EXHIBIT 10.10
NOTE AND STOCK PURCHASE AGREEMENT
This NOTE AND STOCK PURCHASE AGREEMENT, dated as of May 29, 1997 (this
"Agreement"), is entered into by and among HORIZON ORGANIC HOLDING CORPORATION,
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a Delaware corporation ("Company"), with its principal executive office at 7490
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Xxxx Xxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxxxxx 00000, and THE PERSONS AND
ENTITIES LISTED ON THE SCHEDULE OF PURCHASERS attached hereto as Schedule 1
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(each a "Purchaser," and collectively, the "Purchasers").
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RECITALS
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A. On the terms and subject to the conditions set forth herein, each
Purchaser is willing to purchase from Company, and Company is willing to sell to
such Purchaser, an investment unit consisting of an unsecured subordinated
promissory note in the principal amount set forth opposite such Purchaser's name
on Schedule 1 hereto and the number of shares of Common Stock of Company set
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forth opposite such Purchaser's name on Schedule 1 hereto.
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B. Capitalized terms not otherwise defined herein shall have the meaning
set forth in the form of Note (as defined below) attached hereto as Exhibit A.
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AGREEMENT
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NOW THEREFORE, in consideration of the foregoing, and the representations,
warranties, and conditions set forth below, the parties hereto, intending to be
legally bound, hereby agree as follows:
1. THE NOTES AND THE COMMON STOCK.
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(a) Issuance of Notes and Common Stock. At the Closing (as defined
below), Company agrees to issue and sell to each of the Purchasers, and, subject
to all of the terms and conditions hereof, each of the Purchasers agrees to
purchase, investment units (each, a "Unit") consisting of a Secured Promissory
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Note in the form of Exhibit A hereto (each, a "Note," and collectively, the
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"Notes") in the principal amount set forth opposite the respective Purchaser's
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name on Schedule 1 hereto and the number of shares of Common Stock of Company
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(the "Common Stock") set forth opposite such Purchaser's name on Schedule 1
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hereto. Each Unit shall consist of Fifty Thousand Dollars ($50,000) of face
amount of the Note and Two Thousand Five Hundred (2,500) shares of Common Stock
for a purchase price of Fifty Thousand Dollars ($50,000). The obligations of
the Purchasers to purchase Units are several and not joint.
(b) Delivery. The sale and purchase of the Units shall take place at
a closing (the "Closing") to be held at such place and time as Company and the
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Purchasers may determine (the "Closing Date"). At the Closing, Company will
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deliver to each of the Purchasers the Note and the Common Stock to be purchased
by such Purchaser, against receipt by Company of the corresponding purchase
price set forth on Schedule 1 hereto (the "Purchase Price"). Each of the Notes
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and the Common Stock will be registered in such Purchaser's name in Company's
records.
(c) Use of Proceeds. The proceeds of the sale and issuance of the
Notes shall be used for working capital and general corporate purposes.
(d) Payments. The Company will make all cash payments due under the
Notes in immediately available funds by 11:00 A.M. San Francisco time on the
date such payment is due in the manner and at the address for such purpose
specified below each Purchaser's name on Schedule 1 hereto, or at such other
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address as a Purchaser or other registered holder of a Note may from time to
time direct in writing.
2. REPRESENTATIONS AND WARRANTIES OF COMPANY. Company represents and
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warrants to each Purchaser that:
(a) Due Incorporation, Qualification,, etc. Each of Company and its
Subsidiaries (i) is a corporation duly organized, validly existing and in good
standing under the laws of its state of incorporation; (ii) has the power and
authority to own, lease and operate its properties and carry on its business as
no conducted; and (iii) is duly qualified, licensed to do business and in good
standing as a foreign corporation in each jurisdiction where the failure to be
so qualified or licensed could reasonably be expected to have a Material Adverse
Effect.
(b) Authority. The execution, delivery and performance by Company of
each Transaction Document to be executed by Company and the consummation of the
transactions contemplated thereby (i) are within the power of Company and (ii)
have been duly authorized by all necessary actions on the party of Company.
(c) Enforceability. Each Transaction Document executed, or to be
executed, by Company has been, or will be, duly executed and delivered by
Company and constitutes, or will constitute, a legal, valid and binding
obligation of Company, enforceable against Company in accordance with hits
terms, except as limited by bankruptcy, insolvency or other laws of general
application relating to or affecting the enforcement of creditors' rights
generally and general principles of equity.
(d) Non-Contravention. The execution and delivery by Company of the
Transaction Documents executed by Company and the performance and consummation
of the transactions contemplated thereby do not and will not (i) violate the
Articles or Certificate of Incorporation or Bylaws of the Company or any
material judgment, order, writ, decree, statute, rule or regulation applicable
to Company; (ii) violate any provision of, or result in the breach or the
acceleration of, or entitle any other Person to accelerate (whether after the
giving of notice or lapse of time or both), any material mortgage, indenture,
agreement, instrument or contract to which Company is a party or by which it is
bound; or (iii) result in the creation or imposition of any Lien upon any
property, asset or revenue of Company or the suspension, revocation impairment,
forfeiture, or nonrenewal of any material permit, license, authorization or
approval applicable to Company, its business or operations, or any of its assets
or properties.
(e) Approvals. Unless already obtained or waived, no consent,
approval, order or authorization of, or registration, declaration or filing
with, any governmental authority or other Person (including, without limitation,
the shareholders of any Person) is required in connection with the execution and
delivery of the Transaction Documents executed by Company and the performance
and consummation of the transactions contemplated hereby.
(f) No Violation or Default. None of Company or Company's
Subsidiaries is in violation of or in default with respect to (i) its Articles
or Certificate of Incorporation or Bylaws or any material judgment, order, writ,
decree, statute, rule or regulation applicable to such person; or (ii) any
material mortgage, indenture, agreement, instrument or contract to which such
person is party or by which it is bound (nor is there any waiver in effect
which, if not in effect, would result in such a violation or default), where, in
each case, such violation or
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default, individually, or together with all such violations or defaults, could
reasonably be expected to have a Material Adverse Effect. Without limiting the
generality of the foregoing, to the best knowledge of the Company's officers
none of Company or Company's Subsidiaries (A) has violated any Environmental
Laws (as defined below), (B) has any liability under any Environmental Laws or
(C) has received notice or other communication of an investigation or is under
investigation by any governmental authority having authority to enforce
Environmental Laws, where such violation, liability or investigation could
reasonably be expected to have a Material Adverse Effect. For purposes of this
Section 2(f), "Environmental Laws" means all judgments, orders, writs, decrees,
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statutes, rules or regulations relating to the protection of human health or the
environment, including, without limitation, (i) all judgments, orders, writs
decrees, statutes, rules or regulations, pertaining to reporting, licensing,
permitting, investigation, and remediation of emissions, discharges, releases,
or threatened releases of hazardous materials, chemical substances, pollutants,
contaminants, or hazardous or toxic substances, materials or wastes whether
solid, liquid, or gaseous in nature, into the air, surface water, groundwater,
or land, or relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of chemical substances,
pollutants, contaminants, or hazardous or toxic substances, materials, or
wastes, whether solid, liquid, or gaseous in nature; and (ii) all judgments,
orders, writs, decrees, statues, rules or regulations pertaining to the
protection of the health and safety of employees or the public. No Event of
Default or default, which after the giving of notice or the lapse of time or
both would constitute an Event of Default, has occurred and is continuing.
(g) Litigation. Except as set forth (with estimates of the dollar
amounts involved) in Item 2(g) of Schedule II hereto (the "Disclosure
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Schedule"), no actions (including, without limitation, derivative actions),
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suits, proceedings or investigations are pending or, to the knowledge of
Company, threatened against Company or Company's Subsidiaries at law or in
equity in any court or before any other governmental authority which (i) if
adversely determined would (alone or in the aggregate) have a Material Adverse
Effect or (ii) seeks to enjoin, either directly or indirectly, the execution,
delivery or performance by Company of the Transaction Documents or the
transactions contemplated thereby.
(h) Title. Company and Company's Subsidiaries own and have good and
marketable title in fee simple absolute to, or a valid leasehold interest in,
all their respective real properties and good title to their other respective
assets and properties as reflected in the most recent Financial Statements
delivered to Purchasers (except those assets and properties disposed of in the
ordinary course of business since the date of such Financial Statements) and all
respective assets and properties acquired by Company and Company's Subsidiaries
since such date (except those disposed of in the ordinary course of business).
Such assets and properties are subject to no Lien, except for Permitted Liens.
(i) Intellectual Property. To the best of their knowledge, Company
and Company's Subsidiaries own or possess sufficient legal rights to all
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information, processes and other intellectual property rights
necessary for its business as now conducted and as proposed to be conducted
without any conflict with, or infringement of the rights of, others.
(j) Financial Statements. Except as set forth in Item 2(j) of the
Disclosure Schedule, the Financial Statements of Company which have been
delivered to the Purchasers, (i) are in accordance with the books and records of
Company and its Subsidiaries, which have been maintained in accordance with good
business practice; (ii) have been prepared in conformity with GAAP; and (iii)
fairly present the consolidated financial position of Company as of the dates
presented therein and the results of operations, changes in financial positions
or cash flows, as the case may be, for the periods presented therein. None of
Company or any of Company's Subsidiaries has any contingent obligations,
liability for taxes or other outstanding obligations which are material in the
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aggregate, except as disclosed in the Financial Statements for the period ended
[date of last audited Financial Statements] furnished by Company to Purchasers
prior to the date hereof.
(k) Equity Securities. Company's total authorized and issued
capitalization is as set forth in Item 2(k) of the Disclosure Schedule. The
Equity Securities of Company have the respective rights, preferences and
privileges set forth in Company's Certificate of Incorporation in effect on the
date hereof. All of the outstanding Equity Securities of the Company have been
duly authorized and are validly issued, fully paid and nonassessable. Except as
expressly referenced herein or as set forth in Item 2(k) of the Disclosure
Schedule, there are as of the date of this Agreement no options, warrants or
rights to purchase Equity Securities of the Company authorized, issued or
outstanding, nor is Company obligated in any other manner to issue shares of
its Equity Securities. Except as set forth in Item 2(k) of the Disclosure
Schedule, there are no restrictions on the transfer of Equity Securities of
Company, other than those imposed by Company's Certificate of Incorporation and
Bylaws as of the date hereof, or relevant state and federal securities laws, and
no holder of any Equity Security of Company is entitled to preemptive or similar
statutory or contractual rights, either arising pursuant to any agreement or
instrument to which Company is a party or that are otherwise binding upon
Company. The offer and sale of all Equity Securities of Company issued before
the Closing Date complied with or were exempt from registration or qualification
under all applicable federal and state securities laws. Except as expressly
referenced herein or as set forth in Item 2(k) of the Disclosure Schedule, no
Person has the right to demand or other rights to cause Company to file any
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), relating to any Equity Securities of Company presently
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outstanding or that may be subsequently issued, or any right to participate in
any such registration statement.
(l) No Agreements to Sell Assets. None of Company or Company's
Subsidiaries has any legal obligation, absolute or contingent, to any Person to
sell the assets of Company or Company's Subsidiaries (other than sales in the
ordinary course of business), or to effect any merger, consolidation or other
reorganization of Company or to enter into any agreement with respect thereto.
(m) Employee Benefit Plans.
(i) Neither company nor any Person (each, an "ERISA
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Affiliate") which is treated as a single employer with Company under section 414
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of the Internal Revenue Code of 1986, as amended (the "Code") has an employee
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benefit plan (an "Employee Benefit Plan") within the meaning of the Employee
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Retirement Income Security Act of 1974 (as the same may from time to time be
amended or supplemented, and including any rules or regulations issued in
connection therewith, "ERISA") that is an "employee pension benefit plan"
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(within the meaning of section 3(2) of ERISA). Neither Company nor any ERISA
Affiliate has any liability with respect to any post-retirement benefit under
any Employee Benefit Plan which is a welfare plan (as defined in section 3(1) of
ERISA), other than liability for health plan continuation coverage described in
part 6 of Title I(B) of ERISA, which liability for health plan continuation
coverage cannot reasonably be expected to have a Material Adverse Effect.
(ii) Each Employee Benefit Plan complies, in both form and
operation, in all material respects, with its terms, ERISA and the Code, and no
condition exists or event has occurred with respect to any such Employee Benefit
Plan which would result in the incurrence by either Company or any ERISA
Affiliate of any material liability, fine or penalty. Each Employee Benefit
Plan, related trust agreement, arrangement and commitment of Company or any
ERISA Affiliate is legally valid and binding and in full force and effect. No
Employee Benefit Plan is being audited or investigated by any governmental
authority or is subject to any pending
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or threatened claim or suit. Neither company nor any ERISA Affiliate nor any
fiduciary of any Employee Benefit Plan has engaged in a prohibited transaction
under section 406 of ERISA or section 4975 of the Code.
(iii) Except as set forth in Item 2(m) of the Disclosure
Schedule, neither Company nor any ERISA Affiliate contributes to any
multiemployer plan within the meaning of ERISA (a "Multiemployer Plan").
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Neither Company nor any ERISA Affiliate has incurred any material liability
(including secondary liability) to any Multiemployer Plan as a result of a
complete or partial withdrawal from such Multiemployer Plan under section 4201
of ERISA or as a result of a sale of assets described in section 4204 of ERISA.
Neither Company nor any ERISA Affiliate has been notified that any Multiemployer
Plan is in reorganization or insolvent under and within the meaning of section
4241 or section 4245 of ERISA or that any Multiemployer Plan intends to
terminate or has been terminated under section 4041A or ERISA.
(n) Other Regulations. None of Company or its Subsidiaries is
subject to regulation under the Investment Company Act of 1940, the Public
Utility Holding Company Act of 1935, the Federal Power Act, any state public
utilities code or to any federal or state statute or regulation limiting its
ability to incur indebtedness.
