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As filed with the Securities and Exchange Commission on February 13, 1998
Registration No. 333-42185
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
AMENDMENT NO. 1
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
----------------------
EPL TECHNOLOGIES, INC.
(Exact name of Registrant as Specified in its Charter)
Colorado 84-0990658
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2 International Plaza, Suite 245
Philadelphia, Pennsylvania 19113-1507
(610) 521-4400
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
-----------------
Paul L. Devine
Chairman, President and Chief Executive Officer
2 International Plaza, Suite 245
Philadelphia, Pennsylvania 19113-1507
(610) 521-4400
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
-----------------
Copy to:
Raymond D. Agran, Esq.
Ballard Spahr Andrews & Ingersoll, LLP
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103-7599
(215) 665-8500
Approximate date of commencement of proposed sale to public:
As soon as practicable after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. |_|
If any of the securities being registered on this Form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, please check the following box. |X|
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering: |_|
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering: |_|
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: |_|
-----------------
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.
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Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION, DATED FEBRUARY 13, 1998
PROSPECTUS
4,047,878 Shares
EPL TECHNOLOGIES, INC.
Common Stock
(par value $.001 per share)
This Prospectus relates to 4,047,878 shares (the "Shares") of common
stock, par value $.001 per share ("Common Stock"), of EPL Technologies, Inc., a
Colorado corporation (the "Company"), which may be offered for sale from time to
time by certain shareholders of the Company (the "Selling Shareholders"), or by
their respective pledgees, donees, transferees or other successors in interest
that receive such Shares as a gift, partnership distribution or other non-sale
related transfer (the "Offering"). The offer and sale of the Shares by the
Selling Shareholders, or by their pledgees, donees, transferees or other
successors in interest, may be effected from time to time in one or more of the
following transactions: (a) to underwriters who will acquire the Shares for
their own account and resell them in one or more transactions, including
negotiated transactions, at a fixed public offering price or at varying prices
determined at the time of sale (any public offering price and any discount or
concessions allowed or reallowed or paid to dealers may be changed from time to
time); (b) through brokers, acting as principal or agent, in transactions (which
may involve block transactions) on the Nasdaq SmallCap Market or on one or more
exchanges on which the Shares are then listed, in special offerings, exchange
distributions pursuant to the rules of the applicable exchanges or in the
over-the-counter market, or otherwise, at market prices prevailing at the time
of sale, at prices related to such prevailing market prices, at negotiated
prices or at fixed prices; (c) directly or through brokers or agents in private
sales at negotiated prices; (d) short sales; (e) by any other legally available
means; or (f) any combination of the foregoing. The number of Shares that may
actually be sold by each of the Selling Shareholders will be determined by such
Selling Shareholder. See "PLAN OF DISTRIBUTION."
375,720 of the Shares are currently held by the Selling Shareholders.
144,444 of the Shares are issuable to Selling Shareholders by the Company upon
conversion of outstanding shares of the Company's Series C Convertible Preferred
Stock (the "Series C Preferred Stock"). 527,714 of the Shares are issuable to
Selling Shareholders by the Company pursuant to the terms of certain outstanding
warrants (the "Warrants") (403,228 of which are issuable upon the exercise of
warrants which were issued in connection with the Series D Preferred Stock
defined below (the "Series D Warrants")). 3,000,000 of the Shares are issuable
to Selling Shareholders by the Company upon conversion of outstanding shares of
the Company's Series D Convertible Preferred Stock (the "Series D Preferred
Stock"). The number of Shares set forth above with respect to the Series D
Preferred Stock represents an estimate of the number of shares of Common Stock
issuable upon conversion of the Series D Preferred Stock, based on 150% of the
shares of Common Stock issuable at a conversion price of $6.25 per share, in
accordance with Rule 416 ("Rule 416") under the Securities Act of 1933, as
amended (the "Securities Act"). In addition to such estimated number of shares,
in accordance with Rule 416, the number of shares of Common Stock underlying the
Series D Preferred Stock and offered for sale hereby includes such additional
number of shares as may be issued or issuable upon conversion of the Series D
Preferred Stock by reason of the floating rate conversion price mechanism or
other adjustment mechanisms described in the Certificate of Designation for the
Series D Preferred Stock, or by reason of any stock split, stock dividend or
similar transaction involving the Common Stock, in order to prevent dilution.
Although the Company will receive the exercise price of any Warrants that are
exercised, the Company will not receive any of the proceeds from the sale of any
Shares by the Selling Shareholders. The expenses of registration of the Shares
that may be offered hereby under the Securities Act, will be paid by the
Company.
The Common Stock is traded on the Nasdaq SmallCap Market under the symbol
"EPTG". On February 12, 1998, the closing price of the Common Stock was $5.50.
SEE "RISK FACTORS" BEGINNING ON PAGE 4 FOR INFORMATION THAT SHOULD BE
CONSIDERED BY PROSPECTIVE PURCHASERS OF THE SECURITIES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS FEBRUARY __, 1998
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No dealer, salesman or other person has been authorized to give any information
or to make any representation not contained in or incorporated by reference in
this Prospectus and, if given or made, such information or representation must
not be relied upon as having been authorized by the Company, the Selling
Shareholders or any other person. This Prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any of the securities offered
hereby to any person in any jurisdiction in which such offer or solicitation
would be unlawful or to any person to whom it would be unlawful to make such an
offer or solicitation. Neither the delivery of this Prospectus nor any sale made
hereunder shall, under any circumstances, create any implication that the
information herein is correct as of any time subsequent to the date hereof or
that there has been no change in the affairs of the Company since such date.
TABLE OF CONTENTS
Page
----
AVAILABLE INFORMATION ..................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE ........................... 3
RISK FACTORS .............................................................. 4
THE COMPANY ............................................................... 8
USE OF PROCEEDS ........................................................... 9
MANAGEMENT ................................................................ 10
PRINCIPAL SHAREHOLDERS .................................................... 16
SELLING SHAREHOLDERS ...................................................... 18
PLAN OF DISTRIBUTION ...................................................... 19
LEGAL MATTERS ............................................................. 21
EXPERTS ................................................................... 21
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy and information statements and other information
with the Securities and Exchange Commission (the "SEC"). Reports, proxy
statements and other information concerning the Company filed with the SEC can
be inspected and copied at the public reference facilities maintained by the SEC
at its office at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, as
well as at the Regional Offices of the SEC at Citicorp Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661, and Seven World Trade Center, Suite
1300, New York, New York 10048. Copies of such material can be obtained from the
Public Reference Section of the SEC at 450 Fifth Street, N.W., Washington, D.C.
20549, at prescribed rates. The SEC maintains a Web site (http://www.sec.gov)
that contains reports, proxy and information statements and other information
regarding registrants that file electronically with the SEC. Shares of the
Company's Common Stock are traded on the Nasdaq SmallCap Market. Such reports,
proxy and information statements and other information can also be inspected and
copied at the offices of The Nasdaq Stock Market, Inc., 1735 K Street, N.W.,
Washington, D.C. 20006.
The Company has filed a registration statement on Form S-3 (herein,
together with all amendments and exhibits thereto, the "Registration
Statement"), under the Securities Act with respect to the securities offered
pursuant to this Prospectus. This Prospectus does not contain all of the
information set forth in the Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the SEC. For further
information, reference is made to the Registration Statement and the exhibits
filed as a part thereof. Statements contained herein concerning any document
filed as an exhibit are, in each instance, qualified by, and reference is made
to, the copy of such document filed as an exhibit to the Registration Statement.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the SEC pursuant to the Exchange Act
(File No. 0-28444) are hereby incorporated by reference into this Prospectus:
(a) the Company's Annual Report on Form 10-K/A for the fiscal year ended
December 31, 1996, (b) the Company's Quarterly Reports on Forms 10-Q/A for the
quarters ended March 31, 1997, June 30, 1997, and September 30, 1997, (c) the
Company's Current Reports on Form 8-K filed on September 26, 1997, October 3,
1997, October 24, 1997, and December 24, 1997 (as amended by Form 8-K/A filed on
February 12, 1998), (d) the Company's Current Report on Form 8-K dated
September 19, 1995, as amended on November 14, 1995 and (e) the description of
the Common Stock contained in the Company's registration statement on Form 8-A
dated April 30, 1996.
All other documents filed by the Company pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this
Prospectus and prior to the termination of the Offering pursuant to this
Prospectus shall be deemed to be incorporated by reference and to be a part of
this Prospectus from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Prospectus to the extent that a statement contained herein or in any
subsequently filed document that also is or is deemed to be incorporated by
reference herein modifies or supersedes such statement. Any statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon oral or written request of any such person, a
copy of any or all of the documents incorporated herein by reference, other than
the exhibits to such documents (unless such exhibits are specifically
incorporated by reference into the information that this Prospectus
incorporates). Requests should be directed to Timothy B. Owen, Secretary and
Treasurer, EPL Technologies, Inc., 2 International Plaza, Suite 245,
Philadelphia, Pennsylvania 19113-1507, telephone (610) 521-4400.
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RISK FACTORS
An investment in the shares of Common Stock offered hereby is speculative
and involves a high degree of risk. Prospective investors should consider
carefully the following risk factors, in addition to the other information
presented in this Prospectus, before purchasing the shares of Common Stock
offered hereby.
HISTORICAL LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY. To date, the
Company has generated limited revenues from operations. Primarily as a result of
expenses incurred in organization and efforts to build an appropriate
infrastructure, research and development and marketing activities, the Company
has accumulated net losses aggregating $21,022,000 through September 30, 1997.
The Company expects that it will continue to incur significant operating losses
until such time, if ever, that the Company is able to attain sales levels from
its products and services that are sufficient to support its operations. There
can be no assurance that the Company's products and services can be successfully
marketed or that the Company will ever achieve significant revenues or
profitable operations.
LIMITED RELEVANT OPERATING HISTORY. Historically, the Company operated
exclusively as a manufacturer and marketer of processing aids for fruits and
vegetables. After the advent of new management in December 1992, the Company
began to alter its operational and growth strategies by seeking to add
incremental resources and capabilities, in an effort to develop integrated
systems solutions designed to maintain the quality and integrity of fresh-cut
produce. Since 1994, a majority of the Company's revenues have been derived from
sales of packaging materials, a substantial portion of which are used in
applications in the snack food, bakery and confectionery industries, and for
other uses unrelated to the Company's systems approach to fresh produce.
However, the Company's long term growth will depend on the success of its
integrated systems solutions for fresh-cut produce, in general, and on its
processing aids, in particular. Consequently, the Company's limited relevant
operating history makes it difficult to predict future operating results on an
annual or quarterly basis. The Company's prospects must be considered in light
of the risks, uncertainties, expenses and difficulties frequently encountered by
companies marketing new technologies in new and evolving markets.
FUTURE CAPITAL NEEDS; UNCERTAINTY OF ADDITIONAL FUNDING. The Company has
sustained operating losses and, as of September 30, 1997, had accumulated net
losses aggregating $21,022,000. The Company's revenues have not been sufficient
to fund the development of the Company's business, and thus it has had to
finance its operating losses externally, principally through equity financing.
The Company's needs for capital, including for acquisitions, have been
substantial and are expected to continue to be substantial as the Company
pursues its operating and growth strategies. The Company's continued ability to
operate is dependent upon its ability to obtain adequate financing and to
achieve levels of revenue necessary to support its cost structure. There can be
no assurance that the Company will be successful in obtaining additional
financing on commercially acceptable terms, if at all. Failure to obtain
additional financing on terms satisfactory to the Company could materially limit
the Company's ability to fund its operations and its growth plan.
EXTENDED PRODUCT DEVELOPMENT AND SALES PROCESS. The process by which the
Company develops and sells its integrated systems solutions for certain kinds
and varieties of fresh-cut produce is both expensive and time-consuming. After
preliminary discussions with a potential customer, the Company performs a
comprehensive review of the potential customer's methods and facilities and
initiates a series of tests in an effort to tailor the application of the
Company's proprietary and other technologies to the kind or variety of produce
to be processed. The Company also works closely with the potential customer to
develop a detailed protocol to be followed in processing such produce. Once the
development of this integrated systems solution is substantially complete, the
Company conducts increasingly sophisticated tests in an effort to refine the
prescribed solution before the potential customer makes any purchase decision.
Although the Company believes it has improved its sales efforts significantly,
the Company's product development and sales process continues to be lengthy and
resource intensive and could limit the Company's growth. Additionally, limited
awareness of the Company and its products in the marketplace and the highly
fragmented nature of the fresh-cut produce industry may extend the Company's
product development and sales process. The Company does not believe that this
process is likely to shorten significantly, and there can be no assurance that
the Company will have adequate resources to continue to fund this process.
UNCERTAINTY OF MARKET ACCEPTANCE. The Company's penetration to date of the
various markets it is seeking to develop has been limited. Some of the markets
targeted by the Company are newly defined or emerging, such as fresh-cut
potatoes and sliced apples. In light of the evolving nature of these markets,
there can be no assurance as to the ultimate or continuing level of demand for,
or market acceptance of, the Company's products or services. Consequently, there
is no assurance that the Company will be able to obtain sufficient market
acceptance of its processing aids to achieve profitability on a timely basis, or
at all. Failure to gain sufficient market acceptance for the Company's
processing aids would have a material adverse effect on the Company's business,
financial condition and results of operations.
LIMITED MARKETING AND SALES EXPERIENCE. The Company has limited experience
in marketing and selling its products and services as integrated systems
solutions designed to maintain the quality and integrity of fresh-cut produce.
The marketing and sales process requires use of scientific and technical
services and the Company's process engineering capabilities. To achieve broad
market penetration for its products, the Company will be required to develop an
expanded marketing and sales force, including technical and scientific service
and support personnel. Limited market awareness of the Company and its products,
the highly fragmented nature of the fresh produce processing industry and the
lengthy sales cycle for the Company's products heighten the need for an
increased number of sufficiently skilled marketing and sales personnel. There
can be no assurance that the Company will be able to recruit and retain skilled
sales, marketing, service or support personnel on a timely basis, or at all, or
that the Company's marketing and sales efforts will be successful. Failure to
further develop and maintain a marketing and sales staff would have a material
adverse effect on the Company's business, financial condition and results of
operations.
MULTIPLE PRODUCT LINES. The Company currently is engaged in three related
areas of business, which are focused primarily on the fresh-cut produce
industry: processing aids, packaging, and scientific and technical services. The
Company believes that its products and services are complementary and present
cross-marketing opportunities. However, there can be no assurance that the
Company's products or services can be successfully cross-marketed. Additionally,
if problems are encountered with any area of the Company's business, the
financial and personnel resources available to a business of the size of the
Company may be diverted from the other business areas, which could have a
material adverse effect on the Company's business, financial condition and
results of operations.
DEPENDENCE ON PROPRIETARY TECHNOLOGY AND OTHER INTELLECTUAL PROPERTY; RISKS
OF INFRINGEMENT OR MISAPPROPRIATION. The Company's success is dependent in part
on its ability to obtain patent protection for its products, maintain trade
secret protection and operate without infringing the proprietary rights of
others. The Company currently has two U.S. patents, four U.S. patents pending
and numerous others licensed to the Company or under review for application.
Furthermore, the Company has two patents outside the U.S. and 23 patent
applications pending in countries outside the U.S. for its processing aid
technologies, with others under review. There can be no assurance that patent
applications owned by or licensed to the Company will be issued
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or that patents issued or licensed to the Company will provide the Company with
any competitive advantages or adequate protection for its products. Moreover,
no assurance can be given that any patents issued or licensed to the Company
will not be challenged, invalidated or circumvented by others. The Company's
products might conflict with the patent rights of others, whether existing now
or in the future. Alternatively, the products of others could infringe the
patent rights of the Company. Although the Company intends to defend its
proprietary intellectual property rights, the defense and prosecution of patent
claims is costly and time consuming, even if the outcome were favorable to the
Company. An adverse outcome could subject the Company to significant
liabilities to third parties, require that disputed rights be licensed from
third parties or require the Company to cease selling its products.
The Company also relies on trade secrets and proprietary know-how, which it
seeks to protect in part by confidentiality agreements with its collaborators,
employees and consultants, as much of the Company's technology may not be
patentable. There can be no assurance that these agreements will not be
breached, that the Company will have adequate remedies for any such breach or
that the Company's trade secrets will not otherwise become known or be developed
independently by competitors.
In addition, the Company uses certain trademarks owned by other companies
through licensing agreements. For example, the Company uses the Green Giant
Fresh(R) brand on its fresh-cut potato products sold to the food service
industry pursuant to a license agreement, the initial term of which expires in
2007. There can be no assurance that any such licensing agreements will not be
terminated or will be renewed in the future. The inability of the Company to use
the trademarks of such other companies in the future would have a material
adverse effect on the Company's business, financial condition and results of
operations.
GOVERNMENT REGULATION; RISKS ASSOCIATED WITH FOOD PROCESSING PRODUCTS. The
Company is subject to numerous U.S. and foreign regulations. Although the
Company has concluded that the use of the Company's processing aids in
accordance with the Company's protocols is generally recognized as safe ("GRAS")
under FDA regulations, there is a risk that new scientific information about an
ingredient could change its GRAS status, that the FDA could revise its
regulations governing the GRAS status of the ingredients, or that the FDA might
take the position that an ingredient is not GRAS under the current regulations.
Any such change could have a material adverse effect on the Company's business,
financial condition and results of operations. In addition, the Company is
subject to risks generally associated with food processing products, which
include, among others, that (i) production defects may occur; (ii) an ingredient
used in the Company's products may be banned, have its use limited or be found
to cause health problems; and (iii) sales may be limited or discontinued due to
perceived health concerns (regardless of actual effects), adverse publicity or
other reasons within or beyond the control of the Company. Moreover, although
the Company has concluded that the use of the Company's processing aids in
accordance with the Company's recommended protocols currently does not require
the Company's customers to list the Company's processing aids in the list of
ingredients on labels on fresh-cut fruits and vegetables under the FDA's current
labeling requirements for such foods, and production of the Company's processing
aids and packaging materials has not been subject to intensive regulation,
regulations applicable to the Company and its products, including the FDA's
requirements regarding current "good manufacturing practices" and labelling
requirements applicable to food, may change. Any such change could have a
material adverse effect on the Company. The FDA also regulates the material
content of direct-contact food containers and packages. The Company purchases
the film used in its food-related packaging from third parties which
guarantee or warrant the compliance of such films with applicable FDA or foreign
regulations. The failure, however, of any such third party to comply with
applicable regulations could have a material adverse effect on the Company's
business, financial condition and results of operations.
ENVIRONMENTAL MATTERS. The Company's packaging operations are subject to
federal, state and local U.S., U.K. and other European environmental laws and
regulations that impose limitations on the generation, storage, transport,
disposal and emission of various substances into the environment, including laws
that restrict the discharge of pollutants into the air and water and establish
standards for the treatment, storage and disposal of solid and hazardous wastes.
Although in the U.S. the Company's printing operations are subcontracted, in the
U.K. the Company is subject to laws and regulations regarding the use, storage,
transport and disposal of inks used with its packaging products. While the
storage and transport of inks are the contractual responsibility of the
Company's supplier, there can be no assurance that there will not be an
accidental contamination, disposal or injury from the use, storage, transport or
disposal of inks used in the Company's packaging business and that such an
occurrence would not have a material adverse effect on the Company's business,
financial condition or results of operations. Additionally, the Company's use of
plastic film in its packaging operations may subject it, in certain
jurisdictions, to laws and regulations designed to reduce solid wastes by
requiring, among other things, plastics to be degradable in landfills, minimum
levels of recycled content, various recycling requirements, disposal fees and
limits on the use of plastic products. In addition, various consumer and special
interest groups have lobbied from time to time for the implementation of
additional environmental protection measures. The Company may be required to
make capital expenditures in response to changing compliance standards and
environmental regulations. Furthermore, unknown contamination of sites currently
or formerly owned or operated by the Company (including contamination caused by
prior owners and operators of such sites) and off-site disposal of hazardous
substances and wastes may give rise to additional compliance costs. There can be
no assurance that the Company will not incur liabilities for environmental
matters in the future, including those resulting from changes in environmental
regulations, that may be material to the Company's business, financial condition
and results of operations.
INTEGRATION OF ACQUISITIONS; POSSIBLE ADVERSE EFFECT OF RAPID EXPANSION. An
element of the Company's growth strategy is the pursuit of acquisitions that
either expand or complement its existing lines of business. There can be no
assurance that the Company will be able to identify and acquire acceptable
acquisition candidates on terms favorable to the Company and in a timely enough
manner to the extent necessary to fulfill its expansion plans, or that any such
acquisitions can be operated profitably or successfully integrated into the
Company's operations. The Company's failure to complete acquisitions and
continue its expansion could have a material adverse effect on the Company's
business, financial condition and results of operations. The Company has a
limited financial and managerial infrastructure. As the Company proceeds with
its acquisition strategy, there can be no assurance that the Company's
management and financial controls, personnel, computer systems and other
corporate support systems will be adequate to manage the resulting increase in
the size and scope of the Company's operations. In addition, acquisitions
involve a number of special risks, including adverse short-term effects on the
Company's reported financial results, the diversion of management's attention,
the dependence on retention, hiring and training of key personnel, and risks
associated with unanticipated problems or legal liabilities, some or all of
which could have a material adverse effect on the Company's business, financial
condition and results of operations. Additionally, if the Company acquires an
existing business, a significant portion of the purchase price for such business
may be allocated to goodwill and intangibles if such acquisition does not
involve the purchase of significant amounts of tangible property. All of such
goodwill and intangibles must be amortized over time, which amortization would
reduce the Company's reported earnings.
PRODUCT OBSOLESCENCE. The market for products used in maintaining the
integrity of fresh-cut produce is characterized by changing technologies and
evolving industry standards, which could result in product obsolescence or short
product life cycles. The Company's ability to achieve and maintain
profitability, therefore, may be dependent upon its ability to continually
enhance its products and its related applications technology, which may require
the Company to make substantial, unexpected expenditures. The Company may find
it necessary to develop additional products and services to satisfy evolving
industry and customer requirements, which may consume significant funds and
resources. There can be no assurance that the Company will be able to allocate
or obtain the funds and resources as may be necessary to improve its current
products or develop new products, or that the Company will be successful in such
efforts.
RELIANCE ON KEY EMPLOYEES. The Company's success is dependent upon the
efforts of certain key personnel, including Paul L. Devine, the Company's
Chairman, President and Chief Executive Officer. The loss of the services of Mr.
Devine or other key employees could have a material adverse effect on the
Company's business, financial condition and results of operations. Additional
suitably qualified staff will also need to be recruited and retained to expand
the business as planned. There can be no assurance that the Company will be able
to recruit or retain any such personnel to the extent necessary. The Company
currently maintains key person life insurance on Mr. Devine in the amount of
$1,000,000. The Company is not the beneficiary of any life insurance policies on
any other executive officers.
COMPETITION. The Company's direct, indirect and potential competitors
include producers of sulfites and "sulfite substitutes," as well as other
providers of alternative preservation and packaging technologies for fresh-cut
produce, including those employing temperature, gas and humidity control. Many
competitors and potential competitors, particularly in the market for produce
packaging, are larger, have greater financial, marketing, sales, distribution,
technological and management resources, and enjoy greater name recognition than
does the Company. Certain of these companies may also enjoy long-standing
relationships with processors of fresh produce. Accordingly, there can be no
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assurance that the Company will be able to compete effectively against such
competitors and potential competitors.
POTENTIAL FOR DILUTION FROM OUTSTANDING SECURITIES. To the extent
outstanding options or warrants are exercised or shares of preferred stock are
converted, there will be dilution to new investors. At September 30, 1997,
(i) 2,855,000 shares of Common Stock were issuable upon exercise of outstanding
stock options at a weighted average exercise price of $3.45 per share, (ii)
284,501 shares of Common Stock were issuable upon exercise of warrants
outstanding, at a weighted average exercise price of $2.84 per share, and (iii)
2,764,000 shares of Common Stock were issuable upon conversion of the Company's
Series A Preferred Stock and Series C Preferred Stock outstanding.
INTERNATIONAL SALES. A significant portion of the Company's revenues is
earned outside of the United States, principally in Europe, and, therefore, is
subject to the risks associated with international sales, including economic or
political instability, shipping delays, changes in regulation, adverse tax
consequences and various trade restrictions, all of which could have a
significant impact on the Company's ability to deliver products on a competitive
and timely basis. Future imposition of, or significant increases in the level
of, customs, duties, export quotas or other trade restrictions, could have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition, the laws of certain foreign countries do not
protect the Company's intellectual property rights to the same extent as do the
laws of the United States, although this effect is lessened in countries that
adhere to the General Agreement on Tariffs and Trade. Although the impact of
currency fluctuation has not been significant in the past with respect to the
Company's operations in the U.K., the impact of future fluctuations in exchange
rates cannot be predicted with any measure of accuracy. As the Company increases
its operations abroad, particularly in light of the Company's recent acquisition
of a packaging company in Valencia, Spain, no assurance can be given that any
future exchange rate fluctuations will not have a material adverse effect on the
Company's business, financial condition and results of operations.
CERTAIN RISKS ASSOCIATED WITH AGRICULTURAL PRODUCTS. Because the Company's
business relies, both directly and indirectly, on the availability of fresh
produce, the Company's results of operations will be subject to certain risks
associated with agricultural products. The market for agricultural products is
unpredictable and volatile, and is affected by numerous factors. The most
important of such factors are weather conditions and patterns, current and
projected produce stocks and prices, and governmental agricultural policies,
including those that directly or indirectly influence the number of acres
planted, the mix of crops planted, and crop prices. Any or all of such factors
may adversely affect the Company's business, financial condition and results of
operations.
PRICE AND AVAILABILITY OF RAW MATERIALS. The Company's results of
operations may be affected by the price and availability of raw materials used
in the Company's products. Should there be an increase in the price of one or
more of the raw materials used in the manufacture of the Company's products, the
Company may not be able to increase sufficiently the sales price of its products
to compensate for any such increase in raw material costs. Certain of the raw
materials used in the Company's products are obtained from single source
suppliers and the Company has not arranged for alternative supply sources. The
Company's inability to obtain sufficient quantities of such raw materials on
commercially reasonable terms, or in a timely manner, would have a material
adverse effect on its business, financial condition or results of operations.
SEASONALITY AND FLUCTUATIONS IN QUARTERLY OPERATING RESULTS. Although
historically, the management of the Company has not discerned a seasonal pattern
in the Company's business on a consolidated basis, certain aspects of the
Company's business are seasonal. For example, Fabbri Artes Graficas Valencia
S.A., one of the Company's subsidiaries, historically has reported relatively
higher sales and income in the Company's first and fourth fiscal quarters
because of the timing of citrus and other crop harvests. The Company's results
of operations may become subject to greater seasonality as its various
businesses develop at different rates.
The Company may experience significant quarter to quarter fluctuations in
its results of operations. Quarterly results of operations may fluctuate as a
result of a variety of factors including, but not limited to, the timing, market
acceptance and speed of nationwide roll-outs of fresh-cut potato, corn and apple
products by the Company or through its strategic alliances and the timing of
introduction, commercialization and market acceptance of other such produce
products that utilize the Company's proprietary processing aids. In addition,
significant quarterly fluctuations may occur due to the timing of any new
acquisitions. Additional factors that may affect the quarter to quarter results
of operations include competitive conditions in the industry and general
economic conditions. As a result, the Company believes that period to period
comparisons of its results of operations are not necessarily meaningful or
indicative of the results that the Company may achieve in any subsequent
quarters or full years. Such quarterly fluctuations may result in volatility in
the market price of the Common Stock of the Company, and it is possible that in
future quarters the Company's results of operations could be below the
expectations of the public markets. Such an event could have a material adverse
effect on the market price of the Common Stock of the Company.
PRODUCT LIABILITY. The Company's agreements with its customers typically
contain provisions designed to limit the Company's exposure to potential product
liability claims. These agreements generally contain provisions such as
disclaimers of warranties and limitations on liability. It is possible, however,
that the limitation of liability provisions contained in such agreements may not
be effective as a result of existing or future federal, state or local laws or
ordinances or unfavorable judicial decisions. Although EPL has not experienced
any product liability claims to date, the sale and support of products by the
Company may entail the risk of such claims. Although the Company currently
maintains product liability insurance coverage, there can be no assurance that
this coverage will be adequate to protect the Company against future product
liability claims or that product liability insurance will be available to the
Company in the future on commercially reasonable terms, if at all. Furthermore,
there can be no assurance that the Company will be able to avoid significant
product liability claims and the attendant adverse publicity. Consequently, a
product liability claim or other claim with respect to uninsured or underinsured
liabilities could have a material adverse effect on the Company's business,
financial condition and results of operations.
RELIANCE ON KEY CUSTOMERS. The Company's processing aids are specifically
developed for certain varieties and kinds of produce. In marketing its
integrated systems solutions for fresh-cut produce, the Company generally
targets a select group of processors as customers and works closely with each
processor to develop protocols designed to be suited to the particular needs of
such processor. For the nine months ended September 30, 1997, two packaging
customers accounted for an aggregate of approximately 38% of the Company's total
sales. The Company has entered into strategic alliances with certain of its
major customers; however, there can be no assurance that the Company's customer
relationships can be maintained. The loss of any of the Company's major
customers could have a material adverse effect on the Company's business,
financial condition and results of operations.
Furthermore, the development and evolution of markets for the Company's
processing aids is substantially dependent upon the efforts of its customers.
Although the Company believes that its customers will be motivated to
commercialize the products covered by these relationships in a timely and
effective manner, the amount of financial and other resources devoted to these
activities generally is beyond the Company's control.
POSSIBLE VOLATILITY OF SHARE PRICE. The market price of the Common Stock
could be subject to significant fluctuations in response to the Company's
operating results and other factors, and there can be no assurance that the
market price of the Common Stock will not decline below the public offering
price as of the date hereof. Factors such as operating results, contractual
arrangements with customers, natural disasters or other developments relating to
the Company's products or its competitors, changes in analysts' estimates or in
conditions of the economy or the financial markets, and regulatory changes, as
well as changes within the industry, may have a significant effect on the market
price of the Common Stock. In addition, the stock market has experienced from
time to time extreme price and volume fluctuations that may be unrelated to the
operating performance of particular companies. Historically, the average daily
trading volume of the Common Stock as reported on the Nasdaq SmallCap Market has
been relatively low. There can be no assurance that a more active trading market
will develop in the future.
DIVIDEND POLICY. Other than in connection with the payment of accumulated
dividends, which have not been declared or paid, on its Series A Preferred
Stock, Series B Convertible Preferred Stock and Series C Preferred Stock
(collectively with the Series D Preferred Stock, the "Preferred Stock"), the
Company intends to retain earnings, if any, that may be generated from
operations to finance the expansion and development of its business. No cash
dividends have been declared or paid to date on the Common Stock. The Company
does not expect to declare or pay cash dividends to the holders of the Common
Stock in the foreseeable future and no such dividends may be declared or paid
until all accumulated dividends on the Series A, Series B and Series C Preferred
Stock have been paid.
6
<PAGE> 8
SHARES ELIGIBLE FOR FUTURE SALE. As of February 12, 1998, there were
18,095,965 shares of Common Stock outstanding. In addition, an aggregate of
3,556,250 shares are issuable upon the exercise of outstanding stock options and
682,396 shares are issuable upon the exercise of warrants. Upon completion of
the Offering, assuming exercise in full of all of the Company's outstanding
warrants and options and the conversion of the Series A Preferred Stock, Series
C Preferred Stock and Series D Preferred Stock (based on 150% of the number of
Shares issuable upon conversion of the Series D Preferred Stock at a conversion
price of $6.25 per share and in accordance with Rule 416), the Company will have
28,302,555 shares of Common Stock outstanding. The shares offered hereby will be
freely tradeable without restrictions or further registration under the
Securities Act. Substantially all of the remaining shares are either registered
with the SEC pursuant to effective registration statements or are otherwise
freely tradeable without restriction, except for any shares held by "affiliates"
of the Company within the meaning of the Securities Act, which will be subject
to the resale limitations of Rule 144. Therefore, future sales of substantial
amounts of Common Stock (including shares issued upon the exercise of
outstanding options and warrants) in the public market or the prospect of such
sales could adversely affect the market price of the Common Stock and may have a
material adverse effect on the Company's ability to raise any necessary capital
to fund its future operations. An additional 984,250 shares of Common Stock are
reserved for issuance under the Company's 1994 Stock Incentive Plan.
YEAR 2000 COMPLIANCE. The Company uses a significant number of computer
software programs and operating systems in its internal operations, including
applications used in manufacturing, product development, financial business
systems and various administrative functions. To the extent that these software
applications contain source code that is unable to appropriately interpret the
upcoming calendar year "2000," some level of modification or even possibly
replacement of such source code or applications will be necessary. The Company
is currently in the process of completing its identification of software
applications that are not "Year 2000" compliant and expects to make appropriate
responses to address any issues identified. Given the information known at this
time about the Company's systems, coupled with the Company's ongoing, normal
course-of-business efforts to upgrade or replace business critical systems as
necessary, it is currently not anticipated that these "Year 2000" costs will
have any material adverse impact on the Company's business, financial condition
or results of operations. However, the Company is still in the preliminary
stages of analyzing its software applications and, to the extent they are not
fully "Year 2000" compliant, there can be no assurance that the costs necessary
to update software, or potential systems interruptions, would not have a
material adverse effect on the Company's business, financial condition or
results of operations.
CONTROL BY PRINCIPAL SHAREHOLDERS; ANTI-TAKEOVER CONSIDERATIONS.
Trilon Dominion Partners, L.L.C. and Lancer Partners, L.P. beneficially own
approximately 26.0% and 19.8%, respectively, of the Common Stock. Such persons
have the ability to significantly influence the election of the Company's
directors and the outcome of all other issues submitted to the Company's
shareholders. The beneficial ownership of such persons, together with the
ability of the Board of Directors of the Company to issue shares of preferred
stock and to fix the rights and preferences thereof, also may have the effect
of delaying, deferring or preventing an unsolicited change in the control of
the Company, which may adversely affect the market price of the Common Stock or
the ability of shareholders to participate in a transaction in which they might
otherwise receive a premium for their shares.
7
<PAGE> 9
THE COMPANY
The Company is a leading developer, manufacturer and marketer of
proprietary produce processing aids, packaging technologies, and scientific and
technical services, which are designed to maintain the quality and integrity of
fresh-cut produce. The Company designs products which are components of
integrated systems solutions, specifically to address the needs of a variety of
fresh-cut produce categories. The foundation of the Company's integrated system
is its proprietary produce processing aid technology, which inhibits the natural
enzymatic degradation of fruits and vegetables after they have been processed.
Fresh-cut fruits and vegetables that are treated with the Company's proprietary
processing aids better maintain their natural characteristics, such as color,
texture, taste and smell. In certain fresh-cut produce categories, such as
fresh-cut sliced apples, fresh-cut potatoes and fresh corn, the Company's
processing aids allow increased availability of these fresh-cut produce products
in retail and commercial markets. The Company has concluded that the use of the
Company's processing aids, in accordance with the Company's recommended
protocols, is "generally recognized as safe" or "GRAS" under FDA regulations.
The Company also uses a variety of film technologies to create packaging
specifically designed to complement and enhance the effectiveness of the
Company's processing aids by allowing fruits and vegetables to "breathe" after
they have been cut and packaged. The Company markets these packaging products to
produce growers and processors. The Company also markets flexible packaging for
uses in the snack food, bakery and confectionery industries, and for other uses.
In addition, the Company's scientific and technical services, which include food
safety and microbiological testing, provide fresh produce processors with
expertise in food safety, post-harvest horticulture and processing techniques,
and serve to support the cross-marketing efforts for the Company's other
products.
The Company's revenues consist of (i) revenues derived from the sale of
processing aids and flexible packaging, (ii) revenues derived from the sale of
certain fresh-cut fruits and vegetables, (iii) royalties from the sale of
certain fresh-cut fruits and vegetables and (iv) fees received for scientific
and technical services provided by the Company. The Company's revenues from the
sale of produce and royalty revenues are derived from sales of various kinds and
varieties of fresh-cut fruits and vegetables which use the Company's proprietary
technologies and which the Company believes would not be available commercially
without such use. Historically, substantially all of the Company's revenues have
been derived from the sale of flexible packaging to the snack food, produce,
bakery, and confectionery industries and for other uses. The Company believes
that its packaging technologies, coupled with acquisitions of produce packagers,
provide a platform to increase its sales of packaging, processing aids and
scientific and technical services to growers and processors of fresh produce.
Therefore, the Company expects that the proportion of its revenues derived from
the sale of its products and services addressing the needs of the fresh-cut
produce industry will increase over time and constitute a significant portion of
the Company's future revenue growth.
Prior to 1994, the Company was a development-stage enterprise with limited
capital resources and limited revenues operating exclusively as a manufacturer
and marketer of processing aids. After the advent of new management and an
infusion of capital in December 1992, the Company began to expand its business
to include packaging and scientific and technical services in an effort to
develop integrated systems solutions designed to maintain and support the
quality and integrity of fresh-cut produce. The Company has made the following
acquisitions to accomplish this objective:
- In September 1994, the Company acquired Respire Films, Inc. ("Respire"),
a U.S.-based business involved in the marketing of packaging films.
- In September 1995, the Company acquired Bakery Packaging Services
Limited, based near Runcorn, England (the "Runcorn Facility"). The
Runcorn Facility provided the Company with a U.K. base for packaging,
together with access to numerous produce and other food companies in the
U.K. and elsewhere in Europe. The Runcorn Facility also provided the
Company with proprietary perforating technology to enhance the Company's
strategic position, as well as an incremental source of packaging
revenue. The U.K. packaging business was further enhanced by the
acquisition of a food- grade printing facility and certain other assets
located at Gainsborough, Lincolnshire, England (the "Gainsborough
Facility"), from Printpack Europe (St. Helens) Limited in July 1996. The
Company has consolidated the operations of the Runcorn Facility and the
Gainsborough Facility into those of its subsidiary, EPL Flexible
Packaging Limited ("EPL Flexible").
- In April 1996, the Company acquired the assets of Pure Produce, Inc.
("Pure Produce") based in Worcester, Massachusetts, providing the Company
with in-house scientific and technical capabilities, specifically in the
areas of food safety and microbiological testing.
- In July 1996, the Company acquired Crystal Plastics, Inc. ("Crystal"),
located outside Chicago, to provide a base for the proprietary gas flame
perforation equipment and increase the Company's packaging presence in
the U.S. Crystal uses "K" and polystyrene resins to manufacture and
convert a range of films for numerous applications, some of which are
used to support the Company's U.S. packaging business as a part of the
Company's integrated systems solutions. Crystal also provides the U.S.
base for facilitating fulfillment of an exclusive agreement with E.I.
duPont de Nemours & Co. Inc. ("DuPont"), whereby the Company provides all
of DuPont's perforating requirements for DuPont's Mylar(R) films (the
"DuPont Agreement").
- In October 1997, the Company acquired California Microbiological
Consulting, Inc., based in Walnut Creek, California ("CMC"). Together
with Pure Produce, CMC specializes in food safety, forensic testing and
microbiological consulting, and provides the Company with scientific and
technical facilities on the East and West Coasts.
- In December 1997, the Company acquired Fabbri Artes Graficas Valencia
S.A., a converter, printer and marketer of specialty flexible packaging,
serving principally the European produce market, based in Valencia,
Spain. This acquisition complements and enhances the Company's existing
U.K.-based packaging businesses, providing incremental capacity for more
efficient production of the combined product mix, as well as a strategic
foothold on the European continent for the launch of the Company's
related processing aid and scientific and technical services businesses.
The Company's packaging technologies complement and enhance the
effectiveness of its processing aids, making packaging an integral component of
the integrated system. In marketing its packaging technologies, the Company
works closely with its customers to determine optimal packaging characteristics
for the customer's products, thereby being in a position to influence a
customer's buying decision with respect to its packaging needs. The Company's
packaging business also provides a revenue stream that helps to fund market
development and the Company's lengthy sales process, and the presence of its
packaging infrastructure in regions where produce is grown enhances its sales
prospects to produce growers and processors.
The scientific and technical services the Company provides complement the
processing aids and packaging as a part of its integrated systems solutions. The
Company's scientific and technical expertise provides the Company with an
expanding base of knowledge about food technology, and the Company believes this
expertise helps to establish credibility with customers and support the
commercialization of the Company's products.
The Company markets its processing aids, packaging technologies and
scientific and technical services to processors of packaged, fresh-cut produce
as part of integrated systems solutions for processing fresh-cut produce. To
this end, the Company has been developing relationships with produce processors
and other companies in an effort to penetrate further the fresh-cut produce
market.
- In July 1996, the Company formed NewCorn Co LLC ("Newcorn"), a limited
liability company in which the Company has a 51% membership interest.
Newcorn is a joint venture among the Company and Underwood Ranches and
Twin Garden Farms, two major regional growers and processors of fresh-cut
sweet corn. Newcorn processes, packages, markets and sells fresh-cut corn
products using the Company's processing aids and packaging materials,
with the aim of developing year-round, nationally available branded
fresh-cut corn products.
- Effective September 22, 1997, the Company executed a ten-year exclusive
trademark license agreement (subject to extension) and strategic alliance
with Potandon Produce LLC ("Potandon"), a Green Giant Fresh(R) brand
licensee of the Pillsbury Company. The agreement is subject to the terms
of Potandon's license of the Green Giant Fresh(R) brand, and contains
certain minimum royalty requirements and other customary provisions.
During the first three years of the term of the agreement, Potandon has
the option to require the Company to negotiate in good faith to form a
business entity in which Potandon and the Company would jointly
participate in the fresh-cut potato products business on terms yet to be
established. The Company sells fresh-cut potato products, such as french
fries, to the food service industry under the Green Giant Fresh(R) brand
name, utilizing the Company's "Potato Fresh(R) System" processing aid
technologies and related protocols in processing potatoes supplied by
Potandon. In order to produce and market its fresh-cut potato products,
the Company uses one co-packer and plans to add several other regional
co-packers, and is building a dedicated sales and marketing
infrastructure to support its efforts.
- In October 1997, the Company entered into a strategic alliance with
Farmington Fresh, a major grower and marketer of Fuji apples. Under this
alliance, the Company has licensed its "Apple Fresh(R)" processing aids
and provides flexible packaging and scientific and technical services in
connection with the production by Farmington Fresh of certain varieties
of fresh-cut sliced apples. The agreement, which currently extends until
December 2002, grants Farmington Fresh production exclusivity in its
local geographic market. In addition to revenues from sales of the
Company's processing aids, packaging and scientific and technical
services, the agreement entitles the Company to receive a royalty from
each package of fresh-cut apple slices sold.
8
<PAGE> 10
The Company was incorporated in 1985 under the laws of the State of
Colorado. The Company's executive offices are located at 2 International Plaza,
Suite 245, Philadelphia, Pennsylvania 19113-1507, and its telephone number is
(610) 521-4400.
USE OF PROCEEDS
The net proceeds from the sale of the Shares will be received by the
Selling Shareholders. The Company will not receive any of the proceeds from any
sale of the Shares by the Selling Shareholders, but will receive the exercise
price of any Warrants exercised by the Selling Shareholders, up to a maximum of
approximately $4,686,968. Any proceeds received from the exercise of the
Warrants will be used for working capital and general corporate purposes.
9
<PAGE> 11
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to each of
the directors and executive officers of the Company.
<TABLE>
<CAPTION>
NAME AGE POSITIONS WITH THE COMPANY AND AFFILIATES
- ----------------------------------- --- ----------------------------------------------------
<S> <C> <C>
Paul L. Devine..................... 43 Chairman of the Board of Directors, President, Chief
Executive Officer
Timothy B. Owen.................... 38 Secretary and Treasurer
Derrick W. Lyon.................... 54 Chief Executive Officer of EPL Technologies (Europe)
Limited
Dr. William R. Romig............... 51 Senior Vice President -- Science and Technology
Karen A. Penichter................. 44 Vice President -- Sales
Antony E. Kendall.................. 54 Chief Executive Officer of EPL Flexible Packaging
Ltd.
Virginia N. Finnerty............... 37 Chief Operating Officer of IPS Produce, Inc.
Jose Saenz de Santa Maria.......... 42 Managing Director of Fabbri Artes Graficos Valencia
SA
Robert D. Mattei(1)................ 58 Director
Ronald W. Cantwell(1).............. 53 Director
</TABLE>
- ---------------
(1) Member of Compensation, Audit and 1994 Stock Incentive Plan Committees
Paul L. Devine. Mr. Devine was appointed Chairman and Chief Executive
Officer of the Company in March 1992. From 1989 to 1992, Mr. Devine was involved
as a business consultant in the identification and targeting of acquisitions for
various public companies. During this time, he also served as a director and
chief executive officer of various companies, including three U.K. subsidiaries
of Abbey Home Healthcare, Inc., a U.S. public health care group. Prior to this,
he was the Chief Executive of Leisure Time International, plc from 1986 to 1989.
He is a graduate of London University and holds Bachelors and Masters degrees in
curriculum research. Throughout his business career, he has been intimately
involved in the design and implementation of new product strategies, both in
financial services and health/hygiene services.
Timothy B. Owen. Mr. Owen was appointed Secretary and Treasurer in October
1996, having served as European Financial Controller of the Company since 1995.
From 1992 until 1995, Mr. Owen performed financial and accounting services for
the Company as an independent consultant. From 1990 to 1993, Mr. Owen served as
chief financial officer and secretary of various companies, including three U.K.
subsidiaries of Abbey Home Healthcare, Inc. Prior to this, from 1986 to 1990, he
was a financial controller for the Foseco Group Plc, holding both corporate and
operational positions. Mr. Owen qualified as a chartered accountant with Touche
Ross & Co. (now Deloitte & Touche) in 1985. He is a graduate of Brunel
University, and holds an Honors degree in economics.
Derrick W. Lyon. Mr. Lyon was appointed Chief Executive Officer of EPL
Technologies (Europe) Limited in August 1996. Mr. Lyon previously served as
Chief Operating Officer of Bakery Packaging Services Limited ("BPS") (now EPL
Flexible Packaging Ltd.) following its acquisition by the Company in September
1995 until December 1996. From 1981 to 1995, Mr. Lyon was Managing Director and
a founding shareholder of BPS. Prior to this, Mr. Lyon held senior management
positions within Bernard Wardle & Co., Smurfit Limited, and W.R. Grace, where he
had over 25 years experience in the printing and packaging industries. He holds
a degree in mechanical engineering from City University, London, and Bachelors
and Masters degrees in economics from St. John's College, Cambridge.
10
<PAGE> 12
Dr. William R. Romig. Dr. Romig was appointed Vice President of Research
and Development of the Company in September 1994, and, as of January 1, 1998,
serves as Senior Vice President of Science and Technology. From 1988 until 1994,
Dr. Romig was first Senior Director of Vegetable Genetics and then Senior
Director of Business Development and Director of Product Development for
FreshWorld, a joint venture between DNA Plant Technology Corporation, a public
company, and DuPont. Prior to 1988, he worked for General Foods Corporation
(Kraft) eventually attaining the highest technical position of Principal
Scientist. Dr. Romig received his B.S. in Plant Pathology from Cornell
University and his Ph.D. from the University of Delaware. He has held positions
of Adjunct Professor at several universities and has lectured and published in
the area of fresh-cut fruits and vegetables. Dr. Romig is also Chairman of the
Company's Scientific Advisory Board.
Karen A. Penichter. Ms. Penichter joined the Company as Vice President/
Sales in March 1996. From 1986 until 1996, Ms. Penichter worked for FMC
Corporation -- Food Ingredients Division in several sales management positions
until attaining the position of Director of Sales in 1993. She worked as a Sales
Representative and then Sales Manager for SCM Corporation -- Durkee Foods
Division until 1986. Ms. Penichter was employed by Thomas J. Lipton Company as a
Food Technologist from 1978-1982. Ms. Penichter holds a BA in Biology from SUNY
Binghamton and an M.S. in Food Technology from Rutgers University.
Antony P. Kendall. Mr. Kendall joined the Company in August 1996 as chief
executive officer of BPS (now EPL Flexible Packaging Ltd.). From 1970 to 1996,
Mr. Kendall worked for the UCB group of Companies in various senior management
positions. Most recently he was Managing Director of UCB Flexible Ltd.,
responsible for marketing its specialty packaging products in the U.K. and for
Pepsico European contracts. He holds a B.S. degree in Mechanical Engineering
from the University of London.
