SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
DIPPY FOODS, INC.
(Exact name of small business issuer as specified in its charter)
NEVADA 33-076348
(State or other jurisdiction of (IRS Employer Identification)
incorporation or organization)
1161 KNOLLWOOD CIRCLE (714) 816-0150
ANAHEIM, CALIFORNIA 92801 (Issuer's area code and telephone number)
(Address of principal offices)
Securities to be registered under Section 12(b) of the Act:
NONE
Securities to be registered under Section 12(g) of the Act:
COMMON STOCK, PAR VALUE $0.001 PER SHARE
<PAGE>
DIPPY FOODS, INC.
Table of Contents
ITEM 1. DESCRIPTION OF BUSINESS...........................................3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION........13
ITEM 3. DESCRIPTION OF PROPERTY..........................................21
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT...21
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.....22
ITEM 6. EXECUTIVE COMPENSATION...........................................24
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS...................24
ITEM 8. LEGAL PROCEEDINGS................................................25
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.........26
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES..........................27
ITEM 11. DESCRIPTION OF SECURITIES........................................28
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS........................29
ITEM 13. FINANCIAL STATEMENTS.............................................29
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS....................29
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS................................30
<PAGE>
Dippy Foods, Inc. Form 10-SB 3 / 32
ITEM 1. DESCRIPTION OF BUSINESS
FORWARD-LOOKING STATEMENTS
Certain statements in this Form 10-SB, particularly under Items 1 and 2,
constitute forward-looking statements. These forward-looking statements involve
known and unknown risks, uncertainties, and other factors that may cause the
actual results, performance or achievements of the Issuer to be materially
different from any future results, performance or achievements, expressed or
implied by the forward-looking statements.
BUSINESS DEVELOPMENT
Dippy Foods, Inc. (the "ISSUER") was incorporated as Sweetbrier Corporation
under the laws of Nevada on February 23, 1998, for the purpose of developing
mineral properties. Sweetbrier abandoned its mining claims and changed its name
to Dippy Foods, Inc. on September 17, 1998, upon entering into an agreement of
acquisition with Dippy Foods, Inc., a California corporation in the business of
developing, processing and distributing packaged dipping foods for snacks,
school lunch programs, and disaster relief programs ("DIPPY CA"). Dippy CA was
incorporated under the laws of California on May 30, 1997, and began its
operations in January, 1998. The Issuer and Dippy CA together are referred to as
the "COMPANY" in this Form 10-SB.
The Issuer acquired all of the outstanding 6,638,533 shares of Dippy CA in
exchange for 3,219,266 shares of the Issuer under an agreement dated September
17, 1998. See "Item 10. Recent Sales of Unregistered Securities" and Exhibit
#6.1 - Amended Exchange Agreement for more information. For accounting purposes,
the acquisition has been treated as a reverse acquisition with Dippy CA as the
accounting acquirer. In a reverse acquisition, the stock issued goes to the
accounting acquirer. Since reverse acquisition accounting is the reverse of
normal accounting, the fair market value of the issuer's stock at the date of
the acquisition is valued with a write up or write down of the issuer's net
assets depending on whether the stock is trading at more or less than book
value. If the stock's fair market value cannot be determined, and the cost is
based on the fair market value of the issuer's net assets, then goodwill is not
recognized and the transaction is valued at the issuer's net tangible assets.
The Issuer had no tangible assets and a very limited trading history. The fair
market value of the stock issued could not be determined. Accordingly, goodwill
was not recognized and the transaction was recorded as a recapitalization of
Dippy CA.
Neither the Issuer nor Dippy CA have been involved in any bankruptcy,
receivership or similar proceedings, have undergone any material
reclassification, merger or consolidation, or have purchased or sold any
significant assets not in the ordinary course of its business other than as
described in this Form 10-SB.
BUSINESS OF THE COMPANY
PRINCIPAL PRODUCTS
The Company develops and produces packaged, nutritious, single-serving meals and
sells them to institutional food-service providers, specifically schools. The
meals are packaged in single-serving, heat-sealed, recyclable trays with colored
labels listing the flavor and nutritional information. All meals are
shelf-stable for sixty days and require no freezing, refrigeration, heating or
preparation, and can be eaten without utensils. The products are known as
Dippers.
The Company has four Dippers meals--one nacho meal containing corn chips, salsa
and cheese sauce; and three fruit flavored meals containing cinnamon and sugar
corn chips, peanut butter, and a specially blended fruit sauce. See Table 1
below for a list of these products.
The food service directors of each school district must ensure that meals served
under the National School Lunch and Breakfast Programs meet each program's
requirements. Their principal reference for designing the meals is the Food
Buying Guide for Child Nutrition Programs published by the U.S. Department of
Agriculture. The Food Buying Guide is based on the latest federal regulations
and meal pattern requirements. The standards in the guide are based on
laboratory testing performed by the Human Nutrition Information Services and the
U.S. Department of Agriculture, and are consistent with the standards set by the
Food Safety and Inspection Service and the Food and Drug Administration.
<PAGE>
Dippy Foods, Inc. Form 10-SB 4 / 32
Table 1
Minimum Requirements - Lunch Program Grades 4 - 12
<TABLE>
<CAPTION>
- - - - - -------------------------------------------------------------------------------------------------------------
Food Item Food Buying Pineapple Cherry Blueberry Santa Fe
Guide (1) Dive Rapids Surf Nachos
- - - - - ----------------- -------------------- ---------------- ------------------ ---------------- -----------------
<S> <C> <C> <C> <C> <C>
Bread 8 servings per 3 breads per 3 breads per 3 breads per 3 breads per
week serving serving serving serving
Protein 2 oz. 2 oz 2 oz 2 oz 2 oz
Fruit and 3/4 cup 3/8 cup 3/8 cup 3/8 cup 3/8 cup
Vegetables
Dairy (2) 1/2 pint 0 0 0 0
- - - - - ----------------- -------------------- ---------------- ------------------ ---------------- -----------------
</TABLE>
(1) These values are from the U.S. Department of Agriculture's Food Buying
Guide for Child Nutrition Programs.
(2) The dairy minimum requirement will be provided by the schools.
Each of the Company's lunch meals meet the nutritional requirements of the Food
and Drug Administration for three food groups: (1) bread, (2) protein, and (3)
fruits and vegetables. See Table 1 above. Combined with a single serving of
milk, supplied to all children daily as part of the federal program, the meals
are eligible for the National School Lunch Program. (See "Effect of Governmental
Regulation on the Company's Business" below for a detailed discussion of the
National School Lunch Program.) The program sets out weekly nutritional
standards. The schools choose each week's meals to meet these standards. The
Company hopes that its meals will be served at least once a month in this
program.
During 2000, the Company is also designing meals to meet the requirements of
correctional facilities and plans to introduce five new products: three for the
school market and two for the federal, state and county correctional facilities
market. The school breakfasts will contain a breakfast muffin and cereal, each
in a different flavor. For the correctional facilities, one breakfast will
contain a peanut butter and jelly spread, 1/2 cup of cereal, 3 slices of bread,
and a spoon. The other will contain a nutrition bar, 2 hard-boiled eggs and 1
cup of cereal. The Company expects to begin production of the breakfast meals
sometime in August 2000. See "Other Markets" and "Status of Publicly Announced
New Product or Service" below for more information.
The Company plans to develop at least four new products each year. See "Status
of Publicly Announced New Product or Service" under this same item below for
more information.
The Company purchases the separate ingredients from a variety of different
suppliers. The ingredients (fruit blends, peanut butter, chips, salsa and cheese
sauce) and packaging supplies (trays, film, labels, boxes and dividers) are
delivered to the co-packer. The co-packer packs the meals pursuant to the Food
Buying Guide for Child Nutrition Programs. The co-packer packages and boxes the
meals (40 meals per case and 16 cases per pallet) and shrink wraps the pallets
for delivery. The Company sends the co-packer packing slips that identify each
pallet and order and a bill of lading to be signed by whoever picks up the
order. The Company buys the ingredients and supplies. The co-packer maintains
the inventory. The Company and the co-packer count inventory at each month end.
See "Sources, Raw Materials and Principal Suppliers" for more information.
THE MARKET
School Food Service Market
The Company has targeted the school food-services market, which enables it to
take advantage of the National School Lunch Program offered by the United States
Department of Agriculture. The U.S. Department of Agriculture has been providing
assistance for school lunches under this program since 1946. The program was
established to provide low-cost or free meals to children who meet the financial
criteria set by the U.S. Department of Agriculture. Schools that participate in
the program receive cash reimbursement from the U.S. Department of Agriculture
for each meal they serve. The meals must meet the federal nutrition requirements
and must be served free or at reduced prices to eligible children. The
reimbursement program is administered by the department of education in each
state.
<PAGE>
Dippy Foods, Inc. Form 10-SB 5 / 32
The market for school lunches is very large and growing. Approximately 45
million meals are served each school day. Of these, 27 million lunches and 6.5
million breakfasts are free or cost-reduced under the National School Lunch
Program and the School Breakfast Program. As of January 31, 2000, the Company
sold approximately 5,000 meals per day and had approximately a .015% share of
this market.
To date, the Company has shipped its product to 32 different school districts.
At the fiscal year ended April 30, 1999, and for the nine month period ended
January 31, 2000, the Company reported gross sales of $191,000 and $289,703,
respectively. As of February 29, 2000, the Company had firm backlog orders for
240 cases of its products.
Schools are having difficulty keeping up with increasing demand. The number of
eligible children is increasing, causing long cafeteria lines, and the schools'
aging kitchens are unable to produce the high number of meals demanded in the
short time available. The Company's packaged meals can help solve these problems
because the Company's meals are in single-serving, heat-sealed, recyclable trays
and all meals are shelf stable for 60 days and require no freezing,
refrigeration, heating, or preparation and can be eaten without utensils.
Schools must adhere to the Dietary Guidelines for Americans, which took effect
in the beginning of the 1996-7 school year and are similar to the guidelines set
out in the Food Buying Guide. See Table 1 above for more details. Most food
manufacturers for schools do not provide complete nutritional meals. They
provide a portion of the meal. The schools then assemble the complete meal
themselves so that they meet the guidelines set out in the Food Buying Guide.
The Company's meals are already assembled and meet the guidelines set out in the
Food Buying Guide.
Other Markets
The Company has the ability to develop virtually any shelf stable product that
can be packaged in a tray. The Company's internal marketing survey indicates an
interest in the Company's meals in several other markets, including:
o Federal, state and county correctional facilities
o Major stadium operators (college and pro football, baseball and basketball)
o The military
o Club store retailers and retail grocery chains
o Hospitals
o International exporters
o Major theme parks (e.g. Disneyland, MGM and Knott's Berry Farm)
o Airlines
The Company has no written agreements with any company in the aforementioned
markets. Correctional Food Service Management ("CFSM"), which manages more than
100 facilities nationwide, has contacted the Company expressing an interest in
purchasing meals to serve in its institutions if the Company can meet their
price. The Company has been able to satisfy the nutritional requirements. To
date, the Company has been unable to produce meals at a cost that meets the
requirements of CFSM, but continues to research alternatives to produce a cost
effective product for this market. Currently, the Company has no agreement with
CFSM to provide meals for the corrections program. However, the Company has
developed the product and delivered samples to CFSM. The Company is waiting for
CFSM to decide if it wants the Company to provide its product for this program.
Also, Ogden Foods and Airmark, both of which operate stadium concessions, have
inquired about the Company's product requesting information pertaining to
packaging, delivery and pricing. The Company provided all the requested
information. The Company was not able to reach an agreement with Airmark or
Ogden during the past baseball season. The Company attended a food show on
February 28, 2000, sponsored by Volume Services, a large sports facility
concessioner, to renew and increase interest in the Company's products.
Discussions have been re-opened with Volume Services and Airmark for the 2000
baseball season. Volume Services represents Qualcom (San Diego Padres), 3-com
(San Francisco 49ers), Rosenblatt Stadium (NCAA baseball stadium in Omaha,
Nebraska), Irvine Meadows Amphitheater, Glen Helen Race Track, Colorado
Convention Center and Cumberland County Coliseum. Airmark represents Dodger
Stadium. While discussions have been re-opened and samples have been sent, there
is no guarantee that substantial sales will be generated.
<PAGE>
Dippy Foods, Inc. Form 10-SB 6 / 32
The Company entered into a Brokerage Agreement with Anderson Chamberlin, Inc. on
March 25, 1999. See Exhibit #6.12 - Brokerage Agreement for more information.
The agreement is for a term of one year and renews automatically for successive
terms of one year thereafter unless terminated by one of the parties by
providing 60 days' notice to the other party. Anderson Chamberlin, Inc. is a
broker for Costco's warehouses. Costco has approved the proposed point-of-sale
packaging for retail outlets. In order to afford start-up costs, the Company has
requested that any order must be a minimum of two truckloads or approximately
40,320 units. The Company has not yet received a purchase order and does not
know when to expect one. On March 25, 2000, the Brokerage Agreement with
Anderson Chamberlin, Inc. automatically renewed for another year.
MARKETING AND DISTRIBUTION
The Company has an oral distribution agreement with U.S. Foodservice to
distribute Dippers. This agreement can be terminated by either party at any
time. U.S. Foodservice is a major national food distribution company, with sales
of approximately $6 billion per year. U.S. Foodservice has granted the Company
slotting status in its warehouses and stocks the Company's products at its La
Mirada branch near Los Angeles. Slotting (obtaining space on warehouse racks) is
a significant milestone for a food manufacturer, which can take years to obtain.
The working agreement includes the following provisions:
o The Company's sales representative attends monthly U.S. Foodservice local
area sales meetings to generate leads from U.S. Foodservice's agents and to
train the agents in the Company's products. This process began in December
1998, in Southern California and will continue through 2000 for the
remainder of California.
o The Company's sales representative will accompany U.S. Foodservice's agents
on a "ride along" program to make an initial presentation to potential
customers. The Company's sales representative will follow up these
presentations to take orders and will give the purchase orders to the
appropriate U.S. Foodservice agent.
o The Company will charge U.S. Foodservice $0.85 for the fruit meals and
$1.05 for the nachos, FOB the Company's docks. U.S. Foodservice will charge
schools a minimum price equal to the Company's price to U.S. Foodservice
plus 8%. The Company's payment terms are net 14 days of the Company's
shipment to U.S. Foodservice. These arrangements apply to smaller orders,
subject to minimum delivery policies. The price for products delivered on
large orders varies depending on the services rendered and the volume
ordered.
o U.S. Foodservice's sales representative will maintain ongoing service
relationships with Foodservice's directors.
o U.S. Foodservice will pursue other markets, such as hotels, the military,
amusement parks, child care facilities, retail delis and similar
institutions.
U.S. Foodservice has expressed an interest in selling or distributing the
Company's products nationwide. Discussions to define this opportunity have been
on hold until production could match orders from large accounts. The Company
will closely monitor its expected ramp up in sales activity and production
capacity and will ensure that significant increases in capacity are implemented
as seamlessly and with as few bottlenecks as possible.
The ride along program has resulted in sales from as little as six cases to a
deli to more than 1,200 cases (48,000 units) to Bakersfield City Schools. The
program has generated sales of more than 2,100 cases (84,000 meals) since the
first quarter of its implementation.
The Company distributes through ASR Food Service Distributors, Hestbecks, Joseph
Webb, Goldstar, Pinco, Otay Distributors, and Giuliano's, all of whom specialize
in school distribution in Southern and Central California. In the school
markets, smaller distributors represent a larger percentage of the industry.
These distribution arrangements are important as major distributors such as U.S.
Foodservice generally focus on the largest customers. Additional arrangements
with smaller regional firms will enable the Company to cover the entire spectrum
of the school system. The Company will deal with distributors as its customers
prefer or require.
<PAGE>
Dippy Foods, Inc. Form 10-SB 7 / 32
The customers choose their distributors and advise the Company of their choice.
The Company then arranges the shipment. The percentage shipped through each
distributor varies each month depending on how often each school district serves
Dippers on its menu. Table 1 sets out the percentages of product shipped through
each distributor for the nine months ended January 31, 2000.
Table 2
Percentages Shipped
- - - - - --------------------------------------------------
Distributor Percentage
- - - - - ------------------------------------ -------------
ASR 31
Self 22
Pinco 15
Gold Star 11
US Foodservice 10
Joseph Webb 5
Otay 4
Giuliano's 2
------
100
- - - - - -------------------------------------------
The Company recommends that its customers use distributors, but will handle the
distribution of some smaller orders by having the Company's co-packer ship the
orders directly to the customer. The Company bills these shipping costs to the
customer.
SOURCES, RAW MATERIALS AND PRINCIPAL SUPPLIERS
The Company has agreements with several food suppliers to provide high-quality,
specially blended ingredients required by the Company's recipes. In particular,
the co-branding agreement with Hunt-Wesson, Inc. and ConAgra Brands, Inc.
provides for low prices for peanut butter, fruit blends, and salsa under the
brand names of Peter Pan, Knott's Berry Farm, and Rosarita. See "Patents, Trade
Marks, Licences and other Agreements or Labor Contracts" under this item and
Exhibit #6.4 - License Agreement for more information.
In addition to Hunt-Wesson, the Company's major suppliers include La Tapatia for
corn and cinnamon chips, Gage Industries for trays, Acorn for boxes and
dividers, Multi-Pak for film, Best Labels for labels and Real Fresh for cheese
sauce. To date, these have been the primary suppliers. However, the Company has
used other suppliers, including Pioneer Packing for boxes and dividers,
Ampersand for labels, Associated Bag Company for film, and Warnock Tortillas for
chips. The Company has been using its current suppliers because they provide the
best price and terms. The Company will periodically seek new suppliers in order
to receive competitive prices and terms.
With the exception of Hunt-Wesson, the Company has no written agreements or
licensing agreements with any of its suppliers. The Company is currently on a
normal industry standard 30-day account.
The Company no longer uses Feedback Foundation, Inc. as a co-packer as a result
of a dispute over invoices resulting from the spoilage of certain products. See
"Item 8. Legal Proceedings" for further information.
The Issuer entered into a five month co-packing agreement with Global Food
Management Group, LLC ("Global"), which expired on March 4, 2000. On January 24,
2000, the Issuer entered into an amendment to the co-packing agreement with
Global. The term of the agreement was extended to September 1, 2000, and granted
an option to the Issuer at an option payment of $50.00 to extend the agreement
two additional terms of three months each. The Company will furnish all of the
equipment, raw materials and supplies to pack its products. Under the terms of
the agreement, Global, a U.S. Department of Agriculture approved co-packer, is
supposed to provide the location and labor at a cost of $0.12 per unit. See
Exhibit #6.5 - Co-Packing Agreement and Exhibit #6.6 - Amendment to Co-Packing
Agreement for further details. However, the average cost has been $0.16 per unit
due to inefficient production.
<PAGE>
Dippy Foods, Inc. Form 10-SB 8 / 32
The current machine being used to pack the Company's products is an automatic
tray heat sealer and the current assembly process requires 10 people to operate
but only produces 20 units per minute. As a result, the cost of labor averages
$0.16 per unit. However, the new horizontal form fill and seal tray line machine
will require no more than 5 people to operate the assembly process and will
produce 80 units per minute or approximately 1.5 million units a month assuming
a 16-hour production day. This should reduce production costs, particularly the
cost of trays and labels, by $0.07 and labor cost by $0.06 to $0.10 per unit.
The Company expects to have the new machine installed in April 2000 and
operational for May 2000 production. When the Company completes the purchase and
installation of its horizontal form fill and seal tray line machine it can
provide meals to schools cost effectively and at an aggressive price point.
The equipment to be provided by the Company to Global under the Co-Packing
Agreement will include the new horizontal form fill and seal tray line machine
being purchased by the Company. The machine could be installed at the Global
facility or another co-packer's facility. However, the ownership of the machine
will remain with the Company no matter where the machine is installed. If the
new machine is installed at Global's facility, the Company would renegotiate and
extend the existing co-packing agreement with Global.
In July 1999, the Company was approved as a Donated Food Processor for the
1999-2000 school year in an agreement between the California Department of
Education and the Company. See Exhibit #6.15 - Master Donated Food Processing
Agreement for more information. This agreement enables the Company to
participate in the U.S. Department of Agriculture's Commodity School Program,
which donates agricultural commodities to schools participating in the National
School Lunch Program. See "Effect of Governmental Regulations on the Company"
for more information on the National School Lunch Program.
As part of the Commodity School Program, the U.S. Department of Agriculture
purchases raw ingredients such as grains, dairy products, poultry, beef and row
crops from farmers in order to maintain price points and stabilize markets for
the producers of such products. The U.S. Department of Agriculture inventories
and warehouses these products at various locations throughout the country. The
school districts submit a request to the U.S. Department of Agriculture for
these raw ingredients based upon prior year usage. The U.S. Department of
Agriculture will distribute the products based on availability of raw
ingredients to school districts according to student population. School
districts can exchange these commodity foods for credits on finished products.
The school districts and companies that participate in the program both benefit.
The school districts receive agricultural commodities for the cost of the
shipping and deliver them to the manufacturer at no cost to the distributor. The
manufacturer sells the finished product back to the school at a price that is
reduced by the amount saved. Some items such as peanut butter have limited
menu-planning alternatives and can be effectively used by the Company, which can
realize significant cost savings under this program. The schools prefer to buy
meals by exchanging commodities because their facilities and resources are not
adequate to handle food storage, preparation and distribution.
If the Company expands into the national arena, it anticipates signing
agreements with major co-packers. Discussions with large food processors such as
Phillchic, American CoPack, and Overhill Farms have indicated that these major
co-packers would be interested in production contracts once the Company's
production reaches two to three million units per month. There is no guarantee
that the Company can expand into the national arena.
COMPETITION
School districts still prepare their own meals from a central location. As a
result, the Company does not consider itself as direct competition to the school
cafeterias but rather an alternative that supplements what the cafeterias are
already serving. One reason is because the Company's products are not meals that
are intended to be served everyday.
The schools purchase individual ingredients from various food manufacturers and
have their cafeterias assemble a complete meal that meets the guidelines set
forth in the Food Buying Guide. This process requires the storage,
refrigeration, freezing, and preparation of the meals. On the other hand, the
Company's products are already assembled, meet the guidelines set forth in the
Guide, are shelf stable for 60 days, can be eaten without utensils, and require
no freezing, refrigeration, heating nor preparation. As a direct result of these
advantages over its competitors' products, the Company's products are kept in
stock by schools as part of the schools disaster relief
<PAGE>
Dippy Foods, Inc. Form 10-SB 9 / 32
programs, as a back-up food supply in case the schools run out of food for its
daily meals, and as a replacement meal if the schools have trouble with their
food preparation equipment.
Generally at all school districts for grades K-6 the Dippers will be menued at
least once a month. On the days the Dippers are menued the cafeterias are not
preparing food. The only item being served would be the Dippers. This would also
be the case with 7th and 8th graders in older and smaller school districts that
do not have snack bars. At school districts where snack bars are present the
Dippers will be made available on the snack bar menu. In the cafeterias of those
school districts, the Dippers may be the sole entree available or there may be a
choice of entrees.
In the lower grades there will be no competition on the days the Dippers are
sold. In the higher grades there will be competition. In these higher grades the
meal being primarily sold will be the Nacho meal. Market research by Student
Testing indicates that nachos are the most popular food item for students aged 7
to 12. The Company's meals are packaged in single serving, heat sealed,
recyclable trays, are self stable for 60 days and require no freezing,
refrigeration, heating or preparation, and can be eaten without utensils. Any
other meals served will require some form of preparation and maintenance such as
refrigeration, freezing and/or heating.
Although other companies produce frozen and refrigerated meals, no other company
with shelf stable meals participates in the National School Lunch Program or
corrections programs. For example, Oscar Meyer makes "Lunchable" products
including nachos, a pizza pack, cold hamburger and hot dog packs, and a cheese
and cracker product. Jimmy Dean makes similar refrigerated products such as
their sausage products. However, neither company has entered the school
food-service or corrections markets.
As a positive to the Company's competitive position, the Child Nutrition Act
directs the Department of Agriculture to adopt regulations governing the service
of food that is in competition with one or more of the National School Lunch
Program, the Commodity Lunch Program, or the School Breakfast Program. The
Regulations provide that State agencies and schools are required to establish
such rules as necessary to control the sale of foods in competition with school
breakfasts and lunches. In California, at least 50% of all food items sold on
any day at any site on school premises must be selected from the list of
nutritious foods that includes dairy products, juices with at least 50% full
strength fruit juice, fruits/vegetables, grains, meats, legumes and some snack
items such as pretzels, crackers, and popcorn. Food items reimbursed under the
National School Lunch Act are not included in the 50% calculation. Additionally,
the Regulations prohibits the sale of food of minimal nutritional value and of
other foods sold in competition with the school breakfast or school lunch
programs in the food service area during meal periods. However, the sale of
approved competitive foods cannot be prohibited in the food service areas during
meal periods as long as the proceeds go either to the school or to the approved
student organization.
Furthermore, the Company will deal with commodities from the schools, which
provide the schools with certain price benefits. See "Sources, Raw Materials and
Principal Suppliers" and "Effect of Governmental Regulations on the Company" for
more information. Most food manufacturers prefer not to deal with commodities,
specifically the procurement of the raw ingredients due to the administrative
requirements and process involved with the commodity program. There are a few
food manufacturers that will deal with the administrative requirements to
process commodity ingredients. These manufacturers produce products such as
chicken nuggets, pizza, burritos and hamburger patties. These individual "center
of the plate" entrees do not meet the minimum guidelines of the Food Buying
Guide and are not a complete meal in and of themselves unlike the Company's
products.
Schools have acknowledged that while the Company's meals meet the guidelines set
out in the Guide and are very popular with the children, a small segment of the
parents do not perceive the Company's meals as a complete meal. Food
manufacturers of products such as pizza, macaroni and cheese, and burritos
served by schools are also not perceived by certain parents as being complete
meals. While this perception does provide disadvantages, it is not limited to
the Company and its meals as the public's perception is a general one for the
entire industry.
Another positive to the Company's competitive position is a new program that has
recently been implemented called the After School Snack Program. See "Status of
Publicly Announced New Products or Service" for more information on the new
snack products and "Effect of Governmental Regulations on the Company's
Business" for more information on this program. As a result of being a newly
formed program there is less competition in this program. Also, the Company's
products are well suited for the nature of the program and its requirements. The
<PAGE>
Dippy Foods, Inc. Form 10-SB 10 / 32
schools that participate in the After School Snack Program do not usually have
kitchen staff on duty after school. Therefore, teachers are required to
administer the program and distribute the snacks. This results in an advantage
to the Company as its products require no preparation and can be easily
distributed by the teachers.
Management believes that additional competition will enter the market at some
point and believes that the following factors will mitigate the competition:
Flavor Combinations. The Company has designed its products with the school
market specifically in mind. The low margins in this market do not offer a
strong incentive for larger food manufacturers and distributors.
New Flavors. The Company will introduce new meals on a regular basis, and plans
to develop at least four new products each fiscal year.
Packaging Well-tailored to Consumer. The Company's packaging appeals directly to
the younger school audience, where the Company hopes to build brand loyalty, and
its co-branding arrangement with Hunt-Wesson and ConAgra give it brand
recognition, enhancing its marketing appeal generally. See Exhibit #6.4 License
Agreement for more information.
Price Point. Dippers are priced attractively for schools--from $0.85 to $1.05
per meal. These prices represent a low margin for the Company. However, the
Company's management believes that the economics of the School Lunch Program
work in its favor and that other producers of products that compete directly
with Dippers will focus on other, more profitable markets. For example, the
Oscar Meyer nachos product is available in supermarkets and sells for two or
three times the price of Dippers. Even after discounts for supermarket markups,
Dippers prices are more attractive than mainstream products.
Nutrition. To date, producers of similar meals (e.g. Oscar Meyer, Jimmy Dean)
would not qualify for the National School Lunch Program. Review of the
nutritional facts as presented on the labels of these products indicate too much
fat and sodium content and not enough bread, protein and fruit content. As a
result, these products do not meet the minimum standards of the Food Buying
Guide published by the Department of Agriculture.
Customer Support. The school niche is specialized and requires a considerable
amount of customer service. The Company intends to maintain its high level of
service. Major food suppliers have limited interest in pursuing these accounts,
preferring to service the low-maintenance national retailers and distributors.
Management believes that most major manufacturers are set up to pursue and
service the traditional, mass-market retailers. Penetrating the school lunch
market would require that potential competitors undertake a major overhaul of
their products and revise their price points and marketing techniques.
STATUS OF PUBLICLY ANNOUNCED NEW PRODUCT OR SERVICE
The Company has not publicly announced any new products or services. However,
the Company does plan to develop and introduce at least four new products each
fiscal year. The Company is currently developing four new products, (1) animal
crackers and fruit dip, (2) chips and salsa (no cheese), (3) peanut butter and
graham crackers (all for the After School Snack Program), and (4) cereal and
muffin for the School Breakfast Program. See "Effect of Governmental Regulations
on the Company's Business" for more information on these programs. The Company
has not received any purchase orders from schools for this program, but the
Company has sent out samples and displayed the new products at trade shows. The
Company expects to begin production of the new after school snack meals sometime
in August 2000 and begin pursuing purchase orders from school districts shortly
thereafter.
PATENTS, TRADE MARKS, LICENCES AND OTHER AGREEMENTS OR LABOR CONTRACTS
The Company has a licence agreement with ConAgra Brands, Inc. and Hunt-Wesson,
Inc. dated May 19, 1999. See Exhibit #6.4 - License Agreement for more details.
Under the agreement, Hunt-Wesson and ConAgra granted the Company a
non-exclusive, royalty-free licence to use the trademarks PETER PAN(R) and
KNOTT'S BERRY FARMS(R) until December 31, 2008. The Company annually must buy
certain minimum quantities of the licensor's
<PAGE>
Dippy Foods, Inc. Form 10-SB 11 / 32
fruit fillings and peanut butter as set out in Table 3 and use them exclusively
in all of its products except those products destined for the school districts
that are part of the Commodity School Program. The licensor has the right to
cancel the contract if the Company does not buy the minimum amounts.
Table 3
Minimum Quantities under Licence
- - - - - --------------------------------------------------------
Calendar year Fruit Peanut butter
- - - - - ------------------- ----------------- ------------------
1999 400,000 lbs 200,000 lbs
2000 600,000 lbs 400,000 lbs
2001 800,000 lbs 500,000 lbs
- - - - - ------------------- ----------------- ------------------
The minimum annual quantity for fruit filling and peanut butter increases 10%
over the previous year in each calendar year after 2001.
If the Company fails to purchase the minimum quantities specified by the
licensing agreement then ConAgra / Hunt-Wesson could terminate the licensing
agreement and not permit the Company to use their logos on its products. The
Company did not purchase the minimum quantities specified by the licensing
agreement for 1999. The Company orders only what is required to fill its orders
and maintain a small inventory of finished product. To date Con Agra /
Hunt-Wesson has not terminated the licensing agreement. However, even though the
Company has not fulfilled its obligations under the licensing agreement, Con
Agra / Hunt Wesson will continue to sell the necessary fruit filling and the
peanut butter to the Company. The Company's account is current and is a sizeable
account for Hunt-Wesson. See "Results of Operations - Cost of Goods" for more
information.
Jon Stevenson registered copyrights to the cover art that the Company uses on
its packaged meals. Mr. Stevenson, a director and the president of both the
Issuer and of Dippy CA, has assigned his interest in the copyright to the Issuer
under a written agreement dated September 18, 1998, and transferred the
registered copyright into the name of the Issuer in consideration of 850,000
shares in the Issuer's common stock. Currently, the copyright is registered in
the name of Jon Stevenson, who is holding the legal interest in the copyright in
trust for the Issuer. See "Item 7. Certain Relationships and Related
Transactions" and Exhibit #6.2- Assignment of Copyright.
The Company has no other copyrights, patents or trade marks and is not a party
to any other licence or franchise agreements, concessions, or royalty
agreements.
DEPENDENCE ON ONE OR A FEW MAJOR CUSTOMERS
The Company had two major customers in the fiscal year ended April 30, 1999.
These were the Bakersfield City Schools and US Foodservice, who generated 29.2%
and 14.7% of the Company's sales revenue respectively, for a total of 43.9%,
down from five major customers in the prior period. These were Bellflower
Unified School District, Carlsbad, Covina Valley School District, Paramount
Unified School District and South Whittier School District, who generated 91.6%
of the Company's sales revenue. The Company has sold its product to more than 32
customers and is increasing this number and lessening its dependence on a few
major customers. The addition of new product lines will further lessen
dependence on a few major customers.
REQUIREMENT FOR GOVERNMENT APPROVAL OF PRINCIPAL PRODUCTS OR SERVICES
The Company is not required to obtain any direct government approval of its
products. However, pursuant to the National School Lunch Program, all meals
served under the program must meet minimum standards. It is the sole
responsibility of the school districts to ascertain and determine that the meals
they elect to serve meet the minimum standards set forth by the National School
Lunch Program. The Company's products have been developed and produced to meet
these minimum standards. Using the guidelines set forth in the Food Buying
Guide, the Company produces its products to surpass the minimum standards. The
only minimum standard that the Company does not meet is the dairy requirement,
which the school provides by serving milk. See Table 1 above and "Principal
Products" for more information.
<PAGE>
Dippy Foods, Inc. Form 10-SB 12 / 32
EFFECT OF GOVERNMENTAL REGULATIONS ON THE COMPANY'S BUSINESS
The National School Lunch Program and the Commodity School Program are central
to the Company's business strategy. The elimination of these programs could have
a materially adverse affect on the Company's operations.
The National School Lunch Program began in 1946 after military officials noticed
that some World War II recruits were undernourished. The goal was to make sure
children received one good meal at least once a day. Section 2 of the National
School Lunch Act states:
"It is declared to be the policy of Congress, as a measure of national
security, to safeguard the health and well-being of the Nation's children
and to encourage the domestic consumption of nutritious agricultural
commodities and other food, by assisting the States, through grants-in-aid
and other means, in providing an adequate supply of food and other
facilities for the establishment, maintenance, operation and expansion of
nonprofit school lunch programs."
The National School Lunch Program is a program under which participating schools
operate a nonprofit lunch program in accordance with the Code of Federal
Regulations. The Commodity School Program is a program under which a school
operates the same lunch program, but receives donated food assistance in lieu of
general cash assistance. Part 210 of the Code of Federal Regulations sets forth
the requirements for participation in these two programs, specifying
responsibilities of state and local officials in the areas of program
administration, preparation and service of nutritious lunches, payments of
funds, use of program funds, program monitoring, and reporting and record
keeping requirements.
In order to qualify for reimbursement under either program, all lunches offered
by participating schools and served to children two and older must meet the
minimum nutrition standards with respect to the appropriate level of calories
and nutrients as provided in the Code of Federal Regulations. The requirements
and recommendations are designed so that the nutrients of the lunch, averaged
over a period of time, approximate one-third of the Recommended Dietary
Allowance for children.
The Commodity School Program is another federal program whereby the U.S.
Department of Agriculture purchases raw ingredients such as grains, dairy
products, poultry, beef and row crops from farmers in order to maintain price
points and stabilize markets for the producers of such products. The U.S.
Department of Agriculture inventories and warehouses these products at various
locations throughout the country. The school districts submit a request to the
U.S. Department of Agriculture for these raw ingredients based upon prior year
usage. The U.S. Department of Agriculture will distribute the products based on
availability of raw ingredients to school districts according to student
population. School districts can exchange these commodity foods for credits on
finished products. The school districts and companies that participate in the
program both benefit. The school districts receive agricultural commodities for
the cost of the shipping and deliver them to the manufacturer at no cost to the
distributor. The manufacturer sells the finished product back to the school at a
price that is reduced by the amount saved. Some items such as peanut butter have
limited menu-planning alternatives and can be effectively used by the Company,
which can realize significant cost savings under this program. The schools
prefer to buy meals by exchanging commodities because their facilities and
resources are not adequate to handle food storage, preparation and distribution.
The Food and Nutrition Service administers these programs for the Department of
Agriculture. Within each state, the state's educational agency administers these
programs. The state may withhold program payments under any of the programs if
the participating school has failed to comply with all applicable provisions of
the Code of Federal Regulations.
The School Breakfast Program is another federal program that provides states
with cash assistance for non-profit breakfast programs in schools and
residential child care institutions. The School Breakfast Program was
established in 1966 as a two-year pilot project designed to provide categorical
grants to assist schools serving breakfasts to nutritionally needy children. The
School Breakfast Program received permanent authorization in 1975 to carry out
the provisions of Section 4 of the Child Nutrition Act of 1966. The U.S.
Department of Agriculture reports that during the first year of operation, the
School Breakfast Program served approximately 80,000 children at a federal
<PAGE>
Dippy Foods, Inc. Form 10-SB 13 / 32
cost of $573,000. In 1975, approximately two million children participated in
the School Lunch Program on a given day and over the following two decades,
participation increased to seven million.
Under the School Breakfast Program, the objective is to provide one breakfast
per child per day. A school will receive breakfast assistance payments from the
state, if funds are available, for breakfasts served to children. To be eligible
for federal cash reimbursement, a breakfast must contain, at minimum, (i) one
serving of milk, (ii) one serving of fruit or vegetable or both, or full
strength fruit or vegetable juice, and (iii) two servings of bread, bread
alternates, meat or meat alternates, in the quantities specified for each age
group as set out in the Code of Federal Regulations.
The After School Snack Program is a new program under which schools offer an
after school snack in accordance with the Code of Federal Regulations. This
program has been available for quite some time but not until September 1999 did
the federal government begin promoting this program and have approved $3 billion
of funding for this program. The snack to be offered under the program must meet
two out of the four food groups as set out in the Food Buying Guide. For every
student who participates in this program the school receives a $0.52
reimbursement. The Company's products offered in this program will have the same
60 day shelf life, but will be produced at a reduced cost as a result of less
product being put into the snack as compared to the products in the School
Breakfast Program and the National School Lunch Program.
EXPENDITURES ON RESEARCH AND DEVELOPMENT DURING THE LAST TWO FISCAL YEARS
The Company has spent approximately $26,525 on research and development as of
January 31, 2000.
COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS
The Company is not required to comply with any environmental laws and there are
no requirements to use recyclable materials under the School Breakfast Program
and the National School Lunch Program. However, the Company is sensitive to
environmental concerns and uses recyclable materials whenever possible.
For instance, on July 1, 1999, a compliance evaluation inspection was conducted
by the United States Environmental Protection Agency under the Resources
Conservation and Recovery Act at the premises of International Foam Solutions,
Inc. ("IFS") located at Delray Beach, Florida. IFS is the manufacturer of styro
solve, a biodegradable product made with natural ingredients from oranges,
grapefruits and limes. The styro solve system densifies the expanded polystyrene
(styrofoam), which can then be recycled into useful items such as office and
school supplies, trays, garbage cans, computers and many other items. The
inspection report states that the styro solve system reduces on site the volume
of expanded polystyrene (styrofoam) items by as much as 80% to 90%.
On July 8, 1999, the Company entered into a Distributorship Agreement with IFS.
See Exhibit #6.11 - Distributorship Agreement for more information. Under the
agreement, the Company will distribute the equipment and the biodegradable
product for the styro solve system. The Company is currently developing a high
density polystyrene tray for its own products that can easily be recycled using
this system and equipment.
Currently, many school districts use expanded polystyrene (styrofoam) in the
form of trays, plates, cups, utensils and packaging materials. The expanded
polystyrene (styrofoam) can be recycled, but at a high cost to the school. As a
result schools are not recycling these products, which in turn result in a
disposal problem for the school.
However, the styro solve system of IFS is an alternative to expanded polystyrene
(styrofoam). For the school districts that adopt this system, disposal costs
will be greatly reduced. As an incentive for school districts to purchase the
Company's products, the Company has offered to place a styro solve system in any
school, at no cost to the school, provided that (1) the school orders a minimum
of three meal placements per month for a term of five years and (2) purchases
the biodegradable product directly from IFS for use with the styro solve system.
NUMBER OF EMPLOYEES
The Company has a total of three full-time employees.
<PAGE>
Dippy Foods, Inc. Form 10-SB 14 / 32
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
RESULTS OF OPERATIONS
Table 4 sets out the percentage of total revenues represented by certain items
reflected in the Company's income statement for the fiscal periods indicated and
the percentage increase or decrease in the items over the prior period.
Table 4
Percentage Changes in Operations
<TABLE>
<CAPTION>
- - - - - --------------------------------------------------------------------------------------------------------------------
Percentage of total revenue Percentage change
----------------------------- ----------------------
Fiscal periods ended April 30
------------------------------------------------------
1998 1999 1998 vs. 1999
--------------- --------------- ----------------------
<S> <C> <C> <C>
Total revenues 100.00% 100.00% 550.82%
Cost of goods 86.00 95.61 623.57
--------------- ---------------
Gross profit 14.00 4.39 103.95
Selling, general and administrative expenses 269.04 418.33 911.94
--------------- ---------------
Loss from operations 255.04 413.95 956.30
Interest expense -- 2.51 --
--------------- ---------------
Net loss 255.04 416.46 962.71
------------------------------------------------------
Nine months ended January 31
------------------------------------------------------
1999 2000 1999 vs. 2000
--------------- --------------- ----------------------
Total revenues 100.00% 100.00% 196.60%
Cost of goods 110.22 72.09 93.99
--------------- ---------------
Gross profit (loss) (10.22) 27.91 909.96
Selling, general and administrative expenses 241.49 121.05 48.67
--------------- ---------------
Loss from operations 251.71 93.13 9.74
Interest expense 1.26 9.40 2,106.16
--------------- ---------------
Net loss 252.98 102.53 20.21
- - - - - --------------------------------------------------------------------------------------------------------------------
</TABLE>
Revenues. Revenues for the year ended April 30, 1999, were $191,933,
representing a 550.82% increase over the $29,491 the Company realized in revenue
during the period ended April 30, 1998. The Company spent its first year on
product development and market research. Any sales during this period were
incidental. The Company's first sales of any significance began in August, 1998,
for the 1998-1999 school year. Since then, the Company has increased its
customer base among school districts in Southern California. By January 31,
2000, the Company's orders for the 1999-2000 school year exceeded all of last
year's sales to school districts. The Company believes that its sales growth
will continue on this trend as more schools look for more convenient foods to
satisfy their free and subsidized meal programs. Management estimates that sales
will increase by approximately 10% per month in the new school year beginning
September 2000.
Revenues for the nine month period ended January 31, 2000 were $289,703,
representing a 196.6% increase over the $97,675 the Company realized in revenue
during the period ended January 31, 1999. $149,856 of sales during this period
were attributable to the re-opening of schools from Christmas vacation and
concerns with Year 2000 issues. During this period, the Company received orders
for 5,980 cases, an increase of 97.9% over the same period in 1999.
The Company intends to continue its focus on the National School Lunch Program
and the School Breakfast Program. It is management's position that the size of
the school market and the lack of competition in this market create potential
for growth. The Company will also develop a retail strategy for inventory that
is not sold to schools. For instance, Costco's broker initiated discussions with
the Company in the spring of 1999. Costco has approved the Company's proposed
point-of-sale packaging for its retail outlets and agreed that any order must be
a minimum of two truckloads or approximately 40,320 units in order for the
Company to afford the start-up costs. Although its margins on sales to retailers
such as Costco are higher than its margins on sales to school districts,
management's position is that the school districts present a greater potential
for growth. See "The Market" for further information.
<PAGE>
Dippy Foods, Inc. Form 10-SB 15 / 32
Projected Revenues. The Company's product line addresses the concerns and issues
facing thousands of school districts who must supply breakfasts and lunches to
over 45 million children daily nationwide. According to the U.S. Department of
Agriculture, 27 million free and cost reduced lunches are served on a daily
basis as part of the School Breakfast Program and the National School Lunch
Program (the "PROGRAMS"). The number of breakfasts served daily is over 6
million and is expected to double by the year 2002. Under the Programs, schools
receive $1.98 for lunches and $1.19 for breakfasts from the federal government.
The Programs, which represent a market of 6.5 billion units, have an annual
budget of $11,963,160,000. If the Company can sustain steady growth and achieve
at least one percent penetration of the Programs' budgets, the Company could
achieve $50 million in revenues. To achieve this goal, the Company must
establish a nationwide distribution network with three additional manufacturing
facilities. The Company will be required to purchase the necessary equipment of
the same type that the Company is currently in the process of acquiring. With
the four locations and necessary equipment, the Company estimates that it can
achieve production capacity exceeding 48 million units annually. This production
level represents less than one percent of the total market and will generate an
estimated $50 million in revenues.
However, the Company will not be able to achieve such growth internally. The
Company will be required to depend on private placements or public offerings to
fund the projected growth. There is no assurance that the Company can raise the
funds required for such an expansion program.
Cost of Goods. The cost of goods increased to 95.61% of revenue in the year
ended April 30, 1999, from 86% in the period ended April 30, 1998. This 9.61%
increase is due primarily to the increase in the cost of the cheese package
included in the Dippers nachos. The cost of the individual packages of cheese is
approximately $0.31 per meal compared to a total cost of approximately $0.91 per
nacho meal. The Company is buying a tray-line machine that will enable it to
seal the cheese in the tray, eliminating the need to buy the sealed packages of
cheese that it is now using. As a result of the new cheese packaging and the new
machine, management believes that the Company's costs per unit will decrease by
approximately $0.20 for ingredients, $0.07 for packaging, and any where from
$0.06 to $0.10 for labor.
There is not going to be any effect on the cost of goods from the minimum
purchase commitments of the ConAgra Agreement, other than the purchase of the
required amount of fruit filling and peanut butter to produce the amount of
product required to fill the orders. The Company is only going to order what is
required to produce the Dipper product for which it has received orders. The
Company will maintain a small inventory of finished product rather than a larger
inventory because of the short shelf life of the finished product. See "Patents,
Trade Marks, Licenses, and Other Agreements or Labor Contracts" for more
details.
The Company is planning to reduce production costs and to increase sales, both
of which will enable it to increase its production volume and realize economies
of scale from the increase in its demand for raw materials. This can be
accomplished by purchasing and installing its own tray line, a horizontal form
fill and seal machine. This tray line machine could be installed at the Global
facility or any other co-packer facility. See "Sources, Raw Materials and
Principal Suppliers" for more details.
For the nine month period ended January 31, 2000, the costs of goods as a
percentage of revenues decreased from 110.22% in 1999 to 72.09% for the same
period. The Company's cost of goods and the cost of production decreased because
the Company has a new co-packer that is more efficient and has been able to
reduce the waste of ingredients. There has been no reduction in the price of
ingredients. The Company anticipates a further reduction in the cost of goods,
as a percentage of revenue, once the purchase and implementation of the new
horizontal form fill and seal machine is complete. This machine will provide
larger production capacity and greater efficiency reducing the cost of
production by $0.06 to $0.10 per unit. Also, with increased capacity and the
need for larger amounts of ingredients, the Company may be able to negotiate
volume price discounts for the ingredients.
Selling, General and Administrative Expenses. These costs for the year ended
April 30, 1999, were $802,916, or 418.33% of revenue, compared to $79,344, or
269.04% of revenues for the period ended April 30, 1998. Included in these costs
are (1) the one time cost of the $100,000 of non-cash compensation paid to Jon
Stevenson, which represents 12.45% of the Company's administrative costs for the
year; (2) a one-time wage settlement of $96,000 cash and of stock valued at
$276,000, which represent 46.33% respectively of the Company's administrative
costs for the year; (3) the Company's research and development costs of $13,535
that the Company incurred developing its
<PAGE>
Dippy Foods, Inc. Form 10-SB 16 / 32
products and marketing program; (4) payroll costs of $116,500; (5) rent costs of
$25,000; (6) one time compensation costs of $372,000; and (7) legal fees of
$48,429. For more information on the non-cash compensation paid to Jon Stevenson
see "Item 7. Certain Relationships and Related Transactions". For the wage
settlement, see "Item 7. Certain Relationships and Related Transactions".
The Company believes that its selling, general and administrative costs can
remain fairly static and will decrease as a percentage of revenue as its sales
volume grows.
For the nine month period ended January 31, 2000, these costs were $350,671 or
121.04% of the revenues generated during this nine month period compared to
$235,879 or 241.49% of revenues for the period ended January 31, 1999. Included
in these costs were$9,815 for research and development during the nine month
period ended January 31, 2000 and $9,793 for the same period ended January 31,
1999. Also included were payroll costs of $67,883 and rent costs of $46,409. The
Company expects that its administrative and overhead costs will remain
relatively constant for the next 12 months of operation.
Deferred Tax Assets. The Company has deferred tax assets of $181,131 at April
30, 1999, and $36,054 at April 30, 1998. The deferred tax assets for January 31,
2000 were $310,739. Management has established a valuation allowance equal to
the full amount of the deferred tax assets because the Company's ability to
utilize these losses is uncertain.
The net operating losses incurred by Dippy CA before the reverse merger on
September 17, 1998, are limited annually due to the change of ownership (as
defined in Section 382 of the Internal Revenue Code) that resulted from the
reverse merger.
The Issuer's unused annual limitations may be carried over to future years until
the net operating losses expire.
LIQUIDITY AND CAPITAL RESOURCES
As a result of the Company having one-time start up costs and as a result of
research and development, marketing and one time compensation costs, the Company
has (1) an accumulated deficit of $874,532 (since incorporation), which
increased to $1,171,569 as of January 31, 2000, (2) a working capital deficiency
of $208,972, which increased to $636,909 as of January 31, 2000, and (3) a
stockholder deficit of $428,399, which increased to $725,436 by the end of
January 31, 2000. As a result of these figures, the April 30, 1999 and the
January 31, 2000 consolidated financial statements are presented based on the
assumption that the Company would continue as a going concern. This contemplates
the realization of the Company's assets and the satisfaction of its liabilities
in the normal course of business. The Notes to these financial statements state
that the carrying amounts of the Company's assets and liabilities presented in
the financial statements do not purport to represent realizable or settlement
values. The Company's limited operating history and the resulting conditions
raise substantial doubt about the Company's ability to realize its assets and
satisfy its liabilities in the normal course of business. The Report of
Independent Certified Public Accountant's includes an explanatory paragraph
indicating there is substantial doubt about the Company's ability to continue as
a going concern.
From June 2, 1999 to December 1, 1999, the Company borrowed an aggregate
$483,380.95. The Company intends to repay these debt instruments by converting
the debt into shares of the Issuer or by extending the maturity date. If the
maturity date is extended the Company will continue to accrue interest and pay
it with the principal on the extended maturity date. See "Debt Instruments."
under "Internal and External Sources of Liquidity" below for more information.
The Company has incurred an operating accumulated deficit of $699,569.
Management believes that it can overcome the deficit. Based on management's
analysis, the Company can achieve breakeven, before the implementation of the
breakfast meal and snack line, with sales of 150,000 units per month consisting
of 80% nachos and 20% peanut butter and fruit. The cost to provide this level of
monthly sales is $145,460, inclusive of selling, general and administrative
costs of approximately $35,780. To achieve this level, the Company must complete
the purchase of the horizontal form fill and seal tray-line machine and raise an
additional $200,000.
<PAGE>
Dippy Foods, Inc. Form 10-SB 17 / 32
Management plans to overcome the Company's financial difficulties by (1) raising
capital through private placements of stock and injections of funds through
issuance of convertible debt, (2) reducing the Company's production costs by
completing the purchase of the horizontal form fill and seal tray line machine,
which will reduce costs of packaging by 70%, reduce production costs by an
additional 50% and achieve increased production capacity, (3) increasing the
Company's sales to new school districts, (4) selling to markets other than
school districts, and (5) launching a new breakfast and after school snack
program. However, there is no assurance that any of these plans will be
successful in assisting the Company in overcoming its financial difficulties or
in meeting its target production levels.
The Company had a working capital deficiency of $636,909 for the nine month
period January 31, 2000, compared to $208,972 at the year ended April 30, 1999,
and $39,305 in the period ended April 30, 1998. The deficiency is largely
attributable to the increase in convertible notes payable of $483,381 and the
current portion of long term debt of $117,000.
For the next 12 months, the Company will require $2.9 million for its costs and
expenses of developing, producing, packaging and marketing its products, and
includes the Company's selling, general and administrative expenses for the same
12 months. Also, the Company is committed to spend an aggregate $450,000 for the
purchase of new equipment. For instance, the price of the tray-line machine is
$166,905, for which the Company has already paid $75,525, plus additional costs
for shipping and installation of the tray-line machine. The Company is
discussing with several leasing companies for the financing of $275,000 for the
ancillary equipment such as piston portion fillers, weigh scale depositors and
transfer pumps. The purpose of the ancillary equipment is to make the new
tray-line machine operate more efficiently. However, the new horizontal form
fill and seal machine can operate without the ancillary equipment.
The Company expects to raise the balance of the required funds to purchase the
new horizontal form fill and seal machine in April 2000. The Company's capital
expenditures to date have been limited to a delivery vehicle, production
equipment, and office equipment. The Company believes that it can generate
sufficient cash flow if it can achieve sales of 150,000 units per month, not
including the breakfast meal and snacks. This is contingent upon the purchase of
the horizontal form fill and seal tray machine and the raising of an additional
$200,000. The Company intends to rely on the equity capital markets for this
amount but there is no assurance that the Company can raise the required capital
through this venue.
Cash Flows from Operating Activities
The cash used in operating activities for the period ended April 30, 1999 was
$282,622 as compared to $33,629 for the year ended April 30, 1998. The cash used
during the 1998 period was largely attributable to a net operating loss of
$75,215 and an increase in accounts receivable of $22,264 offset by an increase
in accounts payable of $70,246. The cash used for operating activities during
1999 primarily consisted of $799,317 used to fund the net operating loss offset
by an aggregate $472,000 for non-cash compensation and an increase of $47,579 in
accounts payable and an increase $30,698 for advances from related parties . See
"Non-cash Compensation" under "Internal and External Sources of Liquidity" below
for more information.
For the nine month period ended January 31, 1999 cash used for operating
activities was $202,445, this was due to a net operating loss of $247,096, an
increase in inventory purchases of $30, 481 offset by a $61,010 increase in
accounts payable and accruals.
For the nine month period ended January 31, 2000 cash used for operating
activities was $421,163. This was due primarily to the net operating loss of
$297,037, an increase in inventory of $74,810, an increase in deposits of
$95,597, offset by an increase of $42,877 in accounts payable and accruals.
Cash Flows from Investing Activities
Cash used in investing activities for the period ended April 30, 1998 of
$10,653; for the year ended April 30, 1999 of $26,614; for the nine month period
ended January 31, 1999 of $23,322; and for nine month period ended January 31,
2000 $2,523 was used to purchase property and equipment.
<PAGE>
Dippy Foods, Inc. Form 10-SB 18 / 32
Cash Flows from Financing Activities
Cash provided by financing activities for the period ended April 30, 1998, was
all attributable to proceeds of $46,563 received from stock issuances by Dippy
CA.
For the year ended April 30, 1999 cash provided by financing activities was
$306,955. This increase was primarily due to $299,570 of proceeds from stock
issuances the majority of which came from the $249,000 received by the Issuer
for its March 31, 1999 private placement. See "Item 10. Recent Sales of
Unregistered Securities" for more information.
Cash provided by financing activities for the nine month period ended January
31, 1999 was $233,786. This increase was primarily due to $266,620 in proceeds
from stock issuances, which again was part of the Issuer's March 31, 1999
private placement.
For the nine month period ended January 31, 2000, $430,846 of cash was provided
from financing activities. This increase is primarily due to proceeds received
by the Issuer in the amount of $438,353 from convertible debt. See "Debt
Instruments" below on page E for more information.
For fiscal 2001, the Company projects total sales of $4.1 million. Sales will be
divided between the lunch program (50%), the breakfast program (25%) and the
snack program (25%). The cost to generate this level of sales will be $2.9
million, assuming that the new horizontal form fill and seal machine is
operational by at least July 2000. These costs consist of raw ingredients and
packaging materials. The largest portion of these costs will be attributable to
cheese sauce, salsa and chips. The Company is projecting a gross profit of $1.2
million. Selling, general and administrative costs for the period are projected
to be $429,360. Some of the major operating expenses include payroll $160,800,
rent $70,764, accounting $42,000, utilities and telephone $15,600, marketing
$12,000, insurance $7,200, and research and development $6,000.
The Company projects that it can achieve breakeven operations at 150,000 units
per month. This is before the implementation of the breakfast and snack line,
with nachos accounting for 80% of the sales. With the implementation of the
breakfast and snack line, the Company is projecting an average monthly growth
rate of 27.5% for the next 12 months. This growth rate will be primarily
attributable to the breakfast meals and the snacks that will be available for
the 2000-2001 school year. By the end of the 12 month period the Company is
projecting sales of 1.0 million units per month. The breakfast meals and snacks
are projected to sell for $0.49 and $0.30 per unit respectively. The cost to
produce these products is $0.30 and $0.22 per unit respectively. The
installation of the new horizontal form fill and seal machine will greatly
improve the margins by reducing the cost of packaging and labor. Management also
believes that its selling and administrative costs will remain relatively
constant for the next 12 months.
Management plans to increase and preserve the Company's cash flow by (1) raising
capital through private placements, (2) reducing the Company's production costs
by the Company acquiring its own horizontal form fill and seal machine, and (3)
generating additional cash flow by increasing the Company's production and its
sales to new school districts, stadiums, institutions and to the retail market
through retailers such as Costco. However, there is no assurance that any of
these plans will be successful in assisting the Company in overcoming its
financial difficulties or its target production levels.
In the next 12 months the Company will require a cash flow of approximately $2.2
million to fund production costs and to fund capital expenditures. To generate
the required cash flow the Company will rely primarily on operations and sales
of its products. Management believes that increasing sales will increase its
cash flow from operations in the current fiscal year but the Company continues
to depend upon private placements or public offerings to fund its operations.
Also, the Company intends to reduce costs of production in order to reduce and
preserve its cash flow. If the Company completes its purchase of the new
horizontal form fill and seal machine, management believes that the cost of
ingredients and materials will decrease by approximately $0.20 per unit and the
Company's labor costs will decrease by $0.06 to $0.10 per unit, for an average
cost reduction of approximately $0.30 per unit, compared to
<PAGE>
Dippy Foods, Inc. Form 10-SB 19 / 32
current total costs of $0.91 per unit for the nacho Dippers and $0.76 per unit
for the peanut butter and jam Dippers. With the new tray-line machine it is
estimated that the Company would have reduced its aggregate costs of production
by approximately 20% for the past 12 months. However, there is no guarantee that
this cost-reduction estimate or the new tray-line machine will reduce the costs
of production.
