<PAGE>
SECURITIES AND EXCHANGE COMMISSION
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT
(DATE OF EARLIEST EVENT REPORTED): May 2, 1996
-----------
VITAFORT INTERNATIONAL CORPORATION
----------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Delaware 0-18438 68-0110509
- --------------------------------------------------------------------------------
(STATE OR OTHER JURISDICTION (COMMISSION (IRS EMPLOYER
OR INCORPORATION) FILE NUMBER) IDENTIFICATION NO.)
Suite 480, 1800 Avenue Of The Stars, Los Angeles, California 90067
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
Registrant's Telephone Number,
Including Area Code: (310) 552-6393
----------------------------
Not Applicable
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
On May 2, 1996, pursuant to the terms of a letter agreement, dated May
1, 1996, and the attachments thereto (the "Foreclosure Purchase Agreement" or
"FPA")), the Registrant acquired the trademarks "Auburn Farms" and "Nature's
Warehouse" and certain related trademarks, trade dress, and related
intangibles in a foreclosure sale from secured lenders to Auburn Farms, Inc,
d.b.a. Nature's Warehouse ("AFI"). The purchase price under the FPA consists
of a cash payment of $75,000 and deferred payments based upon gross sales, as
defined in the FPA, of products sold by the registrant which bear the
acquired trademarks. The deferred payment for AFI's existing products, as
defined in the FPA, equals three and one half (3 1/2%) percent of gross sales
for a period of thirty months commencing May 1, 1996; three (3%) percent of
gross sales for the next ensuing period of thirty months; two and one half
(2 1\2%) percent of gross sales for the next ensuing period of thirty months;
and two (2%) percent of gross sales for the next ensuing period of thirty
months. For newly created products, as defined in the FPA, which utilize the
acquired trademarks, the Registrant will be required to pay a deferred
purchase price equal to one and one half (1 1/2%) percent of gross sales for
a period of 120 months commencing May 1, 1996. The FPA agreement also
provides that the Registrant has the option to purchase certain inventories
of packaging materials from AFI.
The Registrant will use co-packers which it will select to produce
products bearing the acquired trademarks. The cash portion of the purchase
price was funded through the Registrant's existing working capital.
ITEM 7. FINANCIAL STATEMENTS, PRO-FORMA FINANCIAL INFORMATION AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS TO BE ACQUIRED. Not applicable.
(b) PRO-FORMA FINANCIAL INFORMATION. Not applicable.
(c) EXHIBITS.
1. Foreclosure Purchase Agreement.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
VITAFORT INTERNATIONAL CORPORATION
By: /s/ Mark Beychok
---------------------------------
Mark Beychok,
Chief Executive Officer
Dated: May 16, 1996
3
<PAGE>
OFFICER'S CERTIFICATE
The undersigned, being the President of Vitafort International
Corporation, inc., a Delaware Corporation (the "Company"), hereby represents
and warrants that the Board of Directors of the Company duly authorized the
Company to purchase trademarks, trade dress and related intangibles
heretofore belonging to Auburn Farms, Inc,. d.b.a. Natures's Warehouse
("AFI") along with certain inventory of AFI upon the terms generally
described in that certain letter agreement dated as of May 1, 1996, a copy of
which is attached hereto as Exhibit "A", the Certificates of Sale,
assignments of Registered Trademarks, Assignments of Unregistered Trademarks,
Trademark Assignments executed in furtherance thereof, subject to various
qualifications and clarifications stated on behalf of the Company in various
items of correspondence relating to the subject transaction.
Dated: May 1, 1996 Vitafort International Corporation, Inc.
a Delaware Corporation
By: /s/ Mark Beychok
---------------------------------
Mark Beychok
Title: President
------------------------------
<PAGE>
[DAHL & TANNER LETTERHEAD]
May 1, 1996
David W. Levene
Levene, Neale & Bender
1801 Avenue of the Stars, Suite 1120
Los Angeles, CA 90067
RE: Auburn Farms, Inc., dba Nature's Warehouse
Dear Mr. Levene:
Thank you for your letter of April 29, 1996. The purpose of this letter
is to confirm selected elements of the proposed transaction(s) for
acquisition by your client, Vitafort International Corporation, Inc., a
Delaware Corporation ("Vitafort") of certain assets currently owned by Auburn
Farms, Inc., dba Nature's Warehouse ("AFI").
IDENTIFICATION OF PARTIES AND REPRESENTATION. This office represents
Sacramento Commercial Bank, a California banking corporation ("Sacramento
Commercial"), a secured creditor of Auburn Farms, Inc. ("AFI"). Mr. Attia is
counsel for AFI, Mr. Chediak is counsel for Robert E. Luke and Karen J. Luke
("the Lukes"), Mr. Blumenfeld is counsel for Daniel W. Lang and Anne Z. Lang
("the Langs"), and Mr. Johanson is counsel for River City Bank ("River City").
CONFIDENTIALITY. On behalf of Sacramento Commercial and this office, we
confirm that we have not to date, and shall not, until the effectuation of
the transactions contemplated with AFI are consummated and become public,
disclose or disseminate the identity of Vitafort. In addition, no employee or
agent of Bank or this office has traded nor shall trade, directly or
indirectly, in Vitafort's securities until this transaction has been
consummated and disclosed to the general public and to the investment
community.
FORECLOSURE SALES. AFI has advised Sacramento Commercial and River City
that it desires to effect a sale of certain of its assets to Vitafort by way
of private foreclosure sales to be conducted by Sacramento Commercial and by
River City, substantially in accordance with an agreement AFI has negotiated
with Vitafort. Such agreement is currently memorialized in the
<PAGE>
David W. Levene
May 1, 1996
Page 2
April 22, 1996 letter of Vitafort's counsel, David W. Levene, addressed to
AFI and its counsel, Gilles S. Attia. The April 22, 1996 letter and all of:
its enclosures are collectively referred to as the "Foreclosure Purchase
Agreement". The terms and conditions set forth in this letter, when accepted
and agreed to by Vitafort, constitute an amendment to the Foreclosure
Purchase Agreement, and are deemed incorporated therein.