(o) Governmental Charges and Other Indebtedness. Each of Company and
its Subsidiaries has filed or caused to be filed all tax returns which are
required to be filed by it. Company and Company's Subsidiaries have paid, or
made provision for the payment of, all taxes and other levies, assessments,
fees, claims or other charges imposed by any governmental authority which have
or may have become due pursuant to said returns and all other Indebtedness,
except such taxes, levies, assessments, fees, claims or other charges imposed by
any government authority which have or may have become due pursuant to said
returns and all other Indebtedness, except such taxes, levies, assessments,
fees, claims or other charges or Indebtedness, if any, which are being contested
in good faith and as to which adequate reserves (determined in accordance with
generally accepted accounting principles) have been provided or which could not
reasonably be expected to have a Material Adverse Effect if unpaid.
(p) Subsidiaries, Etc. Except as set forth in Item 2(p) of the
Disclosure Schedule (setting forth the jurisdiction of incorporation, capital
structure and percentage ownership of each shareholder), Company has no
Subsidiaries, is not a partner in any partnership or a joint venturer in any
joint venture.
(q) Solvency, Etc. Company is Solvent (as defined below) and, after
the execution and delivery of the Transaction Documents and the consummation of
the transactions contemplated thereby, each of Company and its Subsidiaries will
be Solvent. "Solvent" shall mean, with respect to any Person on any date, that
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on such date to the best knowledge of the officers of Company, (a) the fair
value of the property of such Person is greater than the fair value of the
liabilities (including, without limitation, contingent liabilities) of such
Person, (b) such Person does not intend to, and does not believe that it will,
incur debts or liabilities beyond such Person's ability to pay as such debts and
liabilities mature and (c) such Person is not engaged in business or a
transaction, and is not about to engage in business or a transaction, for which
such Person's property would constitute an unreasonably small capital.
(r) Catastrophic Events; Labor Disputes. None of Company or
Company's Subsidiaries and none of their properties is or has been affected by
any fire, explosion, accident, strike, lockout or other labor dispute, drought,
storm, hail, earthquake, embargo, act of God or other casualty that could
reasonably be expected to have a Material Adverse Effect in the future. There
are no disputes presently subject to grievance procedure, arbitration or
litigation under any of the collective bargaining agreements, employee contracts
or employee welfare or incentive plans to which Company or Company's
Subsidiaries is a party, and there are no strikes, lockouts, work stoppages or
slowdowns, or, to the best knowledge of Company, jurisdictional disputes or
organizing activity occurring or threatened which could reasonably be expected
to have a Material Adverse Effect.
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(s) No Material Adverse Effect. No event has occurred and no
condition exists which could reasonably be expected to have a Material Adverse
Effect since December 28, 1996.
(t) Accuracy of Information Furnished. None of the Transaction
Documents and none of the other certificates, written statements or written
information furnished to Purchasers by or on behalf of Company or Company's
Subsidiaries in connection with the Transaction Documents or the transactions
contemplated thereby contains or will contain any untrue statement of a material
fact or omits or will omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The Purchasers recognize that all financial projections
furnished to the Purchasers by or on behalf of Company or Company's Subsidiaries
in connection with the Transaction Documents or the transactions contemplated
thereby are not to be viewed as facts and that actual results during the period
or periods covered by such projections may differ from the projected or
forecasted results.
(u) Certain Agreements of Officers, Employees and Consultants.
(i) No officer, employee or consultant of Company or Company's
Subsidiaries is, or is now expected to be, in violation of any term of any
employment contract, proprietary information agreement, nondisclosure agreement,
noncompetition agreement, or any other contract or agreement or any restrictive
covenant relating to the right of any such officer, employee or consultant to be
employed or retained by Company or Company's Subsidiaries because of the nature
of the business conducted or to be conducted by Company or Company's
Subsidiaries or relating to the use of trade secrets or proprietary information
of others, and to the best of Company's knowledge, after due inquiry, the
continued employment of Company and Company's Subsidiaries officers, employees
and consultants do not subject Company or its Subsidiaries to any liability for
any claim or claims arising out of or in connection with any such contract,
agreement, or covenant.
(ii) To the knowledge of Company, no officers of Company, and
no employee or consultant of Company or Company's Subsidiaries whose
termination, either individually or in the aggregate, could reasonably be
expected to have a Material Adverse Effect, has any present intention of
terminating his or her employment or consulting relationship with Company or
Company's Subsidiaries.
(v) Contracts of Commitments; Indebtedness. Except as set forth in
Item 2(v) of the Disclosure Schedule, none of Company or Company's Subsidiaries
and none of their properties is subject to any material judgment, order, writ,
decree, statute, rule or regulation, or any material mortgage, indenture,
agreement, instrument or contract which could reasonably be expected to have a
Material Adverse Effect. Except for this Agreement, the Notes and the other
transaction Documents, and except as set forth in Item 2(v) of the Disclosure
Schedule, neither Company nor any of its Subsidiaries is a party to any
contracts or commitments (or group of related contracts or commitment) involving
more than One Hundred Thousand Dollars ($100,000) or having a term (including
renewals or extensions optional with another party)of more than one (1) year
from the date thereof. Company and its Subsidiaries have no Indebtedness other
than Permitted Indebtedness.
(w) Transactions with Affiliates; Investments. Except as set forth
on the Disclosure Schedule, there are no loans, leases, royalty agreements or
other continuing transactions between Company or its Subsidiaries and any
Affiliate of Company or its Subsidiaries, except transactions in the ordinary
course of business and on terms at least as favorable to Company or its
Subsidiaries as would be the case in an arms-length transaction with an
unaffiliated Person. Except as set forth in the Disclosure Schedule, Company
and its Subsidiaries have no Investments other than Permitted Investments.
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(x) Finder's Fees. Neither the Company nor any Purchaser will incur,
directly or indirectly, as a result of any action taken by the Company, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with this Agreement and the transactions contemplated
hereby.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASERS. Each Purchaser, for
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that Purchaser alone, represents and warrants to Company as follows:
(a) Binding Obligation. Such Purchaser has full legal capacity,
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. Each of this Agreement and the Note issued to such
Purchaser is a valid and binding obligation of the Purchaser, enforceable in
accordance with its terms, except as limited by bankruptcy, insolvency or other
laws of general application relating to or affecting the enforcement of
creditors' rights generally and general principles of equity.
(b) Securities Law compliance. Such Purchaser has been advised that
the Notes and the Common Stock have not been registered under the Securities
Act, or any state securities laws and, therefore, cannot be resold unless they
are registered under the Securities Act and applicable state securities laws or
unless an exemption from such registration requirements is available. Such
Purchaser is aware that Company is under no obligation to effect any such
registration with respect to the Notes or the Common Stock or to file for or
comply with any exemption from registration. Purchaser understands that no
public market now exists for any securities issued by the Company. Such
Purchaser has not been formed solely for thee purpose of making this investment
and is purchasing the Notes and the Common Stock to be acquired by such
Purchaser hereunder for its own account for investment, not as a nominee or
agent, and not with a view to, or for resale in connection with, the
distribution thereof. Such purchaser has such knowledge and experience in
financial and business matters that such Purchaser is capable of evaluating the
merits and risks of such investment, is able to incur a complete loss of such
investment and is able to bear the economic risk of such investment for an
indefinite period of time. Such Purchaser is an accredited investor as such
term is defined in Rule 501 of Regulation D under the Securities Act.
(c) Access to Information. Such Purchaser acknowledges that Company
has given such Purchaser access to the corporate records and accounts of Company
and to all information in its possession relating to Company, has made its
officers and representatives available for interview by such Purchaser, and has
furnished such Purchaser with all documents and other information required for
such Purchaser to make an informed decision with respect to the purchase of the
Notes and the Common Stock.
(d) Compliance with Other Instruments. The execution, delivery and
performance of and compliance with this Agreement, and the issuance of the Notes
and Common Stock have not resulted and will not result in any violation of, or
conflict with, or constitute a default under, any of the terms of any corporate
or partnership restriction or of any indenture, mortgage, deed of trust, pledge,
bank loan or credit agreement, corporate charter, bylaw or any instrument,
document or agreement by which the Purchaser or its properties may be bound or
affected, or result in the creation of any mortgage, pledge, lien, encumbrance
or charge upon any of the properties or assets of the Purchaser.
(e) Governmental Consent, Etc. No consent, approval or authorization
of or designation, declaration or filing with any governmental authority on the
part of the Purchaser is required in connection with the valid execution and
delivery of this Agreement, or the offer, sale or issuance of the Notes or
Common Stock, except for the qualification (or taking such action as may be
necessary to secure an exemption from qualification, if available) or the offer
and sale of the Notes or Common Stock under applicable Blue Sky laws, which
filings
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and qualifications, if required, will be accomplished in a timely manner prior
to or promptly upon the completion of the Closing.
4. CONDITIONS TO CLOSING OF THE PURCHASERS. Each Purchaser's obligations
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at the Closing are subject to the fulfillment, on or prior to the Closing Date,
of all of the following conditions, any of which may be waived in whole or in
party by all of the Purchasers:
(a) Representations and Warranties. The representations and
warranties made by Company in Section 2 hereof shall have been true and correct
when made, and shall be true and correct on the Closing Date.
(b) Approvals and Filings. Except for any notices required or
permitted to be filed after the Closing Date with certain federal and state
securities commissions, Company shall have obtained all governmental approvals
required in connection with the lawful sale and issuance of the Notes and the
Common Stock, and Company shall have obtained all approvals, consents and
waivers required by any other Person in connection with the Transaction
Documents or the transactions contemplated thereby.
(c) Legal Requirements. At the Closing, the sale and issuance by
Company, and the purchase by the Purchasers, of the Notes and the Common Stock
shall be legally permitted by all laws and regulations to which the Purchasers
or Company are subject.
(d) Proceedings and Documents. All corporate and other proceedings
in connection with the transactions contemplated at the Closing and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to the Purchasers.
(e) Opinion of Counsel. There shall have been delivered to the
President a favorable written opinion of Krendl, Xxxxxxxx & Xxxxxx; counsel to
Company, in the form of Exhibit B hereto, dated as of the Closing Date.
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(f) Transaction Documents. Company shall have duly executed and
delivered to the Purchasers the following documents:
(A) This Agreement;
(B) Each Note and the Common Stock issued hereunder;
(C) A separate Guaranty executed in favor of the holders of the
Notes by each of Horizon Organic Dairy, Inc. and Sunrise
Organic Farms, Inc.; and
(D) The Management Rights Agreement.
(g) Corporate Documents. Company shall have delivered to Purchasers
each of the following:
(i) The Certificate of Incorporation of Company, certified as of
a recent date prior to the Closing Date by the Secretary of State of Delaware.
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(ii) A Certificate of Good Standing or comparable certificate
as to Company, certified as of a recent date prior to the Closing Date by the
Secretary of State of Delaware and a Certificate of Good Standing certified as
of a recent date prior to the Closing Date by the Secretary of the State of
Colorado.
(iii) A certificate of the Secretary of Company, dated the
Closing Date, certifying (a) that the Certificate of Incorporation of Company,
delivered to purchasers pursuant to Section 4(h)(i) hereof, is in full force and
effect and has not been amended, supplemented, revoked or repealed since the
date of such certification; (b) that attached thereto is a true and correct copy
of the Bylaws of Company as in effect on the Closing Date; (c) that attached
thereto are true and correct copies of resolutions duly adopted by the Board of
Directors of Company and continuing in effect, which authorize the execution,
delivery and performance by Company of this Agreement and the other Transaction
Documents and the consummation of the transactions contemplated hereby and
thereby; and (d) that there are no proceedings for the dissolution or
liquidation of Company (commenced or threatened); and
(iv) A certificate of the Secretary of Company, dated the
Closing Date, certifying the incumbency, signatures and authority of the
officers of Company authorized to execute and deliver this Agreement, the Notes
and the Common Stock on behalf of Company and perform the Company's obligations
thereunder on behalf of Company.
(h) Common Stock Financing. The Company and certain investors shall
have consummated the sale by the Company and the purchase by such investors of
Common Stock with an aggregate purchase price of not less than $3,000,000 and
all other transactions incident to such sale purchase.
5. CONDITIONS TO OBLIGATIONS OF COMPANY. Company's obligation to issue
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and sell the Notes and Common Stock at the Closing is subject to the
fulfillment, on or prior to the Closing Date, of the following conditions, any
of which may be waived in whole or in party by Company:
(a) Representations and Warranties. The representations and
warranties made by the Purchasers in Section 3 hereof shall be true and correct
when made, and shall be true and correct on the Closing Date.
(b) Approvals and Filings. Except for any notices required or
permitted to be filed after the Closing Date with certain federal and state
securities commissions, Company shall have obtained all governmental approvals
required in connection with the lawful sale and issuance of the Notes and the
Common Stock, and Company shall have obtained all approvals, consents and
waivers required by any other Person in connection with the Transaction
Documents or the transactions contemplated thereby.
(c) Legal Requirements. At the Closing, the sale and issuance by
Company, and the purchase by the Purchasers, of the Notes and the Common Stock
shall be legally permitted by all laws and regulations to which the Purchasers
or Company are subject.
(d) Purchase Price. Each Purchaser shall have delivered to Company
the Purchase Price in respect of the Unit being purchased by such Purchaser
referenced in Section 1(b) hereof.
(e) Shareholders Agreement. Each Purchaser shall have duly executed
in counterparts and delivered to Company the Shareholders Agreement.
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6. MISCELLANEOUS.
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(a) Waivers and Amendments. Any provision of this Agreement may be
amended, waived or modified only upon the written consent of Company and holders
of a Majority in Interest.
(b) Governing Law. This Agreement and all actions arising out of or
in connection with this Agreement shall be governed by and construed in
accordance with the laws of the State of California, without regard to the
conflicts of law provisions of the State of California or of any other state.
(c) Survival. The representations, warranties, covenants and
agreements made herein shall survive the execution and delivery of this
Agreement.
(d) Successors and Assigns. Subject to the restrictions on transfer
described in Sections 6(e) and 6(f) below, the rights and obligations of Company
and the Purchasers of the Notes and the Common Stock shall be binding upon and
benefit the successors, assigns, heirs, administrators and transferees of the
parties.
