SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended January 24, 1998
Commission File No. 1-11254
VERMONT PURE HOLDINGS, LTD.
(Exact name of registrant as specified in its charter)
Delaware 06-1325376
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Route 66; PO Box C; Randolph, VT 05060
(Address of principal executive offices) (Zip Code)
(802)728-3600
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Outstanding at
Class March 3, 1998
Common Stock, $.001 Par Value 10,279,540
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VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES
INDEX
Page Number
Part I - Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet as of
January 24, 1998 (unaudited) and
October 25, 1997 4
Consolidated Statement of Operations
(unaudited) for the Three Months ended
January 24, 1998 and January 25, 1997 5
Consolidated Statement of Cash Flows
(unaudited) for the Three Months ended
January 24, 1998 and January 25, 1997 6
Notes to Consolidated Financial Statements
(unaudited) 7 - 10
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operation 11 - 13
Part II - Other Information 14 - 15
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature 16
2
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Page Number
Exhibit Index 17
Asset Purchase Agreement between Vermont Pure Holding, Ltd. and
Vermont Coffee Time, Inc. relating to the purchase certain assets and
liabilities dated December 19, 1997.
Promissory Note Between Vermont Pure Springs, Inc. and Vermont
Pure Holdings and Vermont Coffee Time, Inc. dated January 5, 1998.
Security Agreement between Vermont Pure Springs and Vermont
Pure Holdings and Vermont Coffee Time, Inc. dated January 5, 1998.
Consulting Agreement between Amy Berger and Vermont Pure Holdings,
Ltd. dated January 5, 1998.
Distribution Rights Agreement between Vermont Pure Springs, Inc. and
Akva Hf. dated December 9, 1997.
Packing and Distribution Agreement between Vermont Pure Springs, Inc.
and Akva Hf. dated December 9, 1997.
3
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<CAPTION>
VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
January 24, October 25,
1998 1997
====================== =================
(Unaudited)
ASSETS
CURRENT ASSETS:
<S> <C> <C>
Cash $ 470,689 $ 93,808
Accounts receivable 1,940,599 1,974,765
Inventory 881,970 978,473
Current portion of deferred tax asset 326,000 326,000
Other current assets 157,025 288,627
___________________ _________________
TOTAL CURRENT ASSETS 3,776,283 3,661,673
___________________ _________________
PROPERTY AND EQUIPMENT - net of
accumulated depreciation 7,572,804 7,332,912
___________________ _________________
OTHER ASSETS:
Intangible assets - net of accumulated 6,777,201 5,216,300
amortization
Deferred tax asset 218,000 218,000
Other assets 188,034 117,881
___________________ _________________
7,183,235 5,552,181
___________________ _________________
$ 18,532,322 $ 16,546,766
=================== =================
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 1,168,323 $ 1,099,094
Current portion of customer deposits 52,201 49,534
Accrued expenses 1,073,370 986,961
Line of credit 980,621 238,021
Current portion of long term debt 977,355 885,748
Current portion of obligations under
capital lease 110,297 144,944
___________________ _________________
TOTAL CURRENT LIABILITIES 4,362,167 3,404,302
Long term debt 6,534,930 5,435,292
Obligations under capital lease 339,725 304,597
Customer deposits 817,810 760,559
___________________ _________________
TOTAL LIABILITIES 12,054,632 9,904,750
___________________ _________________
STOCKHOLDERS' EQUITY:
Common stock - $.001 par value, 20,000,000
authorized shares, issued and outstanding,
10,207,371 shares as of January 24, 1998
and 10,131,980 shares at October 25, 1997 10,207 10,132
Paid in capital 22,747,343 22,447,092
Accumulated deficit (16,279,860) (15,815,208)
___________________ _________________
TOTAL STOCKHOLDERS' EQUITY 6,477,690 6,642,016
___________________ _________________
$ 18,532,322 $ 16,546,766
=================== =================
4
See Notes to Financial Statements
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<CAPTION>
VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
Three months ended
====================================================
January 24, January 25
1998 1997
=================== ====================
(Unaudited) (Unaudited)
<S> <C> <C>
SALES $ 4,407,086 $ 2,315,415
COST OF GOODS SOLD 1,942,154 1,230,895
____________________ ___________________
GROSS PROFIT 2,464,932 1,084,520
____________________ ___________________
OPERATING EXPENSES:
Selling, general and administrative expense 2,017,100 1,237,486
Advertising expenses 640,897 420,656
Amortization 120,706 34,599
____________________ ___________________
TOTAL OPERATING EXPENSES 2,778,703 1,692,741
____________________ ___________________
PROFIT (LOSS) FROM OPERATIONS (313,771) (608,221)
____________________ ___________________
OTHER INCOME (EXPENSE):
Interest - net (151,284) (72,991)
Miscellaneous 403 10,971
____________________ ___________________
TOTAL OTHER INCOME (EXPENSE) (150,881) (62,020)
____________________ ___________________
NET PROFIT (LOSS) $ (464,652) $ (670,241)
==================== ===================
BASIC EARNINGS (LOSS) PER SHARE ($0.05) ($0.07)
==================== ===================
Weighted Average Shares Used in Computation 10,162,759 9,678,268
==================== ===================
5
See Notes to Financial Statements
</TABLE>
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<TABLE>
<CAPTION>
VERMONT PURE HOLDINGS, LTD AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Three months ended
________________________________________
January 24, January 25,
1998 1997
_________________ _________________
(Unaudited) (Unaudited)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (464,652) $ (670,241)
Adjustments to reconcile net loss to net
cash from operating activities:
Depreciation 292,674 175,734
Amortization 120,706 34,599
(Gain) loss on disposal of property and equipment (13,029) (10,248)
_________________ __________________
(64,301) (470,156)
Changes in assets and liabilities (net of
effect of acquisitions):
(Increase) Decrease in accounts receivable 142,313 162,422
(Increase) Decrease in inventory 136,988 (16,046)
(Increase) Decrease in other current assets 131,602 (42,609)
(Increase) Decrease in other assets (149,694) 123,355
(Decrease) Increase in accounts payable (63,016) (160,252)
(Decrease) Increase in customer deposits 13,242 (1,370)
(Decrease) Increase in accrued expenses 86,409 175,600
_________________ __________________
CASH USED IN OPERATING ACTIVITIES 233,543 (229,056)
_________________ __________________
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property, plant and equipment (414,100) (209,179)
Proceeds from sale of fixed assets 13,029 16,636
Cash expended for acquisitions (1,331,169) 0
_________________ __________________
CASH USED IN INVESTING ACTIVITIES (1,732,240) (192,543)
_________________ __________________
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit 742,600 355,316
Proceeds from debt 1,365,489 110,725
Principal payments of debt (243,461) (120,546)
Sale of Common Stock 10,950 0
_________________ __________________
CASH PROVIDED BY FINANCING ACTIVITIES 1,875,578 345,495
_________________ __________________
NET INCREASE (DECREASE) IN CASH 376,881 (76,104)
CASH - Beginning of period 93,808 783,081
_________________ __________________
CASH - End of period $ 470,689 $ 706,977
================= ==================
Cash paid for interest $ 160,952 $ 161,286
================= ==================
6
See Notes to Financial Statements
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<PAGE>
VERMONT PURE HOLDINGS, LTD. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10-QSB instructions and in the opinion
of management contain all adjustments (consisting of only normal
recurring accruals) necessary to present fairly the financial position,
results of operations, and cash flows for the periods presented. The
results have been determined on the basis of generally accepted
accounting principles and practices applied consistently with the Form
10-KSB for the year ended October 25, 1997.
Certain information and footnote disclosures normally included in the
financial statements presented in accordance with generally accepted
accounting principles have been condensed or omitted. The accompanying
consolidated financial statements should be read in conjunction with
the financial statements and notes thereto incorporated by reference
from the Company's Form 10-KSB and Annual Report for the year ended
October 25, 1997.
2. SIGNIFICANT ACCOUNTING POLICIES
In February 1997, the Financial Accounting Standards Board issued
Statement on Financial Accounting Standards No. 128, "Earnings Per
Share" (FAS No. 128) which became effective for both interim and annual
financial statements for periods ending after December 15, 1997. FAS
No. 128 requires a presentation of "Basic" and (where applicable)
"Diluted" earnings per share. Generally, Basic earnings per share are
computed on only the weighted average number of common shares actually
outstanding during the period and the Diluted computation considers
potential shares issuable upon exercise or conversion of other
outstanding instruments where dilution would result. Furthermore, FAS
No. 128 requires the restatement of prior period reported earnings per
share to conform to the new standard.
The Basic loss per share was $.05 for the fiscal quarter ended January
24, 1998 and $.07 for the fiscal quarter ended January 25, 1997. On
these dates, the Company had other potentially dilutive securities
consisting of options and warrants of 2,132,187 and 1,755,000 for the
respective periods. Since the Company incurred a loss in the first
quarter of both 1998 and 1997, inclusion of these securities in the
earnings per share calculation would be antidilutive.
Consequently, diluted earnings per share has not been presented.
7
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3. LINE OF CREDIT
On January 24, 1998 the Company had borrowed $980,621 from its line of
credit with Chittenden Bank. Under the formula of the agreement the
Company was eligible to borrow $1,500,000.
4. ACQUISITIONS
A. Akva - On December 9, 1997 the Company entered into a packing and
distribution rights agreement and a distribution rights agreement with
Akva, Hf. The purpose of the agreements is to allow the Company to
distribute Akva, an Icelandic spring water, on an exclusive basis. The
rights were acquired for 25,000 shares of the Company's common stock
valued at $107,812 and 50% of the profits resulting from the sale of
Akva products from January 1, 1999 through December 31, 2004 to a
maximum of $500,000 for the term. The Company will pay a packing fee to
Akva for bottling the product and will charge a
marketing/administration fee as outlined in the agreements. The
agreements at cancelable by the Company with 90 day written notice.
B. Vermont Coffee Time - On January 5, 1998, the Company completed the
purchase of substantially all of the assets of Vermont Coffee Time,
Inc. a company operating distribution routes for water and coffee to
homes and offices and commercial vending services primarily in Northern
Vermont. The purchase price of the assets was $1,431,564. Chittenden
Bank financed $1,000,000 of the purchase from the acquisition credit
facility that was provided by the loan agreement dated June 20, 1997.
The balance of the purchase price was settled by the issuance of a note
to the seller of $250,000 and by the issuance of 45,391 shares of the
Company's common stock valued at $181,564.
5. LONG TERM DEBT
The Company entered into a note with Vermont Coffee Time, Inc. on
January 5, 1998 in conjunction with the purchase of certain assets from
that Company. The term of the note is five years. It is payable in
equal monthly installments based on a ten year amortization at 8.5%
interest. There is a lump sum of $154,179 due on January 5, 2003. The
loan is secured by all tangible and intangible assets pertaining to the
Asset Purchase agreement governing this transaction.
6. INTANGIBLE ASSETS
The value of the distribution rights obtained from Akva, Hf. in
exchange for the Company's stock will be amortized over six years. The
price of the Company's stock was $4.3125 per share at the time of the
closing. Based on the issuance of 25,000 shares, distribution rights at
the time of the sale were valued at $107,812.
Goodwill that resulted from the acquisition of the assets of Vermont
Coffee Time, Inc. will
8
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be amortized over 30 years and was calculated as follows:
Purchase Price $1,431,564
Acquisition Costs 81,169
Fair Value of Tangible and Identifiable Intangible Assets (397,910)
Liabilities Assumed 248,618
___________
Total $1,363,441
===========
In conjunction with the acquisition, the Company entered into
non-competition, employment and consulting agreements with the owner of
Vermont Coffee Time, Inc., pursuant to which she will receive payments
of $20,000 a year over three years. The assets acquired consisted
primarily of coolers, brewers, vehicles, and customer lists.
7. COMMITMENTS
A. Leased Space - The Company entered into a lease for 18,000 square
feet of space in Halfmoon, New York. The space will be used as a
bottling, warehouse, and distribution plant for the Company's upstate
New York Home and Office operations. This space replaces the former
headquarters of Excelsior Spring Water, in Saratoga, NY which the
Company currently leases on a month to month basis. The lease will
commence approximately April 1, 1998 and the term of the new lease is
10 years. Annual rent payments in the first year of the lease total
$90,000 and increase slightly each year thereafter.
B. Production Capacity - In order to increase production capacity, the
Company has made plans to acquire new production equipment from
December 1997 through April 1998. The equipment includes a five gallon
filling line and associated equipment for installation in the Albany,
New York area. Additionally, the Company is replacing its filling and
packaging machinery in its PET bottling facility in Randolph, VT. The
acquisition of this equipment for an aggregate amount of approximately
$800,000 is being financed by and lease with KeyCorp Leasing. The lease
is for six years with a market value buy out of the equipment after
that term. As of January 24, 1998 the Company had closed on $326,000 of
the total amount of the lease. The company is treating this arrangement
as an operating lease.
8. STOCK ISSUANCES
The Company issued 25,000 shares of its common stock on December 9,
1997 in conjunction with the purchase of distribution rights from Akva,
Hf. valued at $107,812.
The Company issued 45,391 shares of its common stock valued at $181,564
on January 5, 1998 as part of the purchase of the assets of Vermont
Coffee Time, Inc.
As part of the agreement to purchase the stock of A.M. Fridays, Inc. in
July, 1997, the Company agreed to pay contingent consideration in the
event gross sales of A.M. Fridays exceed $1,135,000 from the period of
January 1, 1997 to January 2, 1998. The sales for this
9
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period were $1,461,676. On February 2, 1998, the Company issued 72,169
shares of its common stock, valued at $288,676. This will be accounted
for as part of the purchase price and accordingly booked as goodwill as
of the transaction date.
9. CONTINGENCIES
Former Employees
On March 1, 1996, the Company brought suits against two former
employees alleging that they had breached their agreements with the
Company. The suits seek permanent injunctive relief and damages. On
April 1, 1996 the Company was granted a preliminary injunction in
Vermont Superior Court that prevented the former employees from
pursuing ventures competitive to the Company. A future hearing will
address the permanency of the injunction. Subsequently, both employees
filed counterclaims against the Company seeking monetary damages. The
Company has certain defenses arising out of its claims against the
employees that it will assert when necessary.
On February 24, 1997 the Company reached a settlement with one of the
two former employees involved in ongoing litigation with the Company.
The settlement had no material financial impact on the Company and both
parties agreed to release their claims against each other.