Finally, the Company will raise additional cash flow by way of private
placements and other equity financings. In the next 12 months, the Company plans
on raising up to $2,000,000 by way of private placements and convertible
debentures. At this time there are no planned financings. However, any
financings will contain the same terms as provided in previous subscription
agreements and convertible promissory notes. See Exhibit #6.9 - Blank Form of
Subscription Agreement and Exhibit #6.10 - Blank Form of convertible promissory
note.
The Company believes that its current cash balances together with the net
proceeds of future financing and its expected cash flows from 2000 operations
will allow the Company to fund its operations for at least the next 12 months
and to fund its expected needs for working capital, capital expenditures and
debt service requirements. The Company's ability to meet its financial
obligations, make planned capital expenditures and implement its strategic
initiatives will depend on the Company's future operating performance, which
will be subject to financial, competitive, economic and other factors affecting
the industry and operations of the Company, including factors beyond its
control. Further improvements in operating profitability and achievement of
expected cash flows from operations is critical to providing adequate liquidity
and is dependent upon the Company's attainment of comparable sales increases,
along with gross margin and expense levels that are reasonably consistent with
its financial plans.
However, the Company may require substantial working capital to fund its
business and it may need to raise additional capital. Management is currently in
discussion with a number of groups regarding financing activities from the sale
of equity securities or debt instruments. Management believes that it will be
able to raise $1 to $2 million from such financing sources by the end of the
second quarter of 2000. If the Company is able to complete a minimum of $1
million of the financing, the funds raised from the sale of the equity
securities an debt instruments will be sufficient to support its planned
operations for the next 12 months. To the extent that there is a shortfall in
raising at least $1 million of financing, the Company will be required to modify
its business plan and reduce its operating expenditures.
INTERNAL AND EXTERNAL SOURCES OF LIQUIDITY
The Company has funded its operations principally from private placements and
loans from related parties and arms' length payees.
Private Placements.
On March 5, 1998, the Board of Directors authorized the issuance of an aggregate
6,000,000 shares of common stock at $0.003 per share to private investors. The
Issuer received $18,000 in subscription funds. These shares were issued on March
7, 1998. See "Item 10. Recent Sales of Unregistered Securities"and Exhibit #6.7
- - - - - - Form of Subscription Agreement for further details.
On March 6, 1998, the Board of Directors authorized the issuance of an aggregate
4,000,000 shares of common stock at $0.0015 per share to private investors. The
offering was fully subscribed by Mr. Philip Yee, the former President of the
Issuer, and the Issuer received $6,000 in cash. These shares were issued to Mr.
Yee on March 7, 1998. See "Item 7. Certain Relationships and Related
Transactions" and "Item 10. Recent Sales of Unregistered Securities" for further
details.
On April 16, 1998, the Board of Directors authorized the issuance of an
aggregate 30,000 shares of common stock at $0.01 per share to private investors.
The Issuer received $300 in subscription funds. These shares were issued on
April 16,1998. See "Item 10. Recent Sales of Unregistered Securities" and
Exhibit #6.8 - Form of Subscription Agreement for further details.
On March 31, 1999, the Board of Directors of the Issuer authorized the issuance
of 4,980,000 shares of common stock at $0.05 per share to private investors. The
Issuer received $249,000 in subscription funds, which were used
<PAGE>
Dippy Foods, Inc. Form 10-SB 20 / 32
for the purchase of raw ingredients, packing supplies and administrative costs.
These shares were issued on July 14, 1999. See "Item 10. Recent Sales of
Unregistered Securities" and Exhibit #6.9 - Blank Form of Subscription Agreement
for further details.
Assignment of Copyright.
Jon Stevenson registered a copyright for the cover art that the Company uses on
its packaged meals. Mr. Stevenson, a director and the president of both the
Issuer and of Dippy CA, has assigned his interest in the copyright to the Issuer
pursuant to a written agreement dated September 18, 1998, and transferred the
registered copyright into the name of the Issuer in consideration of 850,000
shares in the Issuer's common stock. The purchase price of the assignment of the
copyright was $8,500. Currently, the copyright is registered in the name of Jon
Stevenson, who is holding the legal interest in the copyright in trust for the
Issuer. It is the intention of the parties to have the copyrights eventually
registered in the name of the Issuer. See "Item 7. Certain Relationships and
Related Transactions" and Exhibit #6.2 - Assignment of Copyright for more
details.
Share Exchange with Dippy CA Shareholders.
The Issuer issued 3,319,266 shares of common stock on September 24, 1999, to the
shareholders of Dippy CA in exchange for all of the issued and outstanding
6,638,533 shares of Dippy CA under an agreement dated September 17, 1998,
accepted and approved by the shareholders of Dippy CA at its annual general
meeting held on February 27, 1999. Under the Amended Exchange Agreement, for
every two shares of Dippy CA that a shareholder owned, a shareholder received
one Common Capital Share of the Issuer. As part of the share exchange Jon
Stevenson received 2,750,000 shares of common stock for his 5,500,000 shares of
Dippy CA. See "Item 1. Description of Business - Business Development", "Item 7.
Certain Relationships and Related Transactions", "Item 10. Recent Sales of
Unregistered Securities", and Exhibit #6.1 - Amended Exchange Agreement for more
details.
Non-cash Compensation.
For the 1999 fiscal year, the Company incurred $100,000 in non-cash compensation
expenses arising from services contributed by Jon Stevenson, the president of
both the Issuer and of Dippy CA. As full payment for these services Mr.
Stevenson was issued 400,000 shares of common stock of the Issuer in lieu of
cash. Mr. Stevenson currently owns 4,000,000 Shares of common stock of the
Issuer. See "Item 7. Certain Relationships and Related Transactions" and "Item
6. Executive Compensation" for more information.
Settlement Agreement with Alexander Diamond.
A wage settlement agreement was entered into between the Issuer and Al Diamond,
a former director and a former executive officer of the Issuer. As consideration
for the parties agreeing not to proceed with any litigation, the Issuer agreed
to pay Mr. Diamond for past and accrued wages in the form of $96,000 and 400,000
shares of the Issuer's non-voting stock to be issued over a three year period.
As per the terms of the Settlement Agreement, the $96,000 was to be paid over
two years. As of January 31, 2000, an aggregate $44,200 has been paid. All
payments have been made by Dippy CA. Also, Dippy CA paid Mr. Diamond $3,940 as
reimbursement for expenses. See Exhibit #6.16 - Settlement Agreement for more
information. Finally, none of the 400,000 shares of non-voting stock of the
Issuer have been issued.
However, Management has taken the position that, as a result of Mr. Diamond
failing to perform his obligations under the agreement, the Settlement Agreement
is null and void and the Company is not obligated to make and further payments
to Mr. Diamond. See "Item 7. Certain Relationships and Related Transactions",
"Item 8. Legal Proceedings" for more details.
Debt Instruments.
From June 2, 1999 to December 1, 1999, the Company borrowed an aggregate
$483,380.95 from the following payees and in the following amounts as set out in
Table 5 below.
<PAGE>
Dippy Foods, Inc. Form 10-SB 21 / 32
Table 5
Debt Instruments
- - - - - --------------------------------------------------------------------------------
Payee Date Principal Sum
- - - - - ------------------------------- ---------------------- -------------------------
Bellevue Investments Ltd. June 2, 1999 $200,000.00
Silverado Farms, Inc. August 20, 1999 $15,000.00
Silverado Farms, Inc. September 9, 1999 $50,000.00
Silverado Farms, Inc. October 12, 1999 $50,000.00
Silverado Farms, Inc. November 8, 1999 $10,000.00
Silverado Farms, Inc. November 9, 1999 $10,000.00
Silverado Farms, Inc. November 18, 1999 $10,000.00
Silverado Farms, Inc. November 19, 1999 $13,380.95
Silverado Farms, Inc. November 29, 1999 $25,000.00
Silverado Farms, Inc. December 1, 1999 $100,000.00
- - - - - --------------------------- ---------------------- -----------------------------
The Issuer gave a promissory note to each of the payees as evidence of the debt.
The principal sum is due in 12 months from the date of the loan together with
interest accruing on the outstanding principal balance at the rate of 12% per
annum. The Issuer has the choice to pay the accrued and unpaid interest on the
1st day of the following month or to accrue the interest and pay it with the
principal sum on the maturity date. The Issuer may repay the principal sum and
any accrued interest in whole or in part at any time without penalty. With any
payment made, the funds will be applied to unpaid interest first. If the Issuer
becomes bankrupt or insolvent, or sells all its assets, or if a corporate event
occurs (as defined in the promissory note) the debt will be due and payable
without demand. The lender has the option to convert any portion of the
outstanding debt or any portion of accrued interest into shares of the Issuer at
a price per share that is equal to the average closing price of the Issuer's
common stock from the date of the promissory note to the date of conversion. See
Exhibit #6.10 - Blank Form of convertible promissory note for further details.
The Company intends to repay these debt instruments by converting the debt into
shares of the Issuer or by extending the maturity date. If the maturity date is
extended the Company will continue to accrue interest and pay it with the
principal on the extended maturity date.
Line of Credit.
The Company obtained a one year, revolving line of credit for $45,000 bearing
interest at 6.6%. As of January 31, 2000, the Company has drawn down $44,500 on
the line of credit. The Company is using a $50,000 certificate of deposit to
secure this line of credit. The $50,000 certificate of deposit matures on July
2, 2000.
YEAR 2000 ISSUES
To date, neither the Company nor its suppliers or other providers of goods and
services have experienced any problems caused by the Year-2000 issues. In
preparing for the Year 2000, the Company's costs were minimal and immaterial.
The Company does not anticipate that it will incur any material cost or that
Year-2000 issues will materially affect its operations, however, the Company
cannot be sure that Year-2000 issues will not adversely affect its operations.
ITEM 3. DESCRIPTION OF PROPERTY
<PAGE>
Dippy Foods, Inc. Form 10-SB 22 / 32
KNOLLWOOD PROPERTY
The Company operates from a leased warehouse with offices at 1161 Knollwood
Circle, Anaheim, California. The property consists of a concrete tilt-up
building of approximately 10,524 square feet located in a light industrial area.
The current rent is $5,893 per month and escalates annually to $5,999 in the
final year. The lease expires December 31, 2001.
SIGNAL HILL PROPERTY
The Company opened a 60-day escrow on October 15, 1999, with a refundable
deposit of $20,000. However, the Company has not been able to complete the
acquisition of the Signal Hill Property and has requested that the escrow be
cancelled and the $20,000 deposit be returned to the Company. As of the date of
this filing, the deposit has not been returned. The deposit is still held in
escrow and the Company has the right to file for arbitration to have the deposit
released.
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Table 6 lists the persons who are known to the Issuer to be the beneficial
owners of more than five percent of the Issuer's equity securities.
Table 6
Beneficial Owners of more than 5%
<TABLE>
<CAPTION>
- - - - - -------------------------------------------------------------------------------------------------
(2) (3) (4)
(1) Name and address of beneficial Number and nature of Percent of
Title of class owner beneficial ownership (1) class
- - - - - --------------------- -------------------------------- ----------------------------- ------------
<S> <C> <C> <C>
Common stock Jon Stevenson 4,000,000
379 Newport Avenue, #9
Long Beach, California 90814 direct 20.43%
- - - - - -------------------------------------------------------------------------------------------------
</TABLE>
(1) The listed beneficial owner has no right to acquire any shares within 60
days of the date of this Form 10-SB from options, warrants, rights,
conversion privileges or similar obligations.
SECURITY OWNERSHIP OF MANAGEMENT
Table 7 lists the Issuer's directors and executive officers who are the
beneficial owners of the Issuer's equity securities.
Table 7
Beneficial Ownership of Management
<TABLE>
<CAPTION>
- - - - - -------------------------------------------------------------------------------------------------
(2) (3) (4)
(1) Name and address of Number and nature of Percent
Title of class beneficial owner beneficial ownership (1) of Class
- - - - - --------------------- -------------------------------- ----------------------------- ------------
<S> <C> <C> <C>
Jon Stevenson 4,000,000
Common stock 379 Newport Avenue, #9 20.43%
Long Beach, California 90814 direct
- - - - - -------------------------------------------------------------------------------------------------
Munjit Johal
Common Stock 42 Rockwood 0
Irvine, California 92614 0.00%
- - - - - -------------------------------------------------------------------------------------------------
Erin Stevenson
1948 Lave Avenue 0
Common stock Long Beach, California 90815 0.00%
- - - - - -------------------------------------------------------------------------------------------------
Common stock Directors as a group 4,000,000 20.43%
- - - - - -------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Dippy Foods, Inc. Form 10-SB 23 / 32
(1) The listed beneficial owner has no right to acquire any shares within 60
days of the date of this Form 10-SB from options, warrants, rights,
conversion privileges or similar obligations.
CHANGE IN CONTROL
The Issuer is not aware of any arrangements that may result in a change in
control of the Issuer.
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
IDENTIFY DIRECTORS AND EXECUTIVE OFFICERS
Jon Stevenson and Munjit Johal are the directors of the Issuer. Jon Stevenson
and Erin Stevenson are the directors of Dippy CA. The Company's management and
development team are listed in Table 8.
Table 8
Officers
<TABLE>
<CAPTION>
- - - - - -----------------------------------------------------------------------------------------------
Office
--------------------------------------------------------------------------
Officer The Issuer Dippy CA
- - - - - -------------------- ------------------------------------ -------------------------------------
<S> <C> <C>
Jon Stevenson CEO, President, Chairman CEO, President, Chairman
- - - - - -------------------- ------------------------------------ -------------------------------------
Chief Financial Officer, Chief Financial Officer
Munjit S. Johal Secretary, Treasurer
- - - - - -------------------- ------------------------------------ -------------------------------------
Erin Stevenson Corporate Secretary , Executive
VP, Director of Trade Show
Services
- - - - - -------------------- ------------------------------------ -------------------------------------
</TABLE>
Jon Stevenson, 37, has been with the Company since its inception. He is involved
in all aspects of product development and packaging. His responsibilities
include direct sales, sales development, public relations and developing the
marketing program for the Company. He is also responsible for the training
program developed for the distributors' representatives and the sales broker
representatives contracted to the Company.
Mr. Stevenson has been in the food service industry for more than sixteen years.
He was formerly employed by Rykoff and U.S. Foodservice Company, one of the
largest broadline distribution companies in the world. Jon left U.S. Foodservice
in November 1997, to focus his full energies on Dippy CA.
Munjit S. Johal, 44, has been with the Company since September 1998, and is
responsible for all aspects of the Company's financial management. He has a
Master of Business Administration degree from the University of San Francisco
and a Bachelor of Arts degree from the University of California, Los Angeles.
Mr. Johal was the chief financial officer of Bengal Recycling, Inc., a
California corporation, from February, 1996, to July, 1997; an executive vice
president and compliance officer and an asset manager for Pacific Heritage Bank
in Torrance, California, from 1990 to 1995; a vice president and compliance and
consulting associate for banks in Glendale and Newport Beach, California; and an
analytical manager and financial analyst for Federal Home Loan Bank of San
Francisco from 1981 to 1987.
Erin Stevenson, 35, has been with the Company since inception. She worked in
sales and marketing with major retail stores for ten years from 1982 to 1992, as
a manager or owner of small retailers from 1992 to 1994, and as a
<PAGE>
Dippy Foods, Inc. Form 10-SB 24 / 32
self-employed massage therapist from 1994 to 1997. She is responsible for show
selections and product sales and participates in designing the customer service
program for the Company.
SIGNIFICANT EMPLOYEES
No other employees are expected to make significant contributions to the
business of the Company.
FAMILY RELATIONSHIPS
Erin Stevenson is Jon Stevenson's sister.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
None of the Company's directors, officers, promoters or control persons, during
the past five years:
1. were a general partner or executive officer of a business that had a
bankruptcy petition filed by or against it either at the time of the
bankruptcy or within the two years before the bankruptcy, except for Munjit
Johal, who was the chief financial officer for seventeen months until July
1997, of Bengal Recycling, Inc., a California corporation that filed under
chapter 7 of the United States Bankruptcy Code on September 4, 1998;
2. were convicted in a criminal proceeding or been subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
3. were subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently
or temporarily enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities or banking activities,
except for (1) Erin Stevenson who voluntarily petitioned into bankruptcy in
February 1998 and was discharged in April 1998; or
4. were found by a court of competent jurisdiction (in a civil action), the
Securities and Exchange Commission or the Commodity Futures Trading
Commission to have violated a federal or state securities or commodities
law, and the judgment has not been reversed, suspended, or vacated.
ITEM 6. EXECUTIVE COMPENSATION
The Issuer has had four named executive officers, only two of whose total annual
salary has exceeded $100,000 since its inception in February, 1998. Neither the
Issuer nor Dippy CA have an employee stock option plan, granted any other form
of compensation to its executive officers or have any written employment
contracts with its executive officers. Also, neither the Issuer nor Dippy CA
compensates its directors for acting as directors. Table 9 sets out the annual
executive compensation of the Company's named executive officers for the fiscal
periods ended April 30, 1999, and 1998.
<PAGE>
Dippy Foods, Inc. Form 10-SB 25 / 32
Table 9
Executive Compensation
<TABLE>
<CAPTION>
- - - - - --------------------------------------------------------------------------------------------------------------------
Long-term compensation
Annual compensation Awards Payouts
---------------------------- ---------- ---------------------
Other Securities
annual Restricted underlying All other
compen- stock options/ LTIP compen-
Name and principal Salary Bonus sation awards SARs Payouts sation
position Year ($) ($) ($) ($) (#) ($) ($)
(a) (b) (c) (d) (e) (f) (g) (h) (i)
- - - - - --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Jon Stevenson 1998 23,367(1) -- -- -- -- -- --
CEO of the Issuer
Feb1999-Present 1999 42,000(1) -- -- -- -- -- 100,000(2)
President of Dippy CA
May 1997 - Present 2000 12,000(3) -- -- -- -- -- --
- - - - - -------------------------- ------- ---------- -------- ---------- ------------ -------------- ---------- -----------
</TABLE>
(1) Paid by Dippy CA.
(2) Mr. Stevenson received 400,000 shares of common stock of Dippy CA in lieu
of $100,000 cash for services provided in this fiscal year. See "Item 7.
Certain Relationships and Related Transactions" and "Item 10. Recent Sales
of Unregistered Securities" for more information.
(3) Paid by the Issuer.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
RELATIONSHIPS WITH INSIDERS
No member of management, executive officer or security holder has had any direct
or indirect interest in any transaction to which the Company was a party other
than the following:
NOTES TO SHAREHOLDERS AND RELATED PARTIES
The Company received cash advances from four related parties in the aggregate
amount of $30,698. As of April 30, 1999, the Company owed June Eckenweiler
$10,000, Brad Eckenweiler $14,648, Patrice Dendero $1,050 and John Walker
$5,000. These funds were used for general working capital. As of January 31,
2000, the cash advances had been fully repaid in cash.
TRANSACTIONS WITH FOUNDING SHAREHOLDERS
On March 6, 1998, Philip Yee, a founder and a former president of the Issuer,
subscribed for an aggregate 4,000,000 shares of common stock at $0.0015 per
share. The shares were issued to Mr. Yee on March 7, 1998, for investment
purposes in a "private transaction". See "Item 10. Recent Sales of Unregistered
Securities" for more information.
Jon Stevenson was a founder of Dippy CA and is currently the president of the
Issuer and of Dippy CA. As part of the share exchange and merger between Dippy
CA and the Issuer, Mr. Stevenson received 2,750,000 shares of common stock of
the Issuer for his 5,500,000 shares of Dippy CA. See "Merger with Dippy CA"
below for more information.
During 1999 the Company incurred $100,000 in non-cash compensation expenses
arising from services contributed by Mr. Stevenson. Mr. Stevenson currently owns
4,000,000 shares of common stock of the Issuer. See "Item 6. Executive
Compensation" for more information.
Also, Jon Stevenson registered a copyright for the cover art that the Company
uses on its packaged meals. Mr. Stevenson, a director and the president of both
the Issuer and of Dippy CA, has assigned his interest in the copyright to the
Issuer pursuant to a written agreement dated September 18, 1998, and transferred
the registered copyright into the name of the Issuer in consideration of 850,000
shares in the Issuer's common stock. The purchase price of the assignment of the
copyright was $8,500. Currently, the copyright is registered in the name of Jon
Stevenson, who is holding the legal interest in the copyright in trust for the
Issuer. It is the intention of the parties to have the copyrights eventually
registered in the name of the Issuer. See "Item 2. Management's Discussion and
Analysis or Plan of Operation - Liquidity and Capital Resources" above and
Exhibit #6.2 - Assignment of Copyright for more information.
<PAGE>
Dippy Foods, Inc. Form 10-SB 26 / 32
WAGE SETTLEMENT WITH FORMER DIRECTOR AND OFFICER
The wage settlement agreement was entered into with Al Diamond, a former
director and executive officer of the Issuer. Mr. Diamond did not agree with the
direction in which the Issuer was being taken. Also, Mr. Diamond had
misappropriated funds of the Issuer and, accordingly, was asked to resign. A
lawsuit was filed by the Issuer against Mr. Diamond. The lawsuit never proceeded
to trial with the parties reaching a settlement and signing mutual releases.
Under the agreement, Mr. Diamond was to receive (1) $3,940 as reimbursement for
expenses, (2) 400,000 shares of non-voting common stock of the Issuer, and (3)
$96,000 in wages, less any necessary Federal or State withholding and related
deductions. In consideration of these payments, Dippy CA was to receive from Mr.
Diamond certain corporate materials belonging to the Company. Mr. Diamond was
obligated to deliver these corporate materials by February 1, 1999. See Exhibit
#6.16 - Settlement Agreement, "Item 6. Executive Compensation" and "Item 8.
Legal Proceedings" for more information.
MERGER WITH DIPPY CA
The Issuer issued 3,319,266 shares of common stock on September 24, 1999, to the
shareholders of Dippy CA in exchange for all of the issued and outstanding
6,638,533 shares of Dippy CA under an agreement dated September 17, 1998,
accepted and approved by the shareholders of Dippy CA at its annual general
meeting held on February 27, 1999. Under the Amended Exchange Agreement, for
every two shares of Dippy CA that a shareholder owned, he received one Common
Capital Share of the Issuer. See "Item 1. Description of Business - Business
Development", "Item 10. Recent Sales of Unregistered Securities" and Exhibit
#6.1 - Amended Exchange Agreement for more information.
TRANSACTIONS WITH PROMOTERS
Mr. Jon Stevenson is the only promoter of the Company. Mr. Stevenson has not
received anything of value from the Company nor is he entitled to receive
anything of value from the Company for services provided as a promoter of the
Company.
ITEM 8. LEGAL PROCEEDINGS
The Company is not a party to any pending legal proceedings and, to the best of
the Company's knowledge, none of the Company's property or assets are the
subject of any pending legal proceedings, except for the following:
LAWSUIT WITH FEEDBACK FOUNDATION, INC.
A dispute has arisen between the Company and its former co-packer, Feedback
Foundation, Inc., regarding two invoices totaling $49,620. The dispute arises
from the spoilage of salsa used in the production of Nacho Dippers. The
Company's investigation revealed that the spoilage occurred while the salsa was
being prepared for production. As a result of the quality control standards of
the Company, there was no consumption of the defective product. In the opinion
of management, the preparation of the ingredients and the production of product
is within the scope of the co-packer's control and responsibility. The Company
and Feedback have not been able to reach an amicable agreement. On March 6,
2000, Feedback filed a lawsuit claiming breach of contract, fraud and
non-payment of invoices. Feedback is suing for not less than $149,620. The
Company will be filing a counter suit by April 5, 2000, for a yet unspecified
amount. Management is confident that the Company will prevail in the lawsuit.
POTENTIAL LAWSUIT WITH AL DIAMOND
Recently, it has come to the Company's attention that Mr. Diamond failed to
perform his obligations under the Settlement Agreement and did not deliver all
corporate materials in his possession. As a result, the Company has taken the
position that the Settlement Agreement is null and void. Currently, Management
is deciding whether to take action against Mr. Diamond for the return of the
remaining corporate materials and for the return of any monies paid to Mr.
Diamond under the Settlement Agreement. See "Item 7. Certain Relationships and
Related Transactions" and Exhibit #6.16 - Settlement Agreement for more
information.
<PAGE>
Dippy Foods, Inc. Form 10-SB 27 / 32
ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
MARKET INFORMATION
The Issuer's common stock has been quoted on the NASD OTC Bulletin Board since
September 1998, under the symbol "DPPI". Table 10 gives the high and low bid
information for each fiscal quarter since the Issuer's common stock has been
quoted. The bid information was obtained from mytrack.com, the Internet site of
Track Data Corporation, and reflects inter-dealer prices, without retail
mark-up, mark-down or commission, and may not represent actual transactions.
Table 10
Bid Information
- - - - - ----------------------------------------------------------------------
Period ended High Low
- - - - - ----------------------------------------------------------------------
31 October 1998 $1.25 $0.65
31 January 1999 $0.99 $0.65
30 April 1999 $0.77 $0.38
31 July 1999 $1.03 $0.25
31 October 1999 $1.22 $0.44
31 January 2000 $0.68 $0.26
29 February 2000 $0.80 $0.44
- - - - - ----------------------------------------------------------------------
As of January 4, 1999, the National Association Securities Dealers, Inc.
implemented a new eligibility rule that limits quotations on the OTC Bulletin
Board to the securities of issuers that are required to file under Sections 13
and 15(d) of the Securities Exchange Act of 1934. The Issuer has filed this Form
10-SB in order to comply with the eligibility rule. If the Issuer fails to
comply with the eligibility rule, it common stock will be deleted from the OTCBB
and may trade on the National Quotation Bureau's Pink Sheets or another
quotation medium.
No shares of common stock are subject to outstanding options or warrants, or
securities convertible into shares of common stock. The Issuer has not agreed to
register any shares of common stock nor has the Issuer publicly offered or
proposed to offer any shares of common stock. Currently there is an aggregate
3,319,266 shares of common stock of the Issuer that are subject to Rule 144.
These shares were issued on September 24, 1999. See "Item 10. Recent Sales of
Unregistered Securities" for more information.
The Issuer's shares of common stock are not approved for quotation on an
established and automated quotation system and have a market price of less than
$5.00 per share. The Issuer's shares are considered penny stock as defined in
Rule 3a51-1 of the Securities Exchange Act of 1934. Before selling or giving
effect to the purchase of any penny stock for or with the account of a customer,
a broker must:
1. provide the customer with a risk disclosure document containing the
information about the risks of investing in penny stocks in both
public offerings and in secondary trading, and about the rights and
remedies available to a customer in case of fraud in penny stock
transactions;
2. obtain and preserve a manually signed and dated written acknowledgment
of receipt of the risk disclosure document from the customer;
3. disclose to the customer, orally or in writing, prior to any
transaction, (i) the insider bid quotations and insider offer
quotations for the penny stock, or, if none exist, the bid and offer
price, and (ii) the number of shares to which the bid/offer prices
apply;
4. disclose to the customer, orally or in writing, prior to effecting any
transaction and in writing prior to confirmation of the transaction,
the aggregate amount of compensation to be received by the broker or
any associated person;
5. provide the customer with a monthly written statement of the
customer's account, that includes any price determinations, the
identity and number of shares held in the customer's account, and the
estimated market value, and also contain a conspicuous legend on the
written statement; and
6. keep a record of such disclosures and written statements for a
required period of time.
<PAGE>
Dippy Foods, Inc. Form 10-SB 28 / 32
In order to give effect to a penny stock transaction, the transaction must be
(i) exempt under certain rules, (ii) the customer must be an established
customer of the broker, or (iii) the broker must approve the account for penny
stock transactions, and the broker must receive a written agreement from the
customer for each such transaction, setting forth the identity and quantity of
the penny stock to be purchased. In order to approve a customer's account for
penny stock transactions, the broker must obtain financial information and
investment experience and objectives of the customer, and make a reasonable
determination that the penny stock transactions are suitable for that customer
and that the customer has sufficient knowledge and experience in financial
matters to be capable of evaluating the risks of penny stock transactions.
HOLDERS
The Issuer has approximately 1,200 registered holders of shares of common stock.
DIVIDENDS
The Issuer has declared no dividends on its common stock and is not subject to
any restrictions that limit its ability to pay dividends on its Shares of common
stock.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES
On March 5, 1998, the Board of Directors authorized the issuance of an aggregate
6,000,000 shares of common stock at $0.003 per share. The Issuer received
$18,000 in subscription funds. The shares subscribed for were issued on March 7,
1998, for investment purposes in a "private transaction". The Issuer relied upon
Sections 3(b) and 4(2) of the Securities Act of 1933 and Rule 504 of Regulation
D. This offering was not accompanied by any general advertisement or any general
solicitation. The Issuer received from each subscriber a completed and signed
subscription agreement containing certain representations and warranties,
including, among others, that the subscribers had bought the shares for their
own investment accounts. See "Item 2. Management's Discussion and Analysis or
Plan of Operation - Liquidity and Capital Resources" and Exhibit #6.7 - Form of
Subscription Agreement for further details.
Also on March 6, 1998, the Board of Directors authorized the issuance of an
aggregate 4,000,000 shares of common stock at $0.0015 per share. The offering
was fully subscribed by Mr. Philip Yee, the former President of the Issuer, and
the Issuer received $6,000 in cash. These shares were issued to Mr. Yee on March
7, 1998, for investment purposes in a "private transaction". The Issuer relied
upon Sections 3(b) and 4(2) of the Securities Act of 1933 and Rule 504 of
Regulation D. This offering was not accompanied by any general advertisement or
any general solicitation. It is the current Management's understanding that Mr.
Yee bought the shares for his own investment account. See "Item 2. Management's
Discussion and Analysis or Plan of Operation - Liquidity and Capital Resources"
for further details.
On April 16, 1998, the Board of Directors authorized the issuance of an
aggregate 30,000 shares of common stock at $0.01 per share. The Issuer received
$300 in subscription funds. The shares were issued on April 16,1998, for
investment purposes in a "private transaction". The Issuer relied upon Sections
3(b) and 4(2) of the Securities Act of 1933 and Rule 504 of Regulation D. This
offering was not accompanied by any general advertisement or any general
solicitation. The Issuer received from each subscriber a completed and signed
subscription agreement containing certain representations and warranties,
including, among others, that the subscribers were accredited investors. See
"Item 2. Management's Discussion and Analysis or Plan of Operation - Liquidity
and Capital Resources" and Exhibit #6.8 - Form of Subscription Agreement for
further details.
On March 31, 1999, the Board of Directors authorized the issuance of an
aggregate 4,980,000 shares of common stock at $0.05 per share. The Issuer
received $249,000 in cash. The shares subscribed for were issued on July 14,
1999, for investment purposes in a "private transaction". The Issuer relied upon
Sections 3(b) and 4(2) of the Securities Act of 1933 and Rule 504 of Regulation
D. This offering was not accompanied by any general advertisement or any general
solicitation. The Issuer received from each subscriber a completed and signed
subscription agreement containing certain representations and warranties,
including, among others, that the subscribers had bought the shares for their
own investment accounts. See "Item 2. Management's Discussion and
<PAGE>
Dippy Foods, Inc. Form 10-SB 29 / 32
Analysis or Plan of Operation - Liquidity and Capital Resources" and Exhibit
#6.9 - Blank Form of Subscription Agreement for further details.
The Issuer paid no underwriting discounts or commissions in connection with any
of its share offerings.
The Issuer issued 3,319,266 shares of common stock on September 24, 1999, to the
shareholders of Dippy CA in exchange for all of the issued and outstanding
6,638,533 shares of Dippy CA under an agreement dated September 17, 1998,
accepted and approved by the shareholders of Dippy CA at its annual general
meeting held on February 27, 1999. These shares were issued in reliance on
Section 4(2) of the Securities Act of 1933 and are subject to the trading
restrictions of Rule 144. The Company relied upon the fact that the shareholders
of Dippy CA received the shares for investment purpose. Also, there was no
advertising and there was no view to distribute the shares publicly.
Additionally, when the Dippy CA shareholders subscribed for their shares in
Dippy CA they each completed and signed a subscription agreement containing
certain representations and warranties, including, among others, that they were
accredited investors. See Exhibit #6.1 - Amended Exchange Agreement and Exhibit
#6.13 - Blank Form of Subscription Agreement for Dippy CA Shareholders for more
information.
On September 18, 1998, the Issuer issued 850,000 shares of common stock to Jon
Stevenson as consideration for the assignment of the copyright for the cover art
that the Company uses on its packaged meals. Mr. Stevenson, assigned his
interest in the copyright to the Issuer pursuant to a written agreement dated
September 18, 1998. The purchase price of the assignment of the copyright was
$8,500. Currently, the copyright is registered in the name of Jon Stevenson, who
is holding the legal interest in the copyright in trust for the Issuer. It is
the intention of the parties to have the copyrights eventually registered in the
name of the Issuer. These shares were issued in reliance on Section 4(2) of the
Securities Act of 1933 and are subject to the trading restrictions of Rule 144.
The Company relied on the fact that Mr. Stevenson was the President of Dippy CA
and as a result had the necessary information to make an informed investment
decision. Also, this issuance of shares was not a public offering and Mr.
Stevenson did not need the protection of the Securities Act of 1933. See "Item
7. Certain Relationships and Related Transactions" and Exhibit #6.2 - Assignment
of Copyright for more details.
Also on September 18, 1998, Dippy CA agreed to issue 400,000 shares of common
stock to Jon Stevenson as non-cash compensation in the amount of $100,000
arising from services contributed to Dippy CA and to the Issuer by Mr.
Stevenson. These shares were issued on September 24, 1999 in reliance on Section
4(2) of the Securities Act of 1933 and are subject to the trading restrictions
of Rule 144. Again, the Company relied on the fact that Mr. Stevenson did not
need the protection of the Securities Act of 1933 and had the requisite
knowledge and information to make an informed investment decision. See "Item 7.
Certain Relationships and Related Transactions" and "Item 6. Executive
Compensation" for more information.
ITEM 11. DESCRIPTION OF SECURITIES
COMMON OR PREFERRED STOCK
The authorized common stock of the Issuer is 200,000,000 shares of common stock
with a par value of $0.001 per share, of which 19,579,266 shares are issued and
outstanding as of the date of this filing. All of the issued and outstanding
shares of common stock are fully paid and non-assessable. There is no preferred
stock authorized.
All shares have equal voting rights and, when validly issued, holders are
entitled to one vote per share in all matters to be voted upon by the
stockholders. The shares have no pre-emptive, subscription, conversion or
redemption rights and may be issued only as fully paid and non-assessable
shares. Cumulative voting in the election of directors is not permitted, which
means that the holders of a majority of the issued and outstanding shares of
common stock represented at any stockholder meeting at which a quorum is present
will be able to elect the entire board of directors if they so choose and the
holders of the remaining shares of common stock will not be able to elect any
directors. In a liquidation of the Issuer, each stockholder is entitled to
receive a proportionate share of the Issuer's assets after distribution in full
of preferential amounts, if any. Holders of shares of common stock are entitled
to share rateable in dividends, as may be declared from time to time by the
directors in their discretion from funds legally available for dividend
payments.
<PAGE>
Dippy Foods, Inc. Form 10-SB 30 / 32
The Issuer's charter documents contain no provision that would delay, defer or
prevent a change in control of the Issuer.
DEBT SECURITIES
The Company has no debt securities.
OTHER SECURITIES TO BE REGISTERED
The Issuer is not registering any other securities.
ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS
The Company will indemnify its directors and officers from any action, suit or
proceeding, whether civil, criminal, administrative, or investigative to the
extent that indemnification is legally permissible under the laws of Nevada and
California. No director or officer is personally liable to the Company or its
stockholders for damages for breach of fiduciary duty as a director or officer.
Directors and officers may be held liable to the Company or its stockholders for
acts or omissions that involve intentional misconduct, fraud, a knowing
violation of law, or the payment of dividends in violation of the Nevada Revised
Statutes. The directors may cause the Company to buy and maintain insurance on
behalf of any person who is or was a director of the Company.
No controlling person, director or officer of the Company is otherwise insured
or indemnified by any statute, charter provisions, by-laws, contract or other
arrangement.
ITEM 13. FINANCIAL STATEMENTS
See Index to Financial Statements on page F-1.
ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
The Company's first independent certified public accountants, Andersen Andersen
& Strong, were appointed by the former management of the Issuer. The Company's
current independent certified public accountants, BDO Seidman, LLP, were
appointed by the current management in August 1999.
The Company has had no disagreements with Andersen Andersen & Strong within the
meaning of Item 304 of Regulation S-B on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure in
connection with the audit of the Company's financial statements for the year
ended April 30, 1999, and the period from February 23, 1998 (the date of the
Issuer's formation) to April 30, 1998, that would have caused Andersen Andersen
& Strong to issue an adverse opinion or disclaimer of opinion, or to modify
their report as to uncertainty, audit scope or accounting principles if the
disagreements had not been resolved to their satisfaction.
No reportable events (as defined in Item 304 of Regulation S-B) occurred with
Andersen Andersen & Strong during the period audited. The Company has not
consulted with BDO Seidman, LLP regarding the application of accounting
principles to a specific transaction or the type of audit opinion that might be
rendered on the financial statements during the period audited by Andersen
Andersen & Strong.
ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
<PAGE>
Dippy Foods, Inc. Form 10-SB 31 / 32
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<S> <C> <C>
A 1. Consolidated Financial Statements for the period May 30, 1997 Filed
(date of incorporation) to April 30, 1998, and the year ended
April 30, 1999 and for the three month period (unaudited) ended
July 31, 1998 and 1999
2. Consolidated Financial Statements for the period May 30, 1997 Included
(date of incorporation) to April 30, 1998, and the year ended
April 30, 1999 and for the nine A month period (unaudited) ended
January 31, 1999 and 2000
</TABLE>
(b) Exhibits
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<S> <C> <C>
2.1 Corporate Charter Filed
2.2 Articles of Incorporation Filed
2.3 Certificate of Amendment to Articles of Incorporation changing Filed
the Issuer's name to Dippy Foods, Inc.
2.4 Bylaws Filed
3 Instruments defining the rights of security holders None
5 Voting Trust Agreement None
6.1 Amended Exchange Agreement dated September 17th, 1998, among Filed
Dippy Foods, Inc. (Nevada), Dippy Foods, Inc. (California) and
the shareholders of Dippy Foods, Inc. (California) for the
Issuer's acquisition of Dippy Foods, Inc., (California)
6.2 Assignment of Copyright dated September 18, 1998 between Jon Included
Stevenson, as assignor, and Dippy Foods, Inc. (Nevada), as
assignee
6.3 Standard Industrial/Commercial Single-tenant Lease--Gross dated Filed
December 16, 1998, between Ae Sil Park as lessor and Dippy Foods,
Inc. as lessee for the lease of the Knollwood Circle property
6.4 License Agreement dated May 19, 1999, between ConAgra Brands, Filed
Inc. and Hunt-Wesson, Inc. as licensor and Dippy Foods, Inc. as
licensee
6.5 Co-Packing Agreement dated October 4, 1999, between Dippy Foods, Included
Inc. (Nevada) and Global Food Management Group, LLC
6.6 Amendment to Co-Packing Agreement dated January 24, 2000, between Included
Dippy Foods, Inc. (Nevada) and Global Food Management Group, LLC
6.7 Form of Subscription Agreement used in March 7, 1998 Reg D Rule Included
504 private placement of 6,000,000 shares at $0.003 per share
6.8 Form of Subscription Agreement used in April 16, 1998 Reg D Rule Included
504 private placement of 30,000 shares at $0.01 per share
6.9 Blank Form of Subscription Agreement used in March 31, 1999 Reg D Included
Rule 504 private placement of 4,980,000 shares at $0.05 per share
6.10 Blank Form of convertible promissory note given by Dippy Foods, Included
Inc. (Nevada) payable in 12 months and bearing interest at 12%
per annum
</TABLE>
<PAGE>
Dippy Foods, Inc. Form 10-SB 32 / 32
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<S> <C> <C>
6.11 Distributorship Agreement dated July 8, 1999, between Dippy Included
Foods, Inc. and International Foam Solutions, Inc.
6.12 Brokerage Agreement dated March 25, 1999, between Dippy Foods and Included
Anderson Chamberlin, Inc.
6.13 Blank Form of Subscription Agreement for Dippy CA Shareholders Included
6.14 1999 - 2000 Donated Food Distributor Agreement dated May 21, Included
1999, among ASR Food Distributors, Dippy Foods, Inc. and Feedback
Foundation, Inc.
6.15 Master Donated Food Processing Agreement dated June 30, 1999, Included
between Dippy Foods, Inc. (California) and California Department
of Education
6.16 Settlement Agreement dated February 1, 1999, between Dippy Foods, Included
Inc. (California) and Alexander Diamond
7 Material Foreign Patents None
12 Additional Exhibits None
27 Financial Data Schedule Included
</TABLE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of 1934 the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, who are duly authorized.
Dated April 14, 2000
DIPPY FOODS, INC.,
a Nevada corporation
/s/ Jon Stevenson
- - - - - -------------------------------------------------
Jon Stevenson
Chief Executive Officer, President
/s/ Munjit Johal
- - - - - -------------------------------------------------
Munjit Johal
Chief Financial Officer, Secretary, Treasurer
<PAGE>
DIPPY FOODS, INC.
(FORMERLY SWEETBRIER CORPORATION)
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD MAY 30, 1997 (DATE OF INCORPORATION)
TO APRIL 30, 1998 AND THE YEAR ENDED APRIL 30, 1999
AND FOR THE NINE MONTH PERIODS (UNAUDITED)
ENDED JANUARY 31, 1999 AND 2000
<PAGE>
DIPPY FOODS, INC.
(FORMERLY SWEETBRIER CORPORATION)
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants F-2
Consolidated Balance Sheets as of April 30, 1998, 1999 and
January 31, 2000 (unaudited) F-3
Consolidated Statements of Operations for the Period May 30, 1997
(date of incorporation) to April 30, 1998, the Year Ended April
30, 1999 and for the Nine Month Periods (unaudited) Ended January
31, 1999 and 2000 F-4
Consolidated Statements of Stockholders' Deficit for the Period May
30, 1997 to (date of incorporation) to April 30, 1998 and Year
Ended April 30, 1999 and for the Nine Month Periods (unaudited)
Ended January 31, 1999 and 2000 F-5
Consolidated Statements of Cash Flows for the Period May 30, 1997
(date of incorporation) to April 30, 1998, the Year Ended April
30, 1999 and for the Nine Month Periods (unaudited) Ended January
31, 1999 and 2000 F-6 - F-7
Summary of Accounting Policies F-8 - F-10
Notes to Consolidated Financial Statements F-11 - F-14
F-1
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Dippy Foods, Inc.
We have audited the accompanying consolidated balance sheets of Dippy Foods,
Inc. (formerly Sweetbrier Corporation) as of April 30, 1998 and 1999, and the
related consolidated statements of operations, stockholders' deficit and cash
flows for the period May 30, 1997 (date of incorporation) to April 30, 1998 and
year ended April 30, 1998. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management as well as evaluating the overall presentation of the financial
statements. We believe that our audits provide 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 Dippy Foods, Inc. as
of April 30, 1998 and 1999, and the results of its operations and its cash flows
for the period May 30, 1997 (date of incorporation) to April 30, 1998 and the
year ended April 30, 1999, in conformity with generally accepted accounting
principles.
The accompanying consolidated financial statements have been prepared assuming
the Company will continue as a going concern. As discussed in Note 1 of the
consolidated financial statements, the Company has limited operating history
resulting in an accumulated deficit of $874,532 since inception, negative
working capital of $208,972, and a stockholders' deficit of $428,399 at April
30, 1999. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 1. The consolidated financial statements do not
include any adjustments that might result from the outcome of this uncertainty.
BDO SEIDMAN, LLP
Los Angeles, California
August 27, 1999
F-2
<PAGE>
DIPPY FOODS, INC.
(FORMERLY SWEETBRIER CORPORATION)
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
April 30, January 31,
--------------------------- -------------
1998 1999 2000
------------ ----------- -------------
(unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 2,281 $ -- $ 7,159
Restricted cash (Notes 2 and 4) -- 10,000 60,000
Accounts receivable 22,264 48,852 20,024
Inventory 6,396 6,149 80,959
Prepaid expenses -- 2,572 2,740
----------- ----------- -----------
Total current assets 30,941 67,573 170,882
----------- ----------- -----------
Fixed assets, net (Notes 3 and 7) 10,653 29,404 26,486
Deposits (Note 9) -- 12,532 108,129
----------- ----------- -----------
$ 41,594 $ 109,509 $ 305,497
=========== =========== ===========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Revolving line of credit (Notes 2 and 4) $ -- $ -- $ 44,500
Bank overdraft -- 9,229 --
Accounts payable 70,246 107,571 125,537
Accrued expenses -- 10,254 35,165
Advances from related parties (Note 5) -- 30,698 --
Convertible notes payable (Note 6) -- -- 483,381
Current portion of long term debt (Note 7) -- 1,793 2,208
Current portion of settlement payable (Note 5) -- 117,000 117,000
----------- ----------- -----------
Total current liabilities 70,246 276,545 807,791
Long-term debt, net of current portion (Note 7) -- 14,363 12,142
Settlement payable, net of current portion (Note 5) -- 247,000 211,000
----------- ----------- -----------
Total liabilities 70,246 537,908 1,030,933
----------- ----------- -----------
Commitments and contingencies (Notes 5 and 9)
Stockholders' deficit:
Common stock, authorized 200,000,000 shares, at $0.001 par
value; 19,579,266 and 4,264,597 common shares subscribed or
issued and outstanding at April 30, 1999 and 1998; 19,579,266
at January 1, 2000 4,265 19,579 19,579
Additional paid-in capital 42,298 426,554 426,554
Accumulated deficit (75,215) (874,532) (1,171,569)
----------- ----------- -----------
Total stockholders' deficit (28,652) (428,399) (725,436)
----------- ----------- -----------
$ 41,594 $ 109,509 $ 305,497
=========== =========== ===========
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-3
<PAGE>
DIPPY FOODS, INC.
(FORMERLY SWEETBRIER CORPORATION)
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Period
May 30, 1997
(date of Nine Months Ended
incorporation) Year Ended January 31,
to April 30, April 30, ----------------------------
1998 1999 1999 2000
-------------- -------------- ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
Revenues (Note 10) $ 29,491 191,933 $ 97,675 $ 289,703
Cost of goods sold (Note 10) 25,362 183,512 107,658 208,845
------------ ------------ ------------ ------------
Gross profit (loss) 4,129 8,421 (9,983) 80,858
Selling, general and administrative expenses 79,344 802,916 235,879 350,671
------------ ------------ ------------ ------------
Loss from operations (75,215) (794,495) (245,862) (269,813)
Interest expense -- (4,822) (1,234) (27,224)
------------ ------------ ------------ ------------
Net loss $ (75,215) $ (799,317) $ (247,096) $ (297,037)
============ ============ ============ ============
Basic and diluted loss per share $ (.02) $ (.07) $ (.02) $ (.02)
============ ============ ============ ============
Basic and diluted weighted average shares
outstanding 3,936,551 11,644,580 10,230,916 19,579,266
============ ============ ============ ============
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-4
<PAGE>
DIPPY FOODS, INC.
(FORMERLY SWEETBRIER CORPORATION)
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE YEAR ENDED APRIL 30, 1999 AND FOR
THE PERIOD MAY 30, 1997 (DATE OF INCORPORATION)
TO APRIL 30, 1998 AND FOR THE
NINE MONTH PERIOD (UNAUDITED) ENDED JANUARY 31, 2000
<TABLE>
<CAPTION>
Common Stock
Common Stock Issued Subscription
--------------------------------------- --------------------------
Number Additional Number Total
of Common Paid-In of Accumulated Stockholders'
Shares Stock Capital Shares Amount Deficit Deficit
----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, May 30, 1997 -- $ -- $ -- -- $ -- $ -- $ --
Issuance of common
stock 4,264,597 4,265 42,298 -- -- -- 46,563
Net loss -- -- -- -- -- (75,215) (75,215)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, April 30, 1998 4,264,597 4,265 42,298 -- -- (75,215) (28,652)
Issuance of common
stock 304,669 304 50,266 -- -- -- 50,570
Effect of reverse
merger 10,030,000 10,030 (10,030) -- -- -- --
Common stock
subscribed -- -- -- 4,980,000 249,000 -- 249,000
Contributed services -- -- 100,000 -- -- -- 100,000
Net loss -- -- -- -- -- (799,317) (799,317)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, April 30, 1999 14,599,266 14,599 182,534 4,980,000 249,000 (874,532) (428,399)
Issuance of common
stock (unaudited) 4,980,000 4,980 244,020 (4,980,000) (249,000) -- --
Net loss (unaudited) -- -- -- -- -- (297,037) (297,037)
----------- ----------- ----------- ----------- ----------- ----------- -----------
Balance, January 31,
2000 (unaudited) 19,579,266 $ 19,579 $ 426,554 $ -- $ -- $(1,171,569) $ (725,436)
=========== =========== =========== =========== ============ =========== ===========
</TABLE>
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-5
<PAGE>
DIPPY FOODS, INC.
(FORMERLY SWEETBRIER CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Period
May 30, 1997
(date of Nine Months Ended
incorporation) Year Ended January 31,
to April 30, April 30, ----------------------------
1998 1999 1999 2000
---------------- ------------------ ------------ ------------
(unaudited) (unaudited)
<S> <C> <C> <C> <C>
INCREASE (DECREASE) IN CASH
Cash flows from operating activities:
Net loss $ (75,215) (799,317) (247,096) (297,037)
Adjustments to reconcile net loss to net cash
Depreciation and amortization -- 7,863 2,858 5,442
Non-cash settlement payable to former -- 372,000 -- --
Non-cash compensation -- 100,000 -- --
Increase (decrease) from changes in:
Accounts receivables (22,264) (26,588) 20,458 28,828
Inventory (6,396) 247 (30,481) (74,810)
Prepaid expenses -- (2,572) (2,575) (168)
Deposits -- (12,532) (6,619) (95,597)
Accounts payable and accruals 70,246 47,579 61,010 42,877
Advances from related parties -- 30,698 -- (30,698)
--------- --------- --------- ---------
Net cash used in operating activities (33,629) (282,622) (202,445) (421,163)
--------- --------- --------- ---------
Cash flows from investing activities:
Purchase of property and equipment (10,653) (26,614) (23,322) (2,524)
--------- --------- --------- ---------
Net cash used in investing activities (10,653) (26,614) (23,322) (2,524)
--------- --------- --------- ---------
Cash flows from financing activities:
Bank overdraft -- 9,229 -- (9,229)
Proceeds from revolving line of credit -- -- -- 44,500
Restricted cash invested in certificate of -- (10,000) (10,000) (50,000)
Proceeds from stock issuance 46,563 299,570 226,620 --
Proceeds from convertible debt -- -- -- 483,381
Proceeds from long term debt -- 17,862 17,862 --
Principal payments of long term debt -- (9,706) (696) (1,806)
Principal payment on settlement payable -- -- -- (36,000)
--------- --------- --------- ---------
Net cash provided by financing activities 46,563 306,955 233,786 430,846
--------- --------- --------- ---------
Increase (decrease) in cash 2,281 (2,281) 8,019 7,159
Cash, beginning of period -- 2,281 2,281 --
--------- --------- --------- ---------
Cash, end of period $ 2,281 $ -- $ 10,300 $ 7,159
========= ========= ========= =========
</TABLE>
F-6
<PAGE>
DIPPY FOODS, INC.
(FORMERLY SWEETBRIER CORPORATION)
CONSOLIDATED STATEMENTS OF CASH FLOWS
(INFORMATION WITH RESPECT TO THE NINE MONTH PERIODS ENDED
JANUARY 31, 1999 AND 2000 IS UNAUDITED)
SUPPLEMENTAL DISCLOSURE FOR STATEMENTS OF CASH FLOWS
Cash paid:
During the periods ended April 30, 1998 and 1999, and the nine months
ended January 31, 1999 and 2000, the Company paid no income
taxes.
During the periods ended April 30, 1998 and 1999, the Company paid $0
and $4,822 in interest and during the nine months ended January
31, 1999 and 2000, the Company paid $1,360 and $4,635 in
interest.
Non-cash financing activities:
On September 19, 1998, the Company exchanged 6,638,538 shares of
stock for 4,569,266 shares of Dippy-NV stock pursuant to a share
exchange agreement.
On October 11, 1998, the Company acquired a vehicle for a note
payable in the amount of $17,862 (Note 7). On February 1, 1999,
the Company accrued a settlement payable to a former director in
the amount of $372,000 consisting of $276,000 payable in common
shares and $96,000 payable in cash. (Note 5).
During the year ended April 30, 1999 the Company recorded non-cash
compensation of $100,000 in respect of a director's uncompensated
services.
During the nine months ended January 31, 2000 the Company issued the
4,980,000 subscribed shares.
See accompanying summary of accounting policies and notes to
consolidated financial statements.
F-7
<PAGE>
DIPPY FOODS, INC.
(FORMERLY SWEETBRIER CORPORATION)
SUMMARY OF ACCOUNTING POLICIES
(INFORMATION WITH RESPECT TO JANUARY 31, 1999 AND 2000 IS UNAUDITED)
ORGANIZATION AND DESCRIPTION OF BUSINESS
Dippy Foods, Inc. ("Dippy" or "Dippy-CA"), a California corporation, was
incorporated on May 30, 1997. Dippy is in the business of developing, processing
and distributing, packaged dipping foods for snacks, school lunch programs and
disaster relief programs. Dippy commenced operations from its California offices
in January 1998. The Company currently distributes products to customers in
California.
On September 17, 1998, the Company merged with and into Sweetbrier Corporation
("Sweetbrier") (see "Merger"). Sweetbrier was incorporated in Nevada on February
23, 1998 for the purpose of developing mineral properties. Sweetbrier abandoned
its mining claims after completing the merger with Dippy-CA.
Subsequent to the merger the Company raised $249,000 through the sale of
4,980,000 shares of common stock.
MERGER
On September 17, 1998, Sweetbrier entered into a share exchange agreement
whereby it acquired all of the outstanding common stock of Dippy. Total
consideration for the acquisition was a share exchange of 6,638,533 shares of
Dippy for 4,569,266 shares of Sweetbrier. For accounting purposes the
acquisition has been treated as a reverse acquisition with Dippy as the
accounting acquirer. In a reverse acquisition, the stock issued goes to the
accounting acquirer. Since reverse acquisition accounting is the reverse of
normal, it is the fair market value ("FMV") of the issuer's stock at date of
acquisition that is valued with a write up (write down) of the issuer's net
assets depending on whether the stock is trading in excess (less than) book
value. If a FMV cannot be determined for the stock, and cost is determined based
on the FMV of the issuer's net assets, then goodwill is not recognized and the
transaction is valued at the issuer's net tangible assets. Sweetbrier had no
tangible net assets and very limited trading history. The FMV of the stock
issued could not be determined. Accordingly, goodwill was not recognized and the
transaction was recorded as a recapitalization of Dippy-CA. Upon consummation of
the merger, Sweetbrier changed its name to Dippy Foods, Inc. ("Dippy-NV").
BASIS OF CONSOLIDATION
The accompanying financial statements include accounts of Dippy-CA for all
periods presented and the accounts of Dippy-NV for the period September 17, 1998
through April 30, 1999 and for the nine months ended January 31, 2000. Pro forma
information giving effect to the merger is not presented because the operating
results of Sweetbrier are not material. All significant intercompany accounts
and transactions have been eliminated in consolidation.
REVENUE RECOGNITION
Revenue is recorded when products are shipped to customers.
F-8
<PAGE>
DIPPY FOODS, INC.
(FORMERLY SWEETBRIER CORPORATION)
SUMMARY OF ACCOUNTING POLICIES -- (CONTINUED)
(INFORMATION WITH RESPECT TO JANUARY 31, 1999 AND 2000 IS UNAUDITED)
INCOME TAXES
The Company provides for income taxes in accordance with Statement of Financial
Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income Taxes". SFAS
109 requires a company to use the asset and liability method of accounting for
income taxes.
Under the asset and liability method, deferred income taxes are recognized for
the tax consequences of "temporary differences" by applying enacted statutory
tax rates applicable to future years to differences between the financial
statement carrying amounts and the tax bases of existing assets and liabilities.
A valuation allowance is provided when management cannot determine whether it is
more likely than not that the deferred tax asset will be realized.
INVENTORIES
Inventories are valued at the lower of cost (first-in, first-out) or market (net
realizable value).
FIXED ASSETS
Fixed Assets are stated at cost.
Depreciation is provided on the straight-line method over the estimated useful
lives, which are generally not greater than five years. Fixed assets are
reviewed each year to determine whether any events or circumstances indicate
that the carrying amount of the assets may not be recoverable. Such review
includes estimating future cash flows. The costs are expensed when determined
not realizable.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets, liabilities, contingent liabilities,
revenues, and expenses at the date and for the periods that the financial
statements are prepared. Actual results could differ from those estimates.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash, restricted cash, accounts receivable, bank
overdraft, accounts payable and revolving line of credit approximate their fair
values because of the short maturity of these instruments. The fair values of
the convertible note payable, settlement payable and long term debt approximate
the carrying amount and are estimated based on the current rates offered to the
Company for debt of the same remaining maturities.
F-9
<PAGE>
DIPPY FOODS, INC.
(FORMERLY SWEETBRIER CORPORATION)
SUMMARY OF ACCOUNTING POLICIES -- (CONTINUED)
(INFORMATION WITH RESPECT TO JANUARY 31, 1999 AND 2000 IS UNAUDITED)
CONCENTRATION OF CREDIT RISK AND OFF-BALANCE SHEET RISK
The Company primarily sells to school districts. These school districts are
located throughout California. The Company conducts business based on periodic
evaluations of its customers' financial condition and generally does not require
deposits. The Company does not believe a significant risk of loss from
concentration of credit exists because these customers are funded by the state
or county.
The Company primarily deals with a few suppliers for purchases of its products
and supplies. The Company does not believe a significant risk of loss exists
because it can obtain these products and supplies from other sources at
comparable prices.
The Company's products meet the standards of the National School Lunch Program
and the Company has been approved for participation in the Commodity School
Program. The National School Lunch Program and the Commodity School Program are
central to the Company's business strategy. The elimination of these programs
could have a materially adverse effect on the Company's operations.