Virginia N. Finnerty. Ms. Finnerty has served as Chief Operating Officer
of IPS Produce, Inc., the subsidiary through which the Company conducts its
activities related to fresh-cut potatoes, since June 1997. From June 1994 to
June 1997, Ms. Finnerty served as the Company's Director of Business
Development. From December 1993 to June 1994, Ms. Finnerty worked in sales and
marketing development for the Greater Philadelphia Chamber of Commerce. From
1990 to 1993, Ms. Finnerty served as a sales and marketing manager for Osterman
Foods. Ms. Finnerty holds a BFA and an Education Certification from Temple
University and an MBA in marketing from St. Joseph's University.
Jose Saenz de Santa Maria. Mr. Saenz has served as Managing Director of
Fabbri since its acquisition by the Company in December 1997. Mr. Saenz joined
the Company in July 1997 as an independent consultant, and was responsible for
conducting the Company's on-site due diligence with respect to the Fabbri
Acquisition. From January 1994 to July 1997, Mr. Saenz served as Managing
Director of AMCOR Flexibles Espano. Prior to this, Mr. Saenz served as a senior
executive of Ramondine, Inc., a specialty packaging company, from August 1987 to
December 1993. He is a law graduate of the University of Madrid and holds
Masters degrees in Commercial Management and Marketing from CESEM Business
School (Madrid).
Robert D. Mattei. Mr. Mattei is an investor and entrepreneur. Mr. Mattei
has been self-employed in various aspects of the food service industry for more
than 20 years. As a restaurateur, Mr. Mattei has developed, operated and sold
many successful operations. Mr. Mattei currently owns three restaurants, and
acts as an industry consultant primarily involved in the development of
restaurant concepts. Mr. Mattei has been a member of the Board of Directors of
the Company since February 1988 and was Secretary of the Company from February
1988 to March 1993.
Ronald W. Cantwell. Mr. Cantwell currently serves as President of Trilon
Dominion Partners L.L.C. ("Trilon"), and has done so since its inception in June
1995. Mr. Cantwell also serves as President of VC Holdings, Inc., the sole
manager of Trilon. Prior to this, Mr. Cantwell served as President of The
Catalyst Group, Inc., where he executed a variety of merchant banking activities
and developed and directed the strategic plan for a diverse mix of utility
assets. In addition, he was involved in advising numerous mergers, acquisitions
and restructuring matters for The Edper Group, the principal investor in The
Catalyst Group. Prior to joining The Catalyst Group, Mr. Cantwell spent nineteen
years in the practice of public accounting, most recently with Ernst & Young,
where he was a tax partner and headed the Dallas-based Mergers and Acquisitions
practice.
<PAGE> 13
EXECUTIVE COMPENSATION
The following table sets forth the aggregate cash compensation paid by the
Company for the year ended December 31, 1997 for services rendered in all
capacities to the Chief Executive Officer and each of the other four most highly
compensated executive officers (the "Named Executive Officers").
11
<PAGE> 14
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
-------------------------------------- ---------------
NAME AND OTHER RESTRICTED ALL OTHER
PRINCIPAL COMPEN- STOCK OPTIONS/ LTIP COMPEN-
POSITION SALARY BONUS SATION AWARD(S) SARs PAYOUTS SATION
YEAR ($) ($) ($) ($) (#) ($) ($)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Paul L. Devine 1997 275,000 225,000 0 200,000 0 0
Chairman, President 1996 225,000 210,978 0 0 500,000 0 0
and Chief Executive 1995 56,250 100,000 120,000 0 200,000 0 0
Officer
Derrick W. Lyon 1997 0 0 148,500(1) 0 0 0 0
CEO - EPL 1996 0 0 184,000(1) 0 100,000 0 0
Technologies 1995 0 0 36,000(1) 0 100,000 0 0
(Europe) Ltd
Antony Kendall 1997 125,470 8,200 13,089(2) 0 50,000 0 0
Chief Executive 1996 47,839 0 2,470(2) 0 100,000 0 0
EPL Flexible 1995 0 0 0 0 0 0 0
Packaging Ltd
Timothy B. Owen 1997 105,000 40,000 0 0 100,000 0 0
Treasurer and 1996 90,000 0 0 0 115,000 0 0
Secretary 1995 60,000 0 30,000 0 125,000 0 0
William R. Romig 1997 105,750 14,075 1,634 0 150,000 0 0
Vice President, 1996 94,089 5,000 0 0 175,000 0 0
Research & 1995 85,000 0 0 0 35,000 0 0
Development
</TABLE>
(1) includes payments made to DWL Associates Limited, an entity controlled by
Mr. Lyon, for the provision of consulting and advisory services. Amounts assume
an exchange rate of GBP1:$1.60 in 1995 and 1996, and GBP1:$1.65 in 1997.
(2) assumes an exchange rate of GBP1:$1.65.
COMPENSATION OF DIRECTORS
With the exception of Mr. Devine in his capacity as an officer of the Company,
no cash compensation was paid to any director of the Company during the year
ended December 31, 1997. In May 1997, in accordance with the terms of the
Company's 1994 Stock Incentive Plan, Robert D. Mattei and former director Dr.
Rainer G. Bichlbauer were each granted an option to acquire 15,000 shares of
Common Stock at an exercise price of $5.25 per share, for their services as
members of the audit and compensation committees. Also pursuant to the 1994
Stock Incentive Plan, Mr. William Hopke, also a former director, served for part
of fiscal 1996 and was granted an option to acquire 10,000 shares of Common
Stock at an exercise price of $5.25 per share for his services as a member of
such committees. These options are exercisable for five-year terms and have
exercise prices equal to the fair market value of such shares on the date of
grant.
EMPLOYMENT AND CONSULTING CONTRACTS
12
<PAGE> 15
Mr. Devine and the Company are parties to an employment agreement dated as
of January 1, 1997 which provides that Mr. Devine is to serve as the Company's
Chairman of the Board, President and Chief Executive Officer. The agreement
provides for a rolling three year term. The Agreement provides for a base salary
to be fixed by the Board which, as of January 1, 1997, was $275,000 per year.
Pursuant to the agreement the Company will maintain life insurance on Mr.
Devine's life with a face amount equal to at least $1,000,000, for which Mr.
Devine may designate a beneficiary. Under the agreement Mr. Devine also will be
entitled to receive a retirement benefit if he remains continuously employed (as
defined) by the Company until age fifty. Generally, if Mr. Devine retires at age
65, the retirement benefit to be received annually will be equal to 50% of his
average annual base salary and bonus during the final three years of his
employment (less benefits from any other defined benefit pension plan of the
Company). The percentage of Mr. Devine's average annual base salary and bonus
will be reduced or increased by 6% for each year by which Mr. Devine elects to
have such retirement benefit commence earlier or later than his 65th birthday.
The agreement also provides that Mr. Devine is entitled to participate in all
benefit plans and arrangements of the Company and may also receive bonuses, if
any, as determined by the Board of Directors. The agreement also provides
certain disability and death benefits to Mr. Devine, as well as severance
payments approximately equal to Mr. Devine's average salary and bonus for the
previous three years, to continue for three years if Mr. Devine is terminated
under certain conditions. Additionally, Mr. Devine is entitled to receive a
payment of slightly less than three times his "base amount" (as defined in the
Internal Revenue Code of 1986) in the event of a "change of control" of the
Company (as defined in the agreement). This agreement also contains certain
customary provisions regarding confidentiality and non-competition.
The Company entered into a Consulting Agreement with DWL Associates
Limited, an entity controlled by Mr. Lyon, for the provision of consulting and
advisory services. The agreement, which was signed as part of the acquisition by
the Company of BPS in September 1995, has an original term of two years,
expiring September 30, 1997. As notice not to renew was not served by either
party, the agreement has automatically renewed for a further twelve months,
expiring September 30, 1998. Under this agreement, either party may terminate
this agreement upon six months notice. Annual fees of GBP90,000 ($149,000 at an
exchange rate of GBP1:$1.65) are payable under this agreement, plus the
reimbursement of directly incurred expenses.
The Company, through Bakery Packaging Services Limited (now known as EPL
Flexible Packaging Limited ("EPL Flexible")), entered into an employment
agreement with Mr. Kendall commencing on August 1, 1996, which provides that Mr.
Kendall is to serve as Chief Executive of EPL Flexible. The agreement provides
for an annual salary of GBP70,000 ($115,000 at an exchange rate of GBP1:$1.65),
which salary is reviewable on January 1 annually and has been increased to
GBP83,000 ($137,000 at an exchange rate of GBP1:$1.65) as of July 1, 1997,
together with customary benefits, such as vacation, the provision of an
automobile, healthcare coverage and contributions into a defined contribution
pension scheme. A bonus is also payable upon the achievement of certain
performance targets, as agreed on an annual basis. After the first twelve
months, the contract may be terminated by either side upon six months' notice.
The agreement also contains certain customary provisions regarding
confidentiality and non-competition.
The Company entered into an employment agreement with Dr. Romig effective
September 1, 1994, which provides for a twelve month term, with annual renewal
terms. Effective January 1, 1998, the Company entered into a new agreement with
Dr. Romig, which runs for an initial term of two years, with annual renewal
terms thereafter. Either party may terminate the contract upon six months'
notice. The initial annual salary is $120,000, with a bonus of up to 25% of the
salary based upon the achievement of agreed-upon objectives. In addition to the
customary provisions on vacation and healthcare coverage, the agreement also
provides that, in the event of a termination of employment by either party due
to a change in control (as defined in the agreement), Dr. Romig would receive a
total payment equal to twice his annual salary plus a bonus equal to his average
bonus earned over the previous twelve months. The agreement also contains
certain customary provisions regarding confidentiality and non-competition.
1994 STOCK INCENTIVE PLAN
The Company's 1994 Stock Incentive Plan (the "Plan") was adopted by the
shareholders on July 21, 1994, and modified by the shareholders to increase the
shares issuable thereunder and to make certain other changes on July 22, 1996,
and again on July 21, 1997. The Plan is intended as an additional incentive to
certain employees, certain consultants or advisors and non-employee members of
the Board of Directors to enter into or remain in the employ of the Company or
to serve on the Board of Directors by providing them with an additional
opportunity to increase their proprietary interest in the Company and to align
their interests with those of the Company's shareholders generally through the
receipt of options to purchase Common Stock and has been structured to comply
with the applicable provisions of Section 16(b) of the Securities Exchange Act
of 1934, as amended, and Rule 16b-3 thereunder. The Plan provides for the grant
of incentive stock options within the meaning of the Internal Revenue Code of
1986, as amended, and non-qualified stock options and the award of shares of
Common Stock. The particular terms of each option grant or stock award are set
forth in a separate agreement between the Company and the optionee or award
recipient. The Plan is administered by the 1994 Stock Incentive Plan
Administration Committee appointed by the Board of Directors, which is currently
comprised of Robert D. Mattei and Ronald W. Cantwell. The committee has the
discretion to determine the number of shares subject to each award, and other
applicable terms and conditions, including a grant's vesting schedule. The term
of an option may not be more than five years from the grant date. Options
granted under the Plan generally terminate three months after an optionee ceases
to be employed by the Company (twelve months in the case of death or
disability). The Plan provides that no option may be granted under it after May
4, 1999.
13
<PAGE> 16
The following table sets forth certain information concerning grants of stock
options made during the year ended December 31, 1997 to Named Executive
Officers.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
-----------------------------------
% OF
TOTAL POTENTIAL REALIZABLE VALUE AT
OPTIONS ASSUMED ANNUAL RATES OF
GRANTED TO STOCK PRICE APPRECIATION FOR
EMPLOYEES EXERCISE OPTION TERM (5 YEARS)(1)
OPTIONS IN FISCAL OR BASE EXPIRATION -------------------------
NAME GRANTED YEAR PRICE DATE 0% 5% 10%
- ---------------- -------- ------------- -------- ---------- --- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Paul L. Devine 200,000 18.51% $7.00 11/14/2002 0 386,794 854,714
Derrick W. Lyon 0 0 0 N/A N/A N/A N/A
Antony Kendall 50,000 4.63 7.00 11/14/2002 0 96,699 213,679
Timothy B. Owen 100,000 9.25 7.00 11/14/2002 0 193,397 427,357
William R. Romig 150,000 13.88 7.00 11/14/2002 0 290,096 641,036
</TABLE>
(1) The dollar amounts under these columns are the result of calculations at
0%, 5% and 10% rates set by the Securities and Exchange Commission and,
therefore, are not intended to forecast possible future appreciation of the
price of the Common Stock.
The following table sets forth certain information concerning exercises of
stock options during the year ended December 31, 1997 and the value of
unexercised stock options at December 31, 1997 for Named Executive Officers.
AGGREGATED OPTION EXERCISES IN LAST FISCAL
YEAR AND FISCAL YEAR-END OPTION VALUES (1)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING OPTIONS AT IN-THE-MONEY OPTIONS AT
SHARES DECEMBER 31, 1997 DECEMBER 31, 1997(1)
ACQUIRED VALUE --------------------------------------------------------
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Paul L. Devine 400,000(1) 2,212,500(1) 800,000 0 1,462,500 0
Derrick W. Lyon 0 0 200,000 0 618,750 0
Antony Kendall 0 0 150,000 0 109,375 0
Timothy B. Owen 10,000(1) 60,625(1) 340,000 0 669,375 0
William R. Romig 0 0 360,000 0 468,751 0
</TABLE>
(1) None of the shares underlying the exercised options has been sold as at
December 31, 1997.
(2) At December 31, 1997, the closing price of a share of Common Stock on the
Nasdaq SmallCap Market was $6.125.
14
<PAGE> 17
CERTAIN TRANSACTIONS
Effective October 21, 1997, the Company completed a revolving line of
credit agreement (the "Trilon Line") with Trilon Dominion Partners L.L.C.
("Trilon"). In connection with obtaining the Trilon Line, the Company paid
Trilon a total transaction fee of $100,000. Under the Trilon Line, Trilon made
available to the Company $2.1 million for working capital purposes. Amounts
drawn were secured by, among other things, a blanket lien on the assets of the
Company's wholly-owned U.S. subsidiaries and on the assets of the Company
itself. Interest was at the "prime rate" (as published in the Wall Street
Journal) plus 4% and payable quarterly in arrears. $337,500 was drawn as of
September 30, 1997. Part of the proceeds of the placement of the Series D
Preferred Stock and the warrants issued in connection with the Series D
Preferred Stock was used to repay the Trilon Line on November 12, 1997,
whereupon the Trilon Line was cancelled. The Trilon Line therefore is no longer
available for drawings. Mr. Cantwell, a director of the Company, is the
President of Trilon and President of VC Holdings, Inc., the sole managing member
of Trilon.
The Company had a revolving line of credit under an agreement originally
obtained from Dominion Capital, Inc. ("Dominion"), a related party of Trilon,
which was to have expired on March 21, 1998, bearing interest at prime plus
2.5%. In July 1995, Dominion transferred its interest in this line of credit to
Trilon. On October 2, 1995 Trilon agreed to convert the outstanding principal
amount of $4,050,000 under the line of credit into 2,025,000 shares of Common
Stock and warrants to purchase 100,000 shares of Common Stock for $2.00 per
share. In addition, as part of such transaction, the Company issued 162,613
shares of Common Stock in settlement of accrued interest of $310,164, and
24,000 shares of Common Stock in settlement of commitment fees.
The Company entered into a Consulting Agreement with DWL Associates
Limited, an entity controlled by Mr. Lyon. See "Management -- Executive
Compensation."
15
<PAGE> 18
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Common Stock (as defined and calculated under Rule 16b-3 issued
under the Securities Exchange Act of 1934, as amended), as of February 12, 1998
by: (i) each person known by the Company to be the beneficial owner of more than
5% of the Common Stock, (ii) each director, (iii) the Named Executive Officers
(see "Management -- Executive Compensation"), and (iv) all current executive
officers and directors of the Company as a group. Except as set forth below, the
shareholders named below have sole voting and investment power with respect to
all shares of Common Stock shown as beneficially owned by them.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY
OWNED (1)
-----------------------
NAME OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------------------- --------- -------
<S> <C> <C>
Trilon Dominion Partners, L.L.C...... 5,381,806(2)(8) 26.0%
Lancer Partners, L.P. ............... 3,577,011(3) 19.8
Norwich Union Investment Management
Limited............................ 962,500(4) 5.3
Willbro Nominees Ltd................. 293,930(5) 1.6
Paul L. Devine....................... 1,540,833(6) 8.1
Robert D. Mattei..................... 428,965(7) 2.4
Ronald W. Cantwell................... 5,381,806(8) 26.0
Derrick W. Lyon...................... 200,000(9) 1.1
Dr. William R. Romig................. 360,000(9) 2.0
Timothy B. Owen...................... 375,000(10) 2.0
Antony E. Kendall.................... 150,000(9) *
Directors and executive officers as a
group (10 persons)................. 8,899,104(11) 38.5
</TABLE>
- ---------------
* Less than one percent.
(1) Unissued shares of Common Stock of each owner subject to currently
exercisable options or other rights to acquire securities exercisable within
60 days of the date hereof are included in the totals listed and are deemed
to be outstanding for the purpose of computing the percentage of Common
Stock owned by such person, but are not deemed to be outstanding for the
purpose of computing the percentage of the class owned by any other person.
The effect of this calculation is to increase the stated total ownership
percentage currently controlled. Information in the table is based solely
upon information contained in filings with the Securities and Exchange
Commission, pursuant to Sections 13(d) and 13(g) of the Securities Exchange
Act of 1934, as amended, and the records of the Company.
(2) Includes 2,577,333 shares of Common Stock that may be acquired by converting
1,933,000 shares of Series A Preferred Stock into shares of Common Stock.
Trilon Dominion Partners, L.L.C. ("Trilon") beneficially owns 93.2% of the
Company's outstanding Series A Preferred Stock. The sole members of Trilon
are VC Holdings, Inc. (the sole managing member of Trilon and owner of 100%
of the voting interest in Trilon) and Dominion Capital, Inc., a Virginia
corporation ("Dominion Capital"). Ronald W. Cantwell, a director of the
Company, owns all of the voting stock of VC Holdings, Inc. Dominion Capital
is a wholly-owned subsidiary of Dominion Resources, Inc., a Virginia
corporation ("Dominion Resources"). Both Dominion Capital and Dominion
Resources may be considered to be indirect beneficial owners of the shares
of Common Stock held by Trilon. However, both Dominion Capital and Dominion
Resources disclaim any beneficial ownership of such shares. The address for
Trilon is 245 Park Avenue, Suite 2820, New York, NY 10017.
(3) Includes shares of Common Stock held by funds other than Lancer Partners,
L.P., but which are commonly managed in a group that includes Lancer
Partners, L.P. The address for Lancer Partners, L.P. is 375 Park Avenue,
Suite 2006, New York, NY 10017.
(4) Includes 62,500 shares of Common Stock issuable upon exercise of Warrants.
The address for Norwich Union Investment Management Limited is Sentinel
House, 37 Surrey Street, Norwich NR13UZ, England, U.K.
(5) Includes 144,444 shares of Common Stock issuable upon conversion of Series C
Preferred Stock and 61,986 shares of Common Stock issuable upon exercise of
Warrants. Willbro Nominees beneficially owns 100% of the Series C Preferred
Stock. The address for Willbro Nominees is 6 Broadgate, London EC2M 2RP,
England, U.K.
(6) Includes 880,000 shares of Common Stock that may be acquired by (i)
converting 50,000 shares of A Preferred Stock into 66,667 shares of Common
Stock, (ii) exercising options to acquire 800,000 shares of Common Stock and
(iii) exercising warrants to acquire 13,333 shares of Common Stock. Mr.
Devine beneficially owns 2.4% of the Series A Preferred Stock. The address
for Mr. Devine is c/o the Company, 2 International Plaza, Suite 245,
Philadelphia, PA 19113-1507.
16
<PAGE> 19
(7) Includes 95,000 shares of Common Stock that may be acquired by exercising
options to acquire 95,000 shares of Common Stock and 20,000 shares of
Common Stock owned by Mr. Mattei's wife, as to which he disclaims
beneficial ownership.
(8) Mr. Cantwell may be considered to be an indirect beneficial owner of
such shares of Common Stock by virtue of his ownership of all of the voting
stock of VC Holdings, Inc., the sole managing member of Trilon and owner of
100% of the voting interest in Trilon. The only other member of Trilon is
Dominion Capital, which holds a non-voting membership interest in Trilon.
Dominion Capital is a wholly-owned subsidiary of Dominion Resources. Both
Dominion Capital and Dominion Resources may be considered to be indirect
beneficial owners of such shares of Common Stock. However, both entities
disclaim any beneficial ownership of such shares. The address for Mr.
Cantwell is c/o Trilon, 245 Park Avenue, Suite 2820, New York, NY 10017.
(9) Amount shown represents shares issuable upon exercise of options.
(10) Includes 340,000 shares that may be acquired by exercising options.
(11) Includes 5,027,333 shares of Common Stock that may be acquired by (i)
converting 1,983,000 shares of A Preferred Stock into 2,644,000 shares of
Common Stock, (ii) exercising options to acquire 2,370,000 shares of Common
Stock and (iii) exercising warrants to acquire 13,333 shares of Common
Stock.
17
<PAGE> 20
SELLING SHAREHOLDERS
The table below sets forth information as of February 12, 1998 with respect
to the Selling Shareholders, including the number of shares of Common Stock
owned prior to the Offering, the number of Shares being offered for each
account, and the number and percentage of shares of Common Stock to be owned by
the Selling Shareholders immediately following the sale of the Shares, assuming
all of the offered Shares are sold. In the case of the shares of Common Stock
underlying the Series D Preferred Stock, the number of shares of Common Stock
owned and offered for sale hereby represents an estimate of the number of shares
of Common Stock issuable upon conversion of the Series D Preferred Stock, based
on 150% of the shares of Common Stock issuable at a conversion price of $6.25
per share. This estimate could be greater than or less than the actual number of
shares issued upon conversion. See footnote 5 to the table below for a detailed
description.
<TABLE>
<CAPTION>
Shares Beneficially
Owned Shares Shares Beneficially
Before the Being Owned
Offering(1) Offered After the Offering(1)(2)
----------- ------- ------------------------
Name Number Percent
---- ------ -------
<S> <C> <C> <C> <C>
Willbro Nominees Ltd. 293,930(3) 293,390 0 0
Norwich Union Investment
Management Limited 962,500(4) 312,500 650,000 3.6%
Clifford M. Coles 78,000 38,220 39,780 *
RGC International Inventors, LDC 1,905,808(5) 1,905,808 0 0
Capital Ventures International 680,645(5) 680,645 0 0
Halifax Fund, L.P. 816,775(5) 816,775 0 0
</TABLE>
* Less than 1%.
(1) Except as set forth in footnote (5) below, beneficial ownership is
determined in accordance with Rule 13d-3 of the Exchange Act. Shares of
Common Stock subject to options or warrants currently exercisable or
exercisable within 60 days of February 12, 1998 are deemed outstanding for
computing the percentage of the person holding such options but are not
deemed outstanding for computing the percentage of any other person. The
persons named in the table above have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by
them.
(2) Assumes all Shares offered hereby are sold in the Offering.
(3) Includes 144,444 shares of Common Stock issuable upon conversion of Series
C Preferred Stock and 61,986 shares of Common Stock issuable upon exercise
of Warrants.
(4) Includes 62,500 shares of Common Stock issuable upon exercise of Warrants.
18
<PAGE> 21
(5) In accordance with Rule 416, the number of shares of Common Stock set
forth in the table represents a good faith estimate of the number of shares of
Common Stock to be offered by the Selling Shareholder, based on 150% of the
number of shares of Common Stock that would have been issuable upon conversion
of the Series D Preferred Stock at a conversion price of $6.25 per share, in
accordance with Rule 416 and exercise of the Series D Warrants. The actual
number of shares of Common Stock issuable upon conversion of the Series D
Preferred Stock is determined by a formula based on the market price at the time
of conversion, is therefore subject to adjustment and could be materially less
or more than such estimated number depending on factors that cannot be
predicted by the Company. Specifically, at any given time, the Series D
Preferred Stock is convertible into a number of shares of Common Stock
determined by dividing the sum of (a) the stated value of the Series D Preferred
Stock and (b) a premium amount equal to 4% (on an annualized basis) of the
stated value of the Series D Preferred Stock, by the then applicable conversion
price (calculated as 94% of the average closing bid prices of the Common Stock
for any five (5) consecutive trading days in the twenty-five (25) trading day
period ending one trading day prior to the date of conversion) with a maximum
conversion price of $11.63, subject to certain restrictions. Such 150% estimate
assumes no accrual of the premium on the conversion price since the issuance of
the Series D Preferred Stock. Additional shares also may be issued in the event
certain other agreements associated with the Series D Preferred Stock require
satisfaction, including certain redemption rights in certain circumstances and
liquidated damages provisions. All of such shares, to the extent issued (if
ever), are included in the shares underlying the Series D Preferred Stock as
presented in this table and offered hereby. The Shares offered hereby, and
included in the Registration Statement of which this Prospectus is a part, also
include such additional number of shares of Common Stock as may be issued or
issuable upon conversion of the Series D Preferred Stock by reason of the
floating rate conversion price mechanism or other adjustment mechanisms
described in the Certificate of Designation for the Series D Preferred Stock, or
by reason of any stock split, stock dividend or similar transaction involving
the Common Stock, in order to prevent dilution. The number of shares of Common
Stock beneficially owned and being offered by RGC International Investors, LDC,
Capital Ventures International, and Halifax Fund, L.P. includes 1,680,000,
600,000 and 720,000 shares of Common Stock issuable upon conversion of the
Series D Preferred Stock, respectively, and 225,808, 80,645 and 96,775 shares of
Common Stock, respectively, issuable upon exercise of the Series D Warrants,
which are exercisable for a period of five (5) years at $10.08 each. Pursuant to
the terms of the Series D Preferred Stock and the Series D Warrants, the shares
of Series D Preferred Stock and the Series D Warrants are convertible or
exercisable by any holder only to the extent that the number of shares of Common
Stock thereby issuable, together with the number of shares of Common Stock owned
by such holder and its affiliates (but not including shares of Common Stock
underlying unconverted shares of Series D Preferred Stock or unexercised
portions of the Series D Warrants) would not exceed 4.99% of the then
outstanding Common Stock as determined in accordance with Section 13(a) of the
Exchange Act. Accordingly, the number of shares of Common Stock set forth in the
table for this Selling Shareholder may exceed the number of shares of Common
Stock that this Selling Shareholder could own beneficially at any given time
through this Selling Shareholder's ownership of the Series D Preferred Stock and
the Series D Warrants. In that regard, beneficial ownership of this Selling
Shareholder set forth in the table is not determined in accordance with Rule
13d-3 under the Exchange Act.
Relationships Between the Company and the Selling Shareholders
Clifford M. Coles is the President of CMC. In connection with the
Company's acquisition of CMC in October 1997, as the former controlling
shareholder of CMC, Mr. Coles received, among other things, 78,000 shares of
Common Stock in exchange for the common stock of CMC.
PLAN OF DISTRIBUTION
The offer and sale of the Shares by the Selling Shareholders, or by their
pledgees, donees, transferees or other successors in interest, may be effected
from time to time in one or more of the following transactions: (a) to
underwriters who will acquire the Shares for their own account and resell them
in one or more transactions,
19
<PAGE> 22
including negotiated transactions, at a fixed public offering price or at
varying prices determined at the time of sale (any public offering price and any
discount or concession allowed or reallowed or paid to dealers may be changed
from time to time); (b) through brokers, acting as principal or agent, in
transactions (which may involve block transactions) on the Nasdaq SmallCap
Market or on one or more exchanges on which the Shares are then listed, in
special offerings, exchange distributions pursuant to the rules of the
applicable exchanges or in the over-the-counter market, or otherwise, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices, at negotiated prices or at fixed prices; (c) directly or through
brokers or agents in private sales at negotiated prices; (d) short sales; (e) by
other legally available means; or (f) any combination of the foregoing. The
number of Shares that may actually be sold by each of the Selling Shareholders
will be determined by such Selling Shareholder.
The sale price to the public may be the market price prevailing at the
time of sale, a price related to such prevailing market price or such other
price as the Selling Shareholders determine from time to time. The Shares may
also be sold pursuant to Rule 144.
The Selling Shareholders or their respective pledgees, donees, transferees
or other successors in interest, may also sell the Shares directly to market
makers acting as principals and/or broker-dealers acting as agents for
themselves or their customers. Brokers acting as agents for the Selling
Shareholders will receive usual and customary commissions for brokerage
transactions, and market makers and block purchasers purchasing the Shares will
do so for their own account and at their own risk. It is possible that a Selling
Shareholder will attempt to sell shares of Common Stock in block transactions to
market makers or other purchasers at a price per share which may be below the
then market price. There can be no assurance that all or any of the Shares
offered hereby will be sold by the Selling Shareholders. The Selling
Shareholders and any brokers, dealers or agents, upon effecting the sale of any
of the Shares offered hereby, may be deemed "underwriters" as that term is
defined under the Securities Act or the Exchange Act, or the rules and
regulations thereunder.
Underwriters participating in any offering made pursuant to this
Prospectus (as amended or supplemented from time to time) may receive
underwriting discounts and commissions. Discounts or concessions may be allowed
or reallowed or paid to dealers.
Upon the Company being notified by any Selling Shareholder that a material
arrangement has been entered into with a broker or dealer for the sale of any of
the Shares through a block trade, special offering, exchange distribution or
secondary distribution or a purchase by a broker or dealer, a supplemented
Prospectus will be filed, if required, pursuant to Rule 424(c) under the
Securities Act, disclosing (a) the name of each such broker-dealer, (b) the
number of shares involved, (c) the price at which such shares were sold, (d) the
commissions paid or discounts or concessions allowed to such broker-dealer(s),
where applicable, (e) that such broker-dealer(s) did not conduct any
investigation to verify the information set out or incorporated by reference in
this Prospectus, as supplemented, and (f) other facts material to the
transaction.
The Selling Shareholders and any other persons participating in the sale
or distribution of the Shares may be subject to applicable provisions of the
Securities Act and Exchange Act and the rules and regulations thereunder,
including Regulation M, which provisions may limit the timing of purchases and
sales of any of the Shares by the Selling Shareholders or any other such person.
The foregoing may affect the marketability of the Shares.
In connection with the Offering, the Company has agreed to indemnify the
Selling Shareholders, or their transferees or assignees, against certain
liabilities, including liabilities under the Securities Act, or to contribute to
payments the Selling Shareholders or their respective pledgees, donees,
transferees or other successors in interest, may be required to make in respect
thereof.
20
<PAGE> 23
In order to comply with the securities laws of certain states, if
applicable, the Shares will be sold in such jurisdictions, if required, only
through registered or licensed brokers or dealers. In addition, in certain
states the Shares may not be sold unless the Shares have been registered or
qualified for sale in such state or an exemption from registration or
qualification is available and complied with.
The Company has agreed that it will bear all costs, expenses and fees in
connection with the registration of the Shares.
LEGAL MATTERS
The validity of the Shares offered hereby is being passed upon for the
Company by Ballard Spahr Andrews & Ingersoll, LLP, Philadelphia, Pennsylvania
and Denver, Colorado.
EXPERTS
The consolidated financial statements incorporated in this prospectus by
reference from the Company's Annual Report on Form 10-K/A for the year ended
December 31, 1996 have been audited by Deloitte & Touche LLP, independent
auditors, as stated in their report, which is incorporated herein by reference
and have been so incorporated in reliance upon the report of such firm given
upon their authority as experts in accounting and auditing.
The financial statements of Fabbri Artes Graficas Valencia S.A. as of
September 30, 1997 and 1996 and for each of the two years in the period ended
September 30, 1997 included in the Company's Current Report on Form 8-K dated
December 24, 1997, as amended on February 12, 1998 and incorporated in this
Prospectus and Registration Statement by reference, have been audited by Coopers
& Lybrand, S.A., independent auditors, as set forth in their report thereon.
Such financial statements are incorporated by reference herein in reliance upon
such report given upon the authority of such firm as experts in accounting and
auditing.
The financial statements of Bakery Packaging Services Limited for each of
the two years in the period ended November 30, 1994 included in the Company's
Current Report on Form 8-K dated September 19, 1995, as amended on November 14,
1995 and incorporated in this Prospectus and Registration Statement by
reference, have been audited by Porter Matthews & Marsden, independent auditors,
as set forth in their report thereon. Such financial statements are incorporated
by reference herein in reliance upon such report given upon the authority of
such firm as experts in accounting and auditing.
21
<PAGE> 24
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following is a list of the estimated expenses to be incurred by the
Registrant in connection with the issuance and distribution of the Shares being
registered hereby.
<TABLE>
<S> <C>
SEC Registration Fee $ 7,356
NASDAQ Listing Fee 7,500
Accountants' Fees and Expenses 10,000*
Legal Fees and Expenses 35,000*
Miscellaneous 144*
-------
TOTAL $60,000*
</TABLE>
* As estimated and subject to change.
The Selling Shareholders will not bear any portion of the expenses of
registration of the Shares.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Under Article 109 of the Colorado Business Corporation Act, as amended
(the "CBCA"), the Company has the power to indemnify directors and officers
under prescribed circumstances and subject to certain limitations, against
certain costs and expenses, including attorneys' fees actually and reasonably
incurred in connection with any action, suit or proceedings, whether civil,
criminal, administrative or investigative, to which any of them is a party by
reason of his or her being a director or officer of the Company if it is
determined that he or she acted in accordance with the applicable standard of
conduct set forth in such statutory provisions.
Article VF. of the Company's Amended and Restated Articles of
Incorporation, as amended, and Article VI of the Company's Bylaws, as amended,
provide that the Company shall indemnify directors and officers of the Company
against all expenses, liability and loss incurred as a result of such person's
being a party to, or threatened to be made a party to, any proceeding (as
defined, which includes any threatened proceeding) by reason of the fact that he
or she is or was a director or officer of the Company or is otherwise the
subject of any such proceeding by reason of that person's relationship with the
Company, to the fullest extent authorized by the CBCA, if the person conducted
the activities in question in good faith, reasonably believed that the conduct
was in the Company's best interests or was not opposed to the Company's best
interests and, in the case of a criminal proceeding, had no reasonable cause to
believe the conduct was unlawful. Article VI of the Bylaws, as amended, further
permits the Company to maintain insurance, at its expense, to protect itself and
any such director or officer of the Company against any such expenses, liability
or loss, whether or not the Company would have the power to indemnify such
person against such expenses, liability or loss under the Bylaws, as amended.
The Company has directors' and officers' liability insurance.
II-1
<PAGE> 25
ITEM 16. EXHIBITS.
Exhibit
Number Description
3.1 Amended and Restated Articles of Incorporation of the Company, as
amended, (Incorporated by reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1997 on file with the Securities and Exchange
Commission (the "SEC")).
3.2 Amended and Restated Bylaws of the Company, as amended.
(Incorporated by reference to Exhibit 3.2 to the Company's Quarterly
Report on Form 10-Q for the quarterly period ended September 30,
1997 on file with the SEC.)
4.1 Specimen Common Stock Certificate (Incorporated by reference to
Exhibit 4.1 to the Company's Annual Report on Form 10-K for the
eight months ended December 31, 1992 on file with the SEC).
5.1* Opinion of Ballard Spahr Andrews & Ingersoll, LLP as to the
validity of the shares of Common Stock being registered.
10.1 License Agreement dated as of April 29, 1997 by and between
Integrated Produce Systems, Inc. and Farmington Fresh (confidential
treatment has been requested for certain portions of this
agreement).
10.2* Amendment to License Agreement, dated February 13, 1998, between
Integrated Produce Systems, Inc. and Farmington Fresh.
10.3 Operating Agreement of NewCornCo, LLC, dated July 19, 1996, between
the Registrant and Agricultural Innovation & Trade, Inc.
(confidential treatment has been requested for certain portions of
this agreement).
10.4 Fresh-Cut Corn Processing Agreement, dated July 22, 1996, between
NewCornCo, LLC, and Agricultural Innovation & Trade, Inc.
(confidential treatment has been requested for certain portions of
this agreement).
10.5 Assignment of Membership Interest, dated December 6, 1997,
between Agricultural Innovation & Trade, Inc. and Twin
Garden Sales, Inc. (confidential treatment has been
requested for certain portions of this agreement).
10.6 Requirements Agreement, dated as of December 6, 1997, between
NewCornCo, LLC, and Twin Garden Farms (confidential treatment has
been requested for certain portions of this agreement).
10.7 Employment Agreement, dated January 1, 1998, between the Company and
William R. Romig
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Coopers & Lybrand, S.A.
23.3 Consent of Porter, Mattews & Marsden
[/R]
23.4* Consent of Ballard Spahr Andrews & Ingersoll, LLP (included in
Exhibit 5.1).
24.1* Power of Attorney (included in signature page).
__________
*previously filed
**to be filed by amendment
II-2
<PAGE> 26
ITEM 17. UNDERTAKINGS.
A. The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this Registration Statement.
(i) To include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933, as amended (the "Securities Act")'
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the Registration Statement. Notwithstanding the foregoing,
any increase or decrease in volume of securities offered (if the
total dollar value of securities offered would not exceed that which
was registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the SEC pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a
20 percent change in the maximum aggregate offering price set forth
in the "Calculation of Registration Fee" table in the effective
registration statement;
(iii) To include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement;
provided, however, that paragraphs (A)(1)(i) and (A)(1)(ii) do not
apply if the Registration Statement is on Form S-3, Form S-8 or Form F-3, and
the information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the SEC
by the Registrant pursuant to Section 13 or Section 15(d) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), that are incorporated by
reference in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
B. The undersigned Registrant hereby undertakes that for purposes of
determining any liability under the Act, each filing of the Registrant's annual
report pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and,
where applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Exchange Act) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
C. Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the SEC such indemnification is against
public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.
II-3
<PAGE> 27
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the Township of Tinicum, Commonwealth of Pennsylvania, on
February 13, 1998.
EPL TECHNOLOGIES, INC.
/s/ Paul L. Devine
----------------------------
Paul L. Devine
Chairman, President and Chief Executive
Officer (Principal Executive Officer)
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signature Title Date
- --------- ----- ----
/s/ Paul L. Devine Chairman, President and February 13, 1998
- --------------------- Chief Executive Officer
Paul L. Devine (Principal Executive Officer)
/s/ Timothy B. Owen Secretary and Treasurer February 13, 1998
- ---------------------- (Principal Financial and
Timothy B. Owen Accounting Officer)
/s/ Robert D. Mattei Director February 13, 1998
- --------------------
Robert D. Mattei
/s/ Ronald W. Cantwell Director February 13, 1998
- ----------------------
Ronald W. Cantwell
II-4
<PAGE> 28
EXHIBIT INDEX
Exhibit Sequentially
Number Description Numbered Page
- ------ ----------- -------------
3.1 Amended and Restated Articles of Incorporation
of the Company, as amended, (Incorporated by
reference to Exhibit 3.1 to the Company's
Quarterly Report on Form 10-Q for the
quarterly period ended September 30, 1997 on
file with the SEC).
3.2 Amended and Restated Bylaws of the Company, as
amended, (Incorporated by reference to Exhibit
3.2 to the Company's Quarterly Report on Form
10-Q for the quarterly period ended September
30, 1997 on file with the SEC.)
4.1 Specimen Common Stock Certificate
(Incorporated by reference to Exhibit 4.1 to
the Company's Annual Report on Form 10-K for
the eight months ended December 31, 1992 on
file with the SEC).
5.1* Opinion of Ballard Spahr Andrews & Ingersoll, LLP
as to the validity of the shares of Common
Stock being registered.
10.1 License Agreement dated as of April 29, 1997 by
and between Integrated Produce Systems, Inc.
and Farmington Fresh (confidential treatment
has been requested for certain portions of this
agreement).
10.2* Amendment to License Agreement, dated February 13,
1998, between Integrated Produce Systems, Inc.
and Farmington Fresh.
10.3 Operating Agreement of NewCornCo, LLC, dated
July 19, 1996, between the Company and
Agricultural Innovation & Trade, Inc. (confidential
treatment has been requested for certain
portions of this agreement).
10.4 Fresh-Cut Corn Processing Agreement, dated
July 22, 1996, between NewCornCo, LLC, and
Agricultural Innovation & Trade, Inc. (confidential
treatment has been requested for certain
portions of this agreement).
10.5 Assignment of Membership Interest, dated December 6, 1997,
between Agricultural Innovation & Trade, Inc. and Twin
Garden Sales, Inc. (confidential treatment has been
requested for certain portions of this agreement).
10.6 Requirements Agreement, dated December 6, 1997,
between NewCornCo, LLC, and Twin Garden Farms
(confidential treatment has been requested for
certain portions of this agreement).
10.7 Employment Agreement, dated January 1, 1998, between the Company
and William R. Romig
23.1 Consent of Deloitte & Touche LLP.
23.2 Consent of Coopers & Lybrand, S.A.
23.3 Consent of Porter, Matthews & Marsden
23.4* Consent of Ballard Spahr Andrews & Ingersoll, LLP
(included in Exhibit 5.1).
24.1* Power of Attorney (included in signature page).
____________
*previously filed
**to be filed by amendment.
<PAGE> 1
EXHIBIT 10.1
LICENSE AGREEMENT, DATED APRIL 29, 1997, BETWEEN INTEGRATED
PRODUCE SYSTEMS, INC., AND FARMINGTON FRESH
<PAGE> 2
THIS AGREEMENT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED ON PAGES 4, 7, 10, 11, 12, 13, AND 14
AND ON EXHIBITS B AND D AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND
EXCHANGE COMMISSION.
LICENSE AGREEMENT
THIS LICENSE AGREEMENT ("Agreement") is made and entered into as of
April 29, 1997 (the "Effective Date") by and between Integrated Produce Systems,
Inc., a Pennsylvania corporation ("IPS"), having its principal office at 2
International Plaza, Suite 245, Philadelphia, Pennsylvania 19113, and Farmington
Fresh, a California corporation ("FF"), having its principal place of business
at 7735 South State Route 99, West Frontage Road, Stockton, California 95215.
R E C I T A L S:
A. IPS is the owner of certain "Patent Rights" and "Technical
Information" (as later defined herein) relating to fresh cut produce processing.
The Patent Rights and "Technical Information" specifically include technologies
and knowledge that facilitate the maintenance of the integrity of fresh cut Fuji
apples, which inhibit the enzymatic browning and subsequent degradation of such
apples. However, the Patent Rights and Technical Information do not include the
design of machinery and processing plants which apply the Patent Rights and
Technical Information to Fuji apples.
B. FF has represented to IPS, in order to induce IPS to enter into this
Agreement, that FF is experienced in the handling, packing, shipping, marketing
and sale of apples, including Fuji apples in the central region of California,
and that FF will commit itself to a thorough, vigorous and diligent program of
exploiting the Patent Rights so that public utilization will result therefrom.
Such commitment will include the design, development, and construction of
machinery and one processing plant in cooperation with IPS for the application
of the Patent Rights and Technical Information to Fuji apples.
C. IPS desires to have the Patent Rights and Technical Information
utilized and is willing to grant a license thereunder. FF desires to obtain a
license under the Patent Rights and Technical Information upon the terms and
conditions hereinafter set forth.
<PAGE> 3
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
For the purposes of this Agreement, the following words and phrases
shall have the following meanings:
1.1 "Affiliate" means, with respect to each party to this Agreement,
any natural person, corporation, proprietorship, firm, partnership, limited
liability company or other business entity (each being a "Business Entity")
controlling, controlled by or under common control with such party; and
"control" shall mean (i) the direct or indirect ownership of more than fifty
percent (50%) of the voting stock, capital or equity, or more than a fifty
percent (50%) interest in the income or profits of such Business Entity or (ii)
the ability to direct the management or control the policy decisions of such
Business Entity.
1.2 "Bankruptcy Event" means that the Business Entity in question
becomes insolvent or voluntary or involuntary proceedings by or against such
Business Entity are instituted in bankruptcy or under such insolvency law, or a
receiver or custodian is appointed for such Business Entity, or proceedings are
instituted by or against such Business Entity for reorganization or the
dissolution of such Business Entity, which proceedings, if voluntary, shall not
have been dismissed within 60 days of the date of filing, or such Business
Entity makes an assignment for the benefit of creditors, or substantially all of
the assets of such Business Entity are seized or attached and not released
within 60 days thereafter.
1.3 "Field of Use" means Fuji apples or parts thereof and their
handling, processing, marketing and sale.
1.4 "IPS Know-How" means certain confidential and proprietary knowledge
relating to the development, manufacture, processing and marketing of fresh-cut
apples.
1.5 "IPS Processing Aids" means "Apple Fresh TM" and other products
produced by IPS that help maintain the integrity of fresh-cut apple products.
1.6 "Joint Patents" means (i) patents and patent applications; (ii)
together with any and all patents issuing upon
2
<PAGE> 4
such applications; (iii) all continuations, continuations-in-part, additions,
divisions, renewals, extensions or examinations and reissues of any of the
foregoing, claiming inventions in the Field of Use and any United States or
foreign patents granted upon such applications, which are based upon inventions
and improvements discovered or made by inventors of FF, jointly with inventors
of IPS, within the Field of Use, during the term of this Agreement.
1.7 "Licensed Product" shall mean any apple or part thereof which:
(a) is covered in whole or in part by an issued,
unexpired claim or a pending claim contained in the
Patent Rights in the country in which any Licensed
Product is made, used or sold;
(b) is manufactured by using a process which is covered
in whole or in part by an issued, unexpired claim or
a pending claim contained in the Patent Rights in the
country in which any Licensed Process is used or in
which such product or part thereof is used or sold;
or
(c) is treated or processed according to IPS Know-How.
1.8 "Licensed Process" shall mean any process which is covered in whole
or in part by a valid claim or a pending claim contained in the Patent Rights or
is IPS Know-How.
1.9 "Net Sales" means, with respect to sales of Licensed Products, the
amount of gross sales of the Licensed Products by FF, its Affiliates, or
assigns, to Third Parties, net of: (1) ordinary and customary quantity, cash,
trade and promotional discounts actually taken for wholesale sales; (2)
separately invoiced sales, excise and other taxes and duties paid or allowed by
the selling party and any other similar governmental charges imposed upon the
production, importation, use or sale of Licensed Products; (3) actual freight,
shipping and insurance charges billed to customers and so identified on invoices
to customers; (4) allowances and credits actually given to customers for
rejected goods; and (5) uncollectible accounts. Sales between or among FF and
its Affiliates shall be excluded from the computation of Net Sales except where
such Affiliates are end users, but Net Sales shall include the subsequent final
sales to Third Parties by such Affiliates.
1.10 "Patent Rights" shall mean all of the following IPS intellectual
property:
(a) the United States and foreign patents and/or patent
applications listed in Exhibit A;
(b) United States and foreign patents issued from the
3
<PAGE> 5
applications listed in Exhibit A and from divisionals
and continuations, continuations-in-part, reissues,
re-examinations and extensions of these applications;
(c) claims of U.S. and foreign continuation-in-part
applications, and of the resulting patents, which are
directed to subject matter specifically described in
the U.S. and foreign applications listed in Exhibit
A;
(d) claims of all foreign patent applications, and of the
resulting patents, which are directed to subject
matter specifically described in the United States
patents and/or patent applications described in (a),
(b), or (c) above; and
(e) any reissues of United States patents described in
(a), (b), (c), or (d) above.
1.11 "Technical Information" means all existing unpatented proprietary
and confidential information, data and know-how (including IPS Know-How) in the
Field of Use, discovered, invented, revealed, obtained, used or reduced to
practice by IPS, prior to the date hereof and currently possessed by IPS, in
connection with the development, manufacture, processing, marketing, use, sale
and commercialization of fresh-cut Fuji apple products, including but not
limited to: the IPS Processing Aids; research data and methods; design data and
information (including machinery designs and IPS Processing Aids formulations
and any specifications on production protocols for Licensed Products approved by
FF); engineering and test data; product and component specifications; bills of
materials; drawings, parts and component lists; production and shipping
techniques; methods of product handling; methods of line manufacture; quality
control data and methods and any similar or related information; and data and
know-how; with respect to which IPS has the right to disclose to Third Parties
and as to which IPS has the right to grant licenses. "Technical Information"
excludes any of the foregoing that are included in a Valid Claim of the Patent
Rights or of the Joint Patents. "Technical Information" also excludes any
specifications or directions for the production of any IPS Processing Aid.
1.12 "Territory" means that [ ]
1.13 "Third Party(ies)" means any person or entity other than IPS, FF
or their respective Affiliates.