The Company does not anticipate that the outcome of the remaining suit
will have a material financial impact on the Company.
10. SUBSEQUENT EVENTS
A. On January 30, 1998 the Company purchased certain assets of Sagamon
Spring Water Company of Rutland, Vermont. The assets included a five
gallon water bottle filler and ancillary equipment, exclusive water
rights to a spring located in Tinmouth, Vermont, and exclusive use of
the Sagamon trade name. The purchase price was approximately $270,000.
B. On January 26, 1998 the Company signed a commitment letter to close
on a new credit facility with CoreStates Bank. The facility replaces
substantially all of the financing with Chittenden Bank. The commitment
is for up to $15,000,000, $2,000,000 of which is for working capital
with the balance available for acquisitions subject to the terms and
conditions set forth by the facility. The interest rate on the facility
is the LIBOR rate plus 250 basis points which was 8.1% as of February
24, 1998. The term of the agreement is five years. Chittenden Bank is
not participating in this loan facility.
10
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PART I - Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with the
financial statements and notes thereto as filed in the Company's Form 10-KSB for
the year ended October 26, 1996.
Forward-Looking Statements
When used in the Form 10-QSB and in future filings by the Company with the
Securities and Exchange Commission, the words or phrases "will likely result"
and "the Company expects," "will continue," "is anticipated," "estimated,"
"project," or "outlook" or similar expressions are intended to identify
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. The Company wishes to caution readers not to
place undue reliance on any such forward-looking statements, each of which speak
only as of the date made. Such statements are subject to certain risks and
uncertainties that could cause actual results to differ materially from
historical earnings and those presently anticipated or projected. Among these
risks are water supply and bottling capacity constraints in the face of
significant growth, dependence on outside distributors, and reliance on
commodity price fluctuations as they influence raw material pricing. The Company
has no obligation to publicly release the result of any revisions which may be
made to any forward-looking statements to reflect anticipated or unanticipated
events or circumstances occurring after the date of such statements.
Results of Operations
Sales - Sales for the first three months of fiscal year 1998 were $4,407,086, an
increase of $2,091,671 or 90% over sales of $2,315,415 for the corresponding
period last year. Excluding sales attributable to the acquisitions made
subsequent to the first quarter of 1997 sales in the first three months of
fiscal 1998 were 27% over the corresponding period last year.
Sales for retail-size products increased $838,082, or 57%, for the first three
months of fiscal year 1998 compared to the corresponding period a year ago. The
increase was a result of volume increases related to the continued growth of
both the Vermont Pure brand and secondary labels. Brand awareness was
accelerated during the quarter through increased promotion. This, as well as
increased market penetration and development of new markets, were responsible
for the sales growth. Average selling price for the first three months of fiscal
year 1997 was up 4% from the previous year. The total 37% increase was accounted
for in the following distribution channels: 27% attributable to Vermont Pure
sizes, 8% attributable to Hidden Spring, and 2% attributable to private labels.
The Akva brand had no material impact on sales for the quarter.
Sales for the home and office division increased $1,226,379, or 139%, for the
first three months of
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fiscal year 1998 compared to the prior year. A substantial portion of the
increase in sales for this division can be attributed to acquisitions. Exclusive
of acquisitions, sales of home and office related products increased
approximately 10% for the first quarter of fiscal year 1998.
Cost of Goods Sold - For the three months, Cost of Goods Sold was $1,942,154 for
fiscal year 1998 compared to $1,230,895 in fiscal year 1997 resulting in gross
profits of $2,464,932, or 56% of sales, for fiscal year 1998 and $1,084,520, or
47% of sales, for fiscal year 1997. The increase in gross profit for first
quarter was due to a considerable increase in sales volume which resulted in a
lower cost per unit. In addition, the Company's raw material costs were
significantly lower during the quarter than for the comparable period last year
as a result of new bottle processing and pricing that was effective in the
second quarter of fiscal 1997. Raw material costs remained stable throughout the
first quarter of 1998. However, the Company's bottle prices are dependant on the
market costs of resin, and the stability of these costs cannot be guaranteed.
Significant price fluctuations in the future could result in corresponding
positive or negative effects on cost of goods sold and gross profit.
Operating Expenses - For the first three months of fiscal year 1998 compared to
the corresponding period in fiscal year 1997, total operating expenses were
$2,778,703 and $1,692,741, respectively, an increase of $1,085,962 or 64%.
Selling, general and administrative expenses increased by $779,614, or 63%, for
the first three months of fiscal year 1997. The increase in these costs was
largely due to conversion and operating costs associated with the recent
acquisitions. The Company anticipates that it will continue to work on
maximizing the operating efficiencies of the acquired companies. However, no
assurance can be given that this effort will yield savings. Advertising expenses
increased by $220,241, or 52%, for the three month period in 1998 compared to
the corresponding period of fiscal 1997. The increase in advertising expenses
was due to higher promotional expenses associated with increased market
penetration and brand awareness. Given the competitive nature of the industry,
the Company anticipates that it will continue to spend significant amounts in
the future for advertising and promotion as it continues to develop brand
recognition and increase market penetration. For the first quarter of fiscal
year 1998 amortization increased $86,107 from the same quarter a year ago as a
result of increased goodwill from new acquisitions.
Profit/Loss From Operations - Loss from operations for the first three months of
fiscal year 1998 was $313,771 as compared to a loss from operations of $608,221
for the same period last year, an improvement of $294,450. The improvement, in
what is historically the Company's weakest quarter, is attributable to the
increase in sales coupled with a decrease in raw material costs and volume
efficiencies. The Company plans to continue to create greater consumer awareness
and to find alternate distribution channels for its retail product and expand
its home and office distribution which is a less cyclical business. No assurance
can be given that this plan will be successful.
Other Income/Expense - Net interest expense increased $78,293, or 107%, for the
first quarter of fiscal year 1998, respectively, compared the first quarter in
fiscal year 1997. The increase in interest expense was primarily due to
increased borrowing to fund capital equipment requirements through a bank line
of credit and finance the recent acquisitions.
12
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Net Profit/Loss - The Company's net loss for the first three months of fiscal
year 1998 was $464,652 compared to $670,241 for the corresponding period last
year, an improvement of $205,589 or 31%.
Liquidity and Capital Resources
Largely as a result of reduction of the net loss, cash flow from operations
showed an improvement for the first three months of fiscal year 1998 as compared
to the corresponding period in fiscal year 1997. The net cash inflow from
operations improved to $246,572 from an outflow of $229,056, for those
respective periods. The Company's primary requirements for capital continue to
be for the marketing and promotional activities needed to effect market
penetration and expand sales, acquiring operating assets needed to accommodate
the growth of the business, and scheduled debt repayments. These requirements
may result in continued net cash outflows on a seasonal basis.
As of January 24, 1998, the Company had a working capital deficit of $585,884
compared to positive working capital of $257,371 at the end of its fiscal year
on October 25, 1997. The decrease in working capital of $843,255 reflects,
primarily, the use of cash to fund the operating loss for the quarter, purchase
equipment, for scheduled debt repayment and to finance acquisitions and
resulting integration costs. As of March 3, 1998 the Company had borrowed on
$1,394,202 its line of credit compared to a $238,021 balance at the beginning of
the fiscal year. The maximum amount available to borrow as of that date was
$1,500,000, based on the level of receivables and inventory. The Company pays
interest on any outstanding principal at the prime rate as published in the Wall
Street Journal plus .50%, which was 9.00% per annum on March 3, 1998. The loan
facility is secured by all the inventory, receivables and intangible assets of
the Company and expires June 1, 1999. The Company plans to replace this line of
credit during the second quarter with an operating line of credit with
CoreStates Bank, in Philadelphia, with a maximum limit of $2,000,000. The line
will be secured by substantially all of the Company's assets and have an
interest rate based on LIBOR plus 250 basis points, presently about 8.1%
At October 25, 1997, the Company had recorded a deferred tax asset of $544,000.
Based on current levels. No adjustments were made to this amount during the
first quarter of 1998. Further recognition is dependant on future earnings.
The Company borrowed $1,000,000 during the fiscal quarter from Chittenden Bank
in connection with the acquisition of the assets of Vermont Coffee Time, Inc. In
addition to the note, the Company issued a note payable to the former owner of
the acquired company of $250,000, payable over the next five years, at an
interest rate of 8.5%. The existing acquisition debt to Chittenden,
approximately $4.3 million, is expected to be refinanced with CoreStates Bank
under the agreement mentioned above. In addition, the commitment letter with
CoreStates Bank provides an additional amount of approximately $8.7 million
available for future acquisitions if they meet defined parameters.
The Company has reduced its cash usage over the last year and anticipates that
its working capital position will improve in future quarters and is adequate to
fund operations when supplemented by its operating line of credit. Future sales
growth and acquisitions may require significant capital additions. The Company
anticipates that it will be able to use its own resources and obtain financing
13
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for this expansion although no assurance can be given that financing will be
available. The Company is pursuing an active program of evaluating acquisition
options. To complete any acquisitions, the Company anticipates using its capital
resources and the CoreStates facility described above.
14
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PART II - Other Information
Item 1 - Legal Proceedings
None
Item 2 - Changes in Securities
(a) None
(b) None
(c) The following shares were issued pursuant to Section 4(2) of the
Securities Act of 1933 as transactions by an issuer not involving a
public offering:
The Company issued 25,000 of its unregistered common shares on December
9, 1997 in conjunction with the purchase of distribution rights from
Akva, Hf. The price of the stock on that date was $4.3125 per share.
20,000 shares were issued to Akva Hf. and 2,500 shares each to David
Thibodeau and William Bennet.
The Company issued 45,391 of its unregistered common shares on January
5, 1998 as part of the purchase of the assets of Vermont Coffee Time,
Inc. The price of the stock on that date was $4 per share. All shares
were issued to the sole stockholder Vermont Coffee Time, Inc.
As part of the agreement to purchase the stock of A.M. Fridays, Inc.
(AMF) in July, 1997, the Company agreed to contingent consideration in
the event gross sales of AMF exceed $1,135,000 from the period of
January 1, 1997 to January 2, 1998. The sales for this period were
$1,461,676. On February 2, 1998, the Company issued 72,169 shares of
its unregistered common shares, valued at $4 per share, the closing
price of its registered shares on December 31, 1997, in conjunction
with this agreement. All shares were issued to the sole stockholder of
AMF.
In addition, 5,000 shares of the Company's unregistered common stock
was issued to an employee of the Company upon the exercise of 5,000
stock options granted under the 1993 Performance Equity Plan. The
exercise price was $2.18 per share and the shares were issued on
November 17, 1997.
Item 3 - Defaults upon Senior Securities
None
Item 4 - Submission of Matters to a Vote of Security Holders
None
15
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Item 5 - Other Information
None
Item 6 - Exhibits and Reports on Form 8-K
Exhibit # Description
10.1 Asset Purchase Agreement between Vermont Pure Holding, Ltd.
and Vermont Coffee Time, Inc. relating to the purchase
certain assets and liabilities dated December 19, 1997.
10.2 Promissory Note Between Vermont Pure Springs, Inc. and
Vermont Pure Holdings and Vermont Coffee Time, Inc. dated
January 5, 1998.
10.3 Security Agreement between Vermont Pure Springs and Vermont
Pure Holdings and Vermont Coffee Time, Inc. dated January 5,
1998.
10.4 Consulting Agreement between Amy Berger and Vermont Pure
Holdings, Ltd. dated January 5, 1998.
10.5 Distribution Rights Agreement between Vermont Pure Springs,
Inc. and Akva Hf. dated December 9, 1997.
10.6 Packing and Distribution Agreement between Vermont Pure
Springs, Inc. and Akva Hf. dated December 9, 1997.
16
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Dated: March 10, 1998
Randolph, Vermont
VERMONT PURE HOLDINGS, LTD.
By: /s/ Bruce S. MacDonald
Bruce S. MacDonald
Vice President, Chief Financial Officer
(Principal Accounting Officer and Principal
Financial Officer)
17
<PAGE>
EXHIBIT INDEX
Exhibit # Description
10.1 Asset Purchase Agreement between Vermont Pure Holding, Ltd.
and Vermont Coffee Time, Inc. relating to the purchase
certain assets and liabilities dated December 19, 1997.
10.2 Promissory Note Between Vermont Pure Springs, Inc. and
Vermont Pure Holdings and Vermont Coffee Time, Inc. dated
January 5, 1998.
10.3 Security Agreement between Vermont Pure Springs and Vermont
Pure Holdings and Vermont Coffee Time, Inc. dated January 5,
1998.
10.4 Consulting Agreement between Amy Berger and Vermont Pure
Holdings, Ltd. dated January 5, 1998.
10.5 Distribution Rights Agreement between Vermont Pure Springs,
Inc. and Akva Hf. dated December 9, 1997.
10.6 Packing and Distribution Agreement between Vermont Pure
Springs, Inc. and Akva Hf. dated December 9, 1997.
27. Financial Data Schedule
18
ASSET PURCHASE AGREEMENT
THIS ASSET PURCHASE AGREEMENT (the "Agreement") is entered into on this 19th
day of December 1997, by and between VERMONT PURE HOLDINGS, LTD. ("VPH") a
Delaware corporation with its principal place of business in Randolph, Vermont
("Buyer") and VERMONT COFFEE TIME, INC. ("VCT"), a Vermont corporation with its
principal place of business at P.O. Box 876, 29A Avenue C, Williston, VT 05495
("Seller").
RECITALS
WHEREAS, VPH is a company engaged in the bottling and sale of natural
spring water with its manufacturing facility and principal place of business in
Randolph Center, VT, and
WHEREAS, VCT is a company, engaged in the business of selling and
distributing coffee, water and related products, and renting cooler and
dispenser equipment for home and office customers (the "Business"), with its
principal place of business in Williston, VT, and
WHEREAS, both parties desire to enter into agreements by which VPH
shall purchase substantially all of the assets and assume certain of the
liabilities of the Business.
NOW THEREFORE, in consideration of the mutual promises contained
herein, the parties agree as follows:
I. ASSETS
A. Asset Purchase and Sale. Upon the terms and conditions of this
Agreement, at the Closing (defined below), Seller shall sell, convey, transfer,
assign and deliver to Buyer, and Buyer shall purchase, substantially all of the
property of Seller (except the Excluded Assets described below), wherever
located, tangible and intangible, consisting of the following assets: coolers,
coffee equipment, accounts receivable, vehicles, purchase orders, telephone
number, customer lists, and goodwill (the "Assets"), but excluding personal
items, mementos and an office chair ("Excluded Assets"), which shall remain the
property of Seller.
