHONE CONVERSATION OF EARLIER TODAY!
ATTACHED ARE COPIES OF THE TECHNICAL INFORMATION THAT I AM FORWARDING TO
ED!
OUR BASIC LEASE TERMS ARE AS FOLLOWS:
1. TERM: FIVE (5) YEAR INITIAL TERM, WITH TWO (2) YEAR RENEWAL
OPTIONS THEREAFTER
2. ANNUAL MINIMUM RENTAL: U.S. $25,000.00 PAYABLE IN TWELVE (12)
EQUAL PAYMENTS OF U.S. $2083.33. FIRST YEAR PAID IN ADVANCE!
3. OVERAGE RENTAL: U.S. $O.12 PER CASE (48/6oz cans) FOR ALL
PRODUCTION IN EXCESS OF 208,333 CASES IN ANY LEASE YEAR OVER-
AGE IS PAYABLE ON AN AS-ACCRUED BASIS.
4. INSURANCE IS REQUIRED IN THE AMOUNT OF U.S. $225,000.00!
NOTE: ALL PAYMENTS ARE "NET" OF ANY APPLICABLE TAXES!
WE HAVE CONTACTED OUR LEGAL COUNSEL IN BAJA, AND HE IS EXPECTING TO HERE
FROM YOU. MR. MANUEL PASERO TIJUANA, B.C. 011-52-66-865557!
PLEASE ADVISE IF WE CAN PROVIDE ADDITIONAL INFORMATION, PRIOR TO SENDING A
"COPY" OF OUR LEASE AGREEMENT FOR YOUR REVIEW!
BEST REGARDS
/s/ Frank Islas
FRANK ISLAS
<PAGE>
REPUBUC OF GUINEA
Work-Justice-Solidarity
Seal of the Department Conakry, 7/25/99
DEPARTMENT OF PROMOTION OF
THE PRIVATE SECTOR AND OF
COMMERCE AND INDUSTRY To: Integrated Food Resources, Inc.
CERTIFICATE OF OWNERSHIP
In accordance with the agreement entered with the Republic of Guinea, the
company Integrated Food Resources is being granted pieces of land forming
parcels of an area of 14,000 hectares in the national cadaver plan.
The referred pieces of land intended for aquaculture and located at the
following geographical coordinates will be registered in the National and Land
Registry (PLAN FONCIER AT DOMANIAL).
1. Forecariah:
Location Bloc A Benty Bloc B Berika Bloc C Touguiyire
Longitude 13DEG. 13' L.W 13DEG. 10' L.W 13DEG. 26' L.W.
Latitude 9DEG. 10' lat. N 9DEG. 22' lat. 9DEG. 28' lat. N
2. Boffa:
Location Bloc F Koba Bloc H Kounsiyire Bloc J kapatchez
Longitude 13DEG. 54' L.W 14DEG. 10' L.W 14DEG. 25' L.W
Latitude 10DEG. 57' lat. N 10DEG. 16' lat.N 10DEG. 23' lat. N
Signed with the
Official seal of the
DEPARTMENT OF PROMOTION OF
THE PRIVATE SECTOR, AND OF COMMERCE
AND INDUSTRY
Exhibit 10.5
<PAGE>
TECHNOLOGY AND TRADEMARK LICENSE AGREEMENT
This agreement is between Alain L. de la Motte ("LICENSOR") an
individual with a residence address of 2460 S.E. Larkspur Ct., Hillsboro, Oregon
97123, and Integrated Food Resources, Inc. ("LICENSEE"), a Nevada corporation,
with a principal place of business at 6700 S.W. Sandburg Road, Tigard, Oregon
97223. This agreement will be effective on the following date: January 25, 1999
("the effective date").
WHEREAS LICENSOR owns rights in certain non-confidential and
confidential technology, know how, concepts, plans, and information, including
all copyrights, trademark/service mark rights, and potential patent rights, all
relating to a system for international business transactions (the "Technology");
WHEREAS LICENSOR owns the following patent applications, copyright
registrations, federal trademark/service mark registrations, federal
trademark/service mark applications and domain name registration relating to the
Technology (all such applications and registrations are referred to collectively
as the "Rights") (the patent applications are referred to collectively as the
"Patent Applications"; the trademark/service mark registrations and applications
are referred to collectively as the "Trademarks"; the copyright registrations
are referred to collectively as the Copyrights"; and the domain name
registration is referred to as the "Domain Name Registration"):
PATENT APPLICATIONS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
PATENT APP. TITLE OF INVENTION PRIORITY DATE
NO.