1.14 "Valid Claim" means a claim of an unexpired Licensed Patent or
Joint Patent or Patent Right that has not been withdrawn, canceled or disclaimed
or held unenforceable, unpatentable or invalid by a decision of a court or
governmental body of competent jurisdiction in an unappealed or unappealable
decision, or a claim of a patent application.
4
<PAGE> 6
ARTICLE II
GRANT OF LICENSE
2.1 IPS hereby grants to FF the right and personal license (the
"License") to make, have made, use, lease and sell the Licensed Products, and to
practice the Licensed Processes (in the Territory for the Field of Use) during
the term of this Agreement unless sooner terminated according to the terms
hereof.
2.2 In order to establish a period of exclusivity for FF, IPS hereby
agrees that it shall not grant any other license to make, have made, use, lease
and sell Licensed Products or to utilize Licensed Processes (in the Territory
for the Field of Use) during the period of time (the "Initial Term") commencing
with the Effective Date of this Agreement and terminating with the first to
occur of:
(a) the expiration of three (3) years after the first
commercial sale of a Licensed Product or first
commercial use of a Licensed Process; or
(b) the expiration of four (4) years after the Effective
Date of this Agreement.
2.3 After the expiration of the exclusive license under Section 2.2(a),
above (but not 2.2(b), the parties may, by mutual consent not to be unreasonably
withheld by either party, extend the period of the exclusive license for another
three (3) years (the "Extension Term"). The parties shall evidence their consent
to the Extension Term in writing not later than sixty (60) days before the end
of the Initial Term.
2.4 The license granted hereunder shall not be construed to confer any
rights upon FF by implication, estoppel or otherwise as to any technology not
specifically set forth in Exhibit A hereof.
2.5 The License shall be exclusive in the Territory. Outside the
Territory, IPS shall have, and hereby retains, the right to use, sublicense and
assign the Licensed Rights, including the Licensed Patents, to make, have made,
use, sell, have sold, market, distribute and/or commercialize products or
processes that are not used or to be used within the Field of Use. In addition,
notwithstanding any implication to the contrary in this Agreement, IPS shall
have the right outside the
5
<PAGE> 7
Territory to conduct research and development activities inside and outside the
Field of Use for its own benefit or that of a Third Party. Within the Territory,
IPS shall only have the right to conduct research and development activities on
Fuji and Gala apples at academic institutions.
2.6 The License granted by IPS to FF in this Article II does not
include any right to manufacture any IPS Processing Aids or any right to use any
trademark of IPS or any of its Affiliates and no other license, either express
or implied, is granted by IPS to FF hereunder with respect to the Licensed
Products, the Licensed Patents or the Technical Information except as
specifically stated in this Article II. The License granted hereunder is granted
only in the Territory and for the term and upon the conditions and subject to
certain rights of termination as set forth in this Agreement.
2.7 FF shall not have the right to sublicense the License granted
hereunder. The License is absolutely non-assignable and non-transferable by FF,
whether by purchase, operation of law or otherwise, including to any business
successor or Affiliate of FF, except with the prior written consent of IPS,
which consent shall not be unreasonably withheld.
ARTICLE III
DUE DILIGENCE
3.1 FF shall use its best efforts to bring one or more Licensed
Products or Licensed Processes to market through a thorough, vigorous and
diligent program for exploitation of the Patent Rights.
3.2 In addition, FF shall adhere to the following milestones:
(a) FF shall deliver to IPS on or within 180 days of
the date first written above a business plan
showing the amount of money, number and kind of
personnel and time budgeted and planned for each
phase of development of the Licensed Products and
Licensed Processes and shall provide similar
reports to IPS on an annual basis on or before the
ninetieth (90th) day following the close of FF's
fiscal year.
(b) FF shall develop a working model on or before August
1, 1997 and permit an in-plant inspection by IPS on
or before July 1, 1997, and thereafter permit
in-plant inspections by IPS at regular intervals with
at least six (6) months between each such inspection.
6
<PAGE> 8
3.3 FF's failure to perform in accordance with Paragraphs 3.1 and 3.2
above shall be grounds for IPS to terminate this Agreement pursuant to Paragraph
13.3 hereof.
3.4 The parties shall cooperate and collaborate with each other and
shall use their best efforts to develop, produce, process, promote, sell and
commercialize Licensed Products as soon as practicable, consistent with sound
and reasonable business practices.
ARTICLE IV
IPS TECHNICAL SUPPORT
4.1 IPS shall produce and sell to FF, and FF shall purchase from IPS,
the IPS Processing Aids pursuant to the following terms and conditions:
(a) The initial price shall be [ ]. However, IPS may
increase such price immediately and fully to account
for any increases in the published prices of the raw
materials included in any IPS Processing Aids, in the
amount that such increases in the price of any raw
material contribute to the price of the IPS
Processing Aids, upon delivery to FF of copies of
relevant publications showing such increases, such as
the Chemical Marketing Reporter, or as otherwise
evidenced in writing from IPS's sources of raw
materials. If the published prices reflect any
decreases, IPS may decrease prices for its IPS
Processing Aids in a method comparable to that
described above for any increases. It is acknowledged
and agreed by IPS and FF that it is unlikely that IPS
would implement any such price changes in amounts
less than 7.5% of the prior price for the raw
materials used by IPS.
(b) IPS Processing Aids shall be shipped to FF FOB IPS's
plant, and title to and risk of loss shall pass to FF
at the time the IPS Processing Aids are put in the
possession of a carrier at IPS's plant. Shipping
dates are approximate.
(c) IPS agrees to sell IPS Processing Aids to FF that
are manufactured, packaged and labeled in
conformity with federal, state, and local laws and
regulations. IPS warrants that the IPS Processing
Aids will conform to the specifications for IPS
Processing Aids in effect from time to time and
initially as set forth in Exhibit B hereto. If
and only if FF complies with all aspects of the
protocols and usage instructions and
7
<PAGE> 9
specifications provided by IPS, then the IPS
Processing Aids will help to maintain the integrity
of each Licensed Product in accordance with the
relevant specifications for such IPS Processing Aids.
EXCEPT FOR THE WARRANTIES EXPRESSED IN THIS
AGREEMENT, IPS MAKES NO OTHER WARRANTY, EITHER
EXPRESS OR IMPLIED WITH RESPECT TO THE IPS PROCESSING
AIDS AND IPS EXPRESSLY DISCLAIMS AND EXCLUDES ALL
IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR
A PARTICULAR PURPOSE.
(d) The standard terms and conditions used by IPS for the
sale of IPS Processing Aids are attached hereto as
Exhibit C, provided, however, that IPS may hereafter
from time to time adopt other terms and conditions,
which shall become applicable upon written notice to
FF. The terms and conditions of this Agreement shall
prevail notwithstanding any different, inconsistent
or additional terms and conditions contained in any
purchase order submitted by FF.
(e) At least forty-five (45) days prior to the beginning
of each calendar quarter, FF shall provide to IPS in
writing a three (3) months rolling forecast of FF's
reasonably anticipated requirements for IPS
Processing Aids for such upcoming quarter, to assist
IPS in establishing and adjusting its production
schedule for IPS Production Aids for such next
upcoming calendar quarter (the "Quarterly Estimate").
In addition to the Quarterly Estimate, FF shall
deliver to IPS a purchase order for each shipment of
IPS Processing Aids listed in the Quarterly Estimate.
FF shall continue to provide IPS with Quarterly
Estimates and purchase orders for each calendar
quarter during the Initial Term and any Extension
Term of this Agreement. FF shall provide IPS with
purchase orders for IPS Processing Aids at least
thirty-five (35) days before FF desires to receive
such order from IPS. At any time up to and including
the date which is twenty (20) days before the date FF
desires to receive IPS Processing Aids pursuant to
such purchase order, FF may alter or cancel any such
purchase order, with no premium or penalty, other
than the resulting offset of the payments owing to
IPS pursuant to this Agreement.
(f) Except in case of a violation of laws, IPS's only
obligation for breach of the warranty set forth in
this section shall be, at the election of FF, to
replace the defective IPS Processing Aids at the FOB
point stated herein or to give credit for such
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defective IPS Processing Aids in an amount equal to
the purchase price paid by FF. FF'S SOLE, COMPLETE
AND EXCLUSIVE REMEDY IN CONNECTION WITH THE SALE OF
IPS PROCESSING AIDS UNDER THIS AGREEMENT IS LIMITED
TO REPLACEMENT OR CREDIT AS PROVIDED IN THIS SECTION.
Replacement or credit will be given only after IPS's
inspection of the goods and its agreement to the
substantially defective condition. All claims for
substantial defect shall be deemed waived unless made
in writing delivered to IPS within ten (10) days
after discovery of the substantial defect but in no
event later than sixty (60) days from the date of
shipment. All claims for damage and return due to
causes other than substantial defect must be made
within thirty (30) days from receipt of shipment. The
exclusive and limited remedy of replacement or credit
provided in this Section shall not fail of its
essential purpose by reason of timeliness, causes
beyond IPS's reasonable control, or FF's general
business concerns or satisfaction. Any action for
breach under this Section must be commenced by FF
within one year after the cause of action has
accrued.
(g) IPS shall not be responsible for any loss of or
damage to FF's Processed Products from any cause
whatsoever, except for the gross negligence or
willful misconduct of IPS, its employees or agents;
otherwise, IPS shall not indemnify nor be liable to
FF, its assigns, successors or purchasers or to any
person or entity for any claims, losses, expenses or
judgments arising out of or resulting in any way from
goods furnished under this Agreement where liability
is premised upon any theory including, but not
limited to warranty, negligence or strict liability.
IPS's total, complete and exclusive liability
hereunder shall be limited to replacement or credit
as provided above or termination of this Agreement as
provided below, and shall not exceed the value of the
substantially defective goods furnished. IPS SHALL
NOT BE LIABLE FOR LOSS OF PROFITS, DIRECT, INDIRECT,
INCIDENTAL, SPECIAL, CONSEQUENTIAL OR OTHER DAMAGES
UNDER THIS AGREEMENT.
4.2 During the Initial Term of this Agreement and any Extension Term,
and subject to the provisions of this Agreement, IPS shall, at its expense,
provide to FF the following technical assistance and support:
(a) Furnish to FF during the start-up phase of processing
fresh cut Fuji apples, as and to the extent deemed
necessary by IPS, custom protocol development, a
distribution study to monitor the
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temperature and physical distribution characteristics
to which the apples are subject, evaluations of taste
and appearance, the provision of microbiological
data, field audits (expected to occur at least
annually during the term of this Agreement) and
monitoring (expected to be on a weekly basis) of the
manufacturing process during the first 4-6 weeks of
the start-up phase.
(b) Furnish to FF copies of selected Technical
Information and provide engineering recommendations
in connection therewith, including compliance with
current Good Manufacturing Practices in
Manufacturing, Packing or Holding Human Food ("GMP")
issued by the U.S. Food and Drug Administration under
21 C.F.R. Part 110, [ ] all with respect to FF's
ability to use, make and sell Licensed Products
(collectively, "Engineering Support"), such
Engineering Support to be provided through the period
of exclusivity as defined in Paragraphs 2.2 and 2.3,
above.
(c) Provide to FF Hazard Analysis and Critical Control
Point ("HACCP") service, including sanitation audit
and personnel training and any microbial testing in
connection therewith, to commence on or about May 1,
1997, through the remaining term of this Agreement.
(d) Instruct FF's personnel in the art and science of
processing the Licensed Products in order to best
maintain the integrity of fresh-cut Fuji apple
products [ ].
(e) Provide research and development resources,
application technologies, assistance in the
determination of the shelf-life of currently [ ] and
the configurations ([ ]) to best preserve the fresh
cut Fuji apples; assistance in the development of
treatments and processes for specific fresh Fuji
apple products, and under the direction of FF,
testing, evaluating and recommending products to FF,
including those that do not use or incorporate any of
the Technical Information or are subject to any Valid
Claims of a Licensed Patent or a Joint Patent,
including, without limitation, expanding the Field of
Use.
(f) IPS will use commercially reasonable efforts to
assist FF in the evaluation and launch of fresh-cut
apple varieties other than Fuji apples, such as [ ].
To the extent that IPS and FF
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agree that apple varieties other than Fuji apples are
to be launched using IPS's Processing Aids for such
other apple types, IPS and FF will enter into a
separate agreement with respect to such other apple
varieties, substantially in the form of this
Agreement.
(g) In order to assist in FF's packaging of the fresh-cut
Fuji apple products, IPS or its affiliate, Respire
Films, Inc. ("Respire"), will, on a purchase order
basis, supply Respire packaging film (bags or
rollstock) to FF [ ] Such purchase orders
shall be negotiated on an arm's length basis by FF
and Respire separate and apart from this Agreement.
Before being used in connection with this Agreement,
any non-Respire packaging film must be checked and
validated by IPS scientists for performance with the
IPS Apple system.
ARTICLE V
ROYALTIES AND OTHER PAYMENTS
5.1 In consideration of the grant of the License and other rights
granted to FF by IPS under this Agreement, FF shall pay to IPS quarterly royalty
payments equal to [ ] of Net Sales of Licensed Products, commencing on the [ ];
provided, however, that in no event shall such royalty payments equal [
] for the [ ], [ ] for [ ], [
] in [ ], and an additional [ ] for each additional
[ ] thereafter in which this Agreement remains in effect (e.g., [ ] for [ ], [ ]
for [ ], and so on). Thus, in [ ] this would equate to [ ] of revenue to FF from
Licensed Products per [ ], and based on a price range of [ ] to [ ], would
equate to sales of [ ] per month. Within ten (10) days after the end of each [
], FF shall deliver to IPS a report stating the gross sales and Net Sales of
Licensed Products, the number of pounds of IPS Processing Aids used in such [ ]
and the amount of royalties payable to IPS.
5.2 In addition to the royalty payments set forth in Section 5.1 of
this Agreement, FF shall make the following payments to IPS for Technical
Support:
(i) A fee of [ ] for Engineering Support for the [ ]
beginning [ ] and ending on [ ]. IPS and FF
acknowledge that this fee shall be invoiced at the
rate of [ ], of which [ ] through [ ] have already
been rendered and paid;
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(ii) FF will, upon written request from IPS, promptly
reimburse IPS for any direct expenses and
out-of-pocket costs that arise in connection with
IPS's provision of Engineering Support services, such
costs to have been pre-approved by FF; and
(iii) Beginning on commencement of production by FF, and
only during weeks when FF is in production for at
least 10 hours (unless otherwise agreed by the
parties), a [ ] for HACCP services plus any
additional charges for any microbial testing work
that must be completed in connection with the
provision of such HACCP services, payable in monthly
installments.
5.3 FF shall pay in full for all IPS Processing Aids purchased from IPS
pursuant to Section 4.1 within thirty (30) days after the date of shipment from
IPS to FF. FF also shall pay to IPS all royalties, Engineering Support fees and
HACCP fees and any out-of-pocket costs accruing during each month as to costs
and quarter as to royalties, within thirty (30) days after the end of each such
period.
5.4 All royalties, fees and charges payable by FF pursuant to this
Agreement are net of applicable taxes, which taxes shall be the sole
responsibility of FF, except taxes on IPS's net income; provided, however, that
FF may withhold from its payments to IPS such amounts as are required by
applicable law.
5.5 All payments required to be made by FF to IPS under this Agreement
shall be made by check payable to IPS or wire transfer to an account designated
by IPS from time to time.
5.6 FF shall have complete control of the processing and/or sale of the
Licensed Products and the terms and conditions of such sale, including the
pricing thereof, so long as they are made in good faith. The terms and
conditions of sale customarily used by FF shall apply to all orders for and Net
Sales of the Licensed Products. FF reserves the exclusive right to adjust,
increase and/or change selling pricing and discount structures and other terms
and conditions involving FF's sale and pricing of the Licensed Products.
ARTICLE VI
REPORTS AND RECORDS
6.1 FF shall maintain, and shall cause its Affiliates to maintain, such
complete and accurate books and records as are necessary for the computation of
the payments to be made hereunder. FF shall maintain the records necessary for
these
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computations for each month for not less than three (3) years after such month.
IPS and its auditors shall have the right no more often than once per six-month
period during the term of this Agreement, upon reasonable prior notice, to
examine all of the books and records of FF and its Affiliates, relating to
royalties and other payments accruing to IPS under this Agreement, during
reasonable business hours and without unreasonable disruption of FF's business,
for the purpose of verifying any computations made under this Agreement, such
examination, subject to the next sentence, to be at IPS's expense. If, as a
result of any such examination, IPS determines that, with respect to the period
being examined, (i) there has been an underpayment of the aggregate amount of
royalties and other payments which should have been paid, in excess of five
percent (5%), FF shall reimburse IPS for the reasonable, documented cost of such
examination and the reasonable, documented cost (including reasonable attorneys'
fees), if any, of the recovery by IPS of such underpayment, or (ii) there has
been an overpayment of royalties and other payments which should have been paid,
the amount by which royalties and other payments have been overpaid shall
promptly be returned to FF.
ARTICLE VII
PATENT PROSECUTION
7.1 All proprietary rights (including without limitation, rights in and
to the Technical Information, Patent Rights, copyrights and trade secret rights,
in each case, relating to the Field of Use) necessary for, related to or arising
in connection with the design, development, manufacture, and use of the Licensed
Products, (i) developed, invented, discovered, owned or possessed by IPS on or
prior to the date hereof or (ii) developed, invented, discovered, owned or
acquired by IPS during the term of this Agreement, shall be the property of IPS,
held and used, subject to the License granted to FF hereunder. As to any rights
developed, invented or discovered jointly by IPS and FF during the term of this
Agreement, the same shall be owned by both parties and shall be deemed to be
Joint Patents. It is expected that FF will design, engineer, develop and create
machines and production facilities which will apply the Patent Rights and the
Technical Information and the Licensed Processes to the apples in order to
produce Licensed Products. Any such machines and facilities designed, invented
and built solely by FF and its agents shall belong exclusively to FF. If IPS
wishes to use such inventions, then IPS and FF shall discuss and agree how this
may occur on a case by case basis. IPS acknowledges that the design of the [ ]
was that of FF and IPS agrees not to promote this design to other processors of
fresh-cut apples. If IPS wishes to promote such design actively, then IPS and FF
shall agree on how this may occur on a case by case basis.
7.2 Upon execution of this Agreement, the parties shall
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prepare a mutually agreed to listing of the respective proprietary rights of
each party and of the proprietary rights held jointly by the parties. Said
listing shall be attached hereto as Exhibit "D" and incorporated herein by
reference. The parties shall by mutual agreement revise and update such Exhibit
"D" not less frequently than every six (6) months. The parties have discussed
and understand that (i) FF does not want to be forced, as a result of IPS
dealing with third parties, to have to compete against the benefits of FF's own
process engineering and trade secrets; and (ii) IPS does not want to be
restricted by FF, except pursuant to this Agreement in the Territory during the
term hereof in the Field of Use, in pursuing the IPS business plan and
exploiting all IPS marketing opportunities in full. In recognition of these
goals, the parties agree (a) to pay reasonable royalties to the other party
whenever using or licensing jointly owned proprietary rights to third parties;
and (b) that IPS will obtain the prior written consent of FF to the licensing of
jointly owned proprietary rights to third parties by IPS only when such
licensing involves the [ ] in the Field of Use.
7.3 Either party may wish to obtain patent protection for its
exclusively owned rights, and both parties may wish to do so for the jointly
owned rights. Whichever of the parties owns the underlying rights shall pay all
costs and expenses necessary or appropriate to obtain patent protection for such
rights in the United States and in other countries where patent protection is
commercially justified. Each party shall execute and deliver and cause its
employees to execute and deliver to the other party all documents requested
which may be necessary in connection with the filing, prosecution, maintenance
and enforcement of such patent protection.
7.4 If either party becomes aware of any infringement of any of the
Patent Rights or of the Joint Patents, it shall promptly notify the other in
writing of all available details. IPS shall have the first right to bring suit
against such infringers. If IPS elects not to bring such a lawsuit within six
months of receipt of notice of such infringement, then FF shall have the right
to pursue such action. In any proceeding brought by IPS, FF shall have the right
to employ its own counsel, at its own expense and without right to
reimbursement, if FF reasonably believes that IPS's defense of patent rights is
insufficient. If IPS pays the expenses of such a lawsuit, any proceeds of such
lawsuit shall first be used to reimburse IPS, on a dollar-for-dollar basis, for
its out-of-pocket expenses of the lawsuit, including attorneys' fees, and the
balance, if any, shall be divided equally between the parties. If FF pays the
expenses of such a lawsuit, any proceeds of such lawsuit shall first be used to
reimburse FF, on a dollar-for-dollar basis, for its out-of-pocket expenses of
the lawsuit, including attorneys' fees, next against amounts that otherwise
would have been payable by FF to IPS under Article V hereof, and the balance, if
any, shall be retained in full by FF. If deemed necessary or desirable by
counsel, the party not joining in such lawsuit may be joined as a
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nominal party plaintiff. The party bringing suit shall bear the legal expenses
of the party involuntarily brought into the lawsuit. Settlement of any such
lawsuit while the Licenses granted pursuant to Article II are exclusive shall
require the written consent of both parties, otherwise it shall require the
consent of only the party bringing the lawsuit.
7.5 In any infringement suit which either party may institute against
any third party to enforce the Patent Rights or the Joint Patents pursuant to
this Agreement, the other party hereto shall, at the request and expense of the
party initiating such suit, cooperate in all respects and, to the extent
possible, have its employees testify when requested and make available relevant
records, papers, information, samples, specimens, and the like.
7.6 Nothing contained in this Agreement shall be construed to convey
any rights or proprietary interest in the Technical Information, Licensed
Patents, Copyrights and Trade Secrets of FF, other than the specific rights
granted under this license.
ARTICLE VIII
PRODUCT LIABILITY
8.1 FF shall at all times during the term of this Agreement and
thereafter, indemnify, defend and hold IPS, its officers, employees and
Affiliates, harmless against all claims and expenses, including legal expenses
and reasonable attorneys' fees, arising out of the death of or injury to any
person or persons or out of any damage to property and against any other claim,
proceeding, demand, expense and liability of any kind whatsoever resulting from
the production, manufacture, sale, use, lease, consumption or advertisement of
the Licensed Product(s) or arising from any obligation of FF hereunder.
8.2 FF shall obtain and carry in full force and effect liability
insurance which shall protect FF and IPS in regard to events covered by the
foregoing paragraph.
8.3 EXCEPT AS OTHERWISE EXPRESSLY SET FORTH IN THIS AGREEMENT, IPS
MAKES NO REPRESENTATIONS AND EXTENDS NO WARRANTIES OF ANY KIND, EITHER EXPRESSED
OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, AND VALIDITY OF PATENT RIGHTS CLAIMS, ISSUED OR
PENDING.
ARTICLE IX
EXPORT CONTROLS
It is understood that the parties are subject to United
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States laws and regulations controlling the export of technical data, computer
software, laboratory prototypes and other commodities (including the Arms Export
Control Act, as amended and the Export Administration Act of 1979), and that
their obligations hereunder are contingent on compliance with applicable United
States export laws and regulations. The transfer of certain technical data and
commodities may require a license from the cognizant agency of the United States
Government and/or written assurances by FF that FF shall not export data or
commodities to certain foreign countries without prior approval of such agency.
IPS neither represents that a license shall not be required nor that, if
required, it shall be issued.
ARTICLE X
WARRANTIES
10.1 IPS represents and warrants to FF, as a material inducement for FF
to enter into this Agreement, that:
(i) This Agreement, when executed and delivered by IPS,
will be the legal, valid and binding obligation of
IPS, enforceable against IPS in accordance with its
terms;
(ii) IPS has not granted rights in the Territory, in or to
the Patent Rights or the Licensed Process to any
person other than FF;
(iii) IPS does not have any knowledge that any of the
Patent Rights or the Licensed Process infringes the
proprietary rights of any Third Party;
(iv) the IPS Processing Aids, Patent Rights and Licensed
Process comply with all requirements, rules and
regulations of the United States Department of
Agriculture, the Food and Drug Administration, the
State of California, and all other governmental
bodies having jurisdiction; and
(v) IPS does not have any knowledge of any patent or
other proprietary technology of IPS other than the
Patent Rights, the Licensed Process, and the
Technical Information which would be required to
make, have made, use and sell the Licensed Products;
provided, however, that IPS gives no representation
or warranty that any patent application or potential
patent application within the Patent Rights will be
granted or, if granted, that any such patent will be
valid.
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10.2 FF represents and warrants to IPS, as a material inducement for
IPS to enter into this Agreement, that:
(i) FF is a corporation duly organized, validly existing
and in good standing under the laws of the State of
California, and has all requisite power and authority
to execute, deliver and perform this Agreement;
(ii) this Agreement, when executed and delivered by FF,
will be the legal, valid and binding obligation of
FF, enforceable against FF in accordance with its
terms and does not conflict with any material
agreement to which FF is a party; and
(iii) FF does not have any knowledge that any of the
processes or materials it uses infringes the
proprietary rights of any Third Party.
ARTICLE XI
CONFIDENTIALITY
11.1 The Technical Information and any information disclosed by IPS to
FF, or by FF to IPS (respectively the "Disclosing Party" and the "Receiving
Party"), pertaining to the respective business of IPS or FF, including customer
lists, contractor lists, marketing methods and plans, sources of supply and
suppliers, cost information, pricing information, and the identities of IPS's or
FF's customers shall be treated by the Receiving Party as confidential
information (collectively, the "Confidential Information").
11.2 The Receiving Party will use its best efforts:
(i) To prevent the disclosure of the Confidential
Information to any Third Party, except as otherwise
permitted pursuant to this Article XI;
(ii) not to use the Confidential Information for any
commercial purpose other than pursuant to this
Agreement;
(iii) not to disclose the Confidential Information to its
officers, employees, contractors, agents or
representatives other than:
(1) attorneys, accountants and such of
its officers and employees who are
directly concerned with the
evaluation, production and sale of
the Licensed
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Product and, except for such
attorneys and accountants, who are
bound to Receiving Party by
confidentiality obligations no less
restrictive than the terms hereof;
and
(2) independent contractors, agents or
representatives bound to Receiving
Party by a confidentiality
obligation no less restrictive than
the terms hereof, and provided that
(A) Receiving Party takes reasonable
precautions to assure that such
disclosure is limited to such
officers or employees of such
independent contractors, agents or
representatives who reasonably
require the same in order to
properly fulfill their duties to the
independent contractors, agents or
representatives and who themselves
are bound to them by such a
confidentiality obligation, and (B)
Receiving Party notifies Disclosing
Party of the identity of such
independent contractor, agent or
representative.
11.3 Notwithstanding the foregoing, Receiving Party shall not have any
obligation to maintain the confidentiality of any information:
(i) Which is developed by Receiving Party in the course
of work entirely independent of any disclosure made
hereunder or the subject matter of this Agreement;
(ii) which Receiving Party receives from another party who
has the right to disclose the same;
(iii) which is or becomes published or otherwise publicly
available without the fault of Receiving Party;
(iv) which is already in the possession of Receiving Party
as of the date hereof; or
(v) which is disclosed in connection with Receiving
Party's exercise of its rights under, or in a dispute
regarding, this Agreement.
11.4 Upon the termination of this Agreement, Receiving Party shall,
within thirty (30) days of Disclosing Party's written request, return or destroy
all materials, copies and extracts that contain any Confidential Information
pursuant to this Article XI.
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11.5 Receiving Party acknowledges and agrees that a breach by Receiving
Party of the covenants contained in this Article XI would cause Disclosing Party
irreparable harm and that the extent of damages to Disclosing Party would be
impossible to ascertain and that there is and will be available to Disclosing
Party no adequate monetary damages or other remedy at law to compensate it in
the event of any such breach. Consequently, Receiving Party agrees that in the
event of a breach of any such covenant, in addition to any other relief to which
Disclosing Party is or may be entitled, Disclosing Party shall be entitled, as a
matter of course, to an injunction or other equitable relief, including the
remedy of specific performance, to enforce any or all of such covenants by
Receiving Party and its employees, agents or any of them.
ARTICLE XII
NON-USE OF NAMES
12.1 Neither party shall use the names of the other party nor of any of
its employees, nor any adaptation thereof, in any advertising, promotional or
sales literature without the prior written consent obtained from the other party
in each case, except that FF may state that it is licensed by IPS under one or
more of the patents and/or applications comprising the Patent Rights.
///
///
///
ARTICLE XIII
TERMINATION
13.1 This Agreement shall terminate prior to the end of the Initial
Term or any Extension Term upon the occurrence of any of the following events:
(i) If either party shall cease to carry on its business;
(ii) if either party is subject to a Bankruptcy Event; or
(iii) upon notice from one party to the other after an
event of force majeure has been in effect for six (6)
months or longer.
13.2 Should FF fail to pay IPS royalties or other payments
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due and payable hereunder, IPS shall have the right to terminate this Agreement
on thirty (30) days' notice, unless FF shall pay IPS within the thirty (30) day
period, all such royalties or other payments and interest due and payable. Upon
the expiration of the thirty (30) day period, if FF shall not have paid all such
payments, royalties and interest due and payable, the rights, privileges and
license granted hereunder shall terminate.
13.3 Upon any material breach or default of this Agreement by either
party, other than those occurrences set out in Paragraphs 13.1 and 13.2
hereinabove, which shall always take precedence in that order over any other
material breach or default referred to in this Paragraph 13.3, the other party
shall have the right to terminate this Agreement and the rights, privileges and
license granted hereunder by ninety (90) days notice to the defaulting party.
Such termination shall become effective unless the defaulting party shall have
cured any such breach or default prior to the expiration of the ninety (90) day
period.
13.4 FF shall have the right to terminate this Agreement at any time on
six (6) months' notice to IPS, and upon payment of all amounts due IPS through
the effective date of the termination.
13.5 Upon termination of this Agreement for any reason, nothing herein
shall be construed to release either party from any obligation that matured
prior to the effective date of such termination. FF and any sublicensee thereof
may, however, after the effective date of such termination, sell all Licensed
Products, and complete Licensed Products in the process of manufacture at the
time of such termination and sell the same, provided that FF shall pay to IPS
the royalties thereon as required by Article V of this Agreement and shall
submit the reports required by Article VI hereof on the sales of Licensed
Products.
13.6 Upon termination of this Agreement for any reason, any sublicensee
not then in default shall have the right to seek a license from IPS.
ARTICLE XIV
INSURANCE
14.1 FF shall maintain property, personal injury, and product liability
insurance coverage in commercially reasonable amounts. In discharge of the
above, FF will obtain and thereafter maintain product and general liability
insurance in the amount of at least Two Million Dollars ($2,000,000) per
occurrence with a deductible of not more than $25,000 per occurrence, together
with an umbrella general and product liability insurance policy for amounts in
excess of such limits,
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in the amount of Three Million Dollars ($3,000,000), against damage to or
destruction of property and injury to or death of individuals and against such
other risks as FF may reasonably determine, arising out of or in connection with
any use, manufacture or sale of Licensed Products. Any such insurance shall be
issued by an insurer rated A or better by A.M. Best & Co. FF will furnish IPS
upon request written confirmation issued by the insurer or an independent
insurance agent confirming that insurance is maintained in accordance with these
requirements.
ARTICLE XV
DISPUTE RESOLUTION
15.1 This Agreement shall be deemed to have been made and entered into
in the State of California, and it shall be construed according to the local,
domestic law of California without regard to conflict of law principles. Any
claim, controversy or dispute arising out of or relating to this Agreement or
any interpretation or breach thereof or performance thereunder, including
without limitation any dispute concerning the scope of this arbitration
provision, shall be settled by submission to final, binding and non-appealable
arbitration ("Arbitration") for determination, without any right by any party to
a trial de novo in a court of competent jurisdiction, after a twenty-five (25)
calendar day waiting period (the "Waiting Period"). During the Waiting Period,
the parties shall work reasonably and in good faith and shall use their best
efforts to amicably resolve the claim, controversy or dispute. The Arbitration
and all prehearing, hearing, post-hearing arbitration procedures, including
those for Disclosure and Challenge, shall be conducted in accordance with the
Commercial Arbitration Rules (the "Commercial Rules") of the American
Arbitration Association (herein referred to as the "Association") in San
Francisco, California, as supplemented by the procedures set forth in Exhibit E
attached hereto.
ARTICLE XVI
PAYMENTS AND NOTICES
16.1 Any notice, payment, or communication required or permitted under
this Agreement shall be made in writing and shall be deemed given if and when
delivered personally or by an overnight delivery service such as Federal Express
or three days after being deposited in the U.S. mail by certified or registered
mail, return receipt requested, postage prepaid, or telecopied with confirmation
of receipt and a hard copy delivered as described above, addressed as follows:
If to FF:
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Farmington Fresh
7735 South State Route 99
West Frontage Road
Stockton, California 95206
ATTN: President
Telephone: (209) 983-9700
Fax: (209) 983-1825
If to IPS:
Integrated Produce Systems, Inc.
2 International Plaza, Suite 245
Philadelphia, PA 19113
ATTN: President
Telephone: (610) 521-4400
Fax: (610) 521-5985
or to such other address as any party may from time to time duly specify by
notice given to the other party in the manner specified above.
ARTICLE XVII
MISCELLANEOUS PROVISIONS
17.1 Relationship of Parties. Nothing contained in this Agreement shall
create a joint venture or partnership between the parties. FF shall be an
independent contractor in performing its obligations hereunder. Neither party
shall be liable for any of the debts or obligations of the other and neither
party shall have any authority or right to act for or incur any liability of any
kind, express or implied, in the name of or on behalf of the other party.
17.2 Survival of Provisions. The obligations of the parties undertaken
pursuant to Article V through XII, inclusive, of this Agreement shall survive
the termination of this Agreement.
17.3 Successors and Assigns. This Agreement and the rights hereunder
may not be assigned by FF, whether by operation of law or otherwise, but may be
assigned by IPS in connection with a sale of substantially all of the assets of
IPS or to any Affiliate of IPS, provided that the obligations of the assignor
are assumed by the assignee thereof.
17.4 Binding Nature. This Agreement shall be binding upon
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and inure to the benefit of the parties hereto and their respective successors,
legal representatives and permitted assigns.
17.5 Force Majeure. Neither party shall be liable for any loss, damage,
detention, or delay resulting from causes beyond its reasonable control or
resulting from acts of God or of the public enemy, acts of the government in
either its sovereign or contractual capacity, priorities, allocations, fires,
floods, epidemics, quarantine restrictions, strikes, labor disputes, freight
embargoes, unusually severe weather, insurrection or riot, damages or shortages
in transportation, or inability due to causes beyond its reasonable control to
obtain necessary labor, materials, or manufacturing facilities; provided,
however, that if an event of force majeure prevents either party from fulfilling
its obligations under this Agreement for a period of six months or longer, then
the other party shall have the right, but not the obligation, to terminate this
Agreement.
17.6 Entire Agreement; Amendments. This Agreement and all exhibits
hereto contain the entire agreement and understanding of the parties relating to
the subject matter hereof, and merge and supersede all prior discussions,
agreements and understandings of every nature between them relating to the
subject matter hereof. This agreement may not be changed or modified, except by
an agreement in writing signed by an authorized officer of the party hereto
against whom the same is sought to be enforced.
17.7 Waiver. Any delay or forbearance by either party in exercising any
right hereunder shall not be deemed a waiver of that right.
17.8 Invalidity. In case any one or more of the provisions contained in
this Agreement shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the validity of any other provision of this Agreement, and such
provision(s) shall be deemed modified to the extent necessary to make it (them)
enforceable.
17.9 Section Headings. The section headings in this Agreement are for
convenience only; they form no part of this Agreement and shall not affect its
interpretation.
17.10 Gender; Number. Words used herein, regardless of the number and
gender specifically used, shall be deemed and construed to include any other
number, singular or plural, any other gender, masculine, feminine or neuter, as
the context requires.
17.11 Number of Days. In computing the number of days for purposes of
this Agreement, all days shall be counted, including Saturdays, Sundays and
holidays; provided, however, that if the final day of any time period falls on a
Saturday, Sunday or holiday, then the final day shall be deemed to be the next
day
23
<PAGE> 25
which is not a Saturday, Sunday or holiday.
17.12 Third Party Beneficiaries. Notwithstanding anything to the
contrary contained herein, no provision of this Agreement is intended to benefit
any party other than FF and IPS and their successors and assigns, and shall not
be enforceable by any other party.
17.13 Further Assurances. After the date hereof, at the request of IPS
and at IPS's expense, FF shall execute and deliver to IPS or cause to be
executed and delivered to IPS, such further instruments of conveyance and
transfer and take such other actions as IPS may reasonably require to perfect
IPS's title to the Licensed Rights, as contemplated by this Agreement.
IN WITNESS WHEREOF, the parties have hereunto set their hands and seals
and duly executed this Agreement the day and year set forth below.
FARMINGTON FRESH INTEGRATED PRODUCE SYSTEMS, INC.
A California Corporation A Pennsylvania Corporation
By:/s/ David N. Rajkovich By:/s/ Paul L. Devine
-------------------------- --------------------------------
Name: David N. Rajkovich Name: Paul L. Devine
-------------------------- --------------------------------
Title: President Title: President
-------------------------- --------------------------------
Date: April 18, 1997 Date: April 29, 1997
-------------------------- --------------------------------
24
<PAGE> 26
EXHIBIT "A"
LISTING OF IPS "PATENT RIGHTS"
NONE
<PAGE> 27
[IPS LOGO]
[INTEGRATED PRODUCE SYSTEMS, INC. LETTERHEAD]
- --------------------------------------------------------------------------------
July 23, 1997
Dave Rajkovich
President
Farmington Fresh
P.O. Box 30667
Stockton, CA 95213
Dear Dave:
By way of this letter, Integrated Produce Systems, Inc.(TM) is notifying you
that Exhibit "A" in the Fuji/Granny Smith License Agreement dated April, 1997,
has be updated. The Listing of IPS "Patent Rights" in Exhibit "A" has changed
from "none" to "pending". We will update you as to the status of the patent
periodically.
Please let me know if I can be of any further help.
Sincerely,
/s/ Karen Penichter
- ----------------------------------
Karen Penichter
Vice President, Sales
cc: Mr. Pat McCarty, Mr. Paul Devine, Mr. Keith Neal, Mr. Rudy Bilawski
<PAGE> 28
EXHIBIT "B"
SPECIFICATIONS FOR IPS PROCESSING AIDS
<PAGE> 29
[INTEGRATED PRODUCE SYSTEMS, INC. LOGO]
IPS's Apple System(TM) is a proprietary processing aid composed of FDA GRAS
ingredients and a complimentary application technology. The Apple System(TM) is
designed to maintain the quality of fresh-cut or minimally processed apples.
The processing aids in IPS's Apple System(TM) are variety and application
specific. The processing aid is part of a systems approach which takes into
account raw material, packaging, process control, and the other variables
affecting product quality.
TYPICAL ANALYSIS
[ ]
MODE OF ACTION
IPS's Apple System(TM) is a synergistic combination of an application specific
processing aid and packaging system. The System is designed to inhibit browning
and to maintain the natural colors, taste and texture of the fresh sliced
apple. [ ]
LABELING REQUIREMENTS
All ingredients in IPS's processing aid are GRAS (Generally Recognized as Safe)
according to the FDA's Code of Federal Regulations. When used in accordance
with prescribed processing protocols, the use of IPS's Apple System(TM) does
not have to be reflected on the packaged product.
<PAGE> 30
EXHIBIT "C"
IPS PROCESSING AIDS
TERMS AND CONDITIONS OF SALE
<PAGE> 31
INTEGRATED PRODUCE SYSTEMS, INC. TERMS AND CONDITIONS OF SALE
These terms, conditions and instructions shall apply to all sales of processing
aids (the "products") by Integrated Produce Systems, Inc, ("Seller") to you
("Buyer") from the date of your receipt of these terms, whether received by
mail, by telephone, or by electronic means until such time as you have received
a revised edition of these terms and conditions or other notice from Seller of
their revocation.
PLEASE RETAIN THIS DOCUMENT IN YOUR FILES FOR FUTURE REFERENCE.
1. ACCEPTANCE. No order for products shall be binding upon Seller until
customer credit is approved and until accepted in writing by an authorized
Seller representative. Buyer shall be deemed to have agreed to all terms and
conditions of sale in effect at the time Buyer submits its order to Seller and
to any special terms and conditions contained in any quotations and
acknowledgement or other writing signed by an authorized representative of
Seller. Buyer shall also be deemed to have agreed to all changes or additions
to such terms and conditions which become effective subsequently, and prior to
Seller's acceptance of Buyer's order unless Buyer notifies Seller in writing to
the contrary within 5 working days after Buyer receives notification of the new
or changed conditions, in which case the Buyer's order shall be deemed canceled.
2. INTERPRETATION. These terms and conditions supersede all terms and
conditions (printed or otherwise) on the purchase order form of Buyer and all
other inconsistent terms submitted by Buyer prior to acceptance of the order
by Seller. This writing is intended by the parties as a final expression of
their agreement and is intended also as a complete and exclusive statement of
the terms and conditions of their agreement, which can be modified or rescinded
only in writing signed by both parties. Failure of Seller to object to the
provisions contained in any order or other communication from Buyer (including
but not limited to penalty clauses) shall not be construed as a waiver of these
terms and conditions of sale nor an acceptance of any terms or conditions of
Buyer. The acceptance of all orders shall be deemed to be contracts entered
into in the Commonwealth of Pennsylvania and shall be construed in accordance
with the substantive laws of Pennsylvania. The United Nations Convention on
Contracts for the International Sale of Goods shall not apply to the agreement
between Buyer and Seller.
3. PRICES AND QUOTATIONS. Sales of products shall be at the prices stated in
the price quotation and shall be firm for 30 days from the date of quotation
and are thereafter subject to change until Seller accepts the order. Prices in
any price list or other literature are not offers to sell and are subject to
confirmation by Seller. No quotation is assignable by Buyer without the prior
written consent of Seller.
4. PAYMENT. Payment terms for all orders are net 30 days from the invoice date.
Seller has the right to charge a late charge of 1 1/2% per month on all unpaid
amounts from the due date until paid; provided, however, that the rate of the
late charge shall not exceed the highest applicable rate allowed by
Pennsylvania law. Receipt of any check or other commercial paper shall not
constitute payment until Seller shall have received in cash the full amount
thereof. In the event that payment for shipped products is not promptly made
when due; or in the event that the credit or the financial responsibility of
Buyer becomes impaired or unsatisfactory to Seller, Seller reserves the right
to demand cash or satisfactory security before making shipments. Upon the
failure of Buyer to provide cash or satisfactory security to fully satisfy
Seller's demands, Seller reserves the right to discontinue making shipments and
to cancel the sale, or any part of the sale, thereby terminating all obligation
on the part of Seller for delivery of the products, or any part of the products
sold.
5. SHIPPING AND RISK OF LOSS; SECURITY INTEREST. Unless otherwise agreed, all
sales shall be F.O.B., Seller's plant of manufacture. Delivery of products to a
carrier at Seller's plant shall constitute delivery to Buyer and Buyer assumes
all risk for subsequent loss or damage. Buyer is responsible for all
transportation, delivery, and insurance costs incurred in connection with the
delivery of the products to the designated site.
6. TAXES AND OTHER CHARGES. In addition to prices quoted or invoiced, Buyer
shall pay or reimburse Seller for its payment of any manufacture tax, retailers'
occupation tax, use tax, sales tax, excise tax, duty, custom, inspection or
testing fee, or other tax, or other charge of any nature whatsoever, imposed by
governmental authority, on or measured by any transaction between Seller and
Buyer.
7. LIMITED WARRANTY. From the date of shipment, Seller warrants the products
manufactured by it to be free from defects in material and workmanship for a
period of three months.
Seller's sole and exclusive obligation and Buyer's sole and exclusive remedy
hereunder for breach of this limited warranty is expressly limited, at the
Seller's option, to replace the defective products at the F.O.B. point stated
herein or to give credit for such defective products in an amount not to exceed
their purchase price, provided: (i) Buyer reports the defect to Seller in
writing and provides a description of the defective product and complete
information about the manner of its discovery within 10 days of its discovery
and in no event later than 60 days from the date of shipment; (ii) Seller has
the opportunity to investigate the reported defect and determines the defect
arises from faulty material or workmanship; and (iii) if deemed appropriate by
Seller, Buyer returns the affected product to a location designated by Seller.
The limited warranty set forth above shall not apply to (i) products repaired
or altered by any others than Seller so as, in Seller's opinion, to have
adversely affected the product, (ii) products subjected to negligence,
accidents or damage by circumstances beyond Seller's control, or (iii) products
subjected to improper storage or other than normal use or service. Seller's
sole and exclusive obligation hereunder shall be limited to the replacement of
the defective portion of the product or credit therefor as provided above. In
no event shall any claim for a breach of this limited warranty be made later
than 1 year after the cause of action has accrued. This reduced statute of
limitations shall supersede any contrary statute of limitations established at
law and is included herein with the mutual agreement of Buyer and Seller. THE
LIMITED WARRANTY SET FORTH ABOVE IS EXCLUSIVE AND IS IN LIEU OF ALL OTHER
EXPRESS OR IMPLIED WARRANTIES, INCLUDING WARRANTIES OF MERCHANTABILITY, FITNESS
FOR A PARTICULAR PURPOSE, OR WARRANTIES ARISING FROM A COURSE OF DEALING OR
USAGE OF TRADE. SELLER MAKES NO OTHER EXPRESS OR IMPLIED WARRANTY, STATUTORY OR
OTHERWISE, CONCERNING PRODUCTS SUPPLIED UNDER THESE TERMS AND CONDITIONS OR ANY
AGREMENT TO WHICH THEY APPLY. TECHNICAL ADVICE AND STATEMENTS AND
RECOMMENDATIONS RELATED THERETO ARE FURNISHED AS AN ACCOMMODATION TO BUYER.
SELLER ASSUMES NO LIABILITY FOR TECHNICAL ADVICE AND BUYER ACCEPTS SUCH ADVICE
AND STATEMENTS AT BUYER'S SOLE RISK.
<PAGE> 32
8. LIMITATION OF LIABILITY. In addition to the limitations of Seller's
liability set forth in Section 7 above, the following limitations are also
applicable:
Seller shall defend Buyer in any suit or proceeding based on a claim that the
Seller's products infringe any United States patents if: Buyer notifies Seller
within 15 days after notice of possible infringement and gives Seller the
authority, information, and assistance (at Seller's expense) for the defense of
the suit. If Buyer's use of the products is enjoined in such a suit, Seller
shall, at its option: (i) procure for Buyer the right to continue using the
products; (ii) modify the products to render them non-infringing; (iii) replace
the products with non-infringing products; or (iv) refund the purchase price
paid by Buyer. Seller will not be responsible for any compromise or settlement
made without its written consent.
No products shall be returned without Seller's express authority and all
claims, except for claims under Section 7, must be made within 30 days after
delivery of the products and failure to do so shall constitute a waiver by
Buyer of any such claims. Seller reserves the right to charge a restocking fee
for any products it permits Buyer to return. Unless otherwise provided in an
agreement between the Buyer and the Seller, Seller has no knowledge as to
trademark or patent rights that third parties may claim in the products.
Consequently, Seller makes no warranty whatsoever with respect to the freedom
of the products from claims of infringement by third parties arising from
trademark, patent or other property rights in the products covered.
SELLER SHALL NOT INDEMNIFY NOR BE LIABLE TO BUYER, ITS ASSIGNS, SUCCESSORS OR
PURCHASERS OR TO ANY PERSON OR ENTITY FOR ANY CLAIMS, LOSSES, EXPENSES OR
JUDGMENTS ARISING OUT OF OR RESULTING IN ANY WAY FROM PRODUCTS FURNISHED
HEREUNDER WHERE LIABILITY IS PREMISED UPON ANY THEORY INCLUDING, WITHOUT
LIMITATION, NEGLIGENCE OR STRICT LIABILITY. SELLER'S TOTAL, COMPLETE AND
EXCLUSIVE LIABILITY HEREUNDER SHALL BE LIMITED TO REPLACEMENT OR CREDIT AS
PROVIDED ABOVE AND SHALL NOT EXCEED THE PURCHASE PRICE RECEIVED BY SELLER FOR
THE PRODUCTS IN RESPECT OF WHICH THE CLAIM IS MADE. SELLER SHALL NOT BE LIABLE
FOR LOST PROFITS, INTERRUPTION OF BUSINESS, INJURY TO PERSONS OR PROPERTY OR
SPECIAL, DIRECT OR INDIRECT, OR CONSEQUENTIAL DAMAGES, OR INCREASES IN COST OF
OPERATION. THE PARTIES EXPRESSLY AGREE THAT THE LIMITATIONS SET FORTH HEREIN
ARE AGREED ALLOCATIONS OF RISK AND SHALL SURVIVE THE DETERMINATION OF ANY COURT
OF COMPETENT JURISDICTION THAT ANY REMEDY PROVIDED HEREIN FAILS OF ITS
ESSENTIAL PURPOSE.