NET LOSS PER SHARE
Basic loss per share includes no dilution and is computed by dividing net loss
available to common shareholders by the weighted average number of common shares
outstanding for the period. Diluted earnings per share reflects the potential
dilution of securities that could occur if securities or other contracts (such
as stock options and warrants) to issue common stock were exercised or converted
into common stock. The Company has no outstanding stock options or warrants.
RESEARCH AND DEVELOPMENT
Research and development costs are charged to operations in the year incurred.
During the periods April 30 ended 1998 and 1999, $3,175 and $13,535 and the nine
month periods ended January 31, 1999 and 2000, $9,793 and $9,815 in research and
development costs were charged to operations.
UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of the Company's management, the consolidated balance sheet as of
January 31, 2000, the consolidated statements of operations and cash flows for
the nine months ended January 31, 2000 and 1999 and the consolidated statements
of stockholders' deficit for the nine months ended January 31, 2000 contain all
adjustments (consisting of only normal recurring accruals and adjustments)
necessary to present fairly the information set forth therein. The results of
operations for the nine months ended January 31, 2000 are not necessarily
indicative of future results.
F-10
<PAGE>
DIPPY FOODS, INC.
(FORMERLY SWEETBRIER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(INFORMATION WITH RESPECT TO JANUARY 31, 1999 AND 2000 IS UNAUDITED)
NOTE 1--GOING CONCERN
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern which contemplates the
realization of the assets and the satisfaction of liabilities in the normal
course of business. The carrying amounts of assets and liabilities presented in
the financial statements do not purport to represent realizable or settlement
values. However, the Company has limited operating history resulting in an
accumulated deficit of $874,532 at April 30, 1999 and $1,171,569 at January 31,
2000 (unaudited): negative working capital of $208,972 at April 30, 1999 and
$636,909 at January 31, 2000 (unaudited); and a stockholders' deficit of
$428,399 at April 30, 1999 and $725,436 at January 31, 2000 (unaudited). These
conditions raise substantial doubt about the Company's ability to continue as a
going concern. The consolidated financial statements do not include any
adjustments that might result from the outcome of those uncertainties.
Management is planning to improve cash flow and operating results in three ways.
First, by raising additional capital through private placements of stock and
injections of funds through issuance of convertible debt. Second, reducing cost
of sales by completing the purchase of the form, fill and seal trayline machine
which will reduce costs of packaging materials by 70%, reduce production costs
by an additional 50% and provide increased production capacity. Third,
increasing sales to more school districts, selling to markets other than school
districts and launching a new breakfast and after school snack program. However,
there is no assurance that such plans will be successful.
NOTE 2--RESTRICTED CASH
Based on a sales agreement, the Company invested $10,000 in a certificate of
deposit which matures on August 13, 2000 and is used as security in the event of
the loss of inventory supplied to the Company by the customer.
The Company invested $50,000 in a certificate of deposit which matures on July
2, 2000 and is used as security against the revolving line of credit (Note 4).
NOTE 3--FIXED ASSETS
Fixed assets are summarized as follows:
<TABLE>
<CAPTION>
April 30, January 31,
---------------------------- -------------
1998 1999 2000
------------ ------------ -------------
<S> <C> <C> <C>
Vehicles $ -- $20,862 $20,862
Equipment 10,653 16,405 18,929
------- ------- -------
10,653 37,267 39,791
Less accumulated depreciation and amortization -- 7,863 13,305
------- ------- -------
$10,653 $29,404 $26,486
======= ======= =======
</TABLE>
F-11
<PAGE>
DIPPY FOODS, INC.
(FORMERLY SWEETBRIER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO JANUARY 31, 1999 AND 2000 IS UNAUDITED)
NOTE 4--LINE OF CREDIT
The Company has a one year line of credit for $45,000 secured by a $50,000
certificate of deposit, bearing interest at 6.6% due July 2, 2000. At January
31, 2000, $44,500 was outstanding on the revolving line of credit (Note 2).
NOTE 5--RELATED PARTY TRANSACTIONS
At April 30, 1999, the Company had $30,698 in advances from four related
parties, these advances were repaid subsequent to year end.
On February 1, 1999, the Company entered into a wage settlement agreement with a
former director. As consideration for the parties agreeing not to proceed with
any litigation, the Company agreed to pay the director $96,000 at $4,000 per
month for 24 months, plus interest at 5% payable on the final payment, and
agreed to issue 400,000 non-voting shares to the former director at 100,000
shares per year for four years commencing February 1, 1999. These shares are to
be issued on each anniversary date of the agreement commencing February 1, 1999.
None of these shares have been issued. In respect of this stock award, the
Company recorded a liability and compensation expense of $276,000, based on a
price of $0.69 which was the fair value of the awarded stock on February 1,
1999.
During the year ending April 30, 1999, the Company recognized $100,000 in
compensation expense arising from services contributed by a significant
shareholder.
NOTE 6--CONVERTIBLE DEBT
Convertible debt consists of $483,381 in notes payable bearing interest at 12%,
payable monthly, unsecured, due at various dates between June 2, 2000 and
December 1, 2000, convertible at the option of the payee into shares of the
Companies' common stock at a per share price equal to the average closing price
of the Companies stock from the date of the note to the date of conversion.
NOTE 7--LONG-TERM DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
April 30, January 31,
---------------------------- --------------
1998 1999 2000
------------ ------------ --------------
<S> <C> <C> <C>
Note payable to bank, interest at 22%, secured by
vehicle, payable in sixty monthly payments of
$493, including principal and interest -- 16,156 14,350
Less: current portion -- (1,793) (2,208)
----------- -------- --------
Note payable due after one year $ -- $ 14,363 $ 12,142
=========== ======== ========
</TABLE>
Annual future minimum payments under note payable as of April 30, 1999 consist
of:
<TABLE>
<S> <C>
2000 $ 1,793
2001 3,056
2002 3,801
2003 4,729
2004 2,777
-----------
$ 16,156
===========
</TABLE>
F-12
<PAGE>
DIPPY FOODS, INC.
(FORMERLY SWEETBRIER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO JANUARY 31, 1999 AND 2000 IS UNAUDITED)
NOTE 8--INCOME TAXES
As of April 30, 1998 and 1999 and nine month period ended January 31, 2000,
deferred tax assets consist of the following:
<TABLE>
<CAPTION>
April 30, January 31
---------------------------- --------------
1998 1999 2000
------------ ------------ --------------
<S> <C> <C> <C>
Federal net operating loss carryforwards $ 28,614 $ 145,342 $ 246,618
State net operating loss carryforwards 7,440 37,789 64,121
--------- --------- ---------
36,054 183,131 310,739
Less: valuation allowance (36,054) (183,131) (310,739)
--------- --------- ---------
$ -- $ -- $ --
========= ========= =========
</TABLE>
Deferred tax assets are fully offset by a valuation allowance as it is more
likely than not that deferred tax assets will not be realized.
At April 30, 1998 and 1999 and January 31, 2000, the Company has net operating
loss carryforwards (NOL's) of approximately $84,159 and $427,476, and $725,348,
respectively, for both federal and state tax purposes. The federal and state
NOL's begin to expire on April 30, 2018 and April 30, 2013, respectively.
NOL's incurred prior to September 19, 1998 are subject to an annual limitation
due to the ownership change (as defined under Section 382 of the Internal
Revenue Code of 1986) which occurred as a result of the merger. Unused annual
limitations may be carried over to future years until the net operating losses
expire. Utilization of net operating losses may also be limited in any one year
by alternative minimum tax rules.
NOTE 9--COMMITMENTS
LEASE OBLIGATIONS
The Company leases premises for $5,788 per month. This lease escalates annually
to $5,999 in the final year and expires December 31, 2001.
Annual future minimum lease payments under operating lease commitments as of
April 30, 1999 are as follows:
<TABLE>
<CAPTION>
April 30,
1999
-----------
<S> <C>
FISCAL YEAR
2000 $ 69,456
2001 69,456
2002 46,304
-----------
Total minimum lease payments $ 185,216
===========
</TABLE>
Rent expense was, $0, $22,686 and $5,788, $52,197 for the years ended April 30,
1999 and 2000 and nine month periods ended January 31, 1999 and 2000,
respectively.
F-13
<PAGE>
DIPPY FOODS, INC.
(FORMERLY SWEETBRIER CORPORATION)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(INFORMATION WITH RESPECT TO JANUARY 31, 1999 AND 2000 IS UNAUDITED)
NOTE 9--COMMITMENTS (CONTINUED)
On May 19,1999, the Company entered into a license agreement with a supplier.
The Company was granted a non-exclusive, royalty-free license to use certain
trademarks until December 31, 2008. The Company annually must buy a minimum of
400,000 pounds of fruit and 200,000 pounds of peanut butter during 1999, 600,000
pounds of fruit and 400,000 pounds of peanut butter during 2000, 800,000 pounds
of fruit and 500,000 pounds of peanut butter during 2001. Purchases of fruit and
peanut butter are to increase by 10% per year between 2002 and 2008, the Company
must use them exclusively in all of its products except those products destined
for the school districts that are part of the Commodity School Program. The
licensor has the right to cancel the contract if the Company does not buy the
minimum amounts.
On August 24, 1999 the Company entered into an agreement to purchase a form fill
and seal machine for $167,000. At January 30, 2000 the Company had paid a
deposit of $75,600 and the balance is due on March 10, 2000, which is the date
the equipment is scheduled to be shipped.
On March 6, 2000 the Company's previous co-packer filed an action against the
Company claiming damages in the amount of $149,620. The Company plans to
vigorously defend this action. The likelihood of an unfavorable outcome cannot
be determined at this time.
NOTE 10--MAJOR CUSTOMERS
The Company had five customers who accounted for 25.3%, 21.1%, 18.9%, 15% and
12% of sales for the period from May 30, 1997 to April 30, 1998. The Company had
two customers who accounted for 29.2% and 14.7% of sales for the year ended
April 30, 1999.
The Company had four customers who accounted for 21.6%, 28.2%, 17.7% and 11.8%
of sales for the nine months ended January 31, 1999 and two customers who
accounted for 12.5% and 11.4% of sales for the nine months ended January 31,
2000.
The Company had four suppliers who accounted for 35%, 24.2%, 12.5% and 11.2% of
the cost of goods sold for the period from May 30, 1997 to April 30, 1998. The
Company had four suppliers who accounted for approximately 27.6%, 16.8%, 13% and
12.7% of cost of goods sold for the year ended April 30, 1999.
The Company had four suppliers who accounted for 43%, 22.1%, 16% and 13.1% of
cost of goods sold for the nine month period ended January 31, 1999 and five
suppliers who accounted for 17.2%, 13.9%, 13.1%, 12.8% and 12.3% of costs of
goods sold for the nine month period ended January 31, 2000.
F-14
<PAGE>
EXHIBIT 2.1
SECRETARY OF STATE
[THE GREAT SEAL OF THE STATE OF NEVADA LOGO]
STATE OF NEVADA
CORPORATE CHARTER
I, DEAN HELLER, the duly elected and qualified Nevada Secretary of State, do
hereby certify that SWEETBRIER CORPORATION did on FEBRUARY 23, 1998 file in
this office the original Articles of Incorporation; that said Articles are now
on file and of record in the office of the Secretary of State of the State
Nevada, and further, that said Articles contain all the provisions required by
the law of said State of Nevada.
IN WITNESS WHEREOF, I have hereunto set my hand
and affixed the Great Seal of State, at my office,
in Carson City, Nevada, on FEBRUARY 24, 1998.
/s/ Dean Heller
[SEAL] Secretary of State
By /s/ Kari Rhodes
Certification Clerk
EXHIBIT 2.2
FILED
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
FEB 23 1998
No. 3622-98
/s/ Dean Heller
DEAN HELLER, SECRETARY OF STATE
ARTICLES OF INCORPORATION
OF
SWEETBRIER CORPORATION
* * * * *
The undersigned, acting as incorporator, pursuant to the provisions of the
laws of the State of Nevada relating to private corporations, hereby adopts the
following Articles of Incorporation:
ARTICLE ONE. [NAME]. The name of the corporation is:
SWEETBRIER CORPORATION
ARTICLE TWO. [RESIDENT AGENT]. The initial agent for service of process is
Nevada Agency and Trust Company, 50 West Liberty Street, Suite 880, City of
Reno, County of Washoe, State of Nevada 89501.
ARTICLE THREE. [PURPOSES]. The purposes for which the corporation is
organized are to engage in any activity or business not in conflict with the
laws of the State of Nevada or of the United States of America, and without
limiting the generality of the foregoing, specifically:
I. [OMNIBUS]. To have to exercise all the powers now or hereafter
conferred by the laws of the State of Nevada upon corporations organized
pursuant to the laws under which the corporation is organized and any and
all acts amendatory thereof and supplemental thereto.
II. [CARRYING ON BUSINESS OUTSIDE STATE]. To conduct and carry on its
business or any branch thereof in any state or territory of the United
States or in any foreign country in conformity with the laws of such state,
territory, or foreign country, and to have and maintain in any state,
territory, or foreign country a business office, plant, store or other
facility.
III. [PURPOSES TO BE CONSTRUED AS POWERS]. The purposes specified
herein shall be construed both as purposes and powers and shall be in no
wise limited or restricted by reference to, or inference from, the terms
<PAGE>
of any other clause in this or any other article, but the purposes and
powers specified in each of the clauses herein shall be regarded as
independent purposes and powers, and the enumeration of specific purposes
and powers shall not be construed to limit or restrict in any manner the
meaning of general terms or of the general powers of the corporation; nor
shall the expression of one thing be deemed to exclude another, although it
be of like nature not expressed.
ARTICLE FOUR. [CAPITAL STOCK]. The corporation shall have authority to
issue an aggregate of TWO HUNDRED MILLION (200,000,000) COMMON CAPITAL SHARES,
PAR VALUE ONE MILL ($0.001) per share for a total capitalization of TWO HUNDRED
THOUSAND DOLLARS ($200,000).
The holders of shares of capital stock of the corporation shall not be
entitled to pre-emptive or preferential rights to subscribe to any unissued
stock or any other securities which the corporation may now or hereafter be
authorized to issue.
The corporation's capital stock may be issued and sold from time to time
for such consideration as may be fixed by the Board of Directors, provided that
the consideration so fixed is not less than par value.
The stockholders shall not possess cumulative voting rights at all
shareholders meetings called for the purpose of electing a Board of Directors.
ARTICLE FIVE. [DIRECTORS]. The affairs of the corporation shall be
governed by a Board of Directors of no more than eight (8) nor less than one
(1) person. The names and addresses of the first Board of Directors are:
<TABLE>
<CAPTION>
NAME ADDRESS
- - - - - ---- -------
<S> <C>
Robert George Krushnisky 5025 - 10 A Avenue
Delta, B.C., Canada V4L 2T8
Michael Kennaugh 42 - 2951 Panorama Drive
Coquitlam, B.C., Canada V3E 2W3
Philip Yee 2652 Dundas Street
Vancouver, B.C., Canada V5K 1P9
</TABLE>
ARTICLE SIX. [ASSESSMENT OF STOCK]. The capital stock of the corporation,
after the amount of the subscription price or par value has been paid in, shall
not be subject to pay debts of
2
<PAGE>
the corporation, and no paid up stock and no stock issued as fully paid up shall
ever be assessable or assessed.
ARTICLE SEVEN. [INCORPORATOR]. The name and address of the incorporator of
the corporation is as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
- - - - - ---- -------
<S> <C>
Amanda Cardinalli 50 West Liberty Street, Suite 880
Reno, Nevada 89501
</TABLE>
ARTICLE EIGHT. [PERIOD OF EXISTENCE]. The period of existence of the
corporation shall be perpetual.
ARTICLE NINE. [BY-LAWS]. The initial By-laws of the corporation shall be
adopted by its Board of Directors. The power to alter, amend, or repeal the
By-laws, or to adopt new By-laws, shall be vested in the Board of Directors,
except as otherwise may be specifically provided in the By-laws.
ARTICLE TEN. [STOCKHOLDERS' MEETINGS]. Meetings of stockholders shall be
held at such place within or without the State of Nevada as may be provided by
the By-laws of the corporation. Special meetings of the stockholders may be
called by the President or any other executive officer of the corporation, the
Board of Directors, or any member thereof, or by the record holder or holders of
at least ten percent (10%) of all shares entitled to vote at the meeting. Any
action otherwise required to be taken at a meeting of the stockholders, except
election of directors, may be taken without a meeting if a consent in writing,
setting forth the action so taken, shall be signed by stockholders having at
least a majority of the voting power.
ARTICLE ELEVEN. [CONTRACTS OF CORPORATION]. No contract or other
transaction between the corporation and any other corporation, whether or not a
majority of the shares of the capital stock of such other corporation is owned
by this corporation, and no act of this corporation shall in any way be
affected or invalidated by the fact that any of the directors of this
corporation are pecuniarily or otherwise interested in, or are directors or
officers of such other corporation. Any director of this corporation,
individually, or any firm of which such director may be a member, may be a
party to, or may be pecuniarily or otherwise interested in any contract or
transaction of the corporation; provided, however, that the fact that he or
such firm is so interested shall be disclosed or shall have been known to the
Board of Directors of this corporation, or a majority thereof; and any director
of this corporation who is also a director or officer of such other
corporation, or who is interested, may be counted
3
<PAGE>
in determining the existence of a quorum at any meeting of the Board of
Directors of this corporation that shall authorize such contract or transaction,
and may vote thereat to authorize such contract or transaction, with like force
and effect as if he were not such director or officer of such other corporation
or not so interested.
ARTICLE TWELVE. [LIABILITY OF DIRECTORS AND OFFICERS]. No director or
officer shall have any personal liability to the corporation or its
stockholders for damages for breach of fiduciary duty as a director or officer,
except that this Article Twelve shall not eliminate or limit the liability of a
director or officer for (I) acts or omissions which involve intentional
misconduct, fraud or a knowing violation of law, or (ii) the payment of
dividends in violation of the Nevada Revised Statutes.
IN WITNESS WHEREOF, the undersigned incorporator has hereunto affixed her
signature at Reno, Nevada this 20th of February, 1998.
/s/ Amanda Cardinalli
----------------------------------------
AMANDA CARDINALLI
STATE OF NEVADA }
: SS.
COUNTY OF WASHOE }
On the 20th day of February, 1998, before me, the undersigned, a NOTARY
PUBLIC in and for the State of Nevada, personally appeared AMANDA CARDINALLI,
known to me to be the person described in and who executed the foregoing
instrument, and who acknowledged to me that she executed the same freely and
voluntarily for the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal the day and year first above written.
/s/ Margaret A. Oliver
----------------------------------------
NOTARY PUBLIC
Residing in Reno, Nevada
My Commission Expires:
October 10, 1998
4
EXHIBIT 2.3
F I L E D
IN THE OFFICE OF THE
SECRETARY OF STATE OF THE
STATE OF NEVADA
SEP 17 1998
NO. C 3622-98
/S/ DEAN HELLER
DEAN HELLER, SECRETARY OF STATE
CERTIFICATE OF AMENDMENT
TO THE ARTICLES OF INCORPORATION OF
SWEETBRIER CORPORATION
The undersigned certify that, pursuant to the provisions of the Nevada Revised
Statutes, Sweetbrier Corporation, a Nevada corporation, adopted the following
resolutions to amend its articles of incorporation:
1. All of the directors consented in writing to the following resolution dated
September 2, 1998:
RESOLVED that the secretary of the corporation is directed to obtain from
the stockholders owning at least a majority of the voting power of the
outstanding stock of the corporation their written consent to the amendment
of article one of the articles of incorporation to change the name of the
corporation from SWEETBRIER CORPORATION TO DIPPY FOODS, INC.
2. A majority of the stockholders holding seventy percent of the common shares
outstanding of Sweetbrier Corporation consented in writing to the following
resolution dated September 2, 1998:
RESOLVED that article one of the Company's articles of incorporation be
amended as follows:
ARTICLE ONE [NAME] The name of the corporation is:
DIPPY FOODS, INC.
The undersigned president and secretary of Sweetbrier Corporation, a Nevada
corporation, signed below on September 12, 1998.
Sweetbrier Corporation
/s/ Munjit Johal
--------------------------------------
Munjit Johal, President
/s/ Al Diamond
--------------------------------------
Al Diamond, Secretary
State of California ACKNOWLEDGEMENT
County of ATTACHED
On September 12, 1998, before me, the undersigned notary public, personally
appeared Munjit Johal, President, and Al Diamond, Secretary, known to be the
persons described in and who executed the foregoing instrument and who
acknowledged to me that they executed it voluntarily for the purpose described.
I have set my hand and affixed my official seal on September 12, 1998.
--------------------------------------
Notary Public
Residing in
---------------------------
My commission expires: ---------------------
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT
State of California
------------
County of Los Angeles
-----------
On 9/12/98 before me, Marsha Jeffer, Notary Public,
------- ---------------------------------------------------------
DATE NAME, TITLE OF OFFICER -- E.G., "JANE DOE, NOTARY PUBLIC"
personally appeared Al Diamond,
-----------------------------------------------------------
NAME(S) OF SIGNER(S)
[ ] personally known to me - OR - [ ] proved to me on the basis of satisfactory
evidence to be the person(s) whose name(s)
is/are subscribed to the within instrument
and acknowledged to me that he/she/they
executed the same in his/her/their
authorized capacity(ies), and that be
his/her/their signature(s) on the
instrument the person(s), or the entity
upon behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
/s/ Marsha Jeffer
--------------------------------------------
SIGNATURE OF NOTARY
- - - - - ----------------------------------
MARSHA JEFFER
COMMISSION # 1130994
[SEAL] NOTARY PUBLIC -- CALIFORNIA
LOS ANGELES COUNTY
MY COMM. EXPIRES MAY 2, 2001
- - - - - ----------------------------------
- - - - - --------------------------- OPTIONAL -------------------------------------------
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION ATTACHED DOCUMENT
[ ] INDIVIDUAL Certificate of Amendment
[X] CORPORATE OFFICE to the Articles of Incorporation
of Sweetbrier Corp.
/s/ Secretary
- - - - - ---------------------------- --------------------------------
TITLE(S) TITLE OR TYPE OF DOCUMENT
[ ] PARTNER(S) [ ] LIMITED
[ ] GENERAL 1
[ ] ATTORNEY-IN-FACT --------------------------------
[ ] TRUSTEE(S) NUMBER OF PAGES
[ ] GUARDIAN/CONSERVATOR
[ ] OTHER: -----------------
------------------------ 9/12/98
------------------------ --------------------------------
DATE OF DOCUMENT
SIGNER IS REPRESENTING:
NAME OF PERSON(S) OR ENTITY(IES)
/s/ Munjit Johal
- - - - - ---------------------------- --------------------------------
- - - - - ---------------------------- SIGNER(S) OTHER THAN NAMED ABOVE
<PAGE>
CALIFORNIA ALL-PURPOSE ACKNOWLEDGEMENT
State of CALIFORNIA
----------
County of ORANGE
---------
On 9/12/98 before me, WILLIAM P BERNARD NOTARY PUBLIC,
------- --------------------------------------------------------
Date Name and Title of Officer (e.g., "Jane Doe, Notary Public")
personally appeared Munjit Johal, President,
------------------------------------------------------------
Name(s) of Signer(s)
[ ] personally known to me - OR - [ ] proved to me on the basis of satisfactory
evidence to be the person(s) whose
name(s) is/are subscribed to the
within instrument and acknowledged to
me that he/she/they executed the same
in his/her/their authorized
capacity(ies), and that be his/her/
their signature(s) on the instrument
the person(s), or the entity upon
behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
/s/ William P. Bernard
-------------------------------------
Signature of Notary
- - - - - --------------------------------
WILLIAM P. BERNARD
COMM...1162191
[SEAL] NOTARY PUBLIC--CALIFORNIA
ORANGE COUNTY
MY TERM EXP. NOV. 21, 2001
- - - - - --------------------------------
- - - - - ---------------------------- OPTIONAL ------------------------------------------
Though the information below is not required by law, it may prove valuable to
persons relying on the document and could prevent fraudulent removal and
reattachment of this form to another document.
DESCRIPTION OF ATTACHED DOCUMENT
Title or Type of Document: Certificate of Amendment
-----------------------------------------------------
Document Date: 9-12-98 Number of Pages: 1
-------------------------- -----------------------
Signer(s) Other Than Named Above: Al Diamond
-----------------------------------------------
CAPACITY(IES) CLAIMED BY SIGNER(S)
Signer's Name: Signer's Name:
-------------------- ------------------------
[ ] Individual [ ] Individual
[X] Corporate Officer [X] Corporate Officer
Title(s): President Title(s):
-------------------- -----------------------------
[ ] Partner -- [ ] Limited [ ] General [ ] Partner -- [ ] Limited [ ] General
[ ] Attorney-in-Fact [ ] Attorney-in-Fact
[ ] Trustee [ ] Trustee
[ ] Guardian or Conservator [ ] Guardian or Conservator
[ ] Other: [ ] Other:
------------- RIGHT THUMBPRINT ---------- RIGHT THUMBPRINT
------------------- OF SIGNER OF SIGNER
Top of thumb here Top of thumb here
Signer is Representing: Signer is Representing:
- - - - - ------------------------ -----------------------
- - - - - ------------------------ -----------------------
EXHIBIT 2.4
BY LAWS
OF
SWEETBRIER CORPORATION
A NEVADA CORPORATION
ARTICLE 1
OFFICES
SECTION 1. The registered office of this corporation shall be in the City of
Reno, State of Nevada.
SECTION 2. The Corporation may also have offices at such other places both
within and without the State of Nevada as the Board of Directors may from time
to time determine or the business of the corporation may require.
ARTICLE 2
MEETINGS OF STOCKHOLDERS
SECTION 1. All annual meetings of the stockholders shall be held at the
registered office of the corporation or at such other place within or without
the State of Nevada as the Directors shall determine. Special meetings of the
stockholders may be held at such time and place within or without the State of
Nevada as shall be stated in the notice of the meeting, or in a duly executed
waiver of notice thereof.
SECTION 2. Annual meetings of the stockholders shall be held on the anniversary
date of incorporation each year if not a legal holiday, and if a legal holiday,
then on the next secular day following, or at such other time as may be set by
the Board of Directors from time to time, at which the stockholders shall elect
by vote a Board of Directors and transact such other business as may properly be
brought before the meeting.
SECTION 3. Special meetings of the stockholders, for any purpose or purposes,
unless otherwise prescribed by statute or by the Articles of Incorporation, may
be called by the President or the Secretary, by the resolution of the Board of
Directors or at the request in writing of the stockholders owning a majority in
amount of the entire capital stock of the corporation issued and outstanding and
entitled to vote. Such request shall state the purpose of the proposed meeting.
SECTION 4. Notices of meetings shall be in writing and signed by the President
or Vice-President or the Secretary or an Assistant Secretary or by such other
person or persons as the Directors shall designate. Such notice shall state the
purpose or purposes for which the meeting is called and the time and place,
which may be] within or without this state, where it is to be held. A copy of
such notice shall be either delivered personally or shall be mailed, postage
prepaid, to each stockholder of record entitled to vote at such meeting not less
than ten nor more than sixty days before such meeting. If mailed, it shall be
directed to a stockholder at his address as it appears upon the records of the
corporation and upon such mailing of any such notice, their service thereof
shall be made complete and the time of the notice shall begin to run from the
date upon which such notice is deposited in the mail for transmission to such
stockholder. Personal delivery of any such notice to an officer of the
corporation or association, or to any member of a partnership shall constitute
delivery of such notice to such corporation, association or partnership. In the
event of the transfer of stock after delivery of such notice and prior to the
holding of the meeting, it shall not be necessary to deliver or mail such notice
of the meeting to the transferee.
SECTION 5. Business transactions at any special meeting of stockholders shall be
limited to the purpose stated in the notice.
SECTION 6. The holders of a majority of the stock issued and outstanding and
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the stockholders for the transaction of
business except as otherwise provided by statute or by the Articles of
Incorporation. If, however, such
<PAGE>
quorum shall not be present or represented at any meeting of the stockholders,
the stockholders entitled to vote thereat, present in person or represented by
proxy, shall have power to adjourn the meeting from time to time, without notice
other than announcements at the meeting, until a quorum shall be presented or
represented. At such adjourned meetings at which a quorum shall be present or
represented, any business may be transacted which might have been transacted at
the meeting as originally notified.
SECTION 7. When a quorum is present or represented at any meeting, the vote of
the holders of 10% of the stock having voting power present in person or
represented by proxy shall be sufficient to elect Directors or to decide any
question brought before such meeting, unless the question is one upon which by
express provision of the statute or of the Articles of Incorporation, a
different vote shall govern and control the decision of such question.
SECTION 8. Each stockholder of record of the corporation shall be entitled at
each meeting of the stockholders to one vote for each share standing in his name
on the books of the corporation. Upon the demand of any stockholder, the vote
for Directors and the vote upon any question before the meeting shall be by
ballot.
SECTION 9. At any meeting of the stockholders any stockholder may be represented
and vote by a proxy or proxies appointed by an instrument in writing. In the
event that any such instrument in writing shall designate two or more persons to
act as proxies, a majority of such persons present at the meeting, or if only
one shall be present, then that one shall have and may exercise all the powers
conferred by such written instruction upon all of the persons so designated
unless the instrument shall otherwise provide. No proxy or power of attorney to
vote shall be voted at a meeting of the stockholders unless it shall have been
filed with the secretary of the meeting when required by the inspectors of
election. All questions regarding the qualifications of voters, the validity of
proxies and the acceptance of or rejection of votes shall be decided by the
inspectors of election who shall be appointed by the Board of Directors, or if
not so appointed, then by the presiding officer at the meeting.
SECTION 10. Any action which may be taken by the vote of the stockholders at a
meeting may be taken without a meeting if authorized by the written consent of
stockholders holding at least a majority of the voting power, unless the
provisions of the statute or the Articles of Incorporation require a greater
proportion of voting power to authorize such action in which case such greater
proportion of written consents shall be required.
ARTICLE 3
DIRECTORS
SECTION 1. The business of the corporation shall be managed by its Board of
Directors which may exercise all such powers of the corporation and do all such
lawful acts and things as are not by statute or by the Articles of Incorporation
or by these Bylaws directed or required to be exercised or done by the
stockholders.
SECTION 2. The number of Directors which shall constitute the whole board shall
be not less than one and not more than eight. The number of Directors may from
time to time be increased or decreased to not less than one nor more than eight
by action of the Board of Directors. The Directors shall be elected at the
annual meeting of the stockholders and except as provided in section 2 of this
Article, each Director elected shall hold office until his successor is elected
and qualified. Directors need not be stockholders.
SECTION 3. Vacancies in the Board of Directors including those caused by an
increase in the number of Directors, may be filed by a majority of the remaining
Directors, though less than a quorum, or by a sole remaining Director, and each
Director so elected shall hold office until his successor is elected at the
annual or a special meeting of the stockholders. The holders of a two-thirds of
the outstanding shares of stock entitled to vote may at any time peremptorily
terminate the term of office of all or any of the Directors by vote at a meeting
called for such purpose or by a written statement filed with the Secretary or,
in his absence, with any other officer. Such removal shall be effective
immediately, even if successors are not elected simultaneously and the vacancies
on the Board of Directors resulting therefrom shall only be filled from the
stockholders.
A vacancy or vacancies on the Board of Directors shall be deemed to exist
in case of death, resignation or removal of any Director, or if the authorized
number of Directors be increased, or if the stockholders fail at any annual or
special meeting of stockholders at which any Director or Directors are elected
to elect the full authorized number of Directors to be voted for at that
meeting.
2
<PAGE>
The stockholders may elect a Director or Directors at any time to fill any
vacancy or vacancies not filled by the Directors. If the Board of Directors
accepts the resignation of a Director tendered to take effect at a future time,
the Board or stockholders shall have power to elect a successor to take office
when the resignation is to become effective.
No reduction of the authorized number of Directors shall have the effect
of removing any Director prior to the expiration of his term office.
ARTICLE 4
MEETING OF THE BOARD OF DIRECTORS
SECTION 1. Regular meetings of the Board of Directors shall be held at any
place within or without the State which has been designated from time to time
by resolution of the Board or by written consent of all members of the Board.
In the absence of such designation regular meetings shall be held at the
registered office of the corporation. Special meetings of the Board may be held
either at a place so designated or at the registered office.
SECTION 2. The first meeting of each newly elected Board of Directors shall be
held immediately following the adjournment of the meeting of stockholders and
at the place thereof. No notice of such meeting shall be necessary to the
Directors in order legally to constitute the meeting, provided a quorum be
present. In the event such meeting is not so held, the meeting may be held at
such time and place as shall be specified in a notice given as provided for
special meetings of the Board of Directors.
SECTION 3. Regular meetings of the Board of Directors may be held without call
or notice at such time and at such place as shall from time to time be fixed
and determined by the Board of Directors.
SECTION 4. Special meetings of the Board of Directors may be called by the
Chairman or the President nor by the Vice-President or by any two Directors.
Written notice of the time and place of special meetings shall be delivered
personally to each Director, or sent to each Director by mail or by other form
of written communication, charges prepaid, addressed to him at his address as it
is shown upon the records or if not readily ascertainable, at the place in which
the meetings of the Directors are regularly held. In case such notice is mailed
or telegraphed, it shall be deposited in the postal service or delivered to the
telegraph company at least forty-eight (48) hours prior to the time of the
holding of the meeting. In case such notice is delivered or faxed, it shall be
so delivered or faxed at least twenty-four (24) hours prior to the time of the
holding of the meeting. Such mailing, telegraphing, delivery or faxing as above
provided shall be due, legal and personal notice of such Director.
SECTION 5. Notice of the time and place of holding an adjourned meeting need
not be given to the absent Directors if the time and place be fixed at the
meeting adjourned.
SECTION 6. The transaction of any meeting of the Board of Directors, however
called and noticed or wherever held, shall be as valid as though transacted at
a meeting duly held after regular call and notice, if a quorum be present, and
if, either before or after such meeting, each of the Directors not be present
signs a written waiver of notice, or a consent of holding such meeting, or
approvals of the minutes thereof. All such waivers, consents or approvals shall
be filed with the corporate records or made a part of the minutes of the
meeting.
SECTION 7. The majority of the authorized number of Directors shall be
necessary to constitute a quorum for the transaction of business, except to
adjourn as hereinafter provided. Every act or decision done or made by a
majority of the Directors present at a meeting duly held at which a quorum is
present shall be regarded as the act of the Board of Directors, unless a
greater number be required by law or by the Articles of Incorporation. Any
action of a majority, although not a regularly called meeting, and the record
thereof, if assented to in writing by all of the other members of the Board
shall be as valid and effective in all respects as if passed by the Board in
regular meeting.
3
<PAGE>
SECTION 8. A quorum of the Directors may adjourn any Directors meeting to meet
again at stated day and hour; provided, however, that in the absence of a
quorum, a majority of the directors present at any Directors meeting, either
regular or special, may adjourn from time to time until the time fixed for the
next regular meeting of the Board.
ARTICLE 5
COMMITTEES OF DIRECTORS
SECTION 1. The Board of Directors may, by resolution adopted by a majority of
the whole Board, designate one or more committees of the Board of Directors,
each committee to consist of two or more of the Directors of the corporation
which, to the extent provided in the resolution, shall and may exercise the
power of the Board of Directors in the management of the business and affairs
of the corporation and may have power to authorize the seal of the corporation
to be affixed to all papers which may require it. Such committee or committees
shall have such name or names as may be determined from time to time by the
Board of Directors. The members of any such committee present at any meeting
and not disqualified from voting may, whether or not the constitute a quorum,
unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any absent or disqualified member. At meetings of such
committees, a majority of the members or alternate members at any meeting at
which there is a quorum shall be the act of the committee.
SECTION 2. The committee shall keep regular minutes of their proceedings and
report the same to the Board of Directors.
SECTION 3. Any action required or permitted to be taken at any meeting of the
Board of Directors or of any committee thereof may be taken without a meeting
if a written consent thereto is signed by all members of the Board of Directors
or of such committee, as the case may be, and such written consent is filed
with the minutes of proceedings of the Board or committee.
ARTICLE 6
COMPENSATION OF DIRECTORS
SECTION 1. The Directors may be paid their expenses of attendance at each
meeting of the Board of Directors and may be paid a fixed sum for attendance at
each meeting of the Board of Directors or a stated salary as Director. No such
payment shall preclude any Director from serving the corporation in any other
capacity and receiving compensation therefor. Members of special or standing
committees may be allowed like reimbursement and compensation for attending
committee meetings.
ARTICLE 7
NOTICES
SECTION 1. Notices to Directors and stockholders shall be in writing and
delivered personally or mailed to the Directors or stockholders at their
addresses appearing on the books of the corporation. Notices to Directors may
also be given by fax and by telegram. Notice by mail, fax or telegram shall be
deemed to be given at the time when the same shall be mailed.
SECTION 2. Whenever all parties entitled to vote at any meeting, whether of
Directors or stockholders, consent, either by a writing on the records of the
meeting or filed with the Secretary, or by presence at such meeting or oral
consent entered on the minutes, or by taking part in the deliberations at such
meeting without objection, the doings of such meeting shall be as valid as if
had at a meeting regularly called and noticed, and at such meeting any business
may be transacted which is not excepted from the written consent to the
consideration of which no objection for want of notice is made at the time, and
if any meeting be irregular for want of notice or such consent, provided a
quorum was present at such meeting, the proceedings of said meeting may be
ratified and approved and rendered likewise valid and the irregularity or defect
therein waived by a writing signed by all parties having the right to vote at
such meeting; and such consent or approval of stockholders may be by proxy or
attorney, but all such proxies and powers of attorney must be in writing.
4
<PAGE>
SECTION 3. Whenever any notice whatever is required to be given under the
provisions of the statute, of the Articles of Incorporation or of these Bylaws,
a waiver thereof in writing, signed by the person or persons entitled to said
notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE 8
OFFICERS
SECTION 1. The officers of the corporation shall be chosen by the Board of
Directors and shall be a President, a Secretary and a Treasurer. Any person may
hold two or more offices.
SECTION 2. The Board of Directors at its first meeting after each annual
meeting of stockholders shall choose a Chairman of the Board who shall be a
Director, and shall choose a President, a Secretary and a Treasurer, none of
whom need be Directors.
SECTION 3. The Board of Directors may appoint a Vice-Chairman of the Board,
Vice-Presidents and one or more Assistant Secretaries and Assistant Treasurers
and such other officers and agents as it shall deem necessary who shall hold
their offices for such terms and shall exercise such powers and perform such
duties as shall be determined from time to time by the Board of Directors.
SECTION 4.The salaries and compensation of all officers of the corporation
shall be fixed by the Board of Directors.
SECTION 5. The officers of the corporation shall hold office at the pleasure of
the Board of Directors. Any officer elected or appointed by the Board of
Directors may be removed any time by the Board of Directors. Any vacancy
occurring in any office of the corporation by death, resignation, removal or
otherwise shall be filled by the Board of Directors.
SECTION 6. The CHAIRMAN OF THE BOARD shall preside at meetings of the
stockholders and the Board of Directors, and shall see that all orders and
resolutions of the Board of Directors are carried into effect.
SECTION 7. The VICE-CHAIRMAN shall, in the absence or disability of the Chairman
of the Board, perform the duties and exercise the powers of the Chairman of the
Board and shall perform other such duties as the Board of Directors may form
time to time prescribe.
SECTION 8. The PRESIDENT shall be the chief executive officer of the
corporation and shall have active management of the business of the
corporation. He shall execute on behalf of the corporation all instruments
requiring such execution except to the extent the signing and execution thereof
shall be expressly designated by the Board of Directors to some other officer
or agent of the corporation.
SECTION 9. The VICE-PRESIDENTS shall act under the direction of the president
and in absence or disability of the President shall perform the duties and
exercise the powers of the President. They shall perform such other duties and
have such other powers as the President or the Board of Directors may from time
to time prescribe. The Board of Directors may designate one or more Executive
Vice-Presidents or may otherwise specify the order of seniority of the
Vice-Presidents. The duties and powers of the President shall descend to the
Vice-Presidents in such specified order of seniority.
SECTION 10. The SECRETARY shall act under the direction of the President.
Subject to the direction of the President he shall attend all meetings of the
Board of Directors and all meetings of the stockholders and record the
proceedings. He shall perform like duties for the standing committees when
required. He shall give, or cause to be given, notice of all meetings of the
stockholders and special meetings of the Board of Directors, and will perform
other such duties as may be prescribed by the President or the Board of
Directors.
SECTION 11. The ASSISTANT SECRETARIES shall act under the direction of the
President. In order of their seniority, unless otherwise determined by the
President or the Board of Directors, they shall, in the absence or
5
<PAGE>
disability of the Secretary, perform the duties and exercise the powers of the
Secretary. They shall perform other such duties and have such other powers as
the President and the Board of Directors may from time to time prescribe.
SECTION 12. The TREASURER shall act under the direction of the President.
Subject to the direction of the President he shall have custody of the corporate
funds and securities and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all money
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the Board of Directors. He shall
disburse the funds of the corporation as may be ordered by the President or the
Board of Directors, taking proper vouchers for such disbursements, and shall
render to the President and the Board of Directors, at its regular meetings, or
when the Board of Directors so requires, an account of all his transactions as
Treasurer and of the financial condition of the corporation.
If required by the Board of Directors, the Treasurer shall give the
corporation a bond in such sum and with such surety as shall be satisfactory to
the Board of Directors for the faithful performance of the duties of his office
and for the restoration to the corporation, in case of his death, resignation,
retirement or removal from office, of all books, papers, vouchers, money and
other property of whatever kind in his possession or under his control
belonging to the corporation.
SECTION 13. The ASSISTANT TREASURERS in order of their seniority, unless
otherwise determined by the President or the Board of Directors, shall, in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer. They shall perform such other duties and have such
other powers as the President or the Board of Directors may from time to time
prescribe.
ARTICLE 9
CERTIFICATES OF STOCK
SECTION 1. Every stockholder shall be entitled to have a certificate signed by
the President or a Vice-President and the Treasurer or an Assistant Treasurer,
or the Secretary or an Assistant Secretary of the corporation, certifying the
number of shares owned by him in the corporation. If the corporation shall be
authorized to issue more than one class of stock or more that one series of any
class, the designations, preferences and relative, participating, optional or
other special rights of the various classes of stock or series thereof and the
qualifications, limitations or restrictions of such rights, shall be set forth
in full or summarized on the face or back of the certificate which the
corporation shall issue to represent such stock.
SECTION 2. If a certificate is signed (a) by a transfer agent other than the
corporation or its employees or (b) by a registrar other than the corporation
or its employees, the signatures of the officers of the corporation may be
facsimiles. In case any officer who has signed or whose facsimile signatures
have been placed upon a certificate shall cease to be such officer before such
certificate is issued, such certificate may be issued with the same effect as
though the person had not ceased to be such officer. The seal of the
corporation, or a facsimile thereof, may, but need not be, affixed to
certificates of stock.
SECTION 3. The Board of Directors may direct a new certificate or certificates
to be issued in place of any certificate or certificates theretofore issued by
the corporation alleged to have been lost or destroyed upon the making of an
affidavit of that fact by the person claiming the certificate of stock to be
lost or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost or destroyed
certificate or certificates, or his legal representative, to advertise the same
in such manner as it shall require and/or give the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against the
corporation with respect to the certificate alleged to have been lost or
destroyed.
SECTION 4. Upon surrender to the corporation or the transfer agent of the
corporation of a certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, it shall be the
duty of the corporation, if it is satisfied that all provisions of the laws and
regulations applicable to the corporation regarding transfer and ownership of
shares have been compiled with, to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon its
books.
6
<PAGE>
SECTION 5. The Board of Directors may fix in advance a date not exceeding sixty
(60) days nor less than ten (10) days preceding the date of any meeting of
stockholders, or the date of the payment of any dividend, or the date of the
allotment of rights, or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining the
consent of stockholders for any purpose, as a record date for the termination of
the stockholders entitled to notice of and to vote at any such meeting, and any
adjournment thereof, or entitled to receive payment of any such dividend, or to
give such consent, and in the such case, such stockholders, and only such
stockholders as shall be stockholders of record on the date so fixed, shall be
entitled to notice of and to vote as such meeting, or any adjournment thereof,
or to receive such payment of dividend, or to receive such allotment of rights,
or to exercise such rights, or to give such consent, as the case may be,
notwithstanding any transfer of any stock on the books of the corporation after
such record date fixed as aforesaid.
SECTION 6. The corporation shall be entitled to recognize the person registered
on its books as the owner of the share to be the exclusive owner for all
purposes including voting and dividends, and the corporation shall not be bound
to recognize any equitable or other claims to or interest in such shares or
shares on the part of any other person, whether or not it shall have express or
other notice thereof, except as otherwise provided by the laws of Nevada.
ARTICLE 10
GENERAL PROVISIONS
SECTION 1. Dividends upon the capital stock of the corporation, subject to the
provisions of the Articles of Incorporation, if any, may be declared by the
Board of Directors at any regular or special meeting, pursuant to law.
Dividends may be paid in cash, in property or in shares of the capital stock,
subject to the provisions of the Articles of Incorporation.
SECTION 2. Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
Directors from time to time, in their absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends or for
repairing and maintaining any property of the corporation, or for such other
purpose as the Directors shall think conducive to the interests of the
corporation, and the Directors may modify or abolish any such reserve in the
manner in which it was created.
SECTION 3. All checks or demands for money and notes of the corporation shall
be signed by such officer or officers or such other person or persons as the
Board of Directors may from time to time designate.
SECTION 4. The fiscal year of the corporation shall be fixed by resolution of
the Board of Directors.
SECTION 5. The corporation may or may not have a corporate seal, as may be from
time to time determined by resolution of the Board of Directors. If a corporate
seal is adopted, it shall have inscribed thereon the name of the corporation
and the words "Corporate Seal" and "Nevada". The seal may be used by causing it
or a facsimile thereof to be impressed or affixed or in any manner reproduced.
ARTICLE 11
INDEMNIFICATION
Every person who was or is a party or is threatened to be made a party to
or is involved in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that he or a person of
whom he is the legal representative is or was a Director or officer of the
corporation or is or was serving at the request of the corporation or for its
benefit as a Director or officer of another corporation, or as its
representative in a partnership, joint venture, trust or other enterprise,
shall be indemnified and held harmless to the fullest legally permissible under
the General Corporation Law of the State of Nevada from time to time against
all expenses, liability and loss (including attorney's fees, judgments, fines
and amounts paid or to be paid in settlement) reasonably incurred or suffered
by him in connection therewith. The expenses of officers and Directors incurred
in defending a civil or criminal action, suit or proceeding must be paid by the
corporation as they are incurred and in advance of the final disposition of the
action, suit or proceeding upon receipt of an undertaking by or on behalf of
the
7
<PAGE>
Director or officer to repay the amount if it is ultimately determined by a
court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. Such right of indemnification shall be a contract right which may
be enforced in any manner desired by such person. Such right of indemnification
shall not be exclusive of any other right which such Directors, officers or
representatives may have or hereafter acquire and, without limiting the
generality of such statement, they shall be entitled to their respective rights
of indemnification under any bylaw, agreement, vote of stockholders, provision
of law or otherwise, as well as their rights under this Article.
The Board of Directors may cause the corporation to purchase and maintain
insurance on behalf of any person who is or was a Director or officer of the
corporation, or is or was serving at the request of the corporation as a
Director or officer of another corporation, or as its representative in a
partnership, joint venture, trust or other enterprise against any liability
asserted against such person and incurred in any such capacity or arising out
of such status, whether or not the corporation would have the power to
indemnify such person.
The Board of Directors may form time to time adopt further Bylaws with
respect to indemnification and amend these and such Bylaws to provide at all
times the fullest indemnification permitted by the General Corporation Law of
the State of Nevada.
ARTICLE 12
AMENDMENTS
SECTION 1. The Bylaws may be amended by a majority vote of all the stock issued
and outstanding and entitled to vote at any annual or special meeting of the
stockholders, provided notice of intention to amend shall have been contained
in the notice of the meeting.
SECTION 2. The Board of Directors by a majority vote of the whole Board at any
meeting may amend these Bylaws, including Bylaws adopted by the stockholders,
but the stockholders may from time to time specify particulars of the Bylaws
which shall not be amended by the Board of Directors.
APPROVED AND ADOPTED FEBRUARY 23, 1998.
CERTIFICATE OF THE SECRETARY
I, Michael Kennaugh, hereby certify that I am the Secretary of SWEETBRIER
CORPORATION, and the foregoing Bylaws, consisting of 8 pages, constitute the
code of Bylaws of this company as duly adopted at a regular meeting of the
Board of Directors of the corporation held on February 23, 1998.
IN WITNESS WHEREOF, I have hereunto subscribed my name on February 23, 1998.
/s/ Michael J. Kennaugh
- - - - - ---------------------------------
Secretary
8
EXHIBIT 6.1
AMENDMENT
EXCHANGE AGREEMENT
THIS AMENDED EXCHANGE AGREEMENT ("Agreement"), dated effective as of
September 9, 1999 is by and between DIPPY FOODS, INC., a Nevada corporation
("Dippy Nevada") DIPPY FOODS, INC., a California corporation ("Dippy
California"), and certain shareholders of Dippy Nevada as listed on Exhibit "A"
attached hereto and incorporated herein by reference (the "Dippy Nevada
Shareholders") (collectively, the "Parties").
WITNESSETH
WHEREAS, as of the date hereof, Dippy California has 10,000,000 shares of
common stock authorized, of which 6,400,000 are outstanding and held by the
Shareholders listed in Section 1.1 hereof ("the Dippy California
Shareholders");
WHEREAS, Dippy Nevada is a publicly traded company;
WHEREAS, the Dippy California Shareholders agree and desire to exchange
their shares of Dippy California for shares of common stock of Dippy Nevada on
the terms and conditions set forth in this Exchange Agreement (hereinafter
called the "Agreement");
WHEREAS, Dippy Nevada desires to exchange newly issued shares of common
stock of Dippy Nevada for all of the shares of common stock of Dippy California
("the Shares") held by the Dippy California Shareholders on the terms and
conditions set forth herein;
WHEREAS, Dippy California desires to become a wholly-owned subsidiary of
Dippy Nevada;
WHEREAS, Dippy Nevada desires to conduct a private offering after the
Exchange occurs (the "Private Offering") as set forth below; and
WHEREAS, the Parties hereby set forth the generally proposed terms of the
transaction set forth herein, but intend to undertake the final transaction, if
applicable, under one the various provisions of the Internal Revenue Code
(including without limitation Sections 351, 368 and 721 of the Code) such that
cash payable hereunder, including the funds raised in the Private Offering,
shall be used to retire debt of Dippy California and such that securities
transferred herein qualify as tax free transactions.
NOW THEREFORE, in consideration of the premises and respective mutual
agreements, covenants, representations and warranties herein contained, it is
agreed by and among the Parties as follows:
1
<PAGE>
THE EXCHANGE
1.1 Exchange of Shares. Upon execution of this Agreement as provided in
Section 5.1 hereto (the "Closing"), subject to the terms and conditions herein
set forth, and on the basis of the representations, warranties and agreements
herein contained, the Dippy California Shareholders listed below will exchange
their shares of common stock of Dippy Nevada in the following denominations
("Exchange"):
<TABLE>
<CAPTION>
NEVADA SHARES OF DIPPY CALIFORNIA SHARES OF DIPPY
NAME OF SHAREHOLDER TO BE SURRENDERED TO BE RECEIVED
- - - - - -------------------------- ---------------------------- ----------------
<S> <C> <C>
Jon Stevenson 5,500,000 4,000,000
Bromley Howser 250,000 125,000
Dan Williams 250,000 125,000
Steven and Vicki Johnson 11,428 5,714
Sarah Ellis 12,000 6,000
James Meyer & Marguerite 24,000 12,000
Sadovski
Ronald and Julie Kewish 12,000 6,000
Joe Vivalacqua 14,400 7,200
David and Janice Burks 57,140 28,570
Michelle Ambrosio 11,428 5,714
Diana Hrechdaikian 12,000 6,000
Patricia and Kenneth Loer 12,000 6,000
John and Virginia Vanore 11,428 5,714
Michael Alan Craig 11,428 5,714
Shirley Cohen 11,428 5,714
Dominic Ioffrida 250,000 125,000
Stuart James Deakyne 11,428 5,714
Mells and Nahrin Lachin 12,000 6,000
Ronald Gray 31,428 15,714
Jeffrey and Naomi Rockenmacher 16,000 8,000
Michael and Judy Falk 13,428 6,714
Harriet Hill 22,856 11,428
Arthur Linderman 11,428 5,714
Jeremy Mason 26,428 13,214
Wendy Klatzker 11,428 5,714
Shirley Cohen 20,000 10,000
Shirleen Jones 11,428 5,714
------- -------
TOTAL 6,638,532 4,569,266
</TABLE>
Upon completion of the Exchange, Dippy California shall be a wholly owned
subsidiary of Dippy Nevada. (The combined companies shall hereafter be referred
to simply as "Dippy Nevada.")
1.2 Instruments of Conveyance and Transfer. At the Closing, the Dippy
California Shareholders shall deliver a certificate or certificates
representing their entire share ownership in Dippy California to Dippy Nevada
sufficient to transfer all right, title, and interest in the share to Dippy
Nevada. Concurrently at the closing, Dippy Nevada shall deliver to the Dippy
California Shareholders a certificate or certificates representing
2
<PAGE>
shares of common stock of Dippy Nevada in the same denominations as set forth in
Section 1.1 hereof sufficient to transfer all right, title, and interest in
those shares to the Dippy California Shareholders.
1.3 Consideration for the Exchange. In consideration for the Exchange,
Dippy California shall receive a total amount of $200,000 ("Exchange Price")
from Dippy Nevada prior to the Closing. Dippy California hereby acknowledges
receipt of $200,000 having been paid in full as agreed.
ARTICLE TWO
THE PRIVATE OFFERING
2.1 The Private Offering. Upon completion of the Exchange as set forth in
Article One of this Agreement, Dippy Nevada shall use its best efforts to issue
and sell shares in a Private Offering under Regulation D of the Securities Act
of 1933, as amended (the "Act"), to raise a minimum of $700,000 and a maximum
$885,000. The Private Offering shall be conducted in accordance with all rules
and regulations of the Act as well as with any and all rules and regulations of
any state in which the Private Offering is sold
2.2 Consideration by Dippy Nevada Shareholders. Certain individuals and
entities own freely tradable shares of common stock of "Dippy Nevada (the
"Dippy Nevada Shareholders").
ARTICLE THREE
USE OF PROCEEDS AND CAPITALIZATION
3.1 Use of Proceeds. Dippy Nevada hereby agrees that to the following uses
of proceeds received under this Agreement and in the Private Offering:
a. $115,000 gross proceeds to be received prior to Closing, shall
first be used to pay or pre-pay any required fees and expenses of
accountants to prepare audited financial statements of Dippy Nevada and of
attorneys to prepare the Private Offering documents. Any remaining proceeds
of the $115,000 shall be used primarily to retire debt of Dippy California,
with 10% of the remaining proceeds to be available for working capital.
b. The gross proceeds to be received from the Private Offering, if
any, or, alternatively, from the sale of the Pledge Shares, shall first be
used to pay any additional fees and expenses of accountants, attorneys, and
other required professionals. After the professional fees are paid, the
remaining proceeds shall be used primarily to retire debt of Dippy
California, with 10% of the remaining proceeds to be available for working
capital.
3
<PAGE>
ARTICLE FOUR
REPRESENTATIONS AND COVENANTS OF
THE PARTIES
4.1 Representations and Warranties of Dippy California. Dippy California
hereby represents and warrants that:
a. Dippy California is a corporation duly organized, validly existing,
and in good standing under the laws of the State of California. It has all
requisite corporate power, franchises, licenses, permits, and authority to
won its properties and assets and to carry on its business as it has been
and is being conducted. Dippy California is duly qualified and in good
standing to do business in each jurisdiction in which a failure to so
qualify would have a Material Adverse Effect (as defined below) on Dippy
California. For purposes of this Agreement, the term "Material Adverse
Effect" means any change or effect that, individually or when taken
together with all other such changes or effects which have occurred prior
to the date of determination of the occurrence of the Material Adverse
Effect, is or is reasonably likely to be materially adverse to the
business, assets (including intangible assets), financial condition, or
results of operations of the entity.
b. The Dippy California Shares were duly authorized by the appropriate
corporate action of Dippy California.
4.2 Representations and Warranties of the Dippy California Shareholders.
The Dippy California Shareholders hereby represent and warrant that, on the
Closing Date as defined in Section 5.1 below, the Dippy California Shareholders
shall transfer title, in and to the Dippy California Share, to Dippy Nevada free
and lear of all liens, security interests, pledges, encumbrances, charges,
restrictions, demands and claims, of any kind and nature whatsoever, whether
direct or indirect or contingent, other than any legends required by the
securities laws.
4.3 Representations and Warranties of Dippy Nevada. Dippy Nevada hereby
represents and warrants that:
a. Dippy Nevada is a corporation duly organized, validly existing, and
in good standing under the laws of the State of Nevada. It has all
requisite corporate power, franchises, licenses, permits, and authority to
own its properties and assets and to carry on its business as it has been
and is being conducted. Dippy Nevada is duly qualified and in good standing
to do business in each jurisdiction in which a failure to so qualify would
have a Material Adverse Effect on Dippy Nevada.
b. Dippy Nevada is an "Accredited Investor" as defined in Regulation D
of the Securities Act of 1933 (the "Act").
4
<PAGE>
c. Dippy Nevada's own account as principal, for investment purposes
only and not with a view to the resale or distribution thereof, in whole or
in part, and no other person or entity has a direct or indirect beneficial
interest in such Shares.
d. Dippy Nevada will not sell or otherwise transfer the Dippy
California Shares without registration under the Act or an exemption
therefrom and fully understands and agrees that Dippy Nevada must bear the
economic risk of Dippy Nevada's purchase for an indefinite period of time
because, among other reasons, the Shares have not been registered under the
Act or under the securities laws of any state and, therefore, cannot be
resold, pledged, asigned or otherwise disposed of unless they are
subsequently registered under the Act and under the applicable securities
laws of such states or unless an exemption from such registration is
available.
e. On the Closing Date as defined in Section 5.1 below, Dippy Nevada
shall transfer title, in and to the newly issued Dippy Nevada Shares to
Dippy California Shareholders free and clear of all liens, security
interests, pledges, encumbrances, charges, restrictions, demands and
claims, of any kind and nature whatsoever, whether direct or indirect or
contingent, other than any legends required by the securities laws.