- ----------------------------------------------------------------------------
<C> <S> <C>
08/745,196 METHOD AND SYSTEM FOR FACILITATING November 9, 1995
SELECTING, ORDERING
AND PURCHASING OF PRODUCTS
- ----------------------------------------------------------------------------
08/879,384 ELECTRONIC HOME SHOPPING SYSTEM AND November 9, 1995;
METHOD June 20, 1997
- ----------------------------------------------------------------------------
to be RATING SYSTEM FOR ALLOWING ELECTRONIC November 9, 1999;
assigned TRADE OF PRODUCTS June 20, 1997
- ----------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
PCT PATENT APP. TITLE OF INVENTION PRIORITY DATE
NO.
- ----------------------------------------------------------------------------
<C> <S> <C>
PCT/US96/18133 METHOD AND SYSTEM FOR FACILITATING, November 9, 1995
SELECTING, ORDERING & PURCHASING OF
PRODUCTS
- ----------------------------------------------------------------------------
</TABLE>
TRADEMARKS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
TRADEMARK MARK REGISTRATION/FILING DATE
REG./APP. NO.
- -------------------------------------------------------------------------------
<C> <S> <C>
Reg. No. 2,213,625 PROJECT HARVEST Registered December 29, 1998
- -------------------------------------------------------------------------------
App. No. MISC. DESIGN (Globe and Filed April 5, 1996;
75/084,500 Wheat Design) Published October 6, 1998
- -------------------------------------------------------------------------------
Reg. No. 2,222,108 WORLD TRADE THROUGH Registered February 9, 1999
PIONEERING TECHNOLOGY
- -------------------------------------------------------------------------------
</TABLE>
COPYRIGHTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
COPYRIGHT REG. NO. TITLE OF WORK REGISTRATION DATE
- -------------------------------------------------------------------------------
<C> <S> <C>
TX 4-383-876 PROJECT HARVEST October 9, 1996
- -------------------------------------------------------------------------------
VA 814-866 PROJECT HARVEST October 9, 1996
- -------------------------------------------------------------------------------
VA 832-717 PROJECT HARVEST CD COVER February 4, 1997
- -------------------------------------------------------------------------------
</TABLE>
DOMAIN NAME REGISTRATION
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
DOMAIN NAME REG. DOMAIN NAME REGISTRATION DATE
- -------------------------------------------------------------------------------
<C> <S> <S>
ProjectHarvest.com
- -------------------------------------------------------------------------------
</TABLE>
WHEREAS LICENSOR has a complete prototype software version of the
Technology for use in the retail-food-store-products industry, including
supporting textual and graphic materials (referred to collectively as the
"Prototype"), which is presently marketed under LICENSOR'S trademark/service
mark PROJECT HARVEST;
WHEREAS LICENSOR has delivered to LICENSEE the Prototype, and LICENSEE
wants to commercialize it for the retail-food-store-products industry;
WHEREAS LICENSEE wants to commercialize the Technology by setting up a
global e-commerce system for trading of retail-food-store products among buyers
and sellers (the "Food Industry Version of the Technology");
WHEREAS LICENSOR and LICENSEE want to enter into a mutually beneficial
license agreement involving the Rights and allowing LICENSEE to use, market and
sell a commercial version of the Technology for the retail-food-store-products
industry;
NOW THEREFORE, in consideration of the promises made below, LICENSOR
and LICENSEE agree as follows:
1. LICENSE.
LICENSOR grants to LICENSEE a worldwide, exclusive license under
the Rights to make, use and sell versions of the Technology for the
retail-food-store-products industry. LICENSEE acknowledges that it has
received from LICENSOR the Prototype.
LICENSEE shall not grant or sub-license to any third party all or any
part of the license it receives in this PARA 1. The sole exception to this
prohibition is that LICENSEE may sub-license rights under this PARA 1 to a
wholly-owned subsidiary of LICENSEE.