9. REMEDIES. In addition to Seller's remedies set forth herein or otherwise
available to it at law, if Buyer fails to make any payment when due, Seller
shall be entitled to: (i) offset the overdue amount against any other funds of
Buyer in Seller's custody; (ii) terminate Seller's obligations under these
terms and conditions and treat this agreement as if canceled by Buyer; (iii)
delay manufacture or delivery of all or part of the products sold to the Buyer
under this or any other agreement between Buyer and Seller; and/or (iv) recover
or require Buyer to return forthwith, at Buyer's expense (including proper
insurance with respect thereto), all products and other material which Seller
provided to Buyer and with respect to which Buyer failed to make timely payment.
10. FORCE MAJEURE. Seller shall not be held responsible or liable for any loss
or damage resulting from a delay in the delivery of the products or any failure
to perform its obligations to Buyer if the causes of such delay or failure are
attributable to acts of God or of the public enemy, acts of the government in
either its sovereign or contractual capacity, acts of the Buyer, priorities,
allocations, inability to obtain, at reasonable prices, utilities or operating
materials or machinery, or due to lock out or other labor dispute, strikes,
fires, floods, explosions, earthquakes, insurrection or riot, embargoes,
epidemics, quarantine restrictions, unusually severe weather, litigation or
other private or public proceedings, or other causes beyond the reasonable
control of Seller. In the event any delay occurs because of these causes, the
date of delivery shall be extended by at least the period of time attributable
to the delay.
11. DISPUTE RESOLUTION. Any claim, controversy or dispute arising out of or
relating to the agreement between Buyer and Seller or any interpretation or
breach thereof or performance thereunder, including without limitation any
dispute concerning the scope of this arbitration provision, shall be settled
by submission to final, binding and non-appealable arbitration ("Arbitration")
for determination, without any right by any party to a trail de novo in a court
of competent jurisdiction, after a 25 calendar day waiting period (the "Waiting
Period"). During the Waiting Period, the parties shall work reasonably and in
good faith and shall use their best efforts to amicably resolve the claim,
controversy or dispute. The Arbitration and all pre-hearing, hearing,
post-hearing arbitration procedures, including those for Disclosure and
Challenge, shall be conducted in accordance with the Commercial Arbitration
Rules (the "Commercial Rules") of the American Arbitration Association (herein
referred to as the "Association") in Philadelphia, Pennsylvania, as
supplemented by Buyer and Seller in any other agreement between the parties
concerning the subject matter hereof.
12. MISCELLANEOUS. These terms and conditions shall insure to the benefit of
and shall be binding upon the heirs, successors, and assigns of the parties
hereto. Buyer shall not assign its duties and obligations hereunder without
Seller's prior written consent. In case of any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect the validity of any other provision hereof, and such
provision(s) shall be deemed modified to the extent necessary to make it (them)
enforceable. All days shall be counted to computing the number of days
hereunder. Buyer hereby expressly agrees that in making sales of products that
use in any manner the Seller's products, Buyer will be bound by and comply with
all federal, state, local laws, ordinances or regulations applicable. Buyer
agrees to indemnify Seller against loss or damage resulting from Buyer's breach
of, or failure to comply with, any of the provisions of this agreement or any
such laws, ordinances or regulations. Section headings used herein are for
convenience only; they form no part of these terms and shall not affect their
interpretation.
08/17/96
<PAGE> 33
EXHIBIT "D"
PROPRIETARY RIGHTS OF PARTIES
FARMINGTON/EPL DEVELOPMENTS:
<TABLE>
<CAPTION>
FARMINGTON EPL/IPS JOINT PUBLIC DOMAIN
---------- ------- ----- -------------
<S> <C> <C> <C>
[ ] [ ] Bin Dumpers
Apple washers
Conveyors
Dewatering systems
Atlas Pacific
Corer, peeler,
slicer
General Diptank
design
Plant
Construction:
-Materials
-Walls
-Floors
</TABLE>
<PAGE> 34
EXHIBIT "E"
ARBITRATION PROCEDURES
a. Following the Waiting Period, the party seeking Arbitration shall
give notice of a demand to arbitrate (herein referred to as the "Demand") to the
other party and to the Association. The Demand shall include (i) the issues to
be determined, (ii) a copy of this arbitration provision, and (iii) to the
extent the parties cannot agree on a single arbitrator, the designation of one
arbitrator, who shall have no prior or existing personal or financial
relationship with the designating party.
b. Within thirty (30) days after receipt of the Demand, the other party
shall give notice (herein referred to as the "Response") to the party that
demanded arbitration, and to the Association, of (i) any additional issues to be
arbitrated, (ii) its answer to the issues raised by the party that sent the
Demand, and (iii) its designation of a second arbitrator, who shall have no
prior or existing personal or financial relationship with the designating party.
c. If a Response designating a second arbitrator is not received within
the above-mentioned thirty (30) day period, the Association shall immediately
designate the second arbitrator.
d. The two arbitrators as designated pursuant to the foregoing
provisions shall then designate a third arbitrator within ten (10) days after
the designation of the second arbitrator. If the two arbitrators cannot agree on
the designation of the third arbitrator within the ten (10) day period
allocated, the Association shall designate the third arbitrator.
e. The arbitration panel as designated above shall proceed with the
Arbitration by giving notice to all parties of its proceedings and hearings in
accordance with the Association's applicable procedures. Within fifteen (15)
days after all three arbitrators have been appointed, an initial meeting among
the arbitrators and counsel for the parties shall be held for the purpose of
establishing a plan for administration of the Arbitration, including:
(i) definition of issues;
(ii) scope, timing and type of discovery, which may at the
discretion of the arbitrators include production of
documents in the possession of the parties, but may
not, without the consent of the parties, include
depositions;
(iii) exchange of documents and filing of detailed
<PAGE> 35
statements of claims and prehearing memoranda;
(iv) schedule and place of hearings; and
(v) any other matters that may promote the efficient,
expeditious and cost-effective conduct of the
proceeding.
The substantive law of the State of California shall be applied by the
arbitrators to the resolution of the dispute, provided that the arbitrators
shall base their decision on the express terms, covenants and conditions of this
Agreement. The arbitrators shall be bound to make specific findings of fact and
reach conclusions of law, based upon the submissions and evidence of the
parties, and shall issue a written decision explaining the basis for the
decision and award.
f. The parties agree that the arbitrators shall have no power to alter
or modify any express provision of this Agreement or to render any award which,
by its terms, effects any such alteration or modification.
g. Upon written demand to any party to the Arbitration for the
production of documents and things (including computer disc and data) reasonably
related to the issues being arbitrated, the party upon which such demand is made
shall promptly produce, or make available for inspection and copying, such
documents or things without the necessity of any action by the arbitrators,
provided, however, that no such demand shall be effective if made more than
ninety (90) days after the receipt of the Response.
h. Subject to the limitations imposed by subsection (f), the
arbitrators shall have the power to grant any and all relief and remedies,
whether at law or in equity, that the courts in the State of California may
grant and such other relief as may be available under the Commercial Rules,
other than punitive damages. Any award of the arbitrators shall include
pre-award and post-award interest at a rate or rates considered just under the
circumstances by the arbitrators. The decision of the arbitrators shall be final
and as an "award" within the meaning of the Commercial Rules and judgment upon
the arbitration award may be entered in the United States District Court for the
Northern District of California ("San Francisco District Court") or any other
court having jurisdiction, as if it were a judgment of that court. The parties
to this Agreement expressly consent to the jurisdiction of the Association,
including, without limitation, reasonable attorney's fees and the parties waive
any objection they may have as to jurisdiction and venue regarding the San
Francisco District Court.
i. The party which does not prevail in the Arbitration shall be
responsible for all fees and expenses incurred in connection with the
Arbitration, including, without limitation, reasonable attorney's fees.
j. Notwithstanding the foregoing, the parties specifically reserve the
right to seek a temporary judicial restraining order, preliminary injunction, or
other similar short term equitable
<PAGE> 36
relief, and grant the arbitration tribunal the right to make a final
determination of the parties' rights, including whether to make permanent or
dissolve such court order. No party shall bring a civil action seeking
enforcement or any other remedy founded on this Agreement.
<PAGE> 1
EXHIBIT 10.3
OPERATING AGREEMENT OF NEWCORNCO, LLC, DATED JULY 19, 1996,
BETWEEN EPL TECHNOLOGIES, INC. AND AGRICULTURAL INNOVATION & TRADE, INC.
<PAGE> 2
THIS AGREEMENT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED ON PAGES 8, 9, 13, 17, 18, 20, 27, 30
AND 35 AND ON EXHIBITS A, C, D AND E AND HAS BEEN FILED SEPARATELY WITH THE
SECURITIES AND EXCHANGE COMMISSION.
OPERATING AGREEMENT
OF
NewCornCo LLC
Dated as of July 19, 1996
<PAGE> 3
OPERATING AGREEMENT
OF
NewCornCo LLC
Dated as of July 19, 1996
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I - DEFINITIONS......................................................................................... 2
1.1. Act.................................................................................. 2
1.2. Additional Capital Balance........................................................... 2
1.3. Additional Capital Contributions..................................................... 2
1.4. Adjusted Basis....................................................................... 2
1.5. Affiliate............................................................................ 2
1.6. AIT Contributed Property............................................................. 3
1.7. Annual Budget and Work Plan.......................................................... 3
1.8. Annual Period........................................................................ 3
1.9. Capital Accounts..................................................................... 3
1.10. Capital Balance...................................................................... 3
1.11. Capital Contributions................................................................ 3
1.12. Carrying Value....................................................................... 3
1.13. Certificate of Formation............................................................. 4
1.14. Closing Price........................................................................ 4
1.15. Code................................................................................. 4
1.16. EPL Shares........................................................................... 4
1.17. Contributed Property................................................................. 4
1.18. Contribution Agreement............................................................... 4
1.19. Covered Transaction.................................................................. 4
1.20. Economic Risk of Loss................................................................ 5
1.21. Entity............................................................................... 5
1.22. Management Committee................................................................. 5
1.23. Majority Members..................................................................... 5
1.24. Members' Loans....................................................................... 5
1.25. Minimum Gain......................................................................... 5
1.26. Net Agreed Value..................................................................... 5
1.27. Net Cash Flow........................................................................ 5
1.28. Net Income........................................................................... 5
1.29. Net Refinancing Proceeds............................................................. 6
1.30. Net Sale Proceeds.................................................................... 6
1.31. Participation Percentage............................................................. 6
1.32. Partner Minimum Gain................................................................. 6
1.33. Partner Nonrecourse Debt............................................................. 6
</TABLE>
i
<PAGE> 4
<TABLE>
<S> <C>
1.34. Partner Nonrecourse Deductions....................................................... 6
1.35. Person............................................................................... 6
1.36. Profit and Loss...................................................................... 6
1.37. Treasury Regulations................................................................. 7
ARTICLE II - GENERAL PROVISIONS................................................................................. 7
2.1. Formation............................................................................ 7
2.2. Name................................................................................. 7
2.3. Purpose.............................................................................. 7
2.4. Principal Office and Resident Agent.................................................. 7
2.5. Nature of Partners' Interests; Non-Partition.
.................................................................................... 7
2.6. Duration of Company.................................................................. 8
2.7. Further Assurances................................................................... 8
2.8. Classification for Tax Purposes...................................................... 8
ARTICLE III - CAPITAL CONTRIBUTIONS; LOANS...................................................................... 8
3.1. Membership and Participation Percentages............................................. 8
3.2. Initial Contributions................................................................ 8
3.3. [INTENTIONALLY LEFT BLANK.].......................................................... 9
3.4. Capital Accounts..................................................................... 9
3.5. Use of Capital Contributions and Loans............................................... 11
3.6. Additional Capital Contributions; Members'
Loans................................................................................ 11
3.7. Operating Deficits................................................................... 12
ARTICLE IV - MANAGEMENT OF THE COMPANY.......................................................................... 12
4.1. Management........................................................................... 12
4.2. Management Committee................................................................. 12
4.3. Executive Committee.................................................................. 15
4.4. Liability; Indemnification of the Members. ......................................... 18
ARTICLE V - DISTRIBUTIONS AND ALLOCATIONS....................................................................... 19
5.1. Distribution of Net Cash Flow. Net Refinancing
Proceeds and Net Sale Proceeds....................................................... 19
5.2. Allocation of Profits and Losses..................................................... 19
5.3. Upholding of Tax Benefits............................................................ 20
5.4. Gain on Sale......................................................................... 22
ARTICLE VI - BOOKS AND RECORDS; TAX MATTERS..................................................................... 23
6.1. Accounting........................................................................... 23
6.2. Statements........................................................................... 23
6.3. Inspection........................................................................... 24
6.4. Tax Matters.......................................................................... 24
</TABLE>
ii
<PAGE> 5
<TABLE>
<S> <C>
ARTICLE VII - TRANSFER OF COMPANY INTERESTS; WITHDRAWAL OF
MEMBERS; BUY/SELL PROVISIONS......................................................... 25
7.1. Transfer of Participation Percentage................................................. 25
7.2. Expenses............................................................................. 27
7.3. Withdrawal of Members................................................................ 27
7.4. Death, Legal Incapacity, Dissolution or
Bankruptcy of a Member............................................................... 28
7.5. Status of Interests Transferred...................................................... 28
7.6. Purchase Option...................................................................... 28
7.7. Take-Along........................................................................... 30
ARTICLE VIII - DISSOLUTION AND TERMINATION...................................................................... 32
8.1. Dissolution.......................................................................... 32
8.2. Appointment of Liquidating Member.................................................... 33
8.3. Distributions and Other Matters...................................................... 33
8.4. Distributions of Property............................................................ 33
8.5. Action During Liquidation; Statements of
Account.............................................................................. 34
ARTICLE IX - REPRESENTATIONS, WARRANTIES AND COVENANTS.......................................................... 35
9.1. Representations and Warranties....................................................... 35
ARTICLE X - NOTICES AND COMMUNICATIONS.......................................................................... 38
10.1. Notices.............................................................................. 38
10.2. Change of Address.................................................................... 38
10.3. Time of Communications............................................................... 39
ARTICLE XI - MISCELLANEOUS...................................................................................... 39
11.1. Default.............................................................................. 39
11.2. Confidentiality...................................................................... 39
11.3. Arbitration.......................................................................... 40
11.4. Filings.............................................................................. 41
11.5. Inspections.......................................................................... 41
11.6. Members as Creditors................................................................. 41
11.7. Independent Ventures................................................................. 41
11.8. Partial Invalidity................................................................... 42
11.9. Governing Law; Parties in Interest................................................... 42
11.10. Amendment............................................................................ 42
11.11. Execution in Counterparts............................................................ 42
11.12. Computation of Time.................................................................. 42
11.13. Table of Contents; Titles and Captions............................................... 42
11.14. Pronouns and Plurals................................................................. 42
11.15. Exhibits............................................................................. 42
11.16. Entire Agreement..................................................................... 42
</TABLE>
iii
<PAGE> 6
Schedule of Exhibits
Annual Budget and
Work Plan Exhibit A
Certificate of Formation Exhibit B
Contribution Agreement Exhibit C
Price and Terms Exhibit D
Premises Leases/Description of Premises Exhibit E
iv
<PAGE> 7
OPERATING AGREEMENT OF NEWCORNCO LLC,
A Delaware Limited Liability Company
The OPERATING AGREEMENT of NewCornCo LLC (the "Agreement") is
made as of this 19th day of July, 1996, by and between EPL TECHNOLOGIES,
INC., a Colorado corporation with offices at 200 Four Falls Corporate Center,
Suite 315, West Conshohocken, Pennsylvania 19428 ("EPL"), and Agricultural
Innovation & Trade, Inc., a California corporation with offices at 3241 Somis
Road, Somis, California 93066 ("AIT"). EPL and AIT are sometimes referred to
herein individually as a "Member" and together as the "Members"). Capitalized
terms used herein and not otherwise defined shall have the meanings ascribed
thereto in Article I hereof.
Explanatory Statement
A. EPL possesses certain confidential and proprietary know-how
and technology relating to the development, manufacture and marketing of
fresh-cut produce processing technology that facilitates the maintenance of the
integrity of fresh-cut corn and corn products, and which inhibits degradation of
such products. AIT is engaged in the business of growing, producing, purchasing
and otherwise acquiring, and of manufacturing, processing and marketing, fresh
corn and corn products, and is the owner of various tangible and intangible
business assets related thereto and to the operation of facilities therefor.
B. EPL and AIT desire to form and operate NewCornCo LLC
pursuant to this Agreement and other related documents and instruments, as a
limited liability company under Delaware law (the "Company"), to engage in the
business of purchasing or otherwise acquiring, and of processing and marketing,
fresh corn (i.e. corn which is not frozen or canned), employing, when
appropriate and available, proprietary fresh-cut produce processing know-how and
technologies that facilitate the maintenance of the integrity of such products.
C. Specifically, it is contemplated that AIT will contribute
certain tangible and intangible assets, as further described or referred to
herein, to the Company as an initial capital contribution; and EPL will
contribute cash or cash equivalents to the Company as an initial capital
contribution; and the Company will enter into various agreements and
arrangements with AIT and/or EPL, or their respective Affiliates, or unrelated
third parties, for various goods, products and services as are from time to time
required by the Company in connection with its business.
<PAGE> 8
D. In furtherance of the foregoing, the Members, to provide
for foregoing, have set forth their agreements and understandings as are stated
herein.
AGREEMENTS
In consideration of the foregoing and of the covenants and
conditions herein contained, and intending to be legally bound hereby, the
Members agree:
ARTICLE I
DEFINITIONS
Certain terms when used in this Agreement shall have the
meanings set forth in the context hereof. The following terms when used in this
Agreement shall have the respective meanings set forth below:
1.1. Act. Title 6, Chapter 18 of the Delaware Code (the Delaware Limited
Liability Company Act), as from time to time in effect in the State of Delaware,
or any corresponding provision or provisions of any succeeding or successor law
of such State; provided however, that in the event any amendment to the Act, or
any succeeding or successor law, is applicable to the Company only if the
Company has elected to be governed by the Act as so amended or by such
succeeding or successor law, as the case may be, the term "Act" shall refer to
the Act as so amended, or to such succeeding or successor law, only after the
appropriate election by the Company, if made, has become effective.
1.2. Additional Capital Balance. The Additional Capital
Contributions of a Member; in each case as reduced from time to time by all
distributions to such Member which are in reduction of a Member's Additional
Capital Balance; and in each case as increased from time to time by any
contributions by such Member which are Additional Capital Contributions.
1.3. Additional Capital Contributions. Any additional
contributions of a Member to the capital of the Company made pursuant to Section
3.6. hereof.
1.4. Adjusted Basis. The Company's adjusted basis in any
Company asset, as determined for Federal income tax purposes pursuant to Section
1011 of the Code.
1.5. Affiliate. When used with respect to a specified Person,
(i) any Person that, directly or indirectly, through one or more intermediaries,
controls, or is controlled by, or is under common control with, the specified
Person or any of its members, partners, shareholders, officers, directors or
trustees, (ii) any
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<PAGE> 9
Person who is a member, shareholder, officer, director, partner, or trustee of,
or serves in a similar capacity with respect to, the specified Person, or which
the specified Person or any of its members, partners, shareholders, officers,
directors, or trustees is a member, shareholder, officer, director or trustee,
or serves in a similar capacity, and (iii) any Person that, directly or
indirectly, is the beneficial owner of five percent (5%) or more of any class of
equity securities of, or otherwise has a substantial beneficial interest in, the
specified Person, or of which the specified Person or any of its members,
partners, shareholders, officers, directors, or trustees is directly or
indirectly the owner of five percent (5%) or more of any class of its equity
securities.
1.6. AIT Contributed Property. The property and assets
referred to and defined thereas in, and to be contributed by AIT to the Company
as AIT's initial Capital Contribution pursuant to, the Contribution Agreement.
1.7. Annual Budget and Work Plan. The budget and plan of work
and operation of the Company, to be prepared on an annual basis, as approved
from time to time by the Management Committee of the Company pursuant to Section
4.2 hereof. The Annual Budget and Work Plan for the short period ending December
31, 1996 is attached hereto as Exhibit A, which shall serve as a format for the
Annual Budget and Work Plan for future Annual Periods.
1.8. Annual Period. Any full calendar year commencing on
January 1 and ending on the next succeeding December 31.
1.9. Capital Accounts. The capital accounts of the Members, as
described in Section 3.4. hereof.
1.10. Capital Balance. The Capital Contributions of a Member
made in cash or in property; in each case as reduced from time to time by all
distributions to such Member which are in reduction of a Member's Capital
Balance; and in each case as increased from time to time by any contributions by
such Member which are Capital Contributions.
1.11. Capital Contributions. Any contributions of a Member to
the capital of the Company made pursuant to Article III hereof.
1.12. Carrying Value. An amount that is equal to: (i) with
respect to Contributed Property, the fair market value of such property at the
time of contribution, and thereafter reduced (but not below zero) by all
depreciation, amortization and similar expenses charged to Capital Accounts
pursuant to Section 3.4. hereof with respect to such property, and (ii) with
respect to any other property, the Adjusted Basis of such property.
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<PAGE> 10
1.13. Certificate of Formation. The Certificate of Formation
of the Company, in the form attached hereto as Exhibit B, filed or to be filed
with the Secretary of State of Delaware in order to form the Company.
1.14. Closing Price. As respects the EPL Shares on any day,
the last sale price, regular way, or, in the case no such sale takes place on
such day, the average of the high bid and low asked prices, in either case as
reported by the NASDAQ on the Bulletin Board, Small Cap Market or otherwise, (as
the case may be) or, if the EPL Shares are not then listed or admitted to
trading on the NASDAQ, the last sale price, regular way, or, in case no such
sale takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed on the principal
national securities exchange on which the EPL Shares are listed or admitted to
trading, or if the EPL Shares are not listed or admitted to trading on any
national securities exchange or NASDAQ, the last quoted price, or if not so
quoted, the average of the high bid and low asked prices in the over-the-counter
market, as reported by NASDAQ or, if such system is no longer in use, the
principal other automated quotation system that may then be in use.
1.15. Code. The Internal Revenue Code of 1986, as amended from
time to time, and all successors thereto.
1.16. EPL Shares. Duly authorized and validly issued shares of
Common Stock, $.001 par value, of EPL, or of any entity which acquires
substantially all of the assets of EPL or which is a successor by merger or
other similar type transaction to EPL; but not including any subsidiary of EPL.
1.17. Contributed Property. Property (other than cash)
contributed to the Company by a Member as a contribution to capital (or deemed
contributed as a result of a termination of the Company for Federal income tax
purposes).
1.18. Contribution Agreement. That certain Contribution
Agreement, by and between AIT and the Company, pursuant to which AIT is to
contribute the AIT Contributed Property to the Company as its initial Capital
Contribution. The form of Contribution Agreement is attached hereto as Exhibit
C.
1.19. Covered Transaction. The sale, transfer (by lease,
license, or conveyance of the beneficial interest), conveyance or other
disposition in one transaction or a related series of transactions, of all or
substantially all of the assets of any Member, other than to an Affiliate; or
any transaction or series of transactions in which at least fifty percent (50%)
of the equity interest in any Member (including voting interests) is acquired by
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<PAGE> 11
any Person or Persons who together constitute a "group" for purposes of Section
13(d) of the Securities Exchange Act of 1934, other than any Person or Persons
who, as of the date hereof, individually or as a "group" hold greater than a ten
percent (10%) equity interest in that Member.
1.20. Economic Risk of Loss. The "economic risk of loss" that
any Member is treated as bearing under Treasury Regulation Section 1.752-2.
1.21. Entity. Any general partnership, limited partnership,
limited liability company, corporation, joint venture, trust, business trust,
cooperative, association or other form of organization.
1.22. Management Committee. The Management Committee is the
committee formed and acting pursuant to Article IV hereof.
1.23. Majority Members. Those Members owning collectively
greater than a fifty percent (50%) Participation Percentage in the Company.
1.24. Members' Loans. All amounts loaned by Members to the
Company pursuant to Section 3.6. hereof.
1.25. Minimum Gain. Minimum Gain shall have the meaning set
forth in Section 5.3. hereof.
1.26. Net Agreed Value. (i) In the case of cash, the amount
thereof, (ii) in the case of Contributed Property, the fair market value of such
property at the time of the contribution, reduced by any indebtedness either
assumed by the Company upon such contribution or to which such property is
subject at the time of the contribution, and (iii) in the case of property
distributed to a Member, the fair market value of such property at the time of
the distribution, reduced by any indebtedness either assumed by the Member upon
such distribution or to which such property is subject at the time of
distribution.
1.27. Net Cash Flow. Net Cash Flow of the Company, with
respect to any calendar period, shall mean the net cash flow as shown on the
accounts of the Company (i.e., net cash flow from operations less capital
expenditures, less net movements in working capital), less reserves established
for future requirements.
1.28. Net Income. Net Income of the Company with respect to
any fiscal period shall mean the net income or loss of the Company as shown or
reported on the Company's U.S. Partnership Return of Income, determined on an
accrual basis.
5
<PAGE> 12
1.29. Net Refinancing Proceeds. The proceeds realized by the
Company upon any refinancing of a Company indebtedness, net of expenses incident
to such refinancing and the satisfaction of any indebtedness being refinanced
and any right of any other creditor of the Company.
1.30. Net Sale Proceeds. The proceeds realized by the Company
upon the sale of all or any part of any Company asset, net of expenses incident
to such sale, the payment of any Company indebtedness secured by or related to
such asset and satisfaction of any right of any creditor of the Company to
receive such proceeds.
1.31. Participation Percentage. The Participation Percentage
of each of the Members, as of the date hereof, as set forth in Section 3.1
hereof.
1.32. Partner Minimum Gain. Partner Minimum gain shall have
the meaning set forth in Section 5.3 hereof.
1.33. Partner Nonrecourse Debt. Partner Nonrecourse Debt shall
have the meaning set forth in Treasury Regulation Section 1.704-2(b)(4).
1.34. Partner Nonrecourse Deductions. Partner Nonrecourse
Deductions shall have the meaning set forth in Treasury Regulation Sections
1.704-2(i)(1) and (2).
1.35. Person. Any individual or Entity.
1.36. Profit and Loss. Profit and Loss shall mean for each
taxable year of the Company or other period, an amount equal to the Company's
taxable income or loss for the year or period, determined in accordance with
Code Section 703(a), with the following adjustments:
a. All items of income, gain, loss, deduction, or
credit required to be stated separately pursuant to Code Section 703(a)(1) shall
be included in computing the Company's taxable income or loss; and
b. Any tax-exempt income of the Company, not
otherwise taken into account in computing Profit or Loss, shall be included in
computing the Company's taxable income or loss; and
c. Any expenditures of the Company described in
Code Section 705(a)(2)(B) (or treated as such pursuant to Regulation Section
1.704-1(b)(2)(iv)(h)(i) and not otherwise taken into account in computing Profit
or Loss, shall be subtracted from taxable income or loss.
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<PAGE> 13
1.37. Treasury Regulations. The Income Tax Regulations,
including Temporary Regulations, promulgated under the Code, as such regulations
may be amended from time to time (including corresponding provisions of
succeeding regulations).
ARTICLE II
GENERAL PROVISIONS
2.1. Formation. EPL and AIT hereby intend to form and operate a limited
liability company under the Act and in accordance with the terms of this
Agreement and the Company's Articles of Organization. The Company shall exist
under and be governed by, and this Agreement shall be construed in accordance
with, the laws of the State of Delaware. Upon the effectiveness of this
Agreement, EPL shall be authorized to execute, and cause to be filed with the
Secretary of State of Delaware, the Certificate of Formation.
2.2. Name. The business of the Company shall be carried on
under the name "NewCornCo LLC", or under such other name as the Members may from
time to time designate.
2.3. Purpose. The purpose and character of the business of the
Company shall be to (i) purchase or otherwise acquire, and to manufacture,
process and market, fresh corn (i.e. other than frozen or canned) and corn
products, employing, when appropriate and available, proprietary food processing
know-how and technologies that facilitate the maintenance and integrity of such
fresh-cut corn and corn products; and (ii) to do all things necessary or
appropriate to effect any part or all of the foregoing.
2.4. Principal Office and Resident Agent. The Company's
registered office in the State of Delaware shall be as follows: The Corporation
Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington,
Delaware 19801. The Company may have such other or additional places of business
within or without the State of Delaware as the Management Committee may from
time to time designate. The name and address of the Company's resident agent in
the State of Delaware shall be as follows: The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.
2.5. Nature of Partners' Interests; Non-Partition. The
interests of the Members in the Company shall be personal property for all
purposes. All property owned by the Company, whether real or personal, tangible
or intangible, shall be owned by the Company as an entity, and no Member
individually shall have any ownership of such property. No Member shall be
entitled to seek partition of any Company property.
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<PAGE> 14
2.6. Duration of Company. The term of the Company shall begin
upon the acceptance of the Articles of Organization with the Department and
shall continue in existence until May 30, 2026, unless sooner terminated
pursuant to any provisions of this Agreement or as otherwise provided by law,
and unless extended by the unanimous vote of the Members.
2.7. Further Assurances. The parties hereto will execute
whatever certificates and documents, and will file, record and publish such
certificates and documents, which are required to form and operate a limited
liability company under the Act.
2.8. Classification for Tax Purposes. The Members hereby
acknowledge their intention that the Company be classified, for federal and
state income tax purposes, as a partnership and not as an association taxable as
a corporation, pursuant to Section 7701(a)(2) of the Code, and agree that the
provisions of this Agreement shall be construed in a manner to give full effect
to such intent. Upon the promulgation of final Treasury Regulations pertaining
to the classification of business entities in accordance with Notice 95-14,
1995-1 C.B. 297, the Management Committee shall, on behalf of the Company and
with the advice of tax counsel, elect to treat the Company as a "partnership"
for federal income tax purposes.
ARTICLE III
CAPITAL CONTRIBUTIONS; LOANS
3.1. Membership and Participation Percentages. The names, addresses and
Participation Percentage of each of the Members are as follows:
<TABLE>
<S> <C>
Names and Addresses Participation Percentage
EPL Technologies, Inc. 51%
200 Four Falls Corporate Center
Suite 315
West Conshohocken, PA 19428
Agricultural Innovation & Trade, Inc. [ ]
3241 Somis Road
Somis, California 93066
</TABLE>
3.2. Initial Contributions. Simultaneously with the execution
of this Agreement, each of the Members shall make their respective initial
Capital Contribution to the Company in the manner and as contemplated by this
Section 3.2.
A. EPL Capital Contribution. Simultaneously with the execution
and delivery hereof, or at or as of such later date as shall be agreed to by the
Members concurrent with the execution and
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<PAGE> 15
delivery of this Agreement, EPL is making a contribution to the capital of the
Company, in cash, or by check, in the amount of [ ]. Payment of said amount by
EPL to the Company will constitute payment in full of EPL's initial Capital
Contribution as required under the terms of this Agreement.
B. AIT Capital Contribution. Simultaneously the execution and
delivery hereof, or at or as of such later date as shall be agreed to by the
Members concurrent with the execution and delivery of this Agreement, AIT shall
execute and deliver to the Company the Contribution Agreement, together with
such instruments of conveyance, documents and other agreements as may be
contemplated thereby or otherwise required in connection therewith or in order
to fully effect the purposes and intent thereof, pursuant to which AIT will
contribute to the Company the AIT Contributed Property (as defined in the
Contribution Agreement) as its initial Capital Contribution. It is expressly
acknowledged and agreed that, assuming full performance by AIT of its
obligations under the Contribution Agreement, the Net Agreed Value of the AIT
Contributed Property equals [ ].
3.3. [INTENTIONALLY LEFT BLANK.]
3.4. Capital Accounts.
A. The Company shall establish and maintain a Capital Account
for each Member. The Capital Account of each Member shall be increased by (i)
the amount of the money contributed by the Member to the Company, (ii) the Net
Agreed Value of any property that is contributed by the Member to the Company,
(iii) allocations of income or gain to the Member by the Company pursuant to
Article 5 of this Agreement (but without regard to Section 5.2.C.), and shall be
reduced by (i) the amount of money distributed to the Member by the Company,
(ii) the Net Agreed Value of any property distributed to the Member by the
Company, and (iii) allocations of deduction or loss to the Member by the Company
pursuant to Article 5 of this Agreement (but without regard to Section 5.2.C.).
B. Upon a distribution in kind of Company property, the
Capital Account of each Member will be debited or credited with such Member's
allocable share of gain or loss which would have been recognized by the Company
had the property been sold for an amount equal to its fair market value
immediately prior to such distribution (to the extent that the gain or loss
inherent in such distributed property has not been previously reflected in the
Capital Accounts).
C. For purposes of computing the amount of any item of income,
gain, loss or deduction to be reflected in the Capital Accounts, the
determination, recognition and classification of each
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<PAGE> 16
such item shall be the same as its determination, recognition and classification
for Federal income tax purposes, provided that:
(1) Any deductions for depreciation, amortization
or similar expense attributable to Contributed Property shall be determined as
if the Adjusted Basis of such Company asset on the date it became Contributed
Property was equal to the Carrying Value of such Company asset as of such date;
(2) Any income, gain or loss attributable to the
taxable disposition of a Contributed Property shall be determined by the Company
as if the Adjusted Basis of such property on the date of disposition was equal
to the Carrying Value of such property on such date;
(3) If the Company's Adjusted Basis in any
"investment credit property" is reduced pursuant to Section 50(c) of the Code,
then the amount of such reduction shall be treated as an expense for the year in
which such reduction occurs and shall be allocated to the Members in the ratio
in which the Adjusted Basis of such property is allocated to the Members
pursuant to Treasury Regulation Section 1.46-3(f)(2)(i) (provided that
principles similar to Section 704(c) of the Code shall be taken into account in
the allocation of such basis); and any restoration of any such reduction in
Adjusted Basis shall be allocated to the Members in the same proportion as the
investment tax credit recapture with respect to such "investment credit
property" is shared among the Members; and
(4) The computation of all items of income, gain,
loss and deduction shall be made without regard to any election that may be made
by the Company under section 754 of the Code (except to the extent required by
Treasury Regulation Section 1.704-1(b)(2)(iv) (m)) and, as to those items
described in Section 705(a)(1)(B) or Section 705(a)(2)(B) of the Code (including
items treated as Section 705(a)(2)(B) expenditures under Treasury Regulation
Section 1.704-1(b)(2)(iv)(i)), shall be made by treating such items as though
they were, respectively, includible in income or currently deductible.
D. It is the intent of the Company to maintain Capital
Accounts and allocations in accordance with Treasury Regulation Section
1.704-1(b). Accordingly, adjustments to conform to those Regulations (or to
successor or amended provisions) or to take into account unexpected events shall
be made by the Members if such adjustments would not materially alter the
economic substance of this Agreement as it applies to any Member.
E. Except as otherwise required to satisfy Treasury Regulation
Section 1.704-1(b) in connection with a Code Section 708(b)(1)(B) termination,
in the event any interest in the Company is transferred in accordance with the
terms of this Agreement, the
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<PAGE> 17
transferee shall succeed to the Capital Account of the transferror to the extent
it relates to such transferred interest.
3.5. Use of Capital Contributions and Loans. The Capital
Contributions of the Members, all proceeds of Company borrowings, and any
Additional Capital Contributions and Members' Loans made pursuant to this
Agreement shall be used and applied for any Company purpose as determined by the
Management Committee or as expressly provided for elsewhere herein.
3.6. Additional Capital Contributions; Members' Loans.
A. Other than as expressly set forth in this Article III, no
Member shall be required to make any Additional Capital Contributions or
Members' Loans to the Company.
B. At any time and from time to time after the date hereof,
any Member may (but shall not be obligated to) make Additional Capital
Contributions or Members' Loans to the Company, if (1) in the opinion of the
Management Committee such contributions or loans are needed by the Company in
furtherance of any Company purpose, and (2) the Management Committee approves
any such contribution or loan in writing.
C. If a Member makes any Additional Capital Contributions in
accordance with the foregoing provisions, such contributions will not increase
such Member's Participation Percentage, will be entitled to the priorities
described in Article V hereof, and unless otherwise agreed at the time of the
making thereof, will be entitled to a compounded preferred return thereon equal
to the fluctuating prime rate of interest announced from time to time by The
Wall Street Journal (or, if The Wall Street Journal is no longer published, the
prime rate published in a publication of national circulation selected by the
Management Committee) plus two percent (2%), or as otherwise set and approved by
the Management Committee.
D. If any Member advances any funds to the Company after the
date of this Agreement (except as provided for in Sections 3.7. hereof, and
except in the case of Additional Capital Contributions), such advances will be
treated as Members' Loans, will not increase such Member's Participation
Percentage, and the amount thereof will be a debt due from the Company to such
Member, entitled to the priorities described in Article V hereof, to be repaid
with interest thereon accruing at the fluctuating prime rate of interest
announced from time to time by The Wall Street Journal (or, if The Wall Street
Journal is no longer published, the prime rate published in a publication of
national circulation selected by the Management Committee) plus two percent
(2%), or as otherwise set and approved by the Management Committee.
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<PAGE> 18
3.7. Operating Deficits. In the event that the Management
Committee determines that the Company requires additional funds to meet
operating expenses or required capital improvements, or for any other proper
Company purpose (in any such case, an "Operating Deficit"), the Management
Committee, in its sole discretion, may either (1) request that the Members, pro
rata in accordance with their then respective Participation Percentages, advance
funds in the amount so required, but in no event will the Members be obligated
to make such an advance or (2) obtain loans on such terms as the Management
Committee deems reasonably satisfactory taking into consideration the
circumstances of the Company and market conditions then prevailing, (3) if loans
are not available on terms satisfactory to the Management Committee, and with
the unanimous consent of the Members, obtain additional equity participation in
the Company by the admission of additional Members and the pro rata reduction of
the existing Members' Participation Percentages or (4) take such other actions,
and explore and pursue such other financing options as the Management Committee
may deem appropriate under the circumstances.
ARTICLE IV
MANAGEMENT OF THE COMPANY
4.1. Management. The Company shall be managed by its Members and, except as
otherwise herein provided, any decision of Majority Member(s) shall be
controlling for all purposes. Each Member shall have the power and authority to
act for and bind the Company to third parties; provided, however, that each such
Member shall severally indemnify, defend and hold harmless the Company from any
damage, loss or expense incurred in so doing in a manner that has not been
approved or ratified in the manner herein provided for the taking of such
action.
4.2. Management Committee.
A. In order to facilitate the management of the Company, the
Members shall select a committee of six individuals (the "Management Committee")
to represent their respective interests and to determine and control the
business of the Company. Subject to the rights of the Members (and any decision
to the contrary by the Majority Members), as herein provided, and without
limiting the generality of the foregoing, it is hereby expressly declared that
the Management Committee shall have the following powers:
1. To conduct, manage and control the business and
affairs of the Company, and to make such rules and regulations therefor not
inconsistent with law or the Certificate of Formation or this Agreement, as the
Management Committee shall deem to be in the best interests of the Company;
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2. To determine whether any services benefiting
the Company should be performed by one of the Members, with the expense of
providing such service to be covered by the Company;
3. To review and approve the Annual Work Plan and
Budget of the Company, and to determine any necessary changes thereto, as the
same shall be prepared and submitted to the Management Committee by the
Executive Committee.
4. To approve the borrowing of money, whether on a
secured or unsecured basis, by the Company, and the refinancing, recasting,
extension, compromise and matters otherwise relating to any loan to the Company
and, in connection therewith, to cause to be executed and delivered therefor, in
the Company's name, promissory notes, bonds, debentures, deeds of trusts,
mortgages, pledges, hypothecations, or other evidences of debt and securities
therefor;
5. To designate in the manner herein described the
individuals who are to serve on the Executive Committee and/or other committees,
and to prescribe the manner in which proceedings of such committee shall be
conducted;
6. To approve the acquisition by the Company of
real and personal property, and to approve the entering into by the Company of
contracts and all other arrangements needed to effectuate the business and
affairs of the Company; and
7. To establish a presence or other business
operations of the Company in one or more jurisdictions.
B. The Management Committee shall be comprised of
six (6) individuals, each of whom shall be referred to as a "Manager", and three
(3) of whom shall be designated as "EPL Managers" and three (3) of whom shall be
designated as "AIT Managers". The three (3) EPL Managers shall at all times be
appointed by EPL; and the three (3) AIT Managers shall at all times be appointed
by AIT. The initial members of the Management Committee shall be Paul L. Devine,
Timothy B. Owen, and Karen Penichter, each an EPL Manager appointed by EPL; and
[____________________________________] each an AIT Manager appointed by AIT.
Each Manager shall continue to serve until his or her death, resignation or
removal; provided, however, that each Manager shall be subject to removal only
by the Member responsible for his or her appointment to the Management
Committee, that is, each EPL Manager may be removed only by EPL and each AIT
Manager may be removed only by AIT. During the course of any disability of any
Manager, any other individual serving on the Management Committee and
representing or appointed by the same Member or Members as the disabled Manager,
shall have the authority to cast the disabled Member's vote on all matters of
business.
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C. A quorum of the Management Committee shall be four (4)
Managers (in person or by proxy) provided that, in any event, there shall at all
times be present at least one (1) EPL Manager and at least one (1) AIT Manager.
For each Management Committee decision, each Manager shall have the number of
votes (to include fractional votes) equal to the Participation Percentage of the
Member who appointed such Manager, divided by the number of Managers serving on
the Management Committee and appointed by that Member. Every act or decision
done or made and approved by those Managers who in the aggregate represent the
Majority Members, shall be regarded as an act or decision approved by the
Management Committee. The Management Committee shall meet no less than
semi-annually on or at such other date as shall be agreed from time to time, the
first Tuesday of June and December of the calendar year, but also as often as
necessary or desirable to carry out its functions. Meetings of the Management
Committee shall be held at any place within or without the State of Delaware
that has been designated from time to time by the Management Committee or the
Chairman. Any Manager not in attendance may give his proxy to the Chairman or
another Manager to cast his vote on all matters of business coming before the
meeting. Continuing proxies may be filed with the Chairman. Any Manager may
convene a meeting of the Management Committee upon at least fourteen (14) days'
prior notice to the other Managers, and in emergencies, any Member of the
Management Committee may convene a telephone meeting on twenty-four (24) hour
notice. Notice of the time and place of meetings shall be delivered personally
or by telephone to each Manager or sent by first-class mail or by telex,
telegram or facsimile transmission, charges prepaid, addressed to each Manager
at his address or appropriate telex, telegram, or facsimile address or number as
it appears on the records of the Company, or, if it is not so shown on the
records and is not readily ascertainable, to the Member whom such Manager
represents. The Management Committee may also hold meetings by telephone and may
make decisions by the written consent of all Managers. A written record of all
formal meetings, (whether by telephone or in person) of the Management Committee
and all material decisions made by it shall be made and kept in the records of
the Company.
D. At the meeting of the Management Committee held in December
of each year, or at such other times as shall be determined by the affirmative
vote of the Management Committee, the Management Committee shall elect from
among the Managers a chairman of the Management Committee (the "Chairman") who
shall preside as chairman of all meetings of the Management Committee during the
succeeding calendar year. In addition, the Chairman shall prepare or cause to be
prepared the Minutes of the meetings of the Management Committee and shall be
entitled to designate the time and place for meetings of the Management
Committee in the manner described hereinabove. At the first meeting of the
Management Committee, the Management Committee shall appoint the initial
Chairman who is to serve as
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Chairman of the Management Committee until his resignation or until his
successor as Chairman shall be duly appointed by the Managers.
E. Each Manager shall be free to represent the views and
positions of the Member or Members whom he or she represents and shall at all
times keep the Member whom he or she represents fully apprised of the
proceedings of the Management Committee. Each Member shall severally indemnify,
defend and hold harmless the Company from any damage, loss or expense incurred
in the taking by any Manager or Executive Officer of the Company appointed by or
designated as the representative of such Member in taking any action which is
contrary to or in excess of the authority of such Manager or Executive Officer.
F. Except as otherwise decided by the Management Committee, no
Manager shall be entitled to receive any salary or other remuneration from the
Company for his or her services as a Manager, or any reimbursement for his or
her expenses relating to such services.
G. Anything herein to the contrary notwithstanding, the
following major decisions (individually, a "Major Decision") of the Company
shall require the unanimous consent of the Members, rather than the affirmative
vote of the Majority Members:
(1) any sale, transfer or other disposal of all or
substantially all of the assets of the Company;
(2) any material change in the business of the
Company from that which is contemplated by the purpose set forth in Section 2.3
hereof;
(3) any amendment to the Articles of Organization
of the Company;
(4) the approval of a voluntary dissolution of the
Company;
(5) approval of a merger, consolidation or other
substantial reorganization of the Company, other than any matter or transaction
in connection with which any Member desires to and does exercise its rights
under Section 7.7 hereof.
H. If either Member (the "Initiating Member") request in
writing that the Other Member (the "Responding Member") consent to a Major
Decision under G(2) above and gives a notice (the "First Notice") of such
request to the Responding Member, consent thereto shall be presumed unless the
Initiating Member receives notice (the "Second Notice") from the Responding
Member denying such request within ten (10) days after the First Notice is
given. If the Second Notice denying such request is given within such period, a
potential
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deadlock shall be deemed to exist, in which event the Initiating Member shall be
deemed to have withdrawn the request unless the Initiating Member delivers
another notice (the "Third Notice") to the Responding Member within ten (10)
days after receipt of the Second Notice, reiterating its request for consent to
the Major Decision. Upon the delivery of the Third Notice reiterating the
request, an actual deadlock shall be deemed to exist and EPL shall have the
right, exercisable at any time within sixty (60) days after the occurrence of
the actual deadlock upon delivery of the Third Notice, to purchase all of the
Participation Percentage of AIT in the Company. The purchase price and terms
applicable to any such purchase by EPL of the Participation Percentage upon the
occurrence of an actual deadlock shall be determined in accordance with Section
7(d) and Section 7(e) hereof, including Exhibit D attached hereto.
4.3. Executive Committee.
A. The day to day business and operations of the Company shall
be overseen and implemented by a committee (the "Executive Committee"), subject
to the limitations imposed by the Management Committee and the Majority Members.
The responsibility of the Executive Committee shall include, but not be limited
to, the carrying out of the Company's business and affairs on a day-to-day basis
in accordance with the Annual Budget and Work Plan approved by the Management
Committee.
B. The authorized number of individuals, who shall be referred
to as "Executive Officers", which shall constitute the Executive Committee shall
be four (4), comprised of two (2) Executive Officers appointed by the EPL
Managers, and two (2) Executive Officers appointed by the AIT Managers. Any
Manager may also serve as an Executive Officer, and any individual may hold the
position of both Manager and an Executive Officer. The Executive Officers shall,
at the expense of the Company, but, as to each item, within the budget and plan
established by the then applicable Annual Budget and Work Plan approved by the
Management Committee, individually or collectively, as the context so dictates:
(1) use their best efforts to cause the Company at
all times to perform and comply with the provisions of any loan commitment,
agreement, guarantee, mortgage, or other contract, instrument or agreement to
which the Company is a party, or which affects the business or the operation
thereof, including, without limitation, the payment on behalf of the Company of
any debt service on loans to the Company;
(2) deliver to the Management Committee promptly
upon the receipt or sending thereof copies of all notices, reports and
communications between the Company and any holder of a mortgage, deed of trust
or other document or instrument affecting all or any portion of the assets of
the Company which relate to any
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existing or pending default thereunder or to any financial or operational
information required by such holder;
(3) prepare and submit to the Management Committee
the Annual Budget and Work Plan, for review and approval by the Management
Committee;
(4) purchase and maintain (or cause to be
purchased and maintained) fire and extended coverage, liability, worker's
compensation, rental loss and other insurance with respect to the assets of the
Company and other property of the Company;
(5) pay (or cause to be paid) all taxes and
assessments levied against the assets of the Company;
(6) employ and dismiss from employment, and
retain, any and all employees, consultants, agents and representatives, and
obtain all legal, accounting and other services necessary in connection with the
operation and management of the business and assets of the Company, for such
compensation and on such terms and conditions as the Management Committee may
determine; and
(7) furnish the statements and reports required to
be prepared and distributed by Article VI hereof at the request of, and in the
form required by, the Management Committee.
