Exhibit 10
LOAN AND SECURITY/STOCK PURCHASE AGREEMENT
LOAN AND SECURITY/STOCK PURCHASE AGREEMENT ("Agreement") is made as of
the __ day of May, 2002, by and between XXXXXXX FARMS, INC., a Delaware
corporation having its principal place of business at 000 Xxxxx Xxxx, X.X. Xxx
000, Xxxxxxxxx, XX 00000 ("Xxxxxxx Farms"), XXXXXXX FARMS OF VERMONT, INC., a
Vermont corporation with its principal place of business at Xxxxxxxx Xxxx,
Xxxxxxx, XX 00000 ("Borrower"), and ST. ALBANS COOPERATIVE CREAMERY, INC., a
Vermont corporation having a place of business at 000 Xxxxxxx Xxxxxx, Xx.
Xxxxxx, Xxxxxxx 00000 ("St. Albans").
WHEREAS, Borrower is a wholly-owned subsidiary of Xxxxxxx Farms; and
WHEREAS, St. Albans currently holds accounts receivable in the amount
of $5,567,221 (through Xxxxx xxxxxxxx) due from the Borrower in connection with
sales of milk and milk products pursuant to an Agreement effective as of
November 1, 1995 (the "Supply Agreement"); and
WHEREAS, St. Albans has agreed to (a) extend to the Borrower a loan in
the principal amount of One Million Dollars ($1,000,000) (the "Loan") for the
purpose of refinancing certain accounts payable of the Borrower past due to St.
Albans, subject to the terms and conditions set forth in this Agreement, and (b)
convert certain current accounts receivable due from the Borrower in the amount
of Four Million Five Hundred Thousand Dollars ($4,500,000) into equity in
Xxxxxxx Farms; and
WHEREAS, St. Albans has assisted Borrower in obtaining a working
capital loan from CoBank, ACB ("CoBank"), by providing a guaranty to CoBank (the
"CoBank Guaranty"); and
WHEREAS, Xxxxxxx Farms has proposed to acquire National Provisions,
Inc., a Florida corporation ("National Deli") and Florida Deli Pickle Company,
Inc., a Florida corporation ("Miramar Pickle"), by merging each of such
companies with a separate wholly owned subsidiary of Xxxxxxx Farms (the
"Acquisitions");
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter contained, the parties hereto agree as
follows:
1. The Loan.
1.1 Amount. Upon the terms and subject to the conditions of
this Agreement, St. Albans hereby extends the Loan to the Borrower by converting
One Million Dollars ($1,000,000) of current accounts receivable due from the
Borrower to a loan.
1.2 Term; Maturity Date. The entire unpaid principal sum
disbursed and outstanding, together with any accrued interest thereon remaining
unpaid and any other sums due St. Albans in connection with the Loan, shall be
due and payable in full on April 14, 2005 (the "Maturity Date").
1.3 Note. The Loan shall be evidenced by and repaid in
accordance with the terms of a promissory note of the Borrower in the amount of
the Loan (the "Note") payable to the order of St. Albans. The Note shall be
convertible into Xxxxxxx Farms common stock, par value $.001 per share ("Common
Stock") at $6.00 per share at any time by St. Albans and, at the option of
Borrower at any time and from time to time, the Note shall automatically be
converted into Common Stock at $6.00 per share, if the closing price (last
trade) for the Common Stock, as reported by Nasdaq or, in the event not reported
on Nasdaq, such other exchange or system on which the Common Stock may be
listed, is $8.00 or higher for a period of 30 consecutive trading days and, in
the case where such conversion is at the option of Xxxxxxx Farms, within 10
business days thereafter, Xxxxxxx Farms gives written notice of conversion to
St. Albans. Interest shall accrue on the outstanding principal balance at the
Applicable Federal Rate as of the date of the Note. Accrued interest shall be
paid annually in arrears on each anniversary date of the Note. The Note shall be
substantially in the form of Exhibit 1.3.
2. Audits by St. Albans. During such time as the Note remains
outstanding, St. Albans shall have the right at any time and from time to time
upon reasonable request to inspect during business hours any of the business
properties or premises of the Borrower and the books and records of the Borrower
relating to its general business affairs and its financial condition.