PRIVATE FORECLOSURE SALE. Sacramento Commercial shall conduct a private
foreclosure sale pursuant to California Commercial Code Section 9504(3) of;
(a) the Intangibles (as defined in the Foreclosure Purchase Agreement); (b)
the right to acquire claims against New Life Bakery (as defined in the
Foreclosure Purchase Agreement); and (c) the inventory, raw materials,
work-in-process, and materials associated with the Intangibles and referenced
in the Foreclosure Purchase Agreement. The buyer shall be Vitafort, Inc., for
the consideration set forth in the Foreclosure Purchase Agreement Sacramento
Commercial shall provide Vitafort with a bill of sale as to such collateral,
warranting that the conduct of such sale was in accordance with Section
9504(3) of the California Commercial Code and that as such, Sacramento
Commercial's security interest in such collateral has been extinguished, and
subject to the terms and conditions set forth therein. Notice of private sale
pursuant to California Commercial Code Section 9504(3) was given April 24,
1996, and Sacramento Commercial is now in a position to proceed with the
foreclosure. The foreclosure sale shall occur on or after April 30, 1996.
RIVER CITY LINE OF CREDIT. AFI is obligated to River City under a line
of credit agreement with a current payoff balance of approximately $470,000
("the River City L/C"). The River City L/C is secured by a first priority
security interest in inventory and accounts receivable due to the
above-referenced inter-creditor agreement. River City shall, contemporaneously
with Sacramento Commercial, conduct a private foreclosure sale of its
inventory collateral pursuant to section 9504(3). The buyer shall be
Vitafort, for the consideration set forth in the Foreclosure Purchase
Agreement. Notice of private sale pursuant to California Commercial Code
Section 9504(3) was given April 24, 1996, and River City is now in a position
to proceed with the foreclosure. The foreclosure sale shall occur on or after
April 30, 1996.
ACCOUNTS RECEIVABLE. From and after its foreclosure sale, River City
shall pursue collection of accounts receivable in accordance with section
9502(1) of the California Commercial Code, and shall appoint Vitafort as its
agent to collect such receivables directly from the account debtors. Vitafort
shall retain a 10% fee for its services in effecting such collections as more
fully set forth in the Foreclosure Purchase Agreement, and shall remit the
net proceeds of the collections of such accounts receivable to River City
Bank via cashier's check or wire transfer. Vitafort shall provide with each
transmission of net collections a schedule indicating the particular invoices
collected. On not less than a monthly basis, Vitafort shall provide an
updated invoice=specific aged accounts receivable report of the remaining
accounts receivable of AFI for which
<PAGE>
David W. Levene
May 1, 1996
Page 3
it is acting as collection agent on behalf of River City. The original of
such report shall be forwarded to River City, with a copy to Sacramento
Commercial.
INVENTORY. The Inventory to be purchased by Vitafort pursuant to the
Foreclosure Purchase Agreement consists of approximately $300,000 (at cost)
of packaging materials and $20,000 (at cost) of finished goods which have a
reasonable remaining code life which affords sufficient time for distribution
and sale in the normal course of business.
As more fully set forth in the Foreclosure Purchase Agreement, Vitafort
shall acquire such quantities of packaging materials and finished goods as
and when it has need therefor. However, to the extent that Vitafort has need
for packaging materials or finished goods not substantially different from
such materials or finished goods which constitute a part of the Inventory,
Vitafort shall acquire and exhaust that portion of the Inventory prior to
utilizing packaging materials or finished goods independently produced by or
for the benefit of Vitafort. The proceeds of the Inventory as and when
acquired by Vitafort shall be tendered via cashier's check or wire transfer
to River City.
The Inventory to be purchased by Vitafort pursuant to the Foreclosure
Purchase Agreement does not include any finished goods which have already been
produced by New Life Bakery and are still held by New Life Bakery pending
payment.
$75,000 TRANSACTION FEE; DISBURSEMENTS. Immediately prior to
consummation of Sacramento Commercial's foreclosure sale, Vitafort shall
remit via cashier's check or wire transfer to the client trust account of
this office the $75,000 transaction fee, net of the pre-closing advance(s)
disbursed by Vitafort at the request of AFI [the total of such advances shall
not exceed $3,000].
DEFERRED PAYMENTS. The percentage of gross sales payments on account of
acquisition of the Intangibles to be tendered by Vitafort as more fully
defined in the Foreclosure Purchase Agreement ("the Deferred Payments") shall
be tendered directly to Sacramento Commercial via cashier's check or wire
transfer.
NET RECOVERIES FROM NEW LIFE BAKERY CLAIMS. In the event that Vitafort
elects to acquire the claims against New Life Bakery, Sacramento Commercial
shall consent to the terms proposed in the Foreclosure Purchase Agreement for
the recoupment first from any proceeds of Vitafort's costs and the retention
by Vitafort of one-half of the net proceeds. Vitafort shall provide to
Sacramento Commercial a detailed recapitulation of the costs incurred in
pursuing such recoveries, and shall remit one-half of the net proceeds
directly to Sacramento Commercial via cashier's check or wire transfer.
<PAGE>
David W. Levene
May 1, 1996
Page 4
CONSENT. The willingness and ability of Sacramento Commercial to effect
the transactions contemplated by the Foreclosure Purchase Agreement is
expressly conditioned upon its receipt of written consent to the terms and
conditions set forth in this letter from Vitafort. Please have a copy of this
letter executed on behalf of your client and returned to me via telecopier
and first class mail.
Sincerely,
DAHL & TANNER
a professional corporation
/s/ Walter R. Dahl
Walter R. Dahl
cc: Sharon Snyder
Gilles S. Attia
Christopher Chediak
Eli Blumenfeld
Stephen H. Johanson
ACCEPTED AND AGREED:
Dated: May , 1996 VITAFORT INTERNATIONAL CORPORATION,
INC., a Delaware corporation
By: /s/ Mark Beychok
---------------------------------
Mark Beychok, President
<PAGE>
BILL OF SALE
[CALIFORNIA COMMERCIAL CODE SECTION 9504(3) -- PRIVATE SALE]
For good and valuable consideration, RIVER CITY BANK, a California
banking corporation ("Seller"), sells, transfers and assigns to VITAFORT
INTERNATIONAL CORPORATION, INC. a Delaware corporation ("Buyer") all the
right, title and interest of Seller, and of AUBURN FARMS, INC., a California
corporation, dba "Nature's Warehouse" ("Debtor") in and to Debtor's
Inventory, including specifically but without limitation, packaging materials
and finished goods ("the Assets").