2. TERM.
The term of this agreement is for twenty (20) years from the effective
date, and is automatically renewable by LICENSEE for additional two (2) year
terms upon sixty (60) days written notice prior to the end of the term of this
Agreement. Such automatic renewal is
<PAGE>
conditioned on: (a) LICENSEE being current with respect to its payment
obligations described in PARA 3, and (b) LICENSEE not having breached this
Agreement.
3. LICENSE FEE; ROYALTY.
3.1 LICENSE FEE. LICENSEE will pay to LICENSOR the following license
fee: (a) a one-time, lump sum payment of $200,000 payable to LICENSOR within
ten (10) days of the occurrence of either of the following alternate events:
(i) LICENSEE'S total equity equals or exceeds fifteen million dollars
($15,000,000) in paid-in capital; or (ii) LICENSEE successfully closes a minimum
of fifteen million dollars ($15,000,000) in debt; and (b) a one-dollar ($1.00)
license-fee payment per year during the term, payable in advance for the then
following year, with the first such payment due on the effective date, and
subsequent payments due on the anniversary of the effective date for each year
during the term.
3.2 ROYALTY. LICENSEE agrees to pay to LICENSOR a royalty measured
at 7.5% of gross profit margin that LICENSEE makes from the commercial use of
the Technology and the Rights under the license granted in PARA 1.
LICENSEE shall make royalty payments and reports to LICENSOR
required by this PARA 3 on a calendar-year, quarterly basis within 30
business days after March 31st, June 30th, September 30th, and December 31st,
each payment for the then preceding accounting quarter. At a future time,
LICENSOR and LICENSEE will agree to the form of the report that LICENSEE will
provide LICENSOR on a quarterly basis pursuant to this paragraph. LICENSEE
shall make the required royalty payments in cash or stock at LICENSEE'S sole
discretion. If payment is in stock and LICENSEE is publicly traded, the
determination of the cash value of the stock shall be based upon the bid and
ask price for the stock for the prior ten (10) trading days.
LICENSEE shall keep accurate books and records reflecting
transactions, including income received pursuant to commercial activities
under this Agreement, and shall make reports at the time of the
above-identified quarterly payments fully supporting the calculation of
payments made, including the income received. LICENSOR shall have the
reasonable right to inspect LICENSEE'S books and records through an agent,
not to exceed one such audit per year. Past due payments shall bear interest
at the highest lawful rate from the due date.
4. LICENSEE'S FIRST RIGHT OF REFUSAL.
<PAGE>
LICENSEE shall have a first right of refusal to receive from
LICENSOR for consideration to be determined in the future, an exclusive,
twenty (20) year license to commercialize the Technology for industries other
than the retail-food-store-product industry. To exercise its first right
under this PARA 4, LICENSEE must provide LICENSOR with written notice of its
intent to exercise its right within thirty (30) days of receiving from
LICENSOR a description of an application of the Technology to an industry
other than the retail-food-store-product industry.
5. OWNERSHIP; ACKNOWLEDGEMENT OF VALIDITY
LICENSEE admits and agrees that LICENSOR owns the Rights and the
Technology. In addition, LICENSEE admits and agrees to the validity and
enforceability in all respects of the Rights. LICENSEE agrees that it will not
participate in any attack on the validity or enforceability of any of the Rights
whether in court, the United States Patent and Trademark Office, the U.S.
Copyright Office or elsewhere except as may be required in response to a
subpoena. It is the intent of LICENSOR and LICENSEE that this paragraph shall
have claim- and issue-preclusive effect.
6. BEST EFFORTS
LICENSEE shall use its best efforts under the license granted in PARA
1 to commercialize the Technology by setting up the Food Industry Version of the
Technology. To maintain the exclusivity of the license in PARA 1, LICENSEE
shall have a minimum of ten million dollars ($10,000,000) in annual sales
revenue beginning two years from the effective date so that for the third year
of this Agreement, and every year thereafter, LICENSEE shall have at least ten
million dollars ($10,000,000) in annual sales revenue.
7. CONTINUED DEVELOPMENT OF THE TECHNOLOGY; CONTINUED PROSECUTION OF
THE RIGHTS; OWNERSHIP OF RIGHTS IN IMPROVEMENTS.