B. Liabilities. At the Closing, the Buyer shall assume by instrument of
assumption reasonably satisfactory to Seller's counsel, and shall pay and
discharge as they become due, all of the obligations and liabilities of Seller
identified and described in Exhibit "A" attached hereto (the "Assumed
Liabilities") and no others. Buyer shall defend, indemnify and hold harm-less
Seller and its successors and assigns from any claim, cost, expense or liability
arising from or pertaining to any of the Assumed Liabilities after the Closing.
C. Bill of Sale. Title to the Assets will be conveyed to Buyer
by Seller pursuant to
<PAGE>
a Bill of Sale, free and clear of all liens and encumbrances except those which
secure any: of the Assumed Liabilities. The form of the Bill of Sale shall be
approved by Buyer's counsel prior to Closing.
D. Lease. At Closing, Seller shall assign to Buyer its right
title and interest under the Lease Agreement, dated March 1, 1996 (the "Lease")
between The Miller Group, as Lessor and the Seller, as Lessee, and Buyer will
assume all obligations of Seller under the Lease.
II. PURCHASE PRICE
In consideration of the transfer of the Assets, the Buyer will (I)
assume all of the Assumed Liabilities in accordance with Section I.B of this
Agreement, (ii) execute and deliver the Consulting Agreement in the form
attached as Exhibit "B" attached hereto and pay the fees required thereby, and
(iii) pay to Seller the total purchase price (the "Purchase Price") of
$1,431,564. The Purchase Price shall be paid as follows:
A. Deposit. A $50,000 cash deposit (the "Deposit") shall be delivered
in escrow to Seller's counsel, Dinse, Knapp & McAndrew, P.C., as escrow agent
(the "Escrow Agent") upon the signing of this Agreement. The Deposit shall be
held in escrow and applied to the Purchase Price at the Closing. Upon
termination of this Agreement by Buyer for failure of any one or more of the
conditions precedent to Buyer's obligations, or upon breach of this Agreement by
Seller, the Deposit shall be delivered by the Escrow Agent to Buyer, and Buyer
shall be entitled to retain the Deposit as agreed and liquidated damages. Upon
termination of this Agreement by Seller for failure of any one or more of the
conditions precedent to Seller's obligations, or upon breach of this Agreement
by Buyer, the Deposit shall be delivered by the Escrow Agent to Seller, and
Seller shall be entitled to retain the Deposit as agreed and liquidated damages
B. Cash Payment at Closing $950,000 in cash or other immediately
available funds which shall be paid at Closing.
C. Common Stock. Buyer shall issue to Seller at Closing, pursuant to a
Stock Issuance Agreement in a form reasonably satisfactory to Buyer, to be
executed and delivered by Buyer to Seller at Closing, shares of unregistered and
restricted common stock of VPH (the "Common Stock") with a fair market value on
the Closing Date of $181,564. The "fair market value" of the Common Stock shall
be determined by the closing price on the date prior to the Closing Date, as
reported on NASDAQ.
D. Promissory Note. Buyer shall execute and deliver to Seller at
Closing a promissory note (the "Note") in the form of Exhibit "C" attached
hereto in the principal amount of $250,000. The Note shall have a ten (10) year
amortization schedule, shall be repaid with interest at the New York Prime Rate,
shall mature five years after the Closing
2
<PAGE>
Date with a balloon payment at the end of the term, and shall be payable monthly
after closing. The Note shall be guaranteed by Vermont Pure Springs, Inc,. and
shall be secured by a security interest in all of the Assets, subject only to
prior liens and security interests of Buyers lender, Chittenden Bank, and the
Vermont Industrial Development Authority securing indebtedness financing Buyer's
purchase of the Assets.
The Purchase Price shall be allocated among the Assets by agreement of
the parties at the Closing. The parties agree that $100,000 of the Purchase
Price shall be allocated to vehicles and equipment.
III. EXCLUDED SECURITIES AND LIABILITIES
The securities of the Seller are expressly excluded from this
transaction. The Buyer shall not assume any liabilities or obligations of
Seller, other than the Assumed Liabilities set forth in Exhibit A. In
particular, but without limitation, the Buyer does not assume any liabilities of
Seller for income taxes, for any liability or payable to Seller's pension or
profit sharing plan, employment claims, or for any note payable to shareholders
of Seller.
IV. CONDUCT OF BUSINESS AND CONDITION OF PREMISES
PENDING SETTLEMENT
Prior to the Closing:
A. The Business of Seller will be conducted only in the ordinary
course, in accordance with all laws and regulations of the township, state, and
federal governments, and Seller shall not violate the terms of any existing
leases or contracts.
B. Seller will continue to operate the business in the manner heretofore
operated by Seller.
C. Seller will maintain in effect its existing insurance on the Assets and
the Business.
D. VCT will use their reasonable efforts to preserve VCT's organization,
to keep
available the services of employees, and to preserve friendly relations with its
customers and trade creditors. Seller shall make no representation or promises
with employees about future employment, but Buyer will consider existing
employees for resumption of duties as appropriate.
E. In the event that prior to the date of Closing, the Assets shall be
totally or substantially lost or damaged by fire or any other casualty, the
Buyer shall have the option to terminate this Agreement or waive the diminution
in value and close under this Agreement buying the Assets "as is", in which
latter event it shall be entitled to treat the proceeds of any insurance paid to
Seller by reason of such loss or damage (excepting insurance for lost profits,
3
<PAGE>
if any), as a payment on the Purchase Price or the Buyer shall have the right to
all insurance proceeds to apply the funds to repair and/or to reconstruct the
Assets.
V. CLOSING
A. The closing of the transactions contemplated hereby shall take place on
January 5, 1998 at 10:00 a.m. (the "Closing Date") at the offices of Dinse,
Knapp & McAndrew, P.C., 209 Battery Street, Burlington, Vermont 05401.
B. Time shall be of the essence of this Agreement.
C. Any closing adjustments shall be apportioned pro rata
as of the Closing Date.
D. At the Closing, Seller shall deliver each of the
following in proper form:
1. The bill of sale required by Section I.C. of
this Agreement.
2. Certificates of Title to any motor vehicles
included in the Assets, endorsed to Buyer.
3. The opinion of Seller's counsel required
by Section VIII.C.
4. An executed Assignment and Assumption
Agreement with respect to the Lease.
5. Authorizing Resolutions of Seller's Board of
Directors and Shareholder, certified by the
Secretary of Seller, approving this
Agreement and the transactions contemplated
hereby.
6. The executed Non-competition and Consulting
Agreement in the form of Exhibit B.
E. At the Closing, Buyer shall deliver each of the
following in proper form:
1. The Deposit.
2. The cash portion of the Purchase Price required by
Section II.B.
3. The Note, together with the guaranty of Vermont Pure
Springs, Inc.
4. An executed security agreement and executed financing
statements as necessary to perfect a security interest in
favor of Seller, securing the Note.
4
<PAGE>
5. The Common Stock, together with the execute
Stock Issuance Agreement.
6. The opinion of Buyer's counsel, as required
by Section IX.C.
7. Authorizing resolutions of Buyer's Board of
Directors, certified by the Secretary of Buyer,
approving this Agreement, the Note, the Stock
Issuance Agreement, and the transactions contemplated
hereby and thereby.
8. The executed assumption agreement with respect to
the Assumed Liabilities, and evidence of payment of
the accounts payable included in the Assumed
Liabilities.
9. The executed assignment and Assumption Agreement
with respect to the Lease.
10. The executed Non-Competition and Consulting
Agreement in the form of Exhibit B.
VI. SELLER'S WARRANTIES
A. The Seller represents and warrants to Buyer that as of the date of this
Agreement and as of the Closing Date, that:
1. The Seller is a corporation duly organized and existing in
good standing under the laws of the State of Vermont, with the corporate power
to own its assets and carry on its business as is now being conducted.
2. Seller has good and marketable title and the right of sole
possession and control of the Assets being sold pursuant to this Agreement, and
the Assets at the time of Closing will not be subject to any mortgages, pledges,
liens, encumbrances, security interest, or charges, except as permitted by
Section I.C.
B. The Seller represents that to the best of the Seller's knowledge, after
reasonable inquiry:
1. The Seller is in substantial compliance with all applicable
laws, ordinances, rules, regulations, and requirements of all governmental
authorities having jurisdiction thereof, and that Seller has substantially
complied with all laws, municipal ordinances, and regulations of all
governmental authorities having jurisdiction thereof.
2. There are no actions, suits, or proceedings pending or
threatened against
5
<PAGE>
Sellers, either at law or in equity, brought by any federal, state, or municipal
or other governmental agency, department, board, bureau, or other
instrumentality.
3. All federal, state, and local tax returns required to be
filed have been filed, all deficiencies proposed have either been paid or
settled or are included in an account for accrued taxes; all withholding,
unemployment, social security, excise interest have been paid or will be paid by
Seller after Settlement from funds set aside at Settlement.
4. Seller has provided to Buyer copies of its federal income
tax returns and related schedules for the years 1994, 1995, and 1996, and its
internally prepared profit/loss and balance sheets for the periods ending August
31, 1997 and October 31 1997. All such financial information is accurate and in
accordance with the books and records of the Company, and fairly represents the
financial condition, assets and liabilities of the Company for the periods, and
as of the dates indicated.
5. Neither Seller nor its sole shareholder has made any
agreement or taken any action which might cause anyone to become entitled to a
broker's fee or commission.
C. If Seller obtains any knowledge or information between the date
hereof and Closing, Making or indicating that any of the aforesaid warranties or
representations are no longer true, or indication that any of the
representations and conditions set forth in this Section VI hereof are not true
and cannot be made true by the Seller by the time of Closing, or will no longer
be true as of the date of Closing, Seller will promptly notify Buyer of such
change in circumstances.
VII. BUYER'S WARRANTIES
The Buyer represents and warrants to Seller as of the date of this
Agreement and the Closing Date that:
A. Buyer is a corporation duly organized and existing in good standing
under the laws of the State of Delaware with the full corporate power and
authority to own its assets, carry on its business as is now being conducted,
and to consummate the transactions contemplated by this Agreement.
B. This Agreement has been, and each and every other agreement and
document to be executed, delivered and performed by Buyer pursuant hereto,
including the Note, the Stock Issuance Agreement, and the other documents to be
delivered by Buyer at Closing, when executed and delivered by Buyer, will have
been duly authorized, executed and delivered by Buyer, and constitutes, or, when
executed and delivered by Buyer will constitute, legal, valid and binding
obligations of Buyer enforceable against Buyer in accordance with their terms.
6
<PAGE>
VIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF BUYER
All obligations of the Buyer under this Agreement are subject to
fulfillment, prior to or at Closing, of each of the following conditions:
A. Representation and Warranties. The representations and
warranties of Seller contained in this Agreement being true at the time of
Closing as though such representations and warrantees were made at such time.
B. Compliance With Agreement. Seller shall have performed and
complied with all agreements and conditions required by this
Agreement to be performed or complied with by, prior to, or
at, closing.
C. Opinion of Counsel. Seller shall have delivered to Buyer, in
form and content satisfactory to Buyer's counsel, an opinion
of its counsel issued to Buyer to the effect that:
(i) Seller has been duly incorporated and is existing as
a corporation in good standing under the laws of the State of Vermont;
(ii) This transaction and its terms do not violate any
provisions of Seller's Articles of Incorporation or Bylaws;
(iii) Seller has taken all shareholder, director and other
actions necessary to authorize the transactions contemplated by the parties
hereto;
(iv) Seller has the authority to carry on the business
presently being conducted by Company;
(v) Seller has full power and authority to sell, assign
and transfer the Assets sold pursuant to this Agreement.
E. Seller's Shareholder Approval. Seller shall have obtained the
necessary Shareholder approval for this transaction.
F. Non-Compete and Consulting Agreement. Buyer and Ms. Amy
Berger shall execute and deliver at Closing the Consulting and Non-Compete
Agreement attached as Exhibit "B".
IX. CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER
7
<PAGE>
All obligations of the Seller under this Agreement are subject to
fulfillment, prior to or at Closing, of each of the following
conditions:
A. Representation and Warranties. The representations and
warranties of Buyer contained in this Agreement being true at the time
of Closing as though such representations and warrantees were made at
such time.
B. Compliance With Agreement. Buyer shall have performed and
complied with all agreements and conditions required by this Agreement
to be performed or complied with by, prior to, or at, Closing.
C. Opinion of Counsel. Buyer shall have delivered to Seller, in
form and content satisfactory to Buyer's counsel, an opinion of its
counsel issued to Seller to the effect that:
(1) Buyer has been duly incorporated and is existing as a
corporation in good standing under the laws of the State of
Delaware;
(ii) This transaction and performance of its terms do not
violate any provisions of Seller's Articles of Incorporation
or Bylaws or any contract or agreement to which the Buyer is a
party or by which it is bound;
(iii) Buyer has taken-.all corporate actions necessary to
authorize the transactions contemplated by the parties hereto.
D. Buyer shall have delivered all of the matters required to be
delivered by Buyer under Section V.E of this Agreement.
X. NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
A. Seller and its directors, shall not, during the term of this
Agreement or at any time for a period of five (5) years following
closing, unless authorized to do so in writing by the Buyer, directly
or indirectly disclose or permit to be known to, or used for the
benefit of, any person, corporation, or other entity (outside of the
employ of the Company), or itself, any confidential information. For
the purposes of this Section, the term confidential information shall
include, but not be limited to, confidential or proprietary knowledge
or information with respect to the conduct or details of the Seller's
business including, but not limited to, lists of customers of the
Buyer's business, pricing strategies, or marketing methods.
Confidential information does not include matters which are generally
known outside of the Buyer, public knowledge or in the public domain.
B. All confidential information described in this Section shall
be the exclusive property of the Buyer.
8
<PAGE>
C. The provisions of this Section shall survive the closing and
shall continue for a period of five (5) years.
XI. RESTRICTIVE COVENANT
In order to protect the Buyer in its full beneficial use and enjoyment
of the goodwill, assets, business relationships, marketing techniques and other
know-how acquired as a result of this Agreement, for a period of five (5) years
after the closing of this Agreement, Seller, including its officers and
directors, will not, within the United States of America, directly or indirectly
compete with the Buyer in the home/office distribution of distilled water,
spring or carbonated water, or coffee/tea products and will not either:
(i) solicit any persons or entities known to be customers
of the Buyer to purchase any of the aforementioned products; or
(ii) solicit or induce any employee of the buyer to leave such
employment to take a position with Seller or with any company for which any
officer or director then works.
