EXHIBIT 10.11
THE INDEBTEDNESS EVIDENCED BY THIS INSTRUMENT IS SUBORDINATED IN RIGHT
OF PAYMENT TO THE OBLIGATIONS (AS DEFINED HEREIN) PURSUANT TO, AND TO
THE EXTENT PROVIDED IN SECTION 2 HEREIN.
PROMISSORY NOTE
$2,000,000 November 24, 1998
FOR VALUE RECEIVED, Fresh Enterprises, Inc., a California corporation
("Maker"), promises to pay to James Magglos, an individual resident in
California ("Payee"), in lawful money of the United States of America, the
principal sum of Two Million Dollars ($2,000,000), together with interest
payable quarterly in arrears on the unpaid principal balance at an annual rate
equal to 6.0%, in the manner provided below. Accrued interest charges hereunder
shall be calculated on the basis of a year of 365 or 366 days, as applicable,
and charged for the actual number of days elapsed.
This Note has been executed and delivered pursuant to and in accordance
with the terms and conditions of the Recapitalization Agreement, dated October
12, 1998, by and among Catterton-Simon Partners III, L.P., Grumman Hill
Investments III, L.P., Oak Investment Partners VIII, L.P., Greg Dollarhyde,
Louis A. Siracusa and the other Buyers named therein (collectively, the
"Buyers") and Linda Magglos ("Ms. Magglos"), John Yonkich, Maker and Payee (as
amended or modified from time to time, the "Recapitalization Agreement"), and is
subject to the terms and conditions of the Recapitalization Agreement, which
are, by this reference, incorporated herein and made a part hereof. Payee and
Ms. Magglos are sometimes together referred to herein as the "Sellers."
Capitalized terms used in this Note without definition shall have the respective
meanings set forth in the Recapitalization Agreement.
1. PAYMENTS
1.1 PRINCIPAL AND INTEREST
Five Hundred Thousand Dollars ($500,000) of the principal amount and
accrued but unpaid interest thereon under this Note shall be due and payable on
the date three years after the Closing Date (as defined in the Recapitalization
Agreement) with the remaining principal amount and accrued but unpaid interest
thereon due on the date four years after the Closing Date.
1.2 MANNER OF PAYMENT
All payments of principal and interest on this Note shall be made by
certified check at Westlake Village, California, or at such other place in the
United States of America as Payee shall designate to Maker in writing or by wire
transfer of immediately available funds to an account designated by Payee in
writing. If any payment of principal or interest on this Note is due on a day
which is not a Business Day, such payment shall be due on the next succeeding
Business Day, and such extension of time shall be taken into account in
calculating the amount of interest payable under this Note. "Business Day" means
any day other than a Saturday, Sunday or legal holiday in the State of
California.
1.3 PREPAYMENT
Maker may, without premium or penalty, at any time and from time to
time, prepay all or any portion of the outstanding principal balance due under
this Note, provided that each such prepayment is accompanied by accrued interest
on the amount of principal prepaid calculated to the date of such prepayment.
Any partial prepayments shall be applied to installments of principal in inverse
order of their maturity.
2. SUBORDINATION
2.1 AGREEMENT TO SUBORDINATE
Payee and the Maker each agree that this Note is and shall be
subordinated in right of payment to all Secured Debt of the Maker or any
subsidiary of the Maker ("Subsidiary"), whether now or hereafter existing and,
whether for principal, interest (including, without limitation, interest
accruing after the filing of a petition initiating any bankruptcy or insolvency
proceeding, whether or not such interest accrues after the filing of such
petition for purposes of the Bankruptcy Code or is an allowed claim in such
proceeding), fees, premiums, expenses or otherwise (such indebtedness being the
"Obligations"). For the purposes of this Note, "Secured Debt" shall mean all
indebtedness of the Maker and its Subsidiaries for which the Maker or any
Subsidiary has granted a security interest, pledge, encumbrance or other lien in
collateral, whether personal or real.
2.2 EVENTS OF SUBORDINATION
In the event that any default under any Obligation shall have occurred
and be continuing, then no payment shall be made by or on behalf of the Maker
for or on account of this Note or any other indebtedness of the Maker being
subordinated to payment of this Note, and the Payee shall not take or receive
from the Maker, directly or indirectly, in cash or other property or by set-off
or in any other manner, including, without limitation, from or by way of
collateral, payment of all or any of the amount due on this Note, unless and
until such default has been cured or waived.
2.3 RIGHT TO CURE OF INSTITUTIONAL LENDERS
Payee shall not accelerate or seek any enforcement or collection action
on this Note on account of any Event of Default of Maker without written notice
to the representatives of Institutional Lenders of Maker and its Subsidiaries,
or their designees, and first providing to such representatives or their
designees the right to cure such default within 30 days from the date notice of
default is delivered to such representatives or their designees. The term
"Institutional Lenders" shall mean institutional lenders of the Maker or its
Subsidiaries that are holders of any Obligations.