This Bill of Sale is executed and delivered as part of a private sale of
collateral conducted by Seller following the default of Debtor, pursuant to
California Commercial Code Section 9504(3). The personal property is sold "as
is", "where is", "with all faults". The personal property is sold is without
warranty, express or implied, save and except that by reason of such sale:
(a) Buyer is now vested with all rights and Interests that Debtor has in and
to the Assets; (b) Buyer now has title to the Assets free and clear of all
liens and encumbrances of Seller; (c) to the best of Seller's knowledge,
Buyer now has title to the Assets free and clear of all liens, encumbrances,
and adverse claims, if any, that were, prior to the sale, junior in priority
to Seller; and, (d) to the best of Seller's knowledge, the sale was conducted
in compliance with California Commercial Code Section 9504(3).
The amount of the purchase price paid and payable by Buyer for the
Assets and matters related thereto are covered in other agreements.
Dated: May , 1996 RIVER CITY BANK,
a California banking corporation
By:
----------------------------------
Jeanne Reaves, Executive Vice President
and Chief Operating Officer
ACKNOWLEDGMENT
WITHOUT LIMITING THE FOREGOING BILL OF SALE AND TO ENSURE THAT IF THERE IS ANY
ACTUAL OR CLAIMED DEFECT IN THE SECURITY INTEREST OF SELLER IN THE ASSETS,
DEBTOR AND EACH OF THE UNDERSIGNED GUARANTORS HEREBY TRANSFER TO BUYER ALL
RIGHT, TITLE AND INTEREST, IF ANY REMAINS, THAT ALL OR ANY OF THEM MAY HAVE
IN AND TO THE ASSETS.
Dated: May , 1996 AUBURN FARMS, INC., A CALIFORNIA CORPORATION
By:
------------------------------------
Robert E. Luke, President
Dated: May , 1996 ------------------------------------
ROBERT E. LUKE
Dated: May , 1996 ------------------------------------
KAREN J. LUKE
Dated: May , 1996 ------------------------------------
DANIEL W. LANG
Dated: May , 1996 ------------------------------------
ANNE Z. LANG
<PAGE>
BILL OF SALE
[CALIFORNIA COMMERCIAL CODE SECTION 9504(3) -- PRIVATE SALE]
For good and valuable consideration, SACRAMENTO COMMERCIAL BANK, a
California banking corporation ("Seller"), sells, transfers and assigns to
VITAFORT INTERNATIONAL CORPORATION, INC. a Delaware corporation ("Buyer") all
the right, title and interest of Seller, and of AUBURN FARMS, INC., a
California corporation, dba "Nature's Warehouse" ("Debtor") in and to
that certain personal property set forth on atteched Exhibit "A" ("the
Assets").
This Bill of Sale is executed and delivered as part of a private sale of
collateral conducted by Seller following the default of Debtor, pursuant to
California Commercial Code Section 9504(3). The personal property is sold "as
is", "where is", "with all faults". The personal property is sold is without
warranty, express or implied, save and except that by reason of such sale:
(a) Buyer is now vested with all rights and Interests that Debtor has in and
to the Assets; (b) Buyer now has title to the Assets free and clear of all
liens and encumbrances of Seller; (c) to the best of Seller's knowledge.
Buyer now has title to the Assets free and clear of all liens, encumbrances,
and adverse claims, if any, that were, prior to the sale, junior in priority
to Seller; and, (d) to the best of Seller's knowledge, the sale was conducted
in compliance with California Commercial Code Section 9504(3).
The amount of the purchase price paid and payable by Buyer for the Assets
and matters related thereto are covered in other agreements.
Dated: May , 1996 SACRAMENTO COMMERCIAL BANK,
a California banking corporation
By:
----------------------------------
Sharon Snyder, Assistant Vice President
ACKNOWLEDGMENT
WITHOUT LIMITING THE FOREGOING BILL OF SALE AND TO ENSURE THAT IF THERE IS ANY
ACTUAL OR CLAIMED DEFECT IN THE SECURITY INTEREST OF SELLER IN THE ASSETS,
DEBTOR AND EACH OF THE UNDERSIGNED GUARANTORS HEREBY TRANSFER TO BUYER ALL
RIGHT, TITLE AND INTEREST, IF ANY REMAINS, THAT ALL OR ANY OF THEM MAY HAVE
IN AND TO THE ASSETS.
Dated: May , 1996 AUBURN FARMS, INC., A CALIFORNIA CORPORATION
By:
------------------------------------
Robert E. Luke, President
Dated: May , 1996 ------------------------------------
ROBERT E. LUKE
Dated: May , 1996 ------------------------------------
KAREN J. LUKE
Dated: May , 1996 ------------------------------------
DANIEL W. LANG
Dated: May , 1996 ------------------------------------
ANNE Z. LANG
<PAGE>
BILL OF SALE
[CALIFORNIA COMMERCIAL CODE SECTION 9504(3) -- PRIVATE SALE]
For good and valuable consideration, SACRAMENTO COMMERCIAL BANK, a
California banking corporation ("Seller"), sells, transfers and assigns to
VITAFORT INTERNATIONAL CORPORATION, INC. a Delaware corporation ("Buyer") all
the right, title and interest of Seller, and of AUBURN FARMS, INC., a
California corporation, dba "Nature's Warehouse" ("Debtor") in and to
Debtor's Inventory, including specifically but without limitation, packaging
materials and finished goods ("the Assets").
This Bill of Sale is executed and delivered as part of a private sale of
collateral conducted by Seller following the default of Debtor, pursuant to
California Commercial Code Section 9504(3). The personal property is sold "as
is", "where is", "with all faults". The personal property is sold is without
warranty, express or implied, save and except that by reason of such sale:
(a) Buyer is now vested with all rights and Interests that Debtor had in and
to the Assets; (b) Buyer now has title to the Assets free and clear of all
liens and encumbrances of Seller; (c) to the best of Seller's knowledge,
Buyer now has title to the Assets free and clear of all liens, encumbrances,
and adverse claims, if any, that were, prior to the sale, junior in priority
to Seller; and, (d) to the best of Seller's knowledge, the sale was conducted
in compliance with California Commercial Code Section 9504(3).
The amount of the purchase price paid and payable by Buyer for the
Assets and matters related thereto are covered in other agreements.