LICENSOR and LICENSEE will work together during the term of this
Agreement to continue development of the Technology. LICENSOR will own all
rights in improvements to the Technology, and LICENSEE shall assign and/or
transfer to LICENSOR, at appropriate times in the future, rights, if any,
LICENSEE may have as a result of any ideas or
<PAGE>
inventions relating to the Technology made by representatives or employees of
LICENSEE. In connection with LICENSEE'S obligation to assign and/or transfer
to LICENSOR rights in such improvements, LICENSEE shall require all employees
and independent contractors LICENSEE hires in the future to continue
development of the Technology to execute written assign and/or transfer
agreements of rights in such improvements to LICENSOR.
All costs for continued commercial development of the Technology will
be paid exclusively by LICENSEE. In addition, LICENSEE will pay for all future
costs associated with continuing the ongoing process of obtaining domestic and
foreign intellectual property rights associated with the Rights and the
Technology, including continuing the Patent Applications, the Trademarks, and
the Copyrights.
8. CONFIDENTIALITY.
LICENSEE will keep confidential the Technology and terms of the
present agreement. LICENSEE'S confidentiality obligation survives termination
of this Agreement. With respect to LICENSEE'S confidentiality obligation
concerning the Technology, LICENSEE will treat all disclosures by LICENSOR
relating to the Technology as confidential. Such confidential disclosures may
include oral or written material, demonstrations, or samples of the Technology.
LICENSEE further agrees not to disclose any information relating to the
Technology to third parties, nor to use information about the Technology
disclosed by LICENSOR for any purpose other than that identified above, unless
written consent from LICENSOR is obtained. LICENSEE agrees to take all steps
reasonably necessary to prevent disclosure of the Technology to any third party.
The confidentiality obligations set forth in this Agreement do not
apply to information:
(i) which, prior to the effective date of this Agreement, was
generally known to the trade or public;
(ii) which at a later date becomes generally known to the trade or
public through no fault of LICENSEE'S and then only after that
date;
(iii) which is possessed by LICENSEE, as evidenced by your
<PAGE>
written or other tangible evidence, before receipt thereof
from LICENSOR; or
(iv) which is disclosed to LICENSEE in good faith by a third party
who has an independent right to such information.
9. TERMINATION.
Each party may terminate the present agreement in the event of a
material breach by the other party, but only if, upon receiving notice of
such breach, the other party fails to cure such breach within sixty (60) days
of such notice.
LICENSOR may also terminate this Agreement if any of the following
occurs:
(i) LICENSEE does not commercialize the Technology under
the license in PARA 1 by signing the first buyers and
sellers to the Food Industry Version of the Technology
within eighteen (18) months after the effective date;
(ii) LICENSEE does not raise a minimum of thirty million
dollars ($30,000,000) to finance the commercialization
of the Technology; and
(iii) LICENSEE defaults as described below and does not cure
within the sixty (60) day period described above in
this PARA 7.
A default may be any one of the following:
(i) failure to pay royalties or the annual license fee upon
the due dates identified above;
(ii) failure to finance expenses associated with enforcement
of the Rights as described in PARA 8;
(iii) failure to use notices as are and will be prescribed by
LICENSOR pursuant to PARA 9; or
(iv) failure to deliver to LICENSOR complete copies of all
improvements made to the Technology, including source
code, within thirty days of making such improvements.
10. ENFORCEMENT OF PATENT RIGHTS.
LICENSEE agrees to notify LICENSOR in writing of any unauthorized use
of the Rights and/or the Technology, if such use comes to the attention of
LICENSEE. LICENSOR
<PAGE>
shall have the sole right and discretion to bring infringement proceedings
involving the Rights and the Technology. If LICENSOR elects to prosecute an
infringer and the infringer is in the retail-food-store-products industry,
then LICENSEE will pay for all expenses, including attorney fees, associated
with prosecuting the infringer. However, all major litigation decisions are
to be made by LICENSOR. If any monetary income is obtained from an infringer
through a settlement or through litigation, that income will be used first to
pay for all expenses including attorney fees associated with prosecution of
the infringer. Any amount of monetary income that exceeds such expenses will
be shared equally among LICENSOR and LICENSEE.