4.4 Representations and Warranties of the Dippy Nevada Shareholders. The
Dippy Nevada Shareholders hereby collectively represent and warrant that they
each are the sole legal and beneficial owners of the number of shares of common
stock of Dippy Nevada set forth next to their name on Exhibit A and that, if
required by the terms of this Agreement, they can immediately transfer title, in
and to the Dippy Nevada Shares owned by them to the Dippy Nevada free and clear
of all liens, security interests, pledges, encumbrances, charges, restrictions,
demands and claims, of any kind and nature whatsoever, whether direct or
indirect or contingent, other than any legends required by the securities laws.
ARTICLE FIVE
CLOSING AND DELIVERY OF DOCUMENTS
5.1 Closing. The Closing shall be deemed to have occurred upon execution of
this Agreement. Immediately upon such execution, the following shall occur as
single integrated transaction.
5.2 Delivery by Dippy Nevada. Dippy Nevada shall deliver the certificates
representing the shares of common stock to the Dippy California Shareholders as
required by Section 1.1 and shall deliver to Dippy California the Purchase
Price as required in Section 1.3.
5.3 Delivery by Dippy California Shareholders. Dippy California
Shareholders shall deliver to Dippy Nevada the stock certificates and any and
all instruments of conveyance and transfer required by Section 1.2.
5
<PAGE>
ARTICLE SIX
MISCELLANEOUS
6.1 Entire Agreement. This Agreement sets forth the entire agreement and
understanding of the parties hereto with respect to the transactions
contemplated hereby, and supersedes all prior agreements, arrangements and
understandings related to the subject matter hereof. No understanding, promise,
inducement, statement of intention, representation, warranty, covenant or
condition, written or oral, express or implied, whether by statute or otherwise,
has been made by any party hereto which is not embodied in this Agreement or the
written statements, certificates, or other documents delivered pursuant hereto
or in connection with the transactions contemplated hereby, and no party hereto
shall be bound by or liable for any alleged understanding, promise, inducement,
statement, representation, warranty, covenant or condition not so set forth.
6.2 Notices. Any notice, request, instruction or other document required by
the terms of this Agreement, or deemed by any of the Parties hereto to be
desirable, to be given to any other Party hereto shall be in writing and shall
be given by facsimile, personal delivery, overnight, delivery, or mailed by
registered or certified mail, postage prepaid, with return receipt requested, to
the following addresses:
If to Dippy California or
The Dippy California Shareholders: Dippy Foods, Inc.
379 Newport Avenue
Long Beach, CA 90814
Attention: Jon Stevenson
Fax: 562/439-7904
If to Dippy Nevada or the
Dippy Nevada Shareholders: Dippy Foods, Inc.
1090 W. Pender, #400
Vancouver, BC V6C 2N7
Attention: Susan Jeffs, Esq.
Fax: 604/682-6509
With copies to: Gary M. Wynn, Esq.
P.O. Box 1652
Big Bear Lake, Ca 92315
Fax: (909) 866-8255
The persons and addresses set forth above may be changed from time to time
by a notice sent as aforesaid. If notice is given by facsimile, personal
delivery, or overnight delivery in accordance with the provisions of this
Section, said notice shall be conclusively deemed given at the time of such
delivery. If notice is given by mail in accordance with the provisions of this
Section, such notice shall be conclusively deemed given seven calendar days
after deposit thereof in the United States mail.
6
<PAGE>
6.3 Waiver and Amendment. Any term, provision covenant, representation,
warranty of condition of this Agreement may be waived, but only by a written
instrument signed by the party entitled to the benefits thereof. The failure or
delay of any party at any time or times to require performance of any provision
hereof or to exercise its rights with respect to any provision hereof shall in
no manner operate as a waiver of or affect such party's right at a later time to
enforce the same. No waiver by any party of any condition, or of the breach of
any term, provision, covenant, representation or warranty contained in this
Agreement, in any one or more instances, shall be deemed to be or construed as a
further or continuing waiver of any such condition or breach or waiver of any
other condition or of the breach of any other term, provision, covenant,
representation or warranty. No modification or amendment of this Agreement shall
be valid and binding unless it be in writing and signed by all parties hereto.
6.4 Choice of Law. This Agreement and the rights of the parties hereunder
shall be governed by and construed in accordance with the laws of the State of
California including all matters of construction, validity, performance, and
enforcement and without giving effect to the principles of conflict of laws.
6.5 Jurisdiction. The parties submit to the jurisdiction of the Courts of
the State of California or a Federal Court empanelled in the State of California
for the resolution of all legal disputes arising under the terms of this
Agreement.
6.6 Counterparts; Facsimile Signatures. This Agreement may be executed in
one or more counterparts, each of which shall be deemed an original, but all of
which shall together constitute one and the same instrument. The Parties agree
that facsimile signatures of this Agreement shall be deemed a valid and binding
execution of this Agreement.
6.7 Attorneys' Fees. Except as otherwise provided herein, if a dispute
should arise between the parties including, but not limited to arbitration, the
prevailing party shall be reimbursed by the non-prevailing party for all
reasonable expenses incurred in resolving such dispute, including reasonable
attorneys' fees exclusive of such amount of attorneys' fees as shall be a
premium for result or for risk of loss under a contingency fee arrangement.
6.8 Taxes. Any income taxes required to be paid in connection with the
payments due hereunder, shall be borne by the party required to make such
payment. Any withholding taxes in the nature of a tax on income shall be
deducted from payments due, and the party required to withhold such tax shall
furnish to the party receiving such payment all documentation necessary to prove
the proper amount to withhold of such taxes and to prove payment to the tax
authority of such required withholding.
6.9 Shareholder and Director Approval. All of the provisions of this
Agreement, including the Closing, are expressly contingent upon the approval of
the shareholder and directors of both Dippy Nevada and Dippy California. Such
approvals shall be evidenced by an executed Certificate of the Secretary of
Dippy Nevada in
7
<PAGE>
substantially the form set forth in Exhibit C attached hereto. If any required
approvals are not received, this Attachment shall be automatically and
immediately terminated and of no effect and all Parties shall return or cause to
be returned any documents or items of value received in connection with this
Agreement. Further, the parties agree to keep the terms and subject of this
Agreement confidential and shall not disclose same to any third parties.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, as of
the date of first written hereinabove.
DIPPY NEVADA DIPPY CALIFORNIA
DIPPY FOOD, INC. DIPPY FOODS, INC.,
A Nevada corporation a California corporation
/s/ Jon Stevenson /s/ Jon Stevenson
- - - - - ----------------------- -------------------------
By: By: Jon Stevenson
President President
8
EXHIBIT 6.2
ASSIGNMENT OF COPYRIGHT
THIS AGREEMENT dated the 18th day of September, 1998,
BETWEEN:
JON STEVENSON, Businessman, of 379 Newport Avenue,
Apartment #9, Long Beach, California, 90814
(the "ASSIGNOR")
AND:
DIPPY FOODS, INC., a company incorporated under the laws of Nevada and
having its principal office located at 1161 Knollwood Circle, Anaheim,
California, 92801
(the "ASSIGNEE")
WHEREAS:
A. pursuant to a Certificate of Registration (#VAu 349-399) dated March 18,
1997, the Assignor is the legal and beneficial owner of the registered
copyright for the Dippy Foods Cover Art (the "COPYRIGHT"), a copy of which
is attached hereto as Schedule "A";
B. the Assignor has agreed to sell and convey all of his right, title and
interest in the Copyright to the Assignee, subject to the terms and
conditions contained in this Agreement;
NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the premises and
the mutual promises, covenants, conditions, representations and warranties
hereinafter contained and the sum of Ten ($10.00) Dollars now paid by the
Assignee to the Assignor and for other good and valuable consideration, the
receipt of which is hereby acknowledged, and subject to the terms and conditions
hereinafter set out, the parties hereto have agreed and do hereby agree as
follows:
ARTICLE 1
ASSIGNMENT OF COPYRIGHT
1.1 The Assignor irrevocably and unconditionally assigns, grants, transfers and
sets over unto the Assignee as and from the 18th day of September, 1998, all of
the Assignor's right, title and interest in the Copyright and any other benefits
and advantages to be derived from the Copyright.
1.2 The purchase price payable to the Assignor for the Copyright is the
aggregate sum of $8,500.00 (the "PURCHASE PRICE").
1.3 The Purchase Price will be paid by the Assignee to the Assignor by the
issuance of 850,000 Common Capital Shares in the stock of the Assignee.
<PAGE>
2
ARTICLE 2
ASSIGNOR'S REPRESENTATIONS, WARRANTIES, AND COVENANTS
2.1 The Assignor represents, warrants, and covenants to the Assignee that:
(a) the Assignor has good right, full power and absolute authority to
assign its interest in the Copyright to the Assignee;
(b) with the exception of this Agreement, no person other than the
Assignor has any right, present or future, contingent or absolute, to
purchase or acquire an interest in the Copyright or to require the
Assignor to grant an option or right to purchase the Copyright; and
(c) the Assignor holds the legal title of the Copyright in trust for the
Assignee.
ARTICLE 3
ASSIGNEE'S AUTHORITY TO ACCEPT ASSIGNMENT OF THE COPYRIGHT
3.1 The Assignee represents and warrants to the Assignor that it has good
right, full power and absolute authority to accept the assignment of the
Assignor's interest in the Copyright.
ARTICLE 4
SEVERABILITY
4.1 If any one or more of the provisions contained herein should be invalid,
illegal or unenforceable in any respect in any jurisdiction, the validity,
legality and enforceability of such provisions shall not in any way be affected
or impaired thereby in any other jurisdiction and the validity, legality and
enforceability of the remaining provisions contained herein shall not in any way
be affected or impaired thereby.
ARTICLE 5
FURTHER ASSURANCES
5.1 Each of the parties covenants and agrees, from time to time and at all
times, to do all such further acts and execute and deliver all such further
deeds and documents as shall be reasonably required in order to fully perform
and carry out the terms and intent of this Agreement.
ARTICLE 6
GOVERNING LAW
6.1 This Agreement and all provisions hereof shall be governed by and construed
in accordance with the laws of the State of California and of the United Stated
applicable therein and shall be treated in all respects as a California
contract.
<PAGE>
3
ARTICLE 7
ENUREMENT
7.1 This Assignment shall extend and enure to the benefit of the Assignee, and
its successors and assigns and shall be binding upon the Assignor and his
respective successors and assigns.
ARTICLE 8
HEADINGS, ET AL
8.1 The division of this Agreement into sections and the insertion of headings
are for convenience and reference only and shall not affect the construction or
interpretation of this Agreement.
IN WITNESS WHEREOF the parties hereto signed this Agreement as of the day
and year first above written.
SIGNED, SEALED and DELIVERED )
by in the presence of: )
)
"Erin Stevenson" )
- - - - - ---------------------------------- )
Signature of Witness )
) "JON STEVENSON"
) ------------------------
Erin Stevenson ) JON STEVENSON
- - - - - ---------------------------------- )
Print Name )
)
1948 Lave Avenue 1B )
- - - - - ---------------------------------- )
Address )
)
Sales )
- - - - - ---------------------------------- )
Occupation )
)
)
The Common Seal of )
DIPPY FOODS, INC. )
affixed was hereunto in the presence of: )
)
"ERIN STEVENSON" ) C/S
- - - - - ------------------------------------ )
Authorized Signatory )
)
)
Authorized Signatory )
This is page 3 of the Assignment of Copyright between JON STEVENSON and DIPPY
FOODS, INC. dated the 18th day of September, 1998.
EXHIBIT 6.3
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE--GROSS
(DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)
BASIC PROVISIONS ("BASIC PROVISIONS")
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes only,
December 16, 1998, is made between Ae Sil Park ("LESSOR"), Dippy Foods, Inc.
("LESSEE"), Actively the "PARTIES," or individually a "Party").
1.2 PREMISES: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease, and commonly
known as 1161 Knollwood Circle, Anaheim, located in the County of Orange, State
of CA 92801, and generally described as (describe briefly the nature of the
property and, if applicable, the "PROJECT", if the property is located within a
Project) A concrete tilt-up building consisting of approximately 10,524 sq. ft.
AP number 070-761-14 as recorded in the office of the County Recorder.
("PREMISES"). (See also Paragraph 2).
1.3 TERM: 3 years and -0- months ("ORIGINAL TERM") commencing January 1,
1999 ("Commencement Date") and ending December 31, 2001 ("Expiration Date").
(See also Paragraph 3).
1.4 EARLY POSSESSION: upon execution of leases ("EARLY POSSESSION DATE").
(See also Paragraphs 3.2 and 3.3).
1.5 BASE RENT: $5,788.00 per month ("BASE RENT"), payable on the first day
of the month commencing February 1, 1999. (See also Paragraph 4). [X] If this
box is checked, there are provisions in this Lease for the Base Rent to be
adjusted and/or for common area maintenance charges.
1.6 BASE RENT PAID UPON EXECUTION: $5,788.00 Base Rent for the period
January 1, 1999 to February 1, 1999.
1.7 SECURITY DEPOSIT: $5,999.00 plus $5,893.00 = $11,892.00 ("SECURITY
DEPOSIT"). (See also Paragraph 5 and 53).
1.8 AGREED USE: Warehousing and executive offices of food packaging
business. (See also Paragraph 6).
1.9 INSURING PARTY: Lessor is the "Insuring Party". The Annual "Base
Premium" is $ ________. (See also Paragraph 8).
1.10 REAL ESTATE BROKERS: (See also Paragraph 15)
(a) REPRESENTATION: The following real estate brokers (collectively,
the "Brokers") and brokerage relationships exist in this transaction (Check
applicable boxes):
[X] Voit Commercial Brokerage represents Lessor exclusively ("LESSOR'S BROKER");
[X] Matlow-Kennedy Commercial represents Lessee exclusively ("LESSEE'S BROKER");
[ ] ________________________ represents both Lessor and Lessee ("Dual Agency").
(b) PAYMENT TO BROKERS: Upon execution and delivery of this Lease by
both Parties, Lessor shall pay to the Broker the fee agreed to in their separate
written agreement (or if there is no such agreement, the sum of per agreement %
of the total Base Rent for the brokerage services rendered by said Broker).
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to be
guaranteed by /s/ __________ ("GUARANTOR"). (See also Paragraph 37).
1.12 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 50 through 53 and exhibits ___________, all of which
constitute a part of this Lease.
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2. PREMISES.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases from
Lessor, the Premises, for the term, at the rental, and upon all of terms,
convenants and conditions set forth in this Lease. Unless otherwise provided
herein, any statement of size set forth in this Lease, or that may have been
used in calculating rental, is an approximation which the Parties agree is
reasonable and the rental based thereon is not subject to revision whether or
not the actual size is more or less.
2.2 CONDITION. Lessor shall deliver the Premises broom clean and free of
debris on the Commencement Date or the Early Possession Date, whichever first
occurs ("START DATE"), and warrants that the existing electrical, plumbing, fire
sprinkler, lighting, heating, ventilating and air conditioning systems ("HVAC"),
loading doors, if any, and all other such elements of the building, in the
Premises, other than those constructed by Lessee, shall be in operating
condition on said date and that the surface and structural elements of the roof,
bearing walls and foundation of any buildings on the Premises (the "Building")
shall be free of material defects. If a non-compliance with said warranty exists
as of the Start Date, Lessor shall, except as otherwise provided in this Lease,
promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance ??? same at Lessor's
expense if, after the start date, Lessee does not give Lessor written notice of
any non-compliance with this warranty within (i) six (6) months as to the HVAC
systems or (ii) thirty (30) days as to the remaining systems and other elements
of the Building, correction of such non-compliance shall be the obligation of
Lessee at Lessee's sole cost and expense, except for the roof, foundations, and
bearing walls which are handled as provided in Paragraph 7.
2.3 COMPLIANCE. Lessor warrants that the improvements on the Premises
comply with all applicable laws, convenants or restrictions of record, building
codes, regulations and ordinances ("APPLICABLE REQUIREMENTS") its effect on the
Start Date. Said warranty does not apply to the use to which Lessee will put the
Premises or to any Alterations or Utility Installations (as defined in Paragraph
7.3(a)) made or to be made by Lessee. NOTE: Lessee is possible for determining
whether or not the zoning is appropriate for Lessee's intended use, and
acknowledges that past uses of the Premises may no longer be allowed. If the
Premises do not comply with said warranty, Lessor shall, except as otherwise
provided, promptly after receipt of written notice from Lessee setting forth
with specificity the nature and extent of such non-compliance, rectify the same
at Lessor's expense. If Lessee does not give Lessor written notice of a
non-compliance with this warranty within six (6) months following the Start
Date, correction of that non-compliance shall be the obligation of Lessee at
Lessee's sole cost and expense. If the Applicable Requirements are hereafter
changed (as opposed to being in existence at the Start Date, which is addressed
in Paragraph 6.2(e) below) so as to require during the term of this Lease the
construction of an addition to or an alteration of the Building, the remediation
of any Hazardous Substance, or the reinforcement or other physical modification
of the Building ("CAPITAL EXPENDITURE"), Lessor and Lessee shall allocate the
cost of such work as follows:
(a) Subject to Paragraph 2.3(c) below, if such Capital Expenditures
are required as a result of the specific and unique use of the Premises by
Lessee as compared with uses by tenants in general, Lessee shall be fully
responsible for the cost thereof, provided, however, that if such Capital
Expenditures is required during the last two (2) years of this Lease and the
cost thereof exceeds six (6) months' Base Rent, Lessee may instead terminate
this Lease unless Lessor notifies Lessee, in writing, within ten (10) days after
receipt of Lessee's termination notice that Lessor has elected to pay the
difference between the actual cost thereof and the amount equal to six (6)
months' base rent. If Lessee elects termination, Lessee shall immediately cease
the use of the premises which requires such Capital Expenditure and deliver to
Lessor written notice specifying a termination date at least ninety (90) days
thereafter. Such termination date shall, however, in no event be earlier than
the last day the Lessee could legally utilize the premises without commencing
such Capital Expenditure.
(b) If such Capital Expenditure is not the result of the specific and
unique use of the Premises by Lessee (such as, governmentally mandated seismic
modifications), then Lessor and Lessee shall allocate the obligation to pay for
such costs pursuant to the provisions of Paragraph 7.1(c); provided, however,
that if such Capital Expenditure is required during the last two years of this
Lease or if Lessor reasonably determines that it is not economically feasible to
pay its share thereof, Lessor shall have the option to terminate this Lease upon
ninety (90) days prior written notice to Lessee unless Lessee notifies Lessor,
in writing, within ten (10) days after receipt of Lessor's termination notice
that Lessee will pay for such Capital Expenditure. If Lessor does not elect to
terminate, and fails to tender its share of any such Capital Expenditure, Lessee
may advance such funds and deduct same, with interest, rent until Lessor's share
of such costs have been fully paid. If Lessee is unable to finance Lessor's
share, or if the balance of the Rent due and payable for the remainder of this
Lease is not sufficient to fully reimburse Lessee on an offset basis, Lessee
shall have the right to terminate this Lease upon thirty (30) days' written
notice to Lessor.
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(c) Notwithstanding the above, the provisions concerning Capital
Expenditures are intended to apply only to non-voluntary, unexpected, and new
Applicable Requirements. If the Capital Expenditures are instead triggered by
Lessee as a result of an actual or proposed change in use, change in intensity
of use, or modification to the Premises then, and in that event, Lessee shall be
fully responsible for the cost thereof, and Lessee shall not have a right to
terminate this Lease.
2.4 ACKNOWLEDGMENTS. Lessee acknowledges that: (a) it has been advised by
Lessor and/or Brokers to satisfy itself with respect to the condition of the
Premises (including but not limited to the electrical, HVAC and fire sprinkler
systems, security, environmental aspects, and compliance with applicable
Requirements), and their suitability for Lessee's intended use, (b) Lessee has
made such investigation as it deems necessary with reference to such matters and
assumes all responsibility therefor as the same relate to its occupancy of the
Premises, and (c) neither Lessor, Lessor's agents, nor any other Broker has made
any oral or written representations or warranties with respect to said matters
other than as set forth in this Lease. In addition, Lessor acknowledges that:(a)
Broker has made no representations, promises or warranties concerning Lessee's
ability to honor the Lease or suitability to occupy the Premises, and (b) it is
Lessor's sole responsibility to investigate the financial capability and/or
suitability of all proposed tenants.
2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in
Paragraph 2 shall be of no force or effect if immediately prior to the Start
Date Lessee was the owner or occupant of the Premises. In such event, Lessee
shall be responsible for any necessary corrective work.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term of this
Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If Lessee totally or partially occupies the Premises
prior to the Commencement Date, the obligation to pay Base Rent shall be abated
for the period of such early possession. All other terms of this Lease shall,
however, be in effect during such period. Any such early possession shall not
affect the Expiration Date.
3.3 DELAY IN POSSESSION. Lessor agrees to use its best commercially
reasonable efforts to deliver possession of the Premises to Lessee by the
Commencement Date. If, despite said efforts, Lessor is unable to deliver
possession as agreed, Lessor shall not be subject to any liability therefor, nor
shall such failure affect the validity of this Lease. Lessee shall not, however,
be obligated to pay Rent or perform its other obligations until it receives
possession of the Premises. If possession is not delivered within sixty (60)
days after the Commencement Date, Lessee may, at its option, by notice in
writing within ten (10) days after the end of such sixty (60) day period, cancel
this Lease, in which event the Parties shall be discharged from all obligations
hereunder. If such written notice is not received by Lessor within said ten (10)
day period, Lessee's right to cancel shall terminate. Except as otherwise
provided, if possession is not tendered to Lessee by the Start Date and Lessee
does not terminate this Lease, as aforesaid, any period of rent abatement that
Lessee would otherwise have enjoyed shall run from the date of delivery of
possession and continue for a period equal to what Lessee would otherwise have
enjoyed under the terms hereof, but minus any days of delay caused by the acts
or omissions of Lessee. If possession of the Premises is not delivered four (4)
months after the Commencement Date, this Lease shall terminate unless other
agreements are reached between Lessor and Lessee in writing.
3.4 LESSEE COMPLIANCE. Lessor shall not be required to tender possession of
the Premises to Lessee until Lessee complies with its obligation to provide
evidence of insurance (Paragraph 8.6). Pending delivery of such evidence, Lessee
shall be required to perform all of its obligations under this Lease from and
after the Start Date, including the payment of Rent, notwithstanding Lessor's
election to withhold possession pending receipt of such evidence of insurance.
Further, if Lessee is required to perform any other conditions prior to or
concurrent with the Start Date, the Start Date shall occur but Lessor may elect
to withhold possession until such conditions are satisfied.
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4. RENT.
4.1 RENT DEFINED. All monetary obligations of Lessee to Lessor under the
terms of this Lease (except for the Security Deposit) are deemed to rent
("Rent").
4.2 PAYMENT. Lessee shall cause payment of Rent to be received by Lessor in
lawful money of the United States, without offset or deduction (except as
specifically permitted in this Lease), on or before the day on which it is due.
Rent for any period during the term hereof which is for less than one (1) full
calendar month shall be prorated based upon the actual number of days of said
month. Payment of Rent shall be made to Lessor at its address stated herein or
to such other persons or place as Lessor may from time to time designate in
writing. Acceptance of a payment which is less than the amount then due shall
not be a waiver of Lessor's rights to the balance of such Rent, regardless of
Lessor's endorsement of any check so stating.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution hereof
the Security Deposit as security for Lessee's faithful performance of its
obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults
under this Lease, Lessor may use, apply or retain all or any portion of said
Security Deposit for the payment of any amount due Lessor or to reimburse or
compensate Lessor for any liability, expense, loss or damage which Lessor may
suffer or incur by reason thereof. If Lessor uses or applies all or any portion
of said Security Deposit, Lessee shall within ten (10) days after written
request therefor deposit monies with Lessor sufficient to restore said Security
Deposit to the full amount required by this Lease. If the Base Rent increases
during the term of this Lease, Lessee shall, upon written request from Lessor,
deposit additional monies with Lessor so that the total amount of the Security
Deposit shall at all times bear the same proportion to the increased Base Rent
as the initial Security Deposit bore to the initial Base Rent. Should the Agreed
use be amended to accommodate a material change in the business of Lessee or to
accommodate a sublessee or assignee, Lessor shall have the right to increase the
Security Deposit to the extent necessary, in Lessor's reasonable judgment, to
account for any increased wear and tear that the Premises may suffer as a result
thereof. If a change in control of Lessee occurs during this Lease and following
such change the financial condition of Lessee is, in Lessor's reasonable
judgment, significantly reduced, Lessee shall deposit such additional monies
with Lessor as shall be sufficient to cause the Security Deposit to be at a
commercially reasonable level based on said change in financial condition.
Lessor shall not be required to keep the Security Deposit separate from the
general accounts. Within fourteen (14) days after the expiration or termination
of this Lease, if Lessor ejects to apply the Security Deposit only to unpaid
rent, and otherwise within thirty (30) days after the Premises have been vacated
pursuant to Paragraph 7.4(c) below, Lessor shall return that portion of the
Security Deposit not used or applied by Lessor. No part of the Security Deposit
shall be considered to be held in trust, to bear interest or to be prepayment
for any monies to be paid by Lessee under this Lease.
6. USE.
6.1 USE. Lessee shall use and occupy the Premises only for the Agreed Use,
or any other legal use which is reasonably comparable thereto, and for no other
purpose. Lessee shall not use or permit the use of the Premises in a manner that
is unlawful, creates damage, waste or a nuisance, or that disturbs owners and/or
occupants of, or causes damage to neighboring properties. Lessor shall not
unreasonably withhold or delay its consent to any written request for a
modification of the Agreed Use, so long as the same will not impair the
structural integrity of the improvements on the Premises or the mechanical or
electrical systems therein, or is not significantly more burdensome to the
Premises. If Lessor elects to withhold consent, Lessor shall within (5) business
days after such request give written notification of same, which notice shall
include an explanation of Lessor's objections to the change in use.
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6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "Hazardous Substance" as
used in this Lease shall mean any product, substance, or waste whose presence,
use, manufacture, disposal, transportation, or release, either by itself or in
combination with other materials expected to be on the Premises, is either; (i)
potentially injurious to the public health, safety or welfare, the environment
or the Premises, (ii) regulated or monitored by any governmental authority, or
(iii) a basis for potential liability of Lessor to any governmental agency or
third party under any applicable statute or common law theory. Hazardous
Substances shall include, but not be limited to, hydrocarbons, petroleum,
gasoline, and/or crude oil or any products, by-products or express prior written
consent of Lessor and timely compliance (at Lessee's expense) with all
Applicable Requirements. "Reportable Use" shall mean (i) the installation or use
of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority, and/or
(iii) the presence at the Premises of a Hazardous Substance with respect to
which any Applicable Requirements requires that a notice be given to persons
entering or occupying the Premises or neighboring properties. Notwithstanding
the foregoing, Lessee may use any ordinary and customary materials reasonably
required to be used in the normal course of the Agreed Use, so long as such use
is in compliance with all Applicable Requirements, is not a Reportable Use, and
does not expose the Premises or neighboring property to any meaningful risk of
contamination or damage or expose Lessor to any liability therefor. In addition,
Lessor may condition its consent to any Reportable Use upon receiving such
additional assurances as Lessor reasonably deems necessary to protect itself,
the public, the Premises and/or the environment against damage, contamination,
injury and/or liability, including, but not limited to, the installation (and
removal on or before Lease expiration or termination) of protective
modifications (such as concrete encasements) and/or increasing the Security
Deposit.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable cause to
believe, that a Hazardous Substance has come to be located in on, under or about
the Premises, other than as previously consented to by Lessor, Lessee shall
immediately give written notice of such fact to Lessor, and provide Lessor with
a copy of any report, notice, claim or other documentation which it has
concerning the presence of such Hazardous Substance.
(c) LESSEE REMEDIATION. Lessee shall not cause or permit any Hazardous
Substance to be spilled or released in, on, under, or about the Premises
(including through the plumbing or sanitary sewer system) and shall promptly, at
Lessee's expense, take all investigatory and/or monitoring remedial action
reasonably recommended, whether or not formally ordered or required, for the
cleanup of any contamination of, and for the maintenance, security and/or
monitoring of the Premises or neighboring properties, that was caused or
materially contributed to by Lessee, or pertaining to or involving any Hazardous
Substance brought onto the Premises during the term of this Lease, by or for
Lessee, or any third party.
(d) LESSEE INDEMNIFICATION. Lessee shall indemnify, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, harmless from
and against any and all loss of rents and/or damages, liabilities, judgments,
claims, expenses, penalties, and attorneys' and consultants' fees arising out of
or involving any Hazardous Substance brought onto the Premises by or for Lessee,
or any third party (provided, however, that Lessee shall have no liability under
this Lease with respect to underground migration of any Hazardous Substance
under the Premises from adjacent properties). Lessee's obligations shall
include, but not be limited to, the effects of any contamination or injury to
person, property or the environment created or suffered by Lessee, and the cost
of investigation, removal, remediation, restoration and/or abatement, and shall
survive the expiration or termination of this Lease. No termination,
cancellation or release agreement entered into by Lessor and Lessee shall
release Lessee from its obligations under this Lease with respect to Hazardous
Substances, unless specifically so agreed by Lessor in writing at the time of
such agreement.
(e) LESSOR INDEMNIFICATION. Lessor and its successors and assigns shall
indemnify, defend, reimburse and hold Lessee, its employees and lenders,
harmless from and against any and all environmental damages, including the cost
of remediation, which existed as a result of Hazardous Substances on the
Premises prior to the Start Date or which are caused by the gross negligence or
willful misconduct of Lessor, its agents or employees, Lessor's obligations, as
and when required by the Applicable Requirements, shall include, but not be
limited to, the cost of investigation, removal, remediation, restoration and/or
abatement, and shall survive the expiration or termination of this Lease.
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(f) INVESTIGATIONS AND REMEDIATIONS. Lessor shall retain the
responsibility and pay for any investigations or remediation measures required
by governmental entitles having jurisdiction with respect to the existence of
Hazardous Substances on the Premises prior to the Start Date, unless such
remediation measure is required as a result of Lessee's use (including
alterations) of the Premises, in which event Lessee's shall be responsible for
such payment. Lessee shall cooperate fully in any such activities at the request
of Lessor, including allowing Lessor and Lessor's agents to have reasonable
access to the Premises at reasonable times in order to carry out Lessor's
investigative and remedial responsibilities.
(g) LESSOR TERMINATION OPTION. If a Hazardous Substance Condition
occurs during the term of this Lease, unless Lessee is legally responsible
therefor (in which case Lessee shall make the investigation and remediation
thereof required by the Applicable Requirements and this Lease shall continue in
full force and effect, but subject to Lessor's rights under Paragraph 6.2(d) and
Paragraph 13), Lessor may, at Lessor's option, either (i) investigate and
remediate such Hazardous Substance Condition, if required, as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue in full
force and effect, or (ii) if the estimated cost to remediate such condition
exceeds twelve (12) times the then monthly Base Rent or $100,000, whichever is
greater, give written notice to Lessee, within thirty (30) days after receipt by
Lessor of knowledge of the occurrence of such Hazardous Substance Condition, of
Lessor's desire to terminate this Lease as of the date sixty (60) days following
the date of such notice. In the event Lessor elects to give a termination
notice, Lessee may within ten (10) days thereafter, give written notice to
Lessor of Lessee's commitment to pay the amount by which the cost of the
remediation of such Hazardous Substance Condition exceeds an amount equal to
twelve (12) times the then monthly Base Rent or $100,000, whichever is greater.
Lessee shall provide Lessor with said funds or satisfactory assurance thereof
within thirty (30) days following such commitment. In such event, this Lease
shall continue in full force and effect, and Lessor shall proceed to make such
remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required funds or
assurance thereof within the time provided, this Lease shall terminate as of the
date specified in Lessor's notice of termination.
6.3 LESSEE'S COMPLIANCE WITH APPLICABLE REQUIREMENTS. Except as otherwise
provided in this Lease, Lessee shall, at Lessee's sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, the requirements of any applicable fire insurance underwriter or
rating bureau, and the recommendations of Lessor's engineers and/or consultants
which relate in any manner to the Premises, without regard to whether said
requirements are now in effect or become effective after the Start Date. Lessee
shall, within ten (10) days after receipt of Lessor's written request, provide
Lessor with copies of all permits and other documents, and other information
evidencing Lessee's compliance with any Applicable requirements specified by
Lessor, and shall immediately upon receipt, notify Lessor in writing (with
copies of any documents involved) of any threatened or actual claim, notice,
citation, warning, complaint or report pertaining to or involving the failure of
Lessee or the Premises to comply with any Applicable requirements.
6.4 INSPECTION: COMPLIANCE. Lessor and Lessor's "Lender" (as defined in
Paragraph 30 below) and consultants shall have the right to enter into Premises
at any time, in the case of an emergency, and otherwise at reasonable times, for
the purpose of inspecting the condition of the Premises and for verifying
compliance by Lessee with this Lease. The cost of any such inspections shall be
paid by Lessor, unless a violation of Applicable Requirements, or a
contamination is found to exist or be imminent, or the inspection is requested
or ordered by a governmental authority. In such case, Lessee shall upon request
reimburse Lessor for the cost of such inspections, so long as such inspection is
reasonably related to the violation or contamination.
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7. MAINTENANCE; REPAIRS, UTILITY INSTALLATIONS; TRADE FIXTURES AND ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) IN GENERAL. Subject to the provisions of Paragraph 2.2 (Condition), 2.3
(Compliance with Covenants, Restrictions and Building Code), Lessee's Compliance
with Applicable Requirements), 7.2 (Lessor's Obligations), 9 (Damage and
Destruction), and 14 (Condemnation), Lessee shall, at Lessee's sole expense,
keep the Premises, Utility Installations, and Alterations in good order,
condition and repair (whether or not the portion of the Premises requiring
repairs, or the means of repairing the same, are reasonably or readily
accessible to Lessee, and whether or not the need for such repairs occurs as a
result of Lessee's use, any prior use, the elements or the age of such portion
of the Premises), including, but not limited to, all equipment or facilities,
such as plumbing, heating, ventilating, air-conditioning, electrical, lighting
facilities, boilers, pressure vessels, fire protection system, fixtures, walls
(interior and exterior), ceilings, floors, windows, doors, skylights,
landscaping, driveways, parking lots, fences, signs, sidewalks and parkways
located in, on, or adjacent to the Premises. Lessee is also responsible for
keeping the roof and roof drainage clean and free of debris. Lessor shall keep
the surface and structural elements of the roof, foundations, and bearing walls
in good repair (see Paragraph 7.2). Lessee, in keeping the Premises in good
order, condition and repair, shall exercise and perform good maintenance
practices. Lessee's obligations shall include restorations, replacements or
renewals when necessary to keep the Premises and all improvements thereon or a
part thereof in good order, condition and state of repair. Lessee shall, during
the term of this Lease, keep exterior appearance of the Building in a
first-class condition (including, e.g., graffiti removal) consistent with the
exterior appearance of other similar facilities of comparable age and size in
the vicinity, including, when necessary, the exterior repainting of the
Building.
(b) SERVICE CONTRACTS. Lessee shall, at Lessee's sole expense, procure and
maintain contracts, with copies to Lessor, in customary form and substance for,
and with contractors specializing and experienced in the maintenance of the
following equipment and improvements ("Basic Elements"). If any, if and when
installed on the Premises: (i) HVAC equipment, (ii) boiler and pressure vessels,
(iii) fire extinguishing systems, including fire alarm and/or smoke detection,
(iv) landscaping and irrigation systems, (v) driveways an parking lots, (vi)
clarifiers, (vii) basic utility feed to the perimeter of the Building, and
(viii) any other equipment, if reasonably required by Lessor.
(c) REPLACEMENT. Subject to Lessee's indemnification of Lessor as set forth
in Paragraph 8.7 below, and without relieving Lessee of liability thereof
resulting from Lessee's failure to exercise and perform good maintenance
practices. If the Basic Elements described in Paragraph 7.1(b) cannot be ???
other than at a cost which is in excess of 60% of the cost of replacing such
Basic Elements, then such Basic Elements shall be replaced by Lessor, and the
cost thereof shall be prorated between the Parties and Lessee shall only be
obligated to pay, each month during the remainder of the term of this Lease, on
the date on which Base Rent is due, an amount equal to the product of
multiplying the cost of such replacement by a fraction, the numerator of which
is, and the denominator of which is the number of months of the useful life of
such replacement as such useful life is specified pursuant to Federal Income Tax
Regulation or guidelines for depreciation thereof (including interest on the
unamortized balance as is then commercially reasonable in the judgment of
Lessor's accounts), interest on the unamortized balance as is then commercially
reasonable in the judgment of Lessor's accountants), with Lessee reserving the
right to prepay its obligation at any time.
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code), 9
(Damage or Destruction) and 14 (Condemnation), it is intended by the Parties
hereto that Lessor have no obligation, in any manner whatsoever, to repair and
maintain the Premises, or the equipment therein, all of which obligations are
intended to be that of the Lessee, except for the surface and structural
elements of the roof, foundations and bearing walls, the repair of which shall
be the responsibility of Lessor upon receipt of written notice that such a
repair is necessary. It is the intention of the Parties that the terms of this
Lease govern the respective obligations of the Parties as to maintenance and
repair of the Premises, and they expressly waive the benefit of any statute now
or hereafter in effect to the extent it is inconsistent with the terms of this
Lease.
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7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "Utility Installations"
refers to all floor and window coverings, air lines, power panels, electrical
distribution, security and fire protection systems and signs, communication
systems, lighting fixtures, HVAC equipment, plumbing, and fencing in or around
the Premises. The term "Trade Fixtures" shall mean Lessee's machinery and
equipment that can be removed without doing material damage to the Premises. The
term "Alterations" shall mean any modification of the improvements, other than
Utility Installations or Trade Fixtures, whether by addition or deletion.
"Lessee Owned Alterations and/or Utility Installations" are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make any Alterations or
Utility Installations to the Premises without Lessor's prior written consent.
Lessee may, however, make non-structural Utility Installations to the interior
of the Premises (excluding the roof) without such consent but upon notice to
Lessor, as long as they are not visible from the outside, do not involve
puncturing, relocating or removing the roof or any existing walls, and the
cumulative cost thereof during this Lease as extended does not exceed $50,000 in
the aggregate or $10,000 in any one year.
(b) CONSENT. Any Alterations or Utility Installations that Lessee shall
desire to make and which require the consent of the Lessor shall be presented to
Lessor in written form with detailed plans. Consent shall be deemed conditioned
upon Lessee's: (i) acquiring all applicable governmental permits, (ii)
furnishing Lessor with copies of both the permits and the plans and
specifications prior to commencement of the work, and (iii) compliance with all
conditions of said permits and other Applicable Requirements in a prompt and
expeditious manner. Any Alterations or Utility Installations shall be performed
in a workmanlike manner with good and sufficient materials. Lessee shall
promptly upon completion furnish Lessor with as-built plans and specifications.
For work which costs an amount equal to the greater of one month's Base Rent, or
$10,000, Lessor may condition its consent upon Lessee providing a lien and
completion bond in an amount equal to one and one-half times the estimated cost
of such Alteration or Utility Installation and/or upon Lessee's posting an
additional Security Deposit with Lessor.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims for labor
or materials furnished or alleged to have been furnished to or for Lessee at or
for use on the Premises, which claims are or may be secured by any mechanic's or
materialmen's lien against the Premises or any interest therein. Lessee shall
give Lessor not less than ten (10) days' notice prior to the commencement of any
work in, on or about the Premises, and Lessor shall have the right to post
notices of non-responsibility. If Lessee shall contest the validity of any such
lien, claim or demand, then Lessee shall, at its sole expense defend and protect
itself, Lessor and the Premises against the same and shall pay and satisfy any
such adverse judgment that may be rendered thereon before the enforcement
thereof. If Lessor shall require, Lessee shall furnish a surety bond in an
amount equal to one and one-half times the amount of such contested lien, claim
or demand, indemnifying Lessor against liability for the same. If Lessor elects
to participate in any such action, Lessee shall pay Lessor's attorneys' fees and
costs.
7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require removal or elect
ownership as hereinafter provided, all Alterations and Utility Installations
made by Lessee shall be the property of Lessee, but considered a part of the
Premises. Lessor may, at any time, elect in writing to be the owner of all or
any specified part of the Lessee Owned Alterations and Utility Installations.
Unless otherwise instructed per Paragraph 7.4(b) hereof, all Lessee Owned
Alterations and Utility Installations shall, at the expiration or termination of
this Lease, become the property of Lessor and be surrended by Lessee with the
Premises.
(b) REMOVAL. By delivery to Lessee of written notice from Lessor not
earlier than ninety (90) and not later than thirty (30) days prior to the end of
the terms of this Lease, Lessor may require that any or all Lessee Owned
Alterations or Utility Installations be removed by the expiration or termination
of this Lease. Lessor may require the removal at any time of all or any part of
any Lessee Owned Alterations or Utility Installations made without the required
consent.
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(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by the
Expiration Date or any earlier termination date, with all of the improvements,
parts and surfaces thereof broom clean and free of debris, and in good operating
order, condition and state of repair, ordinary wear and tear ??? expected.
"Ordinary wear and tear" shall not include any damage or deterioration that
would have been prevented by good maintenance practice. Lessee shall repair any
damage occasioned by the installation, maintenance or removal of Trade Fixtures,
Lessee Owned Alterations and/or Utility Installations, furnishings, and
equipment as well as the removal of any storage tank installed by or for Lessee,
and the removal, replacement, or remediation of any soil, material or
groundwater contaminated by Lessee. Trade Fixtures shall remain the property of
Lessee and shall be removed by Lessee. The failure by Lessee to timely vacate
the Premises pursuant to this Paragraph 7.4(c) without the express written
consent of Lessor shall constitute a holdover under the provisions of Paragraph
28 below.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT OF PREMIUM INCREASES
(a) Lessee shall pay to Lessor any insurance cost increase ("Insurance
Cost Increase") occurring during the term of this Lease. "Insurance Cost
Increase" is defined as any increase in the actual cost of the insurance
required under Paragraphs 8.2(b), and 8.3(a), 8.3(b) ("Required Insurance"),
over and above the Base Premium as hereinafter defined calculated on an annual
basis. "Insurance Cost Increase" shall include but not be limited to increases
resulting from the nature of Lessee's occupancy, any act or omission of Lessee,
requirements of the holder of mortgage or deed of trust covering the Premises,
increased valuation of the Premises and/or a premium rate increase. The Parties
are encouraged to fill in the Base Premium in Paragraph 1.9 with a reasonable
premium for the Required Insurance based on the Agreed Use of the Premises. If
the Parties fail to insert a dollar amount in Paragraph 1.9, then the Base
Premium shall be the lowest annual premium reasonably obtainable for the
Required Insurance as of the commencement of the Original Term for the Agreed
Use of the Premises. In no event, however, shall Lessee be responsible for any
portion of the increase in the premium cost attributable to liability insurance
carried by Lessor under Paragraph 8.1(b) in excess of $2,000,000 per occurrence.
(b) Lessee shall pay any such Insurance Cost Increase to Lessor within
thirty (30) days after receipt by Lessee of a copy of the premium statement or
other reasonable evidence of the amount due. If the insurance policies
maintained hereunder cover other property besides the Premises, Lessor shall
also deliver to Lessee a statement of the amount of such Insurance Cost Increase
attributable only to the Premises showing in reasonable detail the manner in
which such amount was computed. Premiums for policy periods commencing prior to,
or extending beyond the term of this Lease, shall be prorated to correspond to
the term of this Lease.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force a
Commercial General Liability Policy of Insurance protecting Lessee and Lessor
against claims for bodily injury, personal injury and property damage based upon
or arising out of the ownership, use, occupancy or maintenance of the Premises
and all areas appurtenant thereto. Such insurance shall be on an occurrence
basis providing single limit coverage in an amount not less than 2,000,000 per
occurrence with an "Additional Insured-Managers or Lessors of Premises
Endorsement" and contain the "Amendment of the Pollution Exclusion Endorsement"
for damage caused by heat, smoke or fumes from a hostile fire. The Policy shall
not contain any intra-insured exclusions as between insured persons or
organizations, but shall include coverage for liability assumed under this Lease
as an "insured contract" for the performance of Lessee's indemnity obligations
under this Lease. The limits of said insurance shall not, however, limit the
liability of Lessee nor relieve Lessee of any obligation hereunder. All
insurance carried by Lessee shall be primary to and not contributory with any
similar insurance carried by Lessor, whose insurance shall be considered excess
insurance only.
(b) CARRIED BY LESSOR. Lessor shall maintain liability insurance as
described in Paragraph 8.2(a), in addition to, and not in lieu of, the insurance
required to be maintained by Lessee. Lessee shall not be named as an additional
insured therein.
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8.3 PROPERTY INSURANCE-BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING IMPROVEMENTS. The Insuring Party shall obtain and keep in
force a policy or policies in the name of Lessor, with loss payable to Lessor,
any groundlessor, and to any Lender(s) insuring loss or damage to the Premises.
The amount of such insurance shall be equal to the full replacement cost of the
Premises, as the same shall exist from time to time, or the amount required by
any Lenders, but in no event more than the commercially reasonably and available
insurable value thereof. If Lessor is the Insuring Party, however, Lessee Owned
Alterations and Utility Installations, Trade Fixtures, and Lessee's personal
property shall be insured by Lessee under Paragraph 8.4 rather than by Lessor.
If the coverage is available and commercially appropriate, such policy or
policies shall insure against all risks of direct physical loss or damage
(except the perils of flood and/or earthquake unless required by a Lender or
included in the Base Premium), including coverage for debris removal and the
enforcement of any Applicable Requirements requiring the upgrading, demolition,
reconstruction or replacement of any portion of the Premises as the result of a
covered loss. Said policy or policies shall also contain an agreed valuation
provision in lieu of any coinsurance clause, waiver of subrogration, and
inflation guard protection causing an increase in the annual property insurance
coverage amount by a factor of not less than the adjusted U.S. Department of
Labor Consumer Price Index for All Urban Consumers for the city nearest to where
the Premises are located.
(b) RENTAL VALUE. The Insuring Party shall obtain and keep in force a
policy or policies in the name of Lessor, with loss payable to Lessor and any
Lender, insuring the loss of the full Rent for one (1) year. Said insurance
shall provide that in the event the Lease is terminated by reason of an insured
loss, the period of indemnity for such coverage shall be extended beyond the
date of the completion of repairs or replacement of the Premises, to provide for
one full year's loss of Rent from the date of any such loss. Said insurance
shall contain an agreed valuation provision in lieu of any coinsurance clause,
and the amount of coverage shall be adjusted annually to reflect the projected
Rent otherwise payable by Lessee, for the next twelve (12) month period.
(c) ADJACENT PREMISES. If the Premises are part of a larger building,
or of a group of buildings owned by Lessor which are adjacent to the premises,
the Lessee shall pay for an increase in the premiums for the property insurance
of such building or buildings if said increase is caused by Lessee's acts,
omissions, use or occupancy of the Premises.
8.4 LESSEE'S PROPERTY/BUSINESS INTERRUPTION INSURANCE.
(a) PROPERTY DAMAGE. Lessee shall obtain and maintain insurance
coverage on all of Lessee's personal property, Trade Fixtures, and Lessee Owned
Alterations and Utility Installations. Such insurance shall be full replacement
cost coverage with a deductible of not to exceed $1,000 per occurrence. The
proceeds from any such insurance shall be used by Lessee for the replacement of
personal property, Trade Fixtures and Lessee Owned Alterations and Utility
Installations. Lessee shall provide Lessor with written evidence that such
insurance is in force.
(b) BUSINESS INTERRUPTION. Lessee shall obtain and maintain loss of
income and extra expense insurance in amounts as will reimburse Lessee for
direct or indirect loss of earnings attributable to all perils commonly insured
against by prudent Lessees in the business of Lessee or attributable to
prevention of access to the Premises as a result of such perils.
(c) NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
representation that the limits or forms of coverage of insurance specified
herein are adequate to cover Lessee's property, business operations or
obligations under this Lease.
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8.5 INSURANCE POLICIES. Insurance required herein shall be by companies
duly licensed or admitted to transact business in the state where the premises
are located, and maintaining during the policy term a "General Policyholders
Rating" of at least B+, V, as set forth in the most current issue of "Best
Insurance Guide", or such other rating as may be required by a Lender. Lessee
shall not do or permit to be done anything which invalidates the required
insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor
certified copies of policies of such insurance or certificates evidencing the
existence and amounts of the required insurance. No such policy shall be
cancelable or subject to modification except after thirty (30) days prior
written notice to Lessor. Lessee shall, at least thirty (30) days prior to the
expiration of such policies, furnish Lessor with evidence of renewals of
"insurance binders" evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand. Such policies shall be for a term of at least
one year, or the length of the remaining term of this Lease, whichever is less.
If either Party shall fail to procure and maintain the insurance required to be
carried by it, the other Party may, but shall not be required to, procure and
maintain the same.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or remedies,
Lessee and Lessor each hereby release and relieve the other, and waive their
entire right to recover damages against the other, for loss of or damage to its
property arising out of an incident to the perils required to be insured against
herein. The effect of such releases and waivers is not limited by the amount of
insurance carried or required, or by any deductibles applicable hereto, against
herein. The Parties agree to have their respective property damage insurance
carriers waive any right to subrogration that such companies may have against
Lessor or Lessee, as the case may be, so long as the insurance is not
invalidated thereby.
8.7 INDEMNITY. Except for Lessor's gross negligence or willful misconduct,
Lessee shall indemnify, protect, defend and hold harmless the premises, Lessor
and its agents, Lessor's master or ground lessor, partners and Lenders, from and
against any and all claims, loss of rents and/or damages, liens, judgments,
penalties, attorneys' and consultants' fees, expenses and/or liabilities arising
out of, involving, or in connection with, the use and/or occupancy of the
Premises by Lessee. If any action or proceeding is brought against Lessor by
reason of any of the foregoing matters, Lessee shall upon notice defend the same
at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be defended or indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable for
injury or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee's employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, or from other sources or places. Lessor shall not be liable for any
damages arising from any act or neglect of any other tenant of Lessor.
Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall under
no circumstances be liable for injury to Lessee's business or for any loss of
income or profit therefrom.
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9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "Premises Partial Damage" shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations, Utility
Installations and Trade Fixtures, which can reasonably be repaired in six (6)
months or less from the date of the damage or destruction. Lessor shall notify
Lessee in writing within thirty (30) days from the date of the damage or
destruction as to whether or not the damage is Partial or Total.
(b) "Premises Total Destruction" shall mean damage or destruction to the
Premises, other than Lessee Owned Alterations and Utility Installations and
Trade Fixtures, which cannot reasonably be repaired in six (6) months or less
from the date of the damage or destruction. Lessor shall notify Lessee in
writing within thirty (30) days from the date of the damage or destruction as to
whether or not the damage is Partial or Total.
(c) "Insured Loss" shall mean damage or destruction to improvements on the
Premises, other than Lessee Owned Alterations and Utility Installations and
Trade Fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible amounts
or coverage limits involved.
(d) "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of Applicable Requirements, and without
deduction for depreciation.
(e) "Hazardous Substance Condition" shall mean the occurrence or discovery
of a condition involving the presence of, or a contamination by, a Hazardous
Substance as defined in Paragraph 8.2(a), in, on, or under the Premises.
9.2 PARTIAL DAMAGE -- INSURED LOSS. If a Premises Partial Damage that is an
Insured Loss occurs, the Lessor shall, at Lessor's expense, repair such damage
(but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total cost to repair
of which is $10,000 or less, and, in such event, Lessor shall make any
applicable insurance proceeds available to Lessee on a reasonable basis for that
purpose. Notwithstanding the foregoing, if the required insurance was not in
force or the insurance proceeds are not sufficient to effect such repair, the
Insuring Party shall promptly contribute the shortage in proceeds as and when
required to complete said repairs. In the event, however, such shortage was due
to the fact that, by reason of the unique nature of the improvements, full
replacement cost insurance coverage was not commercially reasonable and
available. Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within ten (10) days following receipt of written notice of such shortage and
request therefor. If Lessor receives said funds or adequate assurance thereof
within said ten (10) day period, the party responsible for making the repairs
shall complete them as soon as reasonably possible and this Lease shall remain
in full force and effect. If such funds or assurance are not received, Lessor
may nevertheless elect by written notice to Lessee within ten (10) days
thereafter to: (i) make such restoration and repair as is commercially
reasonably possible. Lessor paying any shortage and proceeds, in which case this
Lease shall remain in full force as effect; or (ii) have this Lease terminate
thirty (30) days thereafter. Lessee shall not be entitled to reimbursement or
any funds contributed by Lessee to repair any such damage or destruction.
Premises Partial damage due to flood or earthquake shall be subject to Paragraph
9.3, notwithstanding that there may be some insurance coverage, but the net
proceeds of any such insurance shall be made available for the repairs if made
by either Party.
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9.3 PARTIAL DAMAGE -- UNINSURED LOSS. If a Premises Partial Damage that is
not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense),
Lessor may either: (i) repair such damage as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) terminate this Lease by giving written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence of such
damage. Such termination shall be effective sixth (60) days following the date
of such notice. In the event Lessor elects to terminate this Lease, Lessee shall
have the right within ten (10) days after receipt of the termination notice to
give written notice to Lessor of Lessee's commitment to pay for the repair of
such damage without reimbursement from Lessor. Lessee shall provide Lessor with
said funds or satisfactory assurance thereof within thirty (30) days after
making such commitment. In such event this Lease shall continue in full force
and effect, and Lessor shall proceed to make such repairs as soon as reasonably
possible after the required funds are available. If Lessee does not make the
required commitment, this Lease shall terminate as of the date specified in the
termination notice.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs, this Lease shall terminate sixty (60) days
following such Destruction. If the damage or destruction was caused by the gross
negligence or willful misconduct of Lessee, Lessor shall have the right to
recover Lessor's damages from Lessee, except as provided in Paragraph 8.6.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6) months
of this Lease there is damage for which the cost to repair exceeds the (1)
month's Base Rent, whether or not an Insured Loss, Lessor may terminate this
Lease effective sixty (60) days following the date of occurrence of such damage
by giving a written termination notice to Lessee within thirty (30) days after
the date of occurrence of such damage. Notwithstanding the foregoing, if Lessee
at that time has an exercisable option to extend this Lease or to purchase the
Premises, then Lessee may preserve this Lease by, (a) exercising such option and
(b) providing Lessor with an shortage in Insurance proceeds (or adequate
assurance thereof) needed to make the repairs on or before the earlier of (i)
the date which is ten days after Lessee's receipt of Lessor's written notice
purporting to terminate this Lease, or (ii) the day prior to the date upon which
such option expires. If Lessee duly exercises such option during such period and
provides Lessor with funds (or adequate assurance thereof) to cover any shortage
in insurance proceeds, Lessor shall, at Lessor's commercially reasonable
expense, repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during such period, then this Lease shall
terminate on the date specified in the termination notice and Lessee's option
shall be extinguished.
9.6 ABATEMENT OF RENT; LESSEE's REMEDIES.
(a) ABATEMENT. In the event of Premises Partial Damage or Premises Total
Destruction or a Hazardous Substance Condition for which Lessee is not
responsible under this Lease, the Rent payable by Lessee for the period required
for the repair, remediation or restoration of such damage shall be abated in
proportion to the degree to which Lessee's use of the Premises is impaired, but
not to exceed the proceeds received from the Rental Value Insurance. All other
obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall
have no liability for any such damage, destruction, remediation, repair or
restoration except as provided herein.
(b) REMEDIES. If Lessor shall be obligated to repair or restore the
Premises and does not commence, in a substantial and meaningful way, such repair
or restoration within ninety (90) days after such obligation shall accrue,
Lessee may, at any time prior to the commencement of such repair or restoration,
give written notice to Lessor and to any Lenders of which Lessee has actual
notice, of Lessee's election to terminate this Lease on a date not less than
sixty (60) days following the giving of such notice. If Lessee gives such notice
and such repair or restoration is not commenced within thirty (30) days
thereafter, this Lease shall terminate as of the date specified in said notice.
If the repair or restoration is commenced within said thirty (30) days, this
Lease shall continue in full force and effect. "Commence" shall mean either the
unconditional authorization of the preparation of the required plans, or the
beginning of the actual work on the Premises, whichever first occurs.
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9.7 TERMINATION -- ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be
made concerning advance Base Rent and any other advance payments made by Lessee
to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's
Security Deposit as has not been, or is not then required to be, used by Lessor.
9.8 WAIVE STATUTES. Lessor and Lessee agree that the terms of this Lease
shall govern the effect of any damage to or destruction of the premises with
respect to the termination of this Lease and hereby waive the provisions of any
present or future statute to the extent inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term "Real
Property Taxes" shall include any form of assessment; real estate, general,
special, ordinary or extraordinary, or rental levy or tax (other than
inheritance, personal income or estate taxes): improvement bond; and/or license
fee imposed upon or levied against any legal or equitable interest of Lessor in
the Premises. Lessor's right to other income therefrom, and/or Lessor's business
of leasing, by any authority having the direct or indirect power to tax and
where the funds are generated with reference to the Building address and where
the proceeds so generated are to be applied by the city, county or other local
taxing authority of a jurisdiction within which the Premises are located. The
term "Real Property Taxes" shall also include any tax, fee, levy, assessment or
charge, or any increase therein, imposed by reason of events occurring during
the term of this Lease, including, but not limited to, a change in the ownership
of the Premises.
10.2(a) PAYMENT OF TAXES. Lessor shall pay the Real Property Taxes
applicable to the Premises provided, however, that Lessee shall pay to Lessor
the amount, if any, by which Real Property Taxes applicable to the Premises
increase over the fiscal tax year during which the Commencement Date occurs
("Tax Increase"). Subject to Paragraph 10.2(b), payment of any such Tax Increase
shall be made by Lessee to Lessor within thirty (30) days after receipt of
Lessor's written statement setting forth the amount due and the computation
thereof. If any such taxes shall cover any period of time prior to or after the
expiration or termination of this Lease, Lessee's share of such taxes shall be
prorated to cover only that portion of the tax bill applicable to the period
that the Lease is in effect.