XII. GOVERNING LAW
This Agreement shall be construed, interpreted and enforced in accordance with
the laws of the State of Vermont.
XIII. TERMS TO SURVIVE: SEVERABILITY
The terms of this Agreement, including but not limited to the
warranties, representations and covenants made by the parties hereto, shall
survive for a period of one (1) year from the Closing Date. In the event that
any term or provision hereof or the application thereof to persons or
circumstances shall to any extent be invalid or unenforceable, then the
remainder of this Agreement shall not be affected thereby and each term or
provision hereof shall be valid and enforced to the fullest extent permitted by
law.
XIV. ENTIRE AGREEMENT
This Agreement, including the Preambles, and any other documents or
exhibit incorporated herein by reference sets forth the entire understanding of
the parties. It shall not be changed or terminated orally. This Agreement may be
executed in one or more counterparts, each of which shall be deemed an original
but all of which together, shall constitute one and the same document.
XV. NOTICE
9
<PAGE>
Notices required under this Agreement shall be in writing,
sent by certified mail and facsimile to the
representatives of the parties as follows:
Vermont Pure Holdings, Ltd.
Route 66
Randolph Center, VT 005061
Att.: Timothy G. Fallon
Facsimile (802) 728-4814
With copy to: Kevin F. Berry, Esquire Ledgewood Law Firm
1521 Locust Street Philadelphia, PA 19102 Facsimile (215)-735-2513
To Seller: Vermont Coffee Time, Inc.
Att.. Amy Berger, President
4 Maeck Farm rd.. Shelburne, Vermont 05482
IN WITNESS whereof, the parties hereto have executed this Agreement as of the
day, month and year first above written.
WITNESS VERMONT PURE HOLDINGS, LTD.
By: /S/Timothy G. Fallon
Name: Timothy G. Fallon
Title: President and CEO
WITNESS VERMONT COFFEE TIME, INC.
By: /S/Amy Berger
Name: Amy Berger
Title: President
10
<PAGE>
Exhibit A to Asset Purchase Agreement
Schedule of Assumed Liabilities
For purposes of this Agreement, the term "Assumed Liabilities" shall
mean and include (i) all liabilities and obligations of Seller reflected on the
Balance Sheet of Seller as of October 31, 1997 (the "Balance Sheet') , attached
hereto as Schedule A-1, except the liability identified on the Balance Sheet as
"Note Payable to Amy Berger", and (ii) all unpaid liabilities and obligations of
Seller incurred in its operations in the ordinary course of business from
October 31, 1997 to the Closing Date which would appear as current liabilities
on a balance sheet prepared in accordance with generally accepted accounting
principles, consistently applied.
<PAGE>
<TABLE>
<CAPTION>
Date Vermont Coffee Time, Inc.
Oct 31, 1997 Balance Sheet
For All Locations
As of October 31,1997
Current Last
Year Year
LIABILITIES AND EQUITY
<S> <C> <C>
Taxes Payable
Sales Tax 0.00 1,023.64
Total Taxes Payable 0.00 1,023.64
OTHER PAYABLES
Cooler Deposit Liability - Adjust (30.00) 0.00
Cafeteria/Healthcare #47 1,105.98 14.00
Accounts Payable 103,285.55 0.00
Bottle Depostis payable 46,648.00 51,041.47
Bottle Deposits payable - Adjust (5,191.39) 0.00
Total Other Payables 145,818.14 51,055.47
Notes Payable
Chittenden Bank Van (538.23) 11,313.05 16,468.31
Chittenden Bank Van (494.21) 10,805.71 15,459.88
Chittenden Bank (887.42) 27,499.33 0.00
Chittenden Bank Line of Credit 0.00 1,934.91
Ford Credit (528.48) 2,597.54 8,536.35
Chittenden Bank (577.13) 6,888.35 12,609.98
N/P Amy Berger 158,230.56 162,688.44
Ebco Finance (130.85) 720.25 0.00
Ebco Finance (476.79) 4,409.22 0.00
Ebco Finance (399.32) 4,059.14 0.00
Ebco Finance (401.65) 4,451.32 0.00
Ebco Finance (419.91) 0.00 801.39
Ebco Finance (225.35) 0.00 636.70
Ebco Finance (938.95) 0.00 9,519.27
Ebco Finance (212.93) 781.35 0.00
Ebco Finance (212.93) 976.70 0.00
Ebco Finance (191.73) 876.50 0.00
Total Notes Payable 233,612.02 228,736.23
Equity
Retained Earnings (200,386.17) (167,356.83)
Common Stock 138,163.32 138,163.32
</TABLE>
<PAGE>
Exhibit C to Purchase and Sale Agreement
PROMISSORY NOTE
$250,000 January _, 1998
FOR VALUE RECEIVED, Vermont Pure Holdings, Ltd. (the "Borrower") hereby
promises to pay to the order of Vermont Coffee Time, Inc. (the "Lender"), the
principal sum of Two Hundred Fifty Thousand Dollars ($250,000) (the "Loan"),
together with interest on the unpaid principal balance payable at the rate and
in the manner specified herein.
1 . Interest Rate. Commencing on the date hereof, interest shall
accrue on the unpaid principal balance of the Loan outstanding from time to time
at a fixed rate of [the New York Prime Rate on the date of the Note].
2. Interest Calculation. The interest required to be paid
pursuant to this Note shall be computed daily on the basis of 360 days per year
for the actual number of days elapsed on the actual outstanding balance.
3. Principal and Interest Payments. The Borrower shall
repay this Note in consecutive installments of principal and interest in the
amount of $ per month beginning 199 and payable on the same day of each month
thereafter. [Monthly payments based on 10 year amortization schedule]
4. Term; Maturity Date. Unless earlier payable in accordance with the
terms of this Note, the entire unpaid principal balance of the Loan and all
accrued and unpaid interest thereon (including interest on accrued interest as
described in paragraph 3 above) shall be due and payable in full on [date five
years after note date].
5. Method and Place of Payment. All payments of principal and
interest shall be payable in lawful money of the United States of America to the
Lender at [specify place and address for payment] or at such other place as the
Lender may designate in writing to the
<PAGE>
Borrower.
6. Prepayment. The Borrower shall have the right to prepay all or
any portion of the outstanding principal balance of this Note without prepayment
premium
7. Late Charge The Borrower shall pay to the Lender a late
charge of five percent (5 %) of any payment not received by the Lender within
fifteen (15) days after such payment is due. Charges will be assessed on day
sixteen (16).
8. Default: Acceleration: At the option of the Lender, this Note and
the indebtedness evidenced hereby shall become immediately due and payable
without further notice or demand, and notwithstanding any prior waiver of any
breach or default or other indulgence, upon the occurrence at any time of any
one or more of the following events: (I) default, in making any payment of
principal, interest, or any other charges due hereunder; and (ii) any other
violation, breach, or default of or under this Note, and continuing uncured
beyond the applicable grace period, or, if no grace period is specified, beyond
30 days from the date the Lender gives written notice to the Borrower specifying
the breach, violation, or default.
9. Remedies Upon Default: Upon any default by the Borrower, the Lender
may pursue any and all remedies provided at law, and in equity, including but
not limited to pursuing the Lenders' rights in any collateral which secures this
note. The Lender's remedies set forth above are not exclusive of any other
available remedy or remedies, but each remedy shall be cumulative and shall be
in addition to any other remedy given in this Note. The exercise of any remedy
or remedies shall not be an election of remedies. The remedies and rights of the
Lender may be exercised concurrently, alone, in any combination, or in any order
that the Lender deems appropriate.
10. Obligations Joint and Several: If there is more than one maker
of this Note, the obligations of each maker shall be joint and several.
11. Payment of Costs of Collection: The Borrower further agrees that if
this Note is placed in the hands of an attorney for collection, or if this debt
or any part thereof is collected by any attorney or by legal proceedings of any
kind, reasonable attorneys' fees and all costs and expenses incident upon such
collection shall be added to the amount due upon this Note and be collectible as
a part hereof.
12. Security: This Note, and the interest and all other
indebtedness evidenced by this Note, are secured by a security interest in
certain assets under a Security Agreement of even date from Borrower to Lender.
13. Governing Law: This Note is to be governed by and construed
in accordance with the laws of the State of Vermont.
<PAGE>
IN THE PRESENCE OF THE FOLLOWING WITNESSES:
(witness only)
"BORROWER"
By:
Its:Duly Authorized Agent
3
PROMISSORY NOTE
$250,000 January 5, 1998
FOR VALUE RECEIVED, Vermont Pure Holdings, Ltd. (the "Borrower") hereby
promises to pay to the order of Vermont Coffee Time, Inc. (the "Lender"), the
principal sum of Two Hundred Fifty Thousand Dollars ($250,000) (the "Loan"),
together with interest on the unpaid principal balance payable at the rate and
in the manner specified herein.
1 . Interest Rate. Commencing on the date hereof, interest shall
accrue on the unpaid principal balance of the Loan outstanding from time to time
at a fixed rate of 8.5% per annum.
2. Interest Calculation. The interest required to be paid
pursuant to this Note shall be computed daily on the basis of 360 days per year
for the actual number of days elapsed on the actual outstanding balance.
3 . Principal and Interest Payments. The Borrower shall repay this Note
in consecutive installments of principal and interest in the amount of $3099.65
per month beginning February 5, 1998 and payable on the same day of each month
thereafter.
4. Term, Maturity Date. Unless earlier payable in accordance with the
terms of this Note, the entire unpaid principal balance of the Loan and all
accrued and unpaid interest thereon (including interest on accrued interest as
described in paragraph 3 above) shall be due and payable in full, with a final
payment of $154,179.30 on January 5, 2003.
5. Method and Place of Payment. All payments of principal and interest
shall be payable in lawful money of the United States of America to the Lender
at c/o Amy Berger 4 Maeck Farm rd., Shelburne, Vermont 05482 or at such other
place as the Lender may designate in writing to the Borrower.
6. Prepayment. The Borrower shall have the right to prepay all
or any portion of the outstanding principal balance of this Note without
prepayment premium.
7. Late Charge. The Borrower shall pay to the Lender a late
charge of five percent (5 %) of any payment not received by the Lender within
fifteen (15) days after such payment is due. Charges will be assessed on day
sixteen (16).
8. Default; Acceleration: At the option of the Lender, this Note
and the indebtedness evidenced hereby shall become immediately due and payable
without further notice or demand, and notwithstanding any prior waiver of any
breach or default or other indulgence, upon the
<PAGE>
occurrence at any time of any one or more of the following events: (I) default,
in making any payment of principal, interest, or any other charges due
hereunder; and (ii) any other violation, breach, or default of or under this
Note, and continuing uncured beyond the applicable grace period, or, if no grace
period is specified, beyond 30 days from the date the Lender gives written
notice to the Borrower specifying the breach, violation, or default.
9. Remedies Upon Default: Upon any default by the Borrower, the Lender
may pursue any and all remedies provided at law, and in equity, including but
not limited to pursuing the Lenders' rights in any collateral which secures this
note. The Lender's remedies set forth above are not exclusive of any other
available remedy or remedies, but each remedy shall be cumulative and shall be
in addition to any other remedy given in this Note. The exercise of any remedy
or remedies shall not be an election of remedies. The remedies and rights of the
Lender may be exercised concurrently, alone, in any combination, or in any order
that the Lender deems appropriate.
10. Obligations Joint and Several: If there is more than one maker
of this Note, the obligations of each maker shall be joint and several.
11. Payment of Costs of Collection: The Borrower further agrees that if
this Note is placed in the hands of an attorney for collection, or if this debt
or any part thereof is collected by any attorney or by legal proceedings of any
kind, reasonable attorneys' fees and all costs and expenses incident upon such
collection shall be added to the amount due upon this Note and be collectible as
a part hereof.
12. Security: This Note, and the interest and all other
indebtedness evidenced by this Note, are secured by a security interest in
certain assets under a Security Agreement of even date from Borrower to Lender.
13. Governing Law: This Note is to be governed by and construed in
accordance with the laws of the State of Vermont.
IN THE PRESENCE OF THE FOLLOWING.
"BORROWER"
Vermont Pure Holdings, Ltd.