(e) Registration, Transfer and Replacement of the Notes. The Notes
issuable under this Agreement shall be registered notes. Company will keep, at
its principal executive office, books for the registration and registration of
transfer of the Notes. Prior to presentation of any Note for registration of
transfer, Company shall treat the Person in whose name such Note is registered
as the owner and holder of such Note for all purposes whatsoever, whether or not
such Note shall be overdue, and the Company shall not be affected by notice to
the contrary. Subject to any restrictions on or conditions to transfer set
forth in any Note, the holder of any Note, at its option, may in person or by
duly authorized attorney surrender the same for exchange at Company's chief
executive office, and promptly thereafter and at Company's expense, except as
provided below, receive in exchange therefor one or more new Note(s), each in
the principal requested by such holder, dated the date to which interest shall
have been paid on the Note so surrendered or, if no interest shall have yet been
so paid, dated the date of the Note so surrendered and registered in the name of
such Person or Persons as shall have been designated in writing by such holder
or its attorney for the same principal amount as the then unpaid principal
amount of the Note so surrendered. Upon receipt by Company of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note and (a) in the case of loss, theft or
destruction, of indemnity reasonably satisfactory to it; or (b) in the case of
mutilation, upon surrender thereof, the Company, at its expense, will execute
and deliver in lieu thereof a new Note executed in the same manner as the Note
begin replaced, in the same principal amount as the unpaid principal amount of
such Note and dated the date to which interest shall have been paid on such Note
or, if no interest shall have yet been so paid, dated the date of such Note.
(f) Assignment by Company. Neither the Notes nor any of the rights,
interests or obligations hereunder may be assigned, by operation of law or
otherwise, in whole or in part, by Company without the prior written consent of
a Majority in Interest.
(g) Entire Agreement. This Agreement together with the Notes and the
other Transaction Documents constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
All prior writings, communications, understandings and/or agreements are
superseded and merged herein.
10
(h) Notices. Any notice, request or other communication required or
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier or personal delivery, addressed (i)
if to a Purchaser, at such Purchaser's address set forth in the Schedule of
Purchasers attached as Schedule I, or at such other address as such Purchaser
----------
shall have furnished Company in writing, or (ii) if to Company, at its address
set forth at the beginning of the Agreement, or at such other address as Company
shall have furnished to the Purchasers in writing.
(i) Expenses. Company shall pay on demand all reasonable fees and
expenses, including reasonable attorneys' fees and expenses in connection with
the preparation, execution and delivery of this Agreement and the other
Transaction Documents up to a maximum amount of $12,000. Company shall pay on
demand all reasonable fees and expenses, including reasonable attorneys' fees
and expenses, incurred by Purchasers with respect to any amendments or waivers
hereof requested by Company or in the enforcement or attempted enforcement of
any of the obligations of Company to the Purchasers under the Transaction
Documents or in preserving any of the Purchasers' rights and remedies
(including, without limitation, all such fees and expenses incurred in
connection with any "workout" or restructuring affecting the Transaction
Documents or the obligations thereunder or any bankruptcy or similar proceeding
involving Company or any of its Subsidiaries).
(j) Separability of Agreements; Severability of this Agreement.
Company's agreement with each of the purchasers is a separate agreement and the
sale of the Units to each of the Purchasers is a separate sale. Unless
otherwise expressly provided herein, the rights of each Purchaser hereunder are
several rights, not rights jointly held with any of the other Purchasers. Any
invalidity, illegality or limitation on the enforceability of the Agreement or
any part thereof, by any Purchaser whether arising by reason of the law of the
respective Purchaser's domicile or otherwise, shall in no way affect or impair
the validity, legality or enforceability of this Agreement with respect to other
Purchasers. If any provision of this Agreement shall be judicially determined
to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
(k) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall be deemed to constitute one instrument.
(l) Legal Representation. Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx,
Professional Corporation ("WSGR") has acted as legal counsel only to Dominion
Fund IV in connection with this Agreement and the consummation of the
transactions contemplated hereby. The other Purchasers acknowledge and agree
that WSGR has not been engaged to protect or represent the interests of any
other Purchaser and that neither this Agreement nor the transactions
contemplated hereby are intended to create an attorney/client relationship
between WSGR and such Partner.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
11
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered by their proper and duly authorized officers as of the
date and year first written above.
COMPANY:
HORIZON ORGANIC HOLDING CORPORATION,
a Delaware corporation
By: /s/ Barnet X. Xxxxxxxx
------------------------------------
Name: Barnet X. Xxxxxxxx
----------------------------------
Title: President
---------------------------------
PURCHASERS:
DOMINION FUND IV,
a Delaware limited partnership
By: Dominion Management IV,
a Delaware limited liability
company, its General Partner
By: /s/ Xxxxxxx Xxx
--------------------------------
Name: Xxxxxxx Xxx
------------------------------
Title: Partner
-----------------------------
THE XXXXXX X. XXXXXXXXX, XX. AND XXXXXX
X. XXXXXXXXX REVOCABLE TRUST OF 1994
By: /s/ Xxxxxx X. XxXxxxxxx
------------------------------------
By: /s/ Xxxxxx X. XxXxxxxxx
------------------------------------
Xxxxxx X. XxXxxxxxx and Xxxxxx
Xxxxxx XxXxxxxxx, Co-trustees
/s/ Xxxxx Xxxx
-----------------------------------------
Xxxxx Xxxx
/s/ Xxxxxx Xxxxxx
-----------------------------------------
/s/ Xxxxxx Xxxxxx
-----------------------------------------
Xxxxxx Xxxxxx and Xxxxxx Xxxxxx, Joint
Tenants with Rights of Survivorship
12
SCHEDULE I
SCHEDULE OF PURCHASERS
UNIT PRINCIPAL
NAME AND ADDRESS UNITS PURCHASE PRICE AMOUNT OF NOTE COMMON STOCK
---------------- ----- -------------- -------------- ----------------
DOMINION FUND IV 50 $2,500,000 $2,500,000 125,000 shares
(1) All payments on account of the Notes
shall be made by bank wire transfer
of immediately available funds to:
Comerica Bank - California
0000 Xxxxxxx Xxxxxxx
Xxxxxxxxx, XX 00000
ABA No.: 121 137 522
Account No.: 000-000-0000
Account Holder: Dominion Fund IV
Reference: HORIZON ORGANIC HOLDING CORPORATION
(2) Address for all notices:
Dominion Fund IV
00 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxxxxxxx, XX 00000
Attn: Xxxxxxx X. Xxxxxx
Tel.: (000) 000-0000
Fax: (000) 000-0000
UNIT PRINCIPAL
NAME AND ADDRESS UNITS PURCHASE PRICE AMOUNT OF NOTE COMMON STOCK
---------------- ----- -------------- --------------- ---------------
THE XXXXXX X. XXXXXXXXX, XX. AND XXXXXX X.
XXXXXXXXX REVOCABLE TRUST OF 1994 10 $500,000 $500,000 25,000 shares
(1) All payments on account of the Notes
shall be made by bank wire transfer
of immediately available funds to:
__________________________________
__________________________________
__________________________________
ABA No.:
Account No.:
Account Holder:
Reference:
(2) Address for all notices:
The Xxxxxx X. XxXxxxxxx, Xx.
and Xxxxxx X. XxXxxxxxx
Revocable Trust of 1994
X.X. Xxx 0000
Xxxxx, Xxxxxxxx 00000
14
UNIT PRINCIPAL
NAME AND ADDRESS UNITS PURCHASE PRICE AMOUNT OF NOTE COMMON STOCK
---------------- ----- -------------- -------------- --------------
XXXXX XXXX 1 $50,000 $50,000 2,500 shares
(1) All payments on account of the Notes
shall be made by bank wire transfer
of immediately available funds to:
_____________________________________
_____________________________________
_____________________________________
ABA No.:
Account No.:
Account Holder:
Reference:
(2) Address for all notices:
Xxxxx Xxxx
0000 Xxxxxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
15
UNIT PRINCIPAL
NAME AND ADDRESS UNITS PURCHASE PRICE AMOUNT OF NOTE COMMON STOCK
---------------- ----- -------------- -------------- -------------
XXXXXX XXXXXX AND XXXXXX XXXXXX, JOINT
TENANTS WITH RIGHTS OF SURVIVORSHIP 1 $50,000 $50,000 2,500 shares
(1) All payments on account of the Notes
shall be made by bank wire transfer
of immediately available funds to:
-------------------------------------
-------------------------------------
-------------------------------------
ABA No.:
Account No.:
Account Holder:
Reference:
(2) Address for all notices:
Xxxxxx Xxxxxx and Xxxxxx Xxxxxx,
Joint Tenants with Rights of Survivorship
X.X. Xxx 000
Xxxxxxx, Xxxxxx 00000
16
SCHEDULE II
DISCLOSURES TO NOTE AND STOCK PURCHASE AGREEMENT
Item 2(g) The Internal Revenue Service is auditing the 1995 tax return for
Sunrise Organic Farms, Inc.
Item 2(j) The Internal Revenue Service is auditing the 1995 tax return for
Sunrise Organic Farms, Inc.
Item 2(k) The capitalization of the Company, excluding the issuance of common
stock under this Agreement and the sale of common stock under the
Company's private placement of even date herewith, is set forth on
Attachment A hereto. The options and warrants presently outstanding
are set forth on Attachment A hereto. The Company's Shareholders'
Agreement and the Shareholders' Agreement for Horizon Organic Dairy,
Inc., provide for preemptive rights. The Company's Shareholders'
Agreement includes restrictions on the transfer of shares.
Item 2(p) The Subsidiaries of the Company are as follows:
1. Horizon Organic Dairy, Inc., a Colorado corporation
2. Horizon Organic Dairy, Idaho Dairy, Inc., f/k/a Sunrise Organic
Farms, Inc., a Colorado corporation
3. Horizon Organic Dairy, Maryland Farm, Inc. a Colorado
corporation
Item 2(v) The material and long-term contracts for the Company and its
Subsidiaries are set forth in the financial statements for Horizon
Organic Dairy, Inc. and Sunrise Organic Farms, Inc., copies of which
have already been provided to the Purchasers. The Company is
indebted to the former shareholders of Sunrise Organic Farms, Inc.,
in the aggregate amount of $3,566,514.
ATTACHMENT A TO DISCLOSURE SCHEDULE II
SHAREHOLDER/OPTION HOLDER HOD SHARES SOF SHARES TOTAL OPTIONS/
WARRANTS
Xxx Xxxxxxx 0 0 0 8,500
Xxxxx Xxxxxx 0 0 0 2,143
Xxxxx Xxxxxx 6,873 7,804 14,677 0
Xxxxx Xxxxxx 6,873 7,804 14,677 0
Aurora Dairy Corporation 0 34,775 34,775 4,903
Aurora Dairy Corporation Pension Plan Trust 129,382 0 129,382 779
BV Horizon Investment LLC 36,402 0 36,402 0
Xxx Xxxx 0 0 0 7,500
Xxxxxxx X. Bath 2,300 0 2,300 0
Xxxx X. Xxxxx 21,350 0 21,350 0
Xxxxx Xxxxx 0 0 0 4,000
Boulder Ventures, L.P. 108,696 0 108,696 0
Xxxxxx Xxxxxx and Xxxxxx Xxxxxx 10,000 0 10,000 0
Xxxxxx Xxxxxx and Xxxxxx Xxxxxx, Joint 10,000 0 10,000 0
Tenants with Rights of Survivorship
Xxxxx Xxxx 0 0 0 500
CVM Equity Fund IV, Ltd. 35,058 0 35,058 0
J. Xxxxxx Xxxxx 153,333 0 153,333 23,000
Xxxxxxx Xxxxx as custodian for Xxx-Xxx Xxxxx 1,800 0 1,800 0
Xxxxxx Xxxxx as custodian for Xxxxxxx Xxxxx 1,800 0 1,800 0
Xxxxx X. Xxxxxxx 55,071 0 55,071 0
Xxxxx Xxxxxx 0 0 0 8,000
Xxxxx Xxxxxx Xxxx 20,000 0 20,000 7,000
SHAREHOLDER/OPTION HOLDER HOD SHARES SOF SHARES TOTAL OPTIONS/
WARRANTS
Xxxxxxx Xxxxx 7,500 0 7,500 0
Xxxxxxx X. Xxxxxxx 7,500 0 7,500 0
Barnet X. Xxxxxxxx 100,000 0 100,000 190,000
Xxxxx Xxxxxxxx 25,000 0 25,000 0
The Xxxxxx Xxxx Xxxxxxxx Trust, Xxxxx X. 5,000 0 5,000 0
Xxxxxxxx, Trustee
The Xxxxxx Xxxx Xxxxxxxx Trust, Xxxxx X. 5,000 0 5,000 0
Xxxxxxxx, Trustee
Xxx X. Xxxxxxx 0 0 0 22,000
Xxxxxx Xxxxxxx 2,000 0 2,000 0
Xxxxxxx Xxxxxxxxx and Xxxxxxxxx Xxxx 40,000 0 40,000 0
Xxxxxxx Xxxx 0 0 0 500
Xxxxx Xxxxxxx Xxxxxxx 20,618 0 20,618 0
X. X. Xxxxxx 5,000 0 5,000 0
XxXx Xxx 2,500 0 2,500 0
J & T Enterprises, general partnership 15,000 0 15,000 0
Xxxxxxx Xxxx Xxxxxx 3,000 0 3,000 0
Xxxxxxx X. Xxxxxx, III 12,700 0 12,700 0
Xxxxxxxx X. Xxxxxx 2,000 0 2,000 0
Xxxxxx X. Xxxxxx 3,106 0 3,106 0
Xxxxx Xxxxx 0 0 0 2,000
Xxxxx Xxxxxx 42,609 0 42,609 0
Xxxxxxx X. Xxxxxx 252,640 0 252,640 0
Xxxxx X. Xxxxxxxx and Xxxxxx X. Xxxxx,
Trustees of the Xxxxx and Xxxxxxxx Living
Trust dated August 18, 1993 40,000 0 40,000 0
3
SHAREHOLDER/OPTION HOLDER HOD SHARES SOF SHARES TOTAL OPTIONS/
WARRANTS
Xxxxx X. Xxxxxx and Xxxxxx Xxx Xxxxxx 5,040 0 5,040 0
Xxx X. Xxxxxx and Xxxxx X. Xxxxxx 3,175 0 3,175 0
Lincoln Trust Company, custodian FBO Xxxxx
X. Xxxxxx 112,112 0 112,112 0
Xxxxx Xxxxxxxx 2,150 0 2,150 0
Xxxxxx Xxxxxx 0 7,811 7,811 6,101
Xxxxx Xxxxxx and Xxxxxxxx Xxxxxx, Trustees
U/D/T of the Xxxxxx Family Trust
established May 11, 1992 2,000 0 2,000 0
Xxxxxx X. XxXxxx 7,500 0 7,500 0
Graham Loving 58,806 0 58,806 0
Xxxxxxx Xxxxxx 20,000 0 20,000 0
E. Xxxxxxx Xxxxxx 12,500 0 12,500 0
Xxxxxxx Xxxxxx Xxxxxxxx 1,554 0 1,554 0
Xxxxx X. Xxxxxxx, XX 52,273 0 52,273 8,000
Xxxxx Xxxxxx Xxxxxxx, III 1992 Trust 5,000 0 5,000 0
Keri Xxxxxxxxx Xxxxxxx 1992 Trust 5,000 0 5,000 0
Megan Xxxxxxxxx Xxxxxxx 1992 Trust 5,000 0 5,000 0
Xxxxx Xxxxxxxx Xxxxxxx 0000 Trust 5,000 0 5,000 0
Xxxxxxx X. Xxxxxx, III 72,273 0 72,273 0
Xxxx Xxxxxxxxx 0 0 0 500
XxXxxxxxx Ventures, LLC 155,280 0 155,280 0
XxXxxxxxx Children's Trust 0 33,111 33,111 4,668
Xxxxxx X. XxXxxxxxx, Xx. and Xxxxxx Xxxxxx
XxXxxxxxx, Co-Trustees under a Trust
Agreement dated April 22, 1994 543,334 0 543,334 23,000
4
SHAREHOLDER/OPTION HOLDER HOD SHARES SOF SHARES TOTAL OPTIONS/
WARRANTS
The Xxxxxx X. XxXxxxxxx Xx. & Xxxxxx X.