(b) ADVANCE PAYMENT. In the event Lessee incurs a late charge on any
Rent payment, Lessor may, at Lessor's option, estimate the current real Property
Taxes, and require that the Tax Increase be paid in advance to Lessor by Lessee,
either: (i) in a lump sum amount equal to the amount due, at least twenty (20)
days prior to the applicable delinquency date; or (ii) monthly in advance with
the payment of the Base Rent. If Lessor elects to require payment monthly in
advance, the monthly payment shall be an amount equal to the amount of the
estimated installment of the Tax Increase divided by the number of months
remaining before the month in which said installment becomes delinquent. When
the actual amount of the applicable Tax Increase is known, the amount of such
equal monthly advance payments shall be adjusted as required to provide the
funds needed to pay the applicable Tax Increase. If the amount collected by
Lessor is insufficient to pay the Tax Increase when due, Lessee shall pay
Lessor, upon demand, such additional sums as are necessary to pay such
obligations. All monies paid to Lessor under this Paragraph may be intermingled
with other monies of Lessor and shall not bear interest. In the event of a
Breach by Lessee in the performance of its obligations under this Lease, then
any balance of funds paid to Lessor under the provisions of this Paragraph may,
at the option of Lessor, be treated as an additional Security Deposit.
(c) ADDITIONAL IMPROVEMENTS. Notwithstanding anything to the contrary
in this Paragraph 10.2, Lessee shall pay to Lessor upon demand herefor the
entirety of any increase in Real Property Taxes assessed by reason of
Alterations or Utility Installations placed upon the Premises by Lessee or
Lessee's request.
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10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Tax Increase for all
of the land and improvements included within the tax parcel assessed, such
proportion to be conclusively determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available.
10.4 PERSONAL PROPERTY TAXES. Lessee shall pay, prior to delinquency, all
taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee. When possible, Lessee shall cause such property to be assessed and
billed separately from the real property of Lessor. If any of Lessee's said
personal property shall be assessed with Lessor's real property, Lessee shall
pay Lessor the taxes attributable to Lessee's property within ten (10) days
after receipt of a written statement.
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to the
Premises, together with any taxes thereon. If any such services are not
separately metered to Lessee, Lessee shall pay a reasonable proportion, to be
determined by Lessor, of all charges jointly metered.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign, transfer,
mortgage or encumber (collectively, "assign or assignment") or sublet all or any
part of Lessee's interest in this Lease or in the Premises without Lessor's
prior written consent.
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(b) A change in the control of Lessee shall constitute an assignment
requiring consent. The transfer, on a cumulative basis, of twenty-five percent
(25%) or more of the voting control of Lessee shall constitute a change in
control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or series
of transactions (by way of merger, sale, acquisition, financing, transfer,
leveraged buy-out or otherwise), whether or not a formal assignment or
hypothecation of this Lease or Lessee's assets occurs, which results or will
result in a reduction of the Net Worth of Lessee by an amount greater than
twenty-five percent (25%) of such Net Worth as it was represented at the time of
execution of this Lease or at the time of the most recent assignment to which
Lessor has consented, or as it exists immediately prior to said transaction or
transactions constituting such reduction, whichever was or is greater, shall be
considered an assignment of this Lessee to which Lessor may withhold its
consent. "NET WORTH OF LESSEE" shall mean the net worth of Lessee (excluding any
guarantors) established under generally accepted accounting principles.
(d) An assignment or subletting without consent shall, at Lessor's option,
be a Default curable after notice per Paragraph 13.1(c), or a noncurable Breach
without the necessity of any notice and grace period. If Lessor elects to treat
such unapproved assignment or subletting as a noncurable Breach, Lessor may
either: (i) terminate this Lease, or (ii) upon thirty (30) days written notice,
increase the monthly Base Rent to one hundred ten percent (110%) of the Base
Rent than in effect. Further, in the event of such Breach and rental adjustment,
(i) the purchase price of any option to purchase the premises held by Lessee
shall be subject to similar adjustment to one hundred ten percent (110%) of the
price previously in effect, and (ii) all fixed and non-fixed rental adjustments
scheduled during the remainder of the Lease term shall be increased to one
hundred ten percent (110%) of the scheduled adjusted rent.
(e) Lessee's remedy for any breach of Paragraph 12.1 by Lessor shall be
limited to compensatory damages and/or injunctive relief.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting shall
not: (i) be effective without the express written assumption by such assignee
or sublessee of the obligations of Lessee under this Lease; (ii) release Lessee
of any obligations hereunder; or (iii) alter the primary liability of lease for
the payment of Rent or for the performance of any other obligations to be
performed by Lessee.
(b) Lessor may accept Rent or performance of Lessee's obligations from any
person other than Lessee pending approval or disapproval of assignment. Neither
a delay in the approval or disapproval of such assignment nor the acceptance of
Rent or performance shall constitute a waiver or appeal of Lessor's right to
exercise its remedies for Lessee's Default or Breach.
(c) Lessor's consent to any assignment or subletting shall not constitute
a consent to any subsequent assignment or subletting.
(d) In the event of any Default or Breach by Lessee, Lessor may proceed
directly against Lessee, any Guarantors or anyone else responsible for the
performance of Lessee's obligations under this Lease, including any assignee or
sublessee, without first exhausting Lessor's remedies against any other person
or entity responsible therefore to Lessor, or any security held by Lessor.
(e) each request for consent to an assignment or subletting shall be in
writing, accompanied by information relevant to Lessor's termination as to the
financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a fee of $1,000
or ten percent (10%) of the current monthly Base Rent applicable to the portion
of the Premises which is the subject of the proposed assignment or sublease,
whichever is greater, as consideration for Lessor's considering and processing
said request. Lessee agrees to provide Lessor with such other or additional
information and/or documentation as may be reasonably requested.
(f) Any assignee of, or sublessee under, this Lease shall, by reason of
accepting such assignment or entering into such sublease, be formed to have
assumed and agreed to conform and comply with each and every term, covenant,
condition and obligation herein to be observed or performed by Lessee during the
term of said assignment or sublease, other than such obligations as are contrary
to or inconsistent with provisions of an assignment or sublease to which Lessor
has specifically consented to in writing.
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12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's interest
in all Rent payable on any sublease, and Lessor may collect such Rent and apply
same toward Lessee's obligations under this Lease; provided, however, that
until a Breach shall occur in the performance of Lessee's obligations, Lessee
may collect said Rent. Lessor shall not, by reason of the foregoing or any
assignment of such sublease, nor by reason of the collection of Rent, be deemed
liable to the sublessee for any failure of Lessee to perform and comply with
any of Lessee's obligations to such sublessee. Lessee hereby irrevocably
authorizes and directs any such sublessee, upon receipt of a written notice
from Lessor stating that a Breach exists in the performance of Sublessee's
obligations under this Lease, to pay to Lessor all Rent due and to become due
under the sublease. Sublessee shall rely upon any such notice from Lessor and
shall pay all Rents to Lessor without any obligation or right to inquire as to
whether such Breach exists, notwithstanding any claim from Lessee to contrary.
(b) In the event of a Breach by Lessee, Lessor may, at its option, require
sublessee to attorn to Lessor, in which event Lessor shall undertake the
obligations of the sublessor under such sublease from the time of the exercise
of said option to the expiration of such sublease; provided, however, Lessor
shall not be liable for any prepaid rents or security deposit paid by such
sublessee to such sublessor or for any prior Defaults or Breaches of such
sublessor.
(c) Any matter requiring the consent of the sublessor under a sublease
shall also require the consent of Lessor.
(d) No sublessee shall further assign or sublet all or any part of the
Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of
Sublessee within the grace period, if any, specified in such notice. The
sublessee shall have a right of reimbursement and offset from and against
Lessee for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES
13.1 DEFAULT; BREACH. A "Default" is defined as a failure by the Lessee to
comply with or perform any of the terms, covenants, conditions or rules under
this Lease. A "Breach" is defined as the occurrence of one or more of the
following Defaults, and the failure of Lessee to cure such Default within any
applicable grace period:
(a) The abandonment of the Premises; or the vacating of the Premises
without providing a commercially reasonable level of security, and/or Security
Deposit or where the coverage of the property insurance described in paragraph
8.3 is jeopardized as a result thereof, or without providing reasonable
assurances to minimize potential vandalism.
(b) The failure of Leases to make any payment of Rent or any Security
Deposit required to be made by Lessee hereunder, whether to Lessor or to a
third party, when due, to provide reasonable evidence of insurance or surety
bond, or to fulfill any obligation under this Lease which endangers or threatens
life or property, where such failure continues for a period of three (3)
business days following written notice to Lessee.
(c) The failure by Lessee to provide (i) reasonable written evidence of
compliance with Applicable Requirement, (ii) the service contracts, the
rescission of an unauthorized assignment or subletting, (iv) a Tenancy
Statement, (v) a requested subordination, (vi) evidence concerning any Guaranty
and/or Guarantor, (vii) any document requested under Paragraph 42 (easements),
or (viii) any other documentation or information which Lessor may reasonably
require of Lessee under the terms of this Lease, where any such failure
continues for a period of ten (10) days following written notice to Lessee.
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(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40 hereof,
other than those described in subparagraphs 13.1(a), (b) or (c), above, where
such Default continues for a period of thirty (30) days after written notice;
provided, however, that if the nature of Lessee's Default is such that more
than thirty (30) days are reasonably required for its cure, then it shall not
be deemed to be a Breach if Lessee commences such cure within said thirty (30)
day period and thereafter diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making of any
general arrangement or assignment for the benefit of creditors; (ii) becoming a
"debtor" as defined in 11 U.S.C (section) 101 or any successor statute thereto
(unless, in the case of a petition filed against Lessee, the same is dismissed
within sixty (60) days; (iii) the appointment of a trustee or receiver to take
possession of substantially all of Lessee's assets located at the premises or of
Lessee's interest in this Lease, where possession is not restored to Lessee
within thirty (30) days; or (iv) the attachment, execution or other judicial
seizure of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where such seizure is not discharged within
thirty (30) days; provided, however, in the event that any provisions of this
subparagraph 13.1(e) is contrary to any applicable law, such provision shall be
of no force or effect, and not affect the validity of the remaining provisions.
(f) The discovery that any financial statement of Lessee or of any
Guarantor given to Lessor was materially false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor; (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty; (iii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing; (iv) a Guarantor's refusal to honor the Guaranty; or (v) a
Guarantor's Breach of its guaranty obligation on a participatory basis, and
Lessee's failure within sixty (60) days following written notice of any such
event, to provide written alternative assurance or security, which, when coupled
with the
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then existing resources of Lessee, equals or exceeds the combined financial
resources of Lessee and the Guarantors that existed at time of execution of
this Lease.
13.2 REMEDIES. If Lessee fails to perform any of its affirmative duties or
obligations, within ten (10) days after written notice (or in case of an
emergency, without notice), Lessor may, at its option, perform such duty or
obligation on Lessee's behalf, including, but not limited to, the obtaining of
reasonably required bonds, insurance policies, or governmental licenses, permits
or approvals. The costs and expenses of any such performance by Lessor shall be
due and payable by Lessee upon receipt of invoice therefor. If any check given
to Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at its option, may require all future payments to be made by Lessee to
be by cashier's check. In the event of a Breach, Lessor may, with or without
further notice or demand, and without limiting Lessor in the exercise of any
right or remedy which Lessor may have by reason of such Breach;
(a) Terminate Lessee's right to possession of the Premises by any lawful
means, in which case this Lease shall terminate and Lessee shall immediately
surrender possession to Lessor. In such event Lessor shall be entitled to
recover from Lessee: (i) the unpaid Rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided; (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including, but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of the District within which the Premises are located
at the time of award plus one percent (1%). Efforts by Lessor to mitigate
damages caused by Lessee's Breach of this Lease shall not waive Lessor's right
to recover damages under Paragraph 12. If termination of this Lease is obtained
through the provisional remedy of unlawful detainer, Lessor shall have the right
to recover in such proceeding any unpaid Rent and damages as are recoverable
therein, or Lessor may reserve the right to recover all or any part thereof in a
separate suit. If a notice and grace period required under Paragraph 13.1 was
not previously given, a notice to pay rent or quit, or to perform or quit given
to Lessee under the unlawful detainer statute shall also constitute the notice
required by Paragraph 13.1. In such case, the applicable grace period required
by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and
the failure of Lessee to cure the Default within the greater of the two such
grace periods shall constitute both an unlawful detainer and a Breach of this
Lease entitling Lessor to the remedies provided for in this Lease and/or by said
statute.
(b) Continue the Lease and Lessee's right to possession and recover the
Rent as it becomes due, in which event Lessee may sublet or assign, subject
only to reasonable limitations. Acts of maintenance, efforts to relet, and/or
the appointment of a receiver to protect the Lessor's interests, shall not
constitute a termination of the Lessee's right to possession.
(c) Pursue any other remedy now or hereafter available under the laws or
judicial decisions of the state wherein the Premises are located. The expiration
or termination of this Lease and/or the termination of Lessee's right to
possession shall not relieve Lessee from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the term
hereof or by reason of Lessee's occupancy of the Premises.
13.3 INDUCEMENT RECAPTURE. Any agreement for free or abated rent or other
charges, or for the giving or paying by Lessor to or for Lessee of any cash or
other bonus, inducement or consideration for Lessee's entering into this Lease,
all of which concessions are hereinafter referred to as "Inducement Provisions,"
shall be deemed conditioned upon Lessee's full and faithful performance of all
of the terms,
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covenants and conditions of this Lease. Upon Breach of this Lease by Lessee,
any such inducement Provision shall automatically be deemed deleted from this
Lease and of no further force or effect, and any rent, other charge, bonus,
inducement or consideration theretofore abated, given or paid by Lessor under
such an inducement Provision shall be immediately due and payable by Lessee to
Lessor, notwithstanding any subsequent cure of said Breach by Lessee. The
acceptance by Lessor of Rent or the cure of the Breach which initiated the
operation of this paragraph shall not be deemed a waiver by Lessor of the
provisions of this paragraph unless specifically so stated in writing by Lessor
at the time of such acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by Lessee
of Rent will cause Lessor to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed upon Lessor by any Lender. Accordingly, if any
Rent shall not be received by Lessor within five (5) days after such amount
shall be due, then, without any requirement for notice to Lessee, Lessee shall
pay to Lessor a one-time late charge equal to ten percent (10%) of each such
overdue amount. The parties hereby agree that such late charge represents a
fair and reasonable estimate of the costs Lessor will incur by reason of such
late payment. Acceptance of such late charge by Lessor shall in no event
constitute a waiver of Lessee's Default or Breach with respect to such overdue
amount, nor prevent the exercise of any of the other rights and remedies
granted hereunder. In the event that a late charge is payable hereunder,
whether or not collected, for three (3) consecutive installments of Base Rent,
then notwithstanding any provision of this Lease to the contrary, Base Rent
shall, at Lessor's option, become due and payable quarterly in advance.
13.5 INTEREST. Any monetary payment due Lessor hereunder, other than late
charges, not received by Lessor, when due as to scheduled payments (such as
Base Rent) or within thirty (30) days following the date on which it was due
for non-scheduled payment, shall bear interest from the date when due, as to
scheduled payments or the thirty-first (31st) day after it was due as to
non-scheduled payments. The interest ("Interest") charged shall be equal to the
prime rate reported in the Wall Street Journal as published closest prior to
the date when due plus four percent (4%), but shall not exceed the maximum rate
allowed by law. Interest is payable in addition to the potential late charge
provided for in Paragraph 13.4.
13.6 BREACH BY LESSOR.
(a) NOTICE OF BREACH. Lessor shall not be deemed in breach of this Lease
unless Lessor fails within a reasonable time to perform an obligation required
to be performed by Lessor. For purposes of this Paragraph, a reasonable time
shall in no event be less than thirty (30) days after receipt by Lessor, and
any Lender whose name and address shall have been furnished Lessee in writing
for such purpose, of written notice specifying wherein such obligation of
Lessor has not been performed; provided, however, that if the nature of
Lessor's obligation is such that more than thirty (30) days are reasonably
required for its performance, then Lessor shall not be in breach if performance
is commenced within such thirty (30) day period thereafter diligently pursued
to completion.
(b) PERFORMANCE BY LESSEE ON BEHALF OF LESSOR. In the event that neither
Lessor nor Lender cures said breach within thirty (30) days after receipt of
said written notice, or if having commenced said cure they do not diligently
pursue it to completion, then Lessee may elect to cure said breach at Lessee's
expense and offset from Rent an amount equal to the greater of one month's Base
Rent or the Security Deposit, and to pay an excess of such expense under
protest, reserving Lessee's right to reimbursement from Lessor. Lessee shall
document the cost of said cure and supply said documentation to Lessor.
14. CONDEMNATION. If the Premises or any portion thereof are taken under
the power of eminent domain or sold under the threat of the exercise of said
power (collectively "Condemnation"), this Lease shall terminate as to the part
taken as of the date the condemning authority takes title or possession,
whichever first occurs. If more than ten percent (10%) of any building portion
of the premises, or more than twenty-five percent (25%) of the land area
portion of the premises not occupied by any building, is taken by
Condemnation, Lessee may, at Lessee's option, to be exercised in writing within
ten (10) days after Lessor shall have given Lessee written notice of such
taking (or in the absence of such notice, within
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ten (10) days after the condemning authority shall have taken possession)
terminate this Lease as of the date the condemning authority takes such
possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in proportion
to the reduction in utility of the Premises caused by such Condemnation.
Condemnation awards and/or payments shall be the property of Lessor, whether
such award shall be made as compensation for diminution in value of the
leasehold, the value of the part taken, or for severance damages; provided,
however, that Lessee shall be entitled to any compensation for Lessee's
relocation expenses, loss of business goodwill and/or Trade fixtures, without
regard to whether or not this Lease is terminated pursuant to the provisions of
this Paragraph. All Alterations and Utility installations made to the Premises
by Lessee, for purposes of Condemnation only, shall be considered the property
of the Lessee and Lessee shall be entitled to any and all compensation which is
payable therefor. In the event that this Lease is not terminated by reason of
the Condemnation, Lessor shall repair any damage to the Premises caused by such
Condemnation.
15. BROKER'S FEE.
15.1 ADDITIONAL COMMISSION. In addition to the payments owed pursuant to
Paragraph 1.10 above, and unless Lessor and the Brokers otherwise agree in
writing, Lessor agrees that: (a) if Lessee exercises any Option; (b) if Lessee
acquires any rights to the Premises or other Premises owned by Lessor and
located within the same project if any, within which the Premises is located,
(c) if Lessee remains in possession of the Premises, without consent of Lessor,
after the expiration of this Lease; or (d) Base Rent is increased, whether by
agreement or operation of an escalation clause herein, then
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Lessor shall pay Brokers a fee in accordance with the schedule of Brokers in
effect at the time of the execution of this Lease.
15.2 ASSUMPTION OF OBLIGATIONS. Any buyer or transferee of Lessor's
interest in this Lease shall be deemed to have assumed Lessor's obligation
hereunder. Each Broker shall be a third party beneficiary of the provisions of
Paragraphs 1.10, 15, 22 and 31. If Lessor fails to pay to a Broker any amounts
due as and for commissions pertaining to this Lease when due, then such amounts
shall accrue interest. In addition, if Lessor fails to pay any amounts to
Lessee's Broker when due, Lessee's Broker may send written notice to Lessor and
Lessee of such failure and if Lessor fails to pay such amounts within ten (10)
days after said notice, Lessee shall pay said monies to its Broker and offset
such amounts against Rent. In addition, Lessee's Broker shall be deemed to be a
third party beneficiary of any commission agreement entered into by and/or
between Lessor and Lessor's Broker.
15.3 REPRESENTATIONS AND INDEMNITIES OF BROKER RELATIONSHIPS. Lessee and
Lessor each represent and warrant to the other that it has had no dealings with
any person, firm, broker or finder (other than the Brokers, if any) in
connection with this Lease, and that no one other than said named Brokers is
entitled to any commission or finder's fee in connection herewith. Lessee and
Lessor do each hereby agree to indemnify, protect, defend and hold the other
harmless from and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by reason of
any dealings or actions of the indemnifying Party, including any costs,
expenses, and/or attorneys' fees reasonably incurred with respect thereto.
16. ESTOPPEL CERTIFICATES.
(a) Each Party (as "Responding Party") shall within ten (10) days after
written notice from the other Party (the "Requesting Party") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "Estoppel Certificate" form published by the
American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.
(b) If the Responding Party shall fail to execute or deliver the Estoppel
Certificate within such ten day period, the Requesting Party may execute an
Estoppel Certificate stating that: (i) the Lease is in full force and effect
without modification except as may be represented by the Requesting Party; (ii)
there are no uncured defaults in the Requesting Party's performance; and (iii)
if Lessor is the Requesting Party, not more than one month's rent has been paid
in advance. Prospective purchasers and encumbrancers may rely upon the
Requesting Party's Estoppel Certificate, and the Responding Party shall be
estopped from denying the truth of the facts contained in said Certificate.
(c) If Lessor desires to finance, refinance, or sell the Premises, or any
part thereof, Lessee and all Guarantors shall deliver to any potential lender
or purchaser designated by Lessor such financial statements as may be
reasonably required by such lender or purchaser, including, but not limited to,
Lessee's financial statements for the past three (3) years. All such financial
statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set forth.
17. DEFINITION OF LESSOR. The Term "Lessor" as used herein shall mean the
owner or owners at the time in question of the fee title to the Premises, or,
if this is a sublease, of the Lessee's interest in the prior lease. In the
event of a transfer of Lessor's title or interest in the Premises or this
Lease, Lessor shall deliver to the transferee or assignee (in cash or by
credit) any unused Security Deposit held by Lessor. Except as provided in
Paragraph 15, upon such transfer or assignment and delivery of the Security
Deposit, as aforesaid, the prior Lessor shall be relieved of all liability with
respect to the obligations and/or covenants under this Lease thereafter to be
performed by the Lessor. Subject to the foregoing, the obligations and/or
covenants in this Lease to be performed by the Lessor shall be binding only
upon the Lessor as hereinabove defined. Notwithstanding the above, and subject
to the provisions of Paragraph 20 below, the original Lessor under this Lease,
and all subsequent holders of the Lessor's interest in this Lease shall remain
liable and responsible with regard to the potential duties and liabilities of
Lessor pertaining to Hazardous Substances as outlined in Paragraph 6 above.
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18. SEVERABILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.
19. DAYS. Unless otherwise specifically indicated to the contrary, the
word "days" as used in this Lease shall mean and refer to calendar days.
20. LIMITATION ON LIABILITY. Subject to the provisions of Paragraph 17
above, the obligations of Lessor under this Lease shall not constitute personal
obligations of Lessor, the individual partners of Lessor or its or their
individual partners, directors, officers or shareholders, and Lessee shall look
to the Premises, and to no other assets of Lessor, for the satisfaction of any
liability of Lessor with respect to this Lease, and shall not seek recourse
against the individual partners of Lessor, or its or their individual partners,
directors, officers or shareholders, or any of their personal assets for such
satisfaction.
21. TIME OF ESSENCE. Time is of the essence with respect to the
performance of all obligations to be performed or observed by the Parties under
this Lease.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains
all agreements between the Parties with respect to any matter mentioned herein,
and no other prior or contemporaneous agreement or understanding shall be
effective. Lessor and Lessee each represents and warrants to the Brokers that
it has made, and is relying solely upon, its own investigation as to the
nature, quality, character and financial responsibility of the other Party to
this Lease and as to the nature, quality and character of the Premises. Brokers
have no responsibility with respect thereto or with respect to any default or
breach hereof by either Party. The liability (including court costs and
Attorneys' fees), of any Broker with respect to negotiation, execution,
delivery or performance by either Lessor or Lessee under this Lease or any
amendment or modification hereto shall be limited to an amount up to the fee
received by such Broker pursuant to this Lease; provided, however, that the
foregoing limitation on each Broker's liability shall not be applicable to any
gross negligence or willful misconduct of such Broker.
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted by this Lease
shall be in writing and may be delivered in person (by hand or by courier) or
may be sent by regular, certified or registered mail or U.S. Postal Service
Express Mail, with postage prepaid, or by facsimile transmission, and shall be
deemed sufficiently given if served in a manner specified in this Paragraph 23.
The addresses noted adjacent to a Party's signature on this Lease shall be that
Party's address for delivery or mailing of notices. Either Party may by written
notice to the other specify a different address for notice, except that upon
Lessee's taking possession of the Premises, the Premises shall constitute
Lessee's address for notice. A copy of all notices to Lessor shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate in writing.
23.2 DATE OF NOTICE. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown
on the receipt card, or if no delivery date is shown, the postmark thereon. If
sent by regular mail the notice shall be deemed given forty-eight (48) hours
after the same is addressed as required herein and mailed with postage prepaid.
Notices delivered by United States Express Mail or overnight courier that
guarantee next day delivery shall be deemed given twenty-four (24) hours after
delivery of the same to the Postal Service or courier. Notices transmitted by
facsimile transmission or similar means shall be deemed delivered upon
telephone confirmation of receipt, provided a copy is also delivered via
delivery or mail. If notice is received on a Saturday, Sunday or legal holiday,
it shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any other
term, covenant or condition hereof, or of any subsequent Default or Breach by
Lessee of the same or of any other term, covenant or condition hereof. Lessor's
consent to, or approval of, any act shall not be deemed to render unnecessary
the obtaining of Lessor's consent to, or approval of, any subsequent or similar
act by Lessee, or be construed as the basis of an estoppel to enforce the
provision or provisions of this Lease requiring such consent. The acceptance of
Rent by Lessor shall not be a waiver of any Default or Breach by Lessee. Any
payment by Lessee may be accepted by Lessor on account of monies or damages due
Lessor, notwithstanding any qualifying
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statements or conditions made by Lessee in connection therewith, which such
statements and/or conditions shall be of no force or effect whatsoever unless
specifically agreed to in writing by Lessor at or before the time of deposit of
such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of this
Lease for recording purposes. The Party requesting recordation shall be
responsible for payment of any fees applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or termination of this
Lease. In the event that Lessee holds over, then the Base Rent shall be
increased to one hundred fifty percent (150%) of the Base Rent applicable
during the month immediately preceding the expiration or termination. Nothing
contained herein shall be construed as consent by Lessor to any holding over by
Lessee.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies
at law or in equity.
28. COVENANTS AND CONDITIONS; CONSTRUCTION OF AGREEMENT. All provisions of
this Lease to be observed or performed by Lessee are both covenants and
conditions. In construing this Lease, all headings and titles are for the
convenience of the Parties only and shall not be considered a part of this
Lease. Whenever required by the context, the singular shall include the plural
and vice versa. This Lease shall not be construed as if prepared by one of the
Parties, but rather according to its fair meaning as a whole, as if both
Parties had prepared it.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
Parties, their personal representatives, successors and assigns and be governed
by the laws in the State in which the Premises are located. Any litigation
between the parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.
Page 24
<PAGE>
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "SECURITY DEVICE"), now or
hereafter placed upon the Premises, to any and all advances made on the Security
thereof, and to all renewals, modifications, and extensions thereof. Lessee
agrees that the holders of any such Security Devices (in this Lease together
referred to as "Lessor's Lender") shall have no liability or obligation to
perform any of the obligations of Lessor under this Lease. Any Lender may elect
to have this Lease and/or any Option granted hereby superior to the lien of its
Security Device by giving written notice thereof to Lessee, whereupon this Lease
and such Options shall be deemed prior to such Security Device, notwithstanding
the relative dates of the documentation or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of Paragraph
30.3, Lessee agrees to attorn to a Lender or any other party who acquires
ownership of the Premises by reason of a foreclosure of a Security Device, and
that in the event of such foreclosure, such new owner shall not: (i) be liable
for any act or omission of any prior Lessor or with respect to events occurring
prior to acquisition of ownership; (ii) be subject to any offsets or defenses
which Lessee might have against any prior Lessor; or (iii) be bound by
prepayment of more than one (1) month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving a commercially reasonable non-disturbance
agreement (a "Non-Disturbance Agreement") from the Lender which Non-Disturbance
Agreement provides that Lessee's possession of the Premises, and this Lease,
including any options to extend the term hereof, will not be disturbed so long
as Lessee is not in Breach hereof and attorns to the record owner of the
Premises. Further, within sixty (60) days after the execution of this Lease,
Lessor shall use its commercially reasonable efforts to obtain a
Non-Disturbance Agreement from the holder of any pre-existing Security Device
which is secured by the Premises. In the event that Lessor is unable to provide
the Non-Disturbance Agreement within said sixty (60) days, then Lessee may, at
Lessee's option, directly contact Lessor's lender and attempt to negotiate for
the execution and delivery of a Non-Disturbance Agreement.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30 shall
be effective without the execution of any further documents; provided, however,
that, upon written request from Lessor or a Lender in connection with a sale,
financing or refinancing of the Premises, Lessee and Lessor shall execute such
further writings as may be reasonably required to separately document any
subordination, attornment and/or Non-Disturbance Agreement provided for herein.
31. ATTORNEY'S FEES. If any Party or Broker brings an action or proceeding
involving the Premises to enforce the terms hereof or to declare rights
hereunder, the Prevailing Party (as hereafter defined) in any such proceeding,
action, or appeal thereon, shall be entitled to reasonable attorneys' fees.
Such fees may be awarded in the same suit or recovered in a separate suit,
whether or not such action or proceeding is pursued to decision or judgment.
The term, "PREVAILING PARTY" shall include, without limitation, a Party or
Broker who substantially obtains or defeats the relief sought, as the case may
be, whether compromise, settlement, judgment, or the abandonment by the other
Party or Broker of its claim or defense. The attorneys' fees award shall not be
computed in accordance with any court fee schedule, but shall be such as to
fully reimburse all attorneys' fees reasonably incurred. In addition, Lessor
shall be entitled to attorneys' fees, costs and expenses incurred in the
preparation and service of notices of Default and consultations in connection
therewith, whether or not a legal action is subsequently commenced in
connection with such Default or resulting Breach.
32. LESSOR'S ACCESS: SHOWING PREMISES; REPAIRS. Lessor and Lessor's agents
shall have the right to enter the Premises at any time, in the case of
emergency, and otherwise at reasonable times for the purpose of showing the
same to prospective purchasers, lenders, or lessees, and making such
preparations, repairs, improvements or additions to the Premises as Lessor may
deem necessary. All such activities shall be without abatement of rent or
liability to Lessee. Lessor may at any time place on the Premises any ordinary
"FOR SALE" signs and Lessor may during the last six (6) months of the term
hereof place on the Premises any ordinary "FOR LEASE" signs. Lessee may at any
time place on or about the Premises any ordinary "FOR SUBLEASE" sign.
Page 25
<PAGE>
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, any
auction upon the Premises without Lessor's prior written consent. Lessor shall
not be obligated to exercise any standard of reasonableness in determining
whether to permit an auction.
34. SIGNS. Except for ordinary "FOR SUBLEASE" signs, Lessee shall not place any
sign upon the Premises without Lessor's prior written consent. All signs must
comply with all Applicable Requirements.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the actual
termination or cancellation hereof, or a termination hereof by Lessor for
Breach by Lessee, shall automatically terminate any sublease or lesser estate
in the Premises; provided, however, that Lessor may elect to continue any one or
all existing subtenancies. Lessor's failure within ten (10) days following any
such event to elect to the contrary by written notice to the holder of any such
lesser interest, shall constitute Lessor's election to have such event
constitute the termination of such interest.
36. CONSENTS. Except as otherwise provided herein, wherever in this Lease the
consent of a Party is required to an act by or for the other Party, such
consent shall not be unreasonably withheld or delayed. Lessor's actual
reasonable costs and expenses (including but not limited to architects',
attorneys', engineers' and other consultants' fees) incurred in the
consideration of, or response to, a request by Lessee for any Lessor consent,
including but not limited to consents to an assignment, a subletting or the
presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt
of an invoice and supporting documentation therefor. Lessor's consent to any
act, assignment or subletting shall not constitute an acknowledgment that no
Default or Breach Lessee of this Lease exists, nor shall such consent be deemed
a waiver of any then existing Default or Breach, except as may be otherwise
specifically stated in writing by Lessor at the time of such consent. The
failure to specify herein any particular condition to Lessor's consent shall
not preclude the position by Lessor at the time of consent of such further or
other conditions as are then reasonable with reference to the particular matter
for which consent being given. In the event that either Party disagrees with
any determination made by the other hereunder and reasonably requests the
reasons for such determination, the determining party shall furnish its reasons
in writing and in reasonable detail within ten (10) business days following
such request.
37. GUARANTOR.
37.1 EXECUTION. The Guarantors, if any, shall each execute a guaranty in
the form most recently published by the American Industrial Real Estate
Association, and each such Guarantor shall have the same obligations as Lessee
under this Lease.
37.2 DEFAULT. It shall constitute a Default of the Lessee if any Guarantor
fails or refuses, upon request to provide: (a) evidence of the execution of the
guaranty, including the authority of the party signing on Guarantor's behalf to
obligate Guarantor, and in the case of a corporate Guarantor, a certified copy
of a resolution of its board of directors authorizing the making of such
guaranty, (b) current financial statements, (c) a Tenancy Statement, or (d)
written confirmation that the guaranty is still in effect.
38. QUIET POSSESSION. Subject to payment by Lessee of the Rent and performance
of all of the covenants, conditions and provisions on Lessee's part to be
observed and performed under this Lease, Lessee shall have quiet possession and
quiet enjoyment of the Premises during the term hereof.
39. OPTIONS.
39.1 DEFINITION. "Option" shall mean: (a) the right to extend the term of
or renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (b) the right of first refusal or first offer to lease
either the Premises or other property of Lessor; (c) the right to purchase or
the right of first refusal to purchase the Premises or other property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to Lessee in
this Lease is personal to the original Lessee, and cannot be assigned or
exercised by anyone other than said original Lessee and only while the original
Lessee is in full possession of the Premises and, if requested by Lessor, with
Lessee certifying that Lessee has no intention of thereafter assigning or
subletting.
Page 26
<PAGE>
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later Option cannot be exercised unless the
prior Options have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option: (i) during the
period commencing with the giving of any notice of Default and continuing until
said Default is cured; (ii) during the period of time any Rent is unpaid
(without regard to whether notice thereof is given Lessee); (iii) during the
time Lessee is in Breach of this Lease; or (iv) in the event that Lessee has
been given three (3) or more notices of separate Default, whether or not the
Defaults are cured, during the twelve (12) month period immediately preceding
the exercise of the Option.
(b) The period of time within which an Option may be exercised shall not
be extended or enlarged by reason of Lessee's inability to exercise Option
because of the provisions of Paragraph 39.4(a).
(c) An Option shall terminate and be of no further force or effect,
notwithstanding Lessee's due and timely exercise of the Option, if, after such
exercise and prior to the commencement of the extended term, (i) Lessee fails
to pay Rent for a period of thirty (30) days after such Rent becomes due
(without any necessity of Lessor to give notice thereof), (ii) Lessor gives to
Lessee three (3) or more notices of separate Default during any twelve (12)
month period, whether or not the Defaults are cured, or (iii) if Lessee commits
a Breach of this Lease.
Page 27
<PAGE>
40. MULTIPLE BUILDINGS. If the Premises are a part of a group of buildings
controlled by Lessor, Lessee agrees that it will observe all reasonable rules
and regulations which Lessor may make from time to time for the management,
safety, and care of said properties, including the care and cleanliness of the
grounds and including the parking, loading and unloading of vehicles and that
Lessee will pay its fair share of common expenses incurred in connection
therewith.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from acts of third parties.
42. RESERVATIONS. Lessor reserves to itself the right, from time to time, to
grant, without the consent or joinder of Lessee, such easements, rights
dedications that Lessor deems necessary, and to cause the recordation of parcel
maps and restrictions, so long as such easements, rights, dedications, maps and
restrictions do not unreasonably interfere with the use of the Premises by
Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate any such easement rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay money is
asserted shall have the right to make payment "under protest" and such payment
shall not be regarded as a voluntary payment and there shall survive the right
on the part of said Party to institute suit for the recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said Party
to pay such sum or any part thereof, said Party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay.
44. AUTHORITY. If either Party hereto is a corporation, trust, limited
liability company, partnership, or similar entity, each individual executing
this Lease in behalf of such entity represents and warrants that he or she is
duly authorized to execute and deliver this Lease on its behalf. Each Party
shall, within thirty (30) days after request, deliver to the other party
satisfactory evidence of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
46. OFFER. Preparation of this Lease by either Party or their agent and
submission of same to the other Party shall not be deemed an offer to lease to
the other Party. This Lease is not intended to be binding until executed and
delivered by all Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonably non-monetary modifications to this Lease as may be reasonably
required by a Lender in connection with the obtaining of normal financing or
refinancing of the Premises.
48. MULTIPLE PARTIES. If more than one person or entity is named herein as
either Lessor or Lessee, such multiple Parties shall have joint and several
responsibility to comply with the terms of this Lease.
49. MEDIATION AND ARBITRATION OF DISPUTES. An Addendum requiring the Mediation
and/or the Arbitration of all disputes between the Parties and/or Brokers
arising out of this Lease / / is / / is not attached to this Lease.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.
- - - - - --------------------------------------------------------------------------------
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION
TO WHICH IT RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF
THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE
POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES,
STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, AND THE
SUITABILITY OF THE PREMISES IS LESSEE'S INTENDED USE.
WARNING: IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE
STATE IN WHICH THE PREMISES IS LOCATED.
Page 28
- - - - - --------------------------------------------------------------------------------
<PAGE>
The Parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
<TABLE>
<S> <C>
Executed at: Anaheim, Ca Executed at: Anaheim, Ca
on: 12-28-98 on: 12-28-98
by LESSOR: by LESSEE:
Ae Sil Park Dippy Foods, Inc.
- - - - - ------------
By: /s/ Ae Sil Park By: /s/ Jon Stevenson
Name Printed: JON STEVENSON
Name Printed: Ae Sil Park
Title: President/CEO Title: PRESIDENT
By: By:
Name Printed: Ae Sil Park Name Printed: Jon Stevenson
Title: Owner Title: President
Address: 345 Val Verde Avenue, Brea, CA 92621 Address: 203 Argonne Ave., Suite 110, Long
Beach, CA 90803
Telephone: (714) 529-7980 Telephone: (562) 434-4708
Facsimile: ( ) Facsimile: ( )
Federal ID No. Federal ID No.
</TABLE>
CP3\RV4465\al
NOTE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call us to make sure you are utilizing
the most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700
So. Flower Street, Suite 600, Los Angeles, California 90017. (213)
687-8777. Fax No. (213) 687-8616
Page 29
<PAGE>
ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL
SINGLE-TENANT LEASE--GROSS
BETWEEN AE SIL PARK AND DIPPY FOODS, INC.
DATED DECEMBER 16, 1998
50. MONTHLY RENTAL SCHEDULE:
January 1, 1999 through December 31, 1999 = $5,788.00 Per Month Industrial
Gross
January 1, 2000 through December 31, 2000 = $5,893.00 Per Month Industrial
Gross
January 1, 2001 through December 31, 2001 = $5,999.00 Per Month Industrial
Gross
51. OPTION TO EXTEND: Lessee shall be granted an option to extend this lease
for an additional three (3) years beginning January 1, 2002 at the then
current market rate.
52. OFFICE FURNISHINGS/EQUIPMENT: Lessor agrees to permit Lessee to use
existing office furnishings and equipment, without warranty, for the
duration of the lease agreement. Lessee shall maintain the
furnishings/equipment in good condition and return same (less normal "wear
and tear") at the termination of the lease agreement.
53. SECURITY DEPOSIT: $5,893.00 security deposit to be credited as January 2000
rent providing all conditions of the lease have been met satisfactorily.
AP
JS
Initials
Page 30
EXHIBIT 6.4
LICENSE AGREEMENT
This License Agreement is made this 19th day of May 1999 by and between ConAgra
Brands, Inc., a Delaware Corporation with principal offices at One ConAgra
Drive, Omaha, Nebraska, 68102-5001, Hunt-Wesson, Inc., a Delaware Corporation
(Licensor) with principal offices at 1645 W. Valencia Drive, Fullerton,
California 92833-3899, and Dippy Foods, Inc., a California corporation
(Licensee) with principal offices at 1161 N. Knollwood Circle, Anaheim,
California 92801.
Whereas Licensor has an exclusive license to use the marks PETER PAN for peanut
butter and KNOTT'S BERRY FARMS for fruit filling with the right to grant
sublicenses thereunder; and
Whereas Licensee wishes to obtain a license to use such trademarks on the terms
set out below:
NOW THEREFORE, the parties mutually agree as follows:
1. DEFINITIONS -- As used herein the following terms shall have the
meaning set out below:
1.1 Licensed Marks -- shall mean the trademarks "PETER PAN" and "KNOTT'S
BERRY FARMS" and the logos associated with each trademark, as such
trademarks and logos now exist or as they may be amended or revised
hereinafter by Licensor.
1.2 Licensed Products -- shall include only individual food trays
containing fruit filling and peanut butter for use in the school lunch
program or in other institutional feeding programs. Use of the
Licensed Marks in institutional feeding programs in the military and
in export markets shall be subject to Licensor's prior written
approval.
1.3 Territory -- shall mean the United States of America.
2. THE LICENSE
2.1 Grant of License -- Licensor hereby grants to Licensee and Licensee
hereby accepts a non exclusive, royalty-free license to use the
Licensed Marks solely to identify the use of Licensor's products in
connection with the production, marketing, sale and distribution of
Licensed Products to school districts, prisons or other institutions
within the Territory.
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<PAGE>
2.2 Authority to Grant Sublicense -- Licensor represents that it has the
exclusive license to use the Licensed Marks for peanut butter and
fruit fillings, and has the right to sublicense the Licensed Marks to
Licensee in accordance with the terms of this Agreement.
3. TERM/TERMINATION
3.1 Term -- The term of this Agreement shall commence upon execution of
this Agreement and shall continue until December 31, 2008 unless
sooner terminated in accordance with the terms of this Agreement (the
"Term").
3.2 Termination -- Notwithstanding the provisions of Section 3.1 above,
both Licensee and Licensor shall have the right, independently, to
immediately terminate this Agreement in the following circumstances:
(a) Where the other party has failed to perform or meet any
material term or condition hereof and has failed to correct the
same within thirty (30) days after written notice of such
failure by the terminating party;
(b) Where (A) the other party fails to vacate an involuntary
bankruptcy, insolvency, or reorganization petition or petition
for an arrangement or composition with creditors filed against
it within sixty (60) days after the date of such filing, or
files such a petition on a voluntary basis; or (B) the other
party fails to vacate the appointment of a receiver or trustee
for it or any interest in its business within thirty (30) days
after such appointment; or (C) the other party's interest or
rights under this Agreement, or any part thereof, pass to
another by operation of law; or (D) the other party ceases to
do business as a going concern or ceases to conduct its
operations in the normal course of business; or (E) with
respect to Licensor's termination rights, Licensee either: (i)
permits an attachment to be levied against and remain
outstanding on any of its equipment which is essential to the
production of Product or any plant at which Product is being
produced, for more than thirty (30) days; or (ii) Licensee
changes the nature of its business or there is a change in the
voting control.
4. LICENSEE PURCHASES
4.1 Requirements and Price -- Licensee shall purchase its total
requirements for peanut butter and fruit filing, whether or not
intended for use in the Licensed Products, from Licensor at the prices
set out on Exhibit A hereto; provided however, Licensor acknowledges
that with respect to certain school districts, Licensee will be
required to use "commodity" Peanut Butter which is
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<PAGE>
provided by said school districts and Licensee shall not use the
Licensed Marks in these situations. The prices shall be firm for the
period specified in Exhibit A, but thereafter, the price of peanut
butter or fruit filling hereunder may be increased: (i) by mutual
agreement of the parties; or (ii) by Licensor upon sixty (60) days
prior written notice to Licensee, provided, however, if Licensor
increases the price of a Licensed Product by more than the amount
necessary to maintain Licensor's percentage profit margin and to
recover increases in the cost of production, warehousing, and
transportation of such product, then in such event, Licensee may
terminate this Agreement by written notice to Licensor, given within
thirty (30) days after Licensee's receipt of the notice of such price
increase.
4.2 Minimum Usage -- Licensee must purchase from Licensor a minimum annual
quantity of peanut butter and fruit filling as follows:
<TABLE>
<CAPTION>
MINIMUM QTY. MINIMUM QTY.
CALENDAR YEAR FRUIT FILLING PEANUT BUTTER
--------------- --------------- --------------
<S> <C> <C>
1999 400,000 lbs. 200,000 lbs.
2000 600,000 lbs. 400,000 lbs.
2001 800,000 lbs. 500,000 lbs.
</TABLE>
The minimum annual quantity for peanut butter and fruit filling shall
each increase ten percent (10%) over the previous year, in each
calendar year after 2001. Licensee's failure to purchase the specified
minimum quantity of each product in any year, shall given Licensor the
right to terminate this Agreement upon thirty (30) days prior written
notice to Licensee.
4.3 Quality of Purchases -- Within thirty (30) days after the date of this
Agreement, Licensor shall furnish to Licensee samples of the peanut
butter and fruit filling to be furnished to Licensee by Licensor under
this Agreement. Licensee shall have ten (10) business days after
receipt of this samples to approve them, which approval shall be
granted or withheld by Licensee in a reasonable manner. Failure of
Licensee to respond within such ten (10) day period shall be deemed an
approval of the sample. All peanut butter and fruit filling sold to
Licensee by Licensor under this Agreement shall comply in all material
respects with the approved samples.
5. APPROVALS BY LICENSOR -- Licensor shall have the right to approve all
packaging and labeling of the Licensed Products, and all advertising,
promotions and other materials containing the Licensed Marks. Such
approval shall be granted or withheld by Licensor in a reasonable manner
and within ten (10) business days of receipt of such packaging and
labeling and such advertising promotional and other
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<PAGE>
materials containing the Licensed Marks. If Licensor should withhold its
approval of any material delivered by Licensee, Licensor shall in its
response provide in adequate detail the basis for its withholding of
approval and shall, if reasonably feasible, identify the remedial action
that should be taken for Licensor to grant such approval. A legend shall
be placed on all packaging of the Licensed Products which shall state that
the Licensed Products are distributed by Licensee under license from
Licensor and that PETER PAN is a registered trademark of ConAgra Brands,
Inc.
If approval is withheld for any reason whatsoever, Licensee shall be able
to continue business operations using packaging, labeling, advertising,
promotions and other materials that do not contain the Licensed Marks
without incurring any obligation or liability whatsoever to licensor for
non-use of the Licensed Marks provided, however, nothing contained herein
shall excuse Licensee's obligation to meet the minimum annual purchase
requirements set out in Paragraph 4.2 above.
6. RECORDS AND REPORTS
6.1 Records. Licensee shall record all sales of the Licensed Products and
shall keep and maintain accurate records thereof for two (2) years
after the year to which such records relate.
6.2 Inspection and Audit. Licensor shall have the right from time to time,
upon five (5) days' prior written notice, to enter Licensee's premises
or other location where records are maintained during regular business
hours, to inspect, audit, and make copies of any such records relating
to sales of the Licensed Products at Licensor's sole expense.
7. INFRINGEMENT
7.1 Claims by Third Parties. In the event that Licensee receives notice,
or is informed, of any claim, suit or demand against Licensee on
account of any alleged infringement, unfair competition, or similar
matter relating to Licensee's use of the Licensed Marks and used by
Licensee in accordance with the terms of this Agreement, Licensee
shall promptly notify Licensor of any such claim, suit, or demand.
Thereupon, Licensor shall take such action as may be necessary to
protect and defend Licensee against any such claim by any third party
and shall indemnify and hold harmless Licensee against any losses, or
reasonable expenses incurred in connection therewith. Licensee shall
not have power or authority to settle or compromise any such claim by
a third party. Licensor does not know nor does it have any reason to
believe that Licensee's use of the Licensed Marks in accordance with
the terms of this Agreement shall infringe upon another person's use
of intellectual property or cause unfair competition with, or create a
claim in favor of, another person.
4
<PAGE>
7.2 Infringement of the Licensed Marks. In the event that Licensee
believes that any third party is improperly using a trademark, trade
name or logotype confusingly similar to the Licensed Marks, Licensee
shall promptly notify Licensor of all facts known to it relating to
such use. Thereupon Licensor shall conduct its own investigation of
such alleged infringing use and shall take such action as Licensor, in
its sole discretion, determines is reasonably necessary or appropriate
to protect the Licensed Marks. Licensor does not know nor does it have
any reason to believe that any third party is improperly using any
intellectual property that is confusingly similar to the Licensed
Marks.
8. QUALITY CONTROL/RECALLS
8.1 Quality Control - Licensee shall obtain from Licensor, before selling
any Licensed Products, the approval of Licensor as to the quality and
nature of such Licensed Products, which approval shall not be
unreasonably withheld, conditioned or delayed. Once a Licensed
Product, approved by Licensor as to quality and nature, has been
developed by Licensee, such Licensed Product may thereafter be
advertised and sold by Licensee in accordance with the terms of this
Agreement, so long as no material change is made in the quality and
nature thereof. Licensee shall furnish to Licensor, at least
quarterly, a reasonable number of samples of all Licensed Products
sold by Licensee, as requested by Licensor.
8.2 Recalls - In the event it becomes necessary to recall any Licensed
Products from distribution, Licensor shall, in consultation with
Licensee, control and manage all aspects of the recall. Furthermore,
subject to the provisions set forth below, Licensee shall reimburse
Licensor for all reasonable costs and expenses incurred by Licensor in
connection with any recall of Licensed Products (whether located in
the distribution system, in stores, in Licensee's warehouses, or
elsewhere) manufactured by Licensee, provided: (i) Licensor shall be
responsible for the costs and expenses of any recall which was caused
by a defect, existing as of the date of delivery to Licensee, in
peanut butter or fruit filling delivered by Licensor to Licensee
hereunder; (ii) licensor shall give Licensee prior notice before
initiating any such recall, which notice shall include the basis for
the recall; and (iii) Licensor shall conduct all recalls in accordance
with its policies and practices applicable to its other products.
9. COMPLIANCE WITH LAWS - Licensee shall manufacture, prepare, promote, market
and distribute the Licensed Products, and Licensor shall manufacture,
prepare and deliver peanut butter sold to Licensee pursuant to this
Agreement, in compliance with all applicable laws, rules and regulations of
all governmental authorities,
5
<PAGE>
including, but not limited to, all applicable food, safety, health,
advertising and other laws and regulations of federal, state or local
governments. Each party shall furnish to the other written evidence of its
compliance as such other party may from time to time reasonably request.
10. INSPECTION - Licensor shall have the right to enter and inspect any
premises or facilities used by Licensee for or in connection with the
manufacture, preparation, promotion, marketing and distribution of the
Licensed Products, at any time during normal business hours. Any inspection
conducted by Licensor shall be made in a manner so as to minimize
interference with the operation of Licensee's business.
11. FORCE MAJEURE - It is understood and agreed that each party's obligations
as set forth therein shall be excused to the extent that such party's
performance is prevented by the unavailability of materials or utilities,
strike or labor troubles, action or interference of governmental
authorities, acts of God, or any other cause whether similar or dissimilar
to the foregoing which is reasonably beyond the control of the parties.
12. INSURANCE AND INDEMNIFICATION
12.1 Insurance Obtained by Licensee. Licensee shall purchase from insurance
companies rated not less than A by Best, and shall maintain, at all
times during the Term of this Agreement, policies of product liability
insurance covering the Licensed Products, with minimum combined single
limit coverage of Five Million Dollars ($5,000,000).
12.2 Indemnification by Licensee. Licensee hereby agrees to defend,
indemnify and hold harmless Licensor, and each shareholder, director,
officer, employee and agent of Licensor, from and against any and all
suits, actions, claims, judgments, debts, obligations or rights of
action, of any nature or description, and all reasonable costs
incurred by such indemnified person(s) in connection therewith
(collectively "Licensor's Losses"), arising out of or relating to any
misfeasance, malfeasance, nonfeasance or negligence of Licensee, or to
the rights granted to Licensee hereunder, or Licensee's manufacture,
preparation, promotion, marketing and distribution of the Licensed
Products, or any acts, omissions, statements or representations of any
employee, agent, officer or director of Licensee relating thereto,
except with respect to any of Licensor's Losses which arise out of
Licensor's breach of any of its representations or obligations under
this Agreement.
12.3 Indemnification by Licensor. Licensor hereby agrees to defend,
indemnify and hold harmless Licensee, and each shareholder, director,
officer, employee and agent of Licensee, from and against any and all
suits, actions, claims,
6
<PAGE>
judgments, debts, obligations, or rights of action, of any nature or
description, and all reasonable costs incurred by such indemnified
person(s) in connection therewith, arising out of or relating to any
misfeasance, malfeasance, nonfeasance or negligence of Licensor, or of
any employee, agent, director or officer of Licensor, in connection
with the manufacture and preparation of the products purchased from
Licensor by Licensee pursuant to this Agreement or the representations
made or covenants to be performed by Licensor under this Agreement.
12.4 Indemnification Procedure. An indemnified person shall notify the
indemnifying party of any such suit, action, claim, judgment, debt,
obligation or right of action, promptly upon receiving notice or being
informed of the existence thereof. Upon receipt of such notice from
such indemnified person, the indemnifying party shall promptly take
such action as may be necessary to protect and defend such indemnified
person against such suit, action, claim, judgment, debt, obligation,
or right of action, using counsel of its choice, and shall indemnify
such indemnified person against any losses, costs or expenses
including reasonable attorney's fees, incurred in connection
therewith. An indemnified person shall have no power or authority to
settle or compromise any such suit, action, claim, judgment, debt,
obligation or right of action, and shall cooperate fully with the
indemnifying party in connection with the defense thereof. In the
event that an indemnified party shall choose to employ counsel to
participate in the resolution of any indemnified claim, the cost of
such counsel shall be borne exclusively by the party which has
employed said counsel.
13. ASSIGNMENT
13.1 Assignment by Licensor. Licensor shall have the right to assign this
Agreement, and all of its rights and privileges hereunder, to any
other persons, firm, corporation or entity; provided that, in respect
to any assignment resulting in the subsequent performance by the
assignee of the functions of Licensor (i) the assignee shall be
financially responsible and economically capable of performing the
obligations of Licensor hereunder; (ii) the assignee shall expressly
assume and agree to perform such obligations, (iii) such assignee will
maintain the wholesome image associated with the Licensed Marks as
previously maintained by Licensor and will not diminish the goodwill
of the business symbolized by such marks, and (iv) such assignee will
produce products to maintain the quality currently marketed by
Licensor. This Agreement shall be binding upon and inure to the
benefit of any firm or corporation which shall purchase, acquire or
become the successor in interest of Licensor. However, nothing shall
be deemed to preclude Licensor from
7
<PAGE>
employing co-packers to perform some or all of Licensor's obligations
to supply peanut butter pursuant to Section 5 hereof, for so long as
Licensor shall remain responsible for said obligations under and
pursuant to Section 5.
13.2 Assignment by Licensee. This Agreement is being entered into in
reliance upon and in consideration of the singular experience,
knowledge, skills, and qualifications of, and trust and confidence
reposed by Licensor in Licensee. Therefore, neither Licensee's
interest in this Agreement nor any of its rights or privileges
hereunder shall be assigned, transferred, shared or divided,
voluntarily or involuntarily, by operation of law or otherwise, in any
manner, without the prior written consent of Licensor which may be
granted or withheld by Licensor in its sole judgment, exercised in
good faith. A change in control of Licensee shall be deemed an
assignment by Licensee of this Agreement. For purposes of the previous
sentence, a "change in control of Licensee" shall occur if the
existing shareholders of Licensee cease to own a majority of
Licensee's equity interests or a majority of its present assets.
Without limiting the generality of the foregoing, Licensee shall not
sublicense to any third party the rights licensed to it hereunder, nor
subcontract with any third party respecting any of Licensee's
obligations hereunder.
14. DISCONTINUANCE OF USE OF LICENSED MARKS. In the event of expiration or
termination of this Agreement, whether by reason of default, lapse of time,
or other cause, Licensee shall forthwith discontinue the use of Licensed
Marks, and shall not thereafter use, in any manner, or for any purpose,
directly or indirectly, any of the Licensed Marks or any marks or symbols
deceptively similar thereto.
15. ARBITRATION. Any controversy or claim arising out of or relating to this
Agreement, or any breach hereof, including, without limitation, any claim
that this Agreement, or any part hereof, is invalid, illegal or otherwise
voidable or void, shall be submitted to arbitration before an arbitrator in
accordance with the Commercial Rules of Arbitration of the American
Arbitration Association and judgment upon the award may be entered in any
court having jurisdiction thereof; provided, however, that this clause
shall not be construed to limit or to preclude either party from bringing
any action in any court of competent jurisdiction for injunctive or other
provisional relief as such party deems necessary or appropriate to compel
the other party to comply with its obligations hereunder or, in the case of
any action brought by Licensor, to protect the Licensed Marks. In the event
that either party shall make demand for arbitration, such arbitration shall
be conducted in Orange County, California. Any arbitrator shall be
reasonably experienced in the manufacture and/or licensing of food
products. The arbitration shall be governed by the provisions of the
Federal Arbitration Act, 9 U.S.C. sections 1 et seq.
8
<PAGE>
16. GENERAL CONDITIONS AND PROVISIONS.
16.1 Headings. Section headings used in this Agreement are for convenience
only and are not a part of the text hereof.
16.2 Entire Agreement. This Agreement constitutes the entire agreement of
the parties with respect to the subject matter (and into which all
prior negotiations, commitments, representations and undertakings of
the parties are merged) and except as herein provided there are no
other oral or written understandings or agreements between the parties
hereto relating to the subject matter hereof.
16.3 Amendments. No amendment or other modification of this AGreement shall
be valid or binding on either party hereto, unless reduced to writing
and executed by the parties hereto.
16.4 Relationship of Parties. The parties hereto are independent and
neither party is the agent, joint venturer, partner or employee of the
other, and neither party shall be obligated by any agreements,
representations or warranties made by the other party to any person,
nor with respect to any other action or omission to act of the other
party, nor shall either party be obligated solely by reason of each
party's entry into this Agreement for any damages to any person
whether caused by the other party's action, failure to act,
negligence, or willful misconduct.
16.5 Waiver. No waiver by either party of any breach or series of breaches
or defaults in performance by the other party, and no failure, refusal
or neglect to exercise any right, power or option given to either
party hereunder or to insist upon strict compliance with or
performance of the obligations under this Agreement, shall constitute
a waiver of the provisions of this Agreement with respect to any
subsequent breach thereof or a waiver by such party of its rights at
any time thereafter to require exact and strict compliance with the
provisions thereof.
16.6 Governing Law. This Agreement shall be governed and construed under
and in accordance with the laws of the State of California.
