EXHIBIT 10.1
OPTION AGREEMENT
THIS OPTION AGREEMENT (the "AGREEMENT") is made and entered into as of
the 30th day of October, 2009 by and between XXXX ANN'S SPECIALTY FOODS, INC.,
an Iowa corporation ("SELLER") and SMOKY MARKET FOODS, INC., a Nevada
corporation ("BUYER").
RECITALS:
A. Seller owns that certain real property comprising approximately 15
acres located in Xxxxxxxx County, Iowa and more particularly described on
EXHIBIT A attached hereto (together with all improvements thereon and all
appurtenances relating thereto, the "PROPERTY") (and others).
B. Seller operates a smoked food processing facility on the Property to
supply the smoked food needs of Buyer.
C. Seller desires to grant to Buyer an option to purchase the Property
on the terms and conditions set forth herein. If Buyer elects to purchase the
Property, Buyer and Seller desire to enter into a lease with respect to a part
of the Property upon the terms and conditions more particularly set forth below.
D. In order to set forth the understanding of Seller and Buyer with
respect to the grant of such option, the respective parties hereto desire to
enter into this Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the above premises, and the
covenants and promises set forth herein, the receipt and sufficiency of which
are hereby acknowledged, the parties hereby agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions of this
Agreement, Seller grants to Buyer the right, but not the obligation, (the
"OPTION") at any time during the Option Term, as defined herein, to purchase the
Property. The Option granted hereunder shall be exercised, closed (the
"CLOSING") and paid for pursuant to the provisions of this Agreement. The Option
does not include the right to purchase any personal property of Seller (other
than buildings, structures and other improvements on the Property), except that
the refrigeration units on the Property shall be deemed part of the Property for
the purposes of the Option.
2. OPTION TERM. The term of the Option (the "OPTION TERM") shall
commence as of the date of this Agreement and shall terminate at 11:59 p.m.
Central Time on the earliest to occur of (a) the Option Expiration Date (as
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defined below), (b) upon the filing or institution of bankruptcy,
reorganization, liquidation or receivership proceedings by or against the Buyer;
however, that in the event of any involuntary bankruptcy or receivership
proceeding, the termination shall not occur if the proceeding dismissed within
sixty (60) days after the filing thereof and (c) if Buyer ceases for any reason
to carry, or to attempt to carry, on its business or makes an assignment for the
benefit of its creditors. The "OPTION EXPIRATION DATE" shall be September 1,
2016 unless prior to September 1, 2016 Buyer exercises the "Addition Option"
described in the Second Amended and Restated Processing Agreement dated October
30, 2009 between Buyer and Seller, in which case the Option Expiration Date
shall be September 1, 2019.
3. CONSIDERATION FOR OPTION. As consideration for the Option, Buyer
shall grant Seller concurrently with the execution of this Agreement warrants
substantially in the form attached hereto as EXHIBIT B (the "WARRANTS") to
purchase 1,500,000 shares of common stock of Buyer. Seller shall retain the
Warrants and any related securities whether or not the Option is exercised.
4. SECURITIES REPRESENTATIONS. In order to induce the Company to issue
the Warrants and the shares of common stock issuable upon exercise of the
Warrants (the "WARRANT SHARES"; together with the Warrants, the "SECURITIES"),
Seller, Xxxx Xxxxxxxx and Xxxx Xxx Xxxxxxxx (Xxxx Xxxxxxxx and Xxxx Xxx Xxxxxxxx
collectively, the "Korleskis"; each a "Xxxxxxxx") represent, warrant and agree
that:
4.1 The Korleskis are a married couple and are the sole and
true parties in interest, will hold the Securities for their own account, will
not hold the Securities for the benefit of any other person, and has no
intention of holding or managing the Securities with others or any intent of
presently selling, distributing or otherwise disposing of any portion of the
Securities.
4.2 Seller is a United States entity and is domiciled in Iowa.
The Korleskis are individuals above the age of 18 and reside in Iowa.
4.3 The Korleskis are the sole equity owners of Seller, and
each Xxxxxxxx is a natural persons (i) whose individual net worth, or joint net
worth with his spouse, at the time of this Agreement exceeds $1,000,000, or (ii)
has had an individual income in excess of $200,000 in each of the two most
recent years or joint income with his spouse in excess of $300,000 in each of
those years and has a reasonable expectation of reaching the same income level
in the current year
4.4 Seller and the Korleskis are aware that being compensated
in the Securities is highly speculative and subject to substantial risks. Seller
and the Korleskis have adequate means of providing for his current needs and
possible contingencies, and are able to bear the high degree of economic risk of
this compensation arrangement, including, but not limited to, the possibility of
the complete loss of their entire compensation, the lack of a public market, and
the limited transferability of the Securities, which may make the liquidation of
Seller's compensation impossible for the indefinite future.
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4.5 Seller and the Korleskis have such knowledge and
experience in financial and business matters as to be capable of evaluating the
merits and risks of being compensated with the Securities and making an informed
decision.
4.6 Seller and the Korleskis understand that the Securities
will not be registered under the Securities Act of 1933, as amended (the
"SECURITIES ACT"), or any state securities laws, in partial reliance upon
exemptions from registration for certain private offerings. Seller and the
Korleskis understand and agree that the Securities, or any interest therein, may
not be resold or otherwise disposed of by the Korleskis unless the Securities is
subsequently registered under the Securities Act and under all applicable state
securities laws or unless the Company receives an opinion of counsel,
satisfactory to it that an exemption from registration is available. Further,
Seller and the Korleskis understand that only the Company can take action so as
to register the Securities and the Company is under no obligation to do so.
4.7 Seller and the Korleskis acknowledge and represent that
each has been given a reasonable opportunity to review all documents, books and
records of the Company pertaining to this Agreement, has had access to documents
filed by the Company on the SEC's XXXXX document storage and retrieval system
("XXXXX") by the Company, has been supplied with all additional information
concerning the Company and the Securities that has been requested by Seller, has
had a reasonable opportunity to ask questions of and receive answers from the
Company or its representatives concerning this Agreement, and that all such
questions have been answered to their full satisfaction.