3. Security. Repayment of the Loan, together with interest thereon and
all other charges as provided herein or in any instrument or document executed
in connection herewith with respect to the Loan, and any amount that St. Albans
shall be required to pay in connection with the CoBank Guaranty, including
reasonable attorneys' fees and other expenses, and all future trade accounts
receivable of St. Albans due and owing from the Borrower, shall be secured by
the following (together referred to as the "Collateral"), which security
interests shall be subordinate to all existing bank and institutional debt and
purchase money obligations:
3.1 Borrower hereby grants, assigns, and pledges to St. Albans
a security interest in all personal property and fixtures of every kind and
nature, including without limitation, all furniture, fixtures, equipment, raw
materials, inventory, goods, accounts, contracts and contracts rights (including
contracts to supply products to third parties), insurance refund claims and all
other insurance claims and proceeds, tort claims, documents, instruments
(including certificated securities), deposit accounts and all general
intangibles, including, without limitation, all uncertificated securities, tax
refund claims, license fees, patents, patent applications, trademarks, trademark
applications, trade names, copyrights, copyright applications, rights to xxx and
recover for past infringement of patents, trademarks and copyrights, computer
programs, computer software, engineering drawings, service marks, customer
lists, goodwill, and all licenses, permits, agreements of any kind or nature
pursuant to which each of the Borrower possesses, uses, or has authority to
possess or use property (whether tangible or intangible) of others, or others
possess, use, or have authority to possess or use property (whether tangible or
intangible) of the Borrowers, and all recorded data of any kind or nature,
regardless of the medium of recording including, without limitation, all
software, writings, plans, specifications and schematics and all additions,
substitutions, replacements and accessions, proceeds, and products of any of the
foregoing; provided that the Collateral shall not include the property (if any)
described on Exhibit 3.1 hereto.
3.2 A mortgage (the "Mortgage") on the real property and
fixtures owned by the Borrower and located on Jonergin Drive, in Swanton,
Vermont, or used by the Borrower in connection with the operation of the
manufacturing plant and whey drying facility (the "Mortgaged Property").
Failure to specifically list any security shall not limit St.
Albans' rights in property that St. Albans otherwise may have from time to time
as security for the Loan, and the term "Collateral" shall include all such
property.
4. Equity Conversion
4.1 Sale and Purchase of Common Stock. Xxxxxxx Farms hereby
sells, assigns, and delivers to St. Albans, and St. Albans hereby purchases from
Xxxxxxx Farms, 333,333 shares of Common Stock (the "Common Shares") for an
aggregate purchase price of $1,000,000 (the "Common Stock Purchase Price"). As
full payment of the Common Stock Purchase Price, St. Albans hereby cancels,
forever discharges, and deems paid in full $1,000,000 in accounts payable
currently owed by Borrower to St. Albans.
4.2 Sale and Purchase of Preferred Stock and Common Stock
Purchase Warrant. Xxxxxxx Farms hereby sells, assigns, and delivers to St.
Albans, and St. Albans hereby purchases from Xxxxxxx Farms, (a) 583 shares of
Xxxxxxx Farms' Series B Convertible Redeemable Preferred Stock (the "Preferred
Shares") and (b) a 10-year warrant to purchase 583,333 shares of Common Stock
(as such amount may be adjusted as hereinafter set forth) at $.01 per share (the
"Common Stock Purchase Warrant"), for an aggregate purchase price of $3,500,000
(the "Preferred Stock/Warrant Purchase Price"). Each Preferred Share shall (i)
be convertible into 1,000.57 shares of Common Stock, (ii) automatically shall be
converted into such number of shares of Common Stock in the event that the
closing price (last trade) of the Common Stock, as reported by Nasdaq or, in the
event not reported on Nasdaq, such other exchange or system on which the Common
Stock may be listed, is $8.00 or more for 30 consecutive trading days, and (iii)
may be redeemed by Xxxxxxx Farms at a redemption price of $6,003.43. The Common
Stock Purchase Warrant may not be exercised for a period of three years from the
date hereof (the "Three Year Period"). If, during the Three Year Period, the
closing price (last trade) of the Common Stock (the "Closing Price"), as
reported by Nasdaq, or in the event not reported on Nasdaq, such other exchange
or system on which the Common Stock may be listed, is $8.00 or higher for 30
consecutive trading days, the Common Stock Purchase Warrant shall terminate. If,
during the Three Year Period, the Closing Price is not $8.00 or higher for 30
consecutive trading days, then the Common Stock Purchase Warrant may be
exercised on a pari passu basis percentage wise with the concurrent conversion
of the Preferred Shares (i.e. if 50% of the 583 Preferred Shares are converted,
concurrently therewith the Common Stock Purchase Warrant may be exercised to the
extent of 50% of the 583,333 shares of Common Stock covered thereby). To the
extent Preferred Shares have been converted or redeemed prior to the expiration
of the Three Year Period, the Common Stock Purchase Warrant may not be
exercised. In the event the Acquisitions are not consummated by September 30,
2002 (or October 31, 2002 in the event the Acquisitions require the holding of a
Xxxxxxx Farms shareholder meeting) for the amount of consideration (i.e. shares
of Common Stock and the warrants) previously represented to St. Albans, then the
number of shares of Common Stock into which the Common Stock Purchase Warrant
shall be exercisable shall be determined by dividing $3,500,000 by the closing
price (last trade) of the Common Stock on October 31, 2002, as reported by
Nasdaq, such other exchange or system on which the Common Stock may be listed,
and deducting from the quotient obtained thereby the number 583,333; provided
however that the end number so obtained shall in no event exceed 1,416,667
shares of Common Stock; and provided further that if between the date hereof and
October 31, 2002, the closing price (last trade) of the Common Stock, as
reported by Nasdaq or, in the event not reported on Nasdaq, such other exchange
or system on which the Common Stock may be listed, is $3.00 or more for 20
consecutive trading days then the number of shares of Common Stock into which
the Common Stock Purchase Warrant may be exercisable shall be 583,333 shares of
Common Stock.. The Common Stock Purchase Warrant shall be substantially in the
form of Exhibit 4.2. As full payment of the Preferred Stock Purchase Price, St.