16.7 Severability. All provisions of this Agreement shall be severable and
no such provision shall be affected by the invalidity of any other
such provision to the extent that such invalidity does not also render
such other provision invalid. In the event of the invalidity of any
provision of this Agreement, it shall be interpreted and enforced as
if all provisions thereby rendered invalid were not contained herein.
If any provision of this Agreement shall be susceptible of
9
<PAGE>
two interpretations, one which would render the provision invalid and
the other of which would cause the provision to be valid, shall be
deemed to have the meaning which would cause it to be valid.
16.8 Attorney's Fees. In the event that any suit, action or arbitration
shall be commenced by either party to enforce any right or obligation
created hereby, the prevailing party in such suit, action or
arbitration shall be entitled to receive the costs incurred by such
party in connection therewith, including reasonable attorneys' fees.
16.9 Notices. All notices permitted or required to be delivered by the
provisions of this Agreement shall be in writing and shall be given by
personal delivery, by confirmed telecopy, by nationally recognized
overnight courier with proof of delivery, or by registered or
certified mail, return receipt requested. Notices shall be deemed
given upon actual receipt if by personal delivery or confirmed
facsimile, next day if by overnight courier, or two (2) days after
delivery if notice is given by mail. Notices shall be addressed to the
parties at the addresess set forth hereinbelow, or to such other
address or addresses as the parties shall from time to time designate
in writing:
If to Licensor: HUNT-WESSON, INC.
1645 W. Valencia Drive
Fullerton, CA 928333-3899
Attn. V.P. Marketing - Peter Pan
cc: Hunt-Wesson Legal Department
1645 W. Valencia Drive
Fullerton, CA 92833-3899
CONAGRA BRANDS, INC.
One ConAgra Drive
Omaha, Nebraska 68102-5001
If to Licensee: DIPPY FOODS, INC.
1161 N. Knollwood Circle
Anaheim, CA 92801
Attn: Jon Stevenson, President
17. CONFIDENTIALITY - The parties recognize that during the term of this
Agreement, Licensee shall disclose to Licensor, and Licensor shall be
given access to, confidential and proprietary information and
documentation relating to Licensee's business, including without
limitation, formulas, processes, marketing and sales data and
promotional information (collectively the "Proprietary Information").
The
10
<PAGE>
Licensor hereby agrees to (i) hold such Proprietary Information in
strict confidence and to take all reasonable precautions to protect
such Proprietary Information from disclosure to third parties,
utilizing all precautions that the Licensor would generally employ
with respect to its most confidential information, (ii) not to divulge
any such Proprietary Information or any information derived therefrom
to any third party and (iii) not to make any use whatsoever at any
time, or attempt to benefit, financially or otherwise, from such
Proprietary Information. The requirement to maintain the
confidentiality of Licensee's Proprietary Information shall not apply
to any information that the Licensor can document is or through no
improper action or inaction by Licensor or any of its affiliates
becomes generally known to the public, was in its possession or known
by it prior to receipt from the Licensee or was rightfully disclosed
to Licensor by a third party having the right to do so.
IN WITNESS WHEREOF, the parties hereto have executed this License Agreement
on the day and year first written above.
HUNT-WESSON, INC., a Delaware Corporation
By: /s/ illegible
-------------------------------------
CONAGRA BRANDS, INC., a Delaware Corporation
By: /s/ illegible
-------------------------------------
DIPPY FOODS, INC., a California Corporation
By: /s/ Jon Stevenson
-------------------------------------
11
<PAGE>
EXHIBIT A
FRUIT FILLING
PRICE F.O.B.
PRODUCT LICENSOR'S PLANT
FLAVOR CODE SIZE PLACENTIA, CA
- - - - - ------ ------- ---- ----------------
Apple Cherry 47205 475 lb. drum $332.50
Apple Raspberry 47208 475 lb. drum $332.50
Pineapple Apple 77207 475 lb. drum $327.75
Prices firm till September 30, 1999
PEANUT BUTTER
PRICE DELIVERED
PRODUCT LICENSEE'S PLANT
VARIETY CODE SIZE ANAHEIM, CA
- - - - - ------- ------- ---- ----------------
Creamy Reduced Fat 45920 500 lb. drum $442.50
Price firm till December 31, 1999
12
EXHIBIT 6.5
CO-PACKING AGREEMENT
THIS AGREEMENT is written to Jon Stevenson, President of Dippy Foods, Inc.,
a Nevada corporation, (hereinafter referred to as "Dippy"), on the date herein
subscribed.
PREAMBLE
The parties to the herein Letter of Intent are as follows:
"Dippy" Dippy Foods, Inc.
a Nevada corporation.
"Global" Global Food Management Group,
LLC, a Limited Liability Company
WITNESSETH:
WHEREAS, Dippy is interested in obtaining a co-packing service agreement
with Global Food Management Group, LLC (hereinafter referred to as "GFMP") for a
term of five months.
WHEREAS, GFMP will provide the location and labor to produce Dippy's
product line.
WHEREAS, Dippy shall furnish all of the equipment, raw material, supplies
and shall own the finished products produced by Global, with Global's only claim
being an unsecured general claim for money.
STATEMENT OF CONFIDENTIALITY
During the course of this co-packing arrangement, it may be necessary for
Dippy to disclose to the personnel of GFMP certain confidential technical and
business information which may include, for example, but is not necessarily
limited to, business plans and interests; information about or samples of
materials; product formulations; prototypes; package designs; process
feasibility issues; production facilities; production and marketing timetables;
and/or other information and proprietary information. Such written and oral
disclosures must remain in the complete confidence during the entire course of
the co-packaging arrangement and after its completion for a period of five
years.
NOW, THEREFORE, FOR AND IN CONSIDERATION OF, the following terms,
conditions and covenants, the parties agree to the following:
1
<PAGE>
1. Dippy shall provide and deliver to the premises of GFMP, located at
1433 Miller Drive, Colton, CA, the necessary and appropriate equipment
needed to produce Dippy's product line.
2. GFMP shall install, with the assistance of Dippy, the said equipment
on an ASAP basis;
3. GFMP shall provide the necessary personnel to support the operation of
said equipment;
4. Dippy shall have the necessary and appropriate raw materials delivered
to GFMP's site, and GFMP shall produce the Dippy product line.
5. GFMP will produce the Dippy meals for a service charge of $.12 per
each unit which shall be payable 30 days after invoicing;
6. It is anticipated that this arrangement shall commence immediately
with the installation of the equipment and delivery of the raw food
products.
7. GFMP will maintain said equipment in a fully operational state and
shall service it as necessary and appropriate.
8. GFMP shall follow the production procedures that are given by Dippy's
representative, either oral or written. All oral instructions shall be
followed up by written confirmation. The parties shall reduce the
assembly process to writing as soon as is practical, which shall
represent the baseline for the future processing methods.
9. GFMP shall hold Dippy harmless from any third party claims of GFMP,
and shall allow full access and release of the said equipment in
proper working order at any time and for any reason during the term of
the herein agreement.
10. GFMP shall list all ingredients, packaging and equipment either
rented, owned or borrowed or otherwise, as the property of Dippy, and
will not encumber their values as part of GFMP's list of assets,
inventories or values.
11. In the spirit of cooperation and financial gain, both parties agree to
fulfill their respective obligations by working together in good faith
and using due diligent best efforts, time attention and energies to
the performance of the duties and responsibilities under this
agreement.
12. Dippy shall provide the technical know-how, formulations, recipes,
process conditions and any other related information to fully ensure a
successful co-packaging arrangement, as part of the initial process
and shall thereafter provide needed information forthwith upon
request.
2
<PAGE>
13. GFMP shall maintain the plant facilities, including but not limited to
the equipment, in a clean and sanitary condition conforming to all
food processing standards and Good Manufacturing Practices.
14. Either party may terminate the agreement for any reason with written
notice and three weeks notice.
15. The subscribing parties represent that he/she is the authorized party
representing their business entity, and fully enters the agreement for
and on behalf of that entity.
16. Dippy and GFMP, each agree to have the other named as also named
insureds on any product liability insurance obtained or maintained by
the other.
17. Upon delivery of any equipment or materials, the parties shall each
sign a statement of inventory which shall be maintained as a permanent
record confirming the ownership of the equipment and materials as
residing in Dippy.
18. GFMP shall not have or acquire any right, title or interest in any
trademark, service mark or trade name, that is now or hereafter
acquired by Dippy either used alone or in conjunction with other words
or names, or in the good will thereof, expressly granted herein.
19. Regardless of the place of execution, place of performance or
otherwise, this Agreement and all amendments, modifications,
alterations or supplements hereto, and the rights of the parties
hereunder, shall be governed by and construed and enforced in
accordance with the laws of the State of California, and the parties
hereby agreement to first tender any dispute to arbitration pursuant
to the American Arbitration Rules, prior to and as a condition
precedent to undertaking formal litigation.
20. This Agreement may not be assigned or transferred by either party
hereto, in whole or in part, without the prior written consent by
Dippy.
21. All notices, requests, demands or other communications required or
permitted to be given or made hereunder shall be in writing and
delivered personally or sent by first class, certified or registered
mail, or by facsimile addressed to the intended recipient thereof at
the address and facsimile set forth above (or to such other address or
facsimile number as either party may from time to time duly notify the
other). Any such notice, demand or communication shall be deemed to
have been given immediately (if given or made by confirmed facsimile),
or three (3) days after mailing, and in proving same it shall be
sufficient to show that the envelope containing the notice, demand or
communication was duly addressed, stamped and posted or that receipt
of a
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<PAGE>
facsimile message was confirmed by a confirming facsimile message from
the recipient.
22. This agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and permitted
assigns.
23. The headings as to the contents of particular paragraphs are inserted
only for convenience and shall not be construed as part of this
Agreement or as a limitation on the scope of any of the terms or
provisions of this Agreement.
24. This Agreement supersedes all prior discussions and agreements between
the parties with respect to the subject matter hereof and this
Agreement contains the sole and entire agreement between the parties
with respect to the matters covered hereby. This Agreement shall not
be modified or amended except by an instrument in writing signed by or
on behalf of the parties thereto.
IN WITNESS WHEREOF, this Agreement is executed on the date set forth with
the herein subscribing signatures, who hereby agree and accept the terms and
conditions of the herein agreement, which is executed in San Bernardino County,
State of California.
Dated: 10-4-99
------------
"Dippy"
Dippy Foods, Inc.,
A Nevada corporation
By: /s/ Jon Stevenson
----------------------
Jon Stevenson
President
"GFMP"
Globe Food Management Group, LLC
By: /s/ Fred Hunter
---------------------
Fred Hunter
Manager
4
EXHIBIT 6.6
AMENDMENT TO THE
CO-PACKING AGREEMENT
THIS AGREEMENT is written to Jon Stevenson, President of Dippy Foods, Inc.,
a Nevada corporation, (hereinafter referred to as "Dippy"), on the date herein
subscribed.
PREAMBLE
The parties to the herein Letter of Intent are as follows:
"Dippy" Dippy Foods, Inc.
a Nevada corporation.
"Global" Global Food Management Group,
LLC, a Limited Liability Company
WITNESSETH:
WHEREAS, Dippy is interested in extending a co-packing service agreement
with Global Food Management Group, LLC (hereinafter referred to as "GFMP") for a
term of an additional six months from March 1, 2000 to September 1, 2000, with
two options for additional extensions for terms of three months each.
WHEREAS, GFMP will provide the location and labor to produce Dippy's
product line.
WHEREAS, Dippy shall furnish all of the equipment, raw material, supplies
and shall own the finished products produced by Global, with Global's only claim
being an unsecured general claim for money.
STATEMENT OF CONFIDENTIALITY
During the course of this co-packing arrangement, it may be necessary for
Dippy to disclose to the personnel of GFMP certain confidential technical and
business information which may include, for example, but is not necessarily
limited to, business plans and interests; information about or samples of
materials; product formulations; prototypes; package designs; process
feasibility issues; production facilities; production and marketing timetables;
and/or other information and proprietary information. Such written and oral
disclosures must remain in the complete confidence during the entire course of
the co-packaging arrangement and after its completion for a period of five
years.
<PAGE>
NOW, THEREFORE, FOR AND IN CONSIDERATION OF, the following terms,
conditions and covenants, the parties agree to the following:
1. Dippy shall provide and deliver to the premises of GFMP, located at
1433 Miller Drive, Colton, CA, the necessary and appropriate equipment
needed to produce Dippy's product line.
2. GFMP shall install, with the assistance of Dippy, the said equipment
on an ASAP basis;
3. GFMP shall provide the necessary personnel to support the operation of
said equipment;
4. Dippy shall have the necessary and appropriate raw materials delivered
to GFMP's site, and GFMP shall produce the Dippy product line.
5. GFMP will produce the Dippy meals for a service charge of $.12 per
each unit which shall be payable 10 days after invoicing;
6. It is anticipated that this arrangement shall commence immediately
with the installation of the equipment and delivery of the raw food
products.
7. GFMP will maintain said equipment in a fully operational state and
shall service it as necessary and appropriate.
8. GFMP shall follow the production procedures that are given by Dippy's
representative, either oral or written. All oral instructions shall be
followed up by written confirmation. The parties shall reduce the
assembly process to writing as soon as is practical, which shall
represent the baseline for the future processing methods.
9. GFMP shall hold Dippy harmless from any third party claims of GFMP,
and shall allow full access and release of the said equipment in
proper working order at any time and for any reason during the term of
the herein agreement.
10. GFMP shall list all ingredients, packaging and equipment either
rented, owned or borrowed or otherwise, as the property of Dippy, and
will not encumber their values as part of GFMP's list of assets,
inventories or values.
11. In the spirit of cooperation and financial gain, both parties agree to
fulfill their respective obligations by working together in good faith
and using due diligent best efforts, time attention and energies to
the performance of the duties and responsibilities under this
agreement.
12. Dippy shall provide the technical know-how, formulations, recipes,
process conditions and any other related information to fully ensure a
successful co-
2
<PAGE>
packaging arrangement, as part of the initial process and shall
thereafter provide needed information forthwith upon request.
13. GFMP shall maintain the plant facilities, including but not limited to
the equipment, in a clean and sanitary condition conforming to all
food processing standards and Good Manufacturing Practices.
14. Either party may terminate the agreement for any reason with written
notice and three weeks notice.
15. The subscribing parties represent that he/she is the authorized party
representing their business entity, and fully enters the agreement for
and on behalf of that entity.
16. Dippy and GFMP, each agree to have the other named as also named
insureds on any product liability insurance obtained or maintained by
the other.
17. Upon delivery of any equipment or materials, the parties shall each
sign a statement of inventory which shall be maintained as a permanent
record confirming the ownership of the equipment and materials as
residing in Dippy.
18. GFMP shall not have or acquire any right, title or interest in any
trademark, service mark or trade name, that is now or hereafter
acquired by Dippy either used alone or in conjunction with other words
or names, or in the good will thereof, expressly granted herein.
19. Regardless of the place of execution, place of performance or
otherwise, this Agreement and all amendments, modifications,
alterations or supplements hereto, and the rights of the parties
hereunder, shall be governed by and construed and enforced in
accordance with the laws of the State of California, and the parties
hereby agreement to first tender any dispute to arbitration pursuant
to the American Arbitration Rules, prior to and as a condition
precedent to undertaking formal litigation.
20. This Agreement may not be assigned or transferred by either party
hereto, in whole or in part, without the prior written consent by
Dippy.
21. All notices, requests, demands or other communications required or
permitted to be given or made hereunder shall be in writing and
delivered personally or sent by first class, certified or registered
mail, or by facsimile addressed to the intended recipient thereof at
the address and facsimile set forth above (or to such other address or
facsimile number as either party may from time to time duly notify the
other). Any such notice, demand or communication shall be deemed to
have been given immediately (if given or made by confirmed facsimile),
or three (3) days after mailing, and in proving same it shall be
3
<PAGE>
facsimile message was confirmed by a confirming facsimile message from
the recipient.
22. This agreement shall be binding upon and shall inure to the benefit of
the parties hereto and their respective successors and permitted
assigns.
23. The headings as to the contents of particular paragraphs are inserted
only for convenience and shall not be construed as part of this
Agreement or as a limitation on the scope of any of the terms or
provisions of this Agreement.
24. This Agreement supersedes all prior discussions and agreements between
the parties with respect to the subject matter hereof and this
Agreement contains the sole and entire agreement between the parties
with respect to the matters covered hereby. This Agreement shall not
be modified or amended except by an instrument in writing signed by or
on behalf of the parties thereto.
25. This Agreement is hereby ratified and extended for an additional term
of six months from March 1, 2000 to September 1, 2000.
26. For and in consideration of the option payment of $50.00 and the
timely performance of the herein agreement, GFMP hereby grants Dippy
the option to extend this Agreement for two additional terms of three
months each, on the same terms and conditions as are contained in the
herein Agreement.
IN WITNESS WHEREOF, this Agreement is executed on the date set forth with
the herein subscribing signatures, who hereby agree and accept the terms and
conditions of the herein agreement, which is executed in San Bernardino County,
State of California.
Dated: 1-24-2000
--------------
Dippy Foods, Inc.,
A Nevada corporation "Dippy"
By: /s/ Jon Stevenson
-------------------------
Jon Stevenson
President
By: /s/ Fred Hunter
-------------------------
Globe Food Management Group, LLC "GFMP"
By: /s/ Fred Hunter
-------------------------
Fred Hunter
Manager
4
EXHIBIT 6.7
SECURITIES SUBSCRIPTION AGREEMENT
Gentlemen:
1. SWEETBRIER CORPORATION, a Nevada corporation (the "Company"), has offered
for sale and the undersigned purchaser (the "Purchaser") hereby tenders
this subscription and applies for the purchase of the number of shares of
Common Stock (the "Common Stock" or the "Shares") of the Company, at the
purchase price per Share set forth on the last page of this Subscription
Agreement (the "Offering"). Together with this Subscription Agreement, the
Purchaser is delivering to the Company the full amount of the purchase
price for the Shares in respect of which it is subscribing. The Offering is
being conducted in reliance upon the exemption from registration
requirements of the Securities Act of 1933 (the "Act") set forth in Rule
504 of Regulation D promulgated under the Act.
2. REPRESENTATIONS AND WARRANTIES OF THE PURCHASER. In order to induce the
Company to accept this subscription, the Purchaser hereby represents and
warrants to, and covenants with, the Company as follows:
A. The Purchaser is purchasing the Common Shares for its own account for
investment purposes and not with a view towards distribution and has
no present arrangement or intention to sell the Common Shares.
B. The Purchaser acknowledges and agrees that the Common Shares have not
been registered under the Act and may not be offered or sold in the
United States or to U.S. Persons unless the Shares are registered
under the Act or an exemption from the Registration requirements of
the Act is available;
C. The Purchaser is not an officer, director or "affiliate" (as the term
is defined in Rule 403 under the Act) of the Company;
D. The Purchaser is purchasing the Shares for its own account and the
Purchaser is qualified to purchase the Shares under the laws of Niue,
and the offer and sale of the Shares will not violate the securities
or other laws of such jurisdiction;
E. All invitations, offers and sales of or in respect of any of the
Shares by the Purchaser, and any distribution by the Purchaser of any
documents relating to the offer by it of any of the Shares, will be in
compliance with applicable laws and regulations and will be made in
such a manner that no prospectus need be filed and no other filing
need be made by the Company with any regulatory authority or stock
exchange in any country or any political subdivision of any country;
F. The Purchaser has had the opportunity to ask and receive answers to
any and all questions the Purchaser had with respect to the Company,
its Management and current financial condition. The Purchaser
acknowledges that the Company is newly organized, does not have an
operating history, will likely require additional capital to complete
its business plan and that there is no assurance that the Company can
obtain additional capital or successfully complete its objectives;
G. The Purchaser is an accredited investor and has such knowledge and
expertise in financial and business matters that the Purchaser is
capable of evaluating the merits and risks involved in an investment
in the Common Shares and acknowledges that an investment in the Common
Shares entails a number of very significant risks and the Purchaser is
able to withstand the total loss of its investment. The Purchaser
acknowledges that the Company has recommended that each Purchaser
obtain independent legal and financial advice prior to subscribing,
including but not limited to advice as to the legality of any resale
of the Shares as well as the suitability of the investment for the
Purchaser;
<PAGE>
H. Except as set forth in this Agreement, no representations or
warranties have been made to the Purchaser by the Company or any
agent, employee or affiliate of the Company and in entering into this
transaction the Purchaser is not relying upon any information, other
than that contained in this Agreement and the results of independent
investigation by the Purchaser;
I. The Purchaser understands that the Common Stock is being offered and
sold to it in reliance on specific exemptions from the registration
requirements of the United States Federal and State securities laws
and that the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and
understandings of the Purchaser set forth herein in order to determine
the applicability of such exemptions and the suitability of the
Purchaser to acquire the Common Shares, and the Purchaser acknowledges
that it is the Purchaser's responsibility to satisfy itself as to the
full observance by this Offering and sale of the Common Stock of the
laws of any jurisdiction outside of the United States and the
Purchaser has done so;
J. The Purchaser has full power and authority to execute and deliver this
Agreement and to perform its obligations thereunder; and this
Agreement is a legally binding obligation of the Purchaser enforceable
against the Purchaser in accordance with its terms; and
K. The Purchaser understands that in the view of the SEC the statutory
basis for the exemption claimed for the transaction would not be
present if the Offering, although in technical compliance with
Regulation D, is part of a plan or scheme to evade registration
provisions of the 1933 Act and Purchaser confirms that its purchase is
not part of any such plan or scheme. The Purchaser has no present
intention to sell the Common Stock.
3. REPRESENTATIONS OF THE COMPANY. The Company represents and warrants:
A. The Company is newly organized under the laws of the State of Nevada
and is in full compliance, to the extent applicable, with all
reporting obligations under Nevada and Federal law;
B. The execution, delivery and performance of this Agreement by the
Company and the performance of its obligations hereunder do not and
will not constitute a breach or violation of any of the terms and
provisions of, or constitute a default under or conflict with or
violate any provisions of (i) the Company's Articles of Incorporation
or By-laws, (ii) any indenture, mortgage, deed of trust, agreement or
any instrument to which the Company is a party or by which it or any
of its property is bound, (iii) any applicable statute or regulation,
or (iv) any judgment, decree or order of any court or government body
having jurisdiction over the Company or any of its property;
C. The execution, delivery and performance of this Agreement and the
consummation of the issuance of Common Stock and the transactions
contemplated by this Agreement are within the Company's corporate
powers and have been duly authorized by all necessary corporate and
stockholder action on behalf of the Company;
D. There is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, now pending or, to
the knowledge of the Company, threatened against or affecting the
Company or any of its properties, which might result in any material
adverse change in the condition (financial or otherwise) or in the
earnings, business affairs or business prospects if the Company, or
which might materially and adversely affect the properties or assets
thereof;
E. The Company is not in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any
material indenture, mortgage, deed of trust or other material
instrument or agreement to which it is a party or by which it or its
property may be bound; and neither the execution, nor the delivery by
the Company, nor the performance by the Company of its obligations
under, this Agreement or the Common Stock will conflict with or result
in the breach or violation of any of the terms or provisions of, or
constitute a default or result in the creation or imposition of any
lien or charge on any assets or properties of the Company under, any
material indenture, mortgage,
<PAGE>
deed of trust of other material agreement or instrument to which the
Company is party or by which it is bound or any statute or the
Articles of Incorporation or By-laws of the Company, or any decree,
judgment, order, ruling or regulation of any court or governmental
agency or body having jurisdiction over the Company or its properties;
F. All documents provided to the Purchaser do not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statement
therein in light of the circumstances under which they were made, not
misleading;
G. The authorized capital stock of Company consists of 200,000,000 shares
of common stock. The Company has offered 6,000,000 common shares and
it is expected that there will be 10,030,000 shares of common stock
issued and outstanding after the completion of this offering; no
options or warrants to acquire common stock are outstanding. There are
no outstanding obligations of the Company to repurchase, redeem or
otherwise acquire any shares of the company's common stock;
H. As of the date hereof, to the Company's best knowledge, the conduct of
the business of the Company complies in all material respects with all
statutes, laws, regulations, ordinances, rules, judgments, orders or
decrees applicable thereto. The Company has not received notice of any
alleged violation of any statute, law, regulation ordinance, rule,
judgment, order or decree from any governmental authority which would
materially adversely affect the business of the Company; and
I. There is no fact known to the Company (other than general economic
conditions known to the public generally) that has not been disclosed
in writing to the Purchaser that (i) could reasonably be expected to
have a material adverse effect on the condition (financial or
otherwise) or on the earnings, business affairs, business prospects,
properties or assets of the Company, or (ii) could reasonably be
expected to materially and adversely affect the ability of the Company
to perform its obligations pursuant to this Agreement and the Common
Stock.
4. NON-BINDING UNTIL ACCEPTED. The Purchaser understands that this
subscription is not binding upon the Company until the Company accepts it,
which acceptance is at the sole discretion of the Company and is to be
evidenced by the Company's execution of this Agreement where indicated. The
funds advanced by the Purchaser will be immediately used by the Company for
general corporate purposes and will be characterized as a non-interest
bearing, non-callable loan by the Purchaser to the Company until acceptance
or rejection of this subscription by the Company, and such deposit and use
shall not be deemed an allotment of shares nor an acceptance of this
subscription, nor shall there be deemed to be any trust conditions
whatsoever imposed upon such money.
5. NON-ASSIGNABILITY. Neither this Agreement nor any of the rights of the
Purchaser hereunder may be transferred or assigned by the Purchaser.
6. MODIFICATION/ENTIRE AGREEMENT. This Agreement (i) may only be modified by a
written instruction executed by the Purchaser and the Company; (ii) sets
forth the entire agreement of the Purchaser and the Company with respect to
the subject matter hereof; and (iii) shall endure to the benefit of and be
binding upon the Company and the Purchaser and their respective heirs,
legal representatives, successors and permitted assigns.
7. GOVERNING LAW. This Agreement will be construed and enforced in accordance
with and governed by the laws of the State of Nevada, except for matters
arising under the Act, without reference to principles of conflicts of law.
Each of the parties consents to the exclusive jurisdiction of the federal
courts whose districts encompass any part of the State of Nevada or the
state court of the State of Nevada in connection with any dispute arising
under this Agreement and hereby waives, to the maximum extent permitted by
law, any objection, including any objection based on forum non conveniens,
to the bringing of any such proceeding in such jurisdictions. Each party
hereby agrees that if another party to this Agreement obtains a judgment
against it in such a proceeding, the party which obtained such judgment may
enforce same by summary judgment in the court of any country having
jurisdiction over the party against whom such
<PAGE>
judgment was obtained, and each party hereby waives any defenses available
to it under local law and agrees to the enforcement of such a judgment.
Each party to this Agreement irrevocably consents to the service of process
in any such proceedings by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth
herein. Nothing herein shall affect the right of any party to serve process
in any other manner permitted by law.
8. NOTICES. All notices or other communication hereunder shall be in writing
and shall be deemed to have been duly given if delivered personally
(including courier service) or mailed by certified or registered mail,
return receipt requested, postage prepaid, as follows. If the Purchaser, to
the address set forth below and if to the Company, to Sweetbrier
Corporation, 250-1075 West Georgia Street, Vancouver, British Columbia,
Canada, V6E 3C9, or to such other address as the Company or the Purchaser
shall have designated to the other by like notice.
IN WITNESS WHEREOF the Purchaser has executed this Securities Subscription
Agreement on the date set forth below.
Number of Shares of Common Stock Subscribed for: 900,000 Shares
Purchase Price per Share $0.003 U.S.
Total Purchase Price (Number of Shares multiplied
By US$0.003 per Share) $2,700.00 U.S. Total Price
DATED:
WITNESS:
- - - - - ----------------------------- ----------------------------------
(Signature) Signature of Subscriber
- - - - - ----------------------------- ----------------------------------
(Address) NAME (PLEASE PRINT) If signing
for a Company specific office held
-----------------------------
ADDRESS
-----------------------------
Receipt is hereby acknowledged of the amount first written in connection with
and on the terms and subject to the conditions set out in this shares
subscription.
DATED: SWEETBRIER CORPORATION
- - - - - -------------------------------
Per
-----------------------------
Authorized Signatory
(TO BE COMPLETED IN DUPLICATE, ONE COPY TO PURCHASER, ONE COPY FOR COMPANY)
EXHIBIT 6.8
SECURITIES SUBSCRIPTION AGREEMENT
TO: SWEETBRIER CORPORATION
250 - 1075 West Georgia Street
Vancouver, British Columbia
V6E 3C9
AND TO: THE DIRECTORS THEREOF
1. I, the undersigned, hereby offer to subscribe for 1,000 shares in the
capital stock of SWEETBRIER CORPORATION (the "Company"), a Nevada non-reporting
company, at and for the price of US $0.01 per share, and enclose herewith the
sum of US 10.00 in full payment of the aggregate subscription price for such
shares, in the event this offer is accepted by the Company. The Securities
Subscription Agreement (the "Offering") is being conducted in reliance upon the
exemption from registration requirements of the Securities Act of 1933 (the Act)
set forth in Rule 504 of Regulation D promulgated under the Act.
2. I hereby represent and warrant that:
(a) I am a close personal friend, relative or business associate (circle
category) of ROBERT KRUSHINISKY, a director and, senior officer of the
Company;
(b) I am either:
(i) a resident of Canada, the United States of America or
_______________ (circle category or complete blank), or
(ii) a private corporation incorporated in the jurisdiction of
_____________ and resident of ___________________.
(c) my offer to subscribe for shares in the Company as herein set out is
unconditional, irrevocable and non-transferable and has not been
induced by any warranties or representations with regard to the
present or future value of the Company's shares.
(d) I am aware and have been advised that my subscription monies represent
"seed" or "risk" capital for the Company, that the Company is in a
promotional and speculative stage of development, that there is no
market whatsoever for the securities of the Company and that the
Company is without substantial assets.
I have had the opportunity to ask and receive answers to any and all
questions I have with respects to the Company, it future plans,
management and current financial conditions. I acknowledge that the
Company is newly organized, does not have an operating history, will
likely require additional capital to complete its business plan and
that there is no assurance that the Company can obtain additional
capital and successfully complete its future plans;
(e) I am aware that the shares of the Company may be issued to acquire
land and shares may be issued to directors, insiders and others at
prices per share less than the subscription price herein;
<PAGE>
2
(f) I am aware that if I am resident in a jurisdiction other than the
State of Nevada, any shares issued to me upon acceptance of my
subscription may be subject to restrictions on resale imposed under
the laws of such jurisdiction;
(g) the Company is non-reporting company and a private issuer under Nevada
laws and the shares to be issued to me upon acceptance of this
subscription will be issued as an exempt trade, based upon the
relationship set out in subparagraph (a) above, and no securities
filings or clearances or reviews have been or are being made in
connection with such trade.
(h) I am an accredited investor and have such knowledge and expertise in
financial and business matters that I am capable of evaluating the
merits and risks involved in an investment in Shares and acknowledge
that an investment in the Shares entails a number of very significant
risks and I am able to withstand the total loss of my investment. I
acknowledge that the Company has recommended that I obtain independent
legal and financial advise prior to subscribing, including but not
limited to advise as to the legality of any resale of the Shares as
well as the suitability of the investment for me.
(i) I understand that the Shares are being offered and sold to me in
reliance on specific exemptions for the registration requirements of
the United States Federal and State securities laws and that the
Company is relying upon the truth and accuracy of the representations,
warranties, agreements, acknowledgment and understanding of myself set
forth herein in order to determine the applicability of such
exemptions and suitability of myself to acquire the Shares, and I
acknowledge that it is my responsibility to satisfy myself as to the
full observance by this Offering and the sale of the Shares to me of
the laws of the jurisdiction outside the United States and I have done
so.
(j) I have full power and authority to execute and deliver this Offering
and to perform its obli8gations thereunder; and this Offering is a
legally binding obligation of myself enforceable against me in
accordance with its terms; and
(k) I understand that in view of the SEC the statutory basis for the
exemption claimed for the transaction would be present if the
Offering, although in technical compliance with Regulation D, is part
of a plan or scheme to evade the registration provisions of the 1933
Act and I confirm that the purchase is not part of such plan or
scheme. I have no present intention to sell the Shares.
3. I hereby agree that:
(a) the funds advanced by me hereunder will immediately be used by the
Company for general corporate purposes and will be characterized as a
non-interest bearing, non-callable loan by me to the Company until
acceptance or rejection of this subscription by the directors of the
Company, and such deposit and use shall not deemed an allotment of
shares nor an acceptance of this subscription, nor shall there be
deemed to be any trust conditions whatsoever imposed upon such money;
(b) this subscription constitutes an irrevocable offer by me for the
shares described in paragraph 1 hereof, at the price, on the terms and
subject to the conditions herein set out;
(c) the offer constituted hereby shall be deemed to have been accepted by
the Company upon notice to me by the directors of the Company of the
allotment and issuance of the shares subscribed for herein;
(d) this subscription need not be considered for acceptance and shares
subscribed for herein need not be allotted and issued until the
Company has received subscriptions for the total number of shares as
the directors in their sole discretion deem sufficient for the
Company's needs, and
<PAGE>
3
(e) I understand and agree that any shares issued to me may be subject to
the requirement that they be delivered into a pool with a recognized
trust company in connection with any public distribution of the
Company
4. I hereby irrevocably appoint the President of the Company, or failing him
the Secretary of the Company in office from time to time, as attorney-in-fact
for me and authorize him as such to make and sign on my behalf and to deliver;
(a) any and all pooling agreements and other documents which such attorney
sees fit in his discretion to give on my behalf in connection with any
distribution to the public of securities of the Company, on such terms
and subject to such conditions as such attorney shall in his
discretion deem fit or advisable; and
(b) any and all resolutions of members, as may be deemed desirable by the
directors of the Company to provide for any changes in the Company's
constating documents or by-laws necessary to enable the Company to
offer its shares to the public.
5. The foregoing appointment shall remain effective until such time as the
Company becomes a reporting company. I acknowledge that the ability of the
Company to become a reporting company with its shares listed for trading on a
recognized exchange is dependent on factors beyond the Company's control, which
factors include the requirements of regulatory authorities having jurisdiction,
the success of the Company's business endeavours and the general state of the
capital markets from time to time, and no representation is made that the
Company will ever become a reporting company or that its shares will become
listed for trading on a recognized stock exchange. I confirm that neither the
Company nor any director of the Company has made to me or makes herein any
representation about the present or future value of the Company's shares, and
making this offer, I have relied solely on the representations directly set out
herein.
6. I hereby direct that, upon acceptance of this offer by the Company, the
shares to be issued in my name at the address provided below and that, instead
of delivering certificates for such shares to me, the Company is directed to
issue certificates and hold them at its registered and records office, or, in
the discretion of the directors, to wait until a distribution to the public of
its shares is completed and then to issue a treasury order for such shares to
its registrar and transfer agent, directing delivery of such certificates at
such time to me or as is provided in any pooling agreement to which I am
subject.
7. Notwithstanding anything contained herein:
(a) the directors may determine, at their sole discretion, that it is not
in the best interests of the Company to become a reporting company but
remain a non-reporting company; and
(b) the directors may deliver the certificates representing the shares
subscribed to the Subscriber (the "Certificate") at any time.
8. The share subscription constitutes the entire agreement between the
undersigned and the Company, and there are no other agreements, warranties,
representations, conditions or covenants, written or oral, express or implied,
in respect of, or which affect, the transactions herein contemplated, and this
shares subscription supersedes and supplants any previous dealings whatsoever
between the undersigned and the Company in respect of the said transactions.
9. This Offering will be construed and enforced in accordance with an governed
by the laws of the State of Nevada without reference to principles of conflict
of law. Each of the parties consents to the exclusive jurisdiction of the
federal courts whose district encompasses any part of the State of Nevada or the
state courts of the State of Nevada in connection with nay dispute arising under
this Offering and hereby waives, to the maximum extent permitted by law, any
objections, including any objection based on forum nor conveniens, to the bring
of any such proceeding in such jurisdiction. Each party hereby agrees that if
another party to this Offering obtains a judgment against it in such a
proceeding, the party which obtained such judgment may enforce same by summary
judgment in the courts of any country having jurisdiction over the
<PAGE>
4
party against whom such judgment was obtained, and each party hereby waives any
defenses available to it under local law and agrees to the enforcement of such a
judgment. Each party to this Offering irrevocably contents to the service of
process in any such proceeding by the mailing of copies thereof by registered or
certified mail, postage prepaid, to such party at its address set forth herein.
Nothing herein shall affect the right of any party to service process in any
other manner permitted by law.
I will update my address as may be required from time to time by notice in
writing to the Company.
DATED:
----------------------
WITNESS: )
) ------------------------------
) SIGNATURE OF SUBSCRIBER
- - - - - ---------------------------------- )
(Signature) )
)
) ------------------------------
- - - - - ---------------------------------- ) NAME (PLEASE PRINT) (IF SIGNING
(Address) ) FOR A COMPANY, SPECIFY OFFICE HELD)
)
)
- - - - - ---------------------------------- ) ------------------------------
)
)
) ------------------------------
Receipt is hereby acknowledged of the amount first written in connection with
and on the terms and subject to the conditions set out in this share
subscriptions:
DATED: SWEETBRIER CORPORATION
----------------------
Per: C/S
--------------------
Authorized Signatory
(TO BE COMPLETED IN DUPLICATE, ONE COPY TO SUBSCRIBER, ONE COPY FOR COMPANY)
EXHIBIT 6.9
SUBSCRIPTION AGREEMENT
To the Directors:
Gentlemen:
I understand that DIPPY FOODS, INC., a Nevada corporation ("the Company"),
is offering shares of the Company's common stock, $.001 par value per share,
(the "Shares") pursuant to the exemptions from registration contained under
regulation D, Rule 504, and Sections 3(b) and 4(2) of the Securities Act of
1933, as amended. I also understand that the subscription price is $0.05 per
Share.
Acknowledging the foregoing and upon consideration and affirmation of the
following representations, I offer to purchase the number of Shares at the price
of $0.05 per share for the aggregate amount (the "Subscription Funds") that are
set out in paragraph 6. In order to induce the Company to accept my offer, I
advise you as follows:
1. AVAILABILITY OF INFORMATION
I represent and warrant that I have been furnished with and have reviewed a copy
of all underlying documents in connection with this transaction. I also
acknowledge that in addition to the business and financial information about the
Company provided to me, the Company has permitted me the opportunity to ask
questions of, and receive answers from, the Company, and any other person or
entity acting on its behalf, concerning the terms and conditions of the offering
and to obtain any additional information necessary to verify the accuracy of the
information provided by the Company and any other person or entity acting on its
behalf.
2. REPRESENTATIONS AND WARRANTIES
I represent and warrant to the Company (and understand that they are relying on
the accuracy and completeness of these representations and warranties in
connection with the availability of an exemption from the registration
requirements of applicable Federal and state securities laws for the offer and
the sale of the Shares) that:
a. NO REGISTRATION. I understand the Shares offered have not been
registered under the Securities Act of 1933, as amended (the "1933
Act"), or any applicable state securities laws, and that I must bear
the economic risk of the investment for an indefinite period of time
because the Shares cannot be sold unless they are registered under the
1933 Act or applicable state securities laws or exemptions from them
are available; that registration under the 1933 Act is unlikely at any
time in the future; that the Company is not obligated to file a
registration statement under the 1933 Act; and that Rule 144, adopted
under the 1933 Act governing the possible disposition of the
Securities, is applicable to the shares of common stock. I agree not
to sell the Shares without registration under the 1933 Act and the
applicable state securities laws unless in an exempt transaction as
set forth in Regulation D, Rule 144 or any other federal securities
act.
b. OWN ACCOUNT. I am the only party with an interest in this subscription
agreement, and I am acquiring the Shares for investment purposes and
for my own account for long-term investment only, and not with any
intent or arrangement to resell, fractionalize, divide or redistribute
all or any part of the Shares to any other person. I have no present
plans to enter into any contract, undertaking or agreement for any
resale, distribution, subdivision or fractionalization.
c. AGE AND CITIZENSHIP. I am at least 21 years old and a citizen of
__________. I am a bonafide resident of the state or province set
forth next to my signature and this state or province is my principal
residence.
<PAGE>
SUBSCRIPTION AGREEMENT DIPPY FOODS, INC. PAGE 2 OF 3
d. KNOWLEDGE AND EXPERIENCE. I have knowledge and experience in financial
and business matters and in investments in particular and I am capable
of evaluating the merits and the risks of an investment in the
Company. I understand that the Company is relying upon my
representations for the purposes of confirming my suitability as an
investor in the Company.
e. ACCURACY OF INFORMATION. The information that I have provided to the
Company concerning my financial position and knowledge of financial
and business matters is correct and complete as of this date. If any
of the information changes materially before you accept this
subscription, I immediately will provide the new information. I
indemnify the Company against any damage, claim, loss, expense or
liability that may arise as a result of a breach of any representation
or covenant that I have made.
f. SPECULATIVE NATURE OF INVESTMENT. I am aware that the Company is new
and is starting to operate and that an investment in the Shares is a
speculative investment which involves a high degree of risk. I
acknowledge that this transaction and the material provided to me have
not been reviewed by the United States Securities and Exchange
Commission or by any state's securities authorities.
g. ADEQUACY OF MEANS. I have adequate means of providing for my current
needs and personal contingencies and have no need to liquidate this
investment in the Company's Shares.
h. NET WORTH. I represent and warrant either that: (1) my net worth
(along with my spouse, but exclusive of home, furnishings and
automobiles) is three times the amount of the investment in the
Company's Shares and that I (alone or jointly with my spouse) have an
adjusted gross income in the most recent year of $75,000 or more; or
(2) 1 have a net worth (alone or with my spouse, but exclusive of
home, furnishings and automobiles) that is five times the amount of an
investment in the shares without regard to my annual income.
3. OFFERING PROCEDURE
I understand this subscription agreement is subject to each of the following
terms and conditions:
a. The Company may reject this subscription agreement for any reason, and
this subscription agreement becomes binding upon the Company only when
the Company has accepted it in writing.
b. If my subscription agreement is rejected, the Company will return to
me the Subscription Funds that I have submitted within ten days of the
rejection without interest or deduction.
c. If my subscription is accepted, I must execute any additional
documents that are necessary to effect the issuance of the Shares that
I have purchased.
4. INDEMNIFICATION.
I acknowledge that I understand the meaning and legal consequences of the
representations and warranties I have given and I agree to indemnify the Company
and its management against any loss, damage or liability arising out of a breach
of any representation or warranty or covenant of the undersigned contained in
the subscription agreement or in the financial information that I have provided
to the Company.
5. MISCELLANEOUS
a. ENTIRE AGREEMENT. This agreement represents, the entire agreement
between the Company and me and supersedes all prior agreements,
understandings or conversations with respect to any transactions of
the type contemplated hereby.
b. WAIVER AND AMENDMENT. Any right granted to either me or the Company
under this agreement may be waived only in writing signed by both of
us. No delay in our exercising any right granted under this agreement
operates as it waiver of the right, and no partial exercise of any
right precludes our exercising
<PAGE>
SUBSCRIPTION AGREEMENT DIPPY FOODS, INC. PAGE 3 OF 3
that right or any other right in the future. Any amendment of this
agreement must be written and signed by the Company and me.
c. GOVERNING LAW. This agreement is governed by, and construed in
accordance with, the laws of its incorporation.
d. ENFORCEMENT. If legal action becomes necessary to enforce this
agreement or any part of it, the prevailing in the action is entitled
to collect its reasonable expenses incurred in the action, including
reasonable attorney's fees, from the non-prevailing party.
6. PAYMENT FOR SHARES
I subscribe for __________ Shares and submit my check payable to the Company for
the amount of $__________.
Dated ___________________, 1999.
_____________________________ ____________________________________
Name of subscriber Signature of subscriber
_____________________________
Address of subscriber ___________________________________
Name and position of authorized
_____________________________ signatory if the subscriber is
not a natural person
_____________________________ ____________________________________
Telephone number Tax I.D. or social security number
_____________________________
Fax number
This subscription is accepted on ___________________. 1999.
The Company:
DIPPY FOODS, INC.
_____________________________
Authorized signatory
EXHIBIT 6.10
PROMISSORY NOTE
$E.00 DATED AS OF E
FOR VALUE RECEIVED, DIPPY FOODS, INC., a Nevada corporation ("Maker"), promises
to pay to the order of E (including its successors and assigns, "Payee"), in
lawful money of the United States, the principal sum of US$E.00 by E, 2000 (the
"Maturity Date"), together with interest accruing on the outstanding principal
balance at the rate of 12% per annum.
MAKER WILL PAY accrued and unpaid interest (a) monthly in arrears on the 1st day
of the following month for so long as any amount is outstanding, (b) upon any
prepayment of principal, and (c) on the Maturity Date (each an "Interest Payment
Date"). Maker may elect to accrue the interest, rather than pay it monthly, and
pay it together with the outstanding principal by the Maturity Date. If an
interest payment date falls on a day that is a weekend or a holiday on which
banks are closed in the State of California (all other days being "Business
Days"), the Maker will make the payment on the next succeeding Business Day,
with accrued interest through to the Business Day.
MAKER MAY PREPAY this promissory note in whole or in part upon five days' notice
in cash or by wire transfer of funds on any date on which a Maker opts to make
the payment. Payee will apply prepayments first to accrued but unpaid interest,
if any, and second to the outstanding principal amount of this promissory note.
THE ENTIRE unpaid principal amount of this promissory note is immediately due
and payable without demand on (a) the filing of a petition by or against the
Maker under the provisions of any insolvency law or under the provisions of any
bankruptcy or insolvency statute or any assignment by the Maker for the benefit
of creditors generally; (b) the sale, assignment or other transfer of all or
substantially all of the Maker's assets, (c) the occurrence of a Corporate Event
(as defined below) without the express prior written consent of Payee, or (d)
the nonpayment of any amounts owing under this promissory note within ten days
of the respective payment date.
THE PAYEE MAY elect to convert the outstanding principal balance or any portion
of it and any accrued interest into shares of Maker's common stock at the price
per share that is equal to the average closing price of the Maker's common stock
from the date of this note to the date of the conversion, adjusted to provide
for any stock splits, stock dividends, reclassifications, amalgamations,
mergers, consolidations or other similar corporate events ("Corporate Events").
The calculation in arriving at any adjustments must be certified by a competent
officer of Maker, and is deemed to be correct in the absence of manifest error.
DIPPY FOODS, INC.
By: ________________________________
Name:
Title:
EXHIBIT 6.11
DISTRIBUTORSHIP AGREEMENT
COMPANY: INTERNATIONAL FOAM SOLUTIONS, INC,
1885 SW 4th Avenue #E3
DELRAY BEACH, FL 33444
561-272-6900 TEL
561-272-4951 FAX
DISTRIBUTOR: DIPPY FOODS, INC.
1161 N Knollwood Circle,
Anaheim, CA 92801
714-816-0150 TEL
714-816-0153 FAX
DATE OF AGREEMENT: JULY 8, 1999
TERRITORY; California (Exclusive re Public Schools)
Washington, Arizona, Oregon & New Mexico as
Non_Exclusive
WHEREAS, Company is engaged in the manufacture, distribution and sale of
STYRO SOLVE and THE SOLUTION MACHINES for the reduction of polystyrene hereafter
known as the Products;
WHEREAS, Distributor is engaged in, among other things, the business of
buying for resale, marketing and distributing products, and Distributor desires
to purchase for its own account certain of Company products namely:
"STYRO SOLVE" and "THE SOLUTION MACHINES" all Models for all Public
School Related Business and for resale and distribution within the
California on an Exclusive Basis; and a Non_Exclusive Basis for any
other Business Public Schools within the balance of the Territory.
WHEREAS, subject to and upon the terms and conditions herein contained, the
Company is willing to sell to Distributor for resale within the TERRITORY
certain of Company's Products and to grant to Distributor the limited right to
distribute and sell such products within the California on an EXCLUSIVE basis to
public schools only, and sell on a NON-EXCLUSIVE basis to any and all other
customers within California and the balance of the territory.
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NOW, THEREFORE, for and in consideration of the premises and the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
1. Appointment. Upon the terms and subject to the conditions contained in
this Agreement, Company hereby grants to Distributor the limited right, during
the term hereof to sell the Products within the Territory on a non_exclusive
basis, and Distributor hereby accepts such appointment. It is understood and
agreed that whereas Distributor shall be, Company's limited Distributor for
Products within the Territory, Company shall not directly compete against the
distributor in their area.
2. Term. Termination.
2.1 Unless sooner terminated in accordance with the provisions of
Section 2.2 below, and with the exception of existing business at the time
of termination for which the Distributors reserves the right to continue
through fruition, this Agreement shall commence on the date of shipment of
products as per the initial order attached hereto (Appendix 1) and shall
continue for a term of twelve (12) months (the Initial Term). Prior to the
end of the Initial Term, this Agreement will be automatically renewed for
an additional twelve (12) months without written confirmation of Company.
2.2 In the event, either party hereto shall be in breach or
non-compliance with any term of this Agreement, the aggrieved party shall
give written notice of such breach in writing to the offending party. The
offending party shall have thirty (30) days from the date of such notice to
cure such breach or non-compliance. In the event, the offending party shall
fail to cure such breach or noncompliance, the agreed party at the
expiration of said thirty-day period may terminate this Agreement.
2.3 Regardless of the status of the underlying Distributorship
Agreement, Distributor herein shall remain the specific Distributor on any
contract written by Distributor during the natural term of the herein
Distributor Agreement, for so long as the Distributor services the specific
contract in a commercially reasonable manner. If Distributor is no longer
able to perform the necessary and appropriate duties required to service
the customer, the account shall be tendered to the Company who shall take
reasonable steps to continue the service of the said customer.
3. Territory. Distributor shall be responsible for achieving certain sales
goals as may be determined by mutual consent with the Company and providing
related services to the customers within the Territory of California. The sales
goals shall be established after the first year following the effective date of
this agreement for the ensuing years. Additional Territories may be added from
time to time upon the Distributor's request and the Company's approval. The
company's decision on whether or not to allow Distributor to take on additional
Territory is final and without recourse. Distributor is hereby given Option to
distribute and sell company products in the TERRITORIES of Washington, Arizona,
Oregon and New Mexico as long as
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Distributor meets or surpasses the parameters set forth for doing business
within such TERRITORIES.
4.0. Responsibilities of Company.
4.1 Marketing Assistance and Advertising. Company shall provide
reasonable quantities of promotional literature regarding the Products. Any
promotional, literature or materials required beyond this shall be made
available to the Distributor at prices and conditions as outlined on
Exhibit A. Company shall also, on request of Distributor and to the extent
practicable and reasonable as determined by Company in its sole discretion,
provide sales support and technical support to Distributor. However,
Distributor is hereby authorized to take reasonably necessary steps to
publish information and other materials regarding the Company and products
as needed by Distributor for the promotion of the business, subject to
prior approval of the Company which shall not be unreasonably withheld or
delayed. Distributor is further authorized to establish, maintain, market
and distribute the products of the Company via the World Wide Web, the
Internet and eCommerce.
4.2 Defects, Product Liability. Company agrees that it will, at no
cost to Distributor and as Distributor's sole remedy therefor, replace or
repair Products that are found to be defective within fifteen months of
shipment to Distributor, and to hold Distributor harmless with respect
thereto; provided, that any such product liability is not due to the
negligence or misuse of the Distributor or Distributor's customer. Company
agrees to have Distributor named as an also named insured on any Product
Liability Insurance obtained by Company.
5.0 Responsibilities of Distributor.
5.1 Distributor agrees to devote its diligent best efforts, time,
attention, and energies to the performance of its duties under this
Agreement.
5.2 During the term of this Agreement and any extension thereof and
for a period of twelve (12) months following termination of this agreement,
Distributor shall not, directly or indirectly, promote the sale of, or
market, distribute or sell Products which are competitive with, or
comparable or similar to, Company's Products for or on behalf of any
person, company or entity other than Company.
5.3 Distributor acknowledges that Company possesses valuable technical
information and know-how relating to the design 9 possesses valuable
technical in specifications, content, manufacture, Processes and all
related technology used in connection with the design, manufacture and sale
of the Products. Further, Distributor acknowledges that this information
(Proprietary Information) is confidential and includes, as part thereof,
Trade Secrets belonging to Company. Distributor that during the term of
this A and for a period of five (5) years after the termi-confidential and
includes, agrees Agreement, nation of this Agreement, it will not (i)
disclose to any third person or (ii) use for its own finan-respectively,
any Proprietary Information Of Company obtained by Distributor during the
term of this Agreement, unless such Proprietary Information shall first
become publicly available from sources other than Distributor. Provided,
however, that Distributor may make
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<PAGE>
disclosures required by a valid order or subpoena issued by a court or
administrative agency of competent jurisdiction. In such event, Distributor
shall promptly notify Company of such order or subpoena to provide Company an
opportunity to protect its interest.
6.0 Price
6.1 Subject to adjustment as hereinafter provided, sales by Company of
Products ordered by Distributor hereunder shall be at the prices and terms
specified in the Price List attached hereto as Exhibit A (the Purchase
Price).
6.2 Company shall have the right at any time and from time to time
during the term hereof, to revise the Purchase Price and or the terms of
sale of the Products upon ninety (90) days prior written notice to
Distributor. Upon any such revision, the Price List in Exhibit A shall be
modified accordingly to reflect the revised Purchase Prices and or Terms of
Sale of the Products.
6.3 The Purchase Price is F.O.B. Company's location, and includes only
standard carton packaging. The Purchase Price does not include any
applicable sales, use, revenues, excise, or other taxes imposed by any
taxing authority. All such taxes imposed by any taxing authority shall be
the sole responsibility of the Distributor. Should the Company for any
reason whatsoever be required to pay any such taxes, all such taxes will be
added to Company's invoice as a separate charge to be paid by Distributor.
6.4 The Distributor hereby agrees to make payment in full for all
purchase, of Company's Products, Sales and Marketing literature and
products and any other related items such as taxes, delivery costs and
other charges, within thirty (30) days of shipment of such products or date
of invoice as the case may be which ever is greater.
6.5 Any amounts payable to Company hereunder which are not paid when
due shall thereafter bear interest at the rate of one and one-half percent
(1.5%) per month or the maximum amount permitted by applicable law,
whichever is less. Time is of the essence for all payments due hereunder,
and in the event any payment due Company is collected at law, or through an
attorney-at-law or under advice therefrom, or through a collection agency,
Distributor agrees to pay all costs of collection, including, without
limitation, all court costs and reasonable attorneys' fees.
7. Delivery and Risk. Sales by Company to Distributor under this Agreement
shall be F.O.B. Company's location. Distributor shall bear all risks of loss or
damage to the Products after they are delivered to the carrier at Company's
facilities. Any arrangements made or expenses incurred by Company for carriage
or insurance of the Products after they are
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<PAGE>
delivered to the carrier shall be for the account of Distributor and promptly
paid or reimbursed to Company by Distributor.
8. Partial Deliveries. Company may deliver Products in partial shipments
and reserves the right to invoice for partial deliveries. Payments for partial
deliveries shall be made in accordance with the payment terms set forth in
Section 5 above. Company shall keep Distributor advised of the necessary lead
times for orders of varying sizes so that Distributor can maintain a proper
level of inventory at the local offices, which is expected to be approximately a
30 day supply. The lead time necessary for orders of new machines is
approximately 6 to 8 weeks; and the lead time for orders of chemicals is
approximately 14 to 21 days before delivery.
9. Limitations. Distributor shall not have or acquire any right, title or
interest in any trademark service mark or trade name that is now owned or
hereafter acquired by Company either used alone or in conjunction with other
words or names, or in the good will thereof, expressly granted herein. If
Distributor, in spite of this provision, acquires any such right, title or
interest by operation of law or otherwise, Distributor shall convey the same to
Company,
10. Insurance. Distributor shall maintain in force at all times general
public liability and product liability insurance in the amount of two (2)
million dollars and shall have issued to Company a certificate of insurance
naming company as also named insured.
11. Polygel Pick-up. Distributor shall arrange entirely at its expense to
pickup from its customers the reduced polystyrene (Polygel) and store at its
premises until such time that it has accumulated a minimum of ten (10) pallets
at which time Distributor shall so advise the Company or its designated
representative to have such polygel picked up at its premises. The Company or
its designated representative will make arrangements to have the polygel removed
from the Distributors premises within ten days of such notification. The polygel
is a non-hazardous material, and if any customer or the Distributor wants to
keep they may do so.
12. Warranty. All products sold hereunder shall be sold subject to
Company's standard terms of warranty in effect on the date of delivery.
13. Relationship of the Parties. The relationship between Company and
Distributor shall be that of independent distributor. Distributor shall not be
the agent of Company and shall have no authority to act on behalf of Company in
any manner except in the manner and to the extent that Company may expressly
agree to in writing. Persons retained by Distributor as employees or agents
shall not solely by reason thereof be deemed to be employees or agents of
Company. Distributor agrees to indemnify and hold Company harmless from and
against any and all liability or expense arising by its employees or agents.
reason of any act or omission of Distributor or
14. Governing Law. Regardless of the place of execution, place of
performance or otherwise, this Agreement and all amendments, modifications,
alterations or sup
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<PAGE>
plements hereto, and the rights of the parties hereunder, shall be governed by
and construed and enforced in accordance with the laws of the State of
California for all arbitration proceeding (American Arbitration Rules), and
formal litigation in accordance with the laws of the State of Florida in the
county of Palm Beach.
15. Miscellaneous.
15.1. Contract Non-Assignable. This Agreement may not be assigned or
transferred by either party hereto, in whole or in part, without the prior
written consent of Company.
15.2 Notice. All notices, requests, demands or other communications,
required or permitted to be given or made hereunder shall be in writing and
delivered personally or sent by first class, certified or registered mail,
or by facsimile addressed to the intended recipient thereof at the address
and facsimile number set forth above (or to such other address or facsimile
number as either party may from time to time duly notify the other.) Any
such notice, demand Of communication shall be deemed to have been duly
given immediately (if given or made by confirmed facsimile), or three (3)
days after mailing, and in proving same it shall be sufficient to show that
the envelope containing the notice, demand or communication was duly
addressed, stamped and posted or that receipt of a facsimile message was
confirmed by a confirming facsimile message from the recipient.
15.3 Partial Invalidity. All rights and restrictions contained herein
may be exercised and shall be applicable and binding only to the extent
that they do not violate any applicable laws and are intended to be limited
to the extent necessary so that they will not render this Agreement
illegal, invalid or unenforceable. If any term of this Agreement shall be
held to be illegal, invalid or unenforceable by a court of competent
jurisdiction, it is the intention of the parties that the remaining terms
hereof shall constitute their agreement with respect to the subject matter
hereof and all such remaining terms shall remain in full force and effect.