11. MARKINGS.
LICENSEE shall mark all products sold or services rendered under the
Rights as being sold or rendered pursuant to a license, and with any statutorily
required notices. LICENSOR will from time to time inform LICENSEE of such
notices and the form in which they should be used.
12. NOTICES.
All notices under this agreement shall be given in writing to the
parties at the addresses listed below. The notices shall be sent via first
class mail to the following addresses:
Alain L. de la Motte Brian E. Bittke
2460 S.E. Larkspur Ct. Integrated Food Resources, Inc.
Hillsboro, Oregon 97123 6700 S.W. Sandburg Road
Tigard, Oregon 97223
13. INSURANCE.
With respect to its use of the license granted in PARA 1, LICENSEE
will maintain reasonable products liability insurance and other pertinent
liability insurance.
14. INDEMNITY.
LICENSEE agrees to indemnify and hold harmless LICENSOR for any claims
that may be brought by third parties against LICENSOR in connection with the
making, selling or using of the Rights or the Technology under this Agreement.
15. WARRANTIES.
<PAGE>
The following warranties, in addition to those set out above, are
made: LICENSOR represents and warrants that he owns the Rights and has full
right and power to grant the license set forth above and to otherwise enter into
this Agreement. LICENSOR and LICENSEE represent and warrant to each other that
no material facts have been withheld from any party that would materially alter
the value of this Agreement, nor the willingness of either party to enter into
this Agreement.
16. MISCELLANEOUS.
16.1 ASSIGNABILITY. All terms and conditions of this agreement are
limited to, binding upon and for the benefit of the parties
hereto. Apart from the exception identified in PARA 1, no
part of this agreement is assignable except upon the written
approval of LICENSOR.
16.2 PARTNERSHIP, JOINT VENTURE. This agreement does not
constitute and shall not be construed as constituting a
partnership or joint venture between LICENSOR and LICENSEE.
16.3 AMENDMENTS. Any amendments or modifications to this agreement
can and will be made by written addendum, agreed to by all
parties.
16.4 GOVERNING LAW. This agreement shall be construed in
accordance with the laws of the state of Oregon and disputes
hereunder shall be decided exclusively in the appropriate
state or federal courts located in the state of Oregon. Each
party agrees to submit to personal jurisdiction and venue in
Oregon.
16.5 INTEGRATION. This agreement constitutes the entire agreement
between the parties and no other agreement, understandings,
representations or discussions are included.
16.6 SEVERABILITY. If any part of this agreement is determined to
be wholly or partially unenforceable, the balance of the
agreement will not be affected and shall remain enforceable.
IN WITNESS WHEREOF, the parties have caused this agreement to be
executed in duplicate and signed by their authorized representatives.
<PAGE>
ALAIN L. de la MOTTE INTEGRATED FOOD RESOURCES, INC.
/s/ Alain de la Motte By: /s/ Brian E. Bittke
- --------------------------- ----------------------------
Name: Brian E. Bittke
Title: Executive Vice President
Date: January 25, 1999 Date: January 25, 1999
---------------------- ---------------------------
<PAGE>
ASSIGNMENT
WHEREAS, I, Dal Norris, of 9690 S.W. 151st Avenue, Beaverton, Oregon
97007, helped develop or may have invented certain improvements in and/or
features of a technology presently marketed under the trademark PROJECT HARVEST
(the improvements and features referred to collectively as the "invention") and
which are the object of the following patent applications:
PATENT APPLICATIONS
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------
PATENT APP. NO. TITLE OF INVENTION PRIORITY DATE
- -----------------------------------------------------------------------------
<S> <C> <C>
08/745,196 METHOD AND SYSTEM FOR FACILITATING November 9, 1995
SELECTING, ORDERING
AND PURCHASING OF PRODUCTS
- -----------------------------------------------------------------------------
08/879,384 ELECTRONIC HOME SHOPPING SYSTEM AND November 9, 1995;
METHOD June 20, 1997
- -----------------------------------------------------------------------------
to be assigned RATING SYSTEM FOR ALLOWING ELECTRONIC November 9, 1999;
TRADE OF PRODUCTS June 20, 1997
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
- -----------------------------------------------------------------------------
PCT PATENT APP. TITLE OF INVENTION PRIORITY DATE
NO.