C. Each Executive Officer shall devote so much of its time and
effort to the management and other affairs of the Company as may be reasonably
required to promote the purposes of the Company in an efficient, effective and
diligent manner.
D. Any Executive Officer, but only upon the terms and
conditions approved by the Management Committee or the Majority Members, shall
have the right to obtain goods and services from any Member of the Company, and
to obtain goods and services from any individual or entity which is an
Affiliate, or otherwise directly or indirectly interested in a Member or any
shareholder, officer or director thereof.
E. In the event of a life threatening emergency or any
requirement of law or governmental order requiring immediate action, and so long
as the expenditure per occurrence is not in excess of [ ] any Executive Officer
may, in its discretion, act immediately without regard to the limitations set
forth herein and without staying within budget limitations, to eliminate such
emergency and/or to comply with such law or order, provided that the Executive
Officer immediately reports its actions and the reasons therefor to the
Management Committee.
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F. No Executive Officer shall be empowered to, and shall not,
without first obtaining the consent and approval of the Management Committee or
the Majority Members:
(1) sell, assign, transfer, exchange, grant
leasehold estates or otherwise dispose of any Company assets;
(2) apply for, execute or modify any mortgage,
pledge, deed of trust, encumbrance or other hypothecation or security agreement
affecting the property or assets of the Company or any interest therein, or
execute any financing statement in connection therewith;
(3) incur any indebtedness on behalf of the
Company other than trade debt for meeting current obligations incurred in the
ordinary course of business and due within 30 days;
(4) undertake any capital expenditures of in
excess of [________];
(5) change or permit to be changed in any
substantial way the accounting process and procedures employed in keeping the
books of account or preparing financial statements with respect to operation or
management of the Company;
(6) make, execute or deliver on behalf of the
Company any assignment for the benefit of creditors or any guarantee, indemnity
bond or surety bond, or any equivalent thereof;
(7) obligate the Company as a surety, guarantor or
accommodation party to any obligation in excess of [_____];
(8) lend funds belonging to the Company to any
Member or any third party or extend to any person, firm or corporation, credit
on behalf of the Company, except for the extension of credit in the ordinary
course of the Company's business to trade debtors up to [_____] each, but in
any event not in excess of [____] in the aggregate;
(9) enter into any contracts affecting the
Company, other than as approved by the Management Committee or in connection and
in accordance with the Annual Budget and Work Plan of the Company; or
(10) take legal action on behalf of the Company.
4.4. Liability; Indemnification of the Members. The Company
shall indemnify, defend and hold harmless each Member, each of their officers
and directors, each Manager and Executive Officer, and any other Person acting
as an agent of the Company to whom the Management Committee shall specifically
and in writing have
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conferred rights hereunder, against any loss, expense, damage, claim, liability,
obligation, judgment or injury suffered or sustained by him, it, them or any of
them by reason of any act, omission or alleged act or omission by him, it, them
or any of them arising out of his, its or their activities on behalf of the
Company or in furtherance of the interests of the Company, including, without
limitation, any judgment, award, settlement, reasonable attorneys' fees and
other costs or expenses incurred in connection with the defense of any actual or
threatened actions, proceedings or claims, all costs of which shall be charged
to and paid by the Company as incurred; provided, however, that the acts,
omissions or alleged acts or omissions upon which such actual or threatened
actions, proceedings or claims are based were performed or omitted in good faith
and within the scope of such Person's authority hereunder, and were not
fraudulent, in bad faith or a result of wanton and willful misconduct or gross
negligence by the party to be indemnified, defended and held harmless under this
Section 4.4.
ARTICLE V
DISTRIBUTIONS AND ALLOCATIONS
5.1. Distribution of Net Cash Flow. Net Refinancing Proceeds and Net Sale
Proceeds. All Net Cash Flow, if any, Net Refinancing Proceeds, if any, and Net
Sale Proceeds, if any, realized by or available to the Company shall first be
applied or added to a reasonable reserve or escrow account retained for working
capital needs or to provide funds for contingencies and expenses of the Company
(all as the Management Committee deems advisable, or as required by any loan,
escrow or other agreement or instrument of the Company). The balance, if any, of
Net Cash Flow, Net Refinancing Proceeds or Net Sale Proceeds shall be
distributed from time to time as the Management Committee shall direct, all in
the following order of priority to the extent available:
A. To the Members pro rata in repayment of the entire
principal amounts of any outstanding Members' Loans, together with all accrued
but unpaid interest thereon, first on account of interest accrued thereon (in
proportion to the interest so accrued) and then on account of outstanding
principal amounts thereof (in proportion to the respective amounts of
outstanding principal);
B. To the Members pro rata in reduction of their then
outstanding Additional Capital Balances, together with all accrued but unpaid
preferred return thereon, first on account of any preferred return accrued
thereon (in proportion to the preferred return so accrued) and then on account
of outstanding Additional Capital Balances (in proportion to the respective
amounts of Additional Capital Balances);
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C. To the Members in reduction of their then outstanding
Capital Accounts, in proportion, to the respective amounts of any such Capital
Accounts; and, thereafter,
D. Any remaining amounts to all Members in proportion to their
respective Participation Percentages.
The Members acknowledge that it is not the intent of the
Members that distributions be made to the Members during the [ ] of operation of
the Company, although any final decisions in that regard shall be made solely by
the Management Committee.
5.2. Allocation of Profits and Losses.
A. Except as otherwise provided in this Section 5.2., Profit,
Loss and all gain, deduction or credit (the "Tax Incidents") for each fiscal
year shall be allocated to the Members in accordance with their respective
Participation Percentages.
B. Upon the assignment or transfer of a Company interest
pursuant to Article VII hereof, the books and records of the Company shall be
closed, and Tax Incidents shall be allocated to each Member who held such
Company interest in accordance with the portion of the year during which such
Member held such Company interest determined as though such portion of the year
was a separate taxable period. Notwithstanding the foregoing, the Member who
held such Company interest and the Member receiving such Company interest may
agree to make the allocation of Tax Incidents in accordance with any other
method permitted by applicable rules and Treasury Regulations.
C. In accordance with Code Section 704(c) and the Treasury
Regulations thereunder, income, gain, loss and deduction with respect to any
property contributed (or deemed contributed pursuant to the provisions of Code
Section 708) to the capital of the Company shall, solely for tax purposes, be
allocated among the Members so as to take account of any variation between the
adjusted basis of such property to the Company for Federal income tax purposes
and its fair market value at the time of contribution. Such allocations shall be
made in accordance with the "traditional method" described in Treasury
Regulation Section 1.704-3(b) (or any successor provision) as shall be
reasonably determined by the Management Committee after consultation with the
Company's tax advisers; provided, however, that curative allocations consisting
of the special allocation of gain or loss upon the sale or other disposition of
the contributed property shall be made in accordance with the "traditional
method with curative allocations" described in Treasury Regulation Section
1.704-3(c) (or any successor provision) to the extent necessary to eliminate any
disparity, to the extent possible, between the Members' book and tax Capital
Accounts attributable to such property; and further provided,
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however, that any other method allowable under applicable Treasury Regulations
may be used in connection with any contribution of property or following any
revaluation as may reasonably be determined by the Management Committee to
reflect the purpose and intention of this Agreement.
D. Any elections or other decisions relating to allocations
shall be made by the Members in any manner that reasonably reflects the purpose
and intention of this Agreement. Allocations pursuant to Sections 5.2.C. are
solely for purposes of federal, state and local income taxes and shall not
affect, or in any way be taken into account in computing, any Member's Capital
Account or share of profits, losses, other items or distributions pursuant to
any provision of this Agreement.
5.3. Upholding of Tax Benefits.
A. Notwithstanding any other provisions of this Article V,
Partner Nonrecourse Deductions attributable to a Partner Nonrecourse Debt for
the taxable year shall be allocated to the Member bearing the Economic Risk of
Loss for such Partner Nonrecourse Debt; provided, however, that if more than one
(1) Member bears the Economic Risk of Loss for such Partner Nonrecourse Debt,
the Partner Nonrecourse Deductions attributable to such Partner Nonrecourse Debt
shall be allocated to and among the Members, pro rata in the same proportions
that their Economic Risks of Loss bear to one another.
B. Notwithstanding any other provisions of this Article V, no
allocation of deduction or loss shall be made to a Member if it would result in
such Member having a negative balance in its Capital Account in excess of the
amount that it is required to restore on a liquidation of the Company (or of the
Member's interest in the Company). For purposes of determining a Member's
Capital Account (and the deficit amount that the Member is required to restore)
in applying the provisions of this Section 5.3., the anticipated adjustments,
allocations and distributions described in Treasury Regulation Section
1.704-1(b)(2)(ii)(d)(4)-(6) shall be taken into account; and each Member shall
be deemed obligated to restore its deficit Capital Account balance to the extent
of its share of "partnership minimum gain", as defined in Treasury Regulation
Section 1.704-2(d)(1) and (k) ("Minimum Gain") and its share of "partner
nonrecourse debt minimum gain", as defined in Treasury Regulation Section
1.704-2(i)(3) and (k)(5) ("Partner Minimum Gain"). Any amount which cannot be
allocated to a Member pursuant to the provisions of this Section 5.3.B. shall
instead be allocated to the remaining Members. To the extent permitted by
Treasury Regulations Sections 1.704-2(h)(3) and (i)(6), the Management Committee
shall cause the Company to treat distributions of Available Cash as not
allocable to an increase in Minimum Gain or to an increase in Partner Minimum
Gain to the extent that such
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distributions do not cause or increase a deficit in the Capital Account of any
Member.
C. Notwithstanding any other provisions of this Article V and
in accordance with and pursuant to Treasury Regulation Section 1.704-2(f), if
there is a net decrease in the Company's Minimum Gain during any taxable year,
the Members shall be allocated, before any other allocation is made of Company
items for such taxable year, items of income and gain for such year (and, if
necessary, subsequent years) in an amount equal to each such Member's share of
the net decrease in Minimum Gain, if any, as determined pursuant to Treasury
Regulation Section 1.704-2(g)(2).
D. Notwithstanding any other provisions of this Article V and
in accordance with and pursuant to Treasury Regulation Section 1.704-2(i)(4), if
there is a net decrease in the Company's Partner Minimum Gain during any taxable
year, the Members shall be allocated, before any other allocation is made of
Company items for such taxable year under any other provision of this Article V
(other than under Section 5.3.C.), items of income and gain for such year (and,
if necessary, subsequent years) in an amount equal to each such Member's share
of the net decrease in Partner Minimum Gain, if any, as determined pursuant to
Treasury Regulations Section 1.704-2(i)(4).
E. Notwithstanding any other provisions of this Article V, in
the event that any Member unexpectedly receives an adjustment, allocation or
distribution described in clause (4), (5) or (6) of Treasury Regulation Section
1.704-1(b)(2)(ii)(d) that results in such Member having a negative balance in
its Capital Account in excess of the amount it is required to restore on a
liquidation of the Company (or of the Member's interest in the Company), or for
any other reason has a deficit Capital Account balance in excess of such amount,
such Member shall be allocated income and gain, before any other allocation is
made of Company items for such taxable year under any other provision of this
Article V (other than under Sections 5.3.C. and 5.3.D.), in an amount and manner
sufficient to eliminate such excess as promptly as possible.
F. It is the intent of the parties to this Agreement that the
chargeback provisions and the limitation on loss allocation provisions provided
herein satisfy the allocation of nonrecourse deduction rules provided in
Treasury Regulation Sections 1.704-2(b)(1) and (e), the allocation of partner
nonrecourse deduction rules of Treasury Regulation Section 1.704-2(i) and the
requirements of Treasury Regulation Section 1.704-1(b)(2)(ii)(d) (relating to
the alternate test for economic effect and "qualified income offset"). It is
further intended that the allocations under this Article V shall effect an
allocation for Federal income tax purposes in a manner consistent with section
704(b) of the Code and
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the regulations promulgated thereunder. If for any reason the allocations
contained in this Agreement shall conflict with the Treasury Regulations
promulgated under section 704 of the Code, the Members acknowledge that such
Regulations shall control.
5.4. Gain on Sale. Gains allocable to the Company from the
sale, exchange, abandonment, foreclosure or other disposition of Company
Property shall be allocated between the Members as follows:
(a) First, in accordance with Code Section 704(c)
and the Treasury Regulations thereunder, income, gain, loss and deduction with
respect to any property contributed (or deemed contributed pursuant to the
provisions of Code Section 708) to the capital of the Company shall, solely for
tax purposes, be allocated among the Members so as to take account of any
variation between the adjusted basis of such property to the Company for Federal
income tax purposes and its fair market value at the time of contribution;
(b) Second, gain shall be allocated to each of the
Members having a negative balance in its Capital Account to the extent and in
the ratios that such Members have negative balances in their Capital Accounts to
date until the balances in such Members' Capital Accounts equal zero;
(c) Third, to the Members as necessary to cause
the balances in their respective Capital Accounts to be in the same proportion
as the Members' Participation Percentage; and
(d) Fourth, to the Members in accordance with
their Participation Percentages.
ARTICLE VI
BOOKS AND RECORDS; TAX MATTERS
6.1. Accounting. Except as may be otherwise directed by the Management
Committee, the Company shall maintain its books and records on an accrual basis
and shall prepare (1) financial statements on the accrual method of accounting
and on a calendar year basis, in accordance with generally accepted accounting
principles, (2) an annual budget and monthly operating statement on forms and in
a format approved by the Management Committee, and (3) income tax returns on the
accrual method of accounting and on a calendar basis. Appropriate records will
be kept so that upon each closing of the Company books it is possible to
determine, among other items defined in this Agreement: (i) the amount of
capital actually contributed by each Member; (ii) the amount of cash or other
property distributed to each Member; (iii) the effect, if any, of all Company
items of income, gain, loss, deduction or credit on
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each Member's Capital Account; and (iv) the amount of the Members' Loans,
Capital Balances, Additional Capital Balances, Net Cash Flow, Net Refinancing
Proceeds, Net Sale Proceeds and Net Income. The depreciation method shall in
each case be the most accelerated method permissible under the Code for the
asset in question.
6.2. Statements.
A. Within sixty (60) days after the close of each Annual
Period, the Management Committee shall furnish or cause to be furnished to each
Member, with respect to such Annual Period, (1) a profit and loss statement, (2)
a statement of source and application of funds, (3) a Company balance sheet as
of the close of such Annual Period, and (4) such other statements showing in
detail each Member's interest in each of the items described in Section 6.1.
hereof. Unless otherwise agreed by the Management Committee, the foregoing
statements shall be audited by Deloitte & Touche or by another independent,
nationally recognized accounting firm selected by the Management Committee, and
shall be at the expense of the Company.
B. By the fifteenth business day of every month, the
Management Committee shall furnish or cause to be furnished to each Member an
unaudited statement showing the results of operations of the Company for the
preceding calendar month and the financial position at the close of such month,
the balance in each Member's Capital Account, the unpaid balance under the
obligations of the Company, a statement of Net Cash Flow for such month and the
use of operating funds for capital expenditures, and all other information
reasonably requested by a Member. Each such monthly statement shall reflect the
operations of the Company in accordance with accrual basis accounting principles
and practices, and show variances between the actual and budgeted amount on both
a monthly and a year-to-date basis for the current and previous calendar years.
A brief commentary on the results for the period will also be prepared and
included.
6.3. Inspection. All books of account and all other records to
the Company (including an executed counterpart of this Agreement and all
amendments hereto) shall at all times be kept for a period of seven (7) years at
the Company's place of business and may be inspected, audited, examined or
copied at any reasonable time by any Member.
6.4. Tax Matters.
A. The Management Committee shall cause, at Company expense,
to be prepared and filed all income tax returns for the Company on an accrual
basis and shall furnish copies thereof to all Members.
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B. In connection with the assignment of a Member's interest in
the Company permitted by Article VII hereof, the Management Committee shall at
the request of any Member, on behalf of the Company and at the time and in the
manner provided by Section 754 of the Code (or any successor section thereto)
and the Regulations thereunder, make an election to adjust the basis of Company
property in the manner provided in Sections 734(b) and 743(b) of the Code (or
any successor sections thereto) (a "Section 754 Election").
C. The Management Committee shall, on behalf of the Company,
elect to group all rental real estate as one rental real estate activity for
purposes of Sections 1.469-4(d)(5) and 1.469-9(h) of the Treasury Regulations
and shall, to the extent permitted by Section 1.469-4(d)(1) of the Treasury
Regulations group such rental real estate activity with all other trade or
business activities conducted by the Company.
D. For purposes of Section 1.752-3(a)(3) and all related and
ancillary provisions of the Treasury Regulations, "excess nonrecourse
liabilities" shall be allocated among the Members in accordance with their
respective Participation Percentages at the time any such determination is made,
and the Management Committee shall make all allocations and distributions under
this Agreement in a manner consistent with such allocations.
E. EPL shall be the "Tax Matters Partner" for Code purposes
and shall notify the Members of any audit or other matter which it is notified
of, or becomes aware of, provided, however, that the Tax Matters Partner, unless
approved by the Management Committee, shall not have the right (1) to extend the
statute of limitations or any period of limitations with respect to the Company
in any matter; (2) to agree to any settlement of any tax matter affecting the
Company; (3) to file any petition for judicial review, or any other judicial
proceeding with respect to the Company in any matter; or (4) to file any
requests for administrative review or adjustment, or other administrative
relief, on behalf of the Company, in any matter. The provisions of this Section
6.5.E. shall survive the termination of the Company or the termination of any
Member's interest in the Company and shall remain binding on the Members for the
period of time necessary to resolve any and all income tax controversies
relating to the Company.
F. If the Code or any provision of state or local law requires
the Company to withhold any tax with respect to a distributive share of Company
income, gain, loss, deduction or credit, or a distribution of cash or property,
the Company shall withhold and pay the tax. If at any time the amount required
to be withheld exceeds the amount that would otherwise be distributed to the
Member to whom the withholding requirement applies, that Member shall make a
contribution to the Company equal to the excess of the
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amount required to be withheld over the amount, if any, that would otherwise be
distributed to that Member and which is available to be withheld. Any amount
withheld with respect to a Member shall be deducted from the amount that would
otherwise be distributed to that Member but shall be treated as though it had
been distributed to that Member.
ARTICLE VII
TRANSFER OF COMPANY INTERESTS; WITHDRAWAL OF MEMBERS;
BUY/SELL PROVISIONS.
7.1. Transfer of Participation Percentage.
A. No Participation Percentage or other interest of a Member
in the Company may be transferred or assigned (including any collateral
assignment or pledge of any interest in the Company), in whole or in part, by
such Member, and no transferee or assignee thereof may be admitted as a
substituted Member of the Company, unless and until, in each instance:
(1) A duly executed and acknowledged instrument of
assignment, setting forth the intention of the assignor that the assignee become
a substituted Member in its place, is delivered to the remaining Member(s);
(2) The assignor and assignee execute and
acknowledge such other instruments (if any) as the remaining Member(s)
reasonably may deem necessary or desirable to effect such admission, which may
include the written acceptance and adoption by the assignee of the provisions of
this Agreement and the assumption of any unperformed obligation of the assignor
(provided that such assignor shall not thereby be released from any of its
unperformed obligations that arose on or prior to the date of the assignment,
specifically including, without limitation, its obligations hereunder to make
Capital Contributions required prior to the date of the Assignment on the terms
herein provided);
(3) The written consent of the Majority Member(s)
of the Company (which may include the assigning or transferring Member), which
consent may be given or withheld as the Member(s) may determine in their sole
discretion, shall have been obtained;
(4) Such interest shall first be offered to the
remaining Member(s), pro rata in accordance with their Participation Percentages
(provided that by agreement among such remaining Members, such offer may be
accepted in varying proportions), for a period of thirty (30) days at a price
(the "Offer Purchase Price") equal to that intended to be offered by the selling
Member to third parties. If the remaining Member(s) elects to exercise the right
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of first offer granted hereby, it or they, as the case may be, must make an
offer on the entire interest intended to be offered by the selling Member. If
the selling Member has not received a written offer from the remaining Member(s)
on terms satisfactory to it within such thirty (30) day period, it shall then be
free, subject to the provisions of this Article VII, to market for sale the
interest offered to the remaining Member(s) on the terms of the offer. If the
selling Member fails to so dispose of its interest within one hundred eighty
(180) days from its right to do so, the first offer procedure established by
this Section 7.1.A.(4) shall be reinstated. The Offer Purchase Price payable
hereunder, in the event one or more Members elects to exercise the right of
first offer granted hereby, shall be payable in the manner and on the terms of
the third party offer; provided, however, that in the event that the Member
exercising the right of first offer is EPL, notwithstanding the terms or
agreements proposed by and between the other Member and a third party, the Offer
Purchase Price to be paid by EPL may, at the option of EPL, be paid in whole or
in part by the delivery by EPL to the selling Member of EPL Shares. Each EPL
Share shall, for purposes of determining the value thereof for payment upon
exercise by EPL of any right of first refusal, be valued at the Closing Price on
the date of delivery thereof in payment of the Offer Purchase Price, in whole or
in part.
B. Notwithstanding anything to the contrary contained in this
Article VII, EPL may from time to time transfer its interest in the Company, or
any part thereof, to an Affiliate or from such Affiliate back to EPL without the
consent of any other Member that might otherwise be required; provided, however,
that no such transferee shall be admitted as substitute Member in the Company
unless and until EPL complies with the notice and documentation requirements of
subsections 7.1.(A)(1) and (2) above, and the consent required under Subsection
7.1.(A)(3) above is obtained. Notwithstanding any such transfer, EPL shall
remain obligated for all of its obligations hereunder arising both before and
after such transfer, and shall, as a condition of the transfer, expressly
confirm its obligations to the remaining Members at the time of the transfer.
Following any such transfer by EPL of its interest in the Company as provided in
this Section 7.1(B), the rights of EPL under this Article VII to deliver EPL
Shares in payment upon certain events shall remain in effect, but only EPL
Shares, and not the shares of the transferee, shall be so deliverable, without
the consent of the recipient thereof.
C. Notwithstanding anything to the contrary contained in this
Article VII, AIT may from time to time transfer its interest in the Company, or
any part thereof, to any entity which is owned or controlled by [_____________]
or from such entity back to AIT without the consent of any other Member that
might otherwise be required; provided, however, that no such transferee shall be
admitted as substitute Member in the Company
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unless and until AIT complies with the notice and documentation requirements of
Subsections 7.1.(A)(1) and (2) above, and the consent required under Subsection
7.1.(A)(3) above is obtained. Notwithstanding any such transfer, AIT shall
remain obligated for all of its obligations hereunder arising both before and
after such transfer, and shall, as a condition of the transfer, expressly
confirm its obligations to the remaining Members at the time of the transfer.
7.2. Expenses. Expenses of the Company or of any Member
occasioned by transfers of interests held by Members shall be reimbursed to the
Company or Member, as the case may be, by the transferring Member. Expenses of
the transferring Member and taxes incurred by any non-transferring Member are
not included within the foregoing reimbursement.
7.3. Withdrawal of Members. No Member may voluntarily withdraw
or retire from the Company except upon the assignment of its entire interest in
the Company (if and as permitted by this Article VII) or upon the surrender,
abandonment or other voiding of its interest pursuant to the next succeeding
sentence hereof. Any Member may at any time, by at least thirty (30) days prior
written notice delivered to all Members, renounce its interest in all current
and future profits, losses and distributions of the Company, and abandon to the
Company its capital contributions; provided, however, that any such surrender,
abandonment or other voiding shall not in any case affect the withdrawing
Member's obligations hereunder, including specifically, but without limitation,
each Member's respective obligations under Article III hereof to continue to
make Additional Capital Contributions or Members' Loans as and to the extent
called for or otherwise required thereunder.
7.4. Death, Legal Incapacity, Dissolution or Bankruptcy of a
Member. Upon the death, legal incapacity, dissolution or bankruptcy of a Member,
subject to the terms, conditions and rights provided for under Section 7.6
hereof, its successor or assign will have all the rights of the Member for the
purpose of settling or managing its estate, and such power as the deceased,
incapacitated, dissolved or bankrupt Member possessed to constitute a successor
as an assignee of its interest in the Company and to join with such assignee in
making application to substitute such assignee as a substituted member.
7.5. Status of Interests Transferred. In any transfer,
assignment or conveyance (or retransfer, reassignment or reconveyance) of any
Participation Percentage herein by a Member to any other Member or other Person,
permitted by the express terms of this Agreement or by operation of law, the
transferee or assignee shall succeed to the same share of profits and losses of
the Company and the same Participation Percentages, distribution priorities and
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ownership rights as were incident to the interest so transferred, assigned or
conveyed.
7.6. Purchase Option.
A. For purposes of this Section 7.6., the term "Triggering
Event" shall mean, as respects any Member, the occurrence of any one or more of
the following:
(1) the voluntary filing of a notice or petition
with, or the voluntary commencement of an action or proceeding in, the
applicable court or other governmental authority to liquidate or dissolve that
Member, or the institution against that Member of an action to liquidate or
dissolve which is not dismissed within sixty (60) days;
(2) the bankruptcy of that Member within the
meaning thereof set forth in Section 8.1(b) hereof; and
(3) any Covered Transaction.
B. Upon the occurrence of a Triggering Event as respects any
Member, each other Member of the Company shall thereupon have the right and
option to purchase all or a portion of, as herein provided, the Participation
Percentage then held in the Company by the Member as respects whom the
Triggering Event occurred. Such right and option shall be exercisable at any
time by delivery of written notice of election (the "Notice of Election") to the
Member with respect to whom the Triggering Event occurred at any time prior to
the expiration of sixty (60) days after the date of the occurrence of the
Triggering Event, provided, however, that in the event that the occurrence of
the Triggering Event is concealed or not otherwise readily apparent, such period
shall be extended for a time co-extensive with the time of concealment or until
a date sixty (60) days after the time upon which the occurrence of the
Triggering Event became readily apparent.
C. As among the Members who exercise their right and option to
purchase all or any portion of the Participation Percentages, each Member shall
be entitled to purchase a pro rata portion thereof, based upon that Member's
Participation Percentage as a percentage of all Participation Percentages owned
by the remaining Members who exercise their respective rights and options to
purchase under this Section 7.6. (or in such other proportion as the remaining
Members may agree). The purchase and sale of the Participation Percentages as
contemplated by this Section 7.6. shall be consummated at a closing (the
"Closing") which will occur at the date, time and place designated in the Notice
of Election, which shall in any event be a day which is a business day not less
than thirty (30) nor more than forty (40) days after delivery of the Notice of
Election.
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D. If under the provisions of this Section 7.6., any Member
desires to exercise its right and option to purchase the Participation
Percentage of any other Member with respect to whom a Triggering Event has
occurred, the purchase price payable shall be determined as follows:
[ ]
The purchase price, as so adjusted, shall be determined ten (10) business days
prior to closing and shall be subject to such post-closing adjustments as the
circumstances may require. The purchase price, as so adjusted, shall be paid at
the selling Member's option in cash, by certified check to the order of the
selling Member, or by wire transfer of immediately available funds to the
selling Member's account at the time of Closing; provided, however, that in the
event that the purchasing Member is EPL, the purchase price may be paid by EPL
through the delivery by EPL of cash or EPL Shares, or any combination thereof,
and any EPL Shares delivered in payment of the purchase price, or any portion
thereof, shall be valued at the Closing Price on the date of delivery. In the
event that there shall be at the time of the purchase one or more outstanding
Member's Loans by the selling Member to the Company, such Member's Loans,
including interest thereon accrued and unpaid, shall be purchased at par by the
purchasing Member for the principal amount thereof and accrued and unpaid
interest thereon as a condition precedent to such sale. The purchase price for
such Member's Loans shall be paid, at the selling Member's option, in cash, by
certified check drawn to the order of the selling Member, or by wire transfer of
immediately available funds to the selling Member's account; provided, however,
that in the event that the purchasing Member is EPL, the purchase price for the
Member's Loan may be paid by EPL through the delivery by EPL of cash or EPL
Shares, or any combination thereof, and any EPL Shares delivered in payment of
the purchase price for, or any portion thereof, shall be valued at the Closing
Price thereof on the date of delivery. At the Closing, the selling Member shall
deliver to the purchasing Member each note and bond evidencing such Member's
Loans and all documents securing the same and an assignment or satisfaction, at
the purchasing Member's option, in form acceptable to the purchasing Member.
E. On payment of the purchase price for the Participation
Percentage, the purchasing Member shall, at its option, either (i) obtain a
release of the selling Member from all liability, direct or contingent, by all
holders of Company debt, obligations or claims against the Company for which
such Member is or may be personally liable, except for any debts, obligations or
claims which are fully insured by the public liability insurers, or (ii) cause
all such debts, obligations or claims to be paid in full at Closing, or (iii)
deliver to the selling Member an agreement in
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form and substance satisfactory to the selling Member to defend, indemnify and
save the selling Member harmless from actions, claims or loss arising from any
debt, obligation or claim of the Company arising prior to the date of sale.
7.7. Take-Along. Notwithstanding anything to the contrary
contained in this Article VII, if the Majority Members (for purposes of this
Section, the "Transferor Member(s)") decide to sell all or any portion of their
Participation Percentages in a single transaction, or in a series of related
transactions, to a third party (including an affiliated group of persons or
entities), the Transferor Member(s) shall have the right to require each other
Member (the "Other Member(s)") to sell all or any portion of the Participation
Percentage held by such Other Member(s) on the same terms and conditions as
those on which the Transferor Member(s) are selling their Participation
Percentages to such third party, including but not limited to, the purchase
price and payment terms provided that the amount to be paid (whether directly by
the third party or inclusive of supplemental amounts paid or contributed to the
Other Member by the Transferor Member) equals or exceeds the amount which the
Other Member would receive on the basis of a valuation of the Company made in
accordance with Exhibit D hereto. At least ten (10) days prior to the proposed
transfer, the Transferor Member(s) shall give notice to each Other Member of the
intention to transfer and the intention of the Transferor Member to exercise its
rights under this Section 7.7 to require that the Other Member transfer its
Participation Percentages, together with a statement as to the portion of the
Participation Percentage of such Other Member to be transferred, and the
principal terms of the transfer, including the price and payment terms. Each
Transferor Member agrees to endeavor to discuss with the Other Members in
reasonable detail the proposed transaction, including but not limited to the
commercial reasonableness of the terms and conditions thereof, prior to
consummation thereof, but shall under no circumstances be required to delay the
consummation of the transaction in order to pursue such discussion. Each Member
hereby covenants and agrees that, upon receipt of the aforesaid notice, it will
take such actions and execute such documents and instruments as shall be
necessary or appropriate to consummate any transfer contemplated by this Section
7.7, and does hereby appoint each Transferor Member as his or its true and
lawful attorney in fact to execute and deliver on its behalf such documents and
instruments should it fail to do so in a timely or appropriate manner.
7.8. Terms Generally Applicable.
A. In connection with and pending any transfer contemplated by
Sections 7.6 or 7.7 hereof, each Member shall be entitled to any distributions
of Net Cash Flow from the Company until full and final consummation of the
transfer.
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B. At the closing on the sale of the Participation Percentage
of a Member as contemplated by Sections 7.6 or 7.7 hereof, unless otherwise
agreed, each selling Member shall execute an assignment of its interest in the
Company, free and clear of all liens, encumbrances and adverse claims, which
assignment shall be in form and substance reasonably satisfactory to the
Purchasing Member or third party purchaser, and such other instruments as the
Purchasing Member or third party purchaser shall reasonably require to assign
the Participation Percentage of the selling Member to such person or entity. For
any sale or transfer under Section 7.6 hereof, the purchasing Member may
designate the assignee of the Participation Percentage, which assignee may be,
but need not be, an affiliate of the purchasing Member.
C. It is the intent of the parties to this Agreement that the
requirements or obligations arising hereunder of one Member to sell its
Participation Percentage to or as directed by the other Member(s) shall be
enforceable by an action for a specific performance and shall be enforceable by
an action for specific performance of a contract, and each of the Members does
hereby acknowledge their respective Participation Percentages to be unique and
an appropriate subject of an action for specific performance. In the event that
any Member shall create or has suffered any unauthorized lien, encumbrance or
other adverse interest against the selling Member's interest in the Company, the
purchasing Member or the Member exercising its rights under Section 7.7 hereof
shall be entitled either to an action for specific performance to compel the
Member to have such defects removed, in which case the closing may be adjourned
for such purpose, or, at the enforcing Member's option, to an appropriate offset
against the purchase price, which offset shall include all reasonable costs
associated with enforcement under this Section 7.8(C).
D. At the election of Member purchasing the Participation
Percentage or exercising its rights under Section 7.7 hereof, the purchase and
sale of the Participation Percentage will be structured to avoid, if possible, a
termination of the Company for federal tax purposes and/or under the Act.
ARTICLE VIII
DISSOLUTION AND TERMINATION
8.1. Dissolution.
A. The Company will be dissolved:
(1) upon the withdrawal, removal, bankruptcy or
dissolution of a Member, unless the remaining Members unanimously agree to
continue the business of the Company (if more than one
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Member remains) within ninety (90) days after the occurrence of such event; or
(2) at 12:00 midnight on May 30, 2036;
provided, however, that the Company shall not terminate until its affairs have
been wound up and its assets distributed as provided herein.
B. As used in Sections 8.1.A. and 8.1.B. hereof, the term
"bankruptcy" shall mean (i) the commencement by a Member of a voluntary case
under any Chapter of the Bankruptcy Code (Title 11 of the United States Code),
as now or hereafter in effect, or the taking by a Member of any equivalent or
similar action by the filing of a petition or otherwise under any other federal
or state law in effect at the time relating to bankruptcy or insolvency, (ii)
the filing of a petition against a Member under any Chapter of the Bankruptcy
Code (Title 11 of the United States Code), as now or hereafter in effect, or the
filing of a petition seeking any equivalent or similar relief against a Member
under any other federal or state law in effect at the time relating to
bankruptcy or insolvency, and in either case the failure by such Member to
secure the discharge of any such petition within sixty (60) consecutive days
from the date of filing, (iii) the making by a Member of a general assignment
for the benefit of his, its or any of their creditors, (iv) the appointment of a
receiver, trustee, custodian or similar officer for a Member or for the property
of a Member and the failure by such Member to secure the discharge of such
receiver, trustee, custodian or similar officer within sixty (60) consecutive
days from the date of appointment, or (v) the admission in writing by a Member
of any inability to pay debts generally as they become due.
8.2. Appointment of Liquidating Member. Upon the dissolution
of the Company, if the Company's business is not continued pursuant to Section
8.1. hereof, subject in any event to the rights of any Member under Section 7.6.
hereof, the Management Committee or its designee shall liquidate the assets and
wind up the affairs of the Company on the terms hereinafter set forth.
8.3. Distributions and Other Matters. Promptly upon the
dissolution of the Company, if the Company's business is not continued pursuant
to Section 8.1. hereof, and in any event subject to the rights of any Member
under Section 7.6. hereof, the Management Committee will cause the assets of the
Company to be liquidated. After proper adjustment to the Capital Accounts
pursuant to Section 3.1. (giving effect to all contributions, distributions, and
allocations for all taxable years, including the taxable year during which such
liquidation occurs), the proceeds of the liquidation of the Company shall be
applied and distributed in the following order: (i) to the discharge of all of
the Company's
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debts and liabilities (whether by payment or the making of reasonable provision
for payment thereof), other than those to any of the Members, including expenses
of liquidation, (ii) to the setting up of any reserves which the liquidator may
deem reasonably necessary for any contingent liabilities or obligations of the
Company, (iii) to the payment and discharge of any debts and liabilities of the
Company to any of the Members, and (iv) to the Members to the extent of their
positive Capital Accounts.
8.4. Distributions of Property.
A. Upon liquidation, the Members may demand or receive
property other than cash in return for their respective contributions, loans or
advances or upon dissolution as provided herein, but only upon the written
approval of the Management Committee.
B. In the event that property is distributed (or deemed
distributed pursuant to the provisions of Code Section 708) by the Company to a
Member, the following special rules shall apply:
(1) the Capital Accounts of the Members shall be
adjusted as provided in Treasury Regulations Section 1.704-1(b)(2)(iv)(e) to
reflect the manner in which the unrealized income, gain, loss and deduction
inherent in such property (that has not already been reflected in the Members'
Capital Accounts) would be allocated to such Member if there were a taxable
disposition of such property for its fair market value on the date of
distribution; and
(2) the Capital Account of the Member who is
receiving the distribution of property from the Company shall be charged with
the fair market value of the property at the time of distribution (net of
liabilities secured by such distributed property that such Member is considered
to assume or take subject to under Code section 752).
8.5. Action During Liquidation; Statements of Account.
A. A reasonable time shall be allowed for the winding up of
the affairs of the Company in order to minimize any losses otherwise attendant
upon such a winding up. The Management Committee shall make final distributions
in liquidation of the Company in the manner set forth above before the later of
(1) the end of the taxable year in which the date of the liquidation of the
Company occurs, or (ii) 90 days after the date of the liquidation of the
Company. For this purpose, the date of the liquidation of the company shall be
the date on which the Company has ceased to be a going concern (within the
meaning of Treasury Regulation Section 1.704-1(b)(2)(ii)(g)).
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B. During the period of liquidation, the Management Committee,
as trustee for the benefit of all Members as tenants in common, will take any
and all action necessary or appropriate to complete such liquidation and
distribution as provided in this Article, having for such purpose all of the
powers enumerated in Article IV of this Agreement necessary or appropriate to
accomplish the same.
C. The Management Committee will prepare or cause to be
prepared a final statement of the accounts of the Company as of the date of
termination, and, as promptly as possible thereafter, a copy thereof will be
furnished to each Member. Such statement will set forth the actual or
contemplated application and distribution of the assets of the Company. Upon
completion of distribution as required hereby, a further statement for the
period of liquidation will be so prepared by the Management Committee and
furnished to each Member.
ARTICLE IX
REPRESENTATIONS, WARRANTIES AND COVENANTS
9.1. Representations and Warranties.
A. AIT represents and warrants to EPL and any and all other
Members as follows:
(1) AIT is a corporation, duly organized, validity
existing and in good standing under the laws of the State of California.
(2) The sole shareholders of AIT, and their
respective percentage interests in AIT, are: [______] and no other person or
entity holds any beneficial interest of any kind or nature whatsoever in AIT, or
any option, warrant or right with respect to, or convertible into, any equity
security or equity interest therein.
(3) This Agreement has been duly and validly
executed and delivered by AIT and constitutes its legal, valid and binding
obligation, enforceable in accordance with the terms hereof, and no
authorization, consent, approval, license, exemption or other action by, and no
registration, qualification, designation, declaration or filing with, any
governmental body or agency is or will be necessary or advisable in connection
with the execution and delivery by AIT of this Agreement.
(4) Neither the execution and delivery of this
Agreement, nor the consummation of the transactions herein contemplated, nor the
performance of or compliance with the terms
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and conditions hereof, will conflict with or result in a breach of or default
under any agreement or instrument to which AIT, is a party or by which it or its
properties (now owned or hereafter acquired) may be subject or bound.
(5) There is no pending or (to their knowledge
after due inquiry) threatened proceeding by or before any court or governmental
agency against or affecting either AIT which, if adversely decided, would have
an adverse affect on the business, operations or conditions, financial or
otherwise, of AIT, or on the ability of AIT to perform its obligations hereunder
or otherwise contemplated hereby, and no proceeding is pending or threatened
against AIT under any Federal or State bankruptcy or insolvency law.
(6) AIT and each stockholder thereof has a net
worth sufficient to bear the economic risks of transactions contemplated hereby,
has sufficient knowledge and experience in financial matters to be capable of
evaluating the merits and risks of its participation in the transactions
contemplated hereby.
(7) The representations and warranties of AIT set
forth in the Contribution Agreement are incorporated fully herein by this
reference as though restated herein in full, and the same are hereby ratified
and confirmed.
(8) AIT has filed all federal, state, local and
foreign income, franchise, real and personal property, and other tax returns,
estimates and statements which were required to be filed, has paid all taxes
(whether income, sales, use, property, unemployment, social security, import
duties, export duties and/or other) as shown on said returns, estimates and
statements, and has made appropriate provision for the payment of all such taxes
where returns, estimates and statements are not yet required to be filed. All
said tax returns and statements correctly set forth and report the entire
liability of AIT for such taxes.
(9) AIT has no knowledge of any intention of any
of its key employees to sever employment arrangements with AIT, and has no
knowledge of any plan or intention of any of its principal customers to cancel
presently existing contracts or other material business arrangements or
relationship with AIT, or to take any other action which would adversely affect
the business, operation or anticipated earnings of AIT.
(10) There are no controversies pending or
threatened between AIT and any of its employees and AIT has not taken or failed
to take any action which would provide a reasonable basis for any such
controversy. AIT has complied with all laws relating to the employment of labor,
including any provisions thereof relating to wages, hours, collective bargaining
and the payment of social security and similar taxes, and AIT is not liable
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for any arrears of wages or any taxes or penalties for failure to comply with
any of the foregoing. AIT has no knowledge of any organizational efforts
presently being made or threatened by or on behalf of any labor union in respect
of AIT or its employees.
(11) The assets to be contributed by AIT pursuant
to the Contribution Agreement include and constitute all of the assets,
properties, licenses and other agreements which are presently being used or are
related to the operation by AIT of its existing business relating to the
processing of fresh corn, other than the agreements of lease by and between AIT
and its landlord for the premises in Somis, California occupied by AIT. AIT
further represents and warrants that attached hereto as Exhibit E, collectively,
is a complete description of its leasehold premises (the "Leasehold Premises")
in Somis, California, together with copies of all leases with respect thereto
(the "Leases"); that AIT is the named tenant under each of the Leases by
assignment from the prior tenants named therein, which assignment has been
expressly consented to and accepted by the landlord named therein; that AIT has
received affirmative assurances from each landlord named in the Leases that AIT
will be permitted to remain fully possessed of the Leasehold Premises for at
least two (2) years from the date hereof, as a tenant holding over in accordance
with the terms of the Leases; and that AIT has received no notice to vacate or
quit the Leasehold Premises or any portion thereof and has no knowledge of any
intention of any landlord under any of the Leases to deliver any such notice;
and that no demand has been made upon AIT to demolish or destroy any of the
structures located on the Leasehold Premises and AIT has no knowledge of any
intention on the part of any person or entity entitled to require the demolition
thereof, to enforce any rights in that regard.
(12) AIT has and expects to continue to have the
authority and resources (including without limitation the necessary capital) to
fully consummate in a timely fashion the transactions contemplated by this
Agreement and the other documents, instruments and agreements to be executed by
and between AIT and the Company concurrent with the execution and delivery of
this Agreement (including, without limitation, that certain Fresh Cut Corn
Processing Agreement, by and between the Company and AIT).
(13) None of the information and documents
furnished by AIT or its representatives to the Company or any other Member of
the Company in connection with the execution and delivery of this Agreement is
false or misleading in any material respect or contains any material
misstatement of fact or omits to state a material fact required to be stated to
make the statements therein not misleading. AIT has disclosed to the Company and
each of the other Members of the Company all information known to AIT which is
material and relevant to the execution and delivery of this Agreement and the
formation of the Company as contemplated hereby.
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B. EPL represents and warrants to AIT and any and all other
Members as follows:
(1) EPL is a corporation duly organized, validity
existing and in good standing under the laws of the State of Colorado.
(2) This Agreement has been duly and validly
executed and delivered by EPL and constitutes the legal, valid and binding
obligation of EPL, enforceable in accordance with the terms hereof, and no
authorization, consent, approval, license, exemption or other action by, and no
registration, qualification, designation, declaration or filing with, any
governmental body or agency is or will be necessary or advisable in connection
with the execution and delivery by EPL of this Agreement.
(3) Neither the execution and delivery of this
Agreement, nor the consummation of the transactions herein contemplated, nor the
performance of or compliance with the terms and conditions hereof, will conflict
with or result in a breach of or default under any agreement or instrument to
which EPL is a party or by which its properties (now owned or hereafter
acquired) may be subject or bound.
(4) There is no pending or (to its knowledge after
due inquiry) threatened proceeding by or before any court or governmental agency
against or affecting EPL which, if adversely decided, would have a material
adverse affect on the business, operations or conditions, financial or
otherwise, of EPL, or on the ability of EPL to perform its obligations
hereunder.
(5) EPL has a net worth sufficient to bear the
economic risks of the transactions contemplated hereby, has sufficient knowledge
and experience in financial matters to be capable of evaluating the merits and
risks of participation in the transactions contemplated hereby.
ARTICLE X
NOTICES AND COMMUNICATIONS
10.1. Notices. All notices, demands, requests, calls and other communications
required by or permitted under this Agreement shall be in writing (whether or
not a writing is expressly required hereby) and shall be directed as follows:
A. If to EPL: EPL Technologies, Inc.
200 Four Falls Corporate Center
Suite 315
West Conshohocken, PA 19428
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ATTN: President
Telephone No.: 610-834-9600
Facsimile No.: 610-834-7584
With a copy to: Raymond D. Agran, Esquire
Ballard Spahr Andrews & Ingersoll
1735 Market Street, 51st Floor
Philadelphia, Pennsylvania 19103-7599
Telephone No.: 215-665-8500
Facsimile No.: 215-864-8999
B. If to AIT: Agricultural Innovation & Trade, Inc.
3241 Somis Road
Somis, California 93066
Telephone No.: 805-386-5059
Facsimile No.: 805-386-4389
10.2. Change of Address. Any Member may specify a different
address by sending to the Company and to each other Member a notice by
registered or certified mail of such different address. If the address of the
Company is changed, a written notice of such change of address shall be sent by
registered or certified mail to each other Member.
10.3. Time of Communications. Any notice, demand, request,
call or other communication required or permitted to be given or made to a
Member, any Manager or to the Company under this Agreement will be deemed given
or made on the earlier of: (1) when delivered to or received by such Member,
Manager or the Company, as the case may be, at its address, by hand delivery, by
overnight delivery service or by facsimile transmission (provided, if by
facsimile transmission, such transmission has been followed by an additional
delivery sent by registered or certified mail to such Member, Manager or the
Company on the same day as the facsimile transmission), or (2) when mailed to
such Member, Manager or to the Company, as the case may be, at its address by
registered or certified mail, postage prepaid, return receipt requested.
ARTICLE XI
MISCELLANEOUS
11.1. Default. If a Member materially defaults in the
performance of its obligations under this Agreement, and if such default is not
cured within ten (10) days after notice of default is given by any Manager,
Executive Officer or other Member to the defaulting Member for a default that
can be cured by the payment of money, or within thirty (30) days after notice of
such default is given to the defaulting Member for any other default, then the
non-defaulting Member shall be entitled to pursue any and all rights and
39
<PAGE> 46
remedies available to them in respect of that default provided, however, that
any such claim, demand or exercise of rights or remedies (other than a claim for
specific performance which may be brought in a court of competent jurisdiction)
shall be pursued in an arbitration proceeding pursuant to Section 11.3. hereof.
11.2. Confidentiality. Any proprietary or confidential
technical or business information or know how of the Company, or of any Member,
which is disclosed to the Company, to any other Member, or to any Manager or
Executive Officer in connection with the business and operations of the Company,
whether directly or indirectly or pursuant to a contractual arrangement by and
between any Member and the Company, including customer lists, contractor lists,
marketing methods and plans, data and know-how (including proprietary and
confidential information, data and know-how relating to the development,
manufacturing and marketing of food processing technology that facilitates the
maintenance of integrity of fresh cut corn and corn products, owned by EPL)
shall be treated by the Company and by each other Member as the proprietary and
confidential information of the disclosing Member or, if the Company is the
disclosing party, the proprietary and confidential information of the Company,
and will not be disclosed, communicated, divulged, or used, by the Company or
the recipient thereof for any purpose or purposes other than in furtherance of
the business and affairs of the Company and, in any event, any confidentiality
agreement entered into by the Company shall be similarly binding and enforceable
as against each Member and their respective officers, agents and employees;
provided, however that any such proprietary information may be disclosed to any
officer, employee or agent of any Member if and so long as each such individual
recipient is bound to the Member by confidentiality obligations no less
restrictive than the terms hereof. Each Member does hereby covenant and agree to
be fully responsible for the maintenance by its employees, representatives and
agents (including the Managers and Executive Officers appointed by it or on its
behalf hereunder) of confidentiality as required of each Member hereunder.