Dated: May ,1996 SACRAMENTO COMMERCIAL BANK
a California banking corporation
By:
---------------------------------------
Sharon Snyder, Assistant Vice President
ACKNOWLEDGMENT
WITHOUT LIMITING THE FOREGOING BILL OF SALE AND TO ENSURE THAT IF THERE IS ANY
ACTUAL OR CLAIMED DEFECT IN THE SECURITY INTEREST OF SELLER IN THE ASSETS,
DEBTOR AND EACH OF THE UNDERSIGNED GUARANTORS HEREBY TRANSFER TO BUYER ALL
RIGHT, TITLE AND INTEREST, IF ANY REMAINS, THAT ALL OR ANY OF THEM MAY HAVE
IN AND TO THE ASSETS.
Dated: May , 1996 AUBURN FARMS, INC., A CALIFORNIA CORPORATION
By:
------------------------------------
Robert E. Luke, President
Dated: May , 1996 ------------------------------------
ROBERT E. LUKE
Dated: May , 1996 ------------------------------------
KAREN J. LUKE
Dated: May , 1996 ------------------------------------
DANIEL W. LANG
Dated: May , 1996 ------------------------------------
ANNE Z. LANG
<PAGE>
EXHIBIT "A"
SCHEDULE OF TRADEMARKS AND TRADE DRESS
1. All common law and statutory rights that Auburn Farms, Inc. has in the
following trademarks and all good will attached thereto:
Mark Status in USA Other Stats or
- ---- ------------- Foreign Regs.
- --------------------------------------------------------------------------------
FREESTYLE | INTENT TO USE APP. |
| NO. 74/628741 FILED |
| 2/2/95 |
- --------------------------------------------------------------------------------
ONLY CHIPS | INTENT TO USE APP. |
| NO. 74/68742 FILED |
| 2/2/95 |
- --------------------------------------------------------------------------------
ONLY SNACKS | NO APP. FILED |
- --------------------------------------------------------------------------------
PUFFITAS | APP. NO. 74/660759 |
| FILED 4/4/95 |
- --------------------------------------------------------------------------------
7 GRAINERS | REG. NO. 1,892,288 |
- --------------------------------------------------------------------------------
AUBURN FARMS | REG. NO. 1,716,884 | CA REG. NO. 096228
- --------------------------------------------------------------------------------
JAMMERS | APP. FILED 10/23/92 | CANADA REG. NO.
| | 434900
- --------------------------------------------------------------------------------
TOAST 'N JAMMERS | REG. NO. 1,743,417 | CA REG. NO. 096227
- --------------------------------------------------------------------------------
PASTRY POPPERS | REG. NO. 1,761,758 | CA REG. NO. 096230
- --------------------------------------------------------------------------------
A-OK | REG. NO. 1,829,517 | CA REG. NO. 84826
- --------------------------------------------------------------------------------
MY O MY | REG. NO. 1,463,038 | CA REG. NO. 084826
- --------------------------------------------------------------------------------
NO HOW | REG. NO. 1,463,787 | CA REG. NO. 084827
- --------------------------------------------------------------------------------
NON STOP | REG. NO. 1,463,766 | CA REG. NO. 084828
- --------------------------------------------------------------------------------
NUT WIT | REG. NO. 1,477,022 | CA REG. NO. 84829
- --------------------------------------------------------------------------------
HIGH LITE | REG. NO. 1,642,469 | CA REG. NO. 096229
- --------------------------------------------------------------------------------
NATURES WAREHOUSE | REG. NO. 1,740,060 | CA REG. NO. 80416,
| | CANADA REG. NO.
| | 416439
- --------------------------------------------------------------------------------
VINTAGE | APP. NO. 74/660780 |
| FILED 4/4/95 |
- --------------------------------------------------------------------------------
NUTTIN' LIKE IT | REG NO. 1,825,918 |
- --------------------------------------------------------------------------------
SPUDBAKES | INTENT TO USE APP. |
| NO. 74/463837 FILED |
| 11/29/93 |
- --------------------------------------------------------------------------------
2. ALL RIGHTS THAT AUBURN FARMS HAS IN THE TRADE DRESS AND TRADE STYLE OF ALL
PACKAGING THAT AUBURN FARMS, INC. HAS USED BEARING ANY OF THE ABOVE TRADEMARKS.
<PAGE>
TELECOPY COVER LETTER
---------------------
LEVENE, NEALE & BENDER L.L.P.
1801 Avenue of the Stars, Suite 1120
Los Angeles, California 90067
Telephone No. (310) 229-1234
Telecopier No. (310) 229-1244
Date: April 22, 1996 TIME:
---------------------------------- --------------------------
Please deliver the following pages to:
Jeff Pollon
NAME: Mark Beychok FIRM: Vitafort International Corporation
----------------------------- ------------------------------------
TELECOPY #: (310) 556-1227 VERIFICATION #: (310) 552-6393
----------------------- --------------------------
NAME: Allan Zackler, Esq FIRM: Zackler & Associates
----------------------------- ------------------------------------
TELECOPY #: (510) 834-9185 VERIFICATION #: (510) 834-4400
----------------------- --------------------------
MESSAGE:
-----------------------------------------------
FROM: David W. Levene NUMBER OF PAGES
----------------------------- ---------------
(including this cover sheet)
If you do not receive all of the pages, please call (310) 229-1234
- --------------------------------------------------------------------------------
IMPORTANT: THIS MESSAGE IS INTENDED ONLY FOR THE USE OF THE INDIVIDUAL OR
ENTITY TO WHICH IT IS ADDRESSED AND MAY CONTAIN INFORMATION THAT IS PRIVILEGED,
CONFIDENTIAL AND EXEMPT FROM DISCLOSURE UNDER APPLICABLE LAW. If the reader of
this message is not the intended recipient, or the employee or agent responsible
for delivering the message to the intended recipient, you are hereby notified
that any dissemination, distribution or copying of this communication is
strictly prohibited. If you have received this communication in error, please
notify us immediately by telephone, and return the original message to us at the
above address via U.S. Postal Service, Thank you.
- --------------------------------------------------------------------------------
-------------------------------
TELECOPIER OPERATOR
Client/Matter #: 1160 Attorney: DWL
---------- ---------------
<PAGE>
[LEVENE, NEALE & BENDER LLP LETTERHEAD]
April 22,1996
VIA FACSIMILE
Gilles S. Attia, Esq.