- -----------------------------------------------------------------------------
<S> <C> <C>
PCT/US96/18133 METHOD AND SYSTEM FOR FACILITATING, November 9, 1995
SELECTING, ORDERING & PURCHASING OF
PRODUCTS
- -----------------------------------------------------------------------------
</TABLE>
WHEREAS, Alain L. de la Motte, of Tigard, Oregon, is desirous of
acquiring any rights Dal Norris may have in the invention:
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, I, Dal Norris sell, assign and transfer to Alain
L. de la Motte: (1) the full and exclusive right to the invention in the United
States and its territorial possessions and in all foreign countries, and (2) the
entire right, title and
<PAGE>
interest in and to any and all Patents or other intellectual property which
may be granted therefor in the United States and its territorial possessions,
in any and all foreign countries, and in and to any and all divisions,
reissues, continuations, continuations-in-part and extensions thereof.
I hereby authorize and request the U.S. Patent and Trademark Office,
the U.S. Copyright Office and any and all foreign countries to issue any and all
of the Patents, Copyrights or other intellectual property, when granted, to
Alain L. de la Motte, as the assignee of my entire right, title and interest in
and to the same, for the sole use of Alain L. de la Motte, his successors and
assigns.
Further, I agree that I will communicate to Alain L. de la Motte any
facts known to me respecting the invention, and testify in any legal proceeding,
sign all lawful papers, execute all divisional, continuation, substitution,
renewal and reissue applications, execute all necessary assignment papers to
cause any and all of the Patents to be issued to Alain L. de la Motte, make all
rightful oaths and generally do everything possible to aid Alain L. de la Motte,
his successors and assigns, to obtain and enforce proper protection for said
invention in the United States and in any and all foreign countries.
Date: April 15, 1999
--------------------------
/s/ Dal Norris
------------------------
Dal Norris
Witness:
/s/ Chris Nelson
- ----------------------
(Name)
28242 S. Salo Road
- ----------------------
(Address)
Mulino, OR 97042
- ----------------------
(City, State)
<PAGE>
ASSIGNMENT
WHEREAS, I, Brian Brackinreed, of 10360 S.W. Coquille Drive,
Tualatin, Oregon 97062, helped develop or may have invented certain
improvements in and/or features of a technology presently marketed under the
trademark PROJECT HARVEST (the improvements and features referred to
collectively as the "invention") and which are the object of the following
patent applications:
PATENT APPLICATIONS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
PATENT APP. NO. TITLE OF INVENTION PRIORITY DATE
- ---------------------------------------------------------------------------------
<S> <C> <C>
08/745,196 METHOD AND SYSTEM FOR FACILITATING November 9, 1995
SELECTING, ORDERING
AND PURCHASING OF PRODUCTS
- ---------------------------------------------------------------------------------
08/879,384 ELECTRONIC HOME SHOPPING SYSTEM AND November 9, 1995;
METHOD June 20, 1997
- ---------------------------------------------------------------------------------
to be assigned RATING SYSTEM FOR ALLOWING ELECTRONIC November 9, 1999;
TRADE OF PRODUCTS June 20, 1997
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
PCT PATENT APP. TITLE OF INVENTION PRIORITY DATE
NO.
- ---------------------------------------------------------------------------------
<C> <S> <S>
PCT/US96/18133 METHOD AND SYSTEM FOR FACILITATING, November 9, 1995
SELECTING, ORDERING & PURCHASING OF
PRODUCTS
- ---------------------------------------------------------------------------------
</TABLE>
WHEREAS, Alain L. de la Motte, of Tigard, Oregon, is desirous of
acquiring any rights Brian Brackinreed may have in the invention:
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, I, Brian Brackinreed sell, assign and transfer to
Alain L. de la Motte: (1) the full and exclusive right to the invention in the
United States and its territorial possessions and in all foreign countries, and
(2) the entire right, title and
<PAGE>
interest in and to any and all Patents or other intellectual property which
may be granted therefor in the United States and its territorial possessions,
in any and all foreign countries, and in and to any and all divisions,
reissues, continuations, continuations-in-part and extensions thereof.
