EXHIBIT 2
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EXECUTION COPY
PROMISSORY NOTE
AND PLEDGE AGREEMENT
$2,639,510.00 June 8, 1998
FOR VALUE RECEIVED, BRYNWOOD PARTNERS III L.P., a Delaware limited
partnership ("Maker") hereby promises to pay to the order of XXXX GROUP, INC., a
Delaware corporation, or its assigns (hereinafter called "Payee") the principal
sum of TWO MILLION SIX HUNDRED THIRTY NINE THOUSAND FIVE HUNDRED TEN DOLLARS
($2,639,510.00) (the "Principal Amount") in lawful money of the United States of
America.
The Principal Amount shall be payable in full, together with interest
on the Principal Amount compounded annually at a rate per annum equal to 6% on
July 23, 1998.
The following additional terms shall govern this Promissory Note and
Pledge Agreement (this "Note"):
1. Principal together with accrued and unpaid interest in respect of
this Note shall be paid in lawful currency of the United States, in immediately
available funds, at the principal executive offices of Payee, 000 Xxxxxxx
Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000, or at such other place or to such
other person as Payee may designate in a written notice to Maker.
2. As security for the full, prompt and complete payment of all
principal and interest on this Note, Maker hereby pledges, assigns and grants to
Payee a continuing security interest in the shares of the Common Stock of
Lincoln Snacks Company (the "Shares") acquired by Maker pursuant to the Stock
Purchase Agreement of even date herewith between Maker and Payee (the "Purchase
Agreement"), together with the cash and non-cash proceeds of such Shares, and
hereby assigns to Payee the right to receive all such cash and non-cash
proceeds, including without limitation distributions of cash, securities or
other property in respect of the Shares (such Shares together with all such cash
and non-cash proceeds thereof being hereinafter referred to as the
"Collateral").
3. So long as no Event of Default (as hereinafter defined) has occurred
and is continuing, Maker shall be entitled to exercise any voting or other
rights of ownership in respect of the Collateral not inconsistent with the terms
and provisions hereof.
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4. Any and all cash received by Maker in respect of the Collateral
(whether in respect of dividends or otherwise) shall promptly be paid over to
Payee in prepayment of the indebtedness represented by this Note.
5. Any securities or other property, other than cash, received by Maker
in respect of the Collateral, including without limitation any securities or
other property distributed in respect of the Company Shares or received in
exchange for or in addition to the Collateral pursuant to any merger,
consolidation or dissolution, shall promptly be delivered in pledge to Payee to
be held by Payee as part of the Collateral. Until the repayment in full of all
principal due under this Note, all Proceeds (as defined in Section 9-306(1) of
the Uniform Commercial Code of the State of New York) in respect of the
Collateral received by Maker and not pledged in accordance with this Paragraph
or applied as a prepayment in accordance with Paragraph 4 above shall be deemed
to be held in trust by Maker and as Collateral hereunder for the benefit of
Payee.
6. The obligations of Maker hereunder are absolute and unconditional
and payment of the Principal Amount hereof shall not be subject to any defense,
counterclaim or right of set-off. This is a full recourse Note.
7. Maker hereby represents and warrants that:
a. Immediately following the Closing (as defined in the
Purchase Agreement), and at all times thereafter until all amounts due
under this Note shall have been paid in full, Maker will be the sole
beneficial owner of the Collateral free and clear of all liens,
charges and encumbrances other than those created hereby and that,
upon the deposit and pledge hereunder, Payee has acquired a valid,
enforceable security interest therein and lien thereon;
b. Maker has not granted, and until all amounts due under
this Note have been paid in full Maker will not grant, to any person
other than Payee any interest in the Collateral, whether superior to,
equal to or inferior to the rights of Payee therein; and
c. Neither the execution and delivery of this Note nor the
performance of any of the terms hereof constitute or will constitute a
material breach of or a default under any law, rule, regulation,
contract, agreement or arrangement applicable to Maker.
8. The following shall constitute an "Event of Default" within the
meaning of this Note:
a. Maker shall fail or refuse to make payment in full of any
amount due hereunder when the same shall become due; or
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b. Maker shall default under any material obligation to any
lender of Maker and such lender declares a default or otherwise
accelerates payment against Maker; or
c. (i) Maker shall make a general assignment for the benefit
of its creditors, (ii) the adjudication in bankruptcy of Maker, (iii)
the filing of a voluntary petition by Maker under any of the
provisions of the United States bankruptcy code or similar laws of any
jurisdiction, (iv) the filing of any answer or other pleading
admitting the material allegations of any petition filed against Maker
in any bankruptcy, insolvency or other such proceeding, (v) the filing
of a petition against Maker under any of the provisions of any
bankruptcy laws of the United States or similar laws of any
jurisdiction, or (vi) the petition for, or the appointment of, or
possession by, a custodian, receiver, liquidator, assignee, trustee or
sequestrator (or other similar official) of Maker or any substantial
part of its properties or assets.