To the extent legally permissible, any illegal, invalid or unenforceable
provision of this Agreement shall be replaced by a valid provision which
will implement the commercial purpose of the illegal, invalid or
unenforceable provision. In the event that any provision essential to the
commercial purpose of this Agreement is held to be illegal, invalid or
unenforceable and cannot be replaced by a valid provision which will
implement the commercial purpose of this Agreement, this Agreement shall be
void and of no force or effect.
15.4 Waiver. No failure on the part of any party hereto to exercise,
and no delay in exercising any right, power, or remedy hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise of
any right, power or remedy by any such party preclude any other or further
exercise thereof or the exercise of any other right, power, or remedy. No
express waiver or assent by any party hereto to any breach of or default in
any term or condition of this Agreement shall constitute a waiver of or an
assent to any succeeding breach of or default in the same or any other term
or condition hereof.
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<PAGE>
15.5 Successors. This Agreement shall be binding upon and shall inure
to the benefit of the parties hereto and their respective successors and
permitted assigns.
15.6 Headings. The headings as to the contents of particular
paragraphs are inserted only for convenience and shall not be construed as
part of this Agreement or as a limitation on the scope of any of the terms
or provisions of this Agreement.
15.7 Entire Agreement. This Agreement supersedes all prior discussions
and agreements between the parties with respect to the subject matter
hereof and this Agreement contains the sole and entire agreement between
the parties with respect to the matters covered hereby. This Agreement
shall not be modified or amended except by an instrument in writing signed
by or on behalf of the parties hereto. By way of illustration and not by
way of limitation, all orders submitted by Distributor for Products
hereunder shall be deemed to incorporate without exception all of the terms
of this Agreement notwithstanding any order form containing additional or
contrary terms and conditions.
IN WITNESS WHEREOF, Company and Distributor have caused this Agreement
to be executed by their duly authorized representatives as of the day and
year first above written.
COMPANY: DISTRIBUTOR:
INTERNATIONAL FOAM SOLUTIONS, INC. DIPPY FOOD'S, INC.
----------------------------------- ------------------
BY: /s/ Antonio Bianco BY: /s/ Jon Stevenson
--------------------------- -----------------------
Name: Antonio Bianco Name: Jon Stevenson
Title: COO Title President
EXHIBIT 6.12
ANDERSON CHAMBERLIN, INC.
BROKERAGE AGREEMENT
This Agreement is made on (mo/dy/yr) 3/25/99
--------------------------------------------
between (Company Name) Dippy Foods
----------------------------------------------------------
(Corporate Address) 1161 N. Knollwood Circle
-------------------------------------------------------------
(City) Anaheim
--------------------------------------------------------------------------
(State, Zip) CA, 92801
--------------------------------------------------------------------
(Contact Name) Jon Stevenson
------------------------------------------------------------------
(Phone) 714-816-0150 (Fax) 714-816-0153
-------------------------------- ------------------------------------
hereinafter referred to as "Supplier", and Anderson Chamberlin, Inc., a
corporation organized and existing under the laws of the State of Washington,
having its Corporate Office in Issaquan, King County, Washington, hereinafter
referred to as "Broker".
Supplier, in consideration for the commitments and obligations set forth herein
to be performed by Broker, hereby agrees that Broker shall be its exclusive
sales representative in connection with all sales and/or contracts for
merchandise designated herein to Costco Warehouses in the following
Region/Regions:
SEE ATTACHED SCHEDULE "A"
The merchandise covered by this Agreement includes all products manufactured by
Supplier, and, also, any additional items Supplier may stock for resale.
1. Supplier's Duties and Broker's Commissions. Supplier agrees to pay Broker's
commission on such products sold and shipped to Costco within the
designated regions.
A. Commissions shall be based on the net amount of sales generated by
Broker's efforts herein. Net sales shall be defined as the amount of
the invoice, less any cash discounts, freight or promotional
allowances.
B. Commissions shall be computed at the following rate or rates:
5%
----------------------------------------------------------------------
<PAGE>
C. Payment of all commissions earned shall be made on or before the 15th
day of the month, following the month in which the invoices subject to
commissions have been paid by Costco. All commissions shall be paid in
US dollars.
D. Monthly payment of Broker's commissions shall be accompanied by an
individual commission statement summary, prepared by Supplier, which
includes the purchase order numbers, invoice numbers and dollar
amounts on which the commissions have been computed.
E. Supplier agrees to mail to Broker copies of any and all customer
invoices or credit memos covering sales within the designated regions.
Said copies shall be mailed to Broker on the date the invoices are
generated by Supplier.
2. Broker's Duties. In consideration of the commissions specified herein,
Broker agrees to act in accordance with the following terms and conditions:
A. To devote its best efforts to the sale of Supplier's products during
the term hereof. Broker represents that it has adequate facilities and
personnel to perform the services required in this Agreement.
B. To make all sales subject to Supplier's prices, terms and conditions.
3. Indemnity. Supplier agrees to protect, defend, indemnify and hold harmless
Broker, its subsidies and affiliated corporations and their respective
directors, officers, employees and agents, from and against any and all
claims, actions, liabilities, losses, costs and expenses arising out of any
actual or alleged injury, sickness, disease or death of any person, damage
to any property or any other damage or loss, by whomever suffered,
resulting or claimed to result, in whole or in part, from any actual or
alleged defect in any merchandise sold by Supplier through Broker, or for
which Broker has earned a commission. The term "defect in any merchandise"
as used in this Agreement shall include, but not be limited to, any actual
or alleged failure of said merchandise to comply with specifications or
with any express or implied warranty of Supplier, or any actual or alleged
failure of such merchandise, its manufacture, possession or sale, to comply
with any law, statute, ordinance or governmental administrative order, rule
or regulation.
4. Insurance. Supplier shall carry and maintain during the entire term of
Broker's representation of Supplier's merchandise, a broad form of
comprehensive public liability insurance policy consistent with Costco
requirements, and agrees to furnish Broker with a certificate of such
insurance coverage showing the effective dates thereof. Broker shall be
named as an Additional Insured on this policy and Supplier shall provide
Broker with a current Certificate of Insurance upon policy renewal.
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<PAGE>
5. Independent Contractor. It is understood by the parties that Supplier shall
not exercise any control over the activities or operations of Broker and
that Broker is an independent contractor and free agent. It is further
understood by the parties that neither Broker nor any of its employees or
representatives shall be the agents of Supplier at any time, under any
circumstances, for any purpose. Each party fully recognizes and agrees that
neither shall owe any fiduciary duty to the other at any time, and that
this Agreement in no way creates any fiduciary obligation between the
parties. Supplier recognizes that Broker may occasionally represent other
suppliers who manufacture similar products to those offered by Supplier.
6. Term of Agreement and Termination. This Agreement shall be for a term of
one (1) year from the date hereof and shall be renewed automatically for
successive terms of one (1) year thereafter, unless terminated by one of
the parties. Either party may terminate this Agreement by providing sixty
(60) days prior written notice to the other party.
Termination of this Agreement for any reason by either party shall not void
the liability of Supplier to Broker for commissions with respect to orders
and contracts accepted by Supplier prior to the effective date of such
termination, regardless of when such shipments are made or invoices
rendered.
7. Entire Agreement. This Agreement constitutes the entire Agreement of the
parties, and contains all terms and conditions agreed to by the parties. If
any term or condition of this Agreement is held to be invalid, void or
unenforceable by a court of competent jurisdiction, the remainder of the
provisions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
8. Successors, Alteration and Assignment. This Agreement shall be binding upon
any and all successors and assigns of Supplier and Broker, including but
not limited to parties acquiring Supplier or Broker by stock acquisition,
merger or acquisition of substantially all the assets of Supplier or
Broker, or of the division of Supplier identified in the first paragraph of
this Agreement. This Agreement may be altered only in a writing signed by
both parties.
9. Applicable Law, Arbitration and Attorneys' Fees. The parties agree that
this Agreement shall be interpreted according to and under the laws of the
State of Washington. In the event of any dispute regarding this Agreement
or the interpretation or enforcement of any of its terms, the parties agree
that jurisdiction and venue over such dispute shall be King County,
Washington. The parties further agree that the substantially prevailing
party shall be entitled to recover from the other party its reasonable
attorneys' fees and costs incurred in connection with any such dispute.
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IN WITNESS WHEREOF, the parties have executed this Agreement the day and year
first above written.
SUPPLIER:
Print Name: Jon Stevenson
--------------------------------------
Signature: /s/ Jon Stevenson
--------------------------------------
Title: President
--------------------------------------
BROKER: ANDERSON CHAMBERLIN, INC.
Print Name: Terry Pressman
-------------------------------------
Signature: /s/ Terry Pressman
--------------------------------------
Title: Executive VP of Food & Sundries
--------------------------------------
4
EXHIBIT 6.13
SUBSCRIPTION AGREEMENT
For an investment in
UNITS OF SHARES OF COMMON STOCK
(The "Units")
of
DIPPY FOODS, INC.
A CALIFORNIA CORPORATION
(THE "CORPORATION")
To: Jon Stevenson
THE FOLLOWING INFORMATION IS CONFIDENTIAL
1. SUBSCRIPTION: I, THE UNDERSIGNED, AGREE TO PURCHASE THE NUMBER OF UNITS SET
FORTH BELOW AND HEREBY TENDER PAYMENT IN CASH IN THE AMOUNT OF $5,714 PER
UNIT WITH A MINIMUM PURCHASE OF ONE UNIT. I UNDERSTAND THAT EACH UNIT
CONSISTS OF 11,428 SHARES OF COMMON STOCK OF THE CORPORATION. I UNDERSTAND
THAT UPON THE CORPORATION'S ACCEPTANCE OF THIS SUBSCRIPTION, I WILL RECEIVE
A COPY OF THIS SUBSCRIPTION AGREEMENT DULY ACKNOWLEDGED BY THE CORPORATION.
2. NUMBER OF UNITS AND PAYMENT.
Number of Units subscribed for:
Amount tendered herewith:
3. GENERAL INFORMATION:
(a) Name:
Social Security Number or Tax I.D.:
Drivers license no.: State:
Date of birth: U.S. Citizen: Yes No
Name:
Social Security Number or Tax I.D.:
Drivers license no.: State:
Date of birth: U.S. Citizen: Yes No
(b) Name(s) as it (they) should appear on legal documents and share
certificates:
1.
2.
(c) Permanent residential address (street, city, state, and zip code no.
P.O. Box)
-----------------------------------------------------------------------
-----------------------------------------------------------------------
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Telephone number: ( ) Years there:
(d) Mailing address (if different from permanent address):
-----------------------------------------------------------------------
-----------------------------------------------------------------------
(e) Present business address and telephone number:
Business name: Telephone #: ( )
Street:
City: State: Zip:
1. SUITABILITY INFORMATION.
(a) Level of knowledge (please check all the boxes which apply):
___ I have had a long term personal or business relationship or both with
the following individuals: (Describe nature and length of
relationship):
___ I am not relying upon the advice of an attorney, accountant or other
advisor in making a final investment decision to contribute to the
investment opportunity. I believe I have sufficient knowledge and
experience in financial and business matters to be capable of
evaluating the merits and risks of this investment opportunity. I am
providing the information contained in this agreement as evidence of
my knowledge and experience in these matters.
___ I will rely upon the advice of, and hereby designate, the individual
named below as my purchaser representative, who will assist me in
evaluating the merits and risks of an investment in the Units. I
understand that you may contact this individual to assess his
qualifications to serve as my advisor.
Name:
Address:
Telephone:
Professional affiliation of purchaser representative:
The above-named purchaser representative has completed a Purchaser
Representative Questionnaire, a copy of which is delivered to you with this
agreement. I believe that I and the above-named purchaser representative,
together have sufficient knowledge and experience in financial and business
matters that together we are capable of evaluating the merits and risks of
making an investment in the Units. The above-named purchaser representative has
disclosed to me in writing prior to the date hereof any relationship between my
purchaser representative and the following persons or entities or their
affiliates:
(b) All applicable statements Accredited Investor (complete if applicable)
based on the following:
___ I am an accredited investor, as defined in Regulation D under the
Securities Act of 1933, as amended (the 1933 Act), or an excluded
purchaser for purposes of the Limited Offering Exemption as set forth
in Section 25102(f) of the California Corporations Code, as amended
(the California Act) or both (please check):
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<PAGE>
___ My individual net worth, or joint net worth with my spouse, exceeds
$1,000,000.00.
___ My individual income was in excess of $200,000.00 for the two most
recent years and I reasonably expect an income in excess of
$200,000.00 in the current year, or
___ I am investing in the Units in the amount of at least $150,000.00 and
my individual net worth, or joint net worth with my spouse, exceeds 10
times my investment.
In determining net worth, the principal residence of an investor must be valued
at either at (I) cost plus the cost of improvements less the amount of current
encumbrances or (ii) the appraised value as determined by a written appraisal
used by an institutional lender (e.g., a bank, a savings and loan company, or a
company whose principal business is making loans secured by real estate and has
loans receivable of $2,000,000.00 or more) plus the cost of the improvements
less the amount of current encumbrances.
THE FOLLOWING INFORMATION IN THIS PARAGRAPH 4 (c) THROUGH 4 (j) IS REQUIRED OF
EACH PROSPECTIVE INVESTOR WHO IS A NATURAL PERSON. ENTITIES, SUCH AS
PARTNERSHIPS, CORPORATIONS AND TRUSTS, MUST SUBMIT A COMPLETE ENTITY
QUESTIONNAIRE IN THE FORM ATTACHED TO THE PRIVATE MEMORANDUM DATED AUGUST 1,
1997, AND COMPLETE THE BALANCE OF THIS AGREEMENT.
(c) Nature of present employment, business or profession:
Position held in present employment, business or profession and
responsibilities involved:
Dates of present employment, business, or profession:
From: To:
Please set forth all other prior occupations or duties during the past
five years:
Anticipated year of retirement:
(d) Education:
High School: Degree: Year:
College: Degree: Year:
Graduate: Degree: Year:
(e) My income from all sources was, or is expected to be, as follows
(please check the highest level):
1994: $25,000 $50,000 $75,000 $100,000 $200,000
1995: $25,000 $50,000 $75,000 $100,000 $200,000
1996: $25,000 $50,000 $75,000 $100,000 $200,000
1997: $25,000 $50,000 $75,000 $100,000 $200,000
(f) List professional licenses or registrations, including admissions,
accounting, insurance, financial planning certifications, etc., if any:
<PAGE>
(g) Investment experience:
(1) The frequency of my investment in publicly-traded securities is:
______ often _______ occasionally _______ never
(2) The frequency of my investment in no-publicly-traded securities is:
______ often _______ occasionally _______ never
(3) The frequency of my investment in tax-sheltered investments is:
______ often _______ occasionally _______ never
(a) During the past five years, I have made the following investments
which were sold in reliance on a private offering exemption from
registration under the Securities Act of 19933, as amended, and/or
applicable state securities laws, (please itemize each investment
separately):
Venture Nature of investment Year of investment Amount invested
(b) Details of my training or experience in financial and business
matters not disclosed above include:
(c) I have made the following additional investments which may reflect
my knowledge and experience in financial and business matters and
investments:
1. REPRESENTATIONS AND WARRANTIES. I hereby represent and warrant as
follows, which representations and warranties are true and correct as of
the date of this Agreement.
(a) The information contained in this Agreement is being furnished to
you to determine whether you to determine whether my subscription
for investment in the Units maybe accepted by you in light of the
requirements of the 1933 Act and the California may accept my
subscription for investment in the Units accepted by you in light
of the requirements of the 1933 Act and the California, or in the
applicable security laws of my state of residence. In understand
that (i)_ you will rely on the information contained herein for
purposes of your determination, (ii) the Units will not be
registered under the 1933 Act, qualified under the California Act
or registered or qualified under the applicable security laws of
any other jurisdiction in reliance on the exemption from
qualification and registration afforded by such laws and (iii)
this Agreement is not an offer of investment in the Units.
(b) I and my purchaser representative(s), if any, have examined the
Memorandum and all of the Exhibits thereto.
(c) I and my purchaser representative(s), if any, have sufficient
knowledge and expertise in business, tax and financial matters to
4
<PAGE>
evaluate the merits and risks of an investment in the Units and I
have consulted with my purchaser representative(s), if any, in
connection with such evaluation.
(d) No representations or warranties, oral or otherwise, have been
make to me by the Corporation's officers or any other agents,
employees or affiliates, or any other person associated with the
offering of the Units. In entering into this transaction, I am not
relying upon any information other than the result of my own
independent investigation.
(e) I am my purchaser representative(s), if any, have analyzed and
reviewed the Memorandum and all exhibits thereto, including,
without limitation, this Agreement, and all related documents, and
have had opportunity to ask questions of and receive answers from
the Corporation's behalf, concerning the merits and risks of this
opportunity. All such questions have been answered by my
satisfaction, none of which answers are in any way inconsistent
with the Memorandum and the Exhibit thereto.
(f) I do intend or anticipate that this opportunity to be a principal
source of income. I am able to bear the substantial economic risks
of contribution to the Investment Opportunity. At the present
time, I could afford a complete loss of such contribution.
(g) The address set forth above is my true and correct residence. I
have no present intention of becoming a resident of any other
state or jurisdiction.
(h) I understand that I must bear the economic risk of an investment
in the Units for an indefinite period of time because the Units
are not registered under the 1933 Act, qualified under the
California Act nor registered or qualified under the applicable
securities laws of any other state or jurisdiction, and may not be
resold unless subsequently registered or qualified or unless an
exemption from such registration or qualification is available.
(i) All of the representations and information provided herein and any
additional information that I have furnished to the Corporation
with respect to any financial position and financial, business and
investment experience are accurate and complete as of the date
hereof. If any such representations or information become
incomplete or inaccurate after this date, I shall supply DFI with
the correct information. If there should be any material adverse
change in any such representations or information prior to my
acceptance as a shareholder, I agree to immediately furnish
accurate and complete information concerning any such material
change to DFI.
(j) I am investing in the Units for my own account, for investment
purposes only and not with a view to the sale or other
distribution thereof, in whole or in part.
1. INDEMNIFICATION. I acknowledge that I understand the meaning and legal
consequences of the representations, warranties and acknowledges
contained in this agreement, and I hereby agree to indemnify, hold
harmless and defend DFI, any corporation or entity affiliated with DFI,
the DFI's officer, directors and employees, and attorneys for DFI against
any and all loss, damage or liability (including reasonable attorney's
fees) due to or arising out of my breach of any representation or
warranty or failure to fulfill any obligation, whether contained in this
Agreement or any other document executed by me, in connection with my
subscription for the Units.
5
<PAGE>
2. NO WAIVER. Notwithstanding any of the representations, warranties,
acknowledgments or agreements made in this Agreement by me. I do not
thereby or in any other manner waive any rights granted to me under
federal or state securities laws.
3. MANNER IN WHICH INVESTMENT IS TO BE MADE (PLEASE CHECK ONLY ONE).
____ Community property (both parties must sign)
____ Individual (if married, complete Spousal Consent Form below)
____ Joint tenants with rights of survivorship (all parties must sign)
____ Corporation (must be signed by corporate officer with corporate
resolution)*
____ Tenants in common (all parties must sign)
____ Partnership (must be signed by the general partner)*
____ As a custodian, agent or trustee*
*Please include completed Entity Questionnaire.
4. MISCELLANEOUS.
(a) This Agreement is governed by and must be construed in accordance
with laws of the State of California.
(b) This Agreement and the other documents executed by me contain the
entire agreement between the parties concerning my subscription
for the Investment Opportunity. The provisions of this Agreement
may not be amended, modified or waived, except by a written
agreement signed by me and DFI.
(c) The headings of this Agreement are for convenient reference only
and do not limit or otherwise affect
the interpretation of any term or provision hereof.
(d) This Agreement and the rights, and powers and duties set forth
herein shall, except as set forth herein, bind and inure to the
benefit of the heirs, executors, administrators, legal
representatives, others, successors and assigns of the parties
hereto.
(e) As used in this Agreement, the singular includes the plural, the
masculine includes the feminine and the neuter and vice versa.
ACCORDINGLY, desiring to become a shareholder in DFI by investing in a Unit or
Units, I hereby (a) acknowledge receipt of the Memorandum and Exhibits thereto;
and (b) execute this Subscription Agreement this ___ day of ______, 1997, and
declare that it is truthful and correct.
- - - - - ----------------------------------- ----------------------------------------
(Signature of Subscriber) (Signature of Subscriber)
Print name (and title, if applicable) Print name (and title, if applicable)
SUBSCRIPTION AGREEMENT ACCEPTED:
Date: , 1997
DIPPY FOODS, INC.
A California corporation
By:
------------------------------- ----------------------------------------
Jon Stevenson, President Alexander Diamond, CFO
6
EXHIBIT 6.14
1999-2000 DONATED FOOD DISTRIBUTOR AGREEMENT
FOR DELIVERY OF END PRODUCTS CONTAINING USDA COMMODITIES
TO ELIGIBLE AGENCIES IN THE STATE OF CALIFORNIA
This Donated Food Distributor Agreement is hereby entered into between
Diggy Foods, Inc. (hereinafter called Processor) and
- - - - - ------------------
(Processor)
ASR Food Distributor (hereinafter called Distributor).
- - - - - --------------------
(Distributor)
Said distributor agrees to perform as its part of this agreement, the pickup and
distribution of food items containing United States Department of Agriculture
(USDA) donated foods to eligible recipient agencies (RA) in California.
The distributors responsibilities include:
1. The distributor agrees to deliver the processor's products containing USDA
donated foods only to eligible RAs for whom the end products were received
and who participate in the USDA Commodity Food Program. The distributor
agrees to place orders with processors for end products based on orders
from RAs.
2. The distributor is aware and agrees that if the end products containing
USDA donated foods are delivered to ineligible RAs, the distributor will be
billed by the processor for the value of USDA donated foods contained in
the end product. The fair value of the donated foods and the eligibility of
an agency will be as determined by the State Distributing Agency (DA).
3. The distributor must maintain supporting inventory records inclusive of
signed receipts and delivery receipts. As a minimum, the supporting records
must reflect:
A. Quantities of end products on hand at the beginning of the month.
B. Quantities of end products received from processor for the month.
C. Quantities of end products delivered to each RA for the month. The
distributor must ensure that delivery tickets or bills of lading for
products delivered to eligible RAs contain the following:
<PAGE>
a. Name of receiving agency.
b. Date product received.
c. Processor name.
d. Quantities of end products delivered.
e. End product code number.
f. End product name and packsize.
g. End product price with donated food.
D. Quantities of end products on hand at end of each month.
4. If processor operates under the California Value-Pass-Through system, the
distributor must prepare and submit a Monthly Distributor Summary report to
processor for the past 30 days activity by the 8th of the month. The report
must be supported by signed delivery vouchers from RAs. As a minimum, the
Monthly Distributor Summary report must contain the following items of
information:
A. RA name and agency number.
B. Processor name.
C. Quantities of end products delivered.
D. End product code number.
E. A certification signed by the distributor stating the contract value of
the USDA commodities contained in each case of end product has passed on
to the RA in the form of a discount.
5. The distributor must produce copies of delivery documents to validate the
processor's random sample of reports when requested by the processor.
6. The distributor must cooperate with the processor, DA and/or USDA in any
reverification effort required to substantiate that end product and the
value pass through have been received.
7. The distributor shall retain all records pertaining to the pickup and/or
distribution of end products containing USDA commodities for three (3)
years from the close of the federal fiscal year to which they pertain or
longer if required for resolution of an audit or litigation. All records
shall be made available for inspection by representatives of the processor,
DA and/or USDA at any time, without prior notice, during normal office
hours. Representatives of DA and USDA shall have the right to inspect
products of processors containing USDA donated food and substituted
commercial food in the possession of distributor and the facilities used in
handling, storing, and transporting those products.
<PAGE>
This agreement shall become effective on 5-21, 1999 and will terminate on June
30, 2000. This agreement may be terminated by either party upon 30 days written
notice to the other.
This agreement shall be terminated immediately upon determination by either the
DA or the USDA of noncompliance by the distributor with any of the terms and
conditions of this agreement. A finding of noncompliance may be cause for
termination of Donated Food Distributor Agreements with all other processors
with whom distributor does business. Noncompliance findings may also subject the
distributor to criminal or civil prosecution.
The distributor recognizes and accepts the facts that this is not an exclusive
agreement. Distributor assures it will not interfere with processor's right to
deliver products through other distributors. DA warehouses, or direct to
recipient agencies.
ASR Food Distributors 5-21-99
- - - - - ------------------------------------------------------------------------
Distributor Name: Date:
6100 Sxxx Street Commerce, CA 90040
- - - - - ------------------------------------------------------------------------
Address: City, State, Zip
illegible President 323 8904525
- - - - - ------------------------------------------------------------------------
Signature: Title: Phone:
XXXX Foundation, Inc./Dippy Foods, Inc.
- - - - - ------------------------------------------------------------------------
Processor Name Date:
Mike Falk General Manager 714 220-0224
- - - - - ------------------------------------------------------------------------
Signature: Title: Phone:
STATE DISTRIBUTING AGENCY APPROVAL:
Walt Henry Manager
- - - - - ----------------------- ----------------------
(Name) (Title)
Walt Henry 6-29-99
- - - - - ----------------------- ----------------------
(Signature) (Date)
<PAGE>
<TABLE>
<S> <C> <C>
THIS IS AN ORIGINAL SCHEDULE UNLESS CHECKED BELOW Basis of Price (check):
X Original Schedule (Submitted w/Agreement no Change) END PRODUCT DATA SCHEDULE Contract Year: 1999-2000
- - - - - --
Additional Schedule (Submitted after Agreement Approval) ALL DONATED FOOD EXCLUDING POULTRY FOB Plant X
- - - - - --- ---
Revised Schedule Short Title PB10 Commodity Code 6475 Delivered
- - - - - --- ----------- ------- ---
Other
---
</TABLE>
<TABLE>
<CAPTION>
- - - - - --------------------------------------------------------------------------------------------
PRODUCT FORMULATION
END PRODUCT DESCRIPTION RAW BATCH BASIS
- - - - - --------------------------------------------------------------------------------------------
Net
Size weight, Name raw ingredients Quantity
Net and/or in ounces, in batch; place "DF" of each
End product label name, weight servings or portion after each donated item in
type, code number, etc. per case per case component food. pounds
1 2 3 4 5 6
- - - - - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Berry Berry Dippers 18.13 40 2.00 PB 10 DF 5.50
82325
- - - - - --------------------------------------------------------------------------------------------
2.50 Berry Berry Apple 6.25
Fruit
- - - - - --------------------------------------------------------------------------------------------
2.75 Cinnamon Tortilla 6.88
Chips
- - - - - --------------------------------------------------------------------------------------------
TOTALS Total portion weight 7.25 Total batch weight 18.63
- - - - - --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - - - - ---------------------------------------------------------------------------------------------------------------------
END PRODUCT RETURN
BASED ON PRODUCTION DONATED FOOD VALUE
- - - - - ---------------------------------------------------------------------------------------------------------------------
Pounds Lbs. of Dollars
Number "DF" to Percentage each Case per
of cases make one of "DF Price allowable
per raw case of end manufacture contained not using pound Value "DF" Net case
batch product yield per case "DF" of "DF" per case price
7 8 9 10 11 12 13 14
- - - - - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Berry Berry Dippers 1.00 5.50 91.00 5.00 $34.00 $0.77 $3.85 $30.15
82325
- - - - - ---------------------------------------------------------------------------------------------------------------------
6.25 6.25
- - - - - ---------------------------------------------------------------------------------------------------------------------
6.88 6.88
- - - - - ---------------------------------------------------------------------------------------------------------------------
TOTALS 18.13 $34.00 $3.85 $30.15
- - - - - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
-----------------------------------------------
By-products other than rework will be product YES NO X If yes PLEASE PRINT OR TYPE
refer to Articles 12 and 35 for further requirements.
CERTIFICATION REQUIRED: (DA must indicate option required) Dippy Foods Inc./Feedback Foundation
------------------------------------
Name of Company
Donated Poultry Requires (Option 1)
------ Jon Stevenson
------------------------------------
Donated Poultry (Option 2) Name of Authorized Representative
Donated Meat Requires Option 1 President
Certification on Nonsubstitution ------------------------------------
and Nondiversion Title of Authorized Representative
------
Jon Stevenson 6-26-99
------------------------------------
Signature Date Signed
-----------------------------------------------
Optional 2 Metal Detection Only
------ ------------------------------------
State Agency Approval Signature
Option 2 Additional Requirements
Attached and signed by DA and
Processor CA 7/1/99
------ ------------------------------------
State Effective Date
-----------------------------------------------
FORMULATION, RETURN, AND FEE FOR SERVICE CANNOT BE CHANGED DURING THE AGREEMENT
PERIOD WITHOUT PRIOR APPROVAL OF DA.
</TABLE>
<PAGE>
<TABLE>
<S> <C>
THIS IS AN ORIGINAL SCHEDULE UNLESS CHECKED BELOW
Basis of Price (check):
X Original Schedule (Submitted w/Agreement no Change) END PRODUCT DATA
SCHEDULE Contract Year: 1999-2000
- - - - - ---
X Additional Schedule (Submitted after Agreement Approval) ALL DONATED FOOD
EXCLUDING POULTRY FOB Plant
- - - - - ---
---
Revised Schedule Short Title PB RDU-FAT 10 Commodity Code 6476 Delivered
- - - - - --- ------------- ------- ---
Other
---
</TABLE>
<TABLE>
<CAPTION>
- - - - - --------------------------------------------------------------------------------------------
PRODUCT FORMULATION
END PRODUCT DESCRIPTION RAW BATCH BASIS
- - - - - --------------------------------------------------------------------------------------------
Net
Size weight, Name raw ingredients Quantity
Net and/or in ounces, in batch; place 'DF' of each
End product label name, weight servings or portion after each donated item in
type, code number, etc. per case per case component food. pounds
1 2 3 4 5 6
- - - - - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cherry Dippers 18.13 40 2.00 PB RDU-FAT 10 DF 5.50
81303
- - - - - --------------------------------------------------------------------------------------------
2.50 Cherry Apple Fruit 6.25
Fruit
- - - - - --------------------------------------------------------------------------------------------
2.75 Cinnamon Tortillas 6.88
Chips
- - - - - --------------------------------------------------------------------------------------------
TOTALS Total portion weight 7.25 Total batch weight 18.63
- - - - - --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - - - - ---------------------------------------------------------------------------------------------------------------------
END PRODUCT RETURN
BASED ON PRODUCTION DONATED FOOD VALUE
- - - - - ---------------------------------------------------------------------------------------------------------------------
Pounds Lbs. of Dollars
Number "DF" to Percentage each Case per
of cases make one of 'DF' Price allowable
per raw case of end manufacture contained not using pound Value 'DF' Net case
batch product yield per case "DF" of "DF" per case price
7 8 9 10 11 12 13 14
- - - - - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cherry Dippers 1.00 5.50 91.00 5.00 $34.00 $1.03 $5.16 $28.84
81303
- - - - - ---------------------------------------------------------------------------------------------------------------------
6.25 6.25
- - - - - ---------------------------------------------------------------------------------------------------------------------
6.88 6.88
- - - - - ---------------------------------------------------------------------------------------------------------------------
TOTALS 18.13 $34.00 $5.16 $28.84
- - - - - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
-----------------------------------------------
By-products other than rework will be product YES NO X If yes PLEASE PRINT OR TYPE
refer to Articles 12 and 35 for further requirements.
CERTIFICATION REQUIRED: (DA must indicate option required) Dippy Foods Inc./Feedback Foundation
------------------------------------
Name of Company
Donated Poultry Requires (Option 1)
------ Jon Stevenson
------------------------------------
Donated Poultry (Option 2) Name of Authorized Representative
Donated Meat Requires Option 1 President
Certification on Nonsubstitution ------------------------------------
and Nondiversion Title of Authorized Representative
------
Jon Stevenson 6-26-99
------------------------------------
Signature Date Signed
-----------------------------------------------
Optional 2 Metal Detection Only illegible
------ ------------------------------------
State Agency Approval Signature
Option 2 Additional Requirements
Attached and signed by DA and
Processor CA 7/1/99
------ ------------------------------------
State Effective Date
-----------------------------------------------
FORMULATION, RETURN, AND FEE FOR SERVICE CANNOT BE CHANGED DURING THE AGREEMENT
PERIOD WITHOUT PRIOR APPROVAL OF DA.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THIS IS AN ORIGINAL SCHEDULE UNLESS CHECKED BELOW Basis of Price (check):
Original Schedule (Submitted w/Agreement no Change) END PRODUCT DATA SCHEDULE Contract Year: 1999-2000
Additional Schedule (Submitted after Agreement Approval) ALL DONATED FOOD EXCLUDING POULTRY FOB Plant X
- - - - - --- ---
Revised Schedule Short Title PB RDU-FAT 10 Commodity Code 6475 Delivered
- - - - - --- ------------- ------- ---
Other
---
</TABLE>
<TABLE>
<CAPTION>
- - - - - --------------------------------------------------------------------------------------------
PRODUCT FORMULATION
END PRODUCT DESCRIPTION RAW BATCH BASIS
- - - - - --------------------------------------------------------------------------------------------
Net
Size weight, Name raw ingredients Quantity
Net and/or in ounces, in batch; place "DF" of each
End product label name, weight servings or portion after each donated item in
type, code number, etc. per case per case component food. pounds
1 2 3 4 5 6
- - - - - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pineapple Dippers 18.13 40 2.00 PB 10 DF 5.50
82314
- - - - - --------------------------------------------------------------------------------------------
2.50 Pineapple Apple 6.25
Fruit
- - - - - --------------------------------------------------------------------------------------------
2.75 Cinnamon Tortillas 6.88
Chips
- - - - - --------------------------------------------------------------------------------------------
TOTALS Total portion weight 7.25 Total batch weight 18.63
- - - - - --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - - - - ---------------------------------------------------------------------------------------------------------------------
END PRODUCT RETURN
BASED ON PRODUCTION DONATED FOOD VALUE
- - - - - ---------------------------------------------------------------------------------------------------------------------
Pounds Lbs. of Dollars
Number "DF" to Percentage each Case per
of cases make one of "DF" Price allowable
per raw case of end manufacture contained not using pound Value "DF" Net case
batch product yield per case "DF" of "DF" per case price
7 8 9 10 11 12 13 14
- - - - - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pineapple Dippers 1.00 5.50 91.00 5.00 $34.00 $0.77 $3.85 $30.15
82314
- - - - - ---------------------------------------------------------------------------------------------------------------------
6.25 6.25
- - - - - ---------------------------------------------------------------------------------------------------------------------
6.88 6.88
- - - - - ---------------------------------------------------------------------------------------------------------------------
TOTALS 18.13 $34.00 $3.85 $30.15
- - - - - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
-----------------------------------------------
By-products other than rework will be product YES NO X If yes PLEASE PRINT OR TYPE
refer to Articles 12 and 35 for further requirements.
CERTIFICATION REQUIRED: (DA must indicate option required) Dippy Foods Inc./Feedback Foundation
------------------------------------
Name of Company
Donated Poultry Requires (Option 1)
------ Jon Stevenson
------------------------------------
Donated Poultry (Option 2) Name of Authorized Representative
Donated Meat Requires Option 1 President
Certification on Nonsubstitution ------------------------------------
and Nondiversion Title of Authorized Representative
------
Jon Stevenson 6-26-99
------------------------------------
Signature Date Signed
-----------------------------------------------
Optional 2 Metal Detection Only illegible
------ ------------------------------------
State Agency Approval Signature
Option 2 Additional Requirements
Attached and signed by DA and
Processor CA 7/1/99
------ ------------------------------------
State Effective Date
-----------------------------------------------
FORMULATION, RETURN, AND FEE FOR SERVICE CANNOT BE CHANGED DURING THE AGREEMENT
PERIOD WITHOUT PRIOR APPROVAL OF DA.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THIS IS AN ORIGINAL SCHEDULE UNLESS CHECKED BELOW Basis of Price (check):
X Original Schedule (Submitted w/Agreement no Change) END PRODUCT DATA SCHEDULE Contract Year: 1999-2000
- - - - - ---
Additional Schedule (Submitted after Agreement Approval) ALL DONATED FOOD EXCLUDING POULTRY FOB Plant X
- - - - - --- ---
Revised Schedule Short Title PB RDU-FAT 10 Commodity Code 6475 Delivered
- - - - - --- ------------- ------- ---
Other
---
</TABLE>
<TABLE>
<CAPTION>
- - - - - --------------------------------------------------------------------------------------------
PRODUCT FORMULATION
END PRODUCT DESCRIPTION RAW BATCH BASIS
- - - - - --------------------------------------------------------------------------------------------
Net
Size weight, Name raw ingredients Quantity
Net and/or in ounces, in batch; place "DF" of each
End product label name, weight servings or portion after each donated item in
type, code number, etc. per case per case component food. pounds
1 2 3 4 5 6
- - - - - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Cherry Dippers 18.13 40 2.00 PB 10 DF 5.50
82303
- - - - - --------------------------------------------------------------------------------------------
2.50 Apple Cherry 6.25
Fruit
- - - - - --------------------------------------------------------------------------------------------
2.75 Cinnamon Tortillas 6.88
Chips
- - - - - --------------------------------------------------------------------------------------------
TOTALS Total portion weight 7.25 Total batch weight 18.63
- - - - - --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - - - - ---------------------------------------------------------------------------------------------------------------------
END PRODUCT RETURN
BASED ON PRODUCTION DONATED FOOD VALUE
- - - - - ---------------------------------------------------------------------------------------------------------------------
Pounds Lbs. of Dollars
Number "DF" to Percentage each Case per
of cases make one of "DF" Price allowable
per raw case of end manufacture contained not using pound Value "DF" Net case
batch product yield per case "DF" of "DF" per case price
7 8 9 10 11 12 13 14
- - - - - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cherry Dippers 1.00 5.50 91.00 5.00 $91.00 $0.77 $3.85 $87.15
82303
- - - - - ---------------------------------------------------------------------------------------------------------------------
6.25 6.25
- - - - - ---------------------------------------------------------------------------------------------------------------------
6.88 6.88
- - - - - ---------------------------------------------------------------------------------------------------------------------
TOTALS 18.13 $91.00 $3.85 $87.15
- - - - - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
-----------------------------------------------
By-products other than rework will be product YES NO X If yes PLEASE PRINT OR TYPE
refer to Articles 12 and 35 for further requirements.
CERTIFICATION REQUIRED: (DA must indicate option required) Dippy Foods Inc./Feedback Foundation
------------------------------------
Name of Company
Donated Poultry Requires (Option 1)
------ Jon Stevenson
------------------------------------
Donated Poultry (Option 2) Name of Authorized Representative
Donated Meat Requires Option 1 President
Certification on Nonsubstitution ------------------------------------
and Nondiversion Title of Authorized Representative
------
Jon Stevenson 6-26-99
------------------------------------
Signature Date Signed
-----------------------------------------------
Optional 2 Metal Detection Only
------ ------------------------------------
State Agency Approval Signature
Option 2 Additional Requirements
Attached and signed by DA and
Processor CA 7/1/99
------ ------------------------------------
State Effective Date
-----------------------------------------------
FORMULATION, RETURN, AND FEE FOR SERVICE CANNOT BE CHANGED DURING THE AGREEMENT
PERIOD WITHOUT PRIOR APPROVAL OF DA.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THIS IS AN ORIGINAL SCHEDULE UNLESS CHECKED BELOW Basis of Price (check):
X Original Schedule (Submitted w/Agreement no Change) END PRODUCT DATA SCHEDULE Contract Year: 1999-2000
- - - - - ---
Additional Schedule (Submitted after Agreement Approval) ALL DONATED FOOD EXCLUDING POULTRY FOB Plant X
- - - - - --- ---
Revised Schedule Short Title PB RDU-FAT 10 Commodity Code 6476 Delivered
- - - - - --- ------------- ------- ---
Other
---
</TABLE>
<TABLE>
<CAPTION>
- - - - - --------------------------------------------------------------------------------------------
PRODUCT FORMULATION
END PRODUCT DESCRIPTION RAW BATCH BASIS
- - - - - --------------------------------------------------------------------------------------------
Net
Size weight, Name raw ingredients Quantity
Net and/or in ounces, in batch; place "DF" of each
End product label name, weight servings or portion after each donated item in
type, code number, etc. per case per case component food. pounds
1 2 3 4 5 6
- - - - - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Berry Berry Dippers 18.13 40 2.00 PB RDU-FAT 10 DF 5.50
81325
- - - - - --------------------------------------------------------------------------------------------
2.50 Berry Berry Apple 6.26
Fruit
- - - - - --------------------------------------------------------------------------------------------
2.75 Cinnamon Tortillas 6.88
Chips
- - - - - --------------------------------------------------------------------------------------------
TOTALS Total portion weight 7.25 Total batch weight 18.64
- - - - - --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - - - - ---------------------------------------------------------------------------------------------------------------------
END PRODUCT RETURN
BASED ON PRODUCTION DONATED FOOD VALUE
- - - - - ---------------------------------------------------------------------------------------------------------------------
Pounds Lbs. of Dollars
Number "DF" to Percentage each Case per
of cases make one of "DF" Price allowable
per raw case of end manufacture contained not using pound Value "DF" Net case
batch product yield per case "DF" of "DF" per case price
7 8 9 10 11 12 13 14
- - - - - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Berry Berry Dippers 1.00 5.50 91.00 5.00 $34.00 $1.03 $5.16 $28.84
81325
- - - - - ---------------------------------------------------------------------------------------------------------------------
6.26 6.26
- - - - - ---------------------------------------------------------------------------------------------------------------------
6.88 6.88
- - - - - ---------------------------------------------------------------------------------------------------------------------
TOTALS 18.14 $34.00 $5.16 $28.84
- - - - - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
-----------------------------------------------
By-products other than rework will be product YES NO X If yes PLEASE PRINT OR TYPE
refer to Articles 12 and 35 for further requirements.
CERTIFICATION REQUIRED: (DA must indicate option required) Dippy Foods Inc./Feedback Foundation
------------------------------------
Name of Company
Donated Poultry Requires (Option 1)
------ Jon Stevenson
------------------------------------
Donated Poultry (Option 2) Name of Authorized Representative
Donated Meat Requires Option 1 President
Certification on Nonsubstitution ------------------------------------
and Nondiversion Title of Authorized Representative
------
Jon Stevenson 6-26-99
------------------------------------
Signature Date Signed
-----------------------------------------------
Optional 2 Metal Detection Only
------ ------------------------------------
State Agency Approval Signature
Option 2 Additional Requirements
Attached and signed by DA and
Processor CA 7/1/99
------ ------------------------------------
State Effective Date
-----------------------------------------------
FORMULATION, RETURN, AND FEE FOR SERVICE CANNOT BE CHANGED DURING THE AGREEMENT
PERIOD WITHOUT PRIOR APPROVAL OF DA.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
THIS IS AN ORIGINAL SCHEDULE UNLESS CHECKED BELOW Basis of Price (check):
X Original Schedule (Submitted w/Agreement no Change) END PRODUCT DATA SCHEDULE Contract Year: 1999-2000
- - - - - ---
Additional Schedule (Submitted after Agreement Approval) ALL DONATED FOOD EXCLUDING POULTRY FOB Plant X
- - - - - --- ---
Revised Schedule Short Title PB RDU-FAT 10 Commodity Code 6476 Delivered
- - - - - --- ------------- ------- ---
Other
---
</TABLE>
<TABLE>
<CAPTION>
- - - - - --------------------------------------------------------------------------------------------
PRODUCT FORMULATION
END PRODUCT DESCRIPTION RAW BATCH BASIS
- - - - - --------------------------------------------------------------------------------------------
Net
Size weight, Name raw ingredients Quantity
Net and/or in ounces, in batch; place "DF" of each
End product label name, weight servings or portion after each donated item in
type, code number, etc. per case per case component food. pounds
1 2 3 4 5 6
- - - - - --------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pineapple Dippers 18.13 40 2.00 PB RDU-FAT 10 DF 5.50
81325
- - - - - --------------------------------------------------------------------------------------------
2.50 Pineapple Apple 6.26
Fruit
- - - - - --------------------------------------------------------------------------------------------
2.75 Cinnamon Tortillas 6.88
Chips
- - - - - --------------------------------------------------------------------------------------------
TOTALS Total portion weight 7.25 Total batch weight 18.64
- - - - - --------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- - - - - ---------------------------------------------------------------------------------------------------------------------
END PRODUCT RETURN
BASED ON PRODUCTION DONATED FOOD VALUE
- - - - - ---------------------------------------------------------------------------------------------------------------------
Pounds Lbs. of Dollars
Number "DF" to Percentage each Case per
of cases make one of "DF" Price allowable
per raw case of end manufacture contained not using pound Value "DF" Net case
batch product yield per case "DF" of "DF" per case price
7 8 9 10 11 12 13 14
- - - - - ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Pineapple Dippers 1.00 5.50 91.00 5.00 $34.00 $1.03 $5.16 $28.84
81325
- - - - - ---------------------------------------------------------------------------------------------------------------------
6.26 6.25
- - - - - ---------------------------------------------------------------------------------------------------------------------
6.88 6.88
- - - - - ---------------------------------------------------------------------------------------------------------------------
TOTALS 18.13 $34.00 $5.16 $28.84
- - - - - ---------------------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
-----------------------------------------------
By-products other than rework will be product YES NO X If yes PLEASE PRINT OR TYPE
refer to Articles 12 and 35 for further requirements.
CERTIFICATION REQUIRED: (DA must indicate option required) Dippy Foods Inc./Feedback Foundation
------------------------------------
Name of Company
Donated Poultry Requires (Option 1)
------ Jon Stevenson
------------------------------------
Donated Poultry (Option 2) Name of Authorized Representative
Donated Meat Requires Option 1 President
Certification on Nonsubstitution ------------------------------------
and Nondiversion Title of Authorized Representative
------
Jon Stevenson 6-26-99
------------------------------------
Signature Date Signed
-----------------------------------------------
Optional 2 Metal Detection Only
------ ------------------------------------
State Agency Approval Signature
Option 2 Additional Requirements
Attached and signed by DA and
Processor CA 7/1/99
------ ------------------------------------
State Effective Date
-----------------------------------------------
FORMULATION, RETURN, AND FEE FOR SERVICE CANNOT BE CHANGED DURING THE AGREEMENT
PERIOD WITHOUT PRIOR APPROVAL OF DA.
</TABLE>
<PAGE>
U.S. DEPARTMENT OF AGRICULTURE
- - - - - --------------------------------------------------------------------------------
Certification Regarding Debarment, Suspension, Ineligibility
and Voluntary Exclusion - Lower Tier Covered Transactions
- - - - - --------------------------------------------------------------------------------
This certification is required by the regulations implementing Executive Order
12549, Debarment and Suspension, 7 CFR Part 3017, Section 3017.510,
Participants' responsibilities. The regulations were published as Part IV of the
January 30, 1989, Federal Register (pages 4722-4733). Copies of the regulations
may be obtained by contacting the Department of Agriculture agency with which
this transaction originated.
(BEFORE COMPLETING CERTIFICATION, READ INSTRUCTIONS ON REVERSE)
(1) The prospective lower tier participant certifies, by submission of this
proposal, that neither it nor its principals is presently debarred,
suspended, proposed for debarment, declared ineligible, or voluntarily
excluded from participation in this transaction by any Federal department
or agency.
(2) Where the prospective lower tier participant is unable to certify to any of
the statements in this certification, such prospective participant shall
attach an explanation to this proposal.
Feedback Foundation, Inc.
- - - - - --------------------------------------------------------------------------------
Organization Name PR/Award Number or Project Name
Mike Falk General Manager
- - - - - --------------------------------------------------------------------------------
Name and Title of Authorized Representative
illegible 5/21/99
- - - - - --------------------------------------------------------------------------------
Signature Date
<PAGE>
CERTIFICATION REGARDING PROVISION
OF A DRUG-FREE WORKPLACE
I, behalf of the contractor or grantee, do hereby certify that the
contractor or grantee will provide a drug-free workplace by doing all of the
following, as required by California Government Code Section 8355, as a
condition of the contract or grant:
(a) Publish a statement notifying employees that the unlawful manufacture,
distribution, dispensation, possession or use of a controlled substance is
prohibited in this person's or organization's workplace and specifying the
actions that will be taken against employees for violations of the prohibition.
(b) Establish a drug-free awareness program to inform employees aboout all
of the following:
(1) The dangers of drug abuse in the workplace.
(2) The person's or organization's policy of maintaining a drug-free
workplace.
(3) Any available drug counseling, rehabilitation and employee assistance
programs.
(4) The penalties that may be imposed upon employees for drug abuse
violations.
(c) Require that each employee engaged in the performance of the contract
or grant be given a copy of the statement required by subdivision (a) and that,
as a condition of employment on the contract or grant, the employee agrees to
abide by the terms of the statement.
The contractor or grantee understands that the contract or grant may be
subject to suspension of payments under the contract or grant or termination of
the contract or grant, or both, and the contractor or grantee thereunder may be
subject to debarment if the California Department of Education determines that
either of the following has occurred:
(1) The contractor or grantee has made a false certification.
(2) The contractor or grantee violates this certification by failing to carry
out the requirements of subdivision (a) to (c), inclusive, above.
- - - - - --------------------------------------------------------------------------------
Organization Name
FEEDBACK FOUNDATION, INC.
- - - - - --------------------------------------------------------------------------------
Name and Title of Authorized Representative
Mike Falk, General Manager
- - - - - --------------------------------------------------------------------------------
Signature Date
illegible August 14, 1998
- - - - - --------------------------------------------------------------------------------
illegible 5/21/99
EXHIBIT 6.15
1999-2000 School Year
Agreement No. MOO-053
STATE OF CALIFORNIA
MASTER DONATED FOOD PROCESSING AGREEMENT
Agreement is made by and between the following State Distributing Agency:
State: CALIFORNIA
-------------------------------------
DEPARTMENT OF EDUCATION, FOOD
Agency: DISTRIBUTION PROGRAM SECTION
-------------------------------------
Agency Representative/Contact Person SEE ATTACHED LIST
-------------------------------------
Address: 560 J. Street, Suite 270
-------------------------------------
City, State, Zip Code: Sacramento, CA 95814
-------------------------------------
Telephone: (916) 323-7181
-------------------------------------
Fax: (916) 327-8969, (916) 327-5405
-------------------------------------
E-Mail: SEE ATTACHED LIST
-------------------------------------
and the following processing (Processor) company:
Company Name: Dippy Foods, Inc.
-------------------------------------
Company Representative: Jon Stevenson
-------------------------------------
Address: 1161 Knollwood Circle
-------------------------------------
City, State, Zip Code: Anaheim, CA 92801
-------------------------------------
Contact Person: Munjh Johal
-------------------------------------
Telephone: (714) 816-0150
-------------------------------------
Fax: (714) 816-0153
-------------------------------------
E-Mail:
-------------------------------------
and is made with respect to the following facts:
The United States Department of Agriculature (USDA) has made federally donated
foods (DF) available to the State Distributing Agency (DA) for distribution to
eligible Recipient Agencies (RA), using the following DF, as identified on the
attached End Product Data Schedule(s).
1
<PAGE>
The DA is desirous of arranging with the Processor for the production of end
product(s) as described on the attached End Product Data Schedule(s) (EPDS) at
the following Processor's plant location(s):
<TABLE>
<CAPTION>
- - - - - ---------------------------------------------------------------------------------------------------------------
Plant Name Street, City, State, Contact Person Phone Number Fax Number
Zip
- - - - - --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1200 N. Knollwood Circle
Feedback Foundation, Inc. Anaheim, CA 92801-1334 Mike Falk (714) 220-0224 (714) 220-1374
- - - - - ---------------------------------------------------------------------------------------------------------------
- - - - - ---------------------------------------------------------------------------------------------------------------
- - - - - ---------------------------------------------------------------------------------------------------------------
</TABLE>
(For additional plants add an attachment)
This agreement is governed by the current and applicable sections of Title 7
Code of Federal Regulations, Parts 210 and 250, and any subsequent changes are
also included as part of this Agreement.
In consideration of the terms and conditions contained within this Agreement,
the parties agree as follows:
1. AGREEMENT INTENT
This Agreement sets forth the contractual obligations under which Processor
may utilize DF to manufacture and deliver specified end product(s) to
eligible RA to ensure the return of quantity, quality, and value of such DF.
2. CATEGORIES OF DONATED FOODS IN PROCESSING
Processor shall adhere to the processing and handling procedures applicable
to the category of DF to be processed under this Agreement as defined below:
A. SUBSTITUTABLE - Such DF may be substituted, interchanged, or commingled
in storage and production with a commercial food of the same generic
identify and of equal or better quality. Butter, processed cheese,
cheddar cheese, mozzarella cheese, corn grits, corn meal, flour,
macaroni, nonfat dry milk, peanut butter, peanut granules, roasted
peanuts, rice, rolled oats, rolled wheat, shortening, vegetable oil,
spaghetti and such otehr DF as specifically approved by Food and
Nutrition Services (FNS) and detailed in Article 35 of this Agreement
shall be substitutable.
1) Processor shall maintain documentation that the commercial food
interchanged, commingled, or substituted for the DF is:
a. Of U.S. origin, and
b. Identical or superior to the DF specification as evidenced by
certification performed by, or acceptable to, the applicable
federal acceptance service.
2
<PAGE>
2) Processor may utilize substitutable DF in the manufacture of end
product sold commercially, but shall not otherwise sell or dispose
of the DF in bulk form. Should Processor elect to utilize a
commercial food in anticipation of replacement with a DF, the RA
or DA cannot guarantee such replacement and assumes no liability
for such replacement.
3) Processor must be able to demonstrate that purchases of commercial
foods are sufficient to meet commercial production needs.
If used of concentrated skim milk to replace donated nonfat dry milk is
approved by the DA, the Processor must comly with provisions in 7 CFR Part
250.30 (f) (3).
B. NONSUBSTITUTABLE - DF other than those listed in Article 2.A. or in
Article 35 of this Agreement shall not be interchanged, commingled or
substituted with a commercial food that could be used in place of the
DF in the product formulation. UNDER NO CIRCUMSTANCES MAY MEAT AND
POULTRY BE SUBSTITUTED. Other nonsubstitutable DF may be substituted
with commercial product as described above in 2.A. with an approval
from the FCS.
Processor shall store such DF apart from all commercial foods and
process them apart from regular commercial production. Processor shall
return all product produced above guaranteed minimum return on the
EPDS. If actual yield falls below the guaranteed return, the Processor
shall make up the difference between actual and guaranteed return by
either:
1) Utilizing commercial food that is of U.S. origin; and identical to
or superior in every particular to the DF as evidenced by
certification performed by or aceptable to the applicable federal
acceptance service. A USDA certificate must be obtained to certify
the quality of replacement meat and poultry;
2) Reimbursing the RA or DA the value of DF that owuld have been used
to produce the end product.
3. PROCESSING ARRANGEMENTS
Processor shall maintain delivery and/or billing invoices, refund
applications, canceled checks or other documentation as applicable, to
substantiate that proper value pass-through occurred or proper fee for
service was charged.
Arrangements for processing DF into various end products will be based on
one of the following:
3
<PAGE>
A. DONATED FOOD VALUE PASS-THROUGH SYSTEM
The processing of DF is incorporated into the Processor's normal manner of
business, including production, pricing, and delivery of the end product.
The specific value of the DF shall be established based on the designated
USDA VALUE. The Processor shall ensure that the full value of the DF
contained in the end product shall be passed on to the eligible purchasing
RA. The dollar pass-through value of DF contained in the end product shall
be provided to the RA either by the DA or the processor at the option of the
DA. With the concurrence of the DA, the Processor shall select one or more
of the following value pass-through systems in Article 36 of this Agreement.
The DA reserves the right to disallow continued use of a value pass-through
system if poor performance is indicated.
1) DIRECT SALES
a. Discount System
The Processor shall invoive the RA at net case price which shall
reflect a discount for the value of the DF established in this
Agreement. Only when end product has been delivered to the RA or the
RA's designee may DF inventory be reduced.
b. Refund System
The Processor shall invoice the RA at the commercial/gross price of
the end product. Refunds that reflect the value of the DF contained
in the end products shall be made to the RA upon proof of purchase.
Refund payments shall be initiated or paid as follows:
(1) RA shall submit a refund application to the Processor within
30 days from the end of the month of the date of delivery. RAs
may submit refund applications to the processor on a quarterly
basis in the total refund due is $25 or less during the
quarter.
(2) Within 30 days of the receipt of the refund application,
Processor shall compute the amount and issue payment of refund
directly to the RA. Processors may issue payment of refunds on
a quarterly basis if the total payment due to that RA is $25
or less during the quarter. Sales cannot be reported and the
inventory cannot be reduced until refunds are actually issued.
(3) Copies of refund application and payment to RAs shall be
forwarded to appropriate DA by the Processor with the monthly
performance report.
4
<PAGE>
2) INDIRECT SALES
a. Discount Syatem (Hybrid System)
The Processor shall sell to the distributor at the commercial/gross
price. The distributor will invoice the RA at the net case price
plus the distributor's markup. The net case price plus the
distributor's markup. The net case price shall reflect a discount
equal to the full value of the DF established in this Agreement. The
distributor shall apply for a refund or credit from the Processor
for the full value of the DF. Sales verification is required for
this pass-through system. (See Article 4.)
b. Refund System
The Processor shall sell to the distributor at the commercial/gross
price. The distributor will invoice the RA this price plus the
distributor's markup. Refunds shall be made to the RA by the
Processor that reflect the value of the DF contained in the end
products upon receipt of refund application. Refund payment shall be
initiated and paid the same as listed above in paragraph 1) b.1
through 3.
3) OTHER VALUE PASS-THROUGH SYSTEMS
Processors are permitted to use alternate value pass-through systems if
approved by DA and FNS. These systems must comply with the sales
vertification requirements outlined in 7 CFR 250.19(b)(2) or alternate
verification system as approved by DA and FNS.
B. FEE-FOR-SERVICE SYSTEM
A "fee-for-service" system is a price by pound or by case representing a
Processor's cost of ingredients (other than the DF), labor, packaging,
overhead, and other costs incurred in the conversion of the DF into the
specified end product. A discount or refund per case is not established;
consequently, there is not a credit for the value of DF. The net price is
based on the charge per pound or per case for processed finished product.