I hereby authorize and request the U.S. Patent and Trademark Office,
the U.S. Copyright Office and any and all foreign countries to issue any and all
of the Patents, Copyrights or other intellectual property, when granted, to
Alain L. de la Motte, as the assignee of my entire right, title and interest in
and to the same, for the sole use of Alain L. de la Motte, his successors and
assigns.
Further, I agree that I will communicate to Alain L. de la Motte any
facts known to me respecting the invention, and testify in any legal proceeding,
sign all lawful papers, execute all divisional, continuation, substitution,
renewal and reissue applications, execute all necessary assignment papers to
cause any and all of the Patents to be issued to Alain L. de la Motte, make all
rightful oaths and generally do everything possible to aid Alain L. de la Motte,
his successors and assigns, to obtain and enforce proper protection for said
invention in the United States and in any and all foreign countries.
Date: April 15, 1999 /s/ Brian Brackinreed
------------------ ----------------------------
Brian Brackinreed
Witness:
/s/ Dal Norris
- ---------------------
(Name)
9690 S.W. 151st Avenue
- ---------------------
(Address)
Beaverton, OR 97007
- ---------------------
(City, State)
<PAGE>
ASSIGNMENT
WHEREAS, I, Chris Nelson, of 28242 South Salo Road, Mulino, Oregon
97042, helped develop or may have invented certain improvements in and/or
features of a technology presently marketed under the trademark PROJECT HARVEST
(the improvements and features referred to collectively as the "invention") and
which are the object of the following patent applications:
PATENT APPLICATIONS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
PATENT APP. NO. TITLE OF INVENTION PRIORITY DATE
- -------------------------------------------------------------------------------------
<C> <S> <S>
08/745,196 METHOD AND SYSTEM FOR FACILITATING November 9, 1995
SELECTING, ORDERING
AND PURCHASING OF PRODUCTS
- -------------------------------------------------------------------------------------
ELECTRONIC HOME SHOPPING SYSTEM November 9, 1995;
08/879,384 AND METHOD June 20, 1997
- -------------------------------------------------------------------------------------
to be assigned RATING SYSTEM FOR ALLOWING November 9, 1999;
ELECTRONIC TRADE OF PRODUCTS June 20, 1997
- -------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------
PCT PATENT APP. TITLE OF INVENTION PRIORITY DATE
NO.
- -------------------------------------------------------------------------------------
<C> <S> <S>
PCT/US96/18133 METHOD AND SYSTEM FOR November 9, 1995
FACILITATING, SELECTING, ORDERING &
PURCHASING OF PRODUCTS
- -------------------------------------------------------------------------------------
</TABLE>
WHEREAS, Alain L. de la Motte, of Tigard, Oregon, is desirous of
acquiring any rights Chris Nelson may have in the invention:
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, I, Chris Nelson sell, assign and transfer to Alain
L. de la Motte: (1) the full and exclusive right to the invention in the United
States and its territorial possessions and in all foreign countries, and (2) the
entire right, title and
<PAGE>
interest in and to any and all Patents or other intellectual property which
may be granted therefor in the United States and its territorial possessions,
in any and all foreign countries, and in and to any and all divisions,
reissues, continuations, continuations-in-part and extensions thereof.
I hereby authorize and request the U.S. Patent and Trademark Office,
the U.S. Copyright Office and any and all foreign countries to issue any and all
of the Patents, Copyrights or other intellectual property, when granted, to
Alain L. de la Motte, as the assignee of my entire right, title and interest in
and to the same, for the sole use of Alain L. de la Motte, his successors and
assigns.
Further, I agree that I will communicate to Alain L. de la Motte any
facts known to me respecting the invention, and testify in any legal proceeding,
sign all lawful papers, execute all divisional, continuation, substitution,
renewal and reissue applications, execute all necessary assignment papers to
cause any and all of the Patents to be issued to Alain L. de la Motte, make all
rightful oaths and generally do everything possible to aid Alain L. de la Motte,
his successors and assigns, to obtain and enforce proper protection for said
invention in the United States and in any and all foreign countries.