Graham & James
400 Capitol Mall
24th Floor
Sacramento, CA 95814
Mr. Robert Luke
Auburn Farms, Inc.
4721 Kelton Way, Building #1
Sacramento, CA 95838
Re: Auburn Farms, Inc.
Nature's Warehouse
Dear Messrs. Attia and Luke:
By letter dated April 19, 1996, my client accepted the proposal summarized
in Mr. Attia's April 17, 1996, subject to certain clarifications and
modifications.
In my client's original proposal dated April 11, 1996, my client offered to
assist the Banks in the collection of accounts receivable if that was the desire
of the Banks. In my client's April 19, 1996, letter we left open the issue of
assisting in the collection of accounts receivable. I have been informed by
Mr. Luke that the Banks viewed my client's assistance in the collection process
to be an attractive and important factor. If, indeed, the Bank's do consider
such involvement to be of importance, my client will reinstate its previous
proposal that should read as follows:
"As an accommodation, Buyer is willing to assist Banks in the collection
of Auburn Farms' accounts receivable. In order to defray its costs,
Buyer shall be entitled to deduct 10% from the amounts collected, as and
when such collections occur. Buyer shall have no duty to initiate suit
or other proceedings to
<PAGE>
Gilles S. Attia, Esq.
Robert Luke
April 22, 1996
Page 2
effect collection of accounts; and, Buyer may discontinue its collection
efforts at such time as Buyer, in its sole judgment, determines to be
appropriate under the circumstances."
Attached hereto is a complete set of documents beginning with my April 19,
1996 letter, and all attachments referred to therein which, together with this
letter dealing with collection of accounts, should hopefully provide you with
all you need in order to obtain the requisite consents from the Banks and any
other party in interest. Regarding the attachments, please note that the default
/surrender document (Exhibit "2") has been corrected to identify the proper code
sections and the Certificate of Sale (Exhibit "3") has not been reviewed by
either of you.
As indicated in my April 19, 1996 letter, we request a response early this
afternoon. Presumably you will present the materials to the Banks to make
certain that they are willing to proceed. Obviously, time is of the essence and
attractiveness of the deal declines with each passing day. Hopefully, we are
now at or close to the point of getting the deal consummated without further
delay.
Very truly yours,
/s/ David W. Levene
David W. Levene
<PAGE>
[LEVENE, NEALE & BENDER LLP LETTERHEAD]
April 19, 1996
VIA FACSIMILE
Gilles S. Attia, Esq.
Graham & James
400 Capitol Mall
24th Floor
Sacramento, CA 95814
Mr. Robert Luke
Auburn Farms, Inc.
4721 Kelton Way, Building #1
Sacramento, CA 95838
Re: Auburn Farms, Inc.
Nature's Warehouse
Dear Messrs. Attia and Luke:
I have received a copy of a proposal on behalf of Auburn Farms, Inc., a
copy of which is attached as Exhibit "1" for your reference (the "Offer").
Upon consideration of the terms of the Offer, I am pleased to inform you that
it is generally acceptable subject to the following clarifications and
modifications.
As an initial proposition, due to the potential applicability of the Bulk
Sale statute, the financial condition of Auburn Farms, Inc. ("Debtor") and
the need to better ensure that my client ("Buyer") acquires title, free and
clear of liens and encumbrances, the purchase of the assets must occur
through a private foreclosure sale conducted pursuant to Section 9504 of the
California Commercial Code. River City Bank and Sacramento Commercial Bank
("Banks") claim a security interest in the interests that Buyer wishes to
acquire. A foreclosure sale is not subject to the Bulk Sale statute. Moreover,
because the Banks must agree to the terms of the transaction and the
disposition of the resulting proceeds in order for Buyer to acquire clear
title, the fact that the purchase is through a foreclosure rather than a
direct transaction should not make a
<PAGE>
Gilles S. Attia, Esq.
Robert Luke
April 19, 1996
Page 2
difference to the Debtor because in either event the Banks' agreement and
cooperation are required.
Based upon the foregoing as well as other matters set forth below, the
Offer is accepted subject to the following clarifications and modifications:
- Wherever reference is made to "Seller", it should instead be "Debtor".
- Paragraph 1 should be deemed modified as to procedure. Specifically,
the Debtor should surrender to Banks the Intangibles listed on
Exhibit "A" and request that the Banks proceed to transfer the
Intangibles identified therein to Buyer pursuant to Section 9504 of
the California Commercial Code. A form surrender letter to the Banks
is attached hereto as Exhibit "2". The Banks shall pass title to the
Intangibles pursuant to the foreclosure and shall evidence the
transfer by a Certificate of Sale substantially in the form attached
hereto as Exhibit "3". In addition, to the extent that the Banks'
security interests might not extend to all of the Intangibles or are
not valid, perfected and unavoidable, the Debtor shall also execute the
Certificate of Sale conveying whatever right, title and interest that
the Debtor may have in and to the Intangibles.
- All payments at Closing and thereafter are to be made by Buyer to the
Banks until the Banks advise Buyer that the obligations to the Banks
have been satisfied. (The fact that $75,000 for transaction expenses
and other funds that Debtor anticipates receiving now or in the
future requires consent of the Banks for the same to be used for any
purpose other than payment of the Bank debt. Therefore, the structure
of the transaction as a foreclosure rather than a sale makes no
difference economically. The issue of the disposition of the
<PAGE>
Gilles S. Attia, Esq.
Robert Luke
April 19, 1996
Page 3
payments to the Banks are matters between the Debtor and the Banks and
are not of concern to Buyer). Accordingly, the $75,000 payable at
closing shall be paid to the Banks or in accordance with instruction
from Banks to Buyer.
- All of the percentage payments referred to the various subsections of
paragraph 1 shall paid to the Banks or in accordance with instruction
from the Banks to Buyer.
- The purchase of the inventory shall likewise be from the Banks and the
Banks and the Certificate of Sale reflects that fact. Likewise, the
payments shall be made to the Banks or in accordance with instruction
from the Banks to Buyer.
Other clarifications or modifications:
- The closing shall occur when as soon as the Banks are prepared to
close, but in no case later than 3 p.m., P.D.T., on Wednesday,
April 24, 1996.
- The ultimate recipients and the applications of the sales proceeds are
matters between the Debtor, the Banks and the Debtor's other creditors.