Albans hereby cancels, forever discharges, and deems paid in full $3,500,000 in
accounts payable currently owed by Borrower to St. Albans.
5. Representations and Warranties of Xxxxxxx Farms and Borrower. To
induce St. Albans to enter into this Agreement, each of Xxxxxxx Farms and the
Borrower hereby represents and warrants to St. Albans that:
5.1 Existence and Authority of Xxxxxxx Farms. Xxxxxxx Farms is
a corporation duly organized and validly existing under the laws of the State of
Delaware, and is duly qualified as a foreign corporation and is in good standing
under the laws of each jurisdiction in which the conduct of its business or the
ownership of its assets requires such qualification. The execution, delivery,
and performance of this Agreement and the documents executed in connection
herewith (collectively, the "Documents") by Xxxxxxx Farms and the consummation
by Xxxxxxx Farms of the transactions with St. Albans contemplated hereby (i)
have been duly authorized by all necessary corporate action, and (ii) do not
conflict with or result in any breach or contravention of any provision of law,
statute, rule or regulation to which Xxxxxxx Farms is subject or any judgment,
order, writ, injunction, license, or permit applicable to Xxxxxxx Farms.
5.2 Existence and Authority of Borrower. Borrower is a
corporation duly organized and validly existing under the laws of the State of
Vermont, and is duly qualified as a foreign corporation and is in good standing
under the laws of each jurisdiction in which the conduct of its business or the
ownership of its assets requires such qualification. The execution, delivery,
and performance of this Agreement and the Documents by Borrower and the
consummation by Borrower of the transactions with St. Albans contemplated hereby
(i) have been duly authorized by all necessary corporate action, and (ii) do not
conflict with or result in any breach or contravention of any provision of law,
statute, rule or regulation to which Borrower is subject or any judgment, order,
writ, injunction, license, or permit applicable to Borrower.
5.3 Enforceability. The execution and delivery by Xxxxxxx
Farms and Borrower of this Agreement and the Documents to which they are a party
constitute their valid and legally binding obligation enforceable against them
in accordance with their respective terms and provisions, except as
enforceability may be limited by bankruptcy, insolvency, moratorium or other
laws affecting the enforceability of creditors' rights and by general principles
of equity, which may limit the enforceability of such obligations.
5.4 Governmental Approvals. The execution, delivery, and
performance by Xxxxxxx Farms and Borrower of this Agreement and the Documents to
which they are a party, and the consummation by them of the transactions
contemplated hereby and thereby do not require the approval or consent of, or
the filing with, any governmental agency or authority other than those already
obtained or made, those set forth on Schedule 5.4 hereof, and the recording of
the Mortgage and related financing statements in the appropriate records
offices.
5.5 Capitalization. The authorized capital stock of Xxxxxxx
Farms consists of (a) 10,000,000 shares of Common Stock, of which 2,971,342
shares are issued and outstanding, and 1,000,000 shares of preferred stock, par
value $.001 per share (the "Preferred Stock"), of which there are outstanding
216 shares designated as Series A Convertible Redeemable Preferred Stock. Except
(x) as set forth on Exhibit 5.5 hereof, and (y) for 2,173,914 shares of Common
Stock and warrants to purchase 869,566 shares of Common Stock at $3.00 per share
currently anticipated to be issued to the shareholders of National Deli and
Miramar Pickle in connection with the Acquisitions, there are no outstanding
subscriptions, options, warrants, calls, commitments, agreements or rights of
any kind or nature in respect of the authorized but unissued shares of capital
stock of Xxxxxxx Farms and none of such shares are reserved for issuance for any
purpose.
5.6 Securities and Exchange Commission Filings; Financial
Statements
(a) Xxxxxxx Farms has filed all forms, reports and
documents required to be filed with the Securities and Exchange Commission
("SEC") since January 1, 1994 and has heretofore delivered to St. Albans in the
form filed with the SEC (i) its Annual Report on Form 10-K for the fiscal year
ended March 31, 2001, and (ii) its Quarterly Reports on Form 10-Q for each of
the quarters ended June 30, 2001 and September 30, 2001, and December 31, 2001
(collectively, "Xxxxxxx Farms SEC Reports"). Xxxxxxx Farms' SEC Reports (x) were
prepared in accordance with SEC requirements, and (y) did not contain any untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. In addition, Xxxxxxx
Farms has delivered to St. Albans a draft copy of Xxxxxxx Farms' financial
results for the three (3) month period ended March 31, 2002 (the "Current
Financial Results"), which Current Financial Results have not been filed with
the SEC.