4.8 Neither Seller nor either of the Korleskis has received no
representations, written or oral, from the Company or its officers, directors,
employees, attorneys or agents, other than those contained in this Agreement. In
making the decision to accept the Securities as consideration under this
Agreement, each of Seller and the Korleskis has relied solely upon this
Agreement, documents filed by the Company on XXXXX and independent
investigations made by the same or by representatives without assistance of the
Company.
4.9 Seller and the Korleskis understand and agree that the
following restrictions and limitations are applicable to his purchases and
resales, pledges, hypothecations or other transfers of the Securities:
4.9.1 The Securities shall not be sold, pledged,
hypothecated or otherwise transferred unless registered under
Securities Act and applicable state securities laws or an exemption
from registration is available;
4.9.2 Each certificate or other document evidencing
the Warrants shall have the legend set forth in the form thereof
attached to this Agreement, and each certificate representing the
Warrant Shares shall be stamped or otherwise imprinted with a legend in
substantially the following form:
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THE COMMON STOCK OF THE COMPANY EVIDENCED BY THIS
CERTIFICATE HAS NOT BEEN REGISTERED WITH THE
SECURITIES AND EXCHANGE COMMISSION OR THE SECURITES
COMMISSION OF ANY STATE IN RELIANCE UPON EXEMPTIONS
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITES
ACT OF 1933, AS AMENDED, AND VARIOUS APPLICABLE STATE
SECURITES LAWS. THIS STOCK MAY NOT BE SOLD,
TRANSFERRED, PLEDGED OR ASSIGNED OR A SECURITY
INTEREST CREATED THEREIN, UNLESS THE PURCHASER,
TRANSFEREE, ASSIGNEE, PLEDGEE OR HOLDER OF SUCH
SECURITY INTEREST COMPLIES WITH ALL STATE AND FEDERAL
SECURITIES LAWS (I.E., SUCH SHARES ARE REGISTERED
UNDER SUCH LAWS OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE THEREUNDER) AND UNLESS THE SELLER,
TRANSFEROR, ASSIGNOR, PLEDGOR OR GRANTOR OF SUCH
SECURITY INTEREST PROVIDES AN OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY THAT THE
TRANSACTION CONTEMPLATED WOULD NOT BE IN VIOLATION OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY
APPLICABLE STATE SECURITIES LAWS.
4.9.3 Stop transfer instructions have been or will be
placed on the Securities so as to restrict the resale, pledge,
hypothecation or other transfer thereof in accordance with the
provisions hereof.
4.10 Certificates evidencing the Warrant Shares shall not
contain any legend, (i) following any sale of such shares pursuant to Rule 144
promulgated under the Securities Act ("RULE 144"), or (ii) if such Shares are
eligible for sale under the last sentence of Rule 144(b)(1)) (and the holder of
such Shares has submitted a written request for removal of the legend indicating
that the holder has complied with the applicable provisions of Rule 144(b)(1)).
The Company shall cause its counsel to issue a legal opinion to the Company's
transfer agent promptly upon the occurrence of any of the events in clauses (i)
or (ii) above to effect the removal of the legend hereunder.
4.11 Seller and the Korleskis represent and affirm that none
of the following information has ever been represented, guaranteed or warranted
to any of them, expressly or by implication, by any person:
4.11.1 The approximate or exact length of time that
Seller will be required to hold the Securities;
4.11.2 The percentage of profit and/or amount of or
type of consideration, profit or loss to be realized, if any, as a
result of holding equity securities in the Company; or
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4.11.3 The possibility that the past performance or
experience on the part of the Company or any affiliate, or any officer,
director, employee or agent of the foregoing, might in any way indicate
or predict the results of ownership of the Securities or the potential
success of the Company's operations.
4.12 Seller and the Korleskis represent that each of them
understands that (i) the Company is a development stage company and has limited
sales revenues to date, (ii) any investment in the Securities is highly
speculative and is subject to a high degree of risk, and (iii) there are
substantial restrictions on the transferability of, and there will be a limited
public market for the Securities, and it may be impossible to liquidate in the
Securities in case of an emergency.
5. METHOD OF EXERCISE. The Option may be exercised at any time during
the Option Term by Buyer delivering to Seller a written notice (the "NOTICE OF
EXERCISE") of Buyer's election to exercise the Option. Within 15 days after
Seller's receipt of the Notice of Exercise, Seller shall, at Seller's sole
expense, deliver the following documents (collectively referred to as the
"SELLER DISCLOSURES") to Buyer: (a) a Seller property condition disclosure for
the Property, signed and dated by Seller, and in the form commonly in use by
licensed real estate brokers in the State of Iowa; (b) an abstract of title (the
"ABSTRACT OF TITLE") showing marketable title to the Property vested in Seller;
(c) a commitment for an owner's standard form ALTA policy of title insurance in
the amount of the Purchase Price, as defined herein, together with legible
copies of all exception documents (the "TITLE COMMITMENT") from First American
Title Company or such other title company as may be acceptable to Buyer (the
"TITLE COMPANY"); (d) written notice of any claims and/or adverse conditions,
environmental problems and building or zoning code violations relating to the
Property known to Seller; and (e) a properly executed Groundwater Hazard
Statement showing no xxxxx, solid waste disposal sites, hazardous wastes and
underground storage tanks on the Property. If a survey of the Property is
required under applicable law, Seller shall pay the costs thereof and cause the
same to be delivered to Buyer as soon as possible after receiving the Notice of
Exercise.
6. PURCHASE PRICE. The purchase price (the "PURCHASE PRICE") for the
Property shall be the greater of (a) $3,000,000 plus all documented costs paid
by Seller since January 1, 2008 for improvements to the buildings and
refrigeration units used for Seller's operations on the Property (net of any
standard tax depreciation with respect to the same); or (b) the fair market
value of the Property (the "FMV") determined pursuant to the appraisal process
below.