XxXxxxxxx Revocable Trust of 1994, Xxxxxx
X. XxXxxxxxx and Xxxxxx X. XxXxxxxxx,
Trustees 91,420 0 91,420 0
Xxxxxxx X. XxXxxxxx 31,872 73,906 105,778 20,000
Xxxxx Xxxxxxxxx XxXxxxx 2,000 0 2,000 7,000
Xxxxxxx X. Xxxxxx 7,500 0 7,500 0
Xxxxx Xxxxxx 0 0 0 1,500
Opportunity Investors, LLC 1,500 0 1,500 0
Xxxxxx X.Xxxxxx 67,764 0 67,764 0
Xxxxxx X. Xxxxxxxx 163,333 317,353 480,686 60,148
Xxx Xxxxxx 0 0 0 2,000
Xxxxxxx X. Xxxxxx, Xx. and Xxxxx Xxx Xxxxxx 3,000 0 3,000 7,000
Xxxxx X. Xxxxxx 1,000 0 1,000 0
Xxxxxx Family Trust 7,106 0 7,106 0
Xxxxxxx X. Xxxxxxx 10,000 0 10,000 0
Xxxxxx X. Xxxxxxx 5,000 0 5,000 0
Xxxx X. Xxxxxxx 435,000 0 435,000 35,000
Xxxxxx Xxxxxxx 22,500 0 22,500 0
Xxxxx X. Xxxxxxxx 5,000 0 5,000 0
Xxxx X. Xxxxxxxx 329,282 0 329,282 35,000
Xxxxxxx Xxxxxxxx as custodian for Xxxxxx
Xxxxxxxx 10,000 0 10,000 0
Xxxxxxx Xxxxxxxx as custodian for Xxxxxx
Xxxxxxxx 10,000 0 10,000 0
Xxxxxxx Xxxxxxxx as custodian for Xxxxxx
Xxxxxxxx 10,000 0 10,000 0
5
SHAREHOLDER/OPTION HOLDER HOD SHARES SOF SHARES TOTAL OPTIONS/
WARRANTS
Xxxxxxx Xxxxxxxx 10,000 0 10,000 0
Xxxxxxx X. Xxxxxxxx 41,164 0 41,164 8,000
Xxxxxx X. Xxxxxxxx 41,164 0 41,164 0
Xxxxxxxxx Xxx Xxxxxxxx 8,050 0 8,050 0
Xxxx X. Xxxxxxx 15,528 0 15,528 0
Xxxxxxxx X. Xxxxx 2,000 0 2,000 12,000
Xxxxx Xxxxxxx 3,931 0 3,931 0
Xxxxx X. Xxxxxxx and Xxxxx Xxxxxxx 5,000 0 5,000 0
Xxxxx Xxxxxxx, Xx. and Xxxxxxxx Xxxxx 2,500 0 2,500 0
Xxxxx Xxxxxxxx 2,000 0 2,000 0
Xxxxx Xxxxxxx 0 3,681 3,681 519
Xxxxx Xxxxxxx 0 0 0 2,000
Xxxxxxxxx Xxxxxx 1,000 0 1,000 7,000
Xxxx Xxxxxx Pluym 29,403 0 29,403 0
Xxxxx X. Xxxxx and Xx X. Xxxxx 12,500 0 12,500 0
Xxxxx X. Xxxxx and Xxxx X. Xxxxx, Joint
Tenants with Rights of Survivorship 3,375 0 3,375 0
Waldorf School Association of Boulder, Inc. 10,000 0 10,000 0
Xxx X. Xxxxxx and Hope Xxxxxx Xxxxxx, as
Trustees of the Xxx and Xxxx Xxxxxx Family
Trust established June 10,1988 3,000 0 3,000 0
Xxxxxxxxx Xxxxxxx 2,000 0 2,000 0
Xxxxxxx Xxxxx 0 4,000 4,000 0
TOTAL 3,664,000 490,245 4,154,245 520,261
6
EXHIBIT A
FORM OF NOTE
------------
THIS NOTE AND THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE,
PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS
TO THE SECURITIES UNDER SAID ACT OR AN OPINION OF COUNSEL SATISFACTORY TO THE
CORPORATION THAT SUCH REGISTRATION IS NOT REQUIRED.
SENIOR SUBORDINATED PROMISSORY NOTE
-----------------------------------
$ ________________ [Date], 1997
FOR VALUE RECEIVED, HORIZON ORGANIC HOLDING CORPORATION, a Delaware
corporation ("Company") promises to pay to ________________________, a Delaware
limited partnership ("Holder"), or its registered assigns, the principal sum of
_____________________ Dollars ($___________), or such lesser amount as shall
equal the outstanding principal amount hereof, together with interest from the
date of this Note on the unpaid principal balance at a rate equal to eleven
percent (11%) per annum, computed on the basis of the actual number of days
elapsed and a year of 360 days. All unpaid principal, together with any then
unpaid and accrued interest and other amounts payable hereunder, shall be due
and payable on the earlier of (i) [Date], 2003, or (ii) when, in accordance with
the terms hereof, such amounts are declared due and payable by Holder or made
automatically due and payable. This Note is one of the "Notes" issued pursuant
to the Note and Stock Purchase Agreement of even date however (as amended,
modified or supplemented, the "Note Purchase Agreement") between Company and the
Purchasers (as defined in the Note Purchase Agreement).
The following is a statement of the rights of Holder and the conditions to
which this Note is subject, and to which Holder, by the acceptance of this Note,
agrees:
1. DEFINITIONS. As used in this Note, the following capitalized
-----------
terms have the following meanings:
(a) "Affiliate" shall mean, with respect to any Person, any other
Person which, directly or indirectly, controls, is controlled by or is under
direct or indirect common control with, such Person. For the purposes of this
definition, "control", when used with respect to any Person, means the power or
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
(b) "Business Day" shall mean any day other than a Saturday,
Sunday or public holiday under the laws of California or Colorado or other day
on which banking institutions are authorized or obligated to close in California
or Colorado.
(c) "Company" includes the corporation initially executing this
Note and any person which shall succeed to or assume the obligations of Company
under this Note.
(d) "Consolidated Tangible Assets" means, as of any applicable
date, the difference between (i) the amount shown on the balance sheet of
Company as the total assets of Company and its Subsidiaries on a consolidated
basis minus (ii) the net book value of all assets of the Company and its
Subsidiaries on a consolidated basis which would be treated as intangibles under
GAAP.
-1-
(e) "Consolidated Total Indebtedness" shall mean, as of any
applicable date, the total Indebtedness of the Company and its Subsidiaries on a
consolidated basis.
(f) "Current Assets" shall mean, as of any applicable date, all
amounts that should in, accordance with GAAP, be included as current assets on
the consolidated balance sheet of Company and its Subsidiaries as at such date,
plus any livestock shown on the consolidated balance sheet of Company and its
Subsidiaries.
(g) "Current Liabilities" shall mean, as of any applicable date,
all amounts that should, in accordance with GAAP, be included as current
liabilities on the consolidated balance sheet of Company and its Subsidiaries,
as at such date, including all Indebtedness that is payable upon demand or
within one year from the date of determination thereof unless such Indebtedness
is renewable or extendable at the option of Borrower or any subsidiary to a date
more than one year from the date of determination, plus any liabilities secured
by a lien on livestock, but excluding Indebtedness under any working capital
revolving credit agreement.
(h) "Equity Securities" of any Person shall mean (a) all common
stock, preferred stock, participations, shares, partnership interests or other
equity interests in and of such Person (regardless of how designated and whether
or not voting or non-voting) and (b) all warrants, options and other rights to
acquire any of the foregoing.
(i) "Event of Default" has the meaning given in Section 5 hereof.
(j) "Financial Statements" shall mean, with respect to any
accounting period for any Person, statements of operations, shareholders equity
and cash flow of such Person for such period, and balance sheets of such Person
as of the end of such period, setting forth in each case in comparative form
figures for the corresponding period in the preceding fiscal year if such period
is less than a full fiscal year or, if such period is a full fiscal year,
corresponding figures from the preceding fiscal year, all prepared in reasonable
detail and in accordance with GAAP, except for customary year-end adjustments
and footnotes for interim periods. Unless otherwise indicated, each reference to
Financial Statements of any Person shall be deemed to refer to Financial
Statements prepared on a consolidated basis.
(k) "GAAP" shall mean generally accepted accounting principles as
in effect in the United States from time to time.
(l) "Guaranties" shall mean each Guaranty executed by a
Subsidiary of Company in the form of Exhibit C to the Note Purchase Agreement.
(m) "Holder" shall mean the Person specified in the introductory
paragraph of this Note or any Person who shall at the time be the registered
holder of this Note.
(n) "Indebtedness" shall mean and include the aggregate amount
of, without duplication (a) all obligations for borrowed money, (b) all
obligations evidenced by bond, debentures, notes or other similar instruments,
(c) all obligations to pay the deferred purchase price of property or services
(other than accounts payable incurred in the ordinary course of business
determined in accordance with GAAP), (d) all obligations with respect to capital
leases, (e) all guaranty obligations; (f) all obligations created or arising
under any conditional sale or other title retention agreement with respect to
property acquired by such Person, (g) all reimbursement and other payment
obligations, contingent or otherwise, in respect of letters of credit.
-2-
(o) "Investment" of any Person shall mean any loan or advance of funds
by such Person to any other Person (other than advances to employees of such
Person for moving and travel expense, drawing accounts and similar expenditures
in the ordinary course of business), any purchase or other acquisition of any
Equity Securities or Indebtedness of any other Person, any capital contribution
by such Person to or any other investment by such Person in any other Person
(including, without limitation, any Indebtedness incurred by such Person of the
type described in clauses (a) and (b) of the definition of "Indebtedness" on
behalf of any other Person); provided, however, that Investments shall not
-----------------
include accounts receivable or other indebtedness owed by customers of such
Person which are current assets and arose from sales or non-exclusive licensing
in the ordinary course of such Person's business.
(p) "Lien" shall mean, with respect to any property, any security
interest, mortgage, pledge, lien, claim, charge or other encumbrance in, of, or
on such property or the income therefrom, including, without limitation, the
interest of a vendor or lessor under a conditional sale agreement, capital lease
or other title retention agreement, or any agreement to provide any of the
foregoing, and the filing of any financing statement or similar instrument under
the Uniform Commercial Code or comparable law of any jurisdiction.
(q) "Liquidity Event" shall mean (i) the closing of firmly
underwritten public offering pursuant to registration statement filed by Company
under the Securities Act of 1933, as amended (the "Act"), or (ii) a sale,
transfer or distribution by the Company of all or substantially all of its
assets (other than any mortgage, pledge or similar transfer whether or not in
the ordinary course of business), or a merger or consolidation of Company with
any other Person such that the holders of Company's outstanding voting
securities immediately prior to such transaction do not own more than 50% of the
combined voting power of the surviving entity's outstanding voting securities
immediately after the transaction, (iii) any "person" (as such term is used in
subsections 13(d) and 14(d) of the Securities Exchange Act of 1934 (the
"Exchange Act")) or group of persons after the date hereof, becomes the
"beneficial owner" (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Company representing more than 50% of the
combined voting power of the Company's then outstanding voting securities, or
(iv) the sale of all or substantially all of the assets of Sunrise, the sale of
any of the capital stock of Sunrise or a merger or consolidation of Sunrise with
or into any Person.
(r) "Majority in Interest" shall mean more than 50% of the aggregate
outstanding principal amount of the Notes issued pursuant to the Note Purchase
Agreement.
(s) "Material Adverse Effect" shall mean a material adverse effect on
(a) the business, assets, operations, prospects or financial or other condition
of Company; (b) the ability of Company to pay or perform the Obligations in
accordance with the terms of this Note; or (c) the rights and remedies of Holder
under this Note or any related document, instrument or agreement.
(t) "Note Purchase Agreement" has the meaning given in the
introductory paragraph hereof.