(b) The financial statements contained in Xxxxxxx
Farms' SEC Reports and the Current Financial Results have been prepared in
accordance with generally accepted accounting principles applied on a consistent
basis throughout the periods involved (except as may be indicated in the notes
thereto) and fairly present the financial position of Xxxxxxx Farms as at the
respective dates thereof and the results of operations of Xxxxxxx Farms for the
periods indicated, except that the unaudited interim financial statements and
the Current Financial Results were or are subject to normal and recurring
year-end adjustments which were not or are not expected to be material in
amount. Since the date of the Current Financial Results there has not been any
material adverse change in the financial condition of Xxxxxxx Farms.
5.7 No Breach or Violation. The consummation of the
transactions with St. Albans hereby contemplated and the performance of this
Agreement will not result in any breach of, or constitute a default under, any
mortgage, deed of trust, lease, loan or credit agreement, trust agreement,
partnership agreement, by-laws, articles of association, shareholder agreement,
or other instrument to which Xxxxxxx Farms or the Borrower is a party or by
which either may be bound or affected.
5.8 Taxes. Xxxxxxx Farms and the Borrower have filed or caused
to be filed all federal, state, and local tax returns required to be filed and
have paid or caused to be paid all taxes, assessments, and governmental charges
and levies thereon, including any interest and penalties, to the extent the same
have become due. Xxxxxxx Farms and the Borrower have set up reserves that are
believed by them to be adequate for the payment of such taxes are not yet due.
Nothing contained in this subsection shall prevent Xxxxxxx Farms and the
Borrower from contesting in good faith any tax or assessment assessed against
them so long as adequate reserves for payment of the same have been made and
verified to St. Albans.
5.9 Absence of Actions. There is no pending or threatened
action or proceeding against or affecting Xxxxxxx Farms or the Borrower before
any court, governmental agency, arbitrator, or otherwise which may, in one case
or in the aggregate, materially adversely affect the validity or enforceability
of the Mortgage, or the priority of the lien thereof, or any Collateral, or the
financial condition, operations, properties, or business of Xxxxxxx Farms or the
Borrower, or which would prevent or impair Xxxxxxx Farms or the Borrower from
complying with or performing any of the provisions of this Agreement or the
Documents. Neither Xxxxxxx Farms nor the Borrower is in default with respect to
any judgment, decision, order, writ, injunction, decree, or demand of any court
or any governmental authority.
5.10 Compliance With Other Instruments, Laws, Etc. Neither
Xxxxxxx Farms nor the Borrower is in violation of any agreement or instrument to
which it may be subject or by which it or any of its properties may be bound, or
any decree, order, judgment, statute, license, rule or regulation, in any of the
foregoing cases in a manner that could result in the imposition of substantial
penalties or materially and adversely affect the financial condition, properties
or business of Xxxxxxx Farms or the Borrower.
5.11 Operation of Business. The Borrower possesses all
licenses, permits, franchises, patents, copyrights, trademarks, and tradenames,
or rights thereto, necessary to conduct the Borrower's business substantially as
now conducted and as presently proposed to be conducted, and is not in violation
of any valid rights of others with respect to any of the foregoing.
5.12 Ownership. Except for the security interest of St. Albans
therein and the liens identified in Exhibit 5.12, the Borrower is the owner of
all Collateral free from any lien, security interest, encumbrance or other
right, title or interest of any other person, firm or corporation, and the
Borrower shall defend the Collateral against all claims and demands of all
persons at any time claiming the same or any interest therein adverse and
subordinate to St. Albans.
6.(a) Covenants of Xxxxxxx Farms. Xxxxxxx Farms covenants and agrees
with St. Albans: (i) to use its best efforts so as to place a designated
representative of St. Albans on the Board of Directors of Xxxxxxx Farms and on
the audit committee of the Board (or if such representative is unable to qualify
for the audit committee, to attend audit committee meetings) for such period of
time that St. Albans owns at least 166 Preferred Shares, which Board shall have
no more than seven (7) members unless NASDAQ requires additional independent
directors to sit on the audit committee of the Board, in which case the Board
shall consist of no more than seven (7) members plus such number of additional
directors as is required to satisfy Nasdaq's requirement for independent Board
members on the audit committee of the Board, (ii) to use its good faith efforts
to renegotiate or refinance existing debt to ensure adequate working capital for
the Borrower and to obtain terms more favorable to the Borrower, and (iii) in
connection with (ii) above, in the event of a renegotiation of debt with CoBank,
(A) to use its good faith efforts to have St. Albans removed from the CoBank
Guaranty, and (B) to not cause the release of any collateral or guaranty until
St. Albans has been fully released from the CoBank Guaranty.
(b) Covenants of Borrower. Borrower covenants and agrees that, in the
event Borrower shall seek to sell the Mortgaged Property and the Collateral used
in connection with the operation of the manufacturing plant (including the whey
drying facility), St. Albans shall have a thirty day right of first refusal with
respect thereto (the "Right of First Refusal").