By: Timothy. Fallon
President
2
<PAGE>
Principal: $250,000.00 amortized over 10 Years at 8.5 % (Ordinary Intrest)
Issued: 1/01/1998 with first payment on 2/01/1998
Payment: $3,099.65 Monthly (Principal + Interest)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Payment Principal Interest Principal
Number Date Payment Payment Balance Memo
0 01/01/98 $250,000.00
1 02/01/98 $1,328.82 $1,770.83 $248,671.18
2 03/01/98 $1,338.23 $1,761.42 $247,332.95
3 04/01/98 $1,347.71 $1,751.94 $245,985.24
4 05/01/98 $1,357.25 $1,742.40 $244,627.99
5 06/01/98 $1,366.87 $1,732.78 $243,261.12
6 07/01/98 $1,376.55 $1,723.10 $241,884.57
7 08/01/98 $1,386.30 $1,713.35 $240,498.27
8 09/01/98 $1,396.12 $1,703.53 $239,102.15
9 10/01/98 $1,406.01 $1,693.64 $237,696.14
10 11/01/98 $1,415.97 $1,683.68 $236,280.17
11 12/01/98 $1,426.00 $1,673.65 $234,854.17
1998 Total $15,145.83 $18,950.32
12 01/01/99 $1,436.10 $1,663.55 $233,418.07
13 02/01/99 $1,446.27 $1,653.38 $231,971.80
14 03/01/99 $1,456.52 $1,643.13 $230,515.28
15 04/01/99 $1,466.83 $1,632.82 $229,048.45
16 05/01/99 $1,477.22 $1,622.43 $227,571.23
17 06/01/99 $1,487.69 $1,611.96 $226,083.54
18 07/01/99 $1,498.22 $1,601.43 $224,585.32
19 08/01/99 $1,508.84 $1,590.81 $223,076.48
20 09/01/99 $1,519.52 $1,580.13 $221,556.96
21 10/01/99 $1,530.29 $1,569.36 $220,026.67
22 11/01/99 $1,541.13 $1,558.52 $218,485.54
23 12/01/99 $1,552.04 $1,547.61 $216,933.50
1999 Total $17,920.67 $19,275.13
24 01/01/2000 $1,563.04 $1,536.61 $215,370.46
25 02/01/2000 $1,574.11 $1,525.54 $213,796.35
26 03/01/2000 $1,585.26 $1,514.39 $212,211.09
27 04/01/2000 $1,596.49 $1,503.16 $210,614.60
28 05/01/2000 $1,607.80 $1,491.85 $209,006.80
29 06/01/2000 $1,619.19 $1,480.46 $207,387.61
30 07/01/2000 $1,630.65 $1,469.00 $205,756.96
31 08/01/2000 $1,642.20 $1,457.45 $204,114.76
32 09/01/2000 $1,653.84 $1,445.81 $202,460.92
33 10/01/2000 $1,665.55 $1,434.10 $200,795.37
34 11/01/2000 $1,677.35 $1,422.30 $199,118.02
35 12/01/2000 $1,689.23 $1,410.42 $197,428.79
2000 Total $19,504.71 $17,691.09
36 01/01/2001 $1,701.20 $1,398.45 $195,727.59
37 02/01/2001 $1,713.25 $1,386.40 $194,014.34
38 03/01/2001 $1,725.38 $1,374.27 $192,288.96
39 04/01/2001 $1,737.60 $1,362.05 $190,551.36
40 05/01/2001 $1,749.91 $1,349.74 $188,801.45
41 06/01/2001 $1,762.31 $1,337.34 $187,039.14
42 07/01/2001 $1,774.79 $1,324.86 $185,264.35
43 08/01/2001 $1,787.36 $1,312.29 $183,476.99
44 09/01/2001 $1,800.02 $1,299.63 $181,676.97
45 10/01/2001 $1,812.77 $1,286.88 $179,864.20
46 11/01/2001 $1,825.61 $1,274.04 $178,038.59
47 12/01/2001 $1,838.54 $1,261.11 $176,200.05
2001 Total $21,228.74 $15,967.06
48 01/01/2002 $1,851.57 $1,248.08 $174,348.48
49 02/01/2002 $1,864.68 $1,234.97 $172,483.80
50 03/01/2002 $1,877.89 $1,221.76 $170,605.91
51 04/01/2002 $1,891.19 $1,208.46 $168,714.72
52 05/01/2002 $1,904.59 $1,195.06 $166,810.13
53 06/01/2002 $1,918.08 $1,181.57 $164,892.05
54 07/01/2002 $1,931.66 $1,167.99 $162,960.39
55 08/01/2002 $1,945.35 $1,154.30 $161,015.04
56 09/01/2002 $1,959.13 $1,140.52 $159,055.91
57 10/01/2002 $1,973.00 $1,126.65 $157,082.91
58 11/01/2002 $1,986.98 $1,112.67 $155,095.93
59 12/01/2002 $2,001.05 $1,098.60 $153,094.88
2002 Total $23,105.17 $14,090.63
60 01/01/2003 $153,094.88 $1,084.42 $0.00
2003 Total $153,094.88 $1,084.42 $0.00
Last payment was $154,179.30
Total Payments made: 60
Total Interest: $87,058.65
</TABLE>
SECURITY AGREEMENT
THIS SECURITY AGREEMENT ("Agreement") is made this 5th day of January
1998, by Vermont Pure Holdings, Ltd., a Delaware corporation with its principal
place of business at Route 66, Randolph, Vermont 05061 (the "Debtor") in favor
of Vermont Coffee Time, Inc.,a Vermont corporation with its principal place of
business at P.O. Box 876, 36 Shunpike Road, Williston, VT 05495 (the "Secured
Party").
To secure the repayment of that certain Promissory Note from Debtor to
Secured Party, dated January 5, 1998, in the principal amount of $250,000 (the
"Note"), the Debtor hereby agrees as follows:
Section 1. Definitions. All capitalized terms used herein or in any
schedule, exhibit, certificate, report or other document delivered pursuant
hereto shall have the meanings assigned to them below (unless otherwise
defined). Except as otherwise defined, terms defined in the Uniform Commercial
Code shall have the meanings set forth therein.
Collateral. See Section 2.
Encumbrance. Any mortgage, pledge, security interest, lien or other
charge or encumbrance of any kind or nature upon or with respect to any
property.
Event of Default. See Section 7.
Uniform Commercial Code. The Uniform Commercial Code as in effect in
the State of Vermont.
Section 2. Grant. To secure the payment and performance of the Note,
the Debtor hereby assigns and pledges to the Secured Party all of its rights,
title and interest in, and grants to the Secured Party a continuing security
interest in, the property described in Schedule A attached hereto, whether now
owned or existing or hereafter arising or acquired, any and all substitutions,
replacements and accessions thereto, and all proceeds and products of any of the
foregoing (collectively, the "Collateral")
Section 3. Representations, Warranties and Covenants. The Debtor makes
the following representations and warranties, and agrees to the following
covenants, each of which representations, warranties and covenants shall be
continuing and in force so long as this Agreement is in effect:
3.1 Name, Debtor/Collateral Location, Changes.
<PAGE>
(a) The name of the Debtor set forth on the first page hereof is the
true and correct legal name of the Debtor, and the Debtor has not done business
as or used any other name.
(b) The address of the Debtor set forth on the first page hereof is the
Debtor's chief executive office and the place where its business records are
kept.
(C) The Debtor will not change its name, identity or organizational
structure or chief executive office or place where its business records are
kept, or merge into or consolidate with any other entity, unless the Debtor
shall have given the Secured Party at least 30 days' prior written notice
thereof and shall have delivered to the Secured Party such new Uniform
Commercial Code financing statements or other documentation as may be necessary
or required by the Secured Party to ensure the continued perfection and priority
of the security interests granted by this Agreement.
3.2 Organization; Good Standing. The Debtor is duly organized, validly
existing and in good standing under the laws of the state of its organization
and duly qualified and in good standing in every other state in which the nature
of its business or properties requires such qualification.
3.3 Authorization of Agreement, No Consents; No Conflicts. The
execution, delivery and performance of this Agreement has been duly authorized
by all necessary action, corporate or otherwise, and does not and will not (I)
require any consent or approval of the stockholders of the Debtor, if any; (ii)
contravene the terms of the charter, by-laws or other organizational papers of
the Debtor; (iii) violate any applicable law, rule or regulation of any
governmental a-ency; (iv) contravene any provision of any agreement, instrument,
order or undertaking binding on the Debtor or by which any of its properties are
bound or affected; (v) other than as contemplated hereby, result in or require
the imposition of any Encumbrance on any of the properties of the Debtor; or
(vi) other than filings required by the Uniform Commercial Code, require the
approval or consent of, or filing or registration with, any governmental or
other agency or authority, or any other party.
3.4 O,ownership of Collateral; Absence of Liens and Restrictions. The
Debtor is, and in the case of property acquired after the date hereof, will be,
the sole legal and equitable owner of the Collateral, holding good and
marketable title to the same free and clear of all Encumbrances except for the
security interests granted hereunder or permitted hereby, and has good right and
legal authority to assign, deliver, and create a security interest in the
Collateral in the manner herein contemplated. The Collateral is genuine and is
what it is purported to be. The Collateral is not subject to any restriction
that would prohibit or restrict the assignment, delivery or creation of the
security interests contemplated hereunder.
3.5 Priority of Security Interest. This Agreement, together with the filing of
Uniform Commercial Code financing statements in the appropriate offices of the
Vermont Secretary of State, creates a valid and continuing lien on and perfected
security interest in the Collateral
2
<PAGE>
(except for property located in the United States in which a security interest
may not be perfected by filing under the Uniform Commercial Code), prior to all
other Encumbrances, except a security interest in favor Chittenden Bank, and is
enforceable as such against creditors of the Debtor, any owner of the real
property where any of the Collateral is located, any purchaser of such real
property and any present or future creditor obtaining a lien on such real
property.
3.6 Further Assurances. Upon the written request of the Secured Party,
and at the sole expense of the Debtor, the Debtor will promptly execute and
deliver such further instruments and documents and take such further actions as
the Secured Party may deem desirable to obtain the full benefits of this
Agreement and of the rights and powers herein granted, including, without
limitation, filing of any financing statement under the Uniform Commercial Code.
Section 4. Defaults. An event of default ("Event of Default") shall
exist hereunder if any of the following events or conditions occur:
(a) failure to pay the Note when due or perform any covenant,
agreement or obligation contained herein or in any agreement,
instrument or other document evidencing, securing or otherwise
delivered in connection with the Note (hereinafter, the "Loan
Documents");
(b) failure of any representation or warranty, statement or information
herein or in any documents or financial statements delivered or disclosed to the
Secured Party in connection with this Agreement or the Note to be true and
correct;
(C) loss, theft or substantial damage of or to the Collateral, or the
issuance of an injunction against the Debtor affecting any of the Collateral,
which impairment of Collateral remains uncured for more than 90 days;
(d) default under any instrument constituting, or under any
agreement (including without limitation any insurance policy) relating to, any
Collateral;
(e) dissolution, termination of existence, insolvency or business
failure of, appointment of a receiver or any other custodian for any part of the
property of, assignment for the benefit of creditors by, or the commencement of
any proceeding under any bankruptcy or insolvency laws by or against, the Debtor
or any indorser, guarantor or surety of or for any Obligation.
Section 5. Secured Party's Rights and Remedies.
(a) So long as any Event of Default shall have occurred
and is continuing:
the Secured Party may, at its option, without notice or demand, cause
all the Note to become immediately due and payable and take immediate
3
<PAGE>
possession of the Collateral, and for that purpose the Secured Party
may, so far as the Debtor can give authority therefor, enter upon any
premises on which any of the, Collateral is situated and remove the
same therefrom or remain on such premises and in possession of such
Collateral for purposes of conducting a sale or enforcing the rights of
the Secured Party;
(ii) the Debtor will, upon demand, assemble the Collateral and
make it available to the Secured Party at a place and time designated
by the Secured Party that is reasonably convenient to both parties;
(iii) the Secured Party may collect and receive all income and
proceeds in respect of the Collateral and exercise all rights of the
Debtor with respect thereto, all without liability except to account
for property actually received (but the Secured Party shall have no
duty to exercise any of the aforesaid rights, privileges or options and
shall not be responsible for any failure to do so or delay in so
doing);
(iv) the Secured Party may sell, lease or otherwise dispose of
the Collateral at a public or private sale, with or without having the
Collateral at the place of sale, and upon such terms and in such manner
as the Secured Party may determine, and the Secured Party may purchase
any Collateral at any such sale. Unless the Collateral threatens to
decline rapidly in value or is of the type customarily sold on a
recognized market, the Secured Party shall send to the Debtor prior
written notice (which, is given within five days of any sale, shall be
deemed to be reasonable) of the time and place of any public sale of
the Collateral or of the time after which any private sale or other
disposition thereof is to be made. The Debtor agrees that upon any such
sale the Collateral shall be held by the purchaser free from all claims
or rights of every kind and nature, including any equity of redemption
or similar rights, and all such equity of redemption and similar rights
are hereby expressly waived and released by the Debtor. In the event
any consent, approval or authorization of any governmental agency is
necessary to effectuate any such sale, the Debtor shall execute all
applications or other instruments as may be required; and
(v) in any jurisdiction where the enforcement of its
rights hereunder is sought, the Secured Party shall have, in addition
to all other rights and remedies, (a) the rights and remedies of a
secured party under the Uniform Commercial Code and (b) all of the
rights and remedies described in the Loan Documents.
(b) Prior to any disposition of Collateral pursuant to this Agreement,
the Secured Party may, at its option, cause any of the Collateral to be repaired
or reconditioned (but not upgraded unless mutually agreed) in such manner and to
such extent as to make it saleable.
4
<PAGE>
(C) The Secured Party shall be entitled to retain and to apply the
proceeds of any disposition of the Collateral, first, to its reasonable expenses
of retaking, holding, protecting and maintaining, and preparing for disposition
and disposing of, the Collateral, including attorneys' fees and other legal
expenses incurred by it in connection therewith; and second, to the payment of
the Note in such order of priority as the Secured Party shall determine. Any
surplus remaining after such application shall be paid to the Debtor or to
whomever may be legally entitled thereto, provided that in no event shall the
Debtor be credited with any part of the proceeds of the disposition of the
Collateral until such proceeds have been received in cash by the Secured Party.
The Debtor shall remain liable for any deficiency.
Section 6. Waivers. The Debtor waives presentment, demand, notice,
protest, notice of acceptance of this Agreement, notice of any loans made,
credit or other extensions granted, collateral received or delivered or any
other action taken in reliance hereon and all other demands and notices of any
description, except for such demands and notices as are expressly required to be
provided to the Debtor under this Agreement or any other document evidencing the
Note. With respect to both the Note and the Collateral, the Debtor assents to
any extension or postponement of the time of payment or any other forgiveness or
indulgence, to any substitution, exchange or release of Collateral, to the
addition or release of any party or person primarily or secondarily liable, to
the acceptance of partial payment thereon and the settlement, compromise or
adjustment of any thereof, all in such manner and at such time or times as the
Secured Party may deem advisable. The Secured Party may exercise its rights with
respect to the Collateral without resorting, or regard, to other collateral or
sources of reimbursement for Note. The Secured Party shall not be deemed to have
waived any of its rights with respect to the Note or the Collateral unless such
waiver is in writing and signed by the Secured Party. No delay or omission on
the part of the Secured Party in exercising any right shall operate as a waiver
of such right or any other right. A waiver on any one occasion shall not be
construed as a bar to or waiver of, any right on any future occasion. All rights
and remedies of the Secured Party in the Note or the Collateral, whether
evidenced hereby or by any other instrument or papers, are cumulative and not
exclusive of any remedies provided by law or any other agreement, and may be
exercised separately or concurrently.
Section 7. Expenses. The Debtor shall, on demand, pay or reimburse the Secured
Party for all reasonable expenses (including attorneys' fees) incurred or paid
by the Secured Party in connection with the enforcement of this Agreement, and
any other amounts permitted to, be expended by the Secured Party hereunder,
including without limitation such expenses as are incurred to preserve
the value of the Collateral and the validity, perfection, priority and
value of any security interest created hereby, the collection, sale or
other disposition of any of the Collateral or the exercise by the Secured
Party of any of the rights conferred upon it hereunder.