7. APPRAISAL. As soon as reasonably possible after Seller receives the
Notice of Exercise, Buyer and Seller will each appoint an independent appraiser
who is a member of the Appraisal Institute holding an MAI designation
("APPRAISER") with at least five years' experience appraising commercial
property in the general area in which the Property is located to determine the
FMV in accordance with this Section. If either Buyer or Seller does not appoint
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an Appraiser within 10 days after notice is given to the party who has not named
its Appraiser, then the single Appraiser appointed shall be the sole Appraiser
and will set the FMV. If two Appraisers are appointed pursuant to this Section,
each Appraiser shall make a written determination of the fair market value of
the Property (a "VALUE DETERMINATION"). The Appraisers shall also elect a third
Appraiser, meeting the qualifications stated in this Section, within 10 days
after the second Appraiser is appointed. Buyer and Seller shall each bear the
cost of their own appointed Appraiser and one-half of the cost of appointing the
third Appraiser and of paying the third Appraiser's fee. The third Appraiser
must be a person who has not previously acted in any capacity for either Buyer
or Seller. The Value Determinations made by the first two Appraisers shall not
be disclosed to the third Appraiser until the third Appraiser has made his or
her written determination of the fair market value of the Property (also a
"VALUE DETERMINATION"), which third Appraiser's appointment. The FMV shall be
the median of the three Value Determinations.
8. BUYER'S RIGHT TO CANCEL. Notwithstanding anything to the contrary
herein, Buyer shall have the right to cancel its exercise of the Option by
sending Seller written notice of its election to cancel within 10 days after the
determination of the FMV. In that event, the Buyer shall bear all costs as
allocated by this Agreement, reasonable attorneys fees incurred by Seller
subsequent to the exercise of the Option and any escrow or other cancellation
charges.
9. BUYER'S ACCESS TO THE SUBJECT PROPERTY. Seller agrees that at any
time after the date hereof and prior to the Closing, Buyer and its agents,
representatives and contractors shall have access to the Property for the
purpose of conducting inspections and tests deemed necessary or desirable by
Buyer in its sole discretion; provided, however, that such access, inspecting
and testing shall not unreasonably interfere with Seller's operations on the
Property.
10. LEASE. At the time of the Closing, Buyer as "Landlord" shall enter
into a lease agreement (the "LEASE") with Seller as "Tenant" whereby Buyer
agrees to lease to Seller the buildings and other portions of the Property in
which Tenant has conducted its meat processing business, along with common areas
as agreed by the parties, excluding any building expansion or new building
constructed at the request of and owned by Buyer as of the date of exercise of
the Option.
11. The Lease shall have the terms set forth on EXHIBIT C attached
hereto, as well as other terms and conditions that are standard in a commercial
lease.
12. CLOSING.
12.1 CLOSING. The Closing shall occur on a date (the "CLOSING
DATE") to be selected by Buyer, but in no event shall the Closing be later than
90 days after the determination of the FMV hereunder.
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12.2 PRORATIONS. At the Closing, Seller shall pay all real
estate taxes that are liens for all years prior to the Closing and all those
that are due and payable in the fiscal year of the Closing. Seller shall pay its
pro-rated share, based upon the Closing Date, of the real estate taxes for the
fiscal year of the Closing, which are due and payable in the subsequent fiscal
year. Buyer shall be given a credit for such pro-ration at the Closing based
upon the last known actual real estate taxes payable according to public record.
However, if such taxes are based upon a partial assessment of the present
property improvements or a changed tax classification as of the date of
possession, such proration shall be based on the current levy rate, assessed
value, legislative tax rollbacks and real estate tax exemptions that will
actually be applicable as shown by the assessor's records on the Closing Date.
All other taxes, including, but not limited to any transfer tax, and special
assessments, whether or not a lien, shall be paid for and discharged by Seller
at the Closing. Closing, escrow and recording charges shall be borne by the
parties in the customary manner.
12.3 DELIVERIES.
12.3.1 BY SELLER. On or before the Closing Date,
Seller shall deliver or cause to be delivered to Buyer the following:
12.3.1.1 A warranty deed (the "DEED")
conveying the Property to Buyer or its designee, duly executed
and acknowledged by Seller, such Deed to be in form and
substance suitable for recording and reasonably satisfactory
to Buyer and subject only to those exceptions approved by
Buyer as provided herein;
12.3.1.2 An ALTA owner's policy of title
insurance (standard coverage) (cost to be paid by Seller)
issued by the Title Company in the form of the Title
Commitment and in the amount of the Purchase Price insuring
Buyer's interest in the Property and subject only to those
exceptions approved by Buyer as provided herein;
12.3.1.3 Evidence, in form reasonably
satisfactory to Buyer, of Seller's authority and power to
execute, deliver and perform this Agreement and all
instruments and other documents in connection herewith; and
12.3.1.4 A counterpart of the Lease executed
by Seller.
12.3.2 BY BUYER: On or before the Closing Date, Buyer
shall deliver or cause to be delivered to Seller the following:
12.3.2.1 The Purchase Price;
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12.3.2.2 Evidence, in a form reasonably
satisfactory to Seller, of Buyer's authority and power to
execute, deliver and perform this Agreement and all
instruments and other documents in connection herewith; and
12.3.2.3 A counterpart of the Lease executed
by Buyer.
12.3.3 COOPERATION. Seller and Buyer agree to deliver
to one another such further documents and instruments as may be
reasonably necessary or appropriate to consummate the transactions
contemplated hereby, including incumbency certificates, good standing
certificates, any update or change to the Abstract of Title requested
by the Title Company (to be provided at Seller's sole cost), and other
similar types of documents and instruments.
13. LOCATION. The Closing shall take place at the offices of the Title
Company.
14. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller hereby warrants
and represents as follows:
14.1 AUTHORITY. Seller has the full and unconditional right,
power and authority, without the consent or acquiescence of any other person or
entity, to enter into this Agreement, to sell and deliver the Property in
accordance with the terms of this Agreement and to perform its other obligations
hereunder.
14.2 CONDITION OF TITLE. Seller represents that Seller has fee
title to the Property and will convey good and marketable title to Buyer at the
Closing by the Deed subject only to the following matters of record: easements,
deed restrictions, CC&R's (meaning covenants, conditions and restrictions), and
rights-of-way in existence as of the date of this Agreement. Buyer agrees to be
responsible for taxes and assessments after the Closing. Seller will cause to be
paid off by the Closing all mortgages, trust deeds, judgments, mechanic's liens,
tax liens and warrants. Seller will cause to be paid current by Closing all
other assessments affecting the Property.
14.3 CONDITION OF PROPERTY. Seller warrants that as of the
Closing, the Property will be free from hazardous materials and any
environmental contaminants except as are present in compliance with all
applicable laws and regulations and that no violation of any zoning laws or
regulations shall exist.
15. CHANGES DURING OPTION TERM. Seller agrees that from the date hereof
until the Closing Date, none of the following shall occur without the prior
written consent of Buyer: (a) no leases shall be entered into relating to the
Property other than with Buyer; (b) no substantial alterations or improvements
to the Property shall be made or undertaken except as may be undertaken pursuant
to a separate written agreement between Buyer and Seller; and (c) no
encumbrances of the Property shall be made in excess of $2,000,000.
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16. SURVIVAL. The representations and warranties made by Seller and
Buyer in this Agreement shall survive the Closing.
17. RISK OF LOSS. All risk of loss to the Property, including physical
damage or destruction to the Property or its improvements due to any cause shall
be borne by Seller until the Closing.
18. MEMORANDUM OF AGREEMENT. Upon execution of this Agreement, Seller
and Buyer shall execute, acknowledge and deliver a memorandum of this Agreement
in a form attached hereto as EXHIBIT D and shall cause the same to be recorded
in the Official Records of the Xxxxxxxx County, Iowa Recorder.
19. TIME IS OF THE ESSENCE. Time is of the essence regarding this
Agreement. All parties must agree to extensions in writing. Unless otherwise
explicitly stated in this Agreement: (a) performance under each Section of this
Agreement which references a date shall absolutely be required by 5:00 p.m.
Central Time on the stated date; and (b) the term "DAYS" shall mean calendar
days and shall be counted beginning on the day following the event which
triggers the timing requirement. Performance dates and times referenced herein
shall not be binding upon title companies, lenders, appraisers and others not
parties to this Agreement, except as otherwise agreed to in writing by such
non-party.
20. NOTICE. All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given (a) when delivered
personally, (b) upon receipt when sent by registered or certified mail, return
receipt requested, (c) when sent by facsimile with a confirmation receipt, or
(d) on the first business day following deposit with a delivery service if sent
by FedEx or other express delivery service (receipt and next business day
delivery requested; provided, however, if the records of such delivery service
indicate that delivery was made on a later date, then such later delivery date
shall be the date on which such notice is deemed to have been duly given) in
each case to the other party at the following addresses (or to such other
address for a party as shall be specified by like notice, provided, that notices
of a change of address number shall be effective only upon receipt thereof):
TO SELLER: Xxxx Ann's Specialty Foods, Inc.
---------
Attention: Xxxxxxx Xxxxxxxx
0000 X. 0xx Xx.
Xxxxxxx Xxxx, XX 00000
Fax: (000) 000-0000
WITH A COPY TO: Xxxxxxxxx & Xxxx P.L.C.
--------------
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxx, XX 00000
Attn: Xxx Xxxxx
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TO BUYER: Smoky Market Foods, Inc.
-------
Attention: Xxxxxx Xxxxxxxx
000 Xxxxxxx Xx., Xxxxx 000
Xxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
WITH A COPY TO: Xxxx Xxxxx Xxx & Xxxxxxxx
--------------- 000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxx
21. RIGHTS AND REMEDIES.
21.1 SELLER'S DEFAULT. In the event Seller defaults in the
performance of its obligations hereunder, Buyer shall be entitled to (a) recover
from Buyer any damages for such default and any reasonable attorneys' fees,
costs and expenses incurred as a result thereof, or (b) obtain enforcement of
this Agreement by specific performance, injunction or other equitable remedy.
21.2 BUYER'S DEFAULT. In the event Buyer defaults in the
performance of its obligations hereunder, Seller shall be entitled to (a)
recover from Seller any damages for such default and any reasonable attorneys'
fees, costs and expenses incurred as a result thereof, or (b) obtain enforcement
of this Agreement by specific performance, injunction or other equitable remedy.
22. SUCCESSORS AND ASSIGNS; NO ASSIGNMENT. This Agreement shall be
binding upon the successors and permitted assigns of Buyer and Seller. Neither
party may assign this Agreement (by operation of law or otherwise) without the
prior written consent of the other party, which shall not be unreasonably
withheld. Any purported assignment in violation of this Section 22 shall be null
and void ab initio.
23. MISCELLANEOUS. The rights and remedies of the parties hereto shall
not be mutually exclusive and the exercise of one or more of the provisions of
this Agreement shall not preclude the exercise of any other provisions. This
Agreement shall be construed and interpreted in accordance with, and governed
by, the substantive laws of the State of Iowa. The failure by any party to
insist upon the strict performance of any covenant, duty, agreement or condition
of this Agreement or to exercise any rights or remedy consequent upon a breach
thereof shall not constitute a waiver of any such breach or of such or any other
covenants, agreement, term or condition. No waiver shall affect or alter the
remainder of this Agreement but each and every other covenant, agreement, term
and condition hereof shall continue in full force and effect with respect to any
other then existing or subsequently occurring breach. In the event any
condition, covenant or other provision herein contained is held to be invalid or
void by any court of competent jurisdiction, the same shall be deemed severable
from the remainder of this Agreement and shall in no way affect any other
condition, covenant or other provision herein contained. If such condition,
covenant or other provision shall be deemed invalid due to its scope or breadth,
such condition, covenant or other provision shall be deemed valid to the extent
of the scope or breadth permitted by law.