7. Representations, Warranties and Covenants of St. Albans. To induce
Xxxxxxx Farms and the Borrower to enter into this Agreement, St. Albans hereby
represents and warrants to each of them that:
7.1 Existence and Authority of St. Albans. St. Albans is a
corporation duly organized and validly existing under the laws of the State of
Vermont and is duly qualified as a foreign corporation and is in good standing
under the laws of each jurisdiction in which the conduct of its business or the
ownership of its assets requires such qualification. The execution, delivery and
performance of this Agreement and the Documents by St. Albans and the
consummation by St. Albans of the transactions contemplated hereby (i) have been
duly authorized by all necessary corporate action, and (ii) do not conflict with
or result in any breach or contravention of any provision of law, statute, rule
or regulation to which St. Albans is subject or any judgment, order, writ,
injunction, license, or permit applicable to St. Albans.
7.2 Enforceability. The execution and delivery by St. Albans
of this Agreement and the Documents to which it is a party constitutes its valid
and legally binding obligation enforceable against it in accordance with their
respective terms and provisions, except as enforceability may be limited by
bankruptcy, insolvency, moratorium or other laws affecting the enforceability of
creditors' rights and by general principles of equity, which may limit the
enforceability of such obligations.
7.3 Governmental Approvals. Except as set forth on Schedule
7.3 hereof, the execution, delivery, and performance by St. Albans of this
Agreement and the Documents to which it is a party and the consummation by it of
the transactions contemplated hereby and thereby do not require the approval or
consent of, or the filing with, any governmental agency or authority.
7.4 No Breach or Violation. The consummation of the
transactions hereby contemplated and the performance of this Agreement will not
result in any breach of, or constitute a default under, any mortgage, deed of
trust, lease, loan or credit agreement, trust agreement, partnership agreement,
by-laws, articles of association, shareholder agreement, or other instrument to
which St. Albans is a party or by which it may be bound or affected.
7.5 Accredited Investor. St. Albans is an "accredited
investor" within the meaning of Rule 501 promulgated under the Securities Act of
1933, as amended (the "Act").
7.6 Investment Knowledge. St. Albans has sufficient knowledge
and experience in financial and business matters so as to be capable of
evaluating the risks and merits of St. Albans' investment in Xxxxxxx Farms.
7.7 St. Albans' Independent Investigation. St. Albans, in
purchasing the Common Shares, the Preferred Shares, the Common Stock Purchase
Warrant and the Note (collectively, the Securities") hereunder, has relied
solely upon an independent investigation made by it and its representatives, if
any. Prior to the date hereof, St. Albans has been given the opportunity to ask
questions of, and receive answers from, representatives of Xxxxxxx Farms. St.
Albans also has been given access to and the opportunity to examine all books
and records of Xxxxxxx Farms, and all material contracts and documents of
Xxxxxxx Farms which have been filed as exhibits to Xxxxxxx Farms' filings made
under the Act and the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). In making its investment decision to purchase the Securities, St. Albans
is not relying on any oral or written representations or assurances from Xxxxxxx
Farms or any other person other than as set forth in this Agreement. St. Albans
acknowledges that it has received and reviewed Xxxxxxx Farms' SEC Reports and
the Current Financial Results. St. Albans is knowledgeable about the affairs of
Xxxxxxx Farms.
7.8 Investment Intent. The Securities are being acquired for
St. Albans' own account for the purpose of investment and not with a view to or
for resale in connection with any distribution thereof or interest therein.
7.9 Registration. St. Albans understands that (a) the
Securities have not been registered under the Act by reason of their issuance in
a transaction exempt from the registration requirements of the Act, (b) the
Securities must be held indefinitely unless a subsequent disposition thereof is
registered under the Act or is exempt from such registration (and Xxxxxxx Farms
has no present intention of registering any disposition of the Securities), (c)
the certificates evidencing the Securities shall bear a legend to such effect,
and (d) Xxxxxxx Farms will make a notation on its transfer books to such effect.
7.10 St. Albans' Economic Risk. St. Albans understands and
acknowledges that an investment in Xxxxxxx Farms involves numerous and
substantial risks. In particular, St. Albans understands and acknowledges that
there are limitations on the liquidity of the Securities. St. Albans represents
that St. Albans is able to bear the economic risk of an investment in Xxxxxxx
Farms, including a possible total loss of investment. In making this statement
St. Albans hereby represents and warrants to Xxxxxxx Farms that St. Albans has
adequate means of providing for St. Albans' current needs and contingencies, and
that St. Albans is able to afford to hold the Securities for an indefinite
period. Further, St. Albans represents that St. Albans has no present need for
liquidity in the Securities and St. Albans is willing to accept such investment
risks.
7.11 No Government Recommendation or Approval. St. Albans
understands that no United States federal or state agency, or similar agency of
any other country, has reviewed, approved, passed upon, or made any
recommendation or endorsement of Xxxxxxx Farms or the purchase of the
Securities.
7.12 No Tax Advice From Xxxxxxx Farms or Its Agents. St.
Albans has had an opportunity to review with its own tax advisors this Agreement
and the tax consequences of the transactions contemplated by this Agreement. St.
Albans is relying solely on such advisors and not on any statements or
representations of Xxxxxxx Farms or any of its agents and understands that St.
Albans (and not Xxxxxxx Farms) shall be responsible for St. Albans' own tax
liability that may arise as a result of the transactions contemplated by this
Agreement.