Section 8. Notices. Any demand upon or notice to the Debtor that the Secured
Party may give shall be effective when delivered by hand, properly deposited in
the mails postage prepaid, or sent by telex, answer back received, or electronic
facsimile transmission, receipt
5
<PAGE>
acknowledged, or delivered to a telegraph company or overnight courier, in each
case addressed to the Debtor at the address shown at the beginning of this
Agreement. Demands or notices addressed to any other address at which the
Secured Party customarily communicates with the Debtor also shall be effective.
Any notice by the Debtor to the Secured Party shall be given as aforesaid,
addressed to the Secured Party at the address shown at the beginning of this
Agreement or such other address as the Secured Party may advise the Debtor in
writing.
Section 9. Successors and Assigns. This Agreement shall be binding upon
the Debtor, and its successors and assigns, and shall inure to the benefit of
and be enforceable by the Secured Party and its successors and assigns.
Section 10. General. This Agreement may not be amended or modified
except by a writing signed by the Debtor and the Secured Party, nor may the
Debtor assign any of its rights hereunder. This Agreement and the terms,
covenants and conditions hereof shall be construed in accordance with, and
governed by, the laws of the State of Vermont (without giving effect to any
conflicts of law provisions contained therein).
Section 11. Section Headings. Section headings are for convenience of
reference only and are not a part of this Agreement.
Section 12. Partial Invalidity. The invalidity . or unenforceability
of any one or more phrases, clauses or sections of this Agreement shall not
affect the validity or enforceability of the remaining portions of it.
6
<PAGE>
IN WITNESS WHEREOF, the Debtor has caused this Agreement to be
duly executed as an instrument under seal as of the date first written
above.
IN THE PRESENCE OF: VERMONT COFFEE TIME, INC.
Witness: Amy Berger, President
STATE OF VERMONT
CHITTENDEN COUNTY, SS.
At Burlington in said County, this 5th day of January, 1998,
personally appeared Amy Berger, the President and duly authorized agent
of Vermont Coffee Time, Inc. and she acknowledged this instrument, by
her subscribed, to be her free act and deed and the free act and deed of
Vermont Coffee Time, Inc.
At Burlington in said County, this 5th day of
January, 1998, personally appeared duly
authorized agent of Vermont Pure
Holdings, Ltd., and he
acknowledged this instrument, by him subscribed, to be his free act and
deed and the free act and deed of said Vermont Pure Holdings, Ltd.
Before me:\S\
Notary Public
My commission expires: 2/1/99
In the Presence of: Vermont Pure Holdings, Ltd.
\S\Bruce MacDonald By:\S\Timothy Fallon
Witness Timothy G. Fallon, President
State of Vermont
Chitterden County, SS.
At Burlington, in said County, this 5th day of January, 1998, personally
appeared ___________, duly authorized agent of Vermont Pure Holdings, Ltd., and
he acknowledged this instrument, by him subscribed, to be his free act and deed
and the free act and deed of said Vermont Pure Holdings, Ltd.
Before me:
Notary Public
My commission expires: 2/1/99
7
<PAGE>
SCHEDULE A
to
SECURITY AGREEMENT
dated January 5, 1998
of VERMONT PURE HOLDINGS, LTD.
The items listed below constitute "Collateral" under the Security Agreement:
All tangible and intangible personal property, including, without limitation,
all Inventory, General Intangibles, Equipment, Machinery, Accounts, Furniture,
Furnishings, Fixtures and Vehicles now owned or hereafter
<PAGE>
acquired by Secured Party in connection with the business of selling and
distributing coffee, water and related products, and renting cooler and
dispenser equipment for home and office customers, including all assets acquired
by Secured Party from Debtor under the Asset Purchase Agreement, dated as of
December 19, 1997 and all products and proceeds thereof and accessions thereto.
8
AGREEMENT
This agreement is made as of January 5, 1998 between Amy Berger, an
individual residing at 4 Maeck Farm Road, Shelburne, Vermont 05482 ("Berger")
and Vermont Pure Holdings, Ltd., a corporation with its principal place of
business on Route 66, Randolph, VT 05060, (the "Company").
Background
A. The Company has established a division that will market spring
water, vending machines and coffee/tea products to the home/office supply market
in the New England area.
B. Berger is a principal of Vermont Coffee Time, Inc.("VCT") which is a
party to an Asset Purchase Agreement with the Company whereby the Company is
purchasing all of the assets of CTV; and, she has had considerable experience in
the business of marketing spring water, vending machines and coffee/tea products
to the home/office supply market similar to those to be conducted by the
Company.
C. Company and Berger wish to enter this Agreement to facilitate
and augment the Asset Purchase Agreement.
Terms
NOW, THEREFORE, in consideration of the premises and the mutual
agreements hereinafter set forth, the parties agree as follows:
1. Term. Subject to Section 7 of this agreement, the term of
this Agreement shall be from January 2, 1998 through January 2, 2001.
2. Consulting Agreement. Company shall retain Berger and Berger
accepts appointment as consultant of the Company upon the terms and conditions
described herein. During the Consulting Term (as defined in Section I above),
Berger shall devote the business time, attention and skills to the business and
affairs of Company as mutually agreed to by the parties signing hereto.
2.1 Duties. Berger shall at all times render
her services at the direction of the Chief Executive Officer and President.
Berger agrees that during the Consulting Term she will be reasonably available
to the Company in person or by telephone in order to provide general business
advice, sales and marketing, customer relations and consulting services
on all aspects of the coffee business. Berger agrees to use her best efforts
to promote and further the reputation and good name of Company and
perform her services well and faithfully.
<PAGE>
3. Restrictive Covenant. In order to protect the Company in its full
beneficial use and enjoyment of the goodwill, assets, business relationships,
marketing techniques and other know-how acquired as a result of a Asset Purchase
Agreement between the Company, Amy Berger and VCT, for a period of three (3)
years after the execution of this Agreement (the "NonCompete Term"), Berger will
not, within the States of New York, Vermont, New Hampshire, Maine,
Massachusetts, Rhode Island, and Connecticut, directly or indirectly compete
with the Company in the home/office distribution of.- distilled water, spring or
carbonated water, coffee/tea products and will not either (I) solicit any
persons or entities known to be customers of the Buyer to purchase any of the
aforementioned products; or (ii) solicit or induce any employee of the Buyer to
leave such employment to take a position with Berger or with any company for
which she then works. During the aforesaid period, Berger shall not make any
statements or commit any acts (including contacting any of the Buyer's
customers) that would in any way be tortiously injurious or detrimental to the
Company's image, business or customer relations. The provisions of this Section
5 shall survive the termination, for any reason, of this Agreement and shall
continue for the three (3) year period contemplated by this Section 3.
4. Confidentiality . Berger agrees that she will not at any time,
either during the term of this Agreement or thereafter, divulge to any person,
firm or corporation any information obtained or learned by his during the course
of his employment with Company, with regard to the operational, financial,
business or other affairs of Company and its affiliates, and their respective
officers and directors, including, without limitation, trade secrets, customer
lists, sources of supply, pricing policies, operational methods or technical
processes, except (i) in the course of performing her duties hereunder, (ii)
with Company's express written consent; (iii) to the extent that any such
information is in the public domain other than as a result of Berger's breach of
any of his obligations hereunder; or (iv) where required to be disclosed by
court order, subpoena or other government process. In the event that Berger
shall be required to make disclosure pursuant to the provisions of clause (iv)
of the preceding sentence, Berger shall promptly, but in no event more than 48
hours after learning of such subpoena, court order, or other government process,
notify Company, by personal delivery or by cablegram, confirmed by mail, and at
Company's expense, Berger shall: (a) take all reasonably necessary steps
requested by Company, at Company expense, to defend against the enforcement of
such subpoena, court order or other government process, and (b) permit Company
to intervene and participate with counsel of its choice in any proceeding
relating to the enforcement thereof.
4.1 All confidential information described in Section 4 shall
be the exclusive property of the Company, and Berger shall use her best efforts
to prevent any publication or disclosure thereof.
4.2 The provisions of this Section 4 shall survive the
termination, for any reason, of this Agreement and shall continue for the period
contemplated by this Section 4.
5. Remedies. Berger acknowledges that her promises with
respect to the agreement
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not to compete and to maintain the confidentiality of information in accordance
with this agreement are promises of a special, unique, unusual, extraordinary
and intellectual character, which give them peculiar value the loss of which
cannot be reasonably or adequately compensated in an action of law, and that, in
the event there is a breach of his promises with respect to her agreement not to
compete and to maintain confidentiality of information by Berger, the Company
will suffer irreparable harm, the amount of which will be impossible to
ascertain. Accordingly, the Company shall be entitled, if it so elects, to
institute and prosecute proceedings in any court of competent jurisdiction,
either at law or in equity, to obtain damages for any breach or to enforce
specific performance of the provisions or to enjoin Berger from committing any
such act in breach of this Agreement. The remedies granted to the Company in
this Agreement are cumulative and are in addition to remedies otherwise
available to the Company at law or in equity. If the Company is obliged to
resort to the courts for the enforcement of a covenant of Berger contained in
Section 3 or 4, such covenant shall be extended for a period of time equal to
the period of such breach which extension shall commence on the later of (I) the
date on which the original (unextended) term of such covenant is scheduled to
terminate or (ii) the date of the final court order (without further right of
appeal) enforcing such covenant.
6. Compensation. As compensation and consideration for Berger's
agreement and consent to the terms of this Agreement and her assumption of the
responsibilities under this Agreement and further consideration for the Asset
Purchase Agreement entered into by and between the Company and CTV, the Company
agrees to pay Berger and Berger agrees to accept the following compensation:
6.1 The Company will pay Berger on a monthly basis on the
first of every month, compensation at an annual rate of $20,000 for the term of
this Agreement.
7. Termination. Notwithstanding anything to the contrary
contained in this Agreement, Berger's employment or consulting may be terminated
prior to the end of the Employment and Term only as follows:
7.1 Termination Upon Death of Berger. Berger's status as
consultant shall terminate upon the death of Berger; provided, however, that
Company shall pay to Berger's estate or designated beneficiary, any amounts due
hereunder accrued but unpaid at Berger's date of death.
7.2 Termination Upon Disability of Berger. Berger's
employment shall terminate if, in good faith, and with the advice of a qualified
and independent physician, the Board of Directors of Company determines that
Berger has become, by reason of accident, illness, mental or physical
disability, so disabled as to be incapable of satisfactorily performing his
duties hereunder for a period of one hundred twenty (120) consecutive days;
provided, however that Berger shall continue to receive any amounts due
hereunder accrued but unpaid at Berger's date of termination due to
disability, less any amount Berger receives for such period from any
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Company-sponsored or Company-paid for source of insurance, disability
compensation or government program.
7.3 Termination Upon Mutual Consent. Berger's employment
may be terminated by the mutual consent of Company and Berger on such terms as
they may agree.
7.4 Termination For Cause. Berger's employment shall terminate
immediately on notice to Berger upon a good faith finding of the Board of
Directors of Company that Berger has (I) wilfully or repeatedly failed to
perform her duties in accordance with the provisions of this Agreement
notwithstanding 30 day prior written notice to Berger and failure of Berger to
cure any deficiency, (ii) committed a breach of any provision of Section 3 or 4
hereof, (iii) misappropriated assets or perpetrated fraud against Company, (iv)
been convicted of a crime which constitutes a felony, or (v) been engaged in the
illegal use of habit forming substances. In the event of termination for cause,
Company shall pay Berger only her compensation through the date of termination
and will have no further liability hereunder.
7.5 Termination by Company Without Cause. The Company may
terminate this agreement at any time without cause, upon written notice to
Berger. In the event of termination pursuant to this paragraph, the Company
shall continue to pay Berger the amounts due under Section 6.1 of this Agreement
which shall survive termination of this Agreement.
8. Applicable Law. This Agreement shall be construed in
accordance with the laws of the State of Vermont, without giving effect to
principles of conflict of law.
9. Waiver of Breach. The waiver by the Company or Berger of a
breach of any provision of this Agreement by the other shall not operate or be
construed as a waiver of any other or subsequent breach of such or any other
provision.
10. Notices. Any notice required or permitted to be given under this
agreement shall be in writing and shall be delivered by hand or sent by
certified mail addressed to Berger at her address set forth in the first
paragraph of this Agreement, with a copy to Ritchie E. Berger, Esq., Dinse,
Knapp & McAndrew, P.C. 209 Battery Street, P.O. Box 988, Burlington, VT
05402-0988 (or such subsequent address as is noted on Company's records), and to
the Company at Route 66, Randolph, VT 05060, with a copy to Kevin F. Berry,
Esq., Ledgewood Law Firm, 1521 Locust Street, Philadelphia, Pennsylvania 19102,
or to such other address as either of such parties may designate in a written
notice served upon the other party in the manner provided herein. Any such
notice shall become effective upon receipt.
11. Severability. If any term or provision of this Agreement or
the application thereof to any person or circumstance shall, to any extent, be
held invalid or unenforceable by a court of competent jurisdiction, the
remainder of this Agreement or the application of any such term or provision to
persons or circumstances other than those as to which it is held invalid or
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unenforceable, shall not be affected thereby, and each term and provision of
this Agreement shall be valid and enforceable to the fullest extent permitted by
law. If any of the provisions contained in this Agreement shall for any reason
be held to be excessively broad as to duration, scope, activity or subject, it
shall be construed by limiting and reducing it, so as to be valid and
enforceable to the extent compatible with the applicable law or the
determination by a court of competent jurisdiction.
12. Binding Effect and Assignability. The rights and obligations of
both parties under this Agreement shall inure to the benefit of and shall be
binding upon their heirs, successors and assigns, but it shall not be assigned
without the written consent of both parties.
13. Entire Agreement. This instrument constitutes the entire
agreement with respect to the subject matter hereof between the parties hereto
and replaces and supersedes as of the date hereof any and all prior oral or
written agreements and understandings between the parties hereto. This Agreement
may only be modified by an agreement in writing executed by both Berger and the
Company.
IN WITNESS WHEREOF, the undersigned have executed this Agreement the
date and year written above.
Vermont Pure Holdings, Ltd.
By:\S\Timothy G. Fallon By: \S\Amy Berger
Timothy G. Fallon Amy Berger
President & CEO 1/5/98
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PACKING AND DISTRIBUTION AGREEMENT
THIS AGREEMENT is made this 9th day of December 1997 between VERMONT PURE
SPRINGS, INC. with its principal place of business offices and manufacturing
facility located on Route 66 in Randolph, Vermont 05060 ("VPS") and AKVA USA,
INC. ("AKVA USA") a United States corporation that owns distribution rights to
AKVAR and AKVA Hf. ("AKVA Hf.") An Icelandic corporation.