(u) "Obligations" shall mean and include all loans, advances, debts,
liabilities and obligations, howsoever arising, owed by Company to Holder of
every kind and description whether or not evidenced by any note or instrument
and (whether or not for the payment of money), now existing or hereafter arising
under or pursuant to the terms of the Transaction Documents, including all
interest, fees, charges, expenses, attorneys' fees and costs and accountants'
fees and costs chargeable to and payable by Company hereunder and thereunder, in
each case, whether direct or indirect, absolute or contingent, due or to become
due, and whether not arising after the commencement of a proceeding under title
11 of the United States Code (11 U.S.C. Section 101 et seq.), as amended
------
-3-
from time to time (including post-petition interest) and whether or not allowed
or allowable as a claim in any such proceeding.
(v) "Permitted Investments" shall mean and include: (a) Deposits with
commercial banks organized under the laws of the United States or a state
thereof to the extent such deposits are fully insured by the Federal Deposit
Insurance Corporation; (b) Investments in marketable obligations issued or fully
guaranteed by the United States and maturing not more than one (1) year from the
date of issuance; (c) Investments in open market commercial paper rated at least
"A1" or "P1" or higher by a national credit rating agency and maturing not more
than one (1) year from the creation thereof; (d) Investments pursuant to or
arising under currency agreements or interest rate agreements entered into in
connection with bona fide hedging arrangements; (e) Investments consisting of
deposit accounts maintained in the ordinary course of business; (f) other
Investments aggregating not in excess of One Hundred Thousand Dollars ($100,000)
at any time; and (g) Investments by the Company in or to its Subsidiaries,
Investments by the Company's Subsidiaries in or to the Company and Investments
by a Subsidiary in or to another Subsidiary.
(w) "Permitted Liens" shall mean and include: (i) Liens for taxes or
other governmental charges not at the time delinquent or thereafter payable
without penalty or being contested in good faith, provided provision is made to
the reasonable satisfaction of Holder for the eventual payment to if
subsequently found payable; (ii) Liens of carriers, warehousemen, mechanics,
materialmen, vendors, and landlords incurred in the ordinary course of business
for sums not overdue or being contested in good faith, provided provision is
made to the reasonable satisfaction of Holder for the eventual payment thereof
if subsequently found payable; (iii) deposits under workers' compensation,
unemployment insurance and social security laws or to secure the performance of
bids, tenders, contracts (other than for the repayment of borrowed money) or
leases, or to secure statutory obligations of surety or appeal bonds or to
secure indemnify, performance or other similar bonds in the ordinary course of
business; (iv) Liens securing obligations under a capital lease if such lease is
permitted under this Note and such Liens do not extend to property other than
the property leased under such capital lease; (v) Liens upon any equipment or
real property acquired or held by Company or any of its Subsidiaries to secure
the purchase price of such equipment or real property or indebtedness incurred
solely for the purpose of financing the acquisition of such equipment or real
property; (vi) easements, reservations, rights of way, restrictions, minor
defects or irregularities in title and other similar charges or encumbrances
affecting real property in a manner not materially or adversely affecting the
value or use of such property; (vii) Liens in favor of a collateral agent
holding collateral on behalf of the holders of the Notes and the Sunrise Notes;
and Liens on the assets of Company's Subsidiaries securing working capital and
acquisition financing so long as the incurrence of no Event of Default would
exist immediately prior to or immediately after the incurrence of such
Indebtedness.
(x) "Person" shall mean and include an individual, a partnership, a
corporation (including a business trust), a joint stock company, a limited
liability company, an unincorporated association, a joint venture or other
entity or a governmental authority.
(y) "Senior Indebtedness" shall mean, unless expressly subordinated to
or made on a parity with the amounts due under this Note, the principal of,
unpaid interest on and amounts reimbursable, fees, expenses, costs of
enforcement and other amounts due in connection with, (i) Indebtedness of
Company or its Subsidiaries to banks or commercial finance or other lending
institutions regularly engaged in the business of lending money (excluding
venture capital, investment banking or similar institutions and their affiliates
which sometimes engage in lending activities but which are primarily engaged in
investments in Equity Securities), whether or not secured, (ii) indebtedness
secured by Liens described in clause (v) of the definition of Permitted Liens,
and (iii) any such Indebtedness or any debentures, notes or other evidence of
indebtedness issued in exchange for such Senior
-4-
Indebtedness, or any indebtedness arising from the satisfaction of such Senior
Indebtedness by a guarantor. "Senior Indebtedness shall not include the Sunrise
Notes.
(z) "Subsidiary" shall mean (a) any corporation of which more than 50%
of the issued and outstanding Equity Securities having ordinary voting power to
elect a majority of the Board of Directors of such corporation is at the time
directly or indirectly owned or controlled by Company, (b) any partnership,
joint venture, or other association of which more than 50% of the equity
interest having the power to vote, direct or control the management of such
partnership, joint venture or other association is at the time directly or
indirectly owned and controlled by Company, and (c) any other entity included in
the financial statements of Company on a consolidated basis.
(aa) "Sunrise" shall mean Sunrise Organic Farms, Inc.
(bb) "Sunrise Notes" shall mean the promissory notes issued under the
Acquisition Agreement, dated as of March 20, 1997.
(cc) "Transaction Documents" shall mean this Note, each of the other
Notes issued under the Note Purchase Agreement, if any, the Note Purchase
agreement and the Guaranties.
2. INTEREST AND PRINCIPAL PAYMENTS.
-------------------------------
(a) Interest Only Period. Company shall make sixteen payments of
accrued and unpaid interest under this Note on the last Business Day of each
calendar quarter commencing on June 30, 1997.
(b) Amortization of Principal and Interest. Commencing on March 31,
2001, and continuing on the last Business Day of each calendar quarter for seven
(7) quarters thereafter, Company shall make a payment to Holder in the amount of
$________, which payments shall fully amortize all principal and interest due
under this Note.
3. PREPAYMENT.
----------
(a) Optional Prepayment. This Note may be prepaid at any time prior
to the second anniversary of the date hereof in whole or in part upon the
payment to Holder of a premium equal to three percent (3%) of the principal
balance prepaid. This Note may be prepaid at any time thereafter in whole or in
part without penalty or premium.
(b) Mandatory Prepayment. This Note shall be prepaid in full upon the
closing of a Liquidity Event. Such prepayment shall be without penalty or
premium unless it occurs prior to the second anniversary of the date hereof in
which case such prepayment shall include a premium of three percent (3%) of the
principal amounts to prepaid.
(c) Provisions Applicable to Prepayments. Any proprietary of this
Note (i) may only be made in connection with the prepayment of all Notes issued
under the Note and Stock Purchase Agreement on a pro rata basis, based on the
respective aggregate outstanding principal amounts of each such Note, and (ii)
will be applied first to the payment of expenses due under this Note, second to
interest accrued on this Note and third, if the amount of prepayment exceeds the
amount of all such expenses and accrued interest, to the payment of principal of
this Note.
-5-
4. CERTAIN COVENANTS. While any amount its outstanding under this
-----------------
Note, without the prior written consent of a Majority in Interest:
(a) Indebtedness. The Company shall not create, incur, assume or
permit to exist any Indebtedness except (i) the Notes, (ii) the Sunrise Notes,
(iii) Indebtedness ranking pari passu with the Notes and the Sunrise Notes which
does not require any amortization of principal prior to September 30, 2001,
which has an interest rate not in excess of the prime rate at the time of
incurrence plus five percentage points and which has a maturity after September
30, 2003; and (iv) Senior Indebtedness. The Company shall not create, incur,
assume or permit to exist any Indebtedness subordinated to the Senior
Indebtedness but senior to the Notes and the Sunrise Notes.
(b) Liens. Neither Company nor any of its Subsidiaries shall create,
incur, assume or permit to exist any Lien on or with respect to any of its
assets or property of any character, whether now owned or hereafter acquired,
except for Permitted Liens.
(c) Asset Dispositions. Neither Company nor any of its Subsidiaries
shall sell, lease, transfer, license or otherwise dispose of (collectively, a
"Transfer") any of its assets or property, whether now owned or hereafter
---------
acquired, except Transfers in the ordinary course of its business (i) consisting
of the sale of inventory, (ii) consisting of sales of worn-out or obsolete
equipment, (iii) consisting of sales between the Subsidiaries or between the
Company and a Subsidiary, and (iv) other Transfers not in excess of Two Hundred
Fifty Thousand Dollars ($250,000) in the aggregate in any fiscal year.
(d) Mergers, Acquisitions, Etc. Neither Company nor any of its
Subsidiaries shall consolidate with or merge into any other Person or permit any
other Person to merge into it, or acquire all or substantially all of the assets
or capital stock of any other Person; provided, however, that a wholly-owned
Subsidiary of the Company may merge with and into another wholly-owned
Subsidiary and a Subsidiary of the Company may merge with and into the Company
so long as the Company is the surviving corporation.
(e) Investments. Neither Company nor any of its Subsidiaries shall
make any Investment except for Permitted Investments.
(f) Dividends, Redemptions, Etc. Neither Company nor any of its
Subsidiaries shall (i) pay any dividends or make any distributions on its Equity
Securities; (ii) purchase, redeem, retire, defease or otherwise acquire for
value any of its Equity Securities; (iii) return any capital to any holder of
its Equity Securities; (iv) make any distribution of assets, Equity Securities,
obligations or securities to any holder of its Equity Securities; or (v) set
apart any sum for any such purpose; provided, however, that any Subsidiary may
pay dividends to Company.
(g) Indebtedness Payments. Neither Company nor any of its
Subsidiaries shall (i) prepay, redeem, purchase, defease or otherwise satisfy in
any manner prior to the scheduled repayment thereof any Indebtedness for
borrowed money (other than amounts due under this Note or the other Notes issued
under the Note Purchase Agreement or the Sunrise Notes, all of which shall be
prepaid only on a pro rata basis) or lease obligations, (ii) amend, modify or
otherwise change the terms of any Indebtedness for borrowed money (other than
the Obligations) or lease obligations so as to accelerate the scheduled
repayment thereof or (iii) repay any notes to officers, directors or
shareholders.
(h) Information Rights; Notices. Company shall furnish to Holder the
following:
-6-
(i) Monthly Financial Statements. Within thirty (30) days after
----------------------------
the last day of each month, a copy of the Financial Statements of Company for
such month and for the fiscal year to date, certified by the chief financial
officer or controller of Company to present fairly the financial condition,
results of operations and other information presented therein and to have been
prepared in accordance with GAAP consistently applied, subject to normal year
end adjustments and except that no footnotes need be included with such
Financial Statements;
(ii) Annual Financial Statements. Within one hundred twenty (120)
---------------------------
days after the close of each fiscal year of Company, (A) copies of the audited
Financial Statements of Company for such year, together with the opinion of
nationally recognized independent auditors that such Financial Statements
present fairly the financial condition, results of operations and other
information presented therein in accordance with GAAP consistently applied, (B)
copies of the reports and management letters delivered by such accountants in
connection with such Financial Statements, and (C) a report containing a
description of projected business prospects (including capital expenditures) and
management's discussion and analysis of financial condition and results of
operation of Company and its Subsidiaries;
(iii) SEC Reports. As soon as possible and in no event later
-----------
than five (5) Business Days after they are sent, made available or filed, copies
of all registration statements and reports filed by Company with the Securities
Exchange Commission and all reports, proxy statements and financial statements
sent or made available by Company to its shareholders generally; and
(iv) Notice of Defaults. Promptly upon the occurrence thereof,
------------------
written notice of the occurrence of any Event of Default hereunder or any event
of default with respect to any Indebtedness of Company.
(v) Compliance Statements. Promptly as they are available and in
---------------------
any event within thirty (30) days of the end of each calendar month a
certificate of Company's Chief Financial Officer or other senior officer stating
that he or she has reviewed the provisions of this Note and that Company is not
in default in the observance or performance of any of the provision hereof, or
if Company shall be so in default, specifying all such defaults and events of
which he or she may have knowledge and setting forth the calculation of
compliance or noncompliance with each of the financial covenants set forth in
Sections 4(l) and 4(m).
(i) Inspection Rights. Holder and its representatives shall have the
right, at any time during normal business hours, upon reasonable prior notice,
to visit and inspect the properties of Company and its corporate, financial and
operating records, and make abstracts therefrom, and to discuss Company's
affairs, finances and accounts with its directors, officers and independent
public accountants. Holder and its representatives shall agree in writing not
to disclose or misuse any confidential information made available to Holder and
its representatives; provided, however, that disclosure of such information may
be made (i) to the subsidiaries or affiliates of Holder, (ii) to prospective
transferees or purchasers of any interest in this Note, provided that they have
entered into a comparable confidentiality agreement in favor of Company and have
delivered a copy to Company, (iii) as required by law, regulations, rule or
order, subpoena, judicial order or similar order and (iv) as may be required in
connection with the examination, audit or similar investigation of Company.
(j) Insurance. Company and its Subsidiaries shall (i) carry and
maintain insurance at its expense of the types and in the amounts customarily
carried from time to time during the term of this Note by other engaged in
substantially the same business as such Person and operating in the same
geographic area as such Person,
-7-
including, but not limited to, fire, public liability, property damage and
worker's compensation, such insurance to be in such form as is carried with
companies and in amounts satisfactory to Lender, and (ii) deliver to Holder from
time to time, as Holder may request, schedules or insurance certificates setting
forth all insurance then in effect.
(k) Issuance of Stock. Company shall not issue any class of capital
stock having rights preferences or privileges prior or in preference to those of
the Common Stock of Company. No Subsidiary of Company shall issue any Equity
Security to any Person other than Company.
(l) Current Ratio. Company shall maintain, as of the last day of each
calendar month, a ratio of Current Assets to Current Liabilities of at least 1.1
to 1.0.
(m) Leverage Ratio. Company shall not permit, as of the last day of
each calendar month, the ratio of Consolidated Total Indebtedness to
Consolidated Tangible Assets to exceed .825 to 1.0.
(n) Subsidiary Guaranties. Company shall cause each Person which
becomes a Subsidiary after the date hereof to execute and deliver a Guaranty in
the form attached to the Note Purchase Agreement as Exhibit C with such changes
to the recitals thereof as are necessary to reflect the execution thereof after
the date hereof.