7.13 No Legal Advice from Xxxxxxx Farms or Its Agents. St.
Albans has had the opportunity to review this Agreement and the transactions
contemplated by this Agreement with its own legal counsel. St. Albans is relying
solely on such counsel and not on any statements or representations of Xxxxxxx
Farms or any of its agents for legal advice with respect to this Agreement and
the transactions contemplated by this Agreement, except for representations,
warranties and covenants set forth herein.
7.14 Resales of Securities. St. Albans acknowledges,
covenants, and agrees that St. Albans may not and will not sell or otherwise
transfer the Securities or the shares of Common Stock issuable upon conversion
of the Preferred Shares or the Note or the exercise of the Common Stock Purchase
Warrant (the "Conversion Shares") unless such sale or transfer is made pursuant
to an effective and current registration statement under the Act or pursuant to
an exemption from registration under the Act. Prior to any sale or transfer
(except a sale or transfer pursuant to an effective and current registration
statement), St. Albans shall deliver to Xxxxxxx Farms (a) a written notice
briefly describing the manner of such sale or transfer, (b) if requested by
Xxxxxxx Farms, a written opinion of counsel for St. Albans (provided that such
counsel, and the form and substance of such opinion, are reasonably satisfactory
to Xxxxxxx Farms) to the effect that such sale or transfer may be effected
without the registration of such sale or transfer under the Act and applicable
state law, and (c) an agreement, duly executed by the purchaser or transferee,
containing a provision substantially similar to this Section 7.14, and
containing such other provisions, agreements, representations, and warranties as
Xxxxxxx Farms shall reasonably request.
7.15 Restrictive Legend. To insure compliance with the
provisions of the Act and state securities laws, the certificates evidencing the
Securities and the Conversion Shares shall bear a legend substantially as
follows:
"The securities represented by this certificate have been
acquired for investment and have not been registered pursuant
to the Securities Act of 1933, as amended (the "Act"), or any
applicable state statutes. Such securities may not be sold,
transferred, pledged, hypothecated, or otherwise disposed of
unless (i) a registration statement under the Act and
applicable state securities laws shall have become effective
with regard thereto or (ii) an exemption from registration
exists under the Act (or regulations promulgated thereunder)
and applicable state securities laws and such exemption is
applicable thereto."
8. Milk and Milk Products Supply.
8.1 Exclusive Contract For Volume. For a period of four (4)
years beginning on the effective date of this Agreement, the Borrower shall (a)
purchase all of its requirements for milk and milk by-products from St. Albans
to the extent that St. Albans has sufficient volume available for sale, and (b)
to the extent that St. Albans cannot supply the Borrower's requirements itself,
the Borrower shall purchase their additional requirements for milk and milk
by-products through St. Albans; provided, however, that the price for such milk
and milk by-products (including handling charges, premiums, etc.) is competitive
with prices the Borrower could obtain elsewhere.
8.2 Price Concessions.
(a) Notwithstanding any contrary provision in the Supply Agreement, for
the period commencing April 1, 2002, and ending on Xxxxx 00, 0000, Xx. Xxxxxx
shall sell milk and milk products to the Borrower at the following prices.
(i) The price for milk will be the announced
USDA milk component prices for each month, plus * (on and all inclusive basis,
including handling, quality premium, administration, etc., but excluding the
USDA Administrator's dues) (the "Milk Premium"), and
(ii) The price for skim condensed will be
the announced USDA milk component prices for each month plus * (the "Skim
Condensed Premium");
provided, however, that Borrower shall not be responsible for or pay the Milk
Premium or the Skin Condensed Premium on purchases for any month until such time
as the aggregate savings on purchases for the month from not having to pay the
same equals * (the "Total Allowable Monthly Savings"), after which time the
Borrower shall pay the Milk Premium and the Skim Condensed Premium for purchases
made during the balance of the month. The savings so enjoyed by the Borrower
with respect to the Milk Premium and the Skim Condensed Premium are hereinafter
referred to as the "Price Concessions".
The prices referred to in (i) and (ii) above, and the amount
of the Total Allowable Monthly Savings will be reviewed and renegotiated by St.
Albans and the Borrower in good faith on or before January 1, 2006, for the
fiscal year beginning April 1, 2006.
*Omitted. Subject of a request for confidential treatment and filed separately
with the Securities and Exchange Commission.
(b) Notwithstanding anything to the contrary
contained in Section 8.2(a) hereof, in the event the Acquisitions are not
consummated by September 30, 2002 (or October 31, 2002 in the event the
Acquisitions require the holding of a Xxxxxxx Farms shareholder meeting) for the
amount of consideration (i.e. shares of Common Stock and the warrants)
previously represented to St. Albans, then the obligation of St. Albans to
extend the aforesaid pricing concessions shall terminate as of Xxxxx 00, 0000,
xxx Xx. Xxxxxx and the Borrower shall renegotiate, in good faith, new milk and
milk product supply terms for the fiscal year beginning April 1, 2003.