RECITALS
WHEREAS, the AKVA Hf desires to engage VPS to distribute on an exclusive basis
worldwide, certain waters to be bottled and/or packaged by AKVA Hf to which AKVA
HF. and AKVA USA have a proprietary interest (hereinafter "Products"), and
WHEREAS, VPS desires to accept such engagement upon the terms and subject to
the conditions set forth in this Agreement.
WHEREAS, AKVA USA currently owns a certain number of cases of Product which VPS
desires to purchase, and
WHEREAS, AKVA USA and AKVA Hf. are parties to that certain International
Manufacturing and Distribution agreement dated June 4, 1994, the rights to which
AKVA USA will assign to VPS pursuant to that certain Agreement Regarding
Distribution Rights of even date herewith, and
NOW, THEREFORE, AKVA USA, AKVA Hf and VPS, intending to be legally bound, hereby
agree as follows:
1. Establishment of Distribution Agreement
1.1 Packing AKVA hereby agrees to provide water natural spring water
(from source: Hesjuvalla Spring ), blow-molding and packing services
and to cause certain non- sparkling waters to be bottled, packaged, and
made available for shipment under the AKVA trademark or private label.
The products as identified in this Agreement (hereinafter "Products")
shall be defined as mutually agreed to by VPS and AKVA
1.2 Territory and Marketing
1.2.1 Territory VPS shall have the exclusive right, subject to the
provisions of this Agreement, to market sell and/or distribute the
Product on a worldwide basis without Stations provided, however,
AKVA Hf. shall have the non-exclusive right to market, sell and
distribute private label product.
1.2.2 Appointment VPS hereby accepts the appointment as exclusive
distributor and importer hereunder and agrees to use its best efforts
to introduce, promote,
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market, and distribute the Product in the Territory. In the course of
its marketing, distribution and other activities with respect to the
Product, VPS agrees to conduct its business in a lawful and ethical
manner. VPS shall use its best efforts to protect and foster AKVA Hf.'s
reputation and the reputation of the Product in the Territory.
1.3 Term This Agreement shall commence on the effective date of this
Agreement and continue until termination pursuant to the provisions hereof
1.4 Price and Additional Terms
1.4.1 Packing Price AKVA Hf. shall provide natural spring water, blow
molding and packing services with respect to AKVA or private label
product ordered by Vermont Pure at a price of $1.75 per physical case.
Such services shall be invoiced when ordered, and shall be due and
payable within thirty (30) days thereafter. Payments after thirty days
shall bear interest at the rate of the lesser of the highest rate legal
in the applicable jurisdiction or 1 1/2 percent per month.
1.4.2 Raw Materials AKVA Hf shall handle the receipt and storage of all
raw materials used in the packing of the AKVA and private label
product. Cost of raw materials, shipping and insurance while in transit
to or from AKVA Hf shall be paid directly to the applicable vendor by
VPS. Shipping of all raw materials hereunder shall be to AKVA Hf.'s
facilities located in Akureyri Iceland, or at such other location in
Akureyri as AKVA Hf shall specify. Except as otherwise provided herein,
AKVA Hf. shall bear the risk of loss for product or Raw materials
stored at its Facilities but not in transit to or from its facilities.
1.4.3 Share of Profits Commencing in calendar year 1999 and ending at
the earlier to occur of (I) the end of the 2004 calendar year or (ii)
the distribution to each party of $500,000 of profits ("Profit Sharing
Period"), AKVA Hf. and VPS shall split operating profits earned on the
sale of Products on a 50/50 basis. Profits will be distributed annually
within a (60) days after the year end in which such profits are earned.
For purposes of this Agreement, operating profits shall be equal to
revenue from sales of Product (Less returns and discounts), less cost
of goods sold, less advertising and promotion of approximately $1.75
per case (except with regard to cases of 12 oz. product in which case
the advertising and promotion costs shall be approximately $1.25 per
case) and allocable SG&A of up to $1.50 per case. Upon termination of
the Profit Sharing Period, AKVA Hf. and VPS shall negotiate in good
faith a new packing price providing AKVA Hf. an adequate return on such
services. Should the parties be unable to reach an agreement as to such
price, this agreement may be terminated by either party upon One
Hundred and Eighty (180) days prior written notice. During such One
Hundred and Eighty (180) day period, the profit sharing arrangement
described above shall continue to apply. In the event that the
Agreement is terminated pursuant to this section, neither party, for a
period of three (3) years, shall market product under the AKVAR name,
nor shall bottle Product for any party for whom they had a co-packing
arrangement hereunder prior to the termination of
this Agreement.
1.4.4 Existing business/de minimus Not withstanding anything to
the contrary herein, AKVA Hf. shall be entitled to sell on its own
account, not subject the co-packing or profit sharing provisions set
forth in Section 1.4.3, up to 10,000 cases of AKVA product to
accounts it
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is currently servicing directly. AKVA Hf shall reimburse VPS its cost of
raw materials used
in such sales.
1.4.5 Sales originated by AKVA Hf. If AKVA Hf shall originate sales of
AKVAR product, or sales of co-packed Product, AKVA Hf. shall be entitled to
a commission equal to five (5%) percent of sales in addition to the
compensation provided in 1.4.3 hereof ("AKVA Hf. Sales"). In addition AKVA
Hf. sales shall be subject to the profit sharing provisions of section
1.4.3 from the date of this Agreement.
1.4.6 Cancellation The distribution and manufacturing arrangement can be
canceled by VPS upon ninety (90) days prior written notice.
1.4.7 Compliance with Laws VPS shall be responsible for compliance with
all U.S. federal state and local laws regarding bottling, water quality,
labeling and like matters. AKVA Hf. shall be responsible for all Icelandic
bottling, water quality, and labeling matters.
1.4.8 Purchase of existing inventory VPS will purchase all AKVA USA's good
inventory at an average price of $5.77 per case. VPS will pay for the
inventory upon shipment of the product to the distributor. VPS shall be
responsible for all storage and shipping charges after Settlement.
Notwithstanding the Foregoing payment terms, payment in full for the
inventory shall be due upon termination by VPS of this Agreement or One
Hundred and Eighty Days (180) after the date hereof, whichever comes first.
VPS shall use its best efforts to sell the 1.5 and 1.0 liter inventory
having "expiration' dates prior to August 1998 ('Dated Inventory"). Such
efforts shall include, without limitation offering such inventory at on a
"buy one, get one free" basis at the current case prices. In the event that
despite its best efforts VPS is unable to sell Dated Inventory because it
expires, VPS shall be credited the purchase price of such inventory.
1.4.9 Reporting VPS shall provide AKVA Hf. with detailed reports on a
quarterly basis showing overall sales by product line, pricing
information, advertising and marketing expenditures, subdistributor
relations, adjustments to projected inventory requirements and any other
information reasonably requested by AKVA Hf. in connection with or
affecting the manufacturing, bottling and shipping of Product in the
Territory. AKVA Hf., or its representatives, shall be entitled to inspect
VPS accounting, regulatory, marketing or other relevant records regarding
Product upon request therefor.
1.4.10 Facilities VPS, or its sub-distributors, as the case may be, shall
maintain a suitable place of business with adequate facilities, trucking
equipment and staffing necessary to comply with the provisions of this
Agreement and to promote and maintain AKVA Hf.'s image and good reputation
in the Territory. All such facilities and trucks shall be clean, dry and
sanitary, and shall be maintained in a manner to prevent contamination of
the Product. AKVA Hf. shall have the right, from time to time, to inspect
such facilities and equipment to ensure compliance with this Section, and
VPS shall afford AKVA Hf. complete access thereto for purposes such
inspection.
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1.4.11 Non-agency The parties acknowledge that VPS is an independent
distributor and neither the making of this Agreement nor the performance of
any of the provisions hereof shall be construed to constitute VPS an agent
or legal representative of AKVA Hf. for any purpose, nor shall this
Agreement be deemed to establish a joint venture or partnership. Each
purchase of the product by VPS from AKVA Hf. pursuant to this Agreement,
each sale of the product made by VPS, and each agreement or commitment made
by VPS to any person, firm or corporation with respect thereto shall be
made by VPS for its own account
2. Delivery
2.1 Delivery of Product AKVA Hf.'s obligation to fill VPS Orders shall
be limited and subject in all events to (i) the availability to AKVA
Hf. of sufficient quantities of raw materials: (ii) any Force Majeure
or circumstance beyond AKVA Hf.'s reasonable control and (iii) timely
and adequate submissions of orders to AKVA Hf. according to the
provisions of the Agreement. AU Products shall be delivered to
AKVA Hf.'s plant.
2.2 Shipping AKVA Hf will arrange for shipment of all finished
Product. The cost of shipping shall be approved in advance and paid
for by VPS.
3. AKVA Hf. and AKVA USA's representations and warranties
3.1 AKVA Hf. AKVA Hf. represents and warrants to VPS that as of the
date of this Agreement and as of the date of the Settlement, that:
3.1.1 AKVA Hf. is a "hlutafelag" duly organized and existing in good
standing under the laws of the Republic of Iceland with the corporate
power to own its assets and carry on its business as is now being
conducted.
3.1.2 AK-VA Hf is in compliance with all applicable laws, ordinances,
rules, regulations, and requirements of all governmental authorities
having jurisdiction thereof, and that AKVA has complied with all laws,
municipal,,. ordinances, and regulations of all governmental
authorities having jurisdiction thereof, and that AKVA has complied
with all laws, municipal ordinances, and regulations applicable to
AKVA and in the ownership of the assets and the business hereunder
where failure to do so would interfere with the performance of its
obligations under this Agreement.
3.1.3 There are no actions, suits, or proceedings pending or
threatened against AKVA Hf., either at law or in equity, brought by any
federal, state, or municipal or other
governmental agency, department, board, bureau, or other
instrumentality that would interfere with the performance of its
obligations under this Agreement.
3.1.4 All trademarks, trade names, copyrights and applications
therefor are owned or used
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or registered in the name of or licensed to AKVA Hf. are listed and
briefly described on Schedule 3.1.4. Other than as specified on
Schedule 3.1.4, no proceedings have been instituted or are pending or
threatened which challenge the validity of the ownership or use by the
AKVA Hf. of any such trademarks, trade names, copyrights or
applications. AKVA Hf. has not licensed anyone, other than AKVA USA to
use any of the foregoing or any other technical know-how or other
proprietary rights of AKVA Hf. and AKVA Hf. has no knowledge of the
infringing use of any of such trademarks and trade names or the
infringement of any such copyrights by any person except as set forth
on Schedule 3.1.4. The Company owns or validly licenses all
trademarks, trade names, copyrights set forth on Schedule 3.1.4 now
used in the conduct of its business and has not received any notice of
conflict with the asserted rights of others except as specified in
Schedule 3.1.4.
3.2 AKVA USA The AKVA USA represents and warrants to VPS that as of
the date of this Agreement and as of the date of the Settlement, that:
3.2.1 AKVA USA is a Corporation duly organized and existing in good
standing under the laws of the state of Delaware with the corporate
power to own its assets and carry on its business as is now being
conducted.
3.2.2 AKVA USA is in compliance with all applicable laws, ordinances,
rules, regulations, and requirements of all governmental authorities
having jurisdiction thereof, and that AKVA USA has complied with all
laws, municipal ordinances, and regulations of all governmental
authorities having jurisdiction thereof, and that AKVA USA has
complied with all laws, municipal ordinances, and regulations
applicable to AKVA USA and in the ownership of the assets and the
business hereunder where failure to do so would interfere with the
performance of its obligations under this Agreement.
3.2.3 There are no actions, suits, or proceedings pending or
threatened against AKVA USA, either at law or in equity, brought by
any federal, state, or municipal or other governmental agency,
department, board, bureau, or other instrumentality that would
interfere with the performance of its obligations under this
Agreement.
3.2.4 All trademarks, trade names, copyrights and applications
therefor are owned or used or registered in the name of or licensed
to AKVA USA are listed and briefly described on Schedule 3.2.4.
Other than as specified on Schedule 3.2.4, no proceedings have been
instituted or are pending or threatened which challenge the validity
of the ownership or use by the AKVA USA of any such trademarks,
trade names, copyrights or applications. AKVA USA has not licensed
anyone, other than AKVA USA to use any of the foregoing or any other
technical know-how or other proprietary rights of AKVA USA and AKVA
USA has no knowledge of the infringing use of any of such trademarks
and trade names or the infringement of any such copyrights by any
person except
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as set forth on Schedule 3.2.3. The Company owns or validly licenses
all trademarks, trade names, copyrights set forth on Schedule 3.2.3
now used in the conduct of its business and has not received any
notice of conflict with the asserted rights of others except as
specified in Schedule 3.2.3.
3.3 Subsequent Knowledge. If AKVA Hf. or AKVA USA obtains any
knowledge or information between the date hereof and Settlement,
making or indicating that any of the aforesaid warranties or
representations are no longer true, or indication that any of the
representations and conditions set forth above are not true and
cannot be made true by the party to which such representation or
warranty applies, by the time of Settlement, or will no longer be
true as of the date of Settlement, the party to whom such
representation or warranty applies will promptly notify VPS of such
change in circumstances.
4. Trademark
4.1 Ownership VPS recognizes that "AKVA" is a trademark of Kaupfelag
Eyfiroinga ("KEA") and licensed to AKVA Hf for so long as AKVA Hf.
is engaged in the business of bottling and distributing spring water
and said trademark, name, marks, names, symbols, slogans, emblems,
insignia, or other designs of AKVA (Schedules 3.1.3 and 3.2.3)(the
"AKVA marks") are owned or licensed to AKVA Hf., but such trade
names and advertising matter or copyrighted materials may be
utilized by VPS in conformity with the Agreement, and must be
approved by AKVA Hf. in advance of its use. VPS shall not act in any
manner which may impair the "AKVA" trademark or affect its good
will. Trademark usage in any form shall be approved by AKVA Hf..
4.2 Non registration VPS shall not, during the term of the Agreement
or thereafter, gr represent that it is the owner of the AKVA Marks,
whether or not the Trademarks are registered, nor shall VPS at any
time register or cause to be registered any AKVA Marks, in its name
or in the name of another, except on behalf of and with written
instructions from AKVA Hf. VPS shall not dispute the validity of AKVA
Hf.'s Trademarks.