Notwithstanding the foregoing, no obligation of confidentiality shall relate to
any information which is received from a third party who has the right to
disclose such information, which is or becomes published or otherwise publicly
available without the fault of any Person or Entity bound hereby, or in respect
of any Person or Entity who or which is already in the possession thereof as of
the date hereof. In addition, any Member may disclose any such confidential
information to any governmental or other regulatory authorities to the extent
that such a disclosure is required by applicable law, regulation or court order;
provided that the disclosing party shall provide written notice to the other
parties and sufficient opportunity to object to such disclosure or to request
confidential treatment thereof. The obligations of confidentiality hereunder
shall be in addition to and shall not preclude, diminish or affect any separate
agreement or obligations of confidentiality now or hereafter arising between or
among any
40
<PAGE> 47
Member(s) and the Company, and their respective agents and employees.
11.3. Arbitration. Except as otherwise provided under Section
11.6 hereof in respect of any creditor Member, any claim, controversy or dispute
arising out of or relating to this Agreement or any interpretation or breach
thereof or performance thereunder, including without limitation any dispute
concerning the scope of this arbitration provision, shall be settled by
submission to final, binding and non-appealable arbitration ("Arbitration") for
determination, without any right by any party to a trial de novo in a court of
competent jurisdiction, after a twenty-five (25) calendar day waiting period
(the "Waiting Period"). During the Waiting Period, the parties shall work
reasonably and in good faith and shall use their best efforts to amicably
resolve the claim, controversy or dispute. The Arbitration and all pre-hearing,
hearing, post-hearing arbitration procedures, including those for Disclosure and
Challenge, shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association in Wilmington, Delaware. The party
which does not prevail in the Arbitration shall be responsible for all fees and
expenses incurred in connection with the Arbitration, including, without
limitation, reasonable attorney's fees. Notwithstanding the foregoing, the
parties specifically reserve the right to seek a temporary judicial restraining
order, preliminary injunction, or other similar short term equitable relief from
a court of law having competent jurisdiction, and grant the arbitration tribunal
the right to make a final determination of the parties' rights, including
whether to make permanent or dissolve such court order. No party shall bring a
civil action seeking enforcement or any other remedy founded on this Agreement.
11.4. Filings. The Members agree that they shall from time to
time sign, acknowledge and file any certificates, instruments and documents, as
well as amendments thereto, required under the laws of the State of Delaware or
any state or other jurisdiction in which the Company is doing or intends to do
business in connection with the use of the name of the Company by the Company,
including, without limitation, filing of amendments to the Articles of
Organization of the Company.
11.5. Inspections. Any Member shall have the full right and
privilege at any time, at its own cost and expense, to inspect all or any part
of Company property.
11.6. Members as Creditors. Any Member who is a bona fide
creditor of the Company as a lender thereto or by reason of any other
debtor/creditor relationship therewith (in each case with the approval of the
Management Committee as and to the extent required hereby; and specifically
including, without limitation, creditor status arising by reason of the making
of any Members' Loan) shall
41
<PAGE> 48
be permitted, in the event of any breach thereof or default thereunder, to take
such action and to exercise and pursue such other rights, powers or remedies
against the Company and/or against any other obligor, which rights, powers or
remedies are available to such Member by law, in equity or by contract; and the
taking of any such action, the exercise and pursuit of any such right, power or
remedy, and the execution or foreclosure on any Company property in connection
therewith, shall each be understood to be for the benefit of the creditor-Member
only and shall not be deemed or understood to cause or permit a reconstitution
of the Company for the benefit of any other Member.
11.7. Independent Ventures. Any Member or any Affiliate of any
Member may engage in, or possess interests in, business ventures of any or every
nature and description, independently or with others, and whether such ventures
are identical in style or purpose with, or directly compete with, the Company or
not; and neither the Company nor any Member will have any rights by virtue of
this Agreement or the existence of this Company in or to such ventures or to the
income or profits derived therefrom or the right to restrict any Member from
initiating or pursuing to the fullest extent any such ventures; provided,
however, that the foregoing shall not relieve AIT of the obligations of AIT not
to compete with the Company contained in that certain Fresh-Cut Corn Processing
Agreement, dated on or about hereof, by and between AIT and the Company, nor
shall it limit the completion of the contribution by AIT of its existing corn
business to the Company pursuant to the Contribution Agreement.
11.8. Partial Invalidity. The invalidity or unenforceability
of a portion of this Agreement will not affect the validity or enforceability of
the remainder hereof.
11.9. Governing Law; Parties in Interest. This Agreement will
be governed by and construed according to the laws of the State of Delaware, and
will bind and inure to the benefit of the Members and each of their respective
successors and assigns.
11.10. Amendment. This Agreement may be amended only by the
unanimous written consent of all Members.
11.11. Execution in Counterparts. This Agreement may be
executed in counterparts, all of which taken together shall be deemed one
original.
11.12. Computation of Time. In computing any period of time
pursuant to this Agreement, the date of the act, notice, event or default from
which the designated period of time begins to run will not be included. The last
day of the period so computed will be included, unless it is a Saturday, Sunday
or a legal holiday in the State of Maryland, in which event the period runs
until the end
42
<PAGE> 49
of the next day which is not a Saturday, Sunday or such legal holiday.
11.13. Table of Contents; Titles and Captions. The Table of
Contents preceding this Agreement and all article, section or subsection titles
or captions contained herein are for convenience only and are not deemed part of
the context hereof.
11.14. Pronouns and Plurals. All pronouns and any variations
thereof are deemed to refer to the masculine, feminine, neuter, singular or
plural as the identity of the Person or Persons may require.
11.15. Exhibits. The Exhibits attached hereto form a part of
this Agreement and each is hereby incorporated herein by reference.
11.16. Entire Agreement. This Agreement and the Exhibits
hereto contain the entire understanding and agreement between the Members, and
supersede any prior understandings and agreements between them respecting the
subject matter hereof.
IN WITNESS WHEREOF, the Members have executed this Agreement,
under seal, effective as of the date first above written.
Witness/Attest: EPL TECHNOLOGIES, INC., a Colorado
corporation
/s/ Minos Athanassiadis By:/s/ Paul L. Devine (SEAL)
- ----------------------- ------------------------
Name: Name: Paul L. Devine
Title: Title: President
Agricultural Innovation & Trade,
Inc., a California corporation
/s/ Jim Roberts By:/s/ Craig Underwood (SEAL)
- ----------------------- ------------------------
Name: Craig Underwood
Title: Treasurer/Secretary
43
<PAGE> 50
EXHIBIT A - 1
SCR LLC - WORK PLAN TO DECEMBER 1996
<TABLE>
<CAPTION>
ACTIVITY START DATE RESPONSIBILITY
- -------- ---------- --------------
<S> <C> <C>
[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
[ ]
</TABLE>
<PAGE> 51
EXHIBIT A-2
[
]
<PAGE> 52
EXHIBIT B
STATE OF DELAWARE
CERTIFICATE OF FORMATION
OF
NEWCORNCO LLC
FIRST: The name of the limited liability company is NewCornCo LLC (the
"Company").
SECOND: The address of the registered office of the Company in the State of
Delaware is c/o The Corporation Trust Company, Corporation Trust Center, 1209
Orange Street, Wilmington, Delaware 19801. The name of the Company's registered
agent at such address is The Corporation Trust Company.
THIRD: The latest date on which the Company is to dissolve is May 30, 2026.
IN WITNESS WHEREOF, the undersigned has executed this Certificate of
Formation this 18th day of July, 1996.
EPL TECHNOLOGIES, INC.
By: /s/ Paul L. Devine
---------------------------
Name: Paul L. Devine
Title: President
Authorized Person
<PAGE> 53
EXHIBIT C
CONTRIBUTION AND EXCHANGE AGREEMENT
THIS CONTRIBUTION AND EXCHANGE AGREEMENT (this "Agreement") dated as of
______________ ___, 199__ is made by and between AGRICULTURAL INNOVATION &
TRADE, INC., a California corporation ("Contributor"), and NEWCORNCO LLC, a
Delaware limited liability company ("Transferee"). Contributor and Transferee
may be referred to herein individually as a "Party" and collectively as the
"Parties".
RECITALS
A. Contributor and EPL Technologies, Inc., a Colorado corporation
("EPL"), are parties to a certain Operating Agreement of NewCornCo LLC, dated as
of even date herewith (the "Operating Agreement"), pursuant to which the
Contributor and EPL have agreed to form, and become members of, the Transferee.
B. Pursuant to Section 3.2 of the Operating Agreement,
Contributor has agreed to make a certain initial Capital Contribution to the
Transferee in exchange for a [ ] percent [ ] Participation Percentage
in the Transferee (the "AIT Interest").
C. Transferee and Contributor now desire to set forth the terms
and conditions of the contribution transaction.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants and promises
hereinafter set forth, the parties to this Agreement do hereby mutually covenant
and agree as follows:
1. Contribution and Exchange.
1.1 Conveyance. Contributor hereby irrevocably contributes,
conveys, transfers and assigns to Transferee in exchange for the Consideration
(as defined in Section 1.2) all of Contributor's right, title, and interest in
and to the property, tangible and intangible, of Contributor described on
Exhibit A hereto (collectively, the "Contributed Property"). It is expressly
understood and agreed that the contributed Property includes, not only tangible
property and equipment, but also all intangibles and other property, including
books, records, customer lists, goodwill, know-how and the like, relating to
Contributor's heretofore ongoing business of producing, purchasing or otherwise
acquiring, and manufacturing, processing and marketing, fresh (i.e. other than
canned or frozen) corn.
<PAGE> 54
1.2 Evidence of Transfer. The conveyance of the Contributed
Property as set forth herein shall be evidenced by this Agreement and by a Bill
of Sale, the form of which is attached hereto as Exhibit B, to be simultaneously
executed herewith and delivered to Transferee. Contributor's conveyance of the
Contributed Property is absolute and irrevocable, and Contributor hereby
relinquishes all rights with respect to the Contributed Property, and expressly
acknowledges that it has no further right to sell, pledge, or otherwise dispose
of the Contributed Property.
1.3 Consideration. In exchange for Contributor's contribution
of the Contributed Property to Transferee, Transferee hereby issues to
Contributor the AIT Interest (the "Consideration").
1.4 Treatment as Contribution. The conveyance to Transferee
set forth in this Agreement shall constitute a "Capital Contribution" pursuant
to Article III of the Operating Agreement of NewCornCo LLC and is intended to be
governed by Section 721(a) of the Internal Revenue Code of 1986, as amended.
2. Representation and Warranties of Contributor.
Contributor hereby represents and warrants to Transferee as follows:
2.1 Organization, Power, Authority and Qualification.
Contributor is a corporation duly organized, validly existing and in good
standing under the laws of California and has the requisite power and authority
to carry on its business as it is now being conducted and to consummate the
transactions contemplated by this Agreement. Contributor is qualified to do
business and is in good standing in each state in which the Contributed Property
is located, if such qualification is required by applicable law. Contributor has
delivered to Transferee true and correct copies of its organizational documents
and a complete and accurate list of its stockholders and directors.
2.2 Authority Relative to This Agreement. All actions of
Contributor necessary to authorize the execution, delivery and performance of
this Agreement by Contributor have been taken, and no other proceedings are
necessary to authorize the execution and delivery by Contributor of this
Agreement and the consummation by Contributor of the transactions contemplated
hereby.
2.3 Compliance With Other Instruments; No Breach or Default.
Except for the waivers, consents and permissions provided by Contributor to
Transferee (collectively, the "Consents"), neither the execution and delivery of
this Agreement by Contributor nor the consummation by Contributor of the
transactions contemplated hereby, nor compliance by Contributor with any of the
- 2 -
<PAGE> 55
provisions hereof will (i) conflict with or result in any breach of any
provisions of the charter or bylaws of Contributor or applicable corporate law,
(ii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, lease, license, contract,
agreement, easement, restriction or other instrument or obligation to which
Contributor is a party or by which Contributor or the Contributed Property may
be bound or (iii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to Contributor or the Contributed Property.
2.4 Binding Obligation. This Agreement has been duly and
validly executed and delivered by Contributor to Transferee and constitutes a
valid and binding agreement of Contributor, enforceable against Contributor in
accordance with its terms, except that such enforcement may be subject to
bankruptcy, conservatorship, receivership, insolvency, moratorium or similar
laws affecting creditors' rights generally and to general principles of equity.
2.5 Title. Contributor has good and marketable title to the
Contributed Property, and neither the Contributed Property, nor any part,
portion or item thereof, is subject to any imperfections in title, lien,
mortgage, encumbrance, pledge, claim, charge, option, defect, preferential
purchase rights or other encumbrances (collectively referred to herein as
"Liens").
2.6 Insurance. Contributor currently has in place fire,
casualty, hazard and other reasonably required insurance coverage with respect
to the Contributed Property. Each of its insurance policies with respect to the
Contributed Property is in full force and effect and all premiums due and
payable thereunder have been fully paid when due.
2.7 Litigation. There are no claims, actions, suits,
proceedings or investigations pending or, to Contributor's knowledge, threatened
against Contributor, or any properties or rights of Contributor, or against the
Contributed Property, before any court or administrative, governmental or
regulatory authority or body, domestic or foreign. Neither Contributor nor the
Contributed Property is subject to any order, judgment, injunction or decree of
any court, tribunal or other governmental authority (other than generally
applicable laws, rules and regulations).
2.8 Taxes. All tax or information returns required to be
filed on or before the date hereof by or on behalf of Contributor have been
filed through the date hereof in accordance with all applicable laws, and there
is no action, suit or proceeding pending against, or with respect to,
Contributor or the
- 3 -
<PAGE> 56
Contributed Property in respect of any tax, nor is any claim for additional tax
asserted by any such authority; and all taxes required to be paid by Contributor
as of the date hereof have been paid.
2.9 Condition of Contributed Property. There is no material
defect in the physical condition of the Contributed Property and all items of
equipment and machinery comprising the Contributed Property is in good working
order, ordinary wear and tear expected, and fit for the purpose or purposes for
which designated.
2.10 Disclosure. No representation or warranty by the
Contributor in this Agreement or any Exhibit hereto, or in any list, statement,
document or information set forth in or attached to any schedule delivered
pursuant hereto, contains any untrue statement of material fact or omits or will
omit any material fact necessary in order to make the statements contained
herein or therein not misleading.
3. Transfer Taxes and Recording Fees. Transferor shall pay for
the cost of and any all sales taxes, real property transfer taxes, documentary
stamps and any and all recording or other taxes and fees of any kind or nature
whatsoever associated with the consummation of the transactions contemplated
hereby.
4. Indemnification.
Contributor hereby covenants and agrees to indemnify and hold harmless
the Transferee for any breach by Contributor of any representations or
warranties made hereunder. The representations and warranties set forth herein
shall survive for one year following the Closing, and the amount of
Participation Percentages received in exchange for the Contributed Property
shall be subject to acquisition by the Transferee as payment for breaches of
such representations and warranties, or the enforcement of such indemnity.
5. Notices.
5.1 Whenever any Party hereto shall desire to give or serve
any notice, demand, request, approval or other communication, each such
communication shall be in writing and shall be personally, by telecopy, by
messenger or by mail, postage prepaid, addressed as set forth below:
- 4 -
<PAGE> 57
If to Transferee:
NewCornCo LLC
c/o EPL Technologies, Inc.
200 Four Falls Corporate Center
Suite 315
West Conshohocken, Pennsylvania 19428
Telephone No: 610-834-9600
Facsimile No: 610-834-7584
Attn: President
If to Contributor:
Agricultural Innovation & Trade, Inc.
3241 Somis Road
Somis, California 93066
Telephone No: 805-386-5059
Facsimile No: 805-386-4389
Attn: President
5.2 Service of any such communication shall be deemed made on
the date of actual receipt at such address (on the date that receipt is
refused). Any Party hereto may from time to time, by notice in writing served
upon the other Party as aforesaid, designate a different address to which, or a
different person or additional persons to whom, all communications are
thereafter to be made.
6. Miscellaneous.
6.1 Governing Law. This Agreement shall be governed by the
laws of the State of Delaware, without regard to principles of choice of law or
conflict of law.
6.2 Attorneys' Fees. In the event of any litigation between
Transferee and Contributor concerning the transactions contemplated hereby, the
prevailing party shall be entitled to reasonable attorneys' fees and costs. The
attorneys' fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to fully reimburse all reasonable attorneys' fees
incurred in good faith.
6.3 Counterparts. This Agreement may be executed by Transferee
and Contributor in counterparts, each of which shall be deemed an original, and
all of which together shall constitute but one and the same instrument.
6.4 Assignment. This Agreement may not be assigned by either
Party, in whole or part, whether by operation of law or otherwise, without the
prior written consent of the Contributor (if
- 5 -
<PAGE> 58
the assignor is the Transferee) or the Transferee (if the assignor is the
Contributor), which consent shall not be unreasonably withheld (provided that
Transferee shall be permitted to assign its rights hereunder to any affiliate).
6.5 Benefit of Agreement. This Agreement shall be binding upon
and shall inure to the benefit of the Parties hereto and their permitted
successors and assigns. No person other than the parties hereto is or shall be
entitled to bring any action to enforce any provision of this Agreement against
any of the Parties hereto or their permitted successors and assigns. The
covenants and agreements set forth in this Agreement shall be solely for the
benefit of the Parties hereto and their permitted successors and assigns.
6.6 Severability. If any part of any provision of this
Agreement or any other agreement, document or writing given pursuant to or in
connection with this Agreement shall be invalid or unenforceable under
applicable law, such part shall be ineffective to the extent of such invalidity
or unenforceability only, without in any way affecting the remaining parts of
such provisions or the remaining provisions of said agreement so long as the
economic and legal substance of the transaction contemplated hereby is not
affected in any manner materially adverse to any Party.
6.7 Headings. The table of contents and the section headings
used in this Agreement are included herein for convenience of reference only and
shall not constitute a part of this Agreement for any other purpose.
IN WITNESS WHEREOF, this Agreement has ban executed as of the day and
year first written above.
CONTRIBUTOR:
AIT, INC.
By: (SEAL)
Name:
Title:
- 6 -
<PAGE> 59
TRANSFEREE:
NewCornCo LLC, a Delaware limited
liability company
By: (SEAL)
Name: Paul L. Devine
Title: Manager
- 7 -
<PAGE> 60
EXHIBIT A
ASSETS
NEW CORN CO. 7/8/96
EXPANDED ASSET LIST PAGE 1
[ ]
<PAGE> 61
NEW CORN CO.
EXPANDED ASSET LIST PAGE 2
[ ]
<PAGE> 62
NEW CORN CO.
EXPANDED ASSET LIST PAGE 3
[ ]
<PAGE> 63
EXHIBIT A (Continued)
[PROVIDED, HOWEVER, that certain of the items described above (as further
indicated on the Schedule of Leases attached hereto as Exhibit 1) are leased to
Agricultural Innovation and Trade, Inc. ("Contributor") and, to the extent so
leased, a leasehold interest is being conveyed therein.]
TOGETHER WITH, each and every of the following, to the extent heretofore used or
otherwise relating to or beneficial to Contributor's business of growing,
causing to be grown, purchasing or otherwise acquiring, and processing,
marketing and selling, fresh corn or corn products (the "Business"):
(i) all procedure manuals, customer lists, advertising or promotional
literature or brochures, databases, know-how, computer software and any
confidential information which has been reduced to writing or any other media
relating to or arising out of the Business or the operation thereof;
(ii) contact lists and other lists relating to customers or potential
customers;
(iii) all rights (but none of the obligations) under all material
agreements of the Contributor in any way arising out of or relating to the
Business or the operation thereof.
(iv) all know-how and good will, tangible or intangible, arising from or
relating to the Business or the operation thereof;
(v) for so long as the Contributor remains a member of the Transferee,
the exclusive royalty-free right and license to the use of the trademark "Somis
Creek Ranches", together with design, and any other trademarks or trade names of
Contributor, for use by the Transferee in connection with the Transferee's
business, now or hereafter existing, relating to the purchasing or otherwise
acquiring, and processing, marketing and selling, fresh corn and corn products.
<PAGE> 64
SCHEDULE OF LEASES
------------------
EXHIBIT 1 TO EXHIBIT A
----------------------
Prepared by UNDERWOOD RANCHES 8/1/96
New Corn Co. LLC - Leases to be transferred from AIT, Inc.
<TABLE>
<CAPTION>
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Contract Est Due Est Total
Number Description Date Cost Pmts Residual Liability Calculation
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
[ ]
[ ]
[ ]
[ ]
[ ]
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</TABLE>
<PAGE> 65
EXHIBIT D
PRICES AND TERMS
The total Company valuation in relation to the calculation of the
purchase price payable under Section 7.6D shall be calculated as [
] of the Company. [ ] shall be the average of the
[ ] from the audited financial statements of the Company for the three
complete calendar years (or if financial statements for three complete calendar
years are not available, as many calendar years as are available) prior to the
date the price is calculated. The purchase price payable will then be the
respective share of the total Company valuation.
For these purposes, the term [ ] shall be determined in accordance
with generally accepted accounting principles (with revenues being recognized
as services are performed or products delivered), and shall be taken from the
audited financial statements of the Company. Interest shall include any
interest charged on any outstanding loans made to, or other indebtedness
incurred by, the Company.
In the event that the above calculation cannot be made for any reason,
or in the event that the above calculation produces a purchase price less than
[ ] to be so purchased, then the purchase price
payable will be equal to the [ ]
<PAGE> 66
EXHIBIT E
DESCRIPTION
That portion of Rancho Calleguas, in the City of Camarillo, County of Ventura,
State of California, according to the United States Patent thereof, described
as follows:
Beginning at a point in line No. 7 of Rancho Calleguas, distant South 40 degree
30 feet West 42.54 chains from Corner No. 7 as located in the Final Survey of
said Rancho, said point of beginning being the most Westerly corner of the land
conveyed to Fredric Aggen, by deed recorded November 8, 1911, in Book 131, Page
387 of Deeds; thence,
1st: South 40 degrees 30 feet West 33.40 chains along said Line No. 7 to the
most Westerly corner of the land conveyed to Michael Flynn by deed recorded
February 2, 1893, in book 38, Page 208 of Deeds; thence,
2nd: South 49 degree 30 feet East 46.30 chains to the most Southerly corner
of the land to conveyed to Michael Flynn; thence,
3rd: North 58 degree 30 feet East 23.10 chains to the most Easterly corner of
the land conveyed to J. B. Palin by deed recorded February 2, 1893, in Book 38,
Page 207 of Deeds; thence,
4th: North 17 degree West 21.24 chains to the most Southerly corner of the land
so conveyed to Fredric Aggen; thence,
5th: North 79 degree 30 feet West 35.54 chains to the Point of Beginning.
EXCEPT that portion thereof conveyed to Southern Pacific Railroad Company, a
corporation,by deed recorded September 1, 1899, in Book 59, Page 348 of Deeds.
ALSO EXCEPT an undivided one-half (1/2) interest in all oil, gas, other
hydrocarbon substances and minerals in and under said real property below a
depth of five hundred (500) feet, without the right of surface entry, as
reserved by Donald M. Pitts and Harvey Les Pitts in deed recorded December 31,
1979 as Instrument No. 144767, in Book 5570, Page 490 of Official Records.
ALSO excepting and reserving unto the Grantor, as a mineral interest and not as
a royalty interest, an undivided one-quarter (1/4) interest in all gas,
hydrocarbons and associated substances, in, under, or produced and saved from
the aforedescribed property, but without the right of entry to the surface of
said property or the top 500 feet of the subsurface of said property for the
purpose of exploring for, developing, and removing such oil, gas, hydrocarbons
and associates substances.
<PAGE> 67
UNDERWOOD ROW CROP LEASE
OF CAMARILLO CITY RANCH PROPERTY
THIS UNDERWOOD ROW CROP LEASE OF CAMARILLO CITY RANCH PROPERTY
("Underwood Lease") is entered into, effective as of October 1, 1991, on the one
hand, by Security Trust Company, a California corporation, as Trustee under
that certain Promissory Trust No. 1699 dated August 20, 1987 ("Landlord") and,
on the other hand, by Los Posas Valley Ranches, Inc., a California
corporation, dba Underwood Ranches ("Tenant"), with reference to the
following facts:
Facts:
A. The Farm Property - This Underwood Lease covers certain portions of
the Camarillo City Ranch. The Camarillo City Ranch is located in Camarillo,
California at the north side of the termination of Flynn Road. The first portion
of the Camarillo City Ranch covered by this Underwood Lease, consists of 56
acres, more or less, of farmable row crop land located on the Camarillo City
Ranch. Said row crop land is hereinafter called "the Farm Property."
B. The Butler Building - The second portion of the Camarillo City
Ranch covered by this Underwood Lease is that certain building located on
Camarillo City Ranch commonly known as and hereinafter called the
"Butler Building."
C. Prior Lease - The Farm Property and the Butler Building were leased
to Tenant pursuant to the terms and conditions of that certain Lease, dated as
of April 4, 1990, between Landlord and Tenant (the "Prior Lease"). The Prior
Lease expired on April 4, 1991, and since that time, Tenant has been renting
the Farm Property and the Butler Building from Landlord on a month-to-month
basis.
D. Purpose - On the terms, and subject to the conditions of this
Underwood Lease, Landlord and Tenant are entering into a new lease for the Farm
Property and the Butler Building.
IN VIEW OF THE FOREGOING FACTS, Landlord and Tenant agree:
Agreement
1. Lease of the Farm Property - On the terms and subject to the
conditions of this Underwood Lease, Landlord hereby leases the Farm Property to
Tenant and Tenant hereby hires the Farm Property from Landlord.
2. Lease of the Butler Building - On the terms and subject to the
conditions of this Underwood Lease, Landlord hereby leases
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the Butler Building to Tenant and Tenant hereby hires the Butler Building from
Landlord.
3. Term of Farm Property Lease - The term of Landlord's lease and
Tenant's hiring of the Farm Property commences October 1, 1991 and terminates on
the earlier of: (a) September 30, 1994 or (b) on such earlier date as may be
required by the terms of this Underwood Lease.
4. Term of Butler Building Lease - The term of Landlord's rental and
Tenant's hiring of the Butler Building commences October 1, 1991 and terminates
on the earlier of: (a) September 30, 1994 or (b) on such earlier date as may
be required by the terms of this Underwood Lease.
5. Rent for Farm Property - The rent for the Farm Property is $[ ] per
year, payable, in advance, in equal quarterly installments of $[ ]. The first
quarterly installment shall be paid on October 1, 1991; the remaining quarterly
installments shall be paid in advance on the first day of each January, April,
July and October during the term of this Underwood Lease.
6. Rent for Butler Building - The rent for the Butler Building is
$1,054.08 per month, payable, in advance, on the 1st day of each month
commencing October 1, 1991. Commencing October 1, 1992, the rent for the Butler
Building shall be $1,106.78 per month, payable in the aforesaid fashion.
Commencing October 1, 1993, the rent for the Butler Building shall be $1,162.12
per month, payable in the aforesaid fashion.
7. Payment - Tenant shall pay the rent for the Farm Property and the
Butler Building and all other amounts due from Tenant by the terms of this
Underwood Lease, without deduction or offset, to Landlord at such place or
places as Landlord may select from time to time. Until otherwise directed by
Landlord, Tenant's payments shall be made to Ag Land Services, Post Office
Box 1, Somis, California 93066.
8. Use - Tenant shall only use the Farm Property for the purpose of
raising and harvesting row crops. No other use of the Farm Property shall be
made without Landlord's prior written consent. Tenant shall only use the
Butler Building for the purpose of processing lettuce and/or other row crops.
No other use of the Butler Building shall be made without Landlord's prior
written consent.
9. Farming Practices - Tenant shall, at Tenant's sole expense, plant,
cultivate, and harvest the Farm Property in accordance with the best
agricultural practices employed for similar properties located in Ventura
County, California. Without limiting the generality of the foregoing, Tenant
shall supply all farming equipment required for the Farm Property,
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including surface irrigation pipelines; Tenant shall maintain and repair all
irrigation pipelines; Tenant shall use ample fertilizer and pest controls to
avoid depletion of the soil or losses caused by vermin, insects, and
pestilences; Tenant shall carry State Compensation Insurance on all Tenant's
hired help and, except as herein provided, Tenant shall pay all costs and
expenses arising from or connected with Tenant's activities on or about the
Farm Property.
10. Maintenance of Butler Building - During the term of Tenant's rental
of the Butler Building, Tenant shall at all times repair and maintain the Butler
Building and all parts thereof in a first class condition at Tenant's sole
cost and expense.
11. Governmental Requirements and Waste - At all times during the
applicable term of Tenant's lease of the Farm Property and/or the Butler
Building, Tenant shall, at Tenant's sole expense, comply with all governmental
laws and regulations relating to the appropriate property and the activities
thereon conducted by Tenant and Tenant's employees, contractors, and invitees.
Tenant shall not commit, or permit others to commit, any waste or nuisance or
other act which disturbs the quiet enjoyment of any other person.
12. Hazardous Materials - At all times during the applicable term of
Tenant's lease of the Farm Property and/or the Butler Building, Tenant shall
prevent all persons and entities from using, generating, manufacturing, storing
or disposing of, on, under, or about the appropriate property or transporting to
or from the appropriate property any flammable explosives, radioactive
materials, hazardous wastes, toxic substances or related materials ("Hazardous
Materials"). For the purpose of this Underwood Lease, Hazardous Materials
includes, but is not limited to, substances defined as "hazardous substances,"
"hazardous materials," or "toxic substances" in the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section
1801, et seq.; the Resource Conservation and Recovery Acts, 42 U.S.C. Section
6901 et seq.; and those substances defined as "hazardous substances" in Section
25316 of the California Health & Safety Code, and in the regulations adopted
and publications promulgated pursuant to said laws.
13. Surrender of Farm Property - On expiration or sooner termination
of the Farm Property portion of this Underwood Lease, Tenant shall peaceably
yield possession of the Farm Property to Landlord in a twice diced and clean
condition, free of all debris, trash, weeds, hazardous materials, and all other
foreign materials and substances.
14. Surrender of Butler Building - On expiration or sooner termination
of the Butler Building portion of this Underwood
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Lease, Tenant shall peaceably yield possession of the Butler Building to
Landlord in the condition in which it was received or in such improved condition
as may have resulted from Tenant's use thereof.
15. Removal of Butler Building -- At Landlord's sole written election,
Landlord may force Tenant to remove the Butler Building from the Camarillo City
Ranch Property. Landlord may make said election at any time after giving the
Butler Building Termination Notice pursuant to Paragraph 28B below, or within
one year following expiration or earlier termination of the term of the Butler
Building portion of this Underwood Lease by written notice to Tenant ("Removal
Notice"). If Landlord does so elect, Tenant shall cause the Butler Building to
be removed from the Camarillo City Ranch Property. Said removal shall occur on
or before the date specified in Landlord's Removal Notice, which date may not
be prior to the termination date for the Butler Building portion of this
Underwood Lease specified in the Butler Building Termination Notice delivered
pursuant to Paragraph 28B below. Said removal shall occur at Tenant's sole cost
and expense in accordance with all applicable governmental rules and
regulations complied with by Tenant at Tenant's sole cost and expense. As a
part of said removal, Tenant shall cause the property on which the Butler
Building is now located and the immediately adjoining property to be cleared of
all foundations, structures, debris and hazardous materials of every kind or
nature at Tenant's sole cost and expense in compliance with all applicable
governmental rules and regulations adhered to by Tenant at Tenant's sole cost
and expense. If Landlord elects to force Tenant to remove the Butler Building,
the Butler Building and all other items Tenant removes (in accordance with the
terms of this paragraph) from the Camarillo City Ranch, shall only be Tenant's
property from and after the removal date.
16. Abandoned Property -- At expiration or sooner termination of the
Butler Building portion of this Underwood Lease, Landlord may remove any of
Tenant's machinery, equipment, trade fixtures, or personal property thereon
located at Landlord's sole option and at Tenant's sole expense and/or Landlord
may sell or otherwise dispose of all or any part of said property in any manner
Landlord deems appropriate without liability to Tenant or others. At expiration
or sooner termination of the Farm Property portion of this Underwood Lease,
Landlord may remove any of Tenant's machinery, equipment, trade fixtures, or
personal property thereon located at Landlord's sole option and at Tenant's
sole expense and/or Landlord may sell or otherwise dispose of all or any part
of said property in any manner Landlord deems appropriate without liability to
Tenant or others.
17. Holding Over -- If Tenant remains in possession of the Farm Property
and/or the Butler Building following expiration or
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sooner termination of this Underwood Lease (or any portion thereof), Tenant's
continued possession of the Farm Property and/or the Butler Building shall
constitute a tenancy at sufferance which shall not act as a renewal of this
Underwood Lease for any additional period pursuant to California Civil Code
Section 1161(2). During Tenant's continued possession of the Farm Property, the
applicable terms and conditions of this Underwood Lease shall apply except
Tenant's rent for said continued possession shall be computed and paid monthly,
in advance, on the first day of each month during said continued possession at
the rate of $[ ] per month without adjustment for partial months, if any.
During Tenant's continued possession of the Butler Building, the applicable
terms and conditions of this Underwood Lease shall apply except Tenant's rent
for said continued possession shall be $[ ] per month without adjustment
for partial months, if any. This paragraph shall not be interpreted to prevent
Landlord from causing Tenant to immediately vacate the Farm Property and/or the
Butler Building on expiration or sooner termination of their respective terms.
18. Irrigation Water and Flooding - Landlord does not warrant the
quality or quantity of the water available from any source will be suitable or
sufficient for Tenant's use and Landlord does not warrant or represent that the
Farm Property and/or the Butler Building will not flood. Tenant hereby waives
all rights Tenant may otherwise have to recover from Landlord for any damages to
Tenant's crops, machinery, equipment and other property caused by flooding, or
leaks, or lack of water or contaminated water or otherwise.
19. Tenant's Use of Irrigation Water from Well - Tenant is familiar
with the water well located on property Landlord has leased to others. Tenant is
satisfied that said well is in good working order and has sufficient capacity to
irrigate both the Farm Property and the adjacent lemon orchards. Tenant may use
the water well to irrigate the Farm Property. In connection with Tenant's use of
the water well, Tenant shall keep a log of the hours Tenant uses the water well
and Tenant shall reimburse Landlord for Tenant's use of the water well by paying
Landlord a portion of all costs of maintaining and operating the water well,
including electricity costs and standby fees, equal to a fraction, the numerator
of which is Tenant's hours of use of the water well during the applicable period
and the denominator of which is the total hours of use of the water well during
the applicable period. If the Farm Property and the adjacent lemon orchards both
need water at the same time, the orchard's water needs shall be served first.
Consistent with good farming practices, Landlord will attempt to cause the
orchards to be irrigated at a time and in a manner compatible with Tenant's
water needs. If the water well consistently fails to produce water sufficient
for Tenant's reasonable needs, Tenant may, by written notice to Landlord,
terminate the Farm Property and/or
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Butler Building portion of this Underwood Lease effective as of the date
Landlord receives said notice, or at Tenant's option, effective as of any later
date specified in the notice. If Tenant elects to so terminate all or any
portion of this Underwood Lease, Landlord shall forthwith refund the unearned
rent for the property which is covered by Tenant's termination notice. Landlord
is not obligated to repair or replace the water well; Landlord is not liable
for (and Tenant shall not be entitled to any rent abatement with respect to)
any crop or other damages suffered by Tenant by reason of any use or abuse of
the water well and/or by reason of any water shortage and/or by reason of
contaminated water or otherwise.
20. Waiver -- As a material part of this Underwood Lease, Tenant hereby
waives all claims and causes of action against Landlord and/or Landlord's other
tenants for personal injuries to Tenant and Tenant's employees, contractors,
guests and invitees and/or for damages to any equipment, crops, and/or property
arising from or in any way connected with the Farm Property and/or the Butler
Building and/or by reason of Landlord's and/or any other tenant's use of the
water well or any activities conducted by Landlord and/or Landlord's other
tenants on the Farm Property and/or the Butler Building and/or the Camarillo
City Ranch Property. This waiver covers all causes of action arising at any
time, including, but not limited to, claims for damages arising out of the acts
or omissions of Landlord and/or its tenants, agents, employees, and
contractors.
21. Indemnification -- As a material part of this Underwood Lease, Tenant
hereby indemnifies and holds Landlord and Landlord's other tenants harmless
from any and all claims, causes of action, suits, proceedings, losses,
expenses, damages, and liability, including attorney's fees and costs, arising
out of or in any way connected with the Farm Property and/or the Butler
Building and/or resulting from Tenant's use, possession, or operation of the
Farm Property and/or the Butler Building.
22. Insurance -- Tenant shall, at Tenant's sole cost and expense, either
naming Landlord as an additional insured or as a co-insured, maintain public
liability insurance in the minimum amount of $500,000.00 for loss from an
accident resulting in bodily injury to or death of one person with an aggregate
amount of $1,000,000.00 per accident and $100,000.00 for loss from an accident
resulting from damage to or destruction of property. Tenant shall furnish
Landlord with a Certificate of Insurance issued by an insurance company
licensed to do business in the State of California showing Tenant is insured
for the foregoing amounts and Landlord is covered by said insurance. Each such
policy of insurance shall provide for at least ten days prior written notice to
Landlord given by the insurance company before the insurance company alters,
amends, cancels, or allows the
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policy to expire. Said insurance does not limit Tenant's liability under this
Underwood Lease.
23. Property Taxes -- All property taxes assessed on the Farm Property
and/or the Butler Building and all personal property taxes attributable to
Landlord's personal property, if any, situated on the Farm Property and/or the
Butler Building shall be paid by Landlord. All other property taxes assessed
during the term of this Underwood Lease shall be paid by Tenant including, but
not limited to, personal property taxes attributable to Tenant's equipment
and/or personal property used on the Farm Property and/or personal property
used in the Butler Building and/or Tenant's crops.
24. Alterations and Mechanic's Liens -- Tenant shall not make any
alterations to the Farm Property and/or the Butler Building without Landlord's
prior written consent. All additions to or alterations of the Farm Property
and/or the Butler Building, except trade fixtures, shall at once become a part
of the Farm Property and/or the Butler Building and shall belong solely to
Landlord. Tenant shall keep the Farm Property and/or the Butler Building and
every part thereof free from all liens arising out of work performed, materials
furnished, or obligations incurred by Tenant and/or at Tenant's request.
25. Oil, Gas, and Mineral Rights -- All rights to all minerals, oil, gas,
and other hydrocarbon substances located on or under the Farm Property and/or
the Butler Building are reserved to Landlord. In exercising Landlord's right to
said minerals, oil, and gas and hydrocarbon substances, Landlord may cause
Tenant to surrender a portion of the surface rights covered by this Underwood
Lease without terminating this Underwood Lease. If Landlord does exercise said
right, Landlord shall abate Tenant's rent based solely on the farmable acreage
so lost by Tenant.
26. Landlord's Entry and Signs -- Landlord and Landlord's agents,
contractors, and any other person or entity authorized by Landlord may enter
upon the Farm Property and/or the Butler Building for the purpose of
conducting any test or study deemed appropriate by Landlord including, but not
limited to, tests and studies connected with Landlord's planned development of
all or any portion of the Camarillo City Ranch, and/or for the purpose of
inspecting the Farm Property and/or the Butler Building or any portion thereof
and/or for any other purpose, including, but not limited to, the removal of any
or all buildings and improvements located on the Camarillo City Ranch. Landlord
may show the Farm Property and/or the Butler Building to prospective brokers,
agents, tenants, and purchasers. Landlord may place and maintain (or allow
others to place and maintain) any "for rent" signs or "for lease" signs or
"for sale" signs or future development signs or any other signs in one or more
conspicuous places on the Farm
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Property and/or the Butler Building. Landlord may also post notices of
non-responsibility on the Farm Property and/or the Butler Building. Tenant
shall not have any right to receive compensation from Landlord and/or any other
person by reason of Landlord's exercise of any of the rights herein reserved to
Landlord.
27. Condemnation Proceeds--Landlord is solely entitled to all
compensation payable by any governmental agency or authority by reason of any
temporary or permanent taking of the Farm Property and/or the Butler Building
or any portion thereof. Tenant hereby waives all rights to said compensation
and hereby irrevocably assigns Tenant's share of same, if any, to Landlord.
28. Premature Termination of Lease
A. Farm Property Portion of Lease--By written notice delivered to
Tenant at any time during the term of this Underwood Lease, Landlord may, for
any reason, cause the Farm Property portion of this Underwood Lease to
prematurely terminate on the date specified in Landlord's written notice ("Farm
Property Termination Notice"). If the date specified in Landlord's Farm
Property Termination Notice is less than 90 days from the date Tenant receives
Landlord's Farm Property Termination Notice and Tenant is not allowed to
harvest the crop which was planted on the Farm Property before Tenant received
Landlord's Farm Property Termination Notice, in addition to refunding all
prepaid and unearned rent, if any, determined as of the date Tenant surrenders
the Farm Property to Landlord, Landlord shall reimburse Tenant for all out of
pocket costs incurred by Tenant in planting said crop on the Farm Property
plus an additional 20% of said costs to reimburse Tenant for Tenant's overhead.
If Tenant is allowed to harvest the crop which was planted before Tenant
received Landlord's Farm Property Termination Notice or if the termination date
specified in Landlord's Farm Property Termination Notice is more than 90 days
from the date Landlord delivers Landlord's Farm Property Termination Notice to
Tenant, Landlord's sole and only liability to Tenant for exercise of the
premature termination rights herein provided Landlord shall be to return all
prepaid and unearned rent, if any (determined as of the date Tenant surrenders
the Farm Property to Landlord). All payments required by this Paragraph 28A
shall be made to Tenant within 15 days following Tenant's surrender of the Farm
Property to Landlord. Under no circumstances shall Landlord be required to pay
Tenant for any loss of expected profits on any crop nor shall Landlord be
required to pay Tenant for any loss or damage Tenant incurs for any crop which
was planted on the Farm Property after Tenant receives Landlord's Farm Property
Termination Notice. Also, under no circumstances shall Landlord be required to
pay Tenant any compensation for any crop Tenant is allowed to harvest.
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B. Butler Building Portion of Lease - By written notice delivered to
Tenant at any time during the term of this Underwood Lease, Landlord may cause
the Butler Building portion of this Underwood Lease to prematurely terminate on
the date specified on Landlord's written notice, which may not be earlier than
30 days from Tenant's receipt of such notice (the "Butler Building Termination
Notice"). Landlord may only give said Butler Building Termination Notice if
Tenant's occupancy rights to the Butler Building interfere with Landlord's
testing, predevelopment work and/or physical development of Camarillo City
Ranch or any other property owned by Landlord in the vicinity (determined
solely in Landlord's good faith judgment). Landlord's sole and only liability
to Tenant for exercise of the premature termination rights provided in this
Paragraph 28B shall be (i) to return all prepaid and unearned rent, if any, as
of the date Tenant surrenders the Butler Building to Landlord, and (ii) to pay
to Tenant an amount equal to the rental which Tenant would have paid during the
remainder of the term of the Butler Building portion of this Underwood Lease
pursuant to Paragraph 6 above from and after the date Tenant surrenders the
Butler Building to Landlord. All payments required by this Paragraph 28B shall
be made to Tenant within 15 days following Tenant's surrender of the Butler
Building to Landlord. Except for the aforesaid payments, under no circumstances
shall Landlord be required to compensate Tenant for any loss of expected profits
on any crop being processed or stored at the Butler Building or pay any cost or
expense incurred by Tenant in moving or relocating its operations from the
Butler Building.
29. Hunting and Trespassing - Tenant shall not permit any employee or
person (including Tenant) to hunt or trespass on the Farm Property or to build
fires thereon or to discharge firearms thereon for any purpose other than
preventing damages to crops. Landlord and Landlord's guests and invitees may
hunt on the Farm Property.
30. Assignment and Subletting - Tenant may not assign this Underwood
Lease or sublet all or any portion of the Farm Property and/or the Butler
Building without Landlord's prior written consent.
31. Crop Mortgages - Tenant shall not mortgage or otherwise encumber
any crop grown on the Farm Property.
32. Remedies on Default - Landlord, in addition to all other rights
and remedies provided by law, shall have the following options on Tenant's
default:
A. Possession - Landlord may take possession of the Farm Property
and/or the Butler Building with or without terminating this Underwood
Lease and with or without process of law.
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B. Reletting -- If Landlord takes possession of the Farm Property
and/or the Butler Building without terminating the applicable portion(s) of
this Underwood Lease, Landlord may relet the Farm Property or the Butler
Building or any part thereof as the agent of and for the benefit of Tenant,
either in Landlord's name or otherwise, and under such terms and conditions
and for such period and at such rent as Landlord deems advisable. In such
event, the rents received on any such reletting during the term of this
Underwood Lease or any part thereof shall be first credited to the
reasonable expense of reletting and to reasonable attorney's fees and
thereafter to the payment of all sums due or to become due from Tenant to
Landlord.
C. Harvesting Crops -- If Landlord takes possession of the Farm
Property with or without terminating the Farm Property portion of this
Underwood Lease, Landlord may complete the harvest of any crop then on the
Farm Property in any manner Landlord deems appropriate and/or Landlord may
cause said crop to go to seed. The proceeds Landlord receives from the sale
of said crop shall be disbursed first to pay all expenses incurred by
Landlord in retaking possession of the Farm Property, including legal fees
and costs; second, to pay Landlord for all of its expenses in completing
the farming and harvesting of the crop; and, third, to pay Landlord all
rent and other charges due Landlord under this Underwood Lease, plus a
commission of 20% of said rent for overseeing the farming and harvesting of
the crops and, last, the balance of said crop proceeds, if any shall be
paid to Tenant.
D. Terminating Lease -- Landlord may terminate the Farm Property
and/or the Butler Building portion of this Underwood Lease and recover from
Tenant all of the items described in Civil Code Section 1951.2 including,
but not limited to, worth at the time of the award of the amount of rent
and other charges equivalent to rent reserved in this Underwood Lease for
the balance of the term of this Underwood Lease over the amount of rental
loss Tenant proves could be reasonably avoided.
33. Election of Remedies -- Landlord shall not be deemed to have elected
to terminate the Butler Building portion of this Underwood Lease unless and
until Landlord provides Tenant with written notice of Landlord's election to so
terminate. Likewise, Landlord shall not be deemed to have elected to terminate
the Farm Property portion of this Underwood Lease unless and until Landlord
provides Tenant with written notice of Landlord's election to so terminate.
34. Cumulative Remedies -- All remedies herein provided Landlord are
cumulative to the end that Landlord may also
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exercise any other right or remedy available to Landlord at law or in equity.
35. Prior Defaults--Landlord's failure to take advantage of any default
or breach of any covenant or condition of this Underwood Lease or to insist
upon Tenant's compliance with any term or condition of this Underwood Lease
shall not constitute a waiver or relinquishment by Landlord of Landlord's right
to future faithful performance of any term or condition of this Underwood
Lease. No custom or practice developed between Landlord or Tenant in the course
of administering this Underwood Lease shall waive or lessen Landlord's right to
insist upon full and complete performance of each and every term, covenant, and
condition of this Underwood Lease.
36. Enforcement Costs--If any controversy, claim, or dispute connected
with or arising out of this Underwood Lease is resolved by Court action,
arbitration, or negotiation, the losing party in said action or proceeding
shall pay all reasonable attorney's fees and costs incurred by the other party
(whether otherwise constituting taxable costs or not) including, but not
limited to, telephone charges, photocopying charges, expert witness fees, and
travel expenses.
37. Governing Law--This Underwood Lease shall be construed and enforced
in accordance with the laws of the State of California. Venue is in Ventura
County, California.
38. Terms--In this Underwood Lease, certain terms have been defined in
the text of this Underwood Lease either by a separate specific definitional
sentence or by the use of a parenthetical reference. If a term has been so
defined by either reference in the text of this Underwood Lease, said term
shall be given the meaning therein assigned to it in all parts of this
Underwood Lease unless the context of this Underwood Lease clearly demonstrates
a contrary intent. Whenever required by the context of this Underwood Lease,
the singular includes the plural and the masculine includes the feminine or the
neuter and vice versa.
39. Construction--This Underwood Lease shall not be interpreted to
presumptively favor either Landlord or Tenant. The captions shall not be
considered in interpreting this Underwood Lease.
40. Binding Effect--This Underwood Lease is binding upon and inures to
the benefit of the parties and their heirs, successors, and assigns.
41. Subordination--All rights created by this Underwood Lease are subject
and subordinate to all liens, mortgages, deeds of trust, and other
encumbrances and restrictions now of record.