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24. ATTORNEYS' FEES. If either party defaults under this Agreement and
it becomes necessary for the other party hereto to employ the services of an
attorney in connection therewith, either with or without litigation, the losing
party to the controversy arising out of the default shall pay to the successful
party reasonable attorneys' fees and, in addition, such costs and expenses as
are incurred in enforcing or in terminating this Agreement.
25. COMMISSIONS. Each party warrants and represents to the other party
that its conduct has not given rise to any claim for a brokerage commission or
finder's fee to any third party. Each party agrees to indemnify and hold the
other harmless from and against any claim, action, suit, liability, loss, cost
or expense (including attorneys' fees and court costs) arising out of a
brokerage commission or finder's fee attributable to or arising out of the
conduct of the other party.
26. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall constitute one and the same instrument.
27. ENTIRE AGREEMENT. This Agreement (together with the Exhibits
attached hereto and the Recitals hereof, which are incorporated herein by
reference and made a part hereof for all purposes) constitutes the entire
agreement between the parties hereto pertaining to the subject matter hereof,
and supersedes all prior written or oral and all contemporaneous oral agreements
and understandings pertaining thereto. This Agreement may be modified only by a
writing signed by both parties hereto. No covenant, representation or condition
not expressed in this Agreement shall affect or be deemed to interpret, change
or restrict the express provisions hereof.
[intentionally left blank; signature page follows]
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IN WITNESS WHEREOF, the parties hereto have executed this Option
Agreement on the date first set forth above.
SELLER BUYER
XXXX ANN'S SPECIALTY FOODS, INC., SMOKY MARKET FOODS, INC., a Nevada
an Iowa corporation corporation
By:/S/ XXXXXXX XXXXXXXX By: /S/ XXXXXX XXXXXXXX
------------------------------- -------------------------------
Name:_____________________________ Name:______________________________
Its:______________________________ Its:_______________________________
The undersigned execute this signature page solely for purpose of making the
representations and warranties with respect to the undersigned set forth in
Section 4:
/S/ XXXXXXX XXXXXXXX
--------------------
Xxxxxxx Xxxxxxxx, an individual
/S/ XXXX XXX XXXXXXXX
---------------------
Xxxx Xxx Xxxxxxxx, an individual
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EXHIBIT A
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TO
OPTION AGREEMENT
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LEGAL DESCRIPTION OF THE PROPERTY
LOT 1
The following-described tract of land is located at approximately 0000 Xxxx
Xxxxxx Xxxxxx, Xxxxxxx Xxxx, Xxxxxxxx Xxxxxx, Xxxx
Lot 1, Custom Meats Minor Subdivision Plat in Xxxxxxx City, Iowa.
LOT 2
The following-described tract of land is located at approximately 0000 Xxxx
Xxxxxx Xxxxxx, Xxxxxxx Xxxx, Xxxxxxxx Xxxxxx, Xxxx
Tract in South 1/2 of SW1/4, Section 34, Township 89 North, Range 25
West of the 5th P.M., being within the Corporate Limits of Xxxxxxx
City, Iowa, described as: Commencing at the South quarter corner of
said Section, thence North 00(degree)00'00" West 467.91 feet along East
line of SE1/4 of SW1/4 of said Section; thence South 89(degree)43'16"
West 1192.37 feet to point of beginning; thence South 00(degree)04'06"
West 456.71 feet; thence North 89(degree)57'54" West 825.54 feet;
thence North 00(degree)33'29" West 452.24 feet; thence North
89(degree)43'16" East 830.58 feet to point of beginning, per Survey
Cabinet Slide 91B, page 2. All in Xxxxxxxx County, Iowa.
EXHIBIT B
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TO
OPTION AGREEMENT
--------------------------------------------------------------------------------
FORM OF WARRANT
[see attached]
B-1
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER ANY APPLICABLE STATE SECURITIES LAWS. THIS WARRANT
AND THE SHARES ISSUABLE UPON EXERCISE OF THIS WARRANT ARE SUBJECT TO
RESTRICTIONS ON RESALE AND MAY NOT BE RESOLD EXCEPT AS PERMITTED UNDER THE ACT
AND ANY APPLICABLE STATE SECURITIES LAWS.
SERIES 2009C WARRANT
Smoky Market Foods, Inc.
Dated: October 30, 2009
1,500,000 Shares of Common Stock Warrant 2009C No. 1
This certifies that XXXX XXXXXXXX OR XXXX XXX XXXXXXXX or its permitted
transferee (such person or any such permitted transferee is sometimes herein
called the "HOLDER") is entitled to purchase from Smoky Market Foods, Inc., a
Nevada corporation (the "COMPANY"), at the price and during the period as
hereinafter specified, up to 1,500,000 shares (the "SHARES") of common stock,
$.001 par value of the Company (the "COMMON STOCK"), at a purchase price of
$0.15 per share, subject to adjustment as described below (as so adjusted from
time to time, the "EXERCISE PRICE"), at any time until the Expiration Date (as
defined below).
1. EXERCISE. The rights represented by this Warrant (this "WARRANT") shall be
exercisable at the Exercise Price, and during the periods as follows:
(a) At any time and from time to time between the date hereof and
September 1, 2014 (the "EXPIRATION DATE") inclusive, the Holder shall have the
right to purchase all or any portion of the Shares at the Exercise Price.
(b) After the Expiration Date, the Holder shall have no right to
purchase all or any portion of the Shares hereunder.