Date: April 15, 1999 /s/ Chris Nelson
------------------- ------------------------
Chris Nelson
Witness:
/s/ Brian Brackinreed
- ---------------------------
(Name)
10360 S.W. Coquille Drive
- ---------------------------
(Address)
Tualatin, OR 97062
- ---------------------------
(City, State)
<PAGE>
ASSIGNMENT
WHEREAS, I, Brian E. Bittke, of 1330 10th Street, West Linn, OR
97068, helped develop or may have invented certain improvements in and/or
features of a technology presently marketed under the trademark PROJECT HARVEST
(the improvements and features referred to collectively as the "invention") and
which are the object of the following patent applications:
PATENT APPLICATIONS
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
PATENT APP. NO. TITLE OF INVENTION PRIORITY DATE
- ---------------------------------------------------------------------------------
<C> <S> <S>
08/745,196 METHOD AND SYSTEM FOR FACILITATING November 9, 1995
SELECTING, ORDERING
AND PURCHASING OF PRODUCTS
- ---------------------------------------------------------------------------------
08/879,384 ELECTRONIC HOME SHOPPING SYSTEM AND November 9, 1995;
METHOD June 20, 1997
- ---------------------------------------------------------------------------------
to be assigned RATING SYSTEM FOR ALLOWING ELECTRONIC November 9, 1999;
TRADE OF PRODUCTS June 20, 1997
- ---------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------
PCT PATENT APP. TITLE OF INVENTION PRIORITY DATE
NO.
- ---------------------------------------------------------------------------------
<S> <C> <C>
PCT/US96/18133 METHOD AND SYSTEM FOR November 9, 1995
FACILITATING, SELECTING, ORDERING &
PURCHASING OF PRODUCTS
- ---------------------------------------------------------------------------------
</TABLE>
WHEREAS, Alain L. de la Motte, of Tigard, Oregon, is desirous of
acquiring any rights Brian Brackinreed may have in the invention:
NOW, THEREFORE, for good and valuable consideration, the receipt of
which is hereby acknowledged, I, Brian Brackinreed sell, assign and transfer to
Alain L. de la Motte: (1) the full and exclusive right to the invention in the
United States and its territorial possessions and in all foreign countries, and
(2) the entire right, title and
<PAGE>
interest in and to any and all Patents or other intellectual property which
may be granted therefor in the United States and its territorial possessions,
in any and all foreign countries, and in and to any and all divisions,
reissues, continuations, continuations-in-part and extensions thereof.
I hereby authorize and request the U.S. Patent and Trademark Office,
the U.S. Copyright Office and any and all foreign countries to issue any and all
of the Patents, Copyrights or other intellectual property, when granted, to
Alain L. de la Motte, as the assignee of my entire right, title and interest in
and to the same, for the sole use of Alain L. de la Motte, his successors and
assigns.
Further, I agree that I will communicate to Alain L. de la Motte any
facts known to me respecting the invention, and testify in any legal proceeding,
sign all lawful papers, execute all divisional, continuation, substitution,
renewal and reissue applications, execute all necessary assignment papers to
cause any and all of the Patents to be issued to Alain L. de la Motte, make all
rightful oaths and generally do everything possible to aid Alain L. de la Motte,
his successors and assigns, to obtain and enforce proper protection for said
invention in the United States and in any and all foreign countries.
Date: April 15, 1999 /s/ Brian E. Bittke
--------------------- -----------------------------
Brian E. Bittke
Witness:
/s/ Dal Norris
- -------------------
(Name)
9690 S.W. 151st Avenue
- -------------------
(Address)
Beaverton, OR 97007
- -------------------
(City, State)
<PAGE>
(letterhead)
K E N O T E
Certified Public Accountant, P.C.
1618 S.W. First Avenue
Suite 215
Portland, Oregon 97201
(503) 24 2977
Fax (503) 224 9049
Message (504) 248 7849
March 15, 1999
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
INTEGRATED FOOD RESOURCES, INC.
FORM 10-SB
FILE NO. 00025109
Dear Sir or Madam:
In compliance with Item 340(a)(3) of Regulation S-B, we are advising you
that we agree with the registrant's disclosures in Part II, Item 3 of Form
10-SB. We did not have any disagreements with the registrant on any matter of
accounting principles or practices, financial statement disclosure or auditing
scope or procedure.
Sincerely,
J. PAUL KENOTE, CPA, P.C.
/s/ J. Paul Kenote
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J. Paul Kenote, CPA
Exhibit 16