The Buyer has no interest in and is not to be concerned with the
disposition of the proceeds.
- All payments based on "gross sales" shall mean the total product invoice
prices for products subject to this agreement less (a) direct sales
incentives, (b) trade promotions costs, (c) freight charges and (d) bad
debt writeoffs or reserves on invoices included in prior "gross sales"
computations. Because of financial reporting considerations, the
payments based on gross sales shall be due the 15th of the month for
the immediately preceding month.
- Paragraph 2, dealing with inventory, shall be paid for by Buyer to Banks
as and when Buyers takes delivery of the
<PAGE>
Gilles S. Attia, Esq.
Robert Luke
April 19, 1996
Page 4
inventory. It is contemplated that the inventory will be obtained by
Buyer on a when needed, as needed basis. The purchase price for the
items of inventory shall be equal to the Company's direct invoiced
purchase price, without regard to whether the Company paid such
invoice. As indicated, the Buyer shall make the payments to the Bank
for application to the Bank debt or in such manner as the Banks and
the Company agree.
- The covenant in paragraph 3 shall be construed as a representation of
Buyer's intention. This paragraph is to be qualified by the following
sentence:
"Nothing herein shall obligate Buyer to commence or continue any of the
activities specified in this paragraph 3 if Buyer, in its sole discretion,
believes that commencement or continuation of the same are not or will not
be in the best interests of Buyer."
The foregoing qualification is intended to simply to protect the Buyer from
having an obligation to promote the sale or distribution of products that the
Buyer in good faith believes to be unprofitable or otherwise harmful to the
company's image or performance.
- Although the Buyer is given 90 days to elect to take an assignment of
claims against New-Life Bakery, if such an assignment is made, Buyer
shall have no obligation to prosecute such action, shall have sole
discretion to compromise, settle or discontinue pursuit of the action
and shall have no duty to Banks, the Company or any other party except
for the payment of the one half of the net recovery; and, the payment
of the one half of the net recovery shall be made to the Banks unless
the obligations to the Banks have been satisfied, in which case, the
payment shall be made to the Company or such other party as may then
be entitled to receive such payment.
<PAGE>
Gilles S. Attia, Esq.
Robert Luke
April 22, 1996
Page 5
Although the April 11, 1996 proposal, is now superseded, it contains
certain provisions which should be incorporated. For your convenience, a copy
of the April 11, 1996 proposal is attached as Exhibit 4. The provisions that
need to be included are the following:
- The Company must change its corporate name and not adopt or use any
legal or fictitious name that is in any manner similar to the
Intangibles.
- Buyer must receive good and marketable title to the Intangibles and
inventory, free and clear of all liens, security interests,
encumbrances and adverse claims of every kind and nature.
- Buyer shall have no obligation to collect or assist in the collection
of Company's accounts receivables. If the Bank's wish Buyer to assist
in such collection efforts, that will be a matter for future discussion.
- A condition to Buyer's obligation to proceed still involves Buyer and
Robert Luke entering into a mutually satisfactory consulting contract.
Unless this condition is waived by Buyer, such a consulting contract
must be entered into prior to or concurrent with closing.
- The transactions shall be subject compliance with applicable law. If
any material provision of this transaction cannot be timely concluded
subject to compliance with applicable law (including, without
limitation, applicable rules and regulations promulgated pursuant to
federal and state securities laws), Buyer may, prior to closing, cancel
this transaction without any liability to any party.
- Buyer's obligations shall be conditioned upon approval of the
transactions by Buyer's Board of Directors.
<PAGE>
Gilles S. Attia, Esq.
Robert Luke
April 19, 1996
Page 6
Please confirm that the foregoing is acceptable by signing and returning
a counterpart of this letter no later than 1:00 p.m., P.D.T., Monday, April 22,
1996. A facsimile signature page will suffice provided that the original
signature page is received by the undersigned the following day by overnight
mail or equally expedient means. Unless extended by Company, the deadline for
Buyer to obtain approval of its Board of Directors shall be 5 p.m., P.D.T.,
Wednesday, April 24, 1996.
The undersigned is acting on behalf of a publicly-traded company, whose
identity will be disclosed when legally appropriate. The undersigned and this
law firm, by transmitting the foregoing, shall have no liability to any party
should there be a failure of performance by this firm's client.
Very truly yours,
/s/ David W. Levene
David W. Levene
THE FOREGOING IS AGREED TO
AND ACCEPTED SUBJECT TO THE
UNDERSIGNED OBTAINING THE REQUISITE
CONSENTS FROM THE BANKS.
AUBURN FARMS, INC.
BY:
--------------------------------------
<PAGE>
[LETTERHEAD OF GRAHAM & JAMES LLP]
April 17, 1996
VIA FACSIMILE
Mr. David Levene
Levene, Neale & Bender LLP.
1801 Avenue of the Stars, Suite 1120
Los Angeles, CA 90067
Dear Mr. Levene:
On behalf of the board of directors of our client Auburn Farms, Inc. (the
"Seller"), the following offer is transmitted to you for presentation to the
publicly-held company, on whose behalf you had forwarded to me the offer
contained in your letter dated April 11, 1996 (the "Offer Letter"). Though
the board of directors recognizes that your client withdrew the Offer Letter
on April 16, 1996, by this reference, this letter incorporates into this
offer on behalf of Seller all elements of the Offer Letter, except for the
additional or different terms, set forth below; all capitalized terms used
herein will have the same definition as in the Offer Letter.