2. PAYMENT FOR SHARES; ISSUANCE OF CERTIFICATES. The rights represented by the
Warrant may be exercised at any time within the periods above specified, in
whole or in part, by (i) the surrender of the Warrant (with the purchase form at
the end hereof properly executed) at the principal executive office of the
Company (or such other office or agency of the Company as it may designate by
notice in writing to the Holder at the address of the Holder appearing on the
books of the Company) and (ii) payment to the Company of the Exercise Price for
the number of Shares specified in the above-mentioned purchase form together
with applicable stock transfer taxes, if any. The Warrant shall be deemed to
have been exercised, in whole or in part to the extent specified, immediately
prior to the close of business on the date the Warrant is surrendered and
payment is made in accordance with the foregoing provisions of this Section 2,
and the person or persons in whose name or names the certificates for the Shares
shall be issuable upon such exercise shall become the holder or holders of
record of such Shares at that time and date. The Shares and the certificates for
the Shares so purchased shall be delivered to the Holder within a reasonable
time, not exceeding five (5) business days, after the rights represented by this
Warrant shall have been so exercised.
3. TRANSFER. (a) Any transfer of this Warrant shall be effected by the Holder by
(i) executing the form of assignment at the end hereof and (ii) surrendering the
Warrant for cancellation at the office or agency of the Company referred to in
Section 2 hereof, accompanied by (y) a certificate (signed by an officer of the
Holder, or other authorized representative reasonably satisfactory to the
Company, if the Holder is an entity) stating that each transferee is a permitted
transferee under this Section 3; and, if applicable, (z) an opinion of counsel,
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reasonably satisfactory in form and substance to the Company, to the effect that
the Shares or the Warrant, as the case may be, may be sold or otherwise
transferred without registration under the Securities Act of 1933, as amended
(the "ACT"). Upon any transfer of this Warrant or any part thereof in accordance
with the first sentence of this Section 3(a), the Company shall issue, in the
name or names specified by the Holder (including the Holder), a new Warrant or
Warrants of like tenor (including all substantive provisions hereof) and
representing in the aggregate rights to purchase the same number of Shares as
are purchasable hereunder at such time.
(b) Any attempted transfer of this Warrant or any part thereof
in violation of this Section 3 shall be null and VOID AB INITIO.
(c) This Warrant may not be exercised and neither this Warrant
nor any of the Shares, nor any interest in either, may be offered, sold,
assigned, pledged, hypothecated, encumbered or in any other manner transferred
or disposed of, in whole or in part, except in compliance with applicable United
States federal and state securities laws and the terms and conditions hereof.
Each Warrant shall bear a legend in substantially the same form as the legend
set forth on the first page of this Warrant. Each certificate for Shares issued
upon exercise of this Warrant, unless at the time of exercise such Shares are
acquired pursuant to a registration statement that has been declared effective
under the Act and applicable blue sky laws, shall bear a legend substantially in
the following form:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "ACT"). SUCH SHARES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF REGISTRATION OR AN EXEMPTION THEREFROM.
SMOKY MARKET FOODS, INC. MAY REQUIRE AN OPINION OF COUNSEL REASONABLY
ACCEPTABLE TO IT THAT A PROPOSED TRANSFER OR SALE IS IN COMPLIANCE WITH
THE ACT.
Any certificate for any Shares issued at any time in exchange or substitution
for any certificate for any Shares bearing such legend (except a new certificate
for any Shares issued after the acquisition of such Shares pursuant to a
registration statement that has been declared effective under the Act) shall
also bear such legend unless, in the opinion of counsel for the Company, the
Shares represented thereby need no longer be subject to the restriction
contained herein. The provisions of this Section 3(c) shall be binding upon all
subsequent holders of certificates for Shares bearing the above legend and all
subsequent holders of this Warrant, if any.
4. SHARES TO BE FULLY PAID. The Company covenants and agrees that all Shares
which may be purchased hereunder will, upon issuance and delivery against
payment therefor of the requisite purchase price, be duly and validly issued,
fully paid and nonassessable.
5. NO VOTING OR DIVIDEND RIGHTS. The Warrant shall not entitle the Holder to any
voting rights or any other rights, including without limitation notice of
meetings of other actions or receipt of dividends or other distributions, as a
stockholder of the Company.
6. ADJUSTMENT OF EXERCISE PRICE. The Exercise Price in effect at the time and
the number and kind of securities purchasable upon the exercise of this Warrant
shall be subject to adjustment from time to time upon the happening of certain
events as follows:
(a) In case the Company shall (i) declare a dividend or make a
distribution on its outstanding Common Stock in Common Stock, (ii) subdivide or
reclassify its outstanding Common Stock into a greater number of shares, (iii)
combine or reclassify its outstanding Common Stock into a smaller number of
shares, or (iv) enter into any transaction whereby the outstanding Common Stock
of the Company are at any time changed into or exchanged for a different number
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or kind of shares or other securities of the Company or of another corporation
through reorganization, merger, consolidation, liquidation or recapitalization,
then appropriate adjustments in the number of Shares (or other securities for
which such Shares have previously been exchanged or converted) subject to this
Warrant shall be made and the Exercise Price in effect at the time of the record
date for such dividend or distribution or of the effective date of such
subdivision, combination, reclassification, reorganization, merger,
consolidation, liquidation or recapitalization shall be proportionately adjusted
so that the Holder of this Warrant exercised after such date shall be entitled
to receive the aggregate number and kind of shares or other securities which, if
this Warrant had been exercised by such Holder immediately prior to such date,
the Holder would have been entitled to receive upon such dividend, distribution,
subdivision, combination, reclassification, reorganization, merger,
consolidation, liquidation or recapitalization. For example, if the Company
declares a 2 for 1 stock subdivision (forward split) and the Exercise Price
hereof immediately prior to such event was $7.00 per Share and the number of
Shares issuable upon exercise of this Warrant was 85,500, the adjusted Exercise
Price immediately after such event would be $3.50 per Share and the adjusted
number of Shares issuable upon exercise of this Warrant would be 171,000. Such
adjustment shall be made successively whenever any event listed above shall
occur.