End products produced under fee-for-service Agreements may be delivered and
invoiced to RA in one of the following ways:
1) The Processor delivers the end products directly to the RA or RA's
designee and bills the RA for the agreed upon fee for service.
5
<PAGE>
2) Delivery is made by commercial distributors. Processor shall not
sell end products directly to distributor. Two options for arranging
payment for end products are:
a. A dual billing system whereby the RA is billed by the Processor
for the fee for service and the distributor bills the RA for
storage and delivery of end products; or
b. Processor arranges for the delivery with a distributor for the
RA. The Processor's invoice must include both processing fee and
the distributor's charges as separate, identifiable charges.
4. PROCESSOR SALES VERIFICATION
If delegated by DA for discount sales made by distributors, the Processor
shall verify sales conducted under the terms of Article 3.A.2. and 3.A.3.).
Verification shall include a statistically valid sample of reported sales in
a manner which ensures a 95 percent confidence level. All sales reported
during a specific period shall be verified at least semiannually. The
Processor shall verify that sales were made only to eligible RAs and that
the value of DF was passed through to those RAs. Sales verification findings
shall be reported as an attachment to the December and June performance
reports in a format approved by the DA. At the same time this report is
submitted, the Processor shall submit to DA a corrective action plan
designed to correct problems identified in the verification effort. This
plan will be subject to DA approval. DA may assess a claim against the
Processor if, after review, it is determined that the value of DF has not
been passed on to the RA or if the end products were improperly distributed.
5. END PRODUCT DATA SCHEDULE
The End Product Data Schedule (EPDS) and instructions are an integral part
of this Agreement. The Processor agrees to the EFFECTIVE DATE ESTABLISHED by
the DA on the EPDS for the item(s) listed thereon and the Processor SHALL
NOT be permitted to reduce inventory for any end products which were sold
prior to the effective date so established.
Specific details are contained in the EPDS instructions. The following
information will be included:
A. END PRODUCT DESCRIPTION
B. PRODUCT FORMULATION
C. END PRODUCT RETURN
D. PRICING STRUCTURE OF END PRODUCT
6
<PAGE>
CASE PRICES SHOWN ON THE ATTACHED EPDS SHALL NOT BE EXCEEDED, BUT MAY BE
QUOTED LOWER FOR SPECIAL PROMOTIONS, BIDS, VOLUME DISCOUNT, ETC. PROVIDED
THE DISCOUNT OR REFUND, IF APPLICABLE, REMAINS THE SAME AS ESTABLISHED IN
THIS AGREEMENT. Any credits (i.e., buy back parts and by-products such as
bones, broth, etc.) must be listed separately on the EPDS.
6. PACKAGING
Processor shall package all end products in accordance with acceptable
standards within Processor's industry and in conformity with federal and
State requirements which may be applicable during the period of this
agreement. Damaged cases may be rejected at no cost to the DA or RA.
7. LABELING
Processor shall label the end product container in accordanced with
applicable labeling requirements. In addition, Processor shall adhere to the
following label requirements:
A. The exterior shipping container, and where practical the individual
wrappings or containers within the exterior container, of end product
containing nonsubstitutable DF as defined in Article 2.B. shall have
clearly shown on the label the legent "Contains Commodities Donated by
the United States (U.S.) Department of Agriculture. This products shall
be sold only to eligible Recipient Agencies".
B. Processor shall obtain approval through procedures established by the
FNS in conjunction with the Food Safety Inspection Service (FSIS) and
Agricultural Marketing Service (AMS) of the U.S. Department of
Agriculture, and National Marine Fisheries Service of the U.S.
Department of Commerce, or other applicable federal agency for all
labels which make any claim with regard to an end product's
contribution toward mail requirements of any child nutrition program.
C. The Processor may be required to obtain a Child Nutrition (CN) label
for all end products containing meat, pooultry, fish or a meat
alternate such as cheese or peanut butter. If a CN label is required
and requested in Article 35 the processor must: (1) submit a copy of
the approved CN labels to the DA prior to requesting the DA to order DF
or picking up DF from RA and (2) affix the CN label to each case of end
product to be sold to eligible RA.
7
<PAGE>
8. QUALITY CONTROL (QC)
As an attachment to the Agreement, the Processor shall provide a written
description of the Processor's quality control program to the DA. By signing
this Agreement, the Processor assures that an effective QC System will be
maintained for the duration of this Agreement.
A. Processor shall transport DF picked up from DA or RA; receive, handle,
store and deliver end product in a safe and sanitary manner and at the
recommended temperature for the specific DF and end product covered by
this Agreement.
B. Processor, with the concurrence of DA and USDA, may refuse to the
carrier for the account and disposition of the vendor or USDA any
delivery of DF directly to the Processor's plant or to his authorized
storage agent which does not meet the federal specifications under
which it was purchased and shipped.
C. All end product produced under this Agreement shall be processed
according to the health and sanitation standards for plant facilities
and food processing established by the locality or stae in which
Processor's plant is located or by the applicable federal standards,
whichever are higher.
D. At the option of DA, samples may be pulled from delivered end product
for laboratory testing. Costs of such tests shall be paid by Processor
only if product sample tested fails to meet either Agreement
specifications or quality and wholesomeness standards.
E. Processor shall maintain end product batch identification in the event
end product is rejected upon delivery. End product failing to meet
Agreement specification or wholesomeness standards shall be rejected by
DA and Processor so notified. Processor shall be given fifteen days
time fromn this notice of rejection to negotiate removal of rejected
product and replacement by acceptable end product. If agreement is not
reached, the DA or purchasing RA shall have the right to purchase the
same or similar product on hte open market at Processor's expense. If
Processor is unable to arrange removal of rejected product within a
reasonable time, DA shall proceed to authorize removal and destruction
at Processor's expense.
3. INSPECTION AND GRADING REQUIREMENTS FOR PROCESSING
The Processor shall be required to provide inspection and/or acceptance
and certification as follows:
8
<PAGE>
A. CONTINUOUS WHOLSESOMENESS INSPECTION - When donated meat or poultry
products are processed or when commercial meat or poultry products are
incorporated into an end product containing one or more DF, all
processing shall be performed in plants under continuous inspection by
FSIS personnel, or State meat and poultry inspection personnel in those
states certified to have programs at least equal to the federal
inspection program.
B. ACCEPTANCE SERVICE GRADING - All donated meat and poultry processing
shall be performed under AMS acceptance service grading. Option 1
complies with FNS minimum requirements for verifying nonsubstitution
and nondiversion. Additional certification requirements may be
requested under Option 2 as specified in Article 35 and EPDS. Under no
circumstances shall Processor set up production runs for the purpose of
circumventing this requirement.
1) The cost of this service shall be borne by the Processor.
2) Exemptions in the use of acceptance service graders will be
authorized on the basis of each order to be processed provided the
Processor can demonstrate:
a. that even with ample notification the Processor cannot
secure the services of a grader;
b. that the cost for a grader is unduly excessive, as
determined per order by DA, relative to the value of food
being processsed and that production runs cannot be combined
or scheduled to enable prorating of the cost of services
among the purchasers of end products; or
c. that the documented urgency of the RA's need for the end
product precludes the use of acceptance services.
DA reserves the right to verify Processor's claim for exemption.
3) Copies of all certification forms issued by AMS graders for
donated meat or poultry processing shall be provided to DA with
the monthly performance report.
4) At the option of DA, and as detailed in Article 35 of this
Agreement, other DF may be required to be processed under the
applicable federal acceptance service including the certification
that a commercial food authorized to be substituted for a DF is
identical or superior to the DF specifications.
9
<PAGE>
10. RESERVED
11. DONATED FOOD CONTAINERS
Processor shall return to the DA, or RA for which the DF was processed, all
funds received from the sale of the DF containers. Refund of such funds
shall, at the option of DA, be in the form of a cash payment or applied as
credit. If credit is selected, it must be clearly identified on the invoice.
If the containers are sold for commercial reuse, all USDA restrictive
legends or markings shall be completely and permanently obliterated or
removed by Processor prior to resale.
12. BY-PRODUCTS OF DONATED FOOD PROCESSING
Salvageable material, not utilized in the end products, that is produced or
derived from manufacturing processes employed in the processing of DF, shall
be disposed of in such a manner as to realize the greatest value possible
for the material. Such material shall, with the concurrence of DA, be
handled as follows:
A. The by-product, if agreeable to the RA for which the DF was processed,
shall be accumlated and returned in a sanitary and wholesome manner to
RA; or
B. At the option of DA, Processor shall return to the DA, or RA for which
the DF was processeds, all funds received from the sale of salvageable
by-product material. Return of which funds shall, at the option of DA,
be in the form of a cash payment or a reduction in the selling price of
the end product based on the following:
1) the actual value received from the sale of the by-product by
processor; or
2) The fair market value of the by-product at the time it is further
processed or refined by Processor.
C. Special handling instructions and disposition of any by-product sh all
be detailed in Article 35 of this Agreement.
13. TRANSFERS OF USDA DONATED FOODS
DF may be transferred only between DAs or RA with the concurrence of the DA
and FNS if applicable. All transfers of DF shall be documented. Such
documentation shall be maintained in accordance with Article 16.C.
10
<PAGE>
14. INVENTORY REDUCTIONS
A. SUBSTITUTABLE DONATED FOODS
For all end products utilizing a substitutable DF, the amount of DF
actually contained in the end product, as identified in the EPDS shall
be the only basis for inventory reduction on the monthly performance
report. The reduction in inventory can be shown only after there has
been pass through to RA of the value of the DF.
B. NONSUBSTITUTABLE DONATED FOODS
For all end products utilizing nonsubstitutable DF, inventory
reductions to monthly performance reports shall be made based on the
actual amount of DF used to produce the end product. The finished good
inventory may be reduced only upon delivery to eligible RA or RA
designee.
15. PERFORMANCE REPORTING
The Processor shall submit monthly reports pertaining to performance under
this Agreement to DA postmarked or transmitted electronically no later than
the last day of the month following the close of the reporting period. IF
NO ACTIVITY TOOK PLACE DURING THE REPORTING MONTH, A PERFORMANCE REPORT
SHALL BE SUBMITTED TO REFLECT NO ACTIVITY. Negative inventory shall be
reported on monthly reports, i.e., negative inventory resulting from sales
of end products containing substituted commercially purchased foods meeting
the standards specified in Article 2. If sales are made using a refund
system, the sales cannot be reported and inventory cannot be reduced, until
a refund is actually issued.
The DA will monitor Processors to ensure that the quantity of DF on hand
does not exceed a six-month supply based on the Processor's average monthly
usage.
If sales verification on discount sales is delegated to the Processor,
findings shall be reported as an attachment to the December and June
performance reports in a format approved by the DA.
Monthly performance reports shall be submitted only in a DA approved format,
which shall include:
A) A list of RA by name and code number (if applicable) purchasing
end products under this Agreement;
B) DF inventory at the beginning of the reporting period;
11
<PAGE>
C) Total quanity of DF received during the reporting period specifying
the sources of such DF, such as backhaul from DA or RA, direct
shipments arranged by DA, and/or transfers into DA's or RA's account
and year-to-date totals;
D) Total number of units/cases of approved end products by product
identification code or brand name delivered to each eligible RA during
the reporting period for which the RA has received a discount or
refund;
E) Total number of pounds of DF reduced from inventory and year-to-date
totals;
F) DF inventory at the end of the reporting period;
G) A certification statement that sufficient DF is in inventory or on
order to account for quantities needed for production of end products
for State processing contracts and that the Processor has on hand or
on order adequate quanitities of foods purchased commercially to meet
the Processor's production requirements for commercial sales.
PROCESSORS FAILING TO SUBMIT MONTHLY PERFORMANCE REPORTS WITHIN THE
ESTABLISHED TIME LIMITS WILL BE CONSIDERED IN NONCOMPLIANCE WITH THIS
AGREEMENT AND THIS MAY RESULT IN AGREEMENT TERMINATION BY THE DA.
16. ACCOUNTABILITY AND RECORDS
Processor shall fully account for all DF delivered or carried forward
from previous contract year into its possession by the production and
delivery of an appropriate number of end product specified in this
Agreement to eligible RAs. Donated Food (DF) or the value thereof not so
accounted for shall be the liability of the Processor. All records and
documents to substantiate information provided on reports shall be
maintained on file for a period of three years form the close of the
federal fiscal year to which they pertain unless longer retention is
required for resolution of an audit, litigation, or State law (refer to
Article 35). Accountability records shall include, but not be limited to,
the following:
A. PRODUCTION RECORDS - Processor is obligated to meet DF usage in
production stated on the EPDS and shall be liable for shortages and
overages between that stated usage per case of end product and the
actual usage per case of end product. Production records shall
include:
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1) Daily or bath production records to substantiate actual DF or
substituted commercial ingredient usage per case of end product. At
a minimum such records shall consist of end product formulation or
batch recipes; production dates, batch identification and/or periods
of production; quantity of DF or substituted commercial food placed
into production for the period; and quanity of end product produced
during the same period of production.
2) Quality control records as required by Article 8, end product
labeling and any in-plant quality control records used to assure
proper formulation, packaging net weight, bacteriological safety,
and other controls to assure end product quality and wholesomeness.
3) Grading certificates and reports for meat and poultry issued on
incoming DF or substituted commercial food, during formulation and
production of the end product, and on the outgoing end product by
the applicable federal acceptance service.
4) Authorization letters from DA waiving federal acceptance service
requirements for a specific production run.
B. PERPETUAL INVENTORY OF DONATED FOOD - Processor shall maintain accurate
and completed records with respect to receipt, usage, disposition,
inventory of DF, load out check sheets, bills of lading, signed delivery
tickets, and any other shipping and receiving documents to substantiate
delivery of DF or substituted commercial food in the end product to DA,
RA or their authorized agent.
C. OTHER RECORDS
1) Quality of Commercial Food. Refer to Article 2.A.1.
2) Documentation of value pass-through or fee for service. Refer to
Article 3.
3) Processor Sales Verification. Refer to Article 4.
4) Transfers of DF. Refer to Article 13.
5) Performance Reports. Refer to Article 15.A.
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17. AUDITS
A. CPA AUDITS
Any Processor which meets the definition of a multi-state Processor as
defined in 7 CFR Part 250 is subject to the following audit
requirements:
Multi-state Processor which receive more than $250,000 each year in
DF, shall obtain an independent CPA audit for that year. Multi-state
Processors which receive $75,000 to $250,000 in DF each year shall
obtain an independent CPA audit every two years. Those which receive
less than $75,000 in DF each year shall obtain an independent CPA audit
every three years. The costs of the audits including those costs
associated with training, shall be borne by the processors. All audit
requirements are to be met as stipulated in Section 7 CFR Part 250.18.
For audit purposes, the total value of the DF received shall be
computed by adding the value of food received under all State Commodity
Processing Programs.
Noncompliance with this audit requirement shall render the Processor
ineligible to renew or enter into another Agreement with any
contracting agency until he required audit has been conducted and
deficiencies corrected.
B. RIGHTS OF REVIEW AND AUDIT
Representatives of DA, USDA and General Accounting Office shall have
the right to inspect the DF and substituted commercial food in the
possession of Processor, the facilities used in handling, storing,
processing, and transporting, methods and procedures used by processor
and/or his agent in carrying out the requirements of this Agreement,
and all records and substantiating documentation required by this
Agreement, during Processor's normal working hours. When requested,
Processor shall furnish such representatives with sames of end product
taken from a production run for testing.
18. LIABILITY FOR DONATED FOODS
Processor shall be financially liable for the value of all DF in inventory.
Any reduction in financial liability can only be accomplished by inventory
reductions as permitted and documented under artiels 3, 13, 14, and 16.
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A. SUBSTITUTABLE DONATED FOODS
Processor shall replace any unaccounted for, loss of, damage to, or
improper use of, DF while in possession of the Processor with
commercial food in compliance with Article 2.A.1.
B. NONSUBSTITUTABLE DONATED FOODS
The Processor shall be responsible for loss of, damage to, or improper
use of DF prior to delivery to RA or RA's designee. Losses shall be
promptly rep;orted to DA with a complete explanation of the
circumstances. Any claim action for the DF shall be determined by DA.
If a claim is required, Processor shall, at option of DA:
1) Replace the DF with an equal quantity of like in kind commercial
food that is identical or superior to the DF specificaitons as
required under Article 2.A.1; or
2) Pay the DA an amount equal to USDA's most recent per pound cost
information on acquiring and delivering replacement food, relative
to the time of the inability to account for, loss of, damage to,
or improper use of the DF; or the current per pound value
established by this Agreement.
19. INVENTORY PROTECTION
Processor shall furnish to DA a surety bond obtained only from a surety
company listed in the Department of Treasury Circular 570, "Surety
Companies Acceptable on Federal Bonds," an irrevocable letter of credit, or
an escrow account. Such bond, letter of credit, or escrow account shall be
made payable to the DA. The bond shall guarantee that the processor shall
faithfully account for, return, or pay for all of the DF received or
carried forward, in accordance with this Agreement.
Inventory protection is required by the DA prior to the delivery of DF to
the processor. The minimum amount of the bond, letter of credit or escrow
account, shall be determined by: value of the DF on hand and on order minus
anticipated usage rate during the Agreement period. The bond shall remain
in effect until all donated food is properly accounted for, paid for or
returned in accorance with this Agreement. Liability for loss is provided
in Article 18 of this Agreement.
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20. AGREEMENT TERMINATION
This Agreement may be terminated immediately at the option of DA for
noncompliance of its terms and conditions by Processor or if any right in
favor of DA is threatened or jeopardized by Processor and/or his agent.
This Agreement may be terminated by either party upon 30 DAYS WRITTEN
NOTICE to the other. Disposition of DF inventory with Processor payment of
value thereof shall be based on the following:
A. When this Agreement is terminated or not renewed, the Processor, at the
option of DA and Food and Nutrition Service Regional Office (FNSRO)
regarding nonsubstitutable DF shall:
1) Return the DF to DA; or
2) Pay the DA an amount equal to USDA's most recent cost information
on acquiring and delivering replacement food relative to the time
of termination; or
3) Pay the DA current per pound value established by this Agreement;
or
4) Pay the Commodity Credit Corporation (CCC) unrestricted sales
price.
B. When this Agreement is terminated or not renewed, the Processor, at the
option of DA and FNSRO regarding substitutable DF shall:
1) Return the DF to DA to a destination designated by DA at
Processor's expense; or
2) Replace the DF with commercial foods of identical or superior to
quality as certified in accordance with Article 2 of this
Agreement and deliver such foods to the DA to a destination
designated by DA at Processor's expense; or
3) Pay the DA for the DF based on USDA's most recent cost information
on acquiring and delivering replacement foods relative to the time
of termination; or
4) Pay the DA for the DF based on the current per pound value
established by this Agreement; or
5) When feasable and with the concurrence of any affected
distributing agency with which the Processor has an agreement,
transfer all DF inventory of DA to the account of the affected
distributing agency; or
6) Pay the CCC unrestricted sales price.
21. ASSIGNMENT/DELEGATION OF RESPONSIBILITIES
Processor shall not assign and/or delegate any of the duties and/or
responsibilities to process DF under this Agreement to any party,
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either by way of subcontract or any other arrangement, without the prior
written consent of DA. If a subcontract is approved, Processor remains
responsible as prime contractor to ensure that DF is accounted for and
processed according to the terms and conditions contained in this Agreement
and is obligated to inform the subcontractor of these requirements. A
subcontractor Agreement (Addendum No. 1) must be filled out for each
subcontractor and included with this Agreement when submitted for approval.
22. SOURCES OF DONATED FOOD FOR PROCESSING
Processor may acquire DF for processing under this Agreement frm one or
more of the following sources:
A. Director shipment of DF to Processor's plant as ordered by DA. Such
orders should be mutually agreed upon between the processor and DA in
consideration of inventory status and estimated deliveries of end
product.
B. Transfer from other States with which Processor has an Agreement and as
authorized by both states.
C. Backhaul from RA's and/or DA's inventory.
All quanitities of DF and sources must be entered as DF received on the
monthly Performance Report required in Article 15.A. of this Agreement.
APPROVAL IF THIS AGREEMENT BY THE DA SHALL NOT OBLIGATE THE DA OR USDA TO
DELIVER DF FOR PROCESSING.
23. DEMURRAGE AND DETENTION
Processor shall be responsible for all demurrage and detention charges on
shipments of DF placed for unloading at Processor's plant that have been
ordered for delivery as mutually agreed unless other payment arrangements
have been mutually agreed upon between Processor and DA. DA should make
every effort to ensure that Processor is notified of shipment of DF
destined for Processor's plant as soon as possible to assist Processor in
coordination of receiving, purchasing, production, and unloading.
24. INDEMNITY/HOLD HARMLESS
Processor will indemnify and hold DA and RA free and harmless from any
claims, damages, judgements, expenses, attorney's fees, and compensations
arising out of phyisical injury, death, and/or property damage sustained or
alleged to have been sustained in whole or in part by any and all persons
whatsoever as a result of or arising out of any act or omission of
Processor, his/her agents or employees, or caused or resulting from any
deleterious substance in any of the products produced from DF for which the
Processor is responsible.
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25. INSURANCE
Processor shall provide adequate insurance or bond coverage for all
insurance losses.
26. ASSURANCE OF CIVIL RIGHTS COMPLIANCE AND EMPLOYMENT
The Processor agrees to comply with Title VI of the Civil Rights Act of
1964 (42 U.S.C. 2000 d, et seq.), all provisions required by the
implementing regulations of U.S. Department of Agriculature, Department of
Justice Enforcement Guideslines, FNS directives and guidelines to the
effect that no person on the grounds of race, color, national origin, sex,
age, or handicap shall be excluded from participation in, be denied the
benefits of or oitherwise be subject to discrimination under any activity
carried out under this Agreement. In addition, the Processor agrees not to
discriminate on the basis of race, color, national origin, sex, age, or
handicap among eligible RA in the merchandising and sale of end products
containing DF. This assurance is given in consideration of and for the
purposes of obtaining permission to use Federal property or interest in
such property without consideration or at a nominal consideration. This
assurance is binding on the Processor, its successors, transferees, and
assignees as long as its receives assistance or retains possession of any
assistance from FNS.
Processor shall comply with all applicable federal, State and local laws
and regulations pertaining to wages, hours, and conditions of employment.
27. UNLAWFUL BENEFITS
No employees and/or agent(s) of any party to this Agreement, DA's office or
any RA for which processing under this Agreement has been approved, shall
be admitted to or may accept any share or part of this Agreement or to any
benefit that may arise therefrom.
28. AGREEMENT ENTIRETY
This document including the attachments contains the entire Agreement
between the parties hereto relating to the matters covered hereunder. All
prior negotiations, representations, understandings and/or stipulations are
conclusively superseded and no other agreement or promise made by any party
hereto, or by any of their agent(s) which is not contained in this
Agreement shall be binding or valid.
29. MODIFICATION/AMENDMENT OF AGREEMENT
This Agreement and Addendum A shall not be modified, amended, altered, or
changed except by a written agreement signed by the parties hereto. If
written agreement is obtained for changes in end product formulation,
return of DF, or net case cost, Processor shall not implement changes until
written approval is received from DA.
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30. SERVING OF NOTICES
Any notice, demand or communication under or in connection with this
Agreement may be served upon the other party by personal service, or by
mailing the same by registered or certified mail, postage prepaid and
addressed to the designated representative of such party at the address set
out in this Agreement. Any such notice or demand shall be deemed served at
the time of personal service or within 48 hours after the posting of the
notice in the United States mail. Either party may change such designated
representatives or mailing address by written notification to the other
party.
31. LEGAL RESOLUTION
Processor agrees that in performance of this Agreement to obey, abide, and
comply with all applicable local, state, and federal laws and regulations.
This Agreement shall be governed and construed and the rights and
obligations of parties hereto shall be determined in accordance with the
laws of the State which DA represents. If any term, covenant, condition or
provision of this Agreement is held by a court of competent jurisdiction to
be invalid, void, or unenforceable, the remainder of the provisions shall
remain in full force and effec tand shall in no way be affected, impaired
or invalidated.
32. DISTRIBUTION OF COPIES
All parties to this Agreement shall retain a copy of the signed Agreement
and Addendum for their records. DA is required by federal regulations to
provide a signed copy of this Agreement and Addendum to the USDA Regional
Office. Copies may be provided to any person upon request as public records
under the applicable federal and state "freedom of information" laws.
33. ELIGIBLE RECIPIENT AGENCIES
Upon approval of this Agreement, DA agrees to provide the Processor with a
listing of all elilgible RA with appropriate identification numbers, if
applicable, and addresses. Processor can reduce inventory only on sale of
approved end products to these eligible RA.
34. DEBARMENT
Certification is required by the regulations implementing Executive Order
12549, Debarment and Suspension, 7 CFR Part 3017, Section 3017.510,
Participants responsibilities. The regulations were published as Part IV of
the January 30, 1989, FEDERAL REGISTER (pages 4722-4733).
The prospective lower tier participant (Processor) agrees by signing the
attached form, it shall not knowingly enter into any lower tier covered
transaction with a person who is debarred, suspended, declared
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ineligible, or voluntarily excluded from participation in this covered
transaction, unless authorized by the department or agency with which this
transaction originated. This signed attached form shall become part of the
Agreement.
35. SPECIAL PROVISIONS (STATE OF CALIFORNIA)
In addition to the foregoing provisions, Processor agrees to the following
Special Provisions required by the State of California.
A. ARTICLE 2.B. NONSUBSTITUTABLE
Article 2.B., second paragraph is amended to read:
Processor shall store such DF apart from all commercial foods and
process them apart from regular commercial production. All
nonsubstitutable DF received from or for California RA shall be kept
separated and not commingled with any other state's DF unless a
written request has been submitted to and approved by DA. The request
must provided written assurance that meat more than one year old will
not be processed. Processor shall return all product produced above
the guaranteed minimum return specified on the EPDS. If the actu al
yield falls below the guaranteed return, the Processor shall make up
the difference between actual and guaranteed return, with the prior
approval of DA, by either:
1) Utilizing commercial food that is of U.S. origin; and identical
to or superior in every particular to the DF as evidenced by
certification performed by or acceptable to the applicable
federal acceptance service. A USDA certificate must be obtained
to certify the quality of replacement meat and poultry;
2) Reimbursing the RA or DA the value of DF that would have been
used to produce the end product.
B. ARTICLE 3 PROCESSING ARRANGEMENTS
Article 3.A.1) a. is amnded to read:
a. Discount System
The Processor shall invoice the RA at net case price which shall
reflect a discount for the value of the DF established in this
Agreement. Only when end product has been delivered to the RA or
the RA's designee may DF inventory be reduced. Processor shall
retain invoices from RA when end products are sold by Processor to
RA through a discount system.
Article 3.A.2.) a. is amended to read:
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a. Discount System (Hybrid System)
The Processor shall sell to the distributor at the
commercial/gross price. The distributor will invoice the RA at the
net case price plus the distributor's markup. The net case price
shall reflect a discount equal to the full value of the DF
established in this Agreement. The distributor shall apply for a
refund or credit from the Processor for the full value of the DF.
Sales verification is required for this pass-through system. (see
Article 4.)
Processor shall ensure that distributors maintain invoices from RA
when end products are sold through a discount system and that such
invoices shall be provided to Processor upon request.
Article 3.A.3) OTHER VALUE PASS-THROUGH SYSTEMS
Article 3.A.3) is amended by the addition of the following paragraph:
California Value-Pass-Through (VPT) System
Processor sells to the distributor at the net case price which
shall reflect a discount for the value of the DF established in
the Agreement. The distributor also sells the end product to RA at
the net case price plus delivery. The invoices generated by these
sales, both by Processor and the distributor, must indicate the
discount included in the sale and identify the discount as
resulting from the valiue of the DF.
Processor shall ensure that distributors maintain invoices from RA
when end products are sold through a discount system and that such
invoices shall be provided to Processor upon request.
C. Article 4 PROCESSOR SALES VERIFICATION
Article 4 is amended by the addition of the following paragraphs:
A. Processor Sales Verification Procedures for Use in the California
Value Pass-Through System
Processor must do a semi-annual review of a statistically valid
sample of sales, as described in Attachment 1 of this Agreement,
for the previous six-month period and submit the sales
verification data to DA as an attachment to the December and June
performance reports in whatever format DA deems necessary. The
sample size must ensure a 95 percent confidence level and
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1) Support the projection of a claim against Processor
when, in the review of the sample, it is determined
that the value of donated foods has not been passed on
to recipient agencies or when end products have been
improperly distributed.
2) Provide for the assessment of claims against Processor
in accordance with FNS Instruction 410-1, Non-Audit
Claims, Food Distribution Program, in instances when
deficiencies have been identified.
3) Provide for the adjustment of performance reports and
processing inventory reports to reflect any invalid
sales.
4) Provide for the development and submission by Processor
to DA of a corrective action plan designed to correct
problems identified during the sales verification.
B. California Pass-Through Sales Reverification
DA will review Processor's rep;orts of sales verification
data, and in instances of poor processor performance, DA
will require Processor to discontinue the California VPT,
initiate an audit or review to determine the extent to which
sales are to be disallowed, established a claim, and/or
terminate the contract.
D. Article 5 END PRODUCT DATA SCHEDULE
Article 5 is amended by the addition of the following paragraph to
the end of the Article:
Processor will utilize automated spreadsheet provided by DA in
preparing EPDS. Processor may not produce any product containing
donated commodities without an approved EPDS on file.
E. Article 9 INSPECTION AND GRADING REQUIREMENTS FOR PROCESSING
Article 9.B.2) is amended by the addition of the following:
d. All requests for exemptions must be made, on the
approved forms, to the DA at least five (5) working
days prior to the Processor's production run.
The following paragraph is added to Article 9:
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C. Poultry Grading - All donated bone-in poultry processing
shall be performed under Option 2 grading requirements
unless a written request has been submitted to and approved
by DA to allow for Option 1 grading.
F. Article 13 TRANSFERS OF USDA DONATED FOODS
Article 13 is amended as follows:
DF may be transferred only between DAs or RA with the concurrence
of the DA and FNS is applicable. All transfers of DF shall be
documented. Such documentation shall be maintained in accordance
with Article 16.C.
All transfers must have the prior written approval of DA. A copy
of each approved transfer must be included with the monthly
report. This includes transfers between RA as well as between
Processors.
If Processor becomes overstocked with DF, Processor will be
responsible for any freight costs involved in the transfer of DF
to locations as determined by DA. The overstock shall be
determined to be an amount in excess of a six-month supply on hand
based on usage reported in Processor's monthly reports. Final
determination will be the responsibility of DA.
G. Article 15 PERFORMANCE REPORTING
The first paragraph of Article 15 is amended to read:
The Processor shall submit monthly reports pertaining to
performance under this Agreement to DA postmarked or transmitted
electronically no later than the last day of the month following
the close of the reporting period. If no activity took place
during the reporting month, a performance report shall be
submitted to reflect no activity. Negative inventory of
substitutable DF shall be reported on monthly reports, i.e.,
negative inventory resulting from sales of end products containing
substituted commercially purchased foods meeting the standards
specified in Article 2. NO NEGATIVE INVENTORIES SHALL BE REPORTED
FOR NONSUBSTITUTABLE DF. RA inventories for nonsubstitutable DF
which have been completely used shall be reported as a zero
balance. If sales are made using a refund system, the sales cannot
be reported and inventory cannot be reduced, until a refund is
actually issued.
The following paragraphs are added to Article 15:
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G) A copy of this report must be submitted monthly to each RA
from whom Processor has received DF. The name of the RA to
whom the report is being sent must be highlighted. It is
essential to provide this information to the RA so they can
accomplish their responsibility of reporting all DF
inventories to DA.
H) Inventories received from cooperatives shall be recorded
under the lead district.
I) An annual reconciliation report based on a year-end
physical inventory must accompany the June 30th monthly
report. This report is due to DA 60 days after the end of
the contract year.
J) California VPT System Reporting
Processor must prepare and submit to DA a Monthly
Performance Report which summarizes the information
contained in the Monthly Distributor Summary received from
distributors. No inventory drawdowns may be made by
Processor until the distributor's monthly summary has been
obtained from the distributor. Processor must retain these
documents for three (3) years following the close of the
federal fiscal year to which they pertain unless longer
retention is required for resolution of an audit,
litigation or investigation.
In addition to the Monthly Donated Food Processing Activity
report identified in Article 15.A., Processor must provide
a monthly a monthly Processing Activity Report to each RA
to check against their records. The report must contain a
statement which says: "The information pertaining to
commodity food value for the products delivered will be
considered correct unless notice is provided to the
processor by the receiving agency not later than thirty
(30) calendar days from the post mark of the report."
H. Article 16 ACCOUNTABILITY AND RECORDS
Article 16 is amended by the addition of the following paragraph:
Upon receipt of all shipments from USDA vendors, Processor will
forward to DA (Food Inventory Management Unit) a copy of the
delivery document (i.e., bill of lading or invoice) reflecting the
amount received along with information regarding damaged DF and
any overage or shortage. A SIGNED LEGIBLE copy of the delivery
document must be faxed to the Food Inventory Management Unit at
(916) 327-4004 WITHIN 24 HOURS of delivery.
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Processor will notify DA (Food Inventory Management Unit) if any
shipment HAS NOT BEEN RECEIVED WITHIN 5 DAYS of the delivery
period indicated on the shipment schedule provided by DA.
Notification must be made to Shirley Guidera at (916) 323-0865.
I. Article 19 INVENTORY PROTECTION
Article 19 is amended by the addition of the following paragraphs
to the end of the Article:
Processor is required to submit the above mentioned supply and
surety bond, irrevocable letter of credit or escrow account with
the Processing Agreement. If one of these instruments is not
received with the Agreement, the Agreement will not be approved.
Letters of credit must contain an expiration date of December 31,
2000.
The coverage cannot be withdrawn without a 30-day written
notification to DA by registered certified mail, return receipt
requested. Any claims against Processor which are assessed by DA
as a result of DA review of Processor's year end reconciliation
will be filed against the performance supply and surety bond,
irrevocable letter of credit or escrow account.
J. Article 20 AGREEMENT TERMINATION
Article 20 is amended by the addition of the following paragraph:
C. Cancellation of this agreement does not relieve Processor
or his agents of any liability for DF until all inventories
being held have been accounted for and a final audit
performed to the satisfaction of DA and/or USDA.
K. Article 26 ASSURANCE OF CIVIL RIGHTS COMPLIANCE AND EMPLOYMENT
Article 26 is amended by the addition of the following paragraphs:
The Processor shall comply with the provisions of the California
Fair Employment and Housing Act (Gov. Code Section 12900 et seq.),
the regulations promulgated thereunder (Cal. Admin. Code, Title 2,
Section 7285.0 et seq.), the provisions of Article 9.5, Chapter 1,
Part 1, Division 3, Title 2 of the Government Code (Gov. Code
Sections 11135-11139.5), and the regulations or standards adopted
by the awarding state agency to implement such article.
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Processor and/or RA shall permit access by representatives of
Department of Fair Employment and Housing and DA upon reasonable
notice at any time during the normal business hours, but in no
case less than 24 hours notice, to its books, records, accounts,
other sources of information and its facilities as said Department
or Agency shall require to ascertain compliance with this clause.
RA, Processor and their subcontractors shall give written notice
of their obligations under this clause to labor organizations with
which they have a collective bargaining agreement or other
agreement.
Processor shall include the nondiscrimination and compliance
provision of this clause in all subcontracts to perform work under
the Agreement.
L. Article 27 UNLAWFUL BENEFITS
Article 27 is replaced by the following:
No employee and/or agent of DA or any RA which processing under
this agreement has been approved shall accept any share of or
personal benefit from this agreement.
M. Article 29 MODIFICATION/AMENDMENT OF AGREEMNT
Article 29 is amended as follows:
This Agreement and subcontractor Agreement (if applicable) shall
not be modified, amended, altered, or changed except by a written
agreement signed by the parties hereto. If written agreement is
obtained for changes in end product formulation, return of DF, or
net case cost, Processor shall not implement changes until written
approval is received from DA. Any changes, modifications, or
exceptions must be included in Article 35, SPECIAL PROVISIONS, of
this Agreement. Following approval by DA of any amendment to this
Agreement, Processor shall provide written notification as to the
changes being made within 10 days to all RA being served by
Processor.
N. Article 32 DISTRIBUTION OF COPIES
The first sentence of Article 32 is amended to read:
All parties to this Agreement shall retain a copy of the signed
Agreement and subcontractor Agreement (if applicable) for their
records.
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O. ADDITIONAL CALIFORNIA REQUIREMENTS:
1. LIST OF END PRODUCTS AVAILABLE
Processor must return a completed, typewritten, camera
ready copy of standard form "List of End Products
Available". The form must include all of the end products
included in the EPDS which are submitted with this
Agreement. In addition, additional EPDS which are submitted
for approval subsequent to the approval of the Agreement
must also be accompanied by the "List of End Products
Available". The forms will be distributed in catalog form
by the DA to RA in California.
2. CERTIFICATE OF HEALTH AND SAFETY
Processor must submit a complete copy of the most recent
Health Inspection Report for each storage site where DF
will be stored and each plant where DF is processed. The
report(s) must show the sanitation conditions or rating for
each site. A State Health Department license is not
acceptable. If Processor operates a USDA inspected plant, a
copy of the most recent Processor Deficiency Report (PDR)
must be provided.
3. CONTRACTORS NATIONAL LABOR RELATIONS BOARD CERTIFICATION
By signing this contract, Processor swears under penalty of
perjury that no more than one final unappealable finding of
contempt of court has been issued by a federal court
against Processor within the last two years because of
failure to comply with a federal court order for compliance
with an order of the National Labor Relations Board
(California Government Code Section 14780.5).
4. CALIFORNIA DRUG-FREE WORKPLACE OF 1990
Processor shall certify and comply with the provisions of
the California Drug-Free Workplace of 1990 (Government Code
Sections 8350-1857).
5. DONATED FOOD DISTRIBUTOR AGREEMENT
Processors utilizing commercial distributors to deliver
products containing donated foods must have a Donated Food
Distributor Agreement completed and signed by both
Processor and distributors. The Donated Food Distributor
Agreement describes the responsibilities and accountability
of the distributor in his relationship to Processor.
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6. METHODS OF DISTRIBUTION
Processor will not discriminate against, or withhold
services from, recipient agencies who choose to have food
products delivered directly to them from the processor or
through the State distribution system.
7. RECYCLED PAPER CERTIFICATION
The processor agrees to certify in writing to the CDE,
under penalty of perjury, the minimum, if not exact,
percentage of recycled content, both postconsumer material
and secondary material as defined in Public Contract Code
Sections 12161 and 12200, in materials, goods or supplies
offered or products used in the performance of the
contract, regardless of whether the product meets the
required recycled product percentage as defined in Sections
12161 and 12200. The contractor may certify that the
product contains zero recycled content.
8. AIR OR WATER POLLUTION VIOLATIONS
By signing this agreement, the processor swears under
penalty or perjury that the contractor is not: (1) in
violation of any order or resolution not subject to review
promulgated by the State Air Resources Board or an air
pollution control District; (2) subject to a cease and
desist order not subject to review issued pursuant to
Section 13301 of the Water Code for violation of waste
discharge requirements or discharge prohibition; or (3)
finally determined to be a violation of provisions of
federal law relating to air or water pollution.
36. PERIOD OF AGREEMENT
This Agreement shall become effective on July 1, 1999 and will terminate
on June 30, 2000. This agreement may be extended for two 1 year periods.
Any changes to date must be updated before any contract extension is
granted, including pricing, yield and bonding information and the
signature page.
37. DONATED FOOD VALUE PASS THROUGH SYSTEM
Processor shall designate arrangements to be used during the term of the
Agreement (Refer to Article 3 and amendments in Article 35). Check the
following selected system(s).
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<PAGE>
__X__ 1. Direct Sale Discount
_____ 2. Direct Sale Refund
_____ 3. Indirect Sale Discount
_____ 4. Indirect Sale Refund
_____ 5. Fee for Service
__X__ 6. California Value Pass-Through System (VPT)
_____ 7. Other (with prior approval)
38. AUTHORIZED PROCESSOR SIGNATURE
Agreement must be signed by Owner, Partner, or Corporate Officer duly
authorized to sign contractual agreements. Disclosure of ownership of
Processor shall be submitted if requested by DA.
Privately Owned -- The Owner must sign this Agreement.
Partnership -- A Partner must sign this Agreement.
Corporation -- A Corporate Officer must sign this Agreement.
If an employee other than these specified individuals signs this
Agreement, a Power of Attorney indicating employee's authority must
accompany this Agreement. All addenda to this Agreement shall be signed
by the authorized individual who signed this Agreement except that the
EPDS may be signed by his/her authorized designee.
In witness whereof, the Parties hereto have caused this Agreement to be
signed by their respective agents.
29
<PAGE>
<TABLE>
<CAPTION>
PLEASE PRINT OR TYPE
APPROVED
<S> <C>
Feedback Foundation, Inc./ Dippy Foods, Inc. California Department of Education
- - - - - ---------------------------------------------------- -----------------------------------------
Processor (State Distributing Agency)
Michael Falk Gary Garnas
- - - - - ----------------------------------------------------- ------------------------------------------
Print or Type Name (Print or Type Name)
Director, Fiscal & Adminstrtive Services
General Manager Division
- - - - - ----------------------------------------------------- ------------------------------------------
Title Title
/s/ [Illegible] /s/ [Illegible]
- - - - - ---------------------------------------------------- ------------------------------------------
Signature (Signature)
1200 N. Knollwood Circle P.O. Box 944272
- - - - - ----------------------------------------------------- ------------------------------------------
Address (Address)
Anaheim, CA 92801 Sacramento, CA 94244-2720
- - - - - ----------------------------------------------------- ------------------------------------------
City/ State/ Zip (City/State/Zip)
(714) 220-0224 (916) 322-5092
- - - - - ----------------------------------------------------- ------------------------------------------
Telephone Number Telephone Number
June 30, 1999
- - - - - ----------------------------------------------------- ------------------------------------------
Date (Date approved)
Federal EIN:
- - - - - -----------------------------------------------------
</TABLE>
EXHIBIT 6.16
SETTLEMENT AGREEMENT
A dispute is currently pending and exists between the parties to the Settlement
Agreement (hereafter "Agreement").
The undersigned parties desire to fully and finally settle their differences
with respect to the Litigation on the basis set forth herein. In view of the
foregoing and in consideration of the following, it is hereby agreed as follows:
I. DEFINITIONS.
It is hereby agreed among the undersigned that the following terms wherever so
employed hereafter shall be intended to mean and include as follows:
A. "Plaintiffs": DIPPY FOODS, INC., and its individual officers,
directors and shareholders. The signature of the President of the DIPPY FOODS,
Inc., if affixed hereto, shall constitute the express representation that the
President has full corporate authority to execute the agreement by and on behalf
of the Plaintiff, and each of its individual members.
B. "Defendant": ALEXANDER DIAMOND
C. "Release": agreement of each of the parties to this Agreement
("releasers") to fully and forever release and discharge the other parties to
the Agreement for those claims identified in the release provisions of this
Agreement.
D. "Claims": any and all claims, demands, liens (both general and
charging), agreements, contracts, covenants, promises, suits, any and all manner
of action or actions, cause or causes of action, obligations, controversies,
debts, attorneys' fees and costs, expenses, damages, judgments, penalties,
fines, and liabilities of whatever kind or nature in law, equity or otherwise,
whether now known or unknown, suspected or unsuspected, fixed or contingent, and
whether or not concealed or hidden, which have existed or may have existed, or
which do exist, respecting any and all claims specified in this Agreement, and
notwithstanding Section 1542 of the California Civil Code.
which provides:
"A GENERAL RELEASE DOES NOT EXTEND TO THE CLAIMS WHICH A CREDITOR DOES NOT KNOW
OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR..."
<PAGE>
The term "claims" as hereinabove defined shall include all such claims as are
referred to in Civil Code Section 1542 and other comparable provisions or
principles of state or federal law, or the common law. Each releaser knowingly
and voluntarily waives the provisions of Section 1542 and any other comparable
provisions or principles of the state or federal law, or the common law, and
acknowledges and agrees that this waiver is an essential material term of this
Agreement and the release provisions contained herein, as well as the definition
of "claims," and that without such waiver this Agreement would not have been
entered into. Each releaser understands and acknowledges the significance and
consequence of the release of the "claims" as defined herein and the specific
waiver of Section 1542 and all other comparable provisions or principles of
state or federal law, or the common law.
E. "Indemnity Claims": any and all claims for contribution, indemnity,
contractual, or implied by law; equitable or legal, total or partial, as and to
the extent such Contribution and indemnity claims could have been asserted by
the releasers against the parties being released in connection with the dispute.
Such claims include any and all consequential damages or other requested relief,
including costs and attorneys' fees.
F. "Other Definitions":
"CORPORATE MATERIALS" shall include all items listed in Exhibit A to this
Agreement.
G. Authority: Each PARTY warrants that the individual executing the
Agreement has been duly authorized by the PARTY, with full corporate authority
where necessary.
THE LITIGATION
The Litigation is currently pending in the Los Angeles County Superior Court for
the State of California. The parties hereto covenant and agree not to commence
or maintain further litigation with respect to claims made, or which could have
been made, in the Litigation, except as specifically reserved in Section IV,
below.
III. RELEASE AGREEMENT
The parties hereto hereby and forever release all claims, including indemnity
claims, against each other and their agents, employees, attorneys, and
reinsures, including, but not limited to, any and all causes of action in law
and equity, claims, suits, debts, liens, indemnities, obligations, promises,
demands, liabilities, damages, losses, costs, or expenses of any kind
whatsoever, known or unknown, fixed or contingent, which the parties may have,
or may hereafter acquire, against each other, by reason of their alleged action
or inactions in connection with any claims or defenses made, or those that are
factually related and which could have been made, involving the
/s/ AD /s/ JS
- - - - - ------------------ ---------------
init. Defendant init. Plaintiff
2
<PAGE>
subject matter of the Litigation.
IV. CONSIDERATION
In consideration of the foregoing, defendants agree to the following:
A. Return of the Corporate Materials not later than midnight February
1, 1999, as identified in Exhibit A hereto, and incorporated by this reference
as though fully set forth. In exchange, payment of the sum of $3940 as provided
below to Defendant by Plaintiff. Simultaneously, this agreement shall be signed
and notarized by Defendant, and Plaintiff shall have the signed original signed
and notarized, and an executed copy returned to Defendant, within 48 hours of
Defendant's signing.
B. Enabling and assisting, insofar as possible, such additional steps
in furtherance of settlement of this matter, by Defendant's full cooperation and
assistance, in the merger of Dippy Foods, Inc. with any other entity deemed by
the Board of Directors to be appropriate, including any pending or contemplated
mergers. Defendant shall not engage in any conduct detrimental to the
Plaintiff's business ventures or efforts, and shall not discuss, without prior
consent of the Board of Directors of Plaintiff, in writing, the business of the
Plaintiff with any shareholder or officer or director.
C. Resignation by Defendant from any and all directorships in Dippy
Foods, Inc., in Dippy Foods, Inc., of Nevada, or any other corporate entity
related to Dippy Foods, Inc. Defendant
D. The parties agree that this is a confidential settlement and that
the terms and conditions of the settlement are not to be disclosed except as may
be ordered by a court of competent jurisdiction upon notice and an opportunity
to be heard. The parties expressly agree to instruct their representatives,
attorneys, agents, employees, or associates who may be informed of this
agreement or its terms for purposes of evaluating the agreement, that they are
bound by this confidentiality agreement. Because the parties are not able to
accurately assess the damage which the breach of this confidentiality agreement
may cause, the parties agree that liquidated damages, as damages and not as
penalty, shall be assessed for each breach of this confidentiality clause in the
sum of $25,000, and shall be assessed against the party breaching the agreement,
whether directly or through an agent.
Any assessment of liquidated damages against defendant for breach of
any provision herein shall be paid, at Plaintiff's sole discretion, either first
from any remaining unissued shares due Defendant under this agreement or from
any cash disbursements due Defendant under this agreement, and any remaining sum
owing thereafter shall be collected directly from Defendant.
E. Defendant agrees that former right, if any, to claim title to any
shares in
/s/ AD /s/ JS
- - - - - ------------------ ---------------
init. Defendant init. Plaintiff
3
<PAGE>
Dippy Foods, Inc., a California Corporation, is relinquished and waived as part
of this agreement, Dippy Foods, Inc., a California Corporation, is directed by
Defendant to effect this waiver and to remove Defendant's name as a shareholder
in Dippy Foods, Inc., immediately.
F. Dippy Foods, Inc., of Nevada shall cause to be issued, upon
execution of this agreement, 400,000 shares of a class of shares in Dippy Foods,
Inc. Of Nevada, of a non-voting common stock, with par value equivalent to the
value of Dippy Foods, Inc. Of Nevada's common stock, to Defendant in his
individual name. If such class of shares does not presently exist, the parties
consent to create such a class of shares for the purpose of effecting this
agreement. The issuance of shares and delivery of same to Defendant shall be
performed annually on the anniversary date of this document, as follows:
100,000 shares upon signing of this agreement, or within such
reasonable time as required for issuance of said shares;
100,000 shares on each of the next three anniversaries of the signing
of this agreement, for a total of 400,000 shares.
The first 100,000 shares so issued shall not be tradable during the
first twelve months following the signing of this agreement by all parties.
Thereafter, the shares issued to Defendant shall be unrestricted for trading
purposes, except that Plaintiff shall have a right of first refusal for any
trading of such shares so issued to Defendant. The right of first refusal shall
be stated on the face of the shares so issued as follows: "Subject to Right of
First Refusal by Issuing Corporation" and notice of an intended transfer shall
be given in writing by Defendant to Plaintiff and shall remain in effect for the
entire next business day following issuance of the notice of first right of
refusal.
G. Plaintiff shall pay to defendant, as consideration for this
agreement, the sum of $96,000, as wages, less necessary amounts for Federal and
State withholding and related deductions, and shall issue to Defendant the
appropriate W-2 form or 1999 Form for tax years in which payments are or were
made to Defendant by Plaintiff. The total net sum to be paid to Defendant shall
be paid in twenty-four equal installments monthly, for two years, beginning with
the first day of the month after this document is signed by all parties. The
unpaid balance of the $96,000 payment shall accrue interest at the simple
interest rate of 5% per annum, which interest shall be added to the final (24th)
payment of installment payments. In the event any installment payment is not
paid within five (5) days after its due date, it shall be deemed "late" and a
five per cent late penalty will be added to the then due amount for that
payment. If payment of any two consecutive monthly payments is late, the
Defendant may elect to accelerate the remaining balance owing and render the
remaining payments all due and payable within thirty days.
H. Defendant agrees not to compete, or to engage in a business which
directly competes with or indirectly competes with, Dippy Foods, Inc., or Dippy
Foods, Inc. Of Nevada, for a period of four years from the date of this
agreement. Defendant waives the provisions of the Business and Professions Code
relating to covenants not to compete, and hereby acknowledges that this
agreement is in exchange for the transfer of all or substantially all of his
interest in Dippy Foods, Inc. Defendant further expressly acknowledges that any
and all
/s/ AD /s/ JS
- - - - - ------------------ ---------------
init. Defendant init. Plaintiff
4
<PAGE>
information he obtained from his contact with Dippy Foods, Inc., is and at all
times was confidential trade secret information and the sole property of Dippy
Foods, Inc., and must be kept confidential and not used by the Defendant in any
manner except as authorized by Plaintiff in writing.
I. Plaintiff shall pay corporate expenses incurred by Defendant through
December 3, 1999. The total amount of said expenses is claimed by Defendant to
be $3,940.000, and includes the telephone bill for the corporation and other
unpaid corporate expenses. Defendant shall submit suitable proof of such
expenses, in the form of invoices, receipts, or bills, to support this charge.
J. Defendant shall execute all necessary documents to effect a change
of corporate address from the present PO Box to such new address as may be
selected by Plaintiff, and shall transfer the corporate telephone number into
the corporation's name.
The implementation of such additional steps in furtherance of this
settlement shall be confidential, and shall be deemed to be communications in
furtherance of settlement, and shall not be used as or admissible as evidence in
any proceeding for any purpose, and shall be kept in confidence by all parties
and their members, except as required by law or as ordered by a court of
competent jurisdiction after ten days' written notice and an opportunity to be
heard.
K. Time is of the essence in this agreement, and this agreement shall
be effective only if the delivery of corporate materials contemplated by EXHIBIT
A hereto, and the execution of this agreement, occurs on or before midnight on
February 1, 1999.
4. Defendant and plaintiffs further agree as follows:
A. Plaintiffs shall dismiss the complaint filed in the currently
pending litigation, Dippy Foods, Inc., A California Corporation, v. Alexander
Diamond, et al, CASE NUMBER: NC 024781 with prejudice, upon receipt of the
executed settlement agreement.
B. Liquidated damages: The parties agree that damages for breach of
this agreement, and its confidentiality provisions, would be difficult to
assess, and on that basis stipulate that any breach of this agreement shall
result in liquidated damages in the sum of $25,000 for each breach by each party
or member of a party.
Any and all claims or controversy that may be attributed to the
agreement, including breach of agreement, will be settled by arbitration
according with established rules utilizing the American Arbitration Association,
and then judgment may be entered into a court of law.
V. OTHER PROVISIONS
/s/ AD /s/ JS
- - - - - ------------------ ---------------
init. Defendant init. Plaintiff
5
<PAGE>
A. In the event that litigation becomes necessary to enforce all or any
part of this agreement, or in the event of breach of any portion of this
agreement, the prevailing parties shall be entitled to recover their attorneys'
fees, expenses, and costs of suit actually incurred. According to its fair
meaning and not strictly for or against any party.
B. Each of the parties hereto denies, and nothing herein shall be
deemed or construed to be an admission or concession of, any liability or fault
in respect to any of the allegations made, or which could have been made by or
against any of the parties to this dispute for any purposes. Accordingly,
nothing contained in this Agreement or the obligations hereunder shall be used
or be admissible in any pending or subsequent actions between or among the
parties.
C. This Agreement shall be governed by the laws of the State of
California.
D. Each of the parties hereto shall bear their own attorneys' fees,
costs, and expenses, except as otherwise provided in this Agreement.
E. Each party hereto agrees to execute such further papers or documents
as shall be necessary or proper in order to fulfill the terms and conditions of
the Agreement.
F. Each of the parties to the Agreement warrants that it has carefully
read and understood the terms and conditions of this Agreement, and that it has
not relied upon the representations or advice of any other party, or any
attorney not its own. This Agreement, and the terms and conditions thereof, were
determined in arms-length negotiations by the parties to this Agreement and
their counsel. It has been jointly negotiated and drafted. The language shall be
construed as a whole according to its fair meaning and not strictly for or
against any party.
G. In the event any portion of this agreement is deemed to be
unenforceable, the remainder of the agreement shall be read and shall remain
fully in force as though the unenforceable portion did not exist, and the
remaining portions shall survive and remain in full force and effect.
DATED: February 1, 1999
/s/ Jon Stevenson /s/ Alexander Diamond
---------------------------- ------------------------------
ALEXANDER DIAMOND
PRESIDENT, Dippy Foods, Inc., Erin Stevenson
a California Corporation ------------------------------
1948 Lave Ave
------------------------------
Long Beach 90815
------------------------------
/s/ AD /s/ JS
- - - - - ------------------ ---------------
init. Defendant init. Plaintiff
6
<PAGE>
EXHIBIT A TO SETTLEMENT AGREEMENT
THE FOLLOWING MATERIALS ARE TO BE PICKED UP ON OR BEFORE Midnight February 1,
1999, BY THE DESIGNATED REPRESENTATIVE OF DIPPY FOODS, INC., at 4414 EAST FIFTH
STREET, LONG BEACH, CALIFORNIA.
1. Two "Chippy" and two "Sassy" characters costumes;
2. KD Containers/Gray and Blue, collapsible;
3. Posters-Nachos & Cherry/Banners and show materials;
4. Marketing materials: a box of purple flyers and boxes of book
markers;
5. Client sale history list;
6. All business documents relating to Dippy Foods, Inc./invoices,
correspondence, records, files, etc.. Approximately 3 file boxes:
7. Disk (Provided by Plaintiff) Copy of all files related to Dippy
Foods, Inc.
/s/ AD /s/ JS
- - - - - ------------------ ---------------
init. Defendant init. Plaintiff
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS EXHIBIT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE AUDITED
FINANCIAL STATEMENTS FOR THE PERIOD ENDED APRIL 30, 1999 AND IS QUALIFIED BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CURRENCY> US-DOLLARS
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> APR-30-1999
<PERIOD-START> MAY-01-1998
<PERIOD-END> APR-30-1999
<EXCHANGE-RATE> 1
<CASH> 10,000
<SECURITIES> 0
<RECEIVABLES> 48,852
<ALLOWANCES> 0
<INVENTORY> 6,149
<CURRENT-ASSETS> 67,573
<PP&E> 37,297
<DEPRECIATION> 7,863
<TOTAL-ASSETS> 109,509
<CURRENT-LIABILITIES> 276,545
<BONDS> 14,363
0
0
<COMMON> 19,579
<OTHER-SE> (447,978)
<TOTAL-LIABILITY-AND-EQUITY> 109,509
<SALES> 8,421
<TOTAL-REVENUES> 191,933
<CGS> 183,512
<TOTAL-COSTS> 802,916
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,822
<INCOME-PRETAX> (794,495)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (799,317)
<EPS-BASIC> (0.07)
<EPS-DILUTED> (0.07)
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS EXHIBIT CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED
FINANCIAL STATEMENTS FOR THE PERIOD ENDED JANUARY 31, 2000 AND IS QUALIFIED BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<CURRENCY> US-DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-START> MAY-01-1999
<PERIOD-END> JAN-31-2000
<EXCHANGE-RATE> 1
<CASH> 67,159
<SECURITIES> 0
<RECEIVABLES> 20,024
<ALLOWANCES> 0
<INVENTORY> 80,959
<CURRENT-ASSETS> 170,882
<PP&E> 39,791
<DEPRECIATION> 13,305
<TOTAL-ASSETS> 305,497
<CURRENT-LIABILITIES> 807,791
<BONDS> 12,142
0
0
<COMMON> 19,579
<OTHER-SE> (745,015)
<TOTAL-LIABILITY-AND-EQUITY> 305,497
<SALES> 80,858
<TOTAL-REVENUES> 289,703
<CGS> 208,845
<TOTAL-COSTS> 350,671
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,224
<INCOME-PRETAX> (269,813)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (297,037)
<EPS-BASIC> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