1. Upon the approval by River City Bank and Sacramento Commercial Bank,
Seller shall sell and Buyer shall purchase from Seller, the Intangibles
listed on Exhibit A to the Offer Letter and Buyer shall agree to pay to
Seller, or its designee, at the closing, to occur on or prior to 5:00 p.m.
on April 19,1996:
a. $75,000 in immediately available funds at the closing for the
payment of expenses in connection with the winding up of the business of and
the administration of settlement with creditors of Seller; and
b. Upon the close of each month, Buyer shall calculate the amount of
gross sales by Buyer or any of its affiliates during such month, in
accordance with generally accepted accounting principles, of all products
that embody any element of the Intangibles except for any sales pursuant to
paragraph 1(c) below ("Gross Sales") and shall pay to Seller, or assignee,
within ten days of the close of such month:
<PAGE>
(i) for a period of 30 months following the beginning of
distribution by Buyer of such products, the sum of three and one-half percent
(3 1/2%) of Gross Sales; and
(ii) for a period of 30 months following the conclusion of the 30=
month period set forth in paragraph 1(b)(i) above, the sum of three percent
(3%) of Gross Sales; and
(iii) for a period of 30 months following the conclusion of the 30=
month period set forth in paragraph 1(b)(ii) above, the sum of two and one-half
percent (2 1/2%) of Gross Sales, and
(iv) for a period of 30 months following the conclusion of the 30=
month period set forth in paragraph 1(b)(iii) above, the sum of two percent
(2%) of Gross Sales.
c. For a period of 120 months following the closing, within ten days
following each month, Buyer shall pay to Seller or assignee, one and one-half
percent (1 1/2%)of the gross sales by Buyer or any of its affiliates during
such monthly period, calculated in accordance with generally accepted
accounting principles, of any new products developed or sold by Buyer or any
of its affiliates under the name Auburn Farms or Nature's Warehouse, which bear
any tradename, trademark or trade dress that is not listed on Exhibit A to
the Offer Letter.
2. Subject to approval by River City Bank and Sacramento Commercial Bank,
Seller shall sell and Buyer shall purchase from Seller (or its supplier, in
cases in which Seller has not yet paid for such goods), all inventory of
Seller that is not obsolete or spoiled, as determined by Buyer and Seller in
good faith at the closing, including all packaging and finished goods of
Seller for a purchase price equal to the amount paid by Seller or due to the
supplier by Seller, as the case may be. Payment shall be made to Seller or
supplier upon delivery of such goods to Buyer.
3. Buyer agrees and covenants to use its best efforts to promote the sale
and distribution of all products that embody the intangibles, or any portion
thereof, and to develop, formulate, sell and distribute additional products
that embody the Intangibles during the term of this agreement and to develop
and sell new products under the name of Auburn Farms or Natures Warehouse.
4. Upon request by Buyer within 90 days following the closing of this
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<PAGE>
Mr. David Levene
April 17, 1996
Page 3
agreement and its concurrent agreement to use its best efforts to prosecute
the causes of action at its sole cost and expense, Seller shall assign its
rights, if any, to any causes of action that Seller may have against New Life
Bakery, a Nevada corporation. In the event of any recovery from any such
civil action, Buyer shall recover its actual expenses and one-half of any
remaining recovery, if any. The remainder of any such recovery will be paid
to Seller.
If this offer is agreeable, please countersign it and return it to me not
later than 5:30 p.m. April 17, 1996 and provide written evidence of the
acceptance of this offer by your client.
Very truly yours,
/s/ Gilles S. Attia
Gilles S. Attia
of
GRAHAM & JAMES LLP
AGREED AND APPROVED:
- ------------------------------------
David Levene, Esq.
GSA:gss
cc: Mr. Robert Luke
Christopher Chediak, Esq.
Eli Blumenfeld, Esq.
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<PAGE>
TO: RIVER CITY BANK
SACRAMENTO COMMERCIAL BANK
FROM: AUBURN FARMS, INC.
DATE: APRIL 22, 1996
RE: DEFAULT AND SURRENDER OF COLLATERAL
- --------------------------------------------------------------------------------
Auburn Farms, Inc. ("Debtor") has sustained substantial losses, lacks the
financial ability to continue operating its business and is in default to River
City Bank and Sacramento Commercial Bank. An offer has been received from
_______________________________________("Buyer") to purchase certain intangibles
and rights appurtenant thereto together with the related inventory. A copy of
the offer is submitted herewith.
Based upon the existing defaults, the belief that the offer represents the
highest and best price obtainable under the circumstances, and due to the
Buyer's time limitations, you are hereby requested to immediately take
possession of the collateral securing the Company's obligations to the Banks and
to immediately transfer the assets and interests included in the offer pursuant
to Section 9504 of the California Commercial Code. Pursuant to Section 9504(3),
the Company and the guarantors hereby expressly renounce their right to the 5
day notice provided therein and request that the private foreclosure sale be
immediately concluded without further notice or advertising.
Dated: April , 1996 AUBURN FARMS, INC.
By:
---------------------------------
Title:
------------------------------
The undersigned Guarantors consent to and join in the above request.
------------------------------ ------------------------------
------------------------------ ------------------------------
<PAGE>
CERTIFICATE OF SALE
THE UNDERSIGNED BANKS HEREBY CERTIFY THAT ON APRIL , 1996, THEY
COLLECTIVELY CAUSED TO BE SOLD TO (INSERT BUYER'S NAME)("BUYER") THE ASSETS
AND INTERESTS DESCRIBED ON EXHIBIT "A" (THE "ASSETS") HERETOFORE OWNED BY
AUBURN FARMS, INC., A CALIFORNIA CORPORATION, D.B.A. NATURE'S WAREHOUSE
("DEBTOR"). THE SALE WAS CONDUCTED BY THE UNDERSIGNED BANKS, ACTING JOINTLY
AND SEVERALLY, PURSUANT TO SECTION 9504(3) OF THE CALIFORNIA COMMERCIAL CODE.
BY REASON THEREOF, BUYER IS NOW VESTED WITH ALL RIGHTS AND INTERESTS
THAT THE DEBTOR HAD IN AND TO THE ASSETS, BUYER NOW HAS GOOD AND MARKETABLE
TITLE IN THE ASSETS FREE AND CLEAR OF ALL LIENS AND ENCUMBRANCES OF THE BANKS
AND EACH OF THEM, AND ALL LIENS, ENCUMBRANCES, AND ADVERSE CLAIMS, IF ANY,
THAT WERE, PRIOR TO THE SALE, JUNIOR IN PRIORITY TO THE BANKS.
THE AMOUNT OF THE PURCHASE PRICE PAID AND PAYABLE BY BUYER FOR THE ASSETS
AND MATTERS RELATED THERETO ARE COVERED IN OTHER AGREEMENTS.
Dated: April , 1996 River City Bank
By:
---------------------------------
Title:
------------------------------
SACRAMENTO COMMERCIAL BANK
By:
---------------------------------
Title:
------------------------------
ACKNOWLEDGMENT
WITHOUT LIMITING THE FOREGOING CERTIFICATE OF SALE AND TO ENSURE THAT IF
THERE IS ANY ACTUAL OR CLAIMED DEFECT IN THE SECURITY INTERESTS OF THE BANKS IN
ANY OF THE ASSETS, AUBURN FARMS, INC., A CALIFORNIA CORPORATION, D.B.A.