5. EVENT OF DEFAULT. The occurrence of any of the following shall
----------------
constitute an "Event of Default" under this Note and the other Transaction
Documents:
(a) Failure to Pay. Company shall fail to pay (i) any principal
payment on the date due hereunder or (ii) any interest or other payment required
under the terms of this Note or any other transaction Document on the date due
and such payment shall not have been made within five (5) days of Company's
receipt of Holder's written notice to Company of such failure to pay; or
(b) Breaches of Certain Covenants. Company or any of its Subsidiaries
shall fail to observe or perform any covenant, obligation, condition or
agreement set forth in Section 4 of this Note (other than a covenant,
obligation, condition or agreement set forth in Section 4(h) or Section 4(j));
or
(c) Breaches of Other Covenants. Company or any of its Subsidiaries
shall fail to observe or perform any other covenant, obligation, condition or
agreement contained in this Note or the other Transaction Documents (other than
those specified in Sections 5(a) and 5(b)) and (i) such failure shall continue
for fifteen (15) days, or (ii) if such failure is not curable within such
fifteen (15) day period, but is reasonably capable of cure within forty-five
(45) days, either (A) such failure shall continue for forty-five (45) days or
(B) Company or its Subsidiary shall not have commenced a cure in a manner
reasonably satisfactory to Holder within the initial fifteen (15) day period; or
(d) Representations and Warranties. Any representation, warranty,
certificate, or other statement (financial or otherwise) made or furnished by or
on behalf of Company to Holder in writing in connection with this Note or any of
the other Transaction Documents, or as an inducement to Holder to enter into
this Note and the other Transaction Documents, shall be false, incorrect,
incomplete or misleading in any material respect when made or furnished; or
(e) Other Payment Obligations. Company or any if its Subsidiaries (i)
shall fail to pay any Indebtedness in an aggregate amount of One Hundred
Thousand Dollars ($100,000) upon final maturity thereof, or (ii) shall fail
(A)(x) to make any payment when due under the terms of any bond, debenture, note
or other evidence
-8-
of Indebtedness to be paid by such Person (excluding this Note and the other
Transaction Documents but including any other evidence of Indebtedness of
Company or any of its Subsidiaries to Holder) and such failure shall continue
beyond any period of grace provided with respect thereto, or (y) default in the
observance or performance of any other agreement, term or condition contained in
any such bond, debenture, note or other evidence of Indebtedness, and (B) the
effect of such failure or default is that the holder or holders thereof cause
Indebtedness in an aggregate amount of Twenty-Five Thousand Dollars ($25,000) or
more to become due prior to its stated date of maturity; or
(f) Voluntary Bankruptcy or Insolvency Proceedings. Company or any of
its Subsidiaries shall (i) apply for or consent to the appointment of a
receiver, trustee, liquidator or custodian of itself or of all or a substantial
part of its property, (ii) be unable, or admit in writing its inability, to pay
its debts generally as they mature, (iii) make a general assignment for the
benefit of its or any of its creditors, (iv) be dissolved or liquidated in full
or in part, (v) become insolvent (as such term may be defined or interpreted
under any applicable statute), (vi) commence a voluntary case or other
proceeding seeking liquidation, reorganization or other relief with respect to
itself or its debts under any bankruptcy, insolvency or other similar law now or
hereafter in effect or consent to any such relief or to the appointment of or
taking possession of its property by any official in any involuntary case or
other proceeding commenced against it, or (vii) take any action for the purpose
of effecting any of the foregoing; or
(g) Involuntary Bankruptcy or Insolvency Proceedings. Proceedings for
the appointment of a receiver, trustee, liquidator or custodian of Company or
any of its Subsidiaries or of all or a substantial part of the property thereof,
or an involuntary case or other proceedings seeking liquidation, reorganization
or other relief with respect to Company or any of its Subsidiaries or the debts
thereof under any bankruptcy, insolvency or other similar law now or hereafter
in effect shall be commenced and an order for relief entered or such proceeding
shall not be dismissed or discharged within sixty (60) days of commencement; or
(h) Judgments. A final judgment or order for the payment of money in
excess of One Hundred Thousand Dollars ($100,000) (exclusive of amounts covered
by insurance issued by an insurer not an Affiliate of company) shall be rendered
against Company or any of its Subsidiaries and the same shall remain
undischarged for a period of thirty (30) days during which execution shall not
be effectively stayed, or any judgment, writ, assessment, warrant of attachment,
or execution or similar process shall be issued or levied against a substantial
part of the property of Company or any if its Subsidiaries and such judgment,
writ, or similar process shall not be released, stayed, vacated or otherwise
dismissed within thirty (30) days after issue or levy; or
(i) Guaranties. Any Guaranty shall cease to be, or be asserted by the
guarantor thereunder not to be, a legal, valid and binding obligation of such
guarantor enforceable in accordance with its terms; or
(j) Material Adverse Effect. One or more conditions exist or events
have occurred which could reasonably indicate, or reasonably result in, a
Material Adverse Effect.
6. RIGHTS OF HOLDER UPON DEFAULT. Upon the occurrence of any Event of
-----------------------------
Default (other than an Event of Default referred to in Sections 5(f) and 5(g)),
immediately and without notice, all outstanding Obligations payable to Company
hereunder shall automatically become immediately due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived, anything contained herein or in the other Transaction
Documents to the contrary notwithstanding. In addition to the foregoing
remedies, upon the occurrence or existence of any Event of Default, Holder may
exercise any other right, power or remedy granted to it by the Transaction
Documents or otherwise permitted to it by law, either by suit in equity or by
action at law, or both.
-9-
7. SUBORDINATION. The indebtedness evidenced by this Note is hereby
-------------
expressly subordinated, to the extent and in the manner hereinafter set forth,
in right of payment to the prior payment in full of all Senior Indebtedness.
(a) Insolvency Proceedings. If there shall occur any receivership,
----------------------
insolvency, assignment for the benefit of creditors, bankruptcy, reorganization,
or arrangements with creditors (whether or not pursuant to bankruptcy or other
insolvency laws), sale of all or substantially all of the assets, dissolution,
liquidation, or any other marshaling of the assets and liabilities of Company,
(i) no amount shall be paid by Company in respect of the principal of, interest
on or other amounts due with respect to this Note at the time outstanding,
unless and until the principal of and interest on the Senior Indebtedness then
outstanding shall be paid in full, and (ii) no claim or proof of claim shall be
filed with Company by or on behalf of Holder of this Note which shall assert any
right to receive any payments in respect of the principal of and interest on
this Note except subject to the payment in full of the principal of and interest
on all of the Senior Indebtedness then outstanding.
(b) Default on Senior Indebtedness. If there shall occur an event of
------------------------------
default which has been declared in writing with respect to any Senior
Indebtedness, as defined therein, or in the instrument under which it is
outstanding, permitting the holder to accelerate the maturity thereof and Holder
shall have closing date written notice thereof from the holder of such Senior
Indebtedness, then, unless and until such event of default shall have been cured
or waived or shall have ceased to exist, or all Senior Indebtedness shall have
been paid in full, no payment shall be made in respect of the principal of or
interest on this Note, unless within one hundred eighty (180) days after the
happening of such event of default, the maturity of such Senior Indebtedness
shall not have been accelerated. Not more than one notice may be given to
Holder pursuant to the terms of this Section 7(b) during any 360 day period.
(c) Further Assurances. By acceptance of this Note, Holder agrees to
------------------
execute and deliver customary forms of subordination agreement requested from
time to time by holders of Senior Indebtedness, and as a condition to Holder's
rights hereunder, Company may require that Holder execute such forms of
subordination agreement; provided that such forms shall not impose on Holder
terms materially less favorable than those provided herein.
(d) Other Indebtedness. No indebtedness which does not constitute
------------------
Senior Indebtedness shall be senior in any respect to the indebtedness
represented by this Note.
(e) Subrogation. Subject to the payment in full of all Senior
-----------
Indebtedness, Holder shall be subrogated to the rights of the holder(s) of such
Senior Indebtedness (to the extent of the payments or distributions made to the
holder(s) of such Senior Indebtedness pursuant to the provisions if this Section
7) to receive payments and distributions of assets of Company applicable to the
Senior Indebtedness. No such payments or distributions applicable to the Senior
Indebtedness shall, as between Company and its creditors, other than the holders
of Senior Indebtedness an Holder, be deemed to be a payment by Company to or on
account of this Note; and for purposes of such subrogation, no payments or
distributions to the holders of Senior Indebtedness to which Holder would be
entitled except for hereto provisions of this Section 7 shall, as between
Company and its creditors, other than the holders of Senior Indebtedness and
Holder, be deemed to be a payment by Company to or on account of the Senior
Indebtedness.
(f) No Impairment. Subject to the rights, if any, of the holders of
-------------
Senior Indebtedness under this Section 7 to receive cash, securities or other
properties otherwise payable or deliverable to Holder, nothing contained in this
Section 7 shall impair, as between Company and Holder, the obligation of
Company, subject to the terms and conditions hereof, to pay to Holder the
principal hereof and interest hereon as and when the same become
-10-
due and payable, or shall prevent Holder, upon default hereunder, from
exercising all rights, powers and remedies otherwise provided herein or by
applicable law.
(g) Lien Subordination. Any Lien of Holder, whether now or hereafter
------------------
existing in connection with the amounts due under this Note, on any assets or
property of Company or any proceeds or revenues therefrom which Holder may have
at any time as security for any amounts due and obligations under this Note
shall be subordinate to all Liens now or hereafter granted to a holder of Senior
Indebtedness by Company or by law, notwithstanding the date, order or method of
attachment or perfection of any such Lien or the provisions of any applicable
law.
(h) Reliance of Holders of Senior Indebtedness. Holder, by its
------------------------------------------
acceptance hereof, shall be deemed to acknowledge and agree that the foregoing
subordination provisions are, and are intended to be, an inducement to and a
consideration of each holder of Senior Indebtedness, whether such Senior
Indebtedness was created or acquired before or after the creation of the
indebtedness evidenced by this Note, and each such holder of Senior Indebtedness
shall be deemed conclusively to have relied on such subordination provisions in
acquiring and holding, or in continuing to hold, such Senior Indebtedness.
8. SUCCESSORS AND ASSIGNS. Subject to the restrictions on transfer
----------------------
described in Sections 10 and 11 below, the rights and obligations of Company and
Holder of this Note shall be binding upon and benefit the successors, assigns,
heirs, administrators and transferees of the parties.
9. WAIVER AND AMENDMENT. Any provision of this Note may be amended,
--------------------
waived or modified upon the written consent of Company and holders of a Majority
in Interest of all then outstanding Notes issued pursuant to the Note Purchase
Agreement.
10. TRANSFER OF THIS NOTE. With respect to any offer, sale or other
---------------------
disposition of this Note, Holder will give written notice to Company prior
thereto, describing briefly the manner thereof, together with a written opinion
of Holder's counsel reasonably satisfactory to Company, to the effect that such
offer, sale or other distribution may be effected without registration or
qualification (under any federal or state law then in effect). Promptly upon
receiving such written notice and reasonably satisfactory opinion, if so
requested, Company, as promptly as practicable, shall notify Holder that Holder
may sell or otherwise dispose of this Note, all in accordance with the terms of
the notice delivered to Company. If a determination has been made pursuant to
this Section 10 that the opinion of counsel for Holder is not reasonably
satisfactory to Company, Company shall so notify Holder promptly after such
determination has been made. Each Note thus transferred shall bear a legend as
to the applicable restrictions on transferability in order to ensure compliance
with the Act. Company may issue stop transfer instructions to its transfer agent
in connection with such restrictions. Subject to the foregoing, transfers of
this Note shall be registered upon registration books maintained for such
purpose by or on behalf of Company as provided in the Note purchase Agreement.
Prior to presentation of this Note for registration of transfer, Company shall
treat the registered holder hereof as the owner and holder of this Note for the
purpose of receiving all payments of principal and interest hereon and for all
other purposes whatsoever, whether or not this Note shall be overdue and Company
shall not be affected by notice to the contrary.
11. ASSIGNMENT BY COMPANY. Neither this Note nor any of the rights,
---------------------
interests or obligations hereunder may be assigned, by operation of law or
otherwise, in whole or in part, by Company without the prior written consent of
Holder.
-11-
12. NOTICES. Any notice, request or other communication required or
-------
permitted hereunder shall be in writing and shall be deemed to have been duly
given if personally delivered or mailed by registered or certified mail, postage
prepaid, or by recognized overnight courier or personal delivery at the
respective addresses of the parties as set forth in the Note Purchase Agreement
or on the register maintained by Company. Any party hereto may by notice so
given change its address for future notice hereunder. Notice shall conclusively
be deemed to have been given when received.
13. PARI PASSU NOTES. Holder acknowledges and agrees that the payment of
----------------
all or any portion of the outstanding principal amount of this Note and all
interest hereof shall be pari passu in right of payment and in all other
respects to the other Notes issued pursuant to the Note Purchase Agreement or
pursuant to the terms of such Notes. In the event Holder receives payments in
excess of its pro rata share of Company's payments to the holders of all of the
Notes, then Holder shall hold in trust all such excess payments for the benefit
of the holders of the other Notes and shall pay such amounts held in trust to
such other holders upon demand by such holders.
14. PAYMENT. Payment shall be made in lawful tender of the United States.
-------
15. DEFAULT RATE; USURY. During any period in which and Event of Default
-------------------
has occurred and is continuing, Company shall pay interest on the unpaid
principal balance hereof at a rate per annum equal to the rate otherwise
applicable hereunder plus five percent (5%). In the event any interest is paid
on this Note which is deemed to be in excess of the then legal maximum rate,
then that portion of the interest payment representing an amount in excess of
the then legal maximum rate shall be deemed a payment of principal and applied
against the principal of this Note.
16. EXPENSES; WAIVERS. If action is instituted to collect this Note, the
-----------------
prevailing party shall be entitled to collect from the other all costs and
expenses, including, without limitation, reasonable attorneys' fees and costs,
incurred in connection with such action. Company hereby waives notice of
default, presentment or demand for payment, protest or notice of nonpayment or
dishonor and all other notices or demands relative to this instrument.