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or hereinafter placed upon the Farm Property and/or the Butler Building or any
part thereof. Such subordination is effective without any further act of Tenant.
Tenant shall from time to time, on Landlord's request, execute and deliver the
documents or instruments that may be required of any lender to effectuate
subordination. If Tenant fails to execute and deliver such documents or
instruments, Tenant irrevocably constitutes and appoints Landlord as Tenant's
special attorney-in-fact to execute and deliver such documents or instruments as
Tenant's agent in Tenant's place and stead.
42. Relationship - Nothing in this Underwood Lease shall be deemed or
construed by the parties or by any third person to create the relationship of
principal and agent or of partnership or of joint venture or of any other
association except Landlord and Tenant.
43. Amendment - This Underwood Lease may be amended or revoked solely
by written instrument executed by Landlord and Tenant.
44. Counterparts - This Underwood Lease may be executed in several
counterparts, each of which shall be deemed a part of an original, but
collectively such counterparts shall constitute only one agreement.
45. Notices - All consents, notices, and demands of any kind must be
made in a writing signed by the party to be charged and served either by
personal delivery or by reputable overnight air carrier or by Fax or by
registered or certified mail, postage prepaid, return receipt requested, on each
intended addressee at the address set forth below. Any such communication shall
be deemed to have been delivered to and received by the intended addressee (a)
in the case of personal delivery, as of the date of receipt, or (b) in the case
of delivery via reputable air carrier, on the earlier of the date of receipt or
first attempted delivery to the addressee's designated address, or (c) in the
case of delivery via Fax, as of the date of receipt, or (d) in the case of
mailing via certified or registered United States mail, as of the earlier of
receipt or first attempted delivery, as evidenced by the return receipt card.
Any notice, approval, or other document given by Landlord only needs to be
signed by Dave O. White or Richard S. Shepherd. Any notice to Tenant only needs
to be delivered to Craig Underwood or to any partner of Tenant. A copy of all
consents and notices to either Landlord or Tenant shall be served on Harry R.
Hibbs Law Corporation, 290 Maple Court, Suite 200, Ventura, CA 93003, Fax No.
(805) 644-4325 and Steven E. Levy, Esq., Sandler and Rosen, 1801 Avenue of the
Stars, Suite 510, Los Angeles, CA 90067, Fax No. (213) 277-5954. Until altered
in accordance with paragraph 46 hereof, the addressee's notice addresses and Fax
numbers are:
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To Landlord: Camarillo City Ranch Properties
Attn: Dave O. White
Post Office Box 1
Somis, CA 93066
Fax No. (805) 388-7178
and
Camarillo City Ranch Properties
Attn: Richard S. Shepherd
c/o Pardee Construction Company
10880 Wilshire Blvd., Suite 1400
Los Angeles, CA 90024
Fax No. (213) 475-3092
and
Security Trust Company
Trustee -- P.T. No. 1699
Attn: Carl E. Weidner, Jr.
Post Office Box 1589
San Diego, CA 92112
Fax No. (619) 544-0028
To Tenant: Los Posas Valley Ranches, Inc.
Attn: Craig Underwood
5696 Los Angeles Avenue
Moorpark, CA 93021
Fax No. (805) 486-8531
46. Notice Changes -- By written notice given in accordance with the
preceding paragraph, any addressee may change said addressee's notice address
or add or change his Fax number.
47. Estoppel Certificate -- At Landlord's written request made at any
time and from time to time, Tenant shall, within ten days of such request,
execute, acknowledge, and deliver to Landlord a statement in writing certifying
that this Underwood Lease is unmodified and in full force and effect (or, if
modified, stating the nature of each modification and certifying that this
Underwood Lease, as so modified, is in full force and effect) and the date to
which the rent or other charges are paid in advance, if any, and acknowledging
that there are not, to Tenant's knowledge, any uncured defaults on the part of
Landlord (or specifying such defaults if any are claimed). Any such statement
may be conclusively relied upon by any prospective purchaser or lender. If
Tenant fails to provide said estoppel statement within the ten day period,
Tenant shall be conclusively bound by any representations made by Landlord to
the prospective purchaser or lender with respect to the status of Tenant's
Lease and/or the prepayment of rent and other charges.
13
<PAGE> 80
48. Building Complex - Except for the Butler Building, this Underwood
Lease does not include any building located at the southwest corner of the Farm
Property.
49. Cooperation - Landlord and Tenant shall cooperate in the consummation
of all transactions contemplated by this Underwood Lease. In connection
therewith, Landlord and Tenant will each execute and deliver such other and
further documents as are reasonably required by this Underwood Lease.
50. Time - Time is of the essence.
51. Recording Lease - As a material inducement to Landlord in entering
into this Underwood Lease, Tenant hereby covenants and agrees that Tenant will
not record or attempt to record or place of record in Ventura County or in any
other county a memorandum or other instrument indicating the existence of this
Underwood Lease and/or Tenant's interest in the Farm Property and/or the Butler
Building.
52. Further Provisions Re Landlord - Presently Security Trust Company
holds fee title to the Farm Property and the Butler Building for the sole use
and benefit of Mark C. Borchard, Anne Borchard, Alma Borchard, John W.
Borchard, John W. Borchard, Jr., Harry R. Hibbs, Camarillo Citrus Properties,
The Horton Company and Pardee Construction Company (hereinafter collectively
called "the True Owners"). Notwithstanding any other provision of this
Underwood Lease apparently to the contrary, whenever the term Landlord is used
in this Underwood Lease, said term shall include the True Owners and each of
them to the end that all rights, duties and indemnifications provided by this
Underwood Lease shall in each case, obligate or benefit, as the case may be,
the True Owners, and each of them.
53. Entire Agreement - This Underwood Lease contains the entire
understanding of the parties. All oral agreements are void. All prior written
agreements are void.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Underwood Lease
in Ventura County, California as of October 1, 1991 with the understanding that
all obligations imposed by this Underwood Lease are to be performed in Ventura
County.
UNDERWOOD & SON SECURITY TRUST COMPANY
a California corporation
By: /s/ Craig Underwood By: [Illegible]
---------------------------- ----------------------------
Craig Underwood
Its Partner Its President
------------------------ -------------------------
By: /s/ Sandra L. Love
----------------------------
<PAGE> 81
PERSONAL GUARANTEE
For Value Received, the undersigned (hereinafter called "Guarantor"),
personally guarantees performance by Los Posas Valley Ranches, Inc., dba
Underwood Ranches ("Tenant"), of each and every term and condition of the
foregoing Underwood Lease ("Lease").
Guarantor hereby waives the right to require the Landlord to proceed
against the Tenant or any other party or any other Guarantor or to proceed
against or apply any security the Landlord may hold. Guarantor hereby waives
the right to require the Landlord to pursue any other remedy for the
Guarantor's benefit. Guarantor hereby agrees that the Landlord may proceed
against Guarantor without taking any action against the Tenant or any other
party or any other Guarantor and without proceeding against or applying any
security the Landlord may hold. Guarantor hereby agrees to pay all attorney's
fees Landlord incurs in enforcing this Personal Guarantee.
Notice of this Personal Guarantee as well as all demands, presentments,
notices of protest and notices of every kind or nature, including those of any
action or non-action on the part of the Tenant or the Tenant's assigns, is
waived. Landlord may modify or extend the terms of the Lease without notifying
Guarantor or affecting Guarantor's liability hereunder.
Guarantor waives the right to plead any statute of limitations. Guarantor
agrees that this Personal Guarantee is binding on Guarantor's heirs and that
this Personal Guarantee shall inure to the benefit of Landlord's heirs and
assigns.
IN WITNESS WHEREOF, this Personal Guarantee has been executed effective as
of execution of the Lease.
/s/ Craig Underwood
-----------------
Craig Underwood
TRUE OWNERS CONSENT
The undersigned, as the sole beneficiaries of Security Trust Company's
Promissory Trust No. 1699 dated August 20, 1987 and the true owners of the
property which is subject to the foregoing Underwood Lease hereby consent to
the foregoing Underwood Lease and direct Security Trust Company, acting in its
capacity as Trustee of said Trust, to execute same, and the undersigned
15
<PAGE> 82
hereby agree to be bound by the terms and conditions of the foregoing Underwood
Lease to the extent of their respective interests in the property covered by it.
/s/ MARK C. BORCHARD /s/ JOHN W. BORCHARD
- ------------------------- -------------------------
MARK C. BORCHARD JOHN W. BORCHARD
/s/ ANNE BORCHARD /s/ JOHN W. BORCHARD, JR.
- ------------------------- -------------------------
ANNE BORCHARD JOHN W. BORCHARD, JR.
/s/ ALMA BORCHARD /s/ HARRY R. HIBBS
- ------------------------- -------------------------
ALMA BORCHARD HARRY R. HIBBS
CAMARILLO CITRUS PROPERTIES, THE HORTON COMPANY,
a general partnership a California corporation
By: /s/ DAVID O. WHITE By: /s/ SUSAN MARTIN
- ------------------------- -------------------------
Its PARTNER Its PRES.
----------------- -----------------
PARDEE CONSTRUCTION COMPANY,
a California corporation
By: /s/ WILLARD BLUM
- -------------------------
Its Asst. Vice Pres.
-----------------
16
<PAGE> 83
ADDENDUM TO UNDERWOOD ROW CROP LEASE
The lease of the "Butler Building" includes the yard area surrounding it which
comprises about two acres and includes three old farm buildings for which
Underwood assumes all responsibility for upkeep and maintenance.
By /s/ Craig Underwood
----------------------
Craig Underwood
<PAGE> 84
AMENDMENT NO. 1 TO
UNDERWOOD ROW CROP LEASE
OF CAMARILLO CITY RANCH PROPERTY
THIS AMENDMENT NO. 1 TO UNDERWOOD ROW CROP LEASE OF CAMARILLO CITY RANCH
PROPERTY (the "Amendment") is entered into effective as of October 1, 1994 (the
"Effective Date"), on the one hand, by Security Trust Company, a California
corporation, as Trustee under that certain Promissory Trust No. 1699 dated
August 20, 1987 ("Landlord") and, on the other hand, by Los Posas Valley
Ranches, Inc., a California corporation, dba Underwood Ranches ("Tenant"), with
reference to the following facts:
RECITALS
A. On or about October 1, 1991, Landlord and Tenant entered into that
certain Underwood Row Crop Lease of Camarillo City Ranch Property with respect
to Tenant's lease of certain portions of the Camarillo City Ranch Property
located in Camarillo, California (the "Underwood Lease"). The first portion of
the Camarillo City Ranch Property covered by the Underwood Lease consisted of
approximately 56 acres of farmable row crop land referred to therein as the
"Farm Property". The second portion of the Camarillo City Ranch Property covered
by the Underwood Lease pertained to certain improved property referred to
therein as the "Butler Building".
B. The Lease expired by its terms on September 30, 1994. Landlord and
Tenant wish to enter into this Amendment to provide for Tenant's rental of the
Farm Property from Landlord on a month-to-month basis and for Tenant's rental of
the Butler Building from Landlord until Tenant removes the same from the
Camarillo City Ranch Property.
C. Except as specifically provided herein, all capitalized terms shall
have the meanings described in the Underwood Lease.
NOW, THEREFORE, the parties agree to amend the Underwood Lease as
follows:
1. From and after the Effective Date, Tenant shall rent the Farm
Property from Landlord on a month-to-month basis, until Tenant's occupancy is
terminated by either party upon giving at least thirty (30) days written notice
to the other.
2. The rental for the Farm Property shall be $[ ] per month,
payable in advance. Tenant shall pay the first monthly rental installment on
October 1, 1994; the remaining monthly installments shall be paid in advance on
the first day of each month during the continuation of Tenant's occupancy.
<PAGE> 85
3. Tenant hereby acknowledges that this Amendment shall serve as
Landlord's "Butler Building Termination Notice" and "Removal Notice" in
accordance with paragraphs 28B and 15, respectively, of the Underwood Lease.
Pursuant to said notices, Tenant hereby agrees to remove the Butler Building
from the Camarillo City Ranch Property, at Tenant's sole cost and expense, in
accordance with all applicable governmental rules and regulations and in
compliance with the obligations set forth in said paragraph 15 (such building
removal and restoration of the property is referred to herein collectively as
the "Butler Building Removal"). Tenant hereby agrees to diligently pursue the
Butler Building Removal and to complete the same as soon as possible, but in no
event later than September 30, 1995. The Butler Building portion of the
Underwood Lease shall be deemed terminated upon completion of the Butler
Building Removal.
4. Until the completion of the Butler Building Removal and termination
of the Butler Building portion of the Underwood Lease, Tenant shall pay rent
for the Butler Building in the amount of $1,220.23 per month, payable in
advance, on the 1st day of each month commencing October 1, 1994. If the Butler
Building Removal is not completed by September 30, 1995, Tenant shall be deemed
to be "holding over", and Tenant's rental for the Butler Building shall
thereafter be the amount called for in paragraph 17 of the Underwood Lease
until completion of the Butler Building Removal.
5. Security Trust Company presently holds fee title to the Farm Property
and the Butler Building for the sole use and benefit of Pardee Construction
Company and certain persons represented by David O. White and Harry R. Hibbs
(hereinafter collectively called "the True Owners"). Notwithstanding any
provision of the Underwood Lease (as modified by this Amendment) apparently to
the contrary, whenever the term Landlord is used in the Underwood Lease or this
Amendment, said term shall include the True Owners and each of them to the end
that all rights, duties and indemnifications provided by the Underwood Lease
(as modified by this Amendment) shall in each case obligate or benefit, as the
case may be, the True Owners, and each of them.
6. Except as otherwise specifically provided herein, the Underwood Lease
shall remain in full force and effect in accordance with its terms.
2
<PAGE> 86
IN WITNESS WHEREOF, Landlord and Tenant have executed this Amendment
as of the Effective Date referred to above.
AIT DBA UNDERWOOD RANCHES SECURITY TRUST COMPANY
a California corporation a California corporation
By: /s/ Craig Underwood By: /s/ Carl E. Weidner, Jr.
------------------- ------------------------
Craig Underwood Carl E. Weidner, Jr.
Its Sec Treas Its Trust Officer and
--------------- --------------------
Asst. Corporate Secretary
3
<PAGE> 87
PERSONAL GUARANTEE
For Value Received, the undersigned (hereinafter called "Guarantor"),
personally guarantees performance by Los Posas Valley Ranches, Inc., dba
Underwood Ranches ("Tenant"), of each and every term and condition of the
foregoing Amendment and the Underwood Lease referred to therein (collectively,
the "Lease").
Guarantor hereby waives the right to require the Landlord to proceed
against the Tenant or any other party or any other Guarantor or to proceed
against or apply any security the Landlord may hold. Guarantor hereby waives
the right to require the Landlord to pursue any other remedy for the
Guarantor's benefit. Guarantor hereby agrees that the Landlord may proceed
against Guarantor without taking any action against the Tenant or any other
party or any other Guarantor and without proceeding against or applying any
security the Landlord may hold. Guarantor hereby agrees to pay all attorney's
fees Landlord incurs in enforcing this Personal Guarantee.
Notice of this Personal Guarantee as well as all demands, presentments,
notices of protest and notices of every kind or nature, including those of any
action or non-action on the part of the Tenant or the Tenant's assigns, is
waived. Landlord may modify or extend the terms of the Lease without notifying
Guarantor or affecting Guarantor's liability hereunder.
Guarantor waives the right to plead any statute of limitations. Guarantor
agrees that this Personal Guarantee is binding on Guarantor's heirs and that
this Personal Guarantee shall inure to the benefit of Landlord's heirs and
assigns.
IN WITNESS WHEREOF, this Personal Guarantee has been executed effective as
of execution of the Lease.
/s/ Craig Underwood
-----------------
Craig Underwood
TRUE OWNERS CONSENT
The undersigned, as the sole beneficiaries of Security Trust Company's
Promissory Trust No. 1699 dated August 20, 1987 and the true owners of the
property which is subject to the foregoing Amendment No. 1 to Underwood Row
Crop Lease of Camarillo City Ranch Property (the "Amendment"), hereby consent
to the foregoing Amendment and direct Security Trust Company, acting in its
4
<PAGE> 88
capacity as Trustee of said Trust, to execute same, and the undersigned hereby
agree to be bound by the terms and conditions of the foregoing Amendment and
the Underwood Lease referred to therein to the extent of their respective
interests in the property covered by it.
Buyer: Seller:
PARDEE CONSTRUCTION COMPANY,
a California corporation
/s/ David O. White
----------------------------
DAVID O. WHITE
By /s/ Willard Blum Authorized Representative
-------------------------
Its Asst. Vice Pres.
---------------------
/s/ Harry R. Hibbs
----------------------------
HARRY R. HIBBS
Authorized Representative
5
<PAGE> 1
EXHIBIT 10.4
FRESH-CUT CORN PROCESSING AGREEMENT, DATED JULY 22,
1996, BETWEEN NEWCORNCO, LLC, AND AGRICULTURAL INNOVATION & TRADE, INC.
<PAGE> 2
THIS AGREEMENT HAS BEEN REDACTED AND IS THE SUBJECT OF
A CONFIDENTIAL TREATMENT REQUEST. REDACTED MATERIAL IS BRACKETED ON PAGES 2 AND
3 AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION.
FRESH-CUT CORN PROCESSING AGREEMENT
This Fresh-cut Corn Processing Agreement (the "Agreement") is
made as of the 22nd day of July, 1996, by and between AGRICULTURAL INNOVATION &
TRADE, INC., a California corporation (the "Processor"), and NEWCORNCO LLC, a
Delaware limited liability company (the "Company").
EXPLANATORY STATEMENT
The Company is engaged in the business of producing,
purchasing or otherwise acquiring, and manufacturing, processing and marketing,
fresh (i.e. other than canned or frozen) corn, employing proprietary food
processing know-how and technologies that facilitate the maintenance of the
integrity of such products. The Processor is a member of the Company. Processor
is engaged in the business of growing, causing to be grown, producing,
purchasing or otherwise acquiring, and of processing and marketing, fresh corn
and has substantial experience in such matters. The Company desires to retain
the Processor as an independent contractor to assist the Company in the
acquisition, processing and marketing by the Company of fresh corn employing
proprietary food processing know-how and technologies, and the Processor wishes
to be so retained, upon the terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the mutual covenants herein
contained, the parties covenant and agree as follows:
1. Engagement of Processor. The Company hereby engages the
Processor, as an independent contractor, on the terms set forth herein, to,
among other things, grow, cause to be grown, produce, purchase or to otherwise
acquire on behalf of the Company, and to manufacture, process and market on
behalf of the Company, fresh corn, employing the proprietary food processing
know-how and technologies available to the Company, and the Processor accepts
such engagements upon the terms and conditions hereinafter set forth.
2. Term. The term of the engagement of Processor hereunder
(the "Term") shall commence on the date hereof and shall continue until the
earlier of (i) the close of business on May 30, 2026, (ii) termination of the
engagement hereunder of Processor for "cause" pursuant to Section 9 hereof,
(iii) termination of the engagement of Processor hereunder by the Company, at
its option, at any time upon which any one or more of Craig Underwood, Minos
Athanassiadis and Jim Roberts no longer remain actively engaged in the
day-to-day business and affairs of the Processor, or in the event of a change in
control of the Processor, that is, in the event that Craig Underwood, Minos
Athanassiadis and Jim Roberts, collectively, cease or fail to hold a majority
equity interest in, or cease or fail to hold majority voting control of the
Processor,
<PAGE> 3
(iv) termination of the engagement of Processor hereunder by the Company, at its
option, at anytime after which the Processor ceases to be a Member of the
Company, as contemplated by that Operating Agreement of NewCornCo LLC, by and
between the Processor and EPL Technologies, Inc., dated on or about the date
hereof (the "Operating Agreement"), and (v) termination as otherwise provided
for under Section 9 hereof.
3. Duties. As an independent contractor engaged hereunder by
the Company, the Processor will perform during the Term the duties set forth on
Exhibit A attached hereto and incorporated herein by this reference, together
with such other duties as the Management Committee of the Company may reasonably
request of the Processor from time to time. The Processor shall devote such
professional time, diligence, skill, labor, attention and energies to the
performance of its work hereunder as may be reasonably required for the
performance thereof.
4. Compensation. (a) For all services to be rendered by the
Processor to the Company hereunder, subject to the terms and limitations set
forth in Subsection 4(c) below, the Company shall pay to the Processor, so long
as the Processor remains engaged hereunder and until expiration or termination
of the Term a fee equal to [ ] of the Net Corn Sales Revenues of the Company
derived from or in respect of corn product processed by the Processor pursuant
hereto (the "Section 4(a) Fee"), but in any event only in respect of Net Corn
Sale Revenues earned on and after [ ]. For purposes hereof, "Net Corn Sales
Revenues" shall mean the gross revenues derived from time to time by the Company
from the sale of fresh-cut (i.e. not frozen or canned) corn products through the
efforts of Processor hereunder, net of ordinary and customary quantity, cash,
trade and promotional discounts actually taken for wholesale sales, separately
invoiced sales, excise and other taxes and duties paid or allowed by the selling
party, any other governmental charges imposed upon the production, importation,
use or sale of corn product, actual freight, shipping and insurance charges
billed to customers and so identified on invoices to customers, allowances and
credits actually given to customers for rejected goods, and other returns,
credits, allowances, discounts, rebates and similar items. Sales between or
among the Company and its members, or by and between the Company and its or its
members' affiliates, shall be excluded from the computation of Net Corn Sales
Revenues, except where such affiliates and members are end users (i.e. the
ultimate consumer of the product), but Net Corn Sales Revenues shall include the
subsequent final sales to third parties by such members or affiliates.
(b) Upon expiration or termination of the Term, and so
long thereafter (if at all) as the Processor shall remain a Member of the
Company (but in any event only in respect of Net Corn Sale Revenues earned on or
after [ ]), subject to the terms and limitations set forth in Subsection 4(c)
below, the Processor shall be entitled to receive payment from the Company from
time to time equal to [ ] of Net Corn Sales Revenues, notwithstanding that the
same will not be derived in whole or in part through the efforts of Processor
hereunder (the "Section 4(b)
- 2 -
<PAGE> 4
Fee"). In no event will the Section 4(a) Fee and the Section 4(b)
Fee be duplicative.
(c) The Section 4(a) Fee and Section 4(b) Fee shall
not begin to accrue in any respect until [ ] (and shall accrue only in respect
of Net Corn Sale Revenues earned after that date), and shall be paid in arrears
with respect to each [ ] during the Term, commencing with [ ] , on or before [ ]
of the immediately following [ ]. Anything herein to the contrary
notwithstanding, in no event will the Section 4(a) Fee or the Section 4(b) Fee,
or the aggregate of both, with respect to any [ ], exceed the amount of earnings
before taxes (but after interest and without consideration of, or deduction in
respect of, the payment of the Section 4(a) Fee and the Section 4(b) Fee accrued
with respect to the relevant [ ]) of the Company for the relevant period, as
determined by the regular accountants for the Company in accordance with
generally accepted accounting principals, consistently applied. In the event
that an event should occur during any [ ] which would result in the accrual of
the Section 4(a) Fee or the Section 4(b) Fee terminating other than at the end
of a [ ], appropriate adjustments shall be made, as determined by the Company's
accountants, to reflect such termination.
(d) In addition to payment of the Section 4(a) Fee
and the Section 4(b) Fee as herein provided, the Company shall make
reimbursement to the Processor of the Processing Costs as provided hereinbelow.
5. Reimbursement for Processing Costs. The Company agrees to
reimburse the Processor for the Processing Costs, as hereinafter defined. Such
reimbursement shall be in addition to the compensation to be paid to the
Processor pursuant to Paragraph 4 hereof.
6. Processing Costs - Defined. The term "Processing Costs"
shall mean all costs reasonably and actually incurred (after consideration and
deduction of all credits, allowances, discounts, returns, rebates and similar
charges) by the Processor in the proper performance of its duties and
responsibilities hereunder during the Term. Such costs shall be at the
reasonable rates and shall include the following:
a. The cost of acquisition by the Processor on behalf
of the Company of corn for processing and/or sale by or on behalf of the
Company, which shall include growing costs actually incurred by the Processor,
provided, however, that such costs will in no event exceed the cost at which
corn grown on a contract basis by others on behalf of the Processor or the
Company might be obtained;
b. The clearly allocable portions of reasonable and
customary wages and salaries and employment costs of Processor personnel
performing the duties of the Processor pursuant to this Agreement;
c. Payments reasonably and customarily made by the
Processor to subcontractors, consultants and other third parties
- 3 -
<PAGE> 5
assisting the Processor in the performance of its duties and obligations
hereunder;
d. Reasonable and customary costs of all materials,
supplies and equipment rentals incorporated in or utilized in connection with
the performance by the Processor of its work hereunder;
e. Reasonable and customary administrative and
selling costs directly attributable to the Processor's activities hereunder on
behalf of the Company, and which are reasonably allocable, as between those
activities and other activities of the Processor, to the activities of the
Processor hereunder on behalf of the Company.
Anything herein to the contrary notwithstanding, the Processor
shall not be entitled to incur any costs or expenses and claim that the same
shall be Processing Costs hereunder, nor shall any costs so incurred by
reimbursable by the Company to the Processor or otherwise constitute Processing
Costs, unless, and in any event only to the extent which, such costs and
expenses were clearly contemplated within the Annual Budget and Work Plan to be
prepared by the Company pursuant to and as contemplated by the Operating
Agreement, and delivered from time to time by the Company to the Processor.
7. Accounting Records. The Processor shall keep such
accounting records as may be reasonably necessary for proper financial
management under this Agreement, and the Company shall be afforded access to all
of the Processor's records pertaining to the performance by the Processor of its
duties and responsibilities hereunder, including, without limitation, all
records pertaining to the Processing Costs.
8. Processing Cost - Payment.
8.1. Semi-Monthly Applications for Processing Cost
Reimbursement. The Processor shall submit to the Company, on or before the 10th
and 25th day of each month, beginning with the first month following the month
in which performance is commenced hereunder, an application for payment showing
the Processing Costs incurred by the Processor during the preceding
half-calendar-month (an "Application"). Each such Application shall be
accompanied by a certificate, in form and substance satisfactory to the Company,
stating that all such Processing Costs were rightfully incurred and are due and
owing pursuant to and under the terms of this Agreement.
8.2. Application Discrepancy. In the event that the
Company finds such Application acceptable to the Company on its face, the
Company shall be free to make payment of the Application and such payment shall
be made within thirty (30) days after receipt. In the event that the Company
notifies the Processor of any questions, concerns or discrepancies identified by
the Company in respect of any Application, the Company may then have its
employees or representatives, or representatives of its independent certified
public accountants, review the Processor's records
- 4 -
<PAGE> 6
relating to the matters included in the Application in question. If, after such
review, the Company does not agree with the Application, the matter may, at the
option of the Company, be referred to the Company's independent certified public
accountants, who shall make an independent review of the matter, and their
determination shall be binding upon both parties. If the Company's certified
public accountants determine that the amount included in the Application is
greater than the appropriate amount due to the Processor, then the Processor
shall pay for all of the charges for making the determination; however, if the
Company's accountants determine that the Application was correct as submitted by
the Processor, then the Company shall pay all of the charges of review. In any
event, payment by the Company of any amounts reflected in any Application shall
not constitute absolute acceptance by the Company of those charges or any waiver
of any right to contest those charges in the future.
8.3. Annual Review. During the month of January
during each calendar year of the Term, and promptly upon expiration of the Term,
the Company shall cause there to be conducted an annual review of the business
and affairs of the Processor relating to its performance hereunder, including,
without limitation, a review of the Processor's records relating to the matters
included in each Application during the preceding calendar year, the calculation
of Processing Costs and Net Corn Sale Revenues. Such review may be conducted by
or on behalf of the Company by its own representatives or employees, or by its
representatives, or representatives of its independent certified public
accountants, or designees. The Processor shall make available to the Company and
such persons or entities conducting the annual review hereunder all accounting
records of the Processor relating to the review and the determinations sought to
be made. If, after such review, the Company determines that any Application
submitted during the preceding calendar year, or any calculation or payment or
other matter arising hereunder or related hereto, shall have been incorrect or
otherwise erroneous, the Company shall advise the Processor and appropriate
adjustments shall be made, in the case of overpayments by the Company to the
Processor, at the option of the Company, either through payment of amounts by
the Processor to the Company or through an offset against future payments which
may thereafter become due from the Company to the Processor hereunder. In the
event that it is determined on the basis of the annual review (which
determination when made by the Company's independent certified public
accountants shall be binding upon both the Company and the Processor) that the
Processor has claimed due from the Company hereunder during the preceding
calendar year an amount equal to greater than 105% of the amount determined to
be the correct amount, the Processor shall pay for all reasonable costs and
expenses, including administrative costs incurred by the Company, relating to
the review. Otherwise, the cost of the review shall be borne by the Company.
8.4. Payments to the Processor. All Applications
submitted to the Company by the Processor shall be due and payable by the
Company within thirty (30) days after the later of receipt of the Application or
determination as to the accuracy of the Application as contemplated by
subparagraph 8.2 above, but subject
- 5 -
<PAGE> 7
in any event to subsequent adjustments as contemplated by Subsection 8.3 above.
9. Termination. The Company may terminate the engagement of
the Processor, and therefore the Term, for "cause" at any time upon written
notice of such termination to the Processor. As used in this Agreement, the term
"cause" shall mean negligence or general failure in the course of carrying out
the duties of the Processor under this Agreement. In addition, either party
shall have the right to immediately terminate this Agreement, and
correspondingly the Term, upon the delivery of written notice to the other party
upon the breach of any provision of this Agreement by either party (whether or
not such breach, in the case of a breach by the Processor, shall also constitute
"cause") and the failure of such party to cure any such breach within ten (10)
days after written notice from the other party in the case of any breach
involving the payment or failure to pay money, or within thirty (30) days after
written notice from the other party in the case of any breach not involving the
payment or failure to pay money; or in the case of a breach not involving the
payment or failure to pay money which cannot be cured within thirty (30) days,
does not endeavor to maintain diligent actions to cure such breach promptly
after notice thereof. Upon termination hereof, the Processor shall be entitled
to any fees, costs or expenses (including Processing Costs) accrued through the
date of termination and otherwise payable to the Processor hereunder, but shall
not be entitled to any further compensation hereunder.
10. (a) Disclosure of Information. Processor does hereby agree
that it will not at any time during the Term or at any time thereafter, nor will
it permit its employees, agents, principals or representatives (it being
understood that dissemination by Processor of confidential information shall be
made to such persons only on an as-necessary basis and only if such persons
shall be advised of, and agree to maintain, the confidential nature of such
matters) to, either directly or indirectly, disclose, communicate, divulge,
furnish or otherwise make accessible or available, in whole or in part, to any
person, firm, company, corporation, partnership, joint venture or any other
entity, or use in any fashion, any confidential information, material or matter
relating to the business of, or any other trade secrets of, the Company or any
member of the Company other than the Processor, or any firm, company,
corporation, partnership, joint venture or any other entity related to the
Company or any such member (the "Company's Affiliates"), obtained or acquired
while in and as a result of the engagement of the Processor hereunder by the
Company.
(b) Return of Confidential Materials. Processor hereby
covenants (on behalf of itself and its employees, agents, principals and
representatives, for whom Processor accepts full responsibility hereunder) that
any and all materials containing confidential information including, but not
limited to, documents, drawings, memoranda, notes, notebooks, reports, studies,
specification, charts, graphs, description, instructions, recordings,
photostats, spread sheets, computer printouts, software programs, materials
contained in any stored data retrieval system and any and all other sources of
confidential information
- 6 -
<PAGE> 8
whatsoever, whether prepared by Processor or not, are property of the Company
(or the Company's Affiliates, as the case may be) and, upon any termination of
the Term hereof for any reason whatsoever, the same shall be left with or
returned to the Company (or the Company's Affiliates, as the case may be).
Processor covenants that it shall not disclose the same to any third party and
further covenants that it will not, either directly or indirectly, copy, or
cause to be copied, or otherwise duplicated or reproduced using any method,
process or technique whatsoever, any of the confidential information to be left
with or returned to the Company (or the Company's Affiliates, as the case may
be), except as is necessary to permit Processor to perform its obligations
hereunder.
(c) Confidential Information. For the purpose of
Subsections (a) and (b) of this Section, "confidential information" shall mean
any and all information of every nature, kind and description whatsoever
disclosed to, learned by or otherwise known to Processor directly and solely as
a consequence of Processor's engagement hereunder by the Company and which is
not generally known in the industry in which the Processor or the Company is
engaged, concerning the Company's (or the Company's Affiliates) services,
products, processes, computer software and/or hardware, equipment, machinery,
devices, techniques, methods, inventions, designs, drawings, specifications,
innovations, materials, expertise, know-how and the like (whether patentable or
not); but shall not in any event include any information obtained by or learned
by Processor in any other manner or by any other means, including without
limitation that which is now known by or is subsequently disclosed to Processor
by or through its own efforts or from others without the breach of any
obligation of confidentiality.
11. Covenant Not to Compete. The Processor acknowledges and
agrees that the Company has retained Processor hereunder based in part on
Processor's unique abilities and expertise in respect of the business of
processing, marketing and selling fresh corn products, and on Processor's
representation to and agreements with the Company that the Processor will not
engage in the business of processing, marketing and selling fresh corn products
for itself or for others (other than the Company) at any time during the Term.
Accordingly, the Processor agrees with the Company that at any time during the
Term, the Processor will not directly or indirectly (through any company,
corporation, partnership or other person or entity whatsoever) attempt to engage
in, or engage in, or assist any other person or entity in the engagement of, any
business or activity, anywhere in the world, related to the business of growing,
acquiring, processing, marketing or selling fresh corn or corn products. The
Processor and the Company do hereby acknowledge and agree that none of the time
span, scope or area terms included within the foregoing restrictive covenant are
unreasonable, and that it is the specific intent of both the Company and the
Processor that the restrictive covenant set forth in the preceding sentence
shall be valid and enforceable as specifically set forth therein. In addition,
the Processor acknowledges and agrees that it has received good and valuable
consideration for its agreement to and acceptance of the terms of this paragraph
11 and the restrictions herein contained. If it shall be judicially determined
that any part or portion of the restrictive covenant set
- 7 -
<PAGE> 9
forth hereinabove shall not be valid or enforceable as specifically set forth,
such restrictive covenants shall not be declared invalid, but rather shall be
modified or reduced in such a manner so as to result in the same being valid and
enforceable to the maximum extent permitted by law.
12. Receipts Held In Trust. In the performance by the
Processor of its duties and responsibilities hereunder, the Processor will,
among other things, as contemplated by Paragraph 4 of Exhibit A attached hereto,
invoice purchasers of corn product from the Company, sometimes in or under the
name of the Processor. The Processor acknowledges and agrees that any invoices,
which may bear the name of Processor, are being submitted and invoiced by
Processor as agent for the Company pursuant to the terms of this Agreement and
that the actual party in interest in respect of each invoice, and the owner of
each receivable (each an "Accounts Receivable") created thereby or thereupon,
shall be the Company. Accordingly, the Processor hereby acknowledges that all
Accounts Receivable, and all funds actually received in hand in respect thereto,
with respect to corn product of the Company, shall be held by the Processor in
trust for the benefit of the Company, and shall be promptly, upon receipt,
remitted in full to the Company, as directed by the Company. In order to secure
the rights of the Company in respect of the Accounts Receivable, the Processor
hereby assigns, pledges and grants to the Company a security interest in all
rights of the Processor with respect to the Accounts Receivable, and all
products and proceeds thereof, including funds collected in respect thereto.
Upon the request of the Company, the Processor shall endorse, assign and deliver
to the Company, in a manner acceptable to the Company, any and all instruments
or agreements necessary to permit the Company to enforce any and all claims of
the Company hereunder or otherwise in or with respect to the Accounts
Receivable, and all products and proceeds thereof, and to collect and receive
any and all sums or payments which may become due or payable, as collected by
the Processor, in respect thereof. The Processor further agrees to deliver to
the Company from time to time, upon the reasonable request of the Company, such
financing statements and other instruments, documents or agreements as may be
reasonably requested by the Company to permit the Company to perfect its
security interest hereunder in the accounts receivable and all payments received
by the Company in respect thereof. The Processor further covenants and agrees
that all payments received by it from time to time in respect of Accounts
Receivable shall, at all times following the request of the Company, be
deposited in a separate trust bank account for the benefit of the Company, in a
manner satisfactory to the Company.
13. Sublicense. This Agreement is the Fresh-cut Corn
Processing Agreement referred to in that certain Sublicense Agreement of even
date herewith, by and between Processor (as Sublicensee) and the Company (as
Sublicensor). Processor covenants and agrees to make use of the rights granted
to Processor as Sublicensor thereunder only in connection with, and in
furtherance of, its performance on behalf of the Company hereunder, and for no
other purpose whatsoever.
14. Set-off. The Processor does hereby expressly agree that
the Company shall have the right, in addition to all other
- 8 -
<PAGE> 10
rights and remedies available to it, to set-off against and to appropriate and
apply to any of the obligations of the Company to the Processor for payment or
otherwise arising hereunder any debt owing to, and any other funds, sums or
rights held in any manner for the account of the Processor by the Company.
15. No Authority to Bind Company. On the basis of this
Agreement, neither the Processor nor the Company shall have the authority to
bind, obligate or commit the other, except to the extent so authorized by
written directive from the other.
16. Successors and Assigns. This Agreement and the rights and
responsibilities of Processor hereunder may not be assigned by Processor,
whether directly or indirectly, by operation of law, due to merger or change of
equity control, or otherwise, without the express written consent of the
Company, in its sole discretion. Any prohibited assignment of this Agreement, or
any rights or obligations hereunder, shall be null and void. This Agreement and
the rights of the Company hereunder may be assigned by the Company, provided
that the obligations of the Company are assumed by the assignee.
17. Controlling Law and Dispute Resolution.
a. This Agreement or any of its provisions shall be
determined, construed, governed and performed under the laws of the State of
Delaware (excepting those conflicts of law provisions which would serve to
defeat application of Delaware law). Any claim, controversy or dispute arising
out of or relating to this Agreement or any interpretation or breach thereof or
performance thereunder, including without limitation any dispute concerning the
scope of this arbitration provision, shall be settled by submission to final,
binding and non-appealable arbitration ("Arbitration") for determination,
without any right by any party to a trial de novo in a court of competent
jurisdiction, after a twenty-five (25) calendar day waiting period (the "Waiting
Period"). During the Waiting Period, the parties shall work reasonably and in
good faith and shall use their best efforts to amicably resolve the claim,
controversy or dispute. The Arbitration and all pre-hearing, hearing,
post-hearing arbitration procedures, including those for Disclosure and
Challenge, shall be conducted in accordance with the Commercial Arbitration
Rules of the American Arbitration Association in Wilmington, Delaware.
b. The party which does not prevail in the
Arbitration shall be responsible for all fees and expenses incurred in
connection with the Arbitration, including, without limitation, reasonable
attorney's fees.
c. Notwithstanding the foregoing, the parties
specifically reserve the right to seek a temporary judicial restraining order,
preliminary injunction, or other similar short term equitable relief from a
court of law having competent jurisdiction, and grant the arbitration tribunal
the right to make a final determination of the parties' rights, including
whether to make permanent or dissolve such court order. No party shall bring a
civil action seeking enforcement or any other remedy founded on this Agreement.
- 9 -
<PAGE> 11
18. Amendment. This Agreement may be amended only by a
writing executed by the Company and by the Processor.
19. Notices. Any notice required or permitted to be given
hereunder shall be given by registered or certified mail, return receipt
requested or by overnight courier service (e.g., Federal Express), at the
following addresses or to such other addresses as either may designate to the
other by notice similarly given:
If to the Company:
NewCornCo LLC
c/o EPL Technologies Inc.
200 Four Falls Corporate Center, Suite 315
Conshohocken, Pennsylvania 19428
Telephone: (610) 834-9600
Facsimile: (610) 834-7564
Attn: President
If to the Processor:
Agricultural Innovation & Trade, Inc.
3241 Somis Road
Somis, California 93066
Telephone: 805-386-5059
Facsimile: 805-386-4389
Attn: President
If mailed as aforesaid, notice shall be deemed given on the date it is mailed.
20. Counterparts. Provided that all parties hereto execute
a copy of this Agreement, this Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which together shall constitute
one and the same instrument.
21. Severability. The invalidity or unenforceability of part
or all of any provisions of this Agreement shall not affect or limit the
validity and enforceability of the remainder of such provision and other
provisions hereof.
22. Survival. The terms and conditions contained herein which
by their express terms or by implication (including without limitation paragraph
10 hereof) are to be performed after the termination and/or execution hereof, or
are prospective in nature, shall survive such termination and/or execution, as
the case may be.
IN WITNESS WHEREOF, this Agreement has been executed under
seal as of the day and year first written above.
COMPANY:
WITNESS: NEWCORNCO LLC
- 10 -
<PAGE> 12
/s/ Minos Athanassiadis By: /s/ Paul L. Devine (SEAL)
- ----------------------- ------------------------
Name: Paul L. Devine
Title: Manager
PROCESSOR:
WITNESS: AGRICULTURAL INNOVATION & TRADE,
INC.
/s/ Jim Roberts By: /s/ Craig Underwood (SEAL)
- ----------------------- ------------------------
Name: Craig Underwood
Title: Treasurer/Secretary
- 11 -
<PAGE> 13
EXHIBIT A TO FRESH-CUT CORN PROCESSING AGREEMENT
DUTIES OF AGRICULTURAL INNOVATION & TRADE, INC., as Processor
1. Procurement of Fresh-Cut Corn. Grow, cause to be
grown, produce, purchase or otherwise acquire, corn suitable for processing,
marketing and sale by the Company in furtherance of the business purposes of the
Company, including, without limitation, the following:
(a) Determination as to proper source.
(b) Determination as to proper variety of corn
product.
(c) Consistent with the Annual Budget and Work Plan
to be delivered from time to time by the Company to the Processor, monitoring of
corn product availability, and coordination of corn product availability with
Company sales projections, so as to insure sufficient product levels are at all
times available to meet existing and anticipated needs of the Company, without
over-purchasing or waste.
2. Raw Product Transportation.
(a) Arrange for the collection, transport and
shipment of fresh corn purchased, grown by or otherwise acquired from others to
the appropriate processing facility.
(b) Manage transportation and shipment of fresh corn
so as to minimize transportation and shipment costs attendant to procurement of
raw fresh corn and delivery thereof to the appropriate facilities.
3. Process.
(a) Collect, sort and grade raw fresh corn received
at the appropriate facilities for processing, using appropriate care and
handling procedures so as to minimize waste and product damage or loss.
(b) Process fresh corn, including de-husking and
cleaning operations, in accordance with all applicable protocols required by the
Company.
(c) Further process fresh-cut corn product by
application of proprietary food processing know-how and technologies to be made
available to the Processor by the Company, and in strict accordance with all
requirements thereof.
(d) Maintain all equipment owned by the Company and
placed on site at the processing facilities managed or operated by Processor
pursuant to the terms of this Agreement in good repair and working order.
A - 1
<PAGE> 14
(e) Once fully processed, package fresh-cut corn
products according to the requirements established from time to time by the
Company and employing the proprietary packaging technologies described to the
Processor by the Company.
4. Marketing and Sales.
(a) Until further notice, procure, process and fill
all orders for the sale of finished fresh and fresh-cut corn products, by and
under the name of the Company, including, without limitation, telephone
solicitations, receipt and processing of invoices in the name of the Company and
other orders.
(b) Coordination and delivery of product for shipment
to purchasers of fresh-cut corn product from the Company, including, without
limitation, selection of shipment means and methods (consistent with protocols
established by the Company), the procurement of reasonable and customary
insurance and all other matters incidental to the shipment of finished product
to Company customers.
(c) Until such time as otherwise agreed, invoicing of
customers for the benefit of the Company and receipt of funds and collection of
accounts from product purchasers. All funds and receipts in respect of Company
product received or collected shall be held in trust and subject to a first
perfected security interest in favor of the Company, pending prompt (within 5
days of receipt) remittance thereof to the Company, as directed by the Company.
5. Coordination.
(a) Supply such information as shall from time to
time be required by the Company in order to analyze the overall business and
operations of the Processor in respect of Company business.
(b) Provide such other additional financial
information as shall be reasonably requested from time to time by the Company
regarding the activities of the Processor hereunder.
(c) Prepare and submit to the Company applications on
a monthly basis as contemplated by paragraph 8 of the Agreement.
6. General.
(a) The performance by the Processor of its duties
hereunder shall generally be undertaken in a diligent manner and with fidelity,
and the Processor will at all times strive to perform its duties in a most
efficient manner and in a manner which will minimize waste and product damage
and, thereby, maximize the profits of the Company.
(b) All duties to be performed by the Processor
hereunder will be performed in compliance with all applicable laws, rules and
regulations relating to, among other things, food handling.
A - 2
<PAGE> 15
(c) The Company and the Processor will confirm and
negotiate in good faith with respect to the performance by the Processor of its
duties and responsibilities hereunder.
(d) Processor will consult with representatives of
the Company (including the Management Committee) regarding new opportunities
which arise from time to time in connection with the fresh-cut corn business,
including new seed varieties and other corn products which could be processed,
marketed and sold through the joint efforts of the Company and the Processor.
A - 3
<PAGE> 1
THIS AGREEMENT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED ON PAGE 1 AND HAS BEEN FILED SEPARATELY
WITH THE SECURITIES AND EXCHANGE COMMISSION.
ASSIGNMENT OF MEMBERSHIP INTEREST
THIS ASSIGNMENT OF MEMBERSHIP INTEREST ("Assignment") is made and entered into
by and among Agricultural Innovation & Trade, Inc., a California Corporation,
with its principal place of business at 3241 Somis Road, Somis, California
93066, ("Assignor") and Twin Garden Sales, Inc., an Illinois Corporation, with
its principal place of business at 23017 Route 173, Harvard, IL 60033,
("Assignee").
RECITALS
a. Assignor is a Member of NewCornCo, LLC, a Delaware Limited
Liability Company ("Company") and owns the Participation
Percentage in a [ ] interest ("Participation Percentage") of
the Company.
b. The Company has entered into an agreement wherein the Company
will purchase certain assets from Assignee. As payment for
those assets, Assignor has agreed to assign to Assignee an [ ]
in the Company.
c. Assignor desires to sell, transfer and convey to Assignee
certain Participation Percentage rights in the Company.
d. Assignee desires to purchase and acquire the Participation
Percentage rights from Assignor.
NOW, THEREFORE, this Assignment is made in consideration of the
premises, warranties, and mutual covenants set forth herein; and each of the
parties to this Assignment agrees as follows:
1. ASSIGNMENT OF MEMBERSHIP INTEREST. For value received, the receipt
and sufficiency of which are hereby acknowledged, the Assignor hereby sells,
transfers, conveys, and assigns to the Assignee:
a. An [ ] Participation Percentage in the Company, together
with that proportionate share of Assignor's capital account that the assigned
Participation Percentage bears to all of the Participation Percentage owned by
Assignor before this Assignment.
b. A proportionate share of Assignor's rights to receive
proceeds or benefit of any indemnity, warranty, or other payments with respect
to the Company's operating agreement.
c. A proportionate share of Assignor's rights to perform under
the Company's
<PAGE> 2
operating agreement, to compel the performance of others, and otherwise exercise
all remedies of a Member.
2. EFFECT OF ASSIGNMENT. From and after the effective date hereof the
portion of the profits or losses attributable to the Participation Percentage
and the portions of all other items of income, gain, loss, deduction, or credit
allocable to the Participation Percentage on or after such date shall be
credited or charged, as the case may be, to the Assignee and not to the
Assignor.
a. The Assignee shall be entitled to all distributions or
payments in respect to the Participation Percentage made on or after the
effective date hereof, regardless of the source of those distributions or
payments or when the same was earned or received by the Company.
b. Nothing in this Assignment will affect the allocation to
the Assignor of profits, losses and other items of income, gain, loss,
deduction, or credit allocable to its Participation Percentage and attributable
to any period before the effective date of this Assignment or any distribution
or payments made to the Assignor in respect of Assignor's Participation
Percentage before that date.
3. ACCEPTANCE. The Assignee hereby accepts from the Assignor the
Participation Percentage and agrees to be bound by all of the terms of the
Company's operating agreement.