9. In the event of and during the continuance of an Event of Default as
defined in Paragraph 8(a) or 8(b), Payee may declare the unpaid Principal Amount
of this Note and all accrued interest hereunder to be immediately due and
payable, and in the event of the occurrence of an Event of Default as defined in
Paragraph 8(c), the unpaid Principal Amount of this Note and all accrued
interest hereunder shall automatically, without any action on the part of Payee,
become immediately due and payable, in each case without presentment, demand,
protest or any notice of any kind, all of which are hereby waived. Upon the
occurrence of an Event of Default, Payee, in addition to any other rights it may
have, shall have the right at any time and from time to time to sell, resell,
assign and deliver, in its discretion, all or any of the Collateral in one or
more parcels at the same or different times, and all right, title and interest,
claim and demand therein and right of redemption thereof, on any securities
exchange on which the Collateral or any of them may be listed, or at public or
private sale, for cash, upon credit or for future delivery. Payee may purchase
all or any of the Collateral being sold. No demand, advertisement or notice
shall be required in connection with any sale or other disposition of any part
of the Collateral which is listed on a recognized securities exchange or traded
in the over-the-counter market and reported in the National Association of
Securities Dealers Automated Quotation System; otherwise Payee shall give Maker
at least twenty (20) calendar days' prior notice of the time and place of any
public sale and of the time after which any private sale or other disposition is
to be made, which notice Maker agrees is reasonable. Payee may, without notice
or publication, adjourn any public or private sale or cause the same to be
adjourned from time to time by announcement at the time and place fixed for
sale, and such sale may, without further notice, be made at the time and place
to which the same was so adjourned. Maker shall pay all reasonable costs and
expenses of every kind for sale or delivery, including brokers' and attorneys'
fees, and after deducting such costs and expenses from the proceeds of sale,
Payee shall apply any residue to the payment of the indebtedness or obligations
of Maker under this Note, and Maker shall
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continue to be liable for any deficiency. The balance, if any, remaining after
payment in full of all of such indebtedness shall be paid to Maker, subject to
any duty of Payee imposed by law to the holder of any subordinate security
interest in the Collateral known to Payee. Payee, in addition to all other
rights or remedies which it may have, shall have all of the rights and remedies
of a secured party upon default under the Uniform Commercial Code of the State
of New York and under any other applicable law. Payee may exercise any or all of
the rights which it may have in the premises in any order, from time to time,
and shall not be obligated to exercise any of such rights. No failure to
exercise any right shall operate as a waiver and no waiver, consent or agreement
given in any instance shall adversely effect the rights of Payee in any other
instance.
10. Maker recognizes that Payee may be unable to effect a public sale
of all or a part of the Collateral by reason of certain prohibitions contained
in the Securities Act of 1933, as amended, or in applicable Blue Sky or other
state securities laws, as now or hereafter in effect, but may be compelled to
resort to one or more private sales to a restricted group of purchasers who will
be obliged to agree, among other things, to acquire such Collateral for their
own account, for investment and not with a view to the distribution or resale
thereof. Maker agrees that private sales so made may be at prices and other
terms less favorable to the seller than if such Collateral were sold at public
sales, and that Payee has no obligation to delay the sale of any such Collateral
for the period of time necessary to permit the issuer of such Collateral, even
if such issuer would agree, to register such Collateral for public sale under
such applicable securities laws.
11. The remedies provided herein in favor of Payee shall not be deemed
exclusive, but shall be cumulative, and shall be in addition to all other
remedies in favor of Payee existing at law or in equity. Payee shall have no
duty as to the collection or protection of the Collateral or any income thereon
or as to the preservation of any rights pertaining thereto, beyond the safe
custody thereof of any securities representing such Collateral that are actually
in its possession. No delay on the part of Payee in exercising any of its
options, powers or rights, or any partial or single exercise thereof, shall
constitute a waiver thereof.
12. Upon payment in full of all indebtedness of Maker hereunder, Maker
shall be entitled to the return of all of the Collateral which has not been used
or applied toward the payment of such indebtedness. The return by Payee to Maker
of such Collateral and other property shall be without representation or
warranty of any nature whatsoever and wholly without recourse.
13. The Maker shall at any time and from time to time upon the request
of the holder of this Note, execute and deliver such further powers,
authorities, proxies, and other documents and do such further acts and things as
the holder of this Note may reasonably request in order to offset the purposes
hereof.
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14. Maker shall, upon request, pay all of the reasonable expenses of
Payee in connection with the enforcement of any rights of Payee under this Note.
15. This Note shall in all respects be governed by the laws of the
State of New York applicable to contracts made and to be performed entirely in
such State and any proceeding relating to this Note or any other indebtedness
secured may be brought only in the federal or state courts sitting in that
state, to the jurisdiction and venue of which the parties hereby submit. This
Note may not be altered or amended, except by a writing duly signed by the party
against whom such alteration or amendment is sought to be enforced.
16. This Note may be prepaid in part or in full at any time without
penalty. All prepayments shall be applied first to the payment of accrued and
unpaid interest and, second, to the reduction of principal.
17. Maker hereby waives presentment for payment, demand, notice of
dishonor, notice of protest and protest and all other notices and demands in
connection with the delivery, acceptance, performance or default of this Note.
BRYNWOOD PARTNERS III L.P.
By: BRYNWOOD MANAGEMENT III L.P.
its General Partner
/s/ Xxxxxxx X. Xxxxxxx, Xx.
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Xxxxxxx X. Xxxxxxx, Xx.
A General Partner of Brynwood
Management III L.P.
THIS IS A FULL RECOURSE NOTE. PAYEE IS NOT OBLIGATED TO RESORT TO THE COLLATERAL
AND MAKER IS RESPONSIBLE FOR THE ENTIRE PRINCIPAL AND INTEREST OF THIS NOTE,
INCLUDING ANY DEFICIENCY IN THE EVENT PAYEE DOES RESORT TO THE COLLATERAL.