17. GOVERNING LAW. This Note and all actions arising out of or in
-------------
connection with this Note shall be governed by and construed in accordance with
the laws of the State of California, without regard to the conflicts of law
provisions of the State of California or of any other state.
18. RIGHT OF FIRST OFFER. Prior to the maturity of this Note, Company
--------------------
shall provide Holder with all requests for additional subordinated debt
financing prior to the time that such requests are provided to other financing
sources. Should Company and Holder fail to agree on the terms and conditions of
such financing within thirty (30) days of such request, then Company may accept
a funding source other than Holder.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-12-
IN WITNESS WHEREOF, Company has caused this Note to be issued as of the
date first written above.
HORIZON ORGANIC HOLDING CORPORATION,
a Delaware corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
-13-
EXHIBIT B
LEGAL OPINION
-------------
ITEMS TO BE COVERED IN OPINION OF COMPANY COUNSEL
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware.
(b) The Company has the requisite corporate power and authority to
execute, deliver and perform the Transaction Documents and to issue the Common
Stock issued or issuable under the Transaction Documents. All action on the
part of the Company, its directors, and its shareholders necessary for the
authorization, execution, delivery, and performance of the Transaction Documents
and the issuance of the Common Stock, has been taken. The Transaction Documents
have been duly executed and delivered by an authorized officer of the Company.
(c) The execution, delivery and performance of the Transaction
Documents and the issuance of the Common Stock under the Transaction Documents
(i) do not conflict with or violate any provision of the Company's Certificate
of Incorporation or Bylaws, or applicable law and (ii) do not conflict with or
constitute a default under any provision of any judgment, writ, decree, order or
material agreement, indenture, or instrument to which the Company is a party or
by which it is bound.
(d) The Transaction Documents constitute legal, valid and binding
obligations of the Company, enforceable in accordance with their respective
terms.
(e) The authorized capital stock of the Company consists of __________
shares, of which the Company is authorized to issue ______________ shares of
Common Stock, _______________ shares of which are issued and outstanding
immediate prior to closing, __________ shares of Preferred Stock, none of which
are issued and outstanding. All such issued and outstanding shares of Preferred
Stock and Common Stock have been duly authorized and validly issued and, to our
knowledge, are fully paid and nonassessable, and are free of any preemptive or
similar rights contained in the Certificate of Incorporation or Bylaws of the
Company or, to our knowledge, in any agreement to which the Company is a party,
except as specifically provided in the Transaction Documents. The shares of
Common Stock issued under the Note and Stock Purchase Agreement are validly
issued, fully paid and nonassessable. To our knowledge, except for rights
described in the Shareholder Agreement and the Certificate of Incorporation,
there are no other options, warrants, conversion privileges, or other rights
presently outstanding to purchase or otherwise acquire any authorized but
unissued shares of capital stock or other securities of the Company, or any
other agreements to issue any such securities or rights.
(f) To our knowledge, there are no actions, suits, proceedings or
investigations pending against the Company or its properties before any court or
governmental agency (nor, to our knowledge, has the Company received any written
threat thereof), which, either in any case or in the aggregate, are likely to
result in any material adverse change in the business or financial condition of
the Company or any of its properties, or in any material impairment of the right
or ability of the Company to carry on its business as now conducted, or which
questions the validity
of the Transaction Documents or any action taken or to be taken by the Company
in connection therewith.
(g) No consent, approval or authorization of or designation,
declaration or filing with any governmental authority on the party of the
Company is required in connection with the valid execution and delivery of the
Transaction Documents, or the offer, sale or issuance of the Common Stock or the
consummation of any other transactions contemplated by the Transaction Documents
except qualification (or taking such action as may be necessary to secure an
exemption from qualification, if available) under applicable blue sky laws of
the offer and sale of securities. Our opinion herein is otherwise subject to
the timely and proper completion of all filings and other actions contemplated
herein where such filings and actions are to be undertaken on or after the date
hereof.
(h) Subject to the accuracy of the Purchasers' representations in
Section 4 of the Note and Stock Purchase Agreement, we are of the opinion that
the offer, sale and issuance of the Common stock in conformity with the terms of
the Agreement constitute transactions exempt from the registration requirements
of Section 5 of the Securities Act of 1933, as amended.
-2-
EXHIBIT C
GUARANTY
--------
-3-
FORM OF SUBSIDIARY GUARANTY
THIS SUBSIDIARY GUARANTY (this "Guaranty"), dated as of [Date], 1997, is
entered into by [GUARANTOR], a [STATE OF GUARANTOR'S FORMATION] (the
"Guarantor"), in favor of each holder from time to time of a senior subordinated
promissory note (each, a "Note") under the Note Agreement (as defined below)
(collectively, the "Guaranteed Parties").
RECITALS
--------
A. The Guaranteed Parties and Horizon Organic Holding Corporation, a
Delaware corporation ("Company"), the 100% parent of the Guarantor, propose to
enter into that certain Note and Stock Purchase Agreement dated as of [Date],
1997 (as the same may be amended, supplemented, amended and restated or
otherwise modified from time to time, the "Note Agreement"), providing for the
purchase of Notes by the Guaranteed Parties, the proceeds of which are to be
used in part by Guarantor (by way of a loan or capital contribution from
Company). Company, Guarantor and each other guarantor of the Guaranteed
Obligations are sometimes referred to herein as the "Credit Parties". When
capitalized and used herein, terms defined in the Note Agreement and not
otherwise defined herein shall have the meanings ascribed to them in the Note
Agreement; and
B. The Guaranteed Parties have required, as a condition to the extension
of credit under the Note Agreement, that the Guarantor execute and deliver this
Guaranty.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the premises and to induce the Holders
to enter into, and to extend credit under the Note Agreement, the Guarantor
agrees with the Guaranteed Parties as follows:
SECTION 1. THE GUARANTEE. The guarantee of the Guarantor hereunder is as
-------------
follows:
Section 1.1 Guaranty of Extensions of Credit to Company. The
-------------------------------------------
Guarantor hereby unconditionally, absolutely and irrevocably guarantees to the
Guaranteed Parties and their successors, endorsees, transferees and assigns, the
prompt payment (whether at stated maturity, on mandatory prepayment by
acceleration or otherwise) and performance of all of the Obligations of the
Company under the Note Agreement and the other Credit Documents (including all
interest and costs of enforcement which may at any time accrue with respect to
the Obligations or which would accrue but for the operation of any provision or
doctrine with respect to the Bankruptcy Code, as hereinafter defined, and
whether or note an allowed claim) (the "Guaranteed Obligations"). The Guarantor
agrees that this Guaranty is a guaranty of payment and performance and not of
collection, and that its obligations under this Guaranty shall be joint and
several with any other Persons which may at any time or from time to time be or
become directly or indirectly financially responsible to the Guaranteed Parties
with respect to the Guaranteed Obligations and shall be under all circumstances
primary, absolute and unconditional irrespective of, and unaffected by:
-4-
(a) the genuineness, validity, regularity, enforceability or any
future amendment of, or change in, this Guaranty, the Note Agreement any other
Credit Document or other agreement, document or instrument to which any Credit
Party is or are or may become a party;
(b) the absence of any action to enforce this Guaranty, any other
Credit Document or the waiver or consent by the Guaranteed Parties with respect
to any of the provisions hereof or thereof;
(c) any bankruptcy, insolvency, reorganization, arrangement,
adjustment, composition, liquidation or the like of any other Credit Party
including, but not limited to, (i) any Guaranteed Party's election, in any
proceeding instituted under Title 11 of the United States code (11 U.S.C. (S)
101 et seq.) or any replacement or supplemental federal statutes dealing with
------
the bankruptcy of debtors (the "Bankruptcy Code"), of the application of Section
1111(b)(2) of the Bankruptcy Code, (ii) any borrowing or grant of a Lien by the
Company or any other Credit Party as debtor-in-possession, under Section 364 of
the Bankruptcy Code, or (iii) the disallowance of all or any portion of any
Guaranteed Party's claim(s) for repayment of the Guaranteed Obligations under
Section 502 of the Bankruptcy Code;
(d) any merger or consolidation of any Credit Party into or with any
other Person, or any sale, lease or transfer of any or all of the assets of any
other Credit Party to any other Person;
(e) any circumstance which might constitute a defense available to, or
a discharge of any other Credit Party;
(f) any sale, transfer or other disposition of any stock of any Credit
Party;
(g) absence of any notice to, or knowledge by, the Guarantor of the
existence or occurrence of any of the matters or events set forth in the
foregoing subdivisions (a) through (g); or
(h) any other fact or circumstance which might otherwise constitute a
defense available to, or a discharge of, a surety or guarantor;
it being agreed by the Guarantor that its obligations under this Guaranty shall
not be discharged until the payment and performance, in full, of the Guaranteed
Obligations (including all interest and costs of enforcement which may at any
time accrue with respect to the Obligations or which would accrue but for the
operation of any provision of or doctrine with respect to the Bankruptcy Code
and whether or not an allowed claim) or release of the Guarantor by the
Guaranteed Parties, whichever shall occur first. The Guarantor shall be
regarded, and shall be in the same position, as principal debtor (and not merely
as surety) with respect to the Guaranteed Obligations and specifically agrees
that, notwithstanding any discharge of the Company or any other Person or the
operation of any other provision of the Bankruptcy Code with respect to the
Guaranteed Obligations or any such Persons, the Guarantor shall be fully
responsible for paying all interest and costs of enforcement or preservation and
protection of Collateral which may at any time accrue with respect to the
Guaranteed Obligations or which would accrue but for the operation of any
provision of or doctrine with respect to the Bankruptcy Code and whether or not
an allowed claim. The Guarantor expressly waives all rights it may have now or
in the future under any statute, or at common law, or at law or in equity, or
otherwise, to compel the Guaranteed Parties to proceed in respect of the
Guaranteed Obligations against the Company, any other Credit Party or any other
party or against any Collateral before proceeding against, or as a condition to
proceeding against, the Guarantor. The Guarantor agrees that any notice or
directive given at any time to the Guaranteed Parties which is inconsistent
with the waiver in the immediately preceding sentence shall be null and void and
may be ignored by the Guaranteed Parties, and, in addition, may not be pleaded
or introduced as evidence in any litigation relating to this Guaranty
-5-
for the reason that such pleading or introduction would be at variance with the
written terms of this Guaranty unless the Guaranteed Parties have specifically
agreed otherwise in writing. It is agreed between the Guarantor and the
Guaranteed Parties that the foregoing waivers are of the essence of the
transaction contemplated by the Credit Documents and that, but for this Guaranty
and such waivers, the Guaranteed Parties would decline to enter into the Note
Agreement.
Section 1.2 Maximum Guaranteed Amount. Notwithstanding any other
-------------------------
provision of this Guaranty to the contrary, if the obligations of the Guarantor
hereunder would otherwise be held or determined by a court of competent
jurisdiction in any action or proceeding involving any state corporate law or
any state or Federal bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance or other law affecting the rights of creditors generally,
to be void, invalid or unenforceable to any extent on account of the amount of
the Guarantor's liability under this Guaranty, then notwithstanding any other
provision of this Guaranty to the contrary, the amount of such liability shall,
without any further action by the Guarantor or any other Person, be
automatically limited and reduced to the highest amount which is valid and
enforceable as determined in such action or proceeding.
Section 1.3 Demand by the Guaranteed Parties. In addition to the
--------------------------------
terms of the Guaranty set forth in Section 1.1 hereof, but subject to the
limitations contained in Section 1.2, and in no manner imposing any other
limitation on such terms, it is expressly understood and agreed that, if any or
all of the then outstanding principal amount of the Guaranteed Obligations
(together with all accrued interest thereon) becomes due and payable, then the
obligations of the Guarantor shall, at the option of the Guaranteed Parties,
without notice or demand, become due and payable and Guarantor shall, upon
demand in writing therefor by the Guaranteed Parties to the Guarantor, pay to
the holder or holders of the Guaranteed Obligations the outstanding Guaranteed
Obligations due and owing to such holder or holders. Payment by the Guarantor
shall be made in dollars to the Guaranteed Parties in accordance with the
amounts owed to each, to be credited and applied upon the Guaranteed
Obligations, in immediately available Federal funds to an account designated by
each Guaranteed Party or at the address set forth in the Note Agreement for the
giving of notice to the Guaranteed Parties or at any other address that may be
specified in writing from time to time by a Guaranteed Party.
Section 1.4 Enforcement of Guaranty. In no event shall the
-----------------------
Guaranteed Parties have any obligation (although it is entitled, at its option)
to proceed against the Company or any other Person before seeking satisfaction
from the Guarantor. The Obligations of Guarantor hereunder are independent of
the obligations of any other guarantor of the Guaranteed Obligations or of any
Credit Party, and a separate action or actions may be brought and prosecuted
against Guarantor whether or not action is brought against any other guarantor
or any other Credit Party, and whether or not any other guarantor or any other
Credit Party be joined in any such action or actions.
Section 1.5 Waiver. In addition to the waivers contained in Section
------
1.1 hereof, the Guarantor waives, and agrees that it shall not at any time
insist upon, plead or in any manner whatever claim or take the benefit or
advantage of, any appraisal, valuation, stay, extension, marshaling of assets or
redemption or similar laws, or exemption, whether now or at any time hereafter
in force, which may delay, prevent or otherwise affect the performance by the
Guarantor of its obligations under, or the enforcement by the Guaranteed Parties
of, this Guaranty. The Guarantor hereby waives diligence, presentment and
demand (whether for nonpayment or protest or of acceptance, maturity, extension
of time, change in nature or form of the Guaranteed Obligations, acceptance of
further security, release of further security, composition or agreement arrived
at as to the amount of, or the terms of, the Guaranteed Obligations, notice of
adverse change in a Company's or any other Credit Party's financial condition or
any other fact which might materially increase the risk to the Guarantor) with
respect to any of the Guaranteed Obligations or all other demands whatsoever and
waives the benefit of all provisions of law
-7-
which are or might be in conflict with the terms of this Guaranty. The
Guarantor hereby waives any requirement on the part of any holder of any Note to
mitigate the damages resulting from any default under such Note. The Guarantor
represents, warrants and agrees that, as of the date of this Guaranty, its
obligations under this Guaranty are not subject to any offsets or defenses
against any Guaranteed Party or any Credit Party of any kind. The Guarantor
further agrees that its obligations under this Guaranty shall not be subject to
any counterclaims, offsets or defenses against any Guaranteed Party or any
Credit Party of any kind which may arise in the future.