8.3 Weekly Payment For Purchases. The Borrower shall pay St.
Albans for all milk and milk product purchases from or through St. Albans on a
weekly basis in arrears based on estimated prices and volume of purchases for
the then current calendar month. If St. Albans and the Borrower cannot agree on
the estimated prices and volume of purchases for the then current calendar
month, then the actual prices and volume of purchases for the previous calendar
month shall be used to determine the amount of the weekly payment. There shall
be an accounting no later the fifteenth day of the following calendar month to
reconcile the actual prices and volume of purchases with the estimated prices
and volume of purchases and any additional payment due from the Borrower shall
be made within five (5) business days of the receipt of the accounting from St.
Albans. In lieu of making the weekly payments required in this subsection, the
Borrower may provide to St. Albans a letter of credit or a bond from a financial
institution and in form and substance acceptable to St. Albans, covering the
purchases to be made for the period covered by the letter of credit or bond. Any
current accounts receivable not converted pursuant to this Agreement shall be
paid as part of the accounting for purchases during the month of April.
8.4 Reimbursement For Price Concessions. Commencing with
Borrower's 2003 fiscal year (ending March 31, 2003), if, for any fiscal year in
which St. Albans had made Price Concessions to the Borrower pursuant to Section
8.2(a) hereof, the Borrower achieves profits of more than $1,000,000, then the
Borrower shall pay to St. Albans as an additional market premium fifty percent
(50%) of pre-tax profits over $1,000,000; provided, however, that under no
circumstances shall the additional market premium in any fiscal year exceed the
total Price Concessions for that fiscal year. Pre-tax profits of the Borrower
shall be those profits of Borrower utilized in preparing Xxxxxxx Farms' Form
10-K for the applicable fiscal year, except that (a) management fees to Xxxxxxx
Farms shall be limited to the Borrower's equitable share of Xxxxxxx Farms'
actual costs of operations (accounting, legal, rent, salaries, etc.), and (b)
inter-company transactions shall be accounted for as though they were entered
into on an arms length basis.
8.5 Supply Agreement. Except as specifically modified by this
Section 8, the terms and conditions of the Supply Agreement shall remain in full
force and effect.
9. Deliveries by the Parties.
9.1 Deliveries by St. Albans. Concurrently with the execution
and delivery of this Agreement, St. Albans is delivering to:
(a) Borrower: Outstanding invoices in the aggregate
amount of $1,000,000, reflecting amounts billed to, but not paid by, Borrower,
each of which shall be marked "paid in full."
(b) Xxxxxxx Farms: Outstanding invoices in the
aggregate amount of $3,500,000, reflecting amounts billed to, but not paid by,
Borrower, each of which shall be marked "paid in full."
9.2 Deliveries by Borrower to St. Albans. Concurrently with
the execution and delivery of this Agreement, Borrower is delivering to St.
Albans:
(a) The Note.
(b) UCC-1 financing statements representing the
subordinated security interest granted pursuant to Section 3.1 hereof.
(c) The Mortgage.
(d) The Right of First Refusal.
9.3 Deliveries by Xxxxxxx Farms to St. Albans. Concurrently
with the execution and delivery of this Agreement, Xxxxxxx Farms is delivering
to St. Albans:
(a) A certificate of the Common Shares.
(b) A certificate for the Preferred Shares.
(c) The Common Stock Purchase Warrant.
10. Miscellaneous.
10.1 Assignment of Agreement by Xxxxxxx Farms and the
Borrower. This Agreement shall not be assignable by Xxxxxxx Farms or the
Borrower without St. Albans prior written consent, and any attempted assignment
without St. Albans prior written consent shall create a default under the Note.
10.2 Assignment of Agreement by Lender. This Agreement and the
Documents may not be assigned by St. Albans without the prior written consent of
Xxxxxxx Farms and Borrower, except in connection with a merger with another
entity or the restructuring of the business of St. Albans.
10.3 Indemnification.
10.3.1 Indemnification of St. Albans. Each of Xxxxxxx
Farms and the Borrower agrees to indemnify and hold harmless St. Albans from and
against any and all claims, actions, suits, liabilities, losses, damages and
expenses (including reasonable attorney's fees) arising out of the breach of any
of their representations, warranties, covenants, or obligations contained in
this Agreement.
10.3.2 Indemnification of Xxxxxxx Farms and the
Borrower. St. Albans agrees to indemnify Xxxxxxx Farms and the Borrower from and
against any and all claims, actions, suits, liabilities, losses, damages and
expenses (including reasonable attorney's fees) arising out of the breach of any
of St. Albans representations, warranties, covenants, or obligations contained
in this Agreement.
10.4 Entire Agreement; Revisions. This Agreement expresses the
entire understanding of the parties with respect to the transactions
contemplated hereby and supersede all prior negotiations, representations,
agreements, and understandings relating to the subject matter thereof, whether
written or oral. Each of the parties acknowledges that it and its counsel have
had an opportunity to review this Agreement. There are no implicit or oral
understandings or agreements not fully and accurately set forth in this
Agreement. It is understood and agreed that no amendment to this Agreement shall
be valid unless the same is in writing and signed by the parties hereto.