(b) In the event that at any time, as a result of an
adjustment made pursuant to the provisions of this Section 8, the Holder of the
Warrant thereafter shall become entitled to receive any shares of the Company
other than Common Stock, thereafter the number of such other shares so
receivable upon exercise of the Warrant shall be subject to adjustment from time
to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in Sections 8(a) above.
7. GOVERNING LAW. This Agreement shall be governed by and in accordance with the
laws of the State of Nevada without regard to conflicts of laws principles
thereof.
8. BINDING EFFECT ON SUCCESSORS. In case of any consolidation of the Company
with, or merger of the Company into, any other entity, or in case of any sale or
conveyance of all or substantially all of the assets of the Company other than
in connection with a plan of complete liquidation of the Company at any time
prior to the Expiration Date, then as a condition of such consolidation, merger
or sale or conveyance, the Company shall give written notice of consolidation,
merger, sale or conveyance to the Holder and, from and after the effective date
of such consolidation, merger, sale or conveyance the Warrant shall represent
only the right to receive the consideration that would have been issuable in
respect of the Shares underlying the Warrant in such consolidation, merger, sale
or conveyance had the Warrant been exercised in full immediately prior to such
effective time and the Holder shall have no further rights under this Warrant
other than the right to receive such consideration.
9. FRACTIONAL SHARES. No fractional shares shall be issued upon exercise of this
Warrant. The Company shall, in lieu of issuing any fractional share, pay the
holder entitled to such fraction a sum in cash equal to such fraction multiplied
by the then effective Exercise Price.
10. LOST WARRANTS. Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant and, in
the case of any such loss, theft or destruction, upon receipt of an affidavit of
loss and indemnity reasonably satisfactory to the Company, or in the case of any
such mutilation upon surrender and cancellation of such Warrant, the Company, at
its expense, will make and deliver a new Warrant, of like tenor, in lieu of the
lost, stolen, destroyed or mutilated Warrant.
11. HEADINGS. The headings of the several sections and paragraphs of this
Warrant are inserted for convenience only and do not constitute a part of this
Warrant.
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12. MODIFICATION AND WAIVER. This Warrant and any provision hereof may be
changed, waived, discharged or terminated only by an instrument in writing
signed by the party against which enforcement of the same is sought.
IN WITNESS WHEREOF, the Company has caused this Series 2009C
Warrant to be signed by its duly authorized officers under its corporate seal.
MOKY MARKET FOODS, INC.
y:
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Xxxxxx Xxxxxxxx, Chief Executive Officer
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PURCHASE FORM
(To be signed only upon exercise of Warrant)
The undersigned, the holder of the foregoing Series 2009C Warrant, hereby
irrevocably elects to exercise the purchase rights represented by such Warrant
for, and to purchase thereunder, _______________ shares of Common Stock, par
value $0.001 per share (the "SHARES"), of SMOKY MARKET FOODS, INC. and tenders
herewith payment of the aggregate Exercise Price in respect of the Shares in
full, in the amount of $_________ and requests that the certificates for the
Shares be issued in the name(s) of, and delivered to _________________, whose
address(es) is (are):
________________________
________________________
________________________
Dated: __________________________
By:
________________________
________________________
________________________
Address
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TRANSFER FORM
(To be signed only upon transfer of Warrant)
For value received, the undersigned hereby sells, assigns, and transfers unto
______________________________ the right to purchase Shares represented by the
foregoing Series 2009C Warrant to the extent of __________ Shares, and appoints
_________________________ attorney to transfer such rights on the books of Smoky
Market Foods, Inc., with full power of substitution in the premises.
Dated: ____________________________
By:
________________________
________________________
________________________
Address
In the presence of:
______________________________
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EXHIBIT C
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TO
OPTION AGREEMENT
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LEASE TERMS
PREMISES: The buildings and other portions of the Property in which Tenant has
conducted its meat processing business, along with common areas as agreed by the
parties, excluding any building expansion or new building constructed at the
request of and owned by Buyer as of the date of exercise of the Option.
INITIAL TERM: 5 years.
RENEWAL TERMS: Three 5-year terms at the option of Tenant.
MONTHLY RENT: $10,000 with 3% annual increases in the monthly rent. When
Landlord's annual sales reach $50,000,000 then the monthly rent will be $15,000
plus an adjustment based on a 3% increase in this monthly rent for each full
year that has elapsed since the beginning of the Lease. This amount will
continue to be increased by 3% at every anniversary of the Lease commencement.
When Landlord's annual sales reach $100,000,000 then the monthly rent will be
$20,000 plus an adjustment based on a 3% increase in this monthly rent for each
full year that has elapsed since the beginning of the Lease. This amount will
continue to be increased by 3% at every anniversary of the Lease commencement.
COMMON AREA MAINTENANCE: Tenant shall pay its share of common area maintenance
charges.
TRIPLE NET LEASE: Tenant shall be responsible for all utilities, taxes,
insurance, repairs, maintenance and other costs associated with the Premises
such that rent will be absolutely net to Landlord.
AS-IS: Landlord shall make no representations or warranties relating to the
Premises of any kind.
INSURANCE: Tenant shall maintain insurance reasonably determined by Landlord and
shall name Landlord as an additional insured under such insurance.
INDEMNITY: Tenant shall indemnify and defend Landlord from and against all
claims, losses, expenses and damages relating to or arising from Tenants or its
agents', guests' or invitees' use of the Premises. Tenant shall also indemnify
and defend Landlord from and against all losses, claims, expenses and damages
relating to or arising out of or in the presence of any hazardous substance on
the Premises, except to the extent such hazardous substance was introduced by
Landlord or its agents.
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HAZARDOUS MATERIALS: All hazardous materials on the Premises shall be used in
strict accordance with applicable laws and regulations.