2.4 NO INVOLUNTARY BANKRUPTCY PETITION
Notwithstanding the foregoing, so long as there are outstanding
Obligations owed to the Institutional Lenders, Payee shall not commence, or join
with others in commencing, an involuntary bankruptcy or insolvency proceeding
and shall not file, or join with others in filing,
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an involuntary petition seeking (a) liquidation, reorganization or other relief
in respect of Maker or any Subsidiary or, in any such case, its debts, or a
substantial part of its assets, under any federal, state or foreign bankruptcy,
insolvency, receivership or similar law now or hereafter in effect or (b) the
appointment of a receiver, trustee, custodian, sequestrator, conservator or
similar official for the Maker or any Subsidiary or for a substantial part of
any of their respective assets.
2.5 BENEFITS OF SUBORDINATION
The provisions of Sections 2.1 and 2.2 of this Note are made for the
benefit of the holders of Obligations, whether now or hereafter existing. The
provisions of Sections 2.3 and 2.4 of this Note are made for the benefit of the
Institutional Lenders, whether now or hereafter existing.
3. RIGHT TO OFFSET
Pursuant to Section 8.3 of the Recapitalization Agreement, Buyers are
given the right to offset any amounts owed to them by the Sellers against
amounts due to Payee hereunder. Reference is hereby made to the Recapitalization
Agreement for a description of the nature and extent of the Buyers' offset
rights thereunder with respect to this Note.
4. DEFAULTS
4.1 EVENTS OF DEFAULT
The occurrence of any one or more of the following events with respect
to Maker shall constitute an event of default hereunder ("Event of Default"):
(a) If Maker shall fail to pay when due any payment of principal or
interest on this Note and such failure continues for five (5) days
after Payee notifies Maker therein writing.
(b) If, pursuant to or within the meaning of the United States Bankruptcy
Code or any other federal or state law relating to insolvency or relief
of debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary
case or proceeding; (ii) consent to the entry of an order for relief
against it in an involuntary case; or (iii) consent to the appointment
of a trustee, receiver, assignee or liquidator.
4.2 NOTICE BY MAKER
Maker shall notify Payee in writing within five days after the
occurrence of any Event of Default of which Maker acquires knowledge.
4.3 REMEDIES
Upon the occurrence of an Event of Default hereunder (unless all Events
of Default have been cured or waived by Payee), Payee may by written notice to
Maker, declare the entire unpaid principal balance of this Note, together with
all accrued interest thereon, immediately due and payable regardless of any
prior forbearance.
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5. MISCELLANEOUS
5.1 WAIVER
No waiver by Payee of any right or remedy under this Note shall be
effective unless in a writing signed by Payee. Neither the failure nor any delay
in exercising any right, power or privilege under this Note will operate as a
waiver of such right, power or privilege and no single or partial exercise of
any such right, power or privilege by Payee will preclude any other or further
exercise of such right, power or privilege or the exercise of any other right,
power or privilege.
5.2 NOTICES
All notices, requests, demands and other communications which are
required or may be given under this Note shall be in writing and shall be deemed
to have been duly given when received if personally delivered; when transmitted
if transmitted by telecopy, electronic or digital transmission method; the day
after it is sent, if sent for next day delivery to a domestic address by
recognized overnight delivery service (e.g, Federal Express); and upon receipt,
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if sent by certified or registered mail, return receipt requested. In each case
notice shall be sent to:
If to Maker, addressed to:
Fresh Enterprises, Inc.
850 Hampshire Road, Suite S
Westlake Village, CA 91361
Attn: President
Telephone: (805) 381-1681
If to Payee, addressed to:
James Magglos
6921 Solano Verde Drive
Telephone: (805)386-1213
If to the representatives of the Institutional Lenders, addressed to:
Imperial Bank
9920 South La Cienega Boulevard
8th Floor
Inglewood, California 90301
Telephone: (617) 521-9400.
or to such other place and with such other copies as either party may
designate as to itself by written notice to the other.
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5.3 SEVERABILITY
If any provision in this Note is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Note will remain
in full force and effect. Any provision of this Note held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
5.4 GOVERNING LAW
This Note will be governed by the laws of the State of California
without regard to conflicts of laws principles.
5.5 PARTIES IN INTEREST
This Note shall not be assigned, conveyed, pledged, hypothecated,
discounted or otherwise transferred or disposed of by Payee.
5.6 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Note are provided for convenience only
and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Note unless otherwise specified.
All words used in this Note will be construed to be of such gender or
number as the circumstances require. Unless otherwise expressly provided, the
words "hereof" and "hereunder" and similar references refer to this Note in its
entirety and not to any specific section or subsection hereof.
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IN WITNESS WHEREOF, Maker has executed and delivered this Note as of
the date first stated above.
FRESH ENTERPRISES, INC.
By /s/ Greg Dollarhyde
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Name: Greg Dollarhyde
Title: President and Chief Executive
Officer
By /s/ Frank M. Vest, Jr.
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Name: Frank M. Vest, Jr.
Title: Secretary
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