10.5 Waiver of Rights. Neither the failure by any party to
this Agreement to exercise, nor the delay by any party to this Agreement in
exercising, any right, power or privilege under this Agreement shall operate as
a waiver thereof, nor shall any single or partial exercise or any right, power
or privilege preclude any other or further exercise of any other right, power or
privilege.
10.6 Notices. Any demand upon or notice to the parties hereto
shall be effective when delivered by hand or when properly deposited in the
mails postage prepaid, or sent by telex, answerback received, or electronic
facsimile transmission, receipt acknowledged, or delivered to a telegraph
company or overnight courier, in each case addressed to the parties at the
address shown below or such other address as a party may advise the others in
writing.
Lender: St. Albans Cooperative Creamery, Inc.
000 Xxxxxxx Xxxxxx
Xx. Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxxxxx
Fax: (000) 000-0000
Copy to: Xxxxxx X. Xxxx, Esq.
Xxxxx, Xxxxx & XxXxxxxx, P.C.
000 Xxxxxxx Xxxxxx
X.X. Xxx 000
Xxxxxxxxxx, XX 00000-0000
Fax: (000) 000-0000
Xxxxxxx Farms and Xxxxxxx Farms, Inc.
Borrower: 000 Xxxxx Xxxx
X.X. Xxx 000
Xxxxxxxxx, XX 00000
Attention: Xxxxxxx Xxxxxxxx
Fax: (000) 000-0000
Copy to: Xxxxxx X. Xxxxxxx, Esq.
Xxxxxxx & Xxxxxx, LLP
000 Xxxxxxx Xxxxxxxxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
10.7 Execution; Governing Law. This Agreement may be executed
in duplicate, each of which shall be deemed an original. This Agreement may be
executed in several counterparts, each of which shall be deemed an original, and
all such counterparts together shall constitute one and the same instrument.
This Agreement shall be construed in accordance with and governed by the laws of
the State of Delaware.
10.8 Agreement not Intended as Partnership or Agency. The
parties expressly disclaim any intention to create a partnership or joint
venture or Agency pertaining to the subject matter of this Agreement.
10.9 Agreement to Govern. In the event of any material
inconsistencies between this Agreement and any of the documents executed in
connection herewith, this Agreement shall govern.
10.10 Costs, Expenses, and Taxes. St. Albans shall pay all
costs and expenses in connection with the preparation, execution and delivery of
the documents securing the Collateral. Xxxxxxx Farms shall pay any and all fees
payable in connection with the recording thereof.
10.11 Severability of Provisions. Any provision of this
Agreement which is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this Agreement
or affecting the validity or enforceability of such provision in any other
jurisdiction.
10.12 Headings. The headings in this Agreement are included
for the convenience of reference only and shall not constitute a part of this
Agreement.
10.13 Binding Effect. This Agreement shall be binding upon the
parties hereto and their respective successors and permitted assigns.
10.14 Confidentiality. Xxxxxxx Farms and the Borrower intend
that the terms of this Agreement shall be confidential. Neither Xxxxxxx Farms
nor Borrower shall release information to the public regarding the terms and
conditions of this Agreement, including ,without limitation, the Price
Concessions without the prior written consent of St. Albans which consent shall
not be unreasonably withheld or delayed. Notwithstanding anything to the
contrary contained in this Section 10.14, Xxxxxxx Farms may disclose such
information as may be required to be disclosed by federal and state securities
laws, a court of competent jurisdiction or any governmental agency having
authority to compel such disclosure, or is otherwise required by law or in
connection with its Nasdaq hearing.
10.15 Venue. Xxxxxxx Farms and Borrower agree that they shall
be subject to the jurisdiction of the courts of the State of Vermont and the
federal courts for the District of Vermont. The exclusive venue for any
proceeding arising out of or related in any way to this Agreement shall be in
the courts of the State of Vermont and the federal courts for the District of
Vermont and each of them hereby waives any objection to such venue.
IN WITNESS WHEREOF, the parties hereto, acting by and through their
duly authorized agents, have caused this Loan and Security Agreement/Stock
Purchase Agreement to be executed as of the date first above written.
XXXXXXX FARMS, INC.
By: /s/ Xxxxxxx Xxxxxxxx
-------------------------------------------
Its President and duly
-------------------------------
authorized agent
XXXXXXX FARMS OF VERMONT, INC.
By: /s/ Xxxxxxx Xxxxxxxx
-------------------------------------------
Its V.P. and duly authorized
----------------------
agent
LENDER
ST. ALBANS COOPERATIVE CREAMERY, INC.
By: /s/ Xxxx Xxxxxxxxxx
-------------------------------------------
Its general manager and duly authorized agent
LIST OF EXHIBITS
Exhibit 1.3 Form of Note
Exhibit 3.1 Collateral Excluded From Lender's Security Interest
Exhibit 4.2 Form of Warrant
Exhibit 5.4 Governmental Approvals
Exhibit 5.5 Options, Warrants, Etc.
Exhibit 5.12 Existing Liens