USE: The Premises shall be used solely for food processing activities.
ASSIGNMENT: Tenant may assign its interest in the Lease with Landlord's written
consent, which may be withheld in Landlord's reasonable discretion.
Other terms as are customary and reasonable shall be negotiated by the parties.
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EXHIBIT D
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TO
OPTION AGREEMENT
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MEMORANDUM OF OPTION AGREEMENT
[see attached]
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WHEN RECORDED, PLEASE RETURN TO:
Xxxx Xxxxx Xxx & Xxxxxxxx
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 000
Xxxx Xxxx Xxxx, Xxxx 00000
Attention: Xxxxx X. Xxxxx
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MEMORANDUM OF OPTION AGREEMENT
THIS MEMORANDUM OF OPTION AGREEMENT (this "MEMORANDUM") is entered into
as of the 30th day of October, 2009 by and between XXXX ANN'S SPECIALTY FOODS,
INC., an Iowa corporation ("SELLER") and SMOKY MARKET FOODS, INC., a Nevada
corporation ("BUYER").
1. NOTICE. Notice is hereby given that subject to certain conditions
set forth in the Option Agreement dated as of October 30, 2009 (the
"AGREEMENT"), Seller has granted to Buyer an exclusive option (the "OPTION")
during the Option Term (defined below) to purchase that certain real property
located in Xxxxxxxx County, Iowa and more particularly described on EXHIBIT A
attached hereto and all improvements thereon and appurtenances relating thereto
(collectively, the "PROPERTY"). If the Option is exercised, Buyer and Seller
shall enter into a lease relating to a portion of the Property, as more
particularly set forth in the Agreement.
2. OPTION TERM. The Option may be exercised by Buyer at any time prior
to 11:59 p.m. Central Time on September 1, 2016 (the "OPTION TERM"), with the
expiration of the Option Term extending to 11:59 p.m. Central Time on September
1, 2019 under certain circumstances identified in the Agreement.
3. TERMS OF OPTION. The provisions set forth in the Agreement regarding
the Option are hereby incorporated herein by this reference. In the event of any
conflict between the provisions of the Agreement and this Memorandum, the
provisions of the Agreement shall control. During the Option Term (a) no leases
shall be entered into relating to the Property; (b) no substantial alterations
or improvements to the Property shall be made or undertaken except as may be
undertaken pursuant to a separate written agreement between Buyer and Seller;
and (c) no encumbrances of the Property shall be made.
4. ADDITIONAL INFORMATION. For more information, the parties to the
Agreement may be contacted at the following addresses:
SELLER: Xxxx Ann's Specialty Foods, Inc.
Attention: Xxxxxxx Xxxxxxxx
0000 X. 0xx Xx.
Xxxxxxx Xxxx XX 00000
Fax: (000) 000-0000
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BUYER: Smoky Market Foods, Inc.
Attention: Xxxxxx Xxxxxxxx
000 Xxxxxxx Xx., Xxxxx 000
Xxxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
5. MISCELLANEOUS. This Memorandum shall inure to the benefit of, and be
binding upon, the parties hereto and their respective successors, assigns and
legal representatives. This Memorandum shall be construed and interpreted in
accordance with the laws of the State of Iowa. This Memorandum may be executed
in any number of counterparts, each of which shall be deemed to be an original
and all of which together shall constitute one and the same instrument.
[intentionally left blank; signature page follows]
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IN WITNESS WHEREOF, Seller and Buyer have executed this Memorandum on
the date first set forth above.
SELLER BUYER
XXXX ANN'S SPECIALTY FOODS, INC., SMOKY MARKET FOODS, INC., a
an Iowa corporation Nevada corporation
By:/S/ XXXXXXX XXXXXXXX By: /S/ XXXXXX XXXXXXXX
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Name:______________________ Name:__________________________
Its:_______________________ Its:___________________________
STATE OF _______ )
: ss.
COUNTY OF _______ )
The foregoing instrument was acknowledged before me this _____ day of
____________________ 2009, by ____________________________, the
______________________________ of XXXX ANN'S SPECIALTY FOODS, INC., on behalf of
the corporation.
My commission expires _____________________.
_____________________________________
NOTARY PUBLIC
STATE OF _______ )
: ss.
COUNTY OF _______ )
The foregoing instrument was acknowledged before me this _____ day of
____________________ 2009, by ____________________________, the
______________________________ of SMOKY MARKET FOODS, INC., on behalf of the
corporation.
My commission expires _____________________.
_____________________________________
NOTARY PUBLIC
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EXHIBIT A
TO
MEMORANDUM OF OPTION AGREEMENT
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LEGAL DESCRIPTION OF THE PROPERTY
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LOT 1
The following-described tract of land is located at approximately 0000 Xxxx
Xxxxxx Xxxxxx, Xxxxxxx Xxxx, Xxxxxxxx Xxxxxx, Xxxx
Lot 1, Custom Meats Minor Subdivision Plat in Xxxxxxx City, Iowa.
LOT 2
The following-described tract of land is located at approximately 0000 Xxxx
Xxxxxx Xxxxxx, Xxxxxxx Xxxx, Xxxxxxxx Xxxxxx, Xxxx
Tract in South 1/2 of SW1/4, Section 34, Township 89 North, Range 25
West of the 5th P.M., being within the Corporate Limits of Xxxxxxx
City, Iowa, described as: Commencing at the South quarter corner of
said Section, thence North 00(degree)00'00" West 467.91 feet along East
line of SE1/4 of SW1/4 of said Section; thence South 89(degree)43'16"
West 1192.37 feet to point of beginning; thence South 00(degree)04'06"
West 456.71 feet; thence North 89(degree)57'54" West 825.54 feet;
thence North 00(degree)33'29" West 452.24 feet; thence North
89(degree)43'16" East 830.58 feet to point of beginning, per Survey
Cabinet Slide 91B, page 2. All in Xxxxxxxx County, Iowa.