4. REPRESENTATIONS OF ASSIGNOR. The Assignor represents to the Assignee
that:
a. This Assignment constitutes legal valid binding obligation
of Assignor, enforceable against the Assignor in accordance with its terms and
has been duly executed and delivered by Assignor;
b. The Assignor is the sole owner of the Participation
Percentage being transferred to the Assignee; and
c. The Assignor has good title to the Participation
Percentage, free and clear of any liens, claims, encumbrances, security
interests, or options.
d. The execution, delivery and consummation of the Assignment
will not directly or indirectly contravene, conflict with, or result in a
violation of any provision of the Organizational Agreement, Operating Agreement,
or any other resolution or agreement of the Company.
e. Contemporaneously herewith, Assignor shall cause NewCornCo,
LLC to execute representations and warranties in form set forth in the exhibit
attached hereto.
5. FUTURE COOPERATION. The Assignor and the Assignee mutually agree to
cooperate at all times from and after the date hereof with respect to any of the
matters described herein, and to
2
<PAGE> 3
execute such further deeds, bills of sale, assignments, releases, assumptions,
notifications, or other documents as may be reasonably requested for the purpose
of giving effect to, evidencing or gibing notice of the transaction evidenced by
this Assignment.
6. SUCCESSORS AND ASSIGNS. This Assignment shall be binding upon, and
shall inure to the benefit of, the parties hereto and their respective
successors and assigns.
7. MODIFICATION AND WAIVER. No supplement, modification, waiver or
termination of this Assignment or any provisions hereof shall be binding unless
executed in writing by all parties hereto. No waiver of any of the provisions of
this Assignment shall constitute a waiver of any other provision (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
expressly provided.
8. COUNTERPARTS. Any number of counterparts of this Assignment may be
executed. Each counterpart will be deemed to be an original instrument and all
counterparts taken together will constitute one agreement.
9. GOVERNING LAW. This Assignment will be interpreted and governed by
the laws of the State of Delaware.
10. GENDER. All pronouns used herein shall include the neuter,
masculine, or feminine. Each term appearing in this Assignment with initial
capitalization and not defined herein shall have the meaning ascribed to it in
the Membership Agreement.
11. TIME. Time is of the essence of this Assignment.
IN WITNESS WHEREOF, the parties hereto have subscribed to this
Assignment on 12/6/97.
Assignor:
Agricultural Innovation & Trade,
Inc., a California Corporation
By: /s/ Jim Roberts
3
<PAGE> 4
James Roberts, Vice-President
ASSIGNEE:
Twin Garden Sales, Inc., an Illinois
Corporation
By: /s/ Mark Hayes
Mark Hayes
Consent:
The undersigned, being all of the Members of the Company, hereby
consent to this Assignment and waive their right of first refusal under the
Operating Agreement.
Dated: 12/6/97 EPL Technologies, Inc.,
a Colorado Corporation
By: /s/ Paul L. Devine
Paul L. Devine, President
Dated: 12/6/97 Agricultural Innovation & Trade, Inc.,
a California Corporation, Member
By: /s/ James Roberts
James Roberts, Vice-President
Dated: 12/6/97 Twin Garden Sales, Inc.,
An Illinois Corporation
By: /s/ Mark Hayes
Mark Hayes, President
4
<PAGE> 1
EXHIBIT 10.6
REQUIREMENTS AGREEMENT, DATED AS OF DECEMBER 6, 1997 BETWEEN
NEWCORNCO LLC AND TWIN GARDEN FARMS, INC.
<PAGE> 2
THIS AGREEMENT HAS BEEN REDACTED AND IS THE SUBJECT OF A CONFIDENTIAL TREATMENT
REQUEST. REDACTED MATERIAL IS BRACKETED ON PAGES 1, 2, 3, 4, AND 8, ON EXHIBIT A
AND ON SCHEDULE 1 AND HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE
COMMISSION.
REQUIREMENTS AGREEMENT
THIS REQUIREMENTS AGREEMENT("Agreement") is entered into by and between
NewCornCo, LLC, a Delaware Limited Liability Company, with its principal place
of business at 3241 Somis Road, Somis, CA 93066 ("Company") and Twin Garden
Farms, an Illinois Partnership, with its principal place of business at 23017
Route 173, Harvard, IL 60033-0728 ("Supplier").
RECITALS
A. The Company is in the business of producing, purchasing or otherwise
acquiring, and manufacturing, processing and marketing fresh husked (i.e., other
than canned or frozen) corn products, including, but not limited to bulk sweet
corn ("Business").
B. The Supplier is a producer of fresh unhusked bulk sweet corn ("Bulk
Sweet Corn").
C. The Company desires to acquire from the Supplier and the Supplier
desires to provide to the Company all of the Bulk Sweet Corn the Company may
require, upon the terms, covenants and conditions contained in this Agreement.
NOW THEREFORE, for valuable consideration the parties agree as follows:
1. TERM. The term ("Term") of this Agreement shall commence January 1,
1998 and shall continue so long as Twin Garden Sales, an Illinois corporation is
a Member of the Company.
2. QUANTITY. During the Term, the Supplier shall supply to the Company
all of the Bulk Sweet Corn that may be required by the Company for its Business
during the months of July through September, or such longer or shorter period as
weather permits in those geographic areas set forth in 2c. below.
a. Nonetheless, the Company will require a [ ] forty-eight
(48) count equivalent cases of Bulk Sweet Corn each year.
b. Supplier's production of the Bulk Sweet Corn for the
Company shall be based on a yearly production plan, which will outline the
volume of sweet corn to be delivered each week. The plan will include the dates
of supply and specific varieties, if any and will be supplemented by Supplier as
to dates of planting and location when available. Any change in the plan will be
<PAGE> 3
approved by the Company and Supplier. A copy of the yearly production plan for
1998 is attached as Exhibit A. Yearly production plans for future years will be
provided to the Supplier as soon as available, but in any event at least six (6)
months prior to the commencement of each annual growing season, as the term
"growing season" is customarily used in the agricultural community where the
corn is to be grown.
c. In addition to the [ ] forty-eight (48) count equivalent
cases of Bulk Sweet Corn described in Section 2.a. above, Supplier will have the
right of first refusal to supply to the Company all additional amounts of Bulk
Sweet Corn required by Company to be grown in Illinois, Wisconsin, Indiana,
Iowa, Missouri, Arkansas, Tennessee, Minnesota, Mississippi, Kentucky, Michigan
or Alabama ("Geographic Area"). The right of first refusal herein shall mean the
right of Supplier to provide any portion of the additional amounts upon the
prices as set forth in section 4a or 4b, if applicable, or as negotiated in good
faith if not applicable.
3. QUALITY. The quality of the Bulk Sweet Corn delivered to the Company
shall meet the standards shown in Schedule 1.
a. A "forty-eight (48) count equivalent case" is made up of
forty-eight (48) ears of processed sweet corn with a minimum length of four and
three-quarters (4 3/4) inches, the term "processed" means ears of corn that have
been husked and trimmed at both ends in accordance with prevailing standard
agricultural practices.
b. The Company's husked quality standards, as delivered to the
Supplier in writing, will be applied when packing the Bulk Sweet Corn.
c. The Supplier has the right to all waste ears which do not
meet the Company's quality requirements for packing. That waste ears may be used
in any one of the following ways:
(1) If the Company can develop a market for the
smaller sized waste ears the Company will pay fifty percent (50%) of
the agreed rate shown in Section 4, below.
(2) The Supplier may elect, in the Supplier's sole
discretion, to make frozen sweet corn kernels out of the "waste ears"
of corn. Those "waste ears" will be packed in transport containers, and
shipped to the facility designated by the Supplier, all at the expense
of the Supplier.
(3) The Supplier may market the "waste ears" as
animal feed.
(4) Any other use in Supplier's sole discretion,
provided it does not directly compete with the Company.
2
<PAGE> 4
4. PRICE. Subject to the annual modifications to reflect changes in
direct costs of productions, as negotiated between the parties in good faith,
for each forty-eight (48) count equivalent cases of Bulk Sweet Corn accepted by
the Company, the Company agrees to pay to the Supplier:
a. Bulk Sweet Corn supplied by the Supplier in [ ] will be
paid at the rate of [ ] for each finished forty-eight (48) count case, F.O.B.
the field where the corn is grown. The price for this corn supplied in [ ] will
be adjusted pursuant to annual modifications above and subject to section 15.
b. For Bulk Sweet Corn supplied for [ ] at the rate of [ ] per
packed forty-eight (48) count equivalent case, F.O.B. field where the corn is
grown. The price for this corn supplied in [ ] will be adjusted pursuant to
annual modifications above and subject to section 15.
c. If the Company is unable to pack the Bulk Sweet Corn due to
market conditions, as determined in the Company's sole discretion, the Company
shall pay for the delivered corn as follows:
(1) Bulk Sweet Corn which has been harvested and
delivered to the Company will be valued [ ]
(2) Bulk Sweet Corn which is left standing the field
will be valued [ ].
d. The Company shall pay all amounts owing pursuant to this
Requirements Agreement in [ ] within twenty-one (21) days of invoice by
Supplier. The time period for payment for successive years shall be negotiated
in good faith by the Company and Supplier each fall for the next year.
5. COST OF PRODUCTION. The Supplier shall bear the entire cost of
production of the Bulk Sweet Corn, including but not limited to labor, seed,
fertilizer, chemicals, land irrigation, tillage costs, harvesting and loading
the crop onto trucks for transport to the Company's designated facility.
6. DELIVERY. The Supplier shall grow, harvest and deliver the Bulk
Sweet Corn F.O.B. the field where the Bulk Sweet Corn is grown and harvested.
a. The Supplier shall deliver to the Company all of the Bulk
Sweet Corn required by the Company as indicated by the Company in writing to the
Supplier from time to time F.O.B. the field where it is grown.
b. With the approval of the Company, the Supplier will arrange
for and schedule trucks to haul the Bulk Sweet Corn crop from the field to the
facility designated by the Company. The cost
3
<PAGE> 5
of cooling, hauling, and unloading the crop at the Company's designated facility
will be expenses borne by the Company.
c. At least one hundred eighty (180) days before the beginning
of the corn growing season (as that term is customarily used in the location
where Supplier grows its corn), the Company will provide Supplier with its
requirements for that next growing season ("Requirements Schedule").
d. If the Supplier is able to provide the amount of bulk Sweet
Corn in the Requirements Schedule, but the Company is unable to accept delivery
for any reason, the Company shall pay to the Supplier [ ]. Upon receipt of
payment, Supplier shall [ ], as calculated pursuant to section 4c.(2).
e. Despite any other provision of this Agreement apparently to
the contrary, any crop to be grown under the terms of this Agreement shall at
all times remain the property of Supplier until harvested and loaded onto trucks
for transport to the Company's designated facility. However, no Bulk Sweet Corn
grown under the terms of this Agreement for any weekly requirement due to the
Company can be sold to anyone other than the Company, until the quantity
required to be sold that week to the Company pursuant to Section 2, has been
satisfied.
7. RISK OF LOSS. The Supplier shall bear the risk of loss of the Bulk
Sweet Corn until the Bulk Sweet Corn is accepted by the Company, as provided in
Section 6. Thereafter, the Company shall bear the risk of loss.
8. UNAVAILABILITY OR DELAY. The Supplier shall not be in default under
this Agreement because of unavailability of the Product due to temporary
shortages or unavailability caused by delays in or unavailability of
transportation, fire, strikes, work stoppages, acts of God, or other causes
beyond the reasonable control of the Supplier.
9. SUPPLIER'S NONCOMPETITION AGREEMENT. During the Term of this
Agreement and for a period if five (5) years after its termination for any
reason, Supplier agrees that it will not directly or indirectly supply Bulk
Sweet Corn products to, and will not, and will use its best efforts to cause its
officers, directors and employees to not, own, manage, operate, control or
participate in the ownership, management, operation or control of, or be
connected as an officer, employee, partner, director, consultant or otherwise
with, or render services to, or have, directly or indirectly, any financial
interest in (except for ownership of less than five percent (5%) of any publicly
traded stock that is a Conflicting Organization) any Conflicting Organization
within the territorial scope of this covenant described in paragraph 9.a, below.
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<PAGE> 6
a. The term "Conflicting Organization" means any person,
entity, corporation, partnership, joint venture or other organization engaged in
or planning or attempting to become engaged in any enterprise substantially
similar to the Business, in the United States, Canada, Mexico, Japan and the
European Economic Community, and any political subdivision within the United
States, Canada, Mexico, Japan and the European Economic Community where the
Buyer currently and reasonably contemplates operating the Business (the
"Territorial Scope" of this Agreement).
b. Recognizing the specialized nature of the Business and the
scope of competition, Supplier acknowledges the geographic areas comprise a
series of separate covenants, one for each of the United States, Canada, Mexico,
Japan and the European Economic Community, and any political subdivision of the
United States, Canada, Mexico, Japan and the European Economic Community.
c. If in any judicial proceeding a court shall refuse to
enforce any of the separate covenants deemed included in this Section 9, then
the unenforceable covenant shall be deemed eliminated for the purpose of that
proceeding to the extent necessary to permit the remaining separate covenants to
be enforced.
d. It is the agreement of the parties that the maximum
protection available under the law within the foregoing limits shall be provided
to the Company and that if the restrictions hereby imposed are deemed by a court
to be unreasonably broad in time, territory or scope, this Section 9 shall be
construed to impose only such restrictions as are reasonable.
e. The Supplier further agrees and acknowledges that any
breach of the foregoing covenant cannot adequately be compensated with money
damages, and that in the event of a breach of the foregoing covenant, Buyer
shall be entitled to all remedies at law or in equity that are available,
including, without limiting the generality of the foregoing, injunctive relief.
f. The Company acknowledges and agrees that this
noncompetition provision does not apply to that portion of the Supplier's
business, which sells Bulk Sweet Corn to retailers, or to companies whose entire
purchases of corn are either frozen or canned.
10. COMPANY'S NONCOMPETITION AGREEMENT. The Company agrees that it will
not directly or indirectly own, manage, operate, control or participate in the
ownership, management, operation or control of, or be connected as an officer,
employee, partner, director, consultant or otherwise with, or render services
to, or have, directly or indirectly, any financial interest in any Supplier
Conflicting Organization, except for ownership of less than five percent (5%) of
any publicly traded stock that is a Conflicting Organization for so long as Twin
Garden Sales, Inc. is
5
<PAGE> 7
a member of the Company in any location within the Geographic Area of this
Agreement during the months of July, August and September.
a. The term "Supplier Conflicting Organization" means any
person, entity, corporation, partnership, joint venture or other organization
engaged in or planning or attempting to become engaged in any enterprise
substantially similar to the Business in the Geographic Area.
b. The term the "Business" means the business of growing,
packaging, producing, marketing, purchasing or otherwise acquiring and
marketing, Bulk Sweet Corn.
c. Notwithstanding any of the foregoing to the contrary, the
Company shall be entitled to market fresh unhusked sweet corn anywhere outside
of Geographic Area if distributed through Twin Garden Sales, Inc., of an amount
equal to the Company's unhusked corn which is in excess of the amount needed to
fulfill its husked sweet corn orders. The Company agrees to use its best faith
efforts to accurately predict the weekly needs for corn products at the time of
planting.
d. This covenant does not apply to the activities of Company
with respect to that amount of fresh unhusked sweet corn requested by the
Company pursuant to the Requirements Agreement which twin Garden Farms is
unwilling or unable to supply.
e. It is the agreement of the parties that the maximum
protection available under the law within the foregoing limits shall be provided
to the Supplier and that if the restrictions hereby imposed are deemed by a
court to be unreasonable broad in time, territory or scope, this Section 9 shall
be construed to impose only such restrictions as are reasonable.
f. The Company further agrees and acknowledges that any breach
of the foregoing covenant cannot adequately be compensated with money damages,
and that in the event of a breach of the foregoing covenant, the Supplier shall
be entitled to all remedies at law or in equity that are available, including,
without limiting the generality of the foregoing, injunctive relief.
11. SUPPLIER IS NOT COMPANY'S AGENT. This Agreement does not
create any relationship between the Company and the Supplier as principal and
agent, or any other relationship except purchaser and seller.
a. Under no circumstances shall the Supplier be deemed an
agent of the Company.
b. The Supplier agrees the Supplier shall not represent itself
as an agent of the Company, directly or by implication.
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<PAGE> 8
c. The Supplier shall not create or assume any obligation in
the name of the Company.
12. PROHIBITION OF ASSIGNMENT BY SUPPLIER. This Agreement has been
entered into by the Company in reliance upon the Supplier's skill and experience
in producing the Bulk Sweet Corn.
a. Except as specifically permitted by this Agreement, the
Supplier shall not make or allow any assignment of this Agreement or of any
rights or interest herein without the prior written consent of the Company,
which the Company may withhold in its sole discretion.
b. For all purposes of this Agreement, each of the following
shall be deemed to be an assignment of this Agreement:
(1) Any sale, assignment, transfer, franchise or
license by the Supplier of or with respect to this Agreement or any
rights or interest herein.
(2) Sale at judicial sale or under power of sale,
conveyance or retention of collateral in satisfaction of debt, or other
procedure to enforce the terms of any pledge, encumbrance or security
interest in this Agreement that results in disposition of the
Supplier's interest herein.
(3) The passing by operation of law to any other
party or parties of the Supplier's interest in this Agreement or any
part thereof.
(4) Any act, transaction or event that results in any
change in the controlling interest of the Supplier.
c. Except as expressly permitted by this Agreement, any
attempted assignment of this Agreement shall be deemed a breach of this
Agreement, and shall confer no rights or interest in this Agreement upon the
purported transferee or any other party.
13. ASSIGNABILITY BY COMPANY. This Agreement may be assigned by the
Company to any successor to the business of the Company, only so long as the
successor agrees to be bound by all of the Company's obligations hereunder.
14. TERMINATION BY SUPPLIER. The Supplier may not terminate this
Agreement at any time without cause. For the purposes of this Agreement, "cause"
shall mean a material default of a nonmonetary obligation owed to the Supplier
under this Agreement by the Company or nonpayment of any amount due to the
Supplier within twenty-one (21) days of the amount becoming due to the Supplier.
Supplier shall provide the Company with written notice of any default. However,
the Company shall not be in default under this Agreement if:
7
<PAGE> 9
a. Within thirty (30) days after receiving written notice of
a nonmonetary default from the Supplier, the Company cures the default.
b. Within nine days after written notice of a monetary default
is sent from the Supplier via telefax to the Company as provided in section 16,
the Company cures the default.
c. If the default is of such nature that it is not capable of
being totally cured with reasonable diligence by the Company within the thirty
(30) day period, but the Company commences to cure that default within that
thirty (30) day period continues to diligently work to cure the default even
after the thirty (30) day period has passed, and curing the default is completed
as soon thereafter as is reasonably practicable.
d. It is agreed that, if any breach or default occurs, in
addition to all other remedies provided in this Agreement or by law, the Company
shall be entitled to relief in equity (including a temporary restraining order,
temporary or preliminary injunction, and permanent mandatory or prohibitory
injunction) to restrain the continuation of any such breach or default or to
compel compliance with the provisions of this Agreement.
15. TERMINATION BY COMPANY. The right of the Company to terminate this
Agreement under this Section 14, whether or not exercised, shall not be
exclusive of any other remedies given to the Company by this Agreement or by law
because of any default of the Supplier.
a. The Company may terminate this Agreement at any time
thereafter by giving written notice of the termination to the Supplier upon any
of the following:
(1) Despite any other provision of this Agreement to
the contrary, on thirty (30) days written notice to Supplier if the
cost to the Company for the Bulk Sweet Corn is [ ] the cost to the
Company for obtaining that corn from other suppliers on terms similar
to this Agreement.
(2) If the Supplier fails to perform any obligation
imposed upon the Supplier by this Agreement, and such default is not
totally cured within thirty (30) days after the Supplier's receipt of
written notice of the default from the Company. However, if the default
is of such nature that it is not capable of being totally cured with
reasonable diligence by the Supplier within the thirty (30) day period,
this Agreement shall not be terminated by the Company if the Supplier
has, upon receipt of the notice of default, begun to exercise
reasonable diligence to cure such default, and the Supplier continues
to be diligent work to cure the default even after the thirty (30) day
period has passed, and curing
8
<PAGE> 10
the default is completed as soon thereafter as is reasonably
practicable.
(3) Except as permitted by this Agreement, any
attempted or purported assignment of this Agreement by the Supplier. If
the Company does not elect to exercise its right to terminate this
Agreement pursuant to this paragraph 15a.(4), that election shall not
be deemed a consent to the assignment nor to confer any rights or
interest whatever upon the purported assignee, and this Agreement shall
remain binding and in full force and effect as between the Company and
the Supplier unless and until the Company elects to terminate it.
(4) The adjudication of the Supplier as bankrupt, or
the filing of any petition by or against the Supplier, under the
federal bankruptcy laws other laws relating to relief of debtors, for
reorganization, arrangement or other similar relief provided therein,
unless such petition filed against the Supplier is dismissed within
thirty (30) days, or the making by the Supplier of a general assignment
for the benefit of creditors.
(5) The appointment of any receiver, trustee,
sequestrator or similar officer to take charge of the Supplier's
business, or any attachment, execution, levy, seizure or appropriation
by any legal process of the Supplier's interest in this Agreement,
unless the appointment of such officer is vacated or discharged or the
effect of such legal process is otherwise released within thirty (30)
days.
b. However, if the Company terminates this Agreement for
anything other than cause, the Company agrees to purchase the Bulk Sweet Corn
that has been planted by Supplier for sale to the Company under the terms of
this Agreement.
c. The Supplier agrees that neither termination of this
Agreement, nor an action at law, nor both, would be an adequate remedy for a
breach or default by the Supplier.
16. NOTICES. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given when delivered by hand, commercial messenger
service or telecopy, or mailed certified mail, return receipt requested,
addressed to the parties as follows:
To the Company: NewCornCo, LLC
c/o Agricultural Innovation & Trade
P.O. Box 607
Somis, CA 93066
Facsimile: (805) 386-4389
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<PAGE> 11
with a copy to: Wilfred J. Freeman
Fairfield, Strauss, Uritz & Kinigstein
290 Maple Court, #200
Ventura, CA 93003
Facsimile: (805) 644-4325
To the Supplier: Twin Garden Farms
23017 Route 173
P.O. Box 728
Harvard, IL 60033-0728
Facsimile: (815) 943-0200
with a copy to: Jack D. Ward
Reno, Zahn, Folgate, Lindberg & Powell
1415 E. State Street, Suite 900
Rockford, IL 61104
Facsimile: (815) 987-4092
or to such other person or address of which a party may advise the
other party in writing.
17. WAIVERS. No failure by the Company to take action on account of any
default by the Supplier, whether in a single instance or repeatedly, shall
constitute a waiver of any such default or of the performance required of the
Supplier. No waiver of any other breach of any obligation or provision in this
Agreement shall be deemed a waiver of any other covenant or provision in this
Agreement, and no waiver shall be valid unless in writing and executed by the
waiving party.
18. CONSTRUCTION. Section headings are solely for the convenience of
the parties and are not a part of and shall not be used to interpret this
Agreement.
a. The singular form shall include the plural and vice versa.
b. This Agreement shall not be construed as if it had been
prepared by one of the parties, but rather as if both parties have prepared it.
c. Unless otherwise indicated, all references to sections are
to this Agreement.
19. THIRD-PARTY RIGHTS. Nothing in this Agreement, express or implied,
is intended to confer on any person, other than the parties to this Agreement
and their respective successors and assigns, any rights or remedies under or by
reason of this Agreement.
20. INTEGRATION. Despite any prior course of dealing, custom or usage
of trade, or course of performance, this Agreement contains the entire agreement
between the parties regarding the
10
<PAGE> 12
matters that are the subject of this Agreement, and this Agreement expressly
supersedes all previous or contemporaneous agreements, understandings,
representations, or statements between the parties regarding the rights and
obligations that are the subject of this Agreement.
21. AMENDMENT. This Agreement may not be amended or altered except by a
written instrument executed by both parties.
22. PARTIAL INVALIDITY. Any provision of this Agreement that is
unenforceable or invalid or the inclusion of which would adversely affect the
validity, legality, or enforceability of this Agreement shall be of no effect,
but all the remaining provisions of this Agreement shall remain in full force.
23. AUTHORITY OF PARTIES. All persons executing this Agreement on
behalf of any party to this Agreement warrant that they have the authority to
execute this Agreement on behalf of that party.
24. GOVERNING LAW. This Agreement will be governed by the laws of the
State of California, without regard to the principles of conflicts of laws.
25. SUCCESSORS. This Agreement shall bind and inure to the benefit of
the respective heirs, personal representatives, successors, and assignees of the
parties to this Agreement.
26. ATTORNEYS' FEES. If any legal action or any arbitration or any
other proceeding is brought for the enforcement of this Agreement, or because of
an alleged dispute, breach, default or misrepresentation in connection with any
of the provisions of this Agreement, the successful or prevailing party shall be
entitled to recover reasonable attorneys' fees and other costs incurred in that
action or proceeding, in addition to any other relief to which it may be
entitled, whether or not such action proceeds to final judgment.
27. TIME OF THE ESSENCE. Time is of the essence of this Agreement.
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<PAGE> 13
IN WITNESS of the mutual promises made above, the Company and the
Supplier have executed this Agreement on 12/6/97.
SUPPLIER:
Twin Garden Farms, an Illinois
Partnership
By: /s/ Mark Hayes
COMPANY:
NewCornCo, LLC, a Delaware Limited
Liability Company
By: EPL Technologies, Inc., a Colorado
Corporation, Member
By: /s/ Paul L. Devine
Paul Devine, President
By: Agricultural Innovation & Trade, Inc.,
a California Corporation, Member
By: /s/ James Roberts
James Roberts, Vice President
By: Twin Garden Sales, an Illinois
Corporation, Member
By: /s/ Mark Hayes
Mark Hayes, President
12
<PAGE> 14
EXHIBIT A
NEW CORN CO.
Midwest Planting Schedule
[
]
<PAGE> 15
SCHEDULE 1
NEW CORN CO.
[ ]
<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
THIS AGREEMENT, made as of this 1st day of January, 1998, by and
between EPL TECHNOLOGIES, INC., a Colorado corporation (hereinafter called
"Company"), and WILLIAM R. ROMIG, an individual (hereinafter called "Employee").
W I T N E S S E T H:
WHEREAS, Company wishes to employ Employee and Employee wishes to enter into the
employ of Company on the terms and conditions contained in this Agreement.
NOW, THEREFORE, in consideration of the facts, mutual promises and
covenants contained herein and intending to be legally bound hereby, Company and
Employee agree as follows:
1. Employment. Company hereby employs Employee and Employee hereby
accepts employment by Company for the period and upon the terms and conditions
contained in this Agreement.
2. Office and Duties.
(a) Employee shall serve Company generally as Senior Vice
President, Science and Technology, reporting to the Chief Executive Officer, or
such other person as may be designated by Company's Board of Directors, and
shall have such authority and such responsibilities as Company reasonably may
determine from time to time. Employee shall perform any other duties reasonably
required by Company and, if requested by Company, shall serve as an officer or
director of Company without additional compensation. Company can change the role
and title of Employee during the term of this Agreement, so long as the new role
carries a similar level of responsibility and compensation as included in this
Agreement.
(b) Throughout the term of this Agreement, Employee shall
devote his entire working time, energy, skill and best efforts to the
performance of his duties hereunder in a manner which will faithfully and
diligently further the business and interests of Company and shall not, during
the term of this Agreement, actively engage in any other business activity,
whether or not for profit; provided, however, that Employee may engage in such
other business activity as is set forth in Exhibit A attached hereto; provided,
further, to the extent such activity, in the aggregate, does not, in the
reasonable judgment of Company, interfere with Employee's duties at the Company
or compete with any aspect of the Company's business.
3. Term. This Agreement shall commence as of 8:00 a.m., January 1, 1998
and shall continue for a term of two years, ending on December 31, 1999 (the
"Initial Term"); provided that (a) this Agreement shall terminate prior to such
date upon Employee's resignation, death or disability, and (b) This Agreement
may be terminated by Company at any time prior to such date for Cause (as herein
after defined). During the Initial Term or any renewal term of this Agreement,
Employee may resign, or Company may terminate Employee without Cause, in either
case by giving the other party
<PAGE> 2
six (6) months' written notice. If Employee resigns during the Initial Term, no
bonus (pursuant to Section 4(b)) shall be earned after the date of resignation
and any bonus earned or accrued but unpaid at the date of resignation shall be
forfeited unless Employee shall continue to serve Company as described in
subparagraphs (a) and (b) during the entire notice period, or for such shorter
period of time as may be determined by Company in its sole discretion. Unless
either party elects to terminate this Agreement at the end of the Initial Term
or any renewal term by giving the other party notice of such election at least
sixty (60) days before the expiration of the then current term, this Agreement
shall be deemed to have been renewed for an additional term of one (1) year
commencing on the day after the expiration of the then current term.
4. Compensation.
(a) For all of the service rendered by Employee to Company,
Employee shall receive an annual base salary of One Hundred and Twenty Thousand
Dollars ($120,000.00) for the Initial Term, payable in installments in
accordance with Company's regular payroll practices in effect from time to time,
but not less frequently than monthly. Subsequent to the Initial Term, on an
annual basis, the Board of Directors of the Company shall review Employee's
performance under this Agreement for the purpose of considering a raise in his
current base salary. The Board of Directors may award such a raise, in any
amount, or no raise whatsoever, in its sole discretion.
(b) In addition to Employee's base salary, Employee may be
entitled to certain bonuses based on agreed objectives as set forth on Exhibit B
attached hereto. Employee may be entitled to additional future bonuses, if, as,
and only to the extent, agreed and determined by the Board of Directors of the
Company, in its sole discretion.
(c) Throughout the term of this Agreement and as long as they
are kept in force by Company, Employee shall be entitled to participate in and
receive the benefits of any profit sharing or retirement plans and any health,
life, accident, disability insurance or sick leave plans or programs made
available to other similarly situated employees of Company.
(d) Employee shall be entitled to twenty (20) days paid
vacation annually during each year ended December 31 (pro rated for any period
less than 12 months), in addition to all national holidays on which the
principal executive offices of the Company are closed. Accrued but unused
vacation days may be carried forward into the succeeding year with the approval
of the President.
5. Expenses. Company will reimburse Employee for all reasonable
expenses incurred by Employee in connection with the performance of Employee's
duties hereunder upon receipt of itemized accounts of such expenditures and in
accordance with Company's regular reimbursement procedures and practices in
effect from time to time.
6. Grant of Options.
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<PAGE> 3
(a) Employee may be entitled to share options ("Options") for
the common stock ("Common Stock") of Company, if, as, and only to the extent,
agreed and determined by the Compensation Committee of Company, in accordance
with the 1994 Stock Incentive Plan of Company.
(b) Withholding of Taxes. Whenever the Company proposes or is
required to deliver or transfer Options or shares of Common Stock pursuant to
this Agreement or the exercise of any Option, the Company shall have the right
to (i) require Employee to remit to the Company or to withhold from Employee
directly, amounts sufficient to satisfy any federal, State and/or local
withholding tax requirements, prior to the delivery or transfer of any
certificates for such Options or Shares of Common Stock or (ii) take whatever
action it deems necessary to protect its interest with respect to tax
liabilities.
7. Disability. If, because of a disability, Employee cannot perform the
essential functions of his job (as described in this Agreement), with or without
reasonable accommodation, Company, during the period of such disability, will
continue the payment of Employee's base salary at its then current rate for up
to a maximum of thirteen (13) weeks following the date Employee is first unable
to perform his duties due to such disability. If, as a result of such
disability, Employee is unable to perform his duties for a period of thirteen
(13) consecutive weeks or for a cumulative period of twenty-six (26) weeks
during any twelve-month period, Company may terminate this Agreement and Company
shall have no further obligations or liabilities hereunder after the date of
such termination, other than as set forth in Paragraph 11 below.
8. Death. If Employee dies, all payments hereunder shall cease at the
end of the month in which Employee's death shall occur and Company shall have no
further obligations or liabilities hereunder to Employee's estate or legal
representative or otherwise, other than as set forth in Paragraph 11 below.
9. Sale of Company's Business. In the event any of one of the following
actions were to occur: (a) the Company adopts any plan of liquidation providing
for the distribution of all or substantially all of its assets; (b) all or
substantially all of the business of the Company is disposed of pursuant to a
merger, consolidation or other transaction (unless the shareholders of the
Company immediately prior to such merger, consolidation or other transaction
beneficially own, directly or indirectly, in substantially the same proportion
as they owned the voting stock of the Company, all of the voting stock or other
ownership interests of the entity or entities, if any, that succeed to the
business of the Company); or (c) the Company combines with another company and
is the surviving corporation, but immediately after the combination, the
shareholders of the Company, immediately prior to the combination, hold,
directly or indirectly, 50% or less of the voting stock of the combined company
(there being excluded from the number of shares held by such shareholders, but
not from the voting stock of the combined company, any share received by
"affiliates" as such term is defined in the rules of the Securities and Exchange
Commission, of such other company in exchange for the stock of such other
company), the Company or Employee may terminate Employee's employment on four
(4) weeks prior notice, and in such event Company shall pay Employee his then
applicable annual
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<PAGE> 4
base salary, in monthly installments, for a period of twenty four (24) months
after the date on which such termination occurred. In addition, the Company
shall pay any bonus earned or accrued up to that date, together with the average
bonus earned over the last 12 months, both amounts to be paid in monthly
installments over a period of twelve (12) months after the date on which such
termination occurred (collectively the "Termination Payment"). Upon making
Termination Payment in full, Company shall have no further obligations or
liabilities hereunder and Employee shall be released from the restrictions
contained in subparagraphs 13 (a) and 13 (b) hereof.
10. Discharge for Cause, etcetera. Company may discharge Employee at
any time for "Cause" immediately upon written notice by Company to Employee. For
the purposes of this Agreement, "Cause" for termination shall, without
limitation, be deemed to exist for any of the following: (i) criminal conduct
(whether or not related to Employee's employment), (ii) material and persistent
failure, inability or negligence in performing his duties hereunder, (iii)
intoxication, (iv) drug addiction, (v) insubordination, (vi) gross negligence,
(vii) any violation of any express direction or any reasonable rule or
regulation established by Company from time to time regarding the conduct of its
business, (viii) refusal by Employee to comply with reasonable directives of the
Board of Directors of the Company, (ix) any misrepresentation made in this
Agreement, or (x) any violation by Employee of the terms and conditions of this
Agreement including without limitation Paragraphs 12 and 13 below. In any such
event, Company shall have no further obligations or liabilities hereunder after
the date of such discharge, and Employee shall forfeit any bonus earned or
accrued but unpaid as of the date of termination.
11. Severance Payments. If this Agreement is terminated pursuant to
Paragraphs 7 and 8 at any time prior to December 31, 1999, Company shall pay
Employee, after such termination, for an additional period of six (6) months
after the month in which such termination occurs, additional monthly
installments of his then applicable annual base salary and upon completion of
such six monthly payments, Company shall have no further liabilities or
obligations to Employee hereunder, other than with respect to any bonus earned
through the date of termination as set forth in Paragraph 4(b) above.
12. Company Property. All advertising, sales, manufacturers' and other
materials or articles or information, including without limitation data
processing reports, customer sales analyses, invoices, price lists or
information, samples, costs, customer lists, supply information, internal
business procedures, market studies, information concerning pending or
contemplated acquisitions or expansion plans of Company or its affiliates, or
the existence of negotiations concerning the same, and similar non-public
information relating to the internal operations, technical information,
processes, procedures, techniques, manufacturing, business plans, policies or
practices of Company or its affiliates, samples, or any other materials or data
of any kind furnished to Employee by Company or developed by Employee on behalf
of Company or at Company's direction or for Company's use or otherwise in
connection with Employee's employment hereunder, are and shall remain the sole
and confidential property of Company, as shall any other books, documents, lists
and records pertaining to the business of Company or its affiliates
(collectively, the "Records"), whether the Records are written, typed, printed,
contained on microfilm, computer disc or tape, or are set forth in some other
medium of expression. Upon termination of Employee's employment with Company,
for any reason, or if Company requests the return of such materials or Records
at any time during Employee's
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<PAGE> 5
employment, Employee shall immediately deliver the same to Company.
13. Noncompetition, Trade Secrets, Etc.
(a) During the term of this Agreement and for a period of two
(2) years after the termination of his employment with Company for any reason
whatsoever, Employee shall not directly or indirectly induce or attempt to
influence any employee of Company to terminate their employment with Company and
shall not engage in (as a principal, partner, director, officer, agent,
employee, consultant or otherwise) or be financially interested in any business
operation within the continental United States, which is involved in business
activities, which are the same as, similar to or in competition with specific
business activities carried on by Company involving EPL's core technologies of
processing aids and perforated flexible packaging, at the time of the
termination of Employee's employment. However, nothing contained in this
Paragraph 13 shall prevent Employee from holding for investment no more than
five percent (5%) of any class of equity securities of a company whose
securities are traded on a national securities exchange or from engaging in the
activities described in Exhibit A attached hereto.
(b) During the term of this Agreement and at all times
thereafter, Employee shall not use for his personal benefit, or disclose,
communicate or divulge to, or use for the direct or indirect benefit of any
person, firm, association or company other than the Company, any material
referred to in Paragraph 12 above or any information regarding the business
methods, business policies, procedures, techniques, research or development
projects or results, trade secrets, or other knowledge or processes of or
developed by the Company or its affiliates or any names and addresses of
customers or clients or any data on or relating to past, present or prospective
customers or clients or any other confidential information relating to or
dealing with the business operations or activities of Company or its affiliates,
made known to Employee or learned or acquired by Employee while in the employ of
Company.
(c) Any and all writing, inventions, improvements, processes,
procedures and/or techniques which Employee may make, conceive, discover or
develop, either solely or jointly with any other person or persons, at any time
during the term of this Agreement, whether during working hours or at any other
time and whether at the request or upon the suggestion of the Company or its
affiliates or otherwise, which relate to or are useful in connection with any
business now or hereafter carried on or contemplated by the Company or its
affiliates, including developments or expansions of its present field of
operations, shall be the sole and exclusive property of Company. Employee shall
make full disclosure to Company of all such writings, inventions, improvements,
processes, procedures and techniques, and shall do everything necessary or
desirable to vest the absolute title thereto in Company. Employee shall write
and prepare all specifications and procedures regarding such inventions,
improvements, processes, procedures and techniques and otherwise aid and assist
Company so that Company can prepare, at the Company's expense, and present
applications for copyright or Letters Patent therefore and can secure such
copyright or Letters Patent wherever possible, as well as reissues, renewals,
and extensions thereof, and can obtain the record title to such copyright or
patents so that Company shall be the sole and absolute owner thereof in all
countries in
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<PAGE> 6
which it may desire to have copyright or patent protection. Employee shall not
be entitled to any additional or special compensation or reimbursement regarding
any and all such writings, inventions, improvements, processes, procedures and
techniques.
(d) Employee acknowledges (i) that the trade secrets and
confidential information of Company and its affiliates relate to the conduct of
Company's business, are of independent economic value to Company because they
are not generally known and are the subject of efforts by Company to maintain
their secrecy, (ii) that the right to maintain the secrecy of the trade secrets
and confidential information of Company and its affiliates constitutes a
proprietary right that Company and its affiliates are entitled to protect, (iii)
that the restrictions contained in the foregoing subparagraphs (a), (b) and (c),
in view of the nature of the business in which Company and its affiliates are
engaged, are reasonable and necessary in order to protect the legitimate
interests of Company and (iv) that any violation of such restrictions would
result in irreparable injuries to Company. Employee therefore acknowledges that,
in the event of his violation of any of these restrictions, Company shall have
the right to obtain from any court of competent jurisdiction preliminary and
permanent injunctive relief as well as damages and an equitable accounting of
all earnings, profits and other benefits arising from such violation, which
rights shall be cumulative and in addition to any other rights or remedies to
which Company may be entitled.
(e) If the period of time or the area specified in
subparagraph (a) above should be adjudged unreasonable in any proceeding, then
the period of time shall be reduced by such number of months or the area shall
be reduced by the elimination of such portion thereof or both so that such
restrictions may be enforced in such area and for such time as is adjudged to be
reasonable. If Employee violates any of the restrictions contained in the
foregoing subparagraph (a), the restrictive period shall not run in favor of
Employee from the time of the commencement of any such violation until such time
as such violation shall be cured by Employee to the satisfaction of Company.
14. Prior Agreement. Employee represents to Company (a) that there are
no restrictions, agreements or understandings whatsoever to which Employee is a
party which would prevent or make unlawful his execution of this Agreement or
his employment hereunder, (b) that his execution of this Agreement and he
employment hereunder shall not constitute a breach of any contract, agreement or
understanding, oral or written, to which he is a party or by which she is bound
and (c) that he is free and able to execute this Agreement and to enter into
employment by Company.
15. Miscellaneous.
(a) Indulgences, Etc. Neither the failure nor any delay on the
part of either party to exercise any right, remedy, power or privilege under
this Agreement shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy, power or privilege preclude any other or
further exercise of the same or of any other right, remedy, power or privilege,
nor shall any waiver of any right, remedy, power or privilege with respect to
any occurrence be construed as a waiver of such right, remedy, power or
privilege with respect to any other occurrence. No waiver shall be effective
unless it is in writing and is signed by the party asserted to have granted such
waiver.
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<PAGE> 7
(b) Controlling Law. This Agreement and all questions relating
to its validity, interpretation, performance and enforcement (including, without
limitation, provisions concerning limitations of actions), shall be governed by
and construed in accordance with the laws of the Commonwealth of Pennsylvania,
and without the aid of any canon, custom or rule of law requiring construction
against the draftsman.
(c) Notices. All notices, request, demands and other
communications required or permitted under this Agreement shall be in writing
and may be given by (i) personal delivery, (ii) first-class United States mail,
postage prepaid, registered or certified, (iii) overnight delivery service,
charges prepaid, or (iv) telecopy or other means of electronic transmission, if
confirmed promptly by any of the methods specified in clauses (i) - (iii) of
this sentence, and will be deemed to have been duly given or made when delivered
personally, when mailed first class, postage prepaid, registered or certified
mail, when delivered to the overnight delivery company, charges prepaid, or when
sent by electronic transmission, to the respective parties, as follows :
(i) If to Employee:
William R. Romig
201 Salem Road
Moorestown, NJ 08057
(ii) If to Company:
EPL Technologies, Inc.
2 International Plaza, Suite 245
Philadelphia, PA 19113-1507
Attention: Secretary
Any party may alter the address to which
communications or copies are to be sent by giving notice of such change of
address in conformity with the provisions of this paragraph for the giving of
notice.
(d) Binding Nature of Agreement. This Agreement shall be
binding upon and inure to the benefit of Company and its successors and assigns
and shall be binding upon Employee, his heirs and legal representatives.
(e) Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which shall be deemed to be an original
as against any party whose signature appears hereon, and all of which shall
together constitute one and the same instrument. This agreement shall become
binding when one or more counterparts hereof, individually or taken together,
shall bear the signatures of all of the parties reflected hereon as the
signatories.
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<PAGE> 8
(f) Provisions Separable. The provisions of this Agreement are
independent of and separable from each other, and no provision shall be affected
or rendered invalid or unenforceable by virtue of the fact that for any reason
any other or others of them may be invalid or unenforceable in whole or in part.
(g) Entire Agreement. This Agreement contains the entire
understanding among the parties hereto with respect to subject matter hereof,
and supersedes all prior and contemporaneous agreements and understanding,
inducements or conditions, express or implied, oral or written, except as herein
contained. The express terms hereof control and supersede any course of
performance and/or usage of the trade inconsistent with any of the terms hereof.
This Agreement may not be modified or amended other than by an agreement in
writing.
(h) Paragraph Headings. The paragraph headings in this
Agreement are for convenience only; they form no part of this Agreement and
shall not affect its interpretation.
(i) Gender, Etc. Words used herein, regardless of the number
and gender specifically used, shall be deemed and construed to include any other
number, singular or plural, and any other gender, masculine, feminine or neuter,
as the context indicates is appropriate.
(j) Number of Days. In computing the number of days for
purposes of this Agreement, all days shall be counted, including Saturdays,
Sundays and holidays; provided, however, that if the final day of any time
period falls on a Saturday, Sunday or holiday on which federal banks are or may
elect to be closed, then the final day shall be deemed to be the next day which
is not a Saturday, Sunday or such holiday.
(k) Survival. Paragraphs 12 and 13 shall survive and continue
in full force in accordance with their terms notwithstanding any termination of
this Agreement.
IN WITNESS WHEREOF, the parties have executed and delivered
that Agreement as of the date first above written.
EPL TECHNOLOGIES, INC.
By:_______________________________
Paul L. Devine
President
By:_______________________________
William R. Romig
Employee
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<PAGE> 9
WILLIAM R. ROMIG
EXHIBIT A
OTHER BUSINESS ACTIVITIES
PROFILE OF OTHER ACTIVITIES
- - Limited in scope and time commitments; employee will give 100% to EPL
- - Activities will be predominantly those which were initiated prior to
September 1, 1994. On-going income (e.g. royalties) resulting from
these consulting agreements prior to September 1, 1994 will not be
effected by employment by EPL.
- - Additional activities will be those that may lead to contacts,
collaborations, interactions of benefit to EPL.
- - Employee respects the needs of "the Company" and will not abuse this
privilege and will keep EPL informed of such activities and their
potential benefit to EPL.
BUSINESS AREAS:
1. CONSULTING a part of obligation to Adjunct Professor positions at Penn State
University and Rutgers University. These are limited to the states of
Pennsylvania and New Jersey. Such consulting is for the purpose of strategic
planning, obtaining grants, and serving population of the state. For example
currently consulting for Rutgers in the general area of medicinal foods; and for
Danish Ministry of Agriculture in conjunction with Penn State.
2. ON-GOING RELATIONSHIPS
a) Agreements with direct competitors will be discontinued. Follow on
financial arrangements will be allowed.
b) Consulting for non-competitors is allowed provided employee meets
requirements of paragraph 2B and no issues are raised by the "Company".
3. FORESEEABLE ACTIVITIES
a) Garden Valley Inc. - Product of peas & beans
b) Special Commodity Services - Transportation of perishable
commodities
c) Cook College, Rutgers University - Medicinal Foods
d) Danish Ministry of Agriculture - Strategic Planning, Food Sciences
e) Penn State University - Postharvest preservation
(lecturer/consultant)
<PAGE> 10
WILLIAM R. ROMIG
EXHIBIT B
BONUS CRITERIA
YEAR ENDED DECEMBER 31, 1998
It is agreed that the bonus for this period will be based on
specific corporate performance objectives, to be agreed between William R. Romig
and the President of the Company. It is envisaged that upon meeting these, the
bonus would allow earnings of up to 25% of the base salary.
Any bonus for periods for or after the year ended December 31, 1999
will be discussed and agreed on a year by year basis between William R. Romig
and the President of the Company.
<PAGE> 1
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to the
Registration Statement of EPL Technologies, Inc. on Form S-3 of our report dated
March 28, 1997, except for Notes 9 and 19, as to which the date is January 26,
1998 appearing in the Annual Report on Form 10-K/A of EPL Technologies, Inc.,
for the year ended December 31, 1996, and to the reference to us under the
heading "Experts" in such Registration Statement.
/s/ Deloitte & Touche LLP
- -------------------------
DELOITTE & TOUCHE LLP
Philadelphia, Pennsylvania
February 10, 1998
<PAGE> 1
Exhibit 23.2
[COOPERS & LYBRAND LETTERHEAD]
INDEPENDENT AUDITOR'S CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to
the Registration Statement of EPL Technologies, Inc. on Form S-3 of our report
dated February 9, 1998, (relating to the financial statements of Fabbri Artes
Graficas Valencia, S.A., for the years ended September 30, 1997 and 1996).
We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
COOPERS & LYBRAND, S.A.
/s/ Jorge Molina
Jorge Molina
Valencia (Spain), February 10, 1998
<PAGE> 1
EXHIBIT 23.3
[LETTERHEAD OF PORTER MATTHEWS & MARSDEN]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this Amendment No. 1 to the
Registration Statement of EPL Technologies, Inc. on Form S-3 of our report
dated August 7, 1995, (relating to the financial statements of Bakery Packaging
Services Limited for the year ended November 30, 1994) and our report dated May
28, 1994 (relating to the financial statements of Bakery Packaging Services
Limited for the year ended November 30, 1993).
We also consent to the reference to us under the heading "Experts" in such
Registration Statement.
/s/ Porter Matthews & Marsden
Porter Matthews & Marsden,
Blackburn, United Kingdom
February 9, 1998