4.3 Termination. VPS will not, after 60 days following the date of
termination use in any manner whatsoever, any of the AKVA Marks.
5. Spoiled or Defective Products
5.1 Product Warranty
5.1.1 AKVA Hf. hereby warrants that the Product will be pure and
uncontaminated. AKVA Hf. shall replace, at its own reasonable
expense, Products which are verified to be spoiled and/or
defective as a result of contamination of the source, the improper
bottling of the Product or contamination or spoilage of the
Product during bottling.
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5.1.2 VPS shall visually inspect Product upon receipt thereof for
external damage and overall condition. VPS shall immediately file
a notice of claim against the carrier(s) in the event that any of
the Product is delivered other than in external good order and
condition. VPS shall also promptly notify AKVA Hf. of such fact.
5.1.3 EXCEPT AS HEREINBEFORE SPECIFICALLY SET FORTH, AKVA Hf MAKES
NO WARRANTY WHATSOEVER WITH RESPECT TO THE PRODUCT. OTHER THAN
THAT SET FORTH ABOVE, ALL WARRANTIES, CONDITIONS, REPRESENTATIONS,
INDEMNIFICATIONS AND GUARANTEES, EXPRESS OR IMPLIED, INCLUDING
WARRANTIES OF MERCHANTABILITY AND FITNESS FOR ANY PARTICULAR
PURPOSE, WHETHER ARISING UNDER ANY PRIOR AGREEMENT OR UNDER ORAL
OR WRITTEN STATEMENT MADE BY OR ON BEHALF OF COMPANY IN
NEGOTIATIONS WITH VPS OR ITS REPRESENTATIVES, ARE HEREBY
OVERRIDDEN AND EXCLUDED.
5.2 Indemnification by AKVA Hf. AKVA agrees to indemnify and hold
harmless VPS and its subsidiaries, affiliates, successors and assigns
from and against any and all (x) liabilities, losses, costs,
deficiencies or damages and any and all amounts paid in settlement
("Loss") and (y) reasonable attorneys' and accountants' fees and
expenses, court costs and all other reasonable out-of-pocket expenses
("Expense",),,. net of any insurance received, incurred by VPS, in
investigating, preparing or defending against any litigation,
commenced or threatened, or any claim asserted in good faith in
connection with or arising from the manufacturing, marketing, and/or
sale of any Product improperly bottled by AKVA or contaminated at the
source or spoiled during bottling, pursuant to this Agreement.
5.2 Indemnification By VPS, VPS agrees to indemnify and hold harmless
AKVA Hf. and its subsidiaries, affiliates, successors and assigns from
and against any and all (x) liabilities, losses, costs, deficiencies
or damages and any and all amounts paid in settlement ("Loss") and (y)
reasonable attorneys' and accountants' fees and expenses, court costs
and all other reasonable out-of-pocket expenses ("Expense") net of any
insurance received, incurred by AKVA Hf., in investigating, preparing
or defending against any litigation, commenced or threatened, or any
claim asserted in good faith in connection with or arising from the
marketing, and/or sale of any Product other than as a result of
improper bottling by AKVA or contamination at the source or spoilage
during bottling, pursuant to this Agreement.
6. Insurance
6.1 VPS Insurance That VPS carries comprehensive general liability
insurance covering injuries or damages to person(s) or property as
herein described. Upon AKVA Hf.'s request, VPS shall deliver to AKVA
Hf. a certificate of insurance with the following coverage amount of
$1,000,000.
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6.2 AKVA Hf. Insurance The AKVA Hf. carries comprehensive general
liability insurance covering, injuries or damages to persons or
property as described herein. AKVA Hf. shall deliver to VPS a
certificate of insurance with the following coverage amount of
$1,000,000.
7. Non-competition
7.1 Scope In further consideration for entering- into this Agreement,
upon the consummation of the transactions contemplated herein and more
effectively to transfer and protect the business of the Company, AKVA
Hf. agrees that for so long as this Agreement is in effect, and except
as otherwise provided herein, neither it nor its current affiliates
and/or shareholders will (I) directly or indirectly own, manage or
operate a bottled water business anywhere in the world; provided that
ownership of not more than five percent (5 %) of the issued and
outstanding shares of a class of securities of a corporation, the
securities of which are traded on a national securities exchange or in
the over-the-counter market, shall not be deemed ownership of the
issuer of such shares for the purposes of this paragraph; or (ii)
induce or attempt to persuade any employee or agent of the VPS to
terminate such employment or agency relationship in order to enter
into any such relationship with AKVA Hf or any of its subsidiaries or
affiliates or to enter into any such,-. relationship on behalf of any
other business organization in competition with VPS.
7.2 Injunction Without limiting the right of VPS and any of its
successors or assigns to pursue all other legal and equitable rights
available to them for violation of the covenant set forth in Section
7.1 above by AKVA, it is agreed that other remedies cannot fully
compensate VPS and its successors and assigns for such a violation and
that VPS and its successors and assigns shall be entitled to
injunctive relief to prevent violation or continuing violation hereof.
It is the intent and understanding of each party hereto that if, in
any action before any court or agency legally empowered to enforce
this covenant, any term, restriction, covenant or promise is found to
be unreasonable and for that reason unenforceable, then such term,
restriction, covenant or promise shall be deemed modified to the
extent necessary to make it enforceable by such court or agency.
8. Termination
8.1 Parties' Right to Terminate Agreement Each Party shall have the
right to terminate this Agreement as follows:
8.1.1 Except as otherwise provided in this Agreement, in the
event either AKVA Hf. or VPS breach any material representation
or warranty or fails to perform any obligation contained in this
Agreement and after having been finished with sixty (60)
days notice to cure by the other Party (except when no Notice
to Cure is required) such breach has not been remedied, then the
party not in breach may terminate this
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Agreement.
8.1.2 AKVA Hf. may terminate this Agreement upon failure by VPS
to make any payment hereunder when due, and does not cure such
payment default within thirty (30) days of written notice
thereof.
8.1.3 In the event AKVA Hf. or VPS (i) fails to vacate an
involuntary bankruptcy, insolvency or reorganization petition or
petition for an arrangement or composition with creditors filed
against AKVA Hf. or VPS with thirty (30) days after the date of
such filing, or files such a petition on a voluntary basis; or
(ii) AKVA Hf. of VPS makes an assignment or deed of trust for the
benefit of creditors; or (iii) AKVA or VPS fails to vacate the
appointment of a receiver or trustee for AKVA Hf. or VPS of for
any interest in the other parties business within thirty (30)
days after such appointment; or (iv) AKVA Hf. or VPS permits an
attachment to be levied against and remain outstanding on any of
its equipment or plant for more that thirty (30) days; AKVA Hf or
VPS may terminate this Agreement upon ten (10) days prior written
notice to the other Party.
9. Notices
Any notice, request, demand, invoice or other communication required or
permitted by this Agreement shall be deemed properly given (I) when actually
delivered; (ii) when dispatched by facsimile, if confirmed in writing by
sender's transmission device; or (iii) if sent certified mail receipt requested,
when the return receipt indicates delivery was made. Addressee for Notice are as
follows, provided that either party may change its address for Notice by notice
to the other.
For AKVA Hf. and AKVA USA: AKVA Hf.
Hafnarstraeti 91-95
Akureyri, Iceland
Attn: Thorarim Sveinsson
Telephone: 354-443-338
Facsimile: 354430-391
With Copy To: Robert L. May, Jr., Esquire
10 Railroad Place
Saratoga Springs, NY 12866
Telephone: (518) 581 - 8800
Facsimile: (518) 581 - 8823
For VPS: Vermont Pure Springs, Inc. Route 66
Randolph Center, VT 05061
Attn: Timothy G. Fallon
Telephone: (802) 728 - 3600
Facsimile: (802) 728-4814
9
<PAGE>
With Copy to: Kevin F. Berry, Esquire
Ledgewood Law Firm
Philadelphia, PA 19102
Telephone: (215) 731 - 9450
facsimile: (215) 735 - 2513
10. Integrated Agreement
This Agreement contains the entire agreement of the parties with respect to
the subject matter hereof This Agreement may be modified only by an
agreement of the parties in writing, signed by the party to be charged,
which need by supplied by additional consideration.
11. No Assignment
Neither party shall assign its right or delegate its duties under this
Agreement to any other person or entity without the prior written consent of
the other party. A consent required by either party pursuant to this
paragraph shall not, once requested, be unreasonably withheld.
12. Severability
If any provision of this Agreement is found by a court of competent
jurisdiction to be void or unenforceable, the other provision of this
Agreement shall remain in full force and effect.
14. Non-Waiver
Failure of either party to exercise promptly any right granted by this
Agreement or to require strict performance of any obligation undertaken by
the other party pursuant to this Agreement, shall be deemed to be a waiver
of such right or of the right to demand subsequent perfomance of any and
all such obligations undertaken by the other party.
15. Arbitration.
All disputes arising in connection with this Agreement which cannot be
resolved by the parties shall be finally settled in accordance with the
rules with respect to commercial arbitration then in effect of the
International Chamber of Commerce (ICC) arbitration in Geneva, Switzerland.
The arbitrators shall be persons skilled in the legal and business aspects
of the bottled spring water business. Arbitrators are to be selected by the
parties, each side choosing one. In the event that the two arbitrators
cannot agree, they shall select a third arbitrator (or, failing agreement,
such third arbitrator shall be selected by the ICC upon reference being
made to such body), and the decision of any two of the three arbitrators
shall be binding on the parties. Judgment upon any award rendered in
arbitration may be entered in a court of competent jurisdiction or
application may be made to such court for judicial acceptance of such
award and an order of enforcement, as the case may be. Each party shall
bear its own costs of arbitration hereunder.
16. Choice of Law
This Agreement is to be governed by the laws of the State of New York
without regard to its
10
<PAGE>
conflicts of laws.
17. Official Language
The official language of this Agreement and notices is English.
IN WITNESS WHEREOF the parties hereto have executed this Agreement as of the day
and year set forth hereinabove.
AKVA: AKVA USA, INC.
Date:09/12/97 By:\S\Thorafim Sveinsson
Thorafim Sveinsson
President
AKVA Hf.
Date:09/12/97 By:\S\Maghus Gauti Gautason
Maghus Gauti Gautason
Chairman
VPS: VERMONT PURE SPRINGS, INC.
Date:09/12/97 By:\S\Timothy G. Fallon
Timothy G. Faflon
President & CEO
11
<PAGE>
Schedule 3.1.4
AKVA Hf. Trademarks
AKVA - Licensed to AKVA Hf. by KEA,
"The pure soul of Iceland" - not registered, no assurance that its registrable.
Hesjuvalla Springs medallion logo - not registered, no assurance that it is
registrable.
12
<PAGE>
Schedule 3,2.4
AKVA USA Trademarks
NONE
13
<PAGE>
AGREEMENT REGARDING DISTRIBUTION RIGHTS
THIS AGREEMENT REGARDING DISTRIBUTION RIGHTS (the "Assiginment"), dated as of
DECEMBER 9th 1997, is by and between AKVA USA, INC., a Delaware corporation,
having its principal office at 12 Marshall Street, Boston, Massachusetts 02108
(the "Assignor') and Vermont Pure Springs, Inc., a Delaware corporation, having
its principal place of business at Route 66 in Randolph, Vermont 05060 (the
"Assignee").
WITNESSETH:
WHEREAS, Assignor is a party to that certain International Distribution and
Manufacturing Agreement dated as of June 6, 1994 (the "Distribution Agreement");
and WHEREAS, the Assignor wishes to assign its right under the Distribution
Agreement to distribute AKVA Spring Water in the United States (the
"Rights") to the Assignee in exchange for 25,000 shares of Assignee's parent
company, Vermont Pure Holdings, Ltd.; and
WHEREAS, the Assignee is willing to accept an assignment of the rights in
exchange for 25,000 shares;
NOW THEREFORE, THE PARTIES HERETO AGREE AS FOLLOWS:
SECTION 1. Assignor does hereby irrevocably and unconditionally assign,
transfer and set over to the Assignee or its designees all of the Assignor's
rights under the Distribution Agreement.
SECTION 2. In exchange for the assignment contained in Section I hereof,
Assignee shall cause 25,000 unregistered shares of its class A common stock,
$.Ol par value (the "shares") to be issued in the name of of
the persons set forth in Exhibit A. Assignee shall issue such certificates for
the shares within five days of the date hereof.
SECTION 3. This Assignment may not be modified orally or in any manner other
than by an agreement in writing signed by the parties hereto or their respective
successors, administrators and assigns.
SECTION 4. This Assignment shall be binding upon and inure to the benefit of the
successors, administrators and permitted assigns of the parties hereto.
SECTION 5. This Assignment shall be governed by and construed under the laws of
the State of Massachusetts.
A-1
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this ASSIGNMENT OF
RECEIVABLES as of the day and year first above written.
AKVA USA, INC.
By:\S\Thorarian Sveinsson
Title:President, 09/12/97
VERMONT PURE SPRINGS, INC.
By:\S\Timothy G. Fallon
Title:President and CEO, 09/12/97
A-2
<PAGE>
Exhibit A
Akva Hf. 20,000 Shares
Hafnarstraeti 91-95.
Akureyri, Iceland
David T. Thibodeau 2,500 Shares
133 Myrtle Street
Boston, Ma. 02114
Wilham S. Bennet 2,500 Shares
12 Marshall Street
Boston, Ma. 02108
A-3
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<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000885040
<NAME> VERMONT PURE HOLDINGS, LTD
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-24-1998
<PERIOD-START> OCT-25-1997
<PERIOD-END> JAN-24-1998
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<CASH> 470,689
<SECURITIES> 0
<RECEIVABLES> 2,145,233
<ALLOWANCES> 204,634
<INVENTORY> 881,970
<CURRENT-ASSETS> 3,776,283
<PP&E> 10,429,755
<DEPRECIATION> 2,856,951
<TOTAL-ASSETS> 18,532,322
<CURRENT-LIABILITIES> 4,362,167
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0
0
<COMMON> 10,207
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<TOTAL-LIABILITY-AND-EQUITY> 18,532,322
<SALES> 4,407,086
<TOTAL-REVENUES> 4,407,086
<CGS> 1,942,154
<TOTAL-COSTS> 1,942,154
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 151,284
<INCOME-PRETAX> (464,652)
<INCOME-TAX> 0
<INCOME-CONTINUING> (464,652)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (464,652)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
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