Section 1.6 Benefit of Guaranty. The provisions of this Guaranty are
-------------------
for the ratable benefit of the Guaranteed Parties and their respective
successors, transferees, endorsees and assigns, and nothing herein contained
shall impair, as between the Credit Parties and the Guaranteed Parties, the
obligations of the Credit Parties under the Credit Documents. In the event all
or any part of the Guaranteed Obligations are transferred, endorsed or assigned
by the Guaranteed Parties to any Person or Persons in accordance with the terms
of the Note Agreement, any reference to "Guaranteed Parties" herein shall be
deemed to refer equally to such Person or Persons.
Section 1.7 Modification of Guaranteed Obligations. If the
--------------------------------------
Guaranteed Parties shall at any time or from time to time, with or without the
consent of, or notice to, the Guarantor:
(a) extend other credit to the Company, change the time,
manner or place of payment of, or any other term of, all or any portion of, the
Guaranteed Obligations, or otherwise waive or consent to any departure from, the
terms of any Credit Document;
(b) take any action under or in respect of the Credit
Documents in the exercise of any remedy, power or privilege contained therein or
available to it at law, equity or otherwise, or waive or refrain from exercising
any such remedies, powers or privileges;
(c) amend or modify, in any manner whatsoever, the Credit
Documents;
(d) extend or waive the time for and of the Guarantor's, any
Credit Party's or any other Person's performance of, or compliance with, any
term, covenant or agreement on its part to be performed or observed under the
Credit Documents, or waive such performance or compliance or consent to a
failure of, or departure from, such performance or compliance;
(e) take and hold collateral for the payment of the Guaranteed
Obligations, or sell, exchange, release, dispose of, or otherwise deal with, any
collateral to secure any indebtedness of the Guarantor or the Credit Parties to
the Guaranteed Parties;
(f) release or limit the liability of anyone who may be liable
in any manner for the payment of any amounts owed by the Guarantor or any Credit
Party to the Guaranteed Parties;
(g) modify or terminate the terms of any intercreditor or
subordination agreement pursuant to which claims of other creditors of the
Guarantor or the Credit Parties are subordinated to the claims of any of the
Guaranteed Parties; and/or
(h) apply any sums by whomever paid or however realized to any
amounts owing by the Guarantor or the Credit Parties to the Guaranteed Parties
in such manner as the Guaranteed Parties shall determine in their discretion;
-8-
then the Guaranteed Parties shall not incur any liability to the Guarantor
pursuant hereto as a result thereof and no such action shall impair or release
the obligations of the Guarantor under this Guaranty.
Section 1.8 Reinstatement. This Guaranty shall remain in full force
-------------
and effect and continue to be effective in the event any petition is filed by or
against any of the Credit Parties or the Guarantor for liquidation or
reorganization, in the event any of the Credit Parties or the Guarantor becomes
insolvent or makes an assignment for the benefit of creditors or in the event a
receiver or trustee is appointed for all or any significant part of any of the
Credit Parties' or the Guarantor's assets, and shall continue to be effective or
be reinstated, as the case may be, if at any time payment and performance of the
Guaranteed Obligations, or any part thereof, is, pursuant to applicable law,
rescinded or reduced in amount, or must otherwise be restored or returned by the
Guaranteed Parties, whether as a "voidable preference", "fraudulent conveyance",
or otherwise, all as though such payment or performance had not been made. In
the event that any payment, or any part thereof, is rescinded, reduced, restored
or returned, the Guaranteed Obligations shall be reinstated and deemed reduced
only by such amount paid and not so rescinded, reduced, restored or returned.
Section 1.9 Waiver of Subrogation. GUARANTOR HEREBY IRREVOCABLY
---------------------
WAIVES, WHILE THE GUARANTEED OBLIGATIONS ARE OUTSTANDING, ALL RIGHTS OF
SUBROGATION (WHETHER CONTRACTUAL, UNDER SECTION 509 OF THE BANKRUPTCY CODE,
UNDER COMMON LAW, OR OTHERWISE) TO THE CLAIMS OF THE GUARANTEED PARTIES AGAINST
THE COMPANY AND ALL CONTRACTUAL, STATUTORY OR COMMON LAW RIGHTS OF CONTRIBUTION,
REIMBURSEMENT, INDEMNIFICATION AND SIMILAR RIGHTS AND "CLAIMS" (AS SUCH TERM IS
DEFINED IN THE BANKRUPTCY CODE) AGAINST THE COMPANY WHICH ARISE IN CONNECTION
WITH, OR AS A RESULT OF, THIS GUARANTEE.
Section 1.10 Continuing Guaranty, Transfer of Notes. This Guaranty
--------------------------------------
is a continuing guaranty and shall (i) remain in full force and effect until
payment in full of the Guaranteed Obligations, (ii) be binding upon the
Guarantor and its successors and permitted assigns; and (iii) inure, together
with the rights and remedies of the Guaranteed Parties hereunder, to the benefit
of the Guaranteed Parties and their respective successors, transferees,
endorsees and assigns. Without limiting the generality foregoing clause (iii),
any Holder may, except as limited by the express terms of the Note Agreement,
assign or otherwise transfer any Note held by it to any other person or entity,
and such other person or entity shall thereupon become vested with all the
benefits in respect thereof granted to such Guaranteed Party herein or
otherwise.
Subordination. Notwithstanding anything to the contrary set forth
-------------
herein, the rights of the Guaranteed Parties hereunder shall be subject to the
terms, covenants and agreements set forth in Section 7 of the Notes, the terms
and conditions of which are incorporated herein by this reference.
SECTION 2. SUBORDINATION OF OTHER OBLIGATIONS. Any indebtedness of any
----------------------------------
Credit Party now or hereafter held by Guarantor is hereby subordinated in right
of payment to the Guaranteed Obligations, and any such indebtedness of any
Credit Party to Guarantor collected or received by Guarantor after an Event of
Default has occurred and is continuing shall be held in trust for the Guaranteed
Parties and shall forthwith be paid over to the Guaranteed Parties ratably
according to the amount owed to each to be credited and applied against the
Guaranteed Obligations but without affecting, impairing or limiting in any
manner the liability of Guarantor under any other provision of this Guaranty.
SECTION 3. REPRESENTATIONS AND COVENANTS. The Guarantor represents and
-----------------------------
warrants that:
-9-
(a) the execution, delivery and performance by the Guarantor of this
Guaranty is within the Guarantor's corporate powers, have been duly authorized
by all necessary corporate action, require no action by or in respect of, or
filing with, any governmental authority and do not contravene, or constitute a
default under, any provision of applicable law or regulation or of the
certificate of incorporation or bylaws of the Guarantor or of any agreement,
judgment, injunction, order, decree or other instrument binding upon the
Guarantor or result in the creation or imposition of any Lien, security interest
or other charge or encumbrance on any asset of the Guarantor; and
(b) this Guaranty constitutes a legal, valid and binding agreement of
the Guarantor, enforceable against the Guarantor in accordance with its terms.
SECTION 4. FURTHER ASSURANCES. The Guarantor agrees, upon the written
------------------
request of the Guaranteed Parties, and at the Guarantor's expense, to execute
and deliver to the Guaranteed Parties, from time to time, any additional
instruments or documents considered necessary by the Guaranteed Parties to cause
this Guaranty to be, become or remain valid and effective in accordance with its
terms.
SECTION 5 MISCELLANEOUS.
-------------
Section 5.1 Amendments. Any amendment or waiver of any provision of
----------
this Guaranty and any consent to any departure by the Guarantor from any
provision of this Guaranty shall be effective only if made or given in writing
by the party against which enforcement is sought.
Section 5.2 Expenses. The Guarantor shall promptly pay to the
--------
Guaranteed Parties, for the ratable benefit of the Guaranteed Parties, the
amount of any and all reasonable out-of-pocket costs and expenses of the
Guaranteed Parties in connection with any matters contemplated by or arising out
of this Guaranty or any of the Credit documents whether (a) to commence, defend,
or intervene in any litigation or to file a petition, complaint, answer, motion
or other pleadings necessary to protect or enforce the rights of the Guaranteed
Parties under this Guaranty or any other Credit Document, (c) to take any other
action in or with respect to any suit or proceeding (bankruptcy or otherwise)
necessary to protect the rights of the Guaranteed Parties under this Guaranty or
any other Credit Document or to respond to any subpoena, deposition or
interrogatory with respect to any litigation involving the Guarantor, or (d) to
attempt to enforce or to enforce any rights of the Guaranteed Parties to collect
any of the Guaranteed Obligations, including all reasonable fees and expenses of
attorneys and paralegals (including charges for inside counsel).
Section 5.3 Headings. The headings in this Guaranty are for purposes
--------
of reference only and shall not otherwise affect the meaning or construction of
any provision of this Guaranty.
Section 5.4 Severability. The provisions of this Guaranty are
------------
severable, and if any clause or provision shall be held invalid or unenforceable
in whole or in part in any jurisdiction, then such invalidity or
unenforceability shall affect in that jurisdiction only such clause or
provision, or part thereof, and shall not in any manner affect such clause or
provision in any other jurisdiction or any other clause or provision of this
Guaranty in any jurisdiction.
Section 5.5 Notices. All notices, requests and other hereunder shall
-------
be in accordance with the provisions of the Note Agreement with notices to
Guarantor to be directed to the address specified for Company therein.
-10-
Section 5.6 Remedies Cumulative. Each right, power and remedy of the
-------------------
Guaranteed Parties provided in this Guaranty or now or hereafter existing at law
or in equity or by statute or otherwise shall be cumulative and concurrent and
shall be in addition to every other right, power or remedy provided for in this
Guaranty or now or hereafter existing at law or in equity or by statute or
otherwise. The exercise or partial exercise by the Guaranteed Parties of any
one or more of such rights, powers or remedies shall not preclude the
simultaneous or later exercise by the Guaranteed Parties of all such other
rights, powers or remedies, and no failure or delay on the part of the
Guaranteed Parties to exercise any such right, power or remedy shall operate as
a waiver thereof.
Section 5.7 Statute of Limitations. To the full extent permitted by
----------------------
applicable law, Guarantor hereby waives the right to plead any statute of
limitations as a defense to performance of its obligations under, or enforcement
of, this Guaranty.
Section 5.8 Final Expression. This Guaranty, together with any other
----------------
agreement executed in connection herewith, is intended by the parties as a final
expression of the Guaranty and is intended as a complete and exclusive statement
of the terms and conditions thereof. Acceptance of or acquiescence in a course
of performance rendered under this Guaranty shall not be relevant to determine
the meaning of this Guaranty even though the accepting or acquiescing party had
knowledge of the nature of the performance and opportunity.
Section 5.9 Financial Status. The Guarantor hereby assumes
----------------
responsibility for keeping itself informed of the financial condition of the
Company and any and all endorsers and/or other guarantors of any instrument or
document evidencing all or any part of the Guaranteed Obligations and of all
other circumstances bearing upon the risk of nonpayment of the Guaranteed
Obligations or any part thereof that diligent inquiry would reveal, and the
Guarantor hereby agrees that the Guaranteed Parties shall have no duty to advise
the Guarantor of information known to the Guaranteed Parties regarding such
condition or any such circumstances. In the event the Guaranteed Parties, in
their discretion, undertake at any time or from time to time to provide any such
information to the undersigned, the Guaranteed Parties shall be under no
obligation (i) to undertake any investigation not a part of their regular
business routine, (ii) to disclose any information which pursuant to accepted or
reasonable commercial lending practices the Guaranteed Parties wish to maintain
confidential, or (iii) to make any other or future disclosures of such
information or any other information to the Guarantor.
Section 5.10 Assignability. This Guaranty shall be binding on the
-------------
Guarantor and its successors and permitted assigns and shall inure to the
benefit of the Guaranteed Parties and their respective successors, transferees,
endorsees and assigns. The Guarantor may not assign this Guaranty.
Section 5.11 Non-Waiver. The failure of the Guaranteed Parties to
----------
exercise any right or remedy hereunder, or promptly to enforce any such right or
remedy, shall not constitute a waiver thereof, nor give rise to any estoppel
against the Guaranteed Parties, nor excuse the Guarantor from its obligations
hereunder.
Section 5.12 Termination. Subject to the provisions of Section 1.8,
-----------
this Guaranty shall terminate upon the receipt by each of the Guaranteed Parties
of the payment (or prepayment) in full of the Guaranteed Obligations and any
other amounts which may be owing hereunder, or the release of the Guarantor by
the Guaranteed Parties, whichever shall occur first. At the time of such
termination, the Guaranteed Parties, at the request and expense of the
Guarantor, will execute and deliver to the Guarantor a proper instrument or
instruments acknowledging the satisfaction and termination of this Guaranty.
-11-
Section 5.13 Counterparts. This Guaranty may be executed in any
------------
number of counterparts and by the different parties hereto on separate
counterparts, each of which, when so executed and delivered, shall be an
original, but all of which shall together constitute one and the same agreement.
Section 5.14 GOVERNING LAW. THE VALIDITY, INTERPRETATION AND
-------------
ENFORCEMENT OF THIS GUARANTEE AND ANY DISPUTE ARISING OUT OF OR IN CONNECTION
WITH THIS GUARANTEE, WHETHER SOUNDING IN CONTRACT, TORT, EQUITY OR OTHERWISE,
SHALL BE GOVERNED BY THE INTERNAL LAWS (AS OPPOSED TO THE CONFLICTS OF LAWS
PROVISIONS) AND DECISIONS OF THE STATE OF CALIFORNIA.
[SIGNATURE PAGE FOLLOWS]
-12-
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered as of the date first above written.
[GUARANTOR],
a _________________ corporation
By:
-----------------------------------
Name:
---------------------------------
Title:
--------------------------------
-13-