NATURE'S WAREHOUSE ("DEBTOR') AND EACH OF THE UNDERSIGNED GUARANTORS, HEREBY
TRANSFER TO BUYER ALL RIGHT, TITLE AND INTEREST, IF ANY REMAINS, THAT ALL OR
ANY OF THEM MAY STILL HAVE IN AND TO THE ASSETS.
DATED: APRIL , 1996 AUBURN FARMS, INC., A CALIFORNIA CORPORATION
By:
---------------------------------
Title:
------------------------------
------------------------------------
------------------------------------
------------------------------------
<PAGE>
[LEVENE, NEALE & BENDER L.L.P. LETTERHEAD]
Via Facsimile
Gilles S. Attia, Esq.
Graham & James
400 Capitol Mall
24th Floor
Sacramento, CA 95814
Re: Auburn Farms, Inc.
Nature's Warehouse
Dear Mr. Attia:
As indicated in our telephone discussion, this firm represents a
publicly-traded company. For now, my client must ensure that its identity
not be disclosed unless and until an agreement is formalized concerning the
matters outlined below and the issue of appropriate disclosure is considered
and agreed upon so that there are no violations of applicable laws and rules
governing information pertaining to public companies. For ease of reference,
my client shall simply be referred to as "Buyer".
Buyer proposes to acquire from Auburn Farms, Inc. d.b.a. Nature's Warehouse
("Seller") the trademarks, tradenames, service marks, logos and other rights
and interests appurtenant thereto which are listed in Exhibit "A=" (the
"Intangibles"). The purchase price for the Intangibles shall be a sum equal
to 2.5% of all net revenues received by or on behalf of Buyer over a 5 year
period from the sale of products incorporating one or more of the Intangibles
(the "Deferred Payments"). "Net revenues" shall be the gross sales of
products incorporating the Intangibles less discounts, returns allowances and
bad debts.
At closing, Buyer shall make a non-refundable advance to Seller of $25,000
against Deferred Payments. The advance shall be recouped by Buyer out of
Deferred Payments. After Buyer has fully recouped its $25,000 advance, Buyer
shall thereafter make the Deferred Payments for the balance of the 5 year term,
within 30 days after the end of each calendar quarter. The entire
<PAGE>
Gilles S. Attia, Esq.
Graham & James
April 11, 1996
Page 2
purchase price of the Intangibles shall be deemed fully paid upon the 5th
anniversary of the closing date. The Deferred Payments shall be accompanied
by appropriate accountings. Seller shall have the right, from time to time,
upon reasonable notice and during regular business hours, to have independent
auditors verify the accountings. The cost of such audits shall be the sole
responsibility of Seller. The information obtained by such auditors, to the
extent it is not generally available to the public, must be kept confidential
(except for the auditor's conclusions) and not be distributed to Seller or
any other person without the express written consent of Buyer.
Seller shall change its corporate name and not adopt or use any legal or
fictitious name that is in any manner similar to the Intangibles.
Buyer shall have the option to purchase so much of Buyer's inventory on
hand at closing as Buyer designates ("Purchased Inventory"). The purchase price
of the Purchased Inventory shall be equal to Seller's direct cost, computed
in accordance with generally accepted accounting principals, consistently
applied. Buyer shall have no obligation to acquire any inventory that it does
not wish to purchase. An inventory of the Purchased Inventory and costing
thereof shall be performed as of closing. Upon identification and pricing of
the Purchase Inventory, Buyer shall pay the purchase within one business day
after closing, in cash or good funds.
Buyer shall receive good and marketable title to the intangibles and
Purchased Inventory, free and clear of all liens, security interests,
encumbrances and adverse claims of every kind and nature.
As an accommodation, Buyer is willing to assist Seller in the collection
of Seller's accounts receivable. In order to defray its costs, Buyer shall
be entitled to deduct 10% from the amounts collected, as and when such
collections occur. Buyer shall have no duty to initiate suit or other
proceedings to effect collection of accounts; and, Buyer may discontinue its
<PAGE>
Gilles S. Attia, Esq.
Graham & James
April 11, 1996
Page 3
collection efforts at such time as Buyer, in its sole judgment, determines to
be appropriate under the circumstances.
As a material inducement to Buyer's willingness to proceed as outlined
above, Buyer deems it imperative that a mutually satisfactory consulting
contract be entered into between Buyer and Robert Luke. The minimum term of
the consulting contract shall be one year at a gross monthly compensation of
approximately $6,000.
The transactions herein outlined shall be subject to compliance with
applicable law.
Because Seller is not currently filling orders or shipping products, the
transactions must be concluded immediately. Otherwise, the customer base
will erode quickly and Buyer's willingness to proceed as described will no
longer exist. Accordingly, this proposal will expire unless accepted by
Seller by 1:00 p.m., Tuesday, April 16, 1996. If timely accepted, the
closing must occur no later than Friday, April 19, 1996. Otherwise, Buyer
shall have the option to withdraw from the transaction at any time without
any liability to any person.
If the foregoing is acceptable, please so indicate by signing a counterpart
in the space provided below and fax a signed counterpart to the undersigned
by the Tuesday deadline. We can discuss the steps and allocate the tasks
necessary to conclude the transaction in a timely manner.
Without wishing to appear redundant, any party who receives a copy of
this proposal must, as a condition to disclosure of the identity of my
client, sign a confidentially agreement and agree not to trade in the
securities of my client until this matter concluded one way or another and
the issue of public disclosure has been appropriate considered and resolved.
This, I believe, is important for the protection of all who are or may become
involved in this transaction.
<PAGE>
Gilles S. Attia, Esq.
Graham & James
April 11, 1996
Page 4
Finally, this outline has not been reviewed by all members of my
client's management team who have been involved in this matter. Because time
is of the essence, I have elected to forward this to you subject to your
understanding that it is possible I may be requested to modify this outline
in certain respects. I will know first thing in the morning if there are any
required changes. In either case, I will confirm to you whether you may
proceed on the basis of this letter as written or I will provide you with any
changes that may be required.
Thank you for your courtesy and cooperation.
Very truly yours,
DAVID W. LEVENE
Agreed to and accepted:
AUBURN FARMS, INC.
By:
-------------------------------
