PROMISSORY NOTE
$500,000.00 New York, New York
September 15, 2000
FOR VALUE RECEIVED, the undersigned, LIBERTY PROCESSING & DISTRIBUTION,
INC., a Delaware corporation with an address of 11 52nd Street, Brooklyn, New
York, 11232, (hereinafter referred to as "Maker"), hereby promises to pay to the
order of MARVIN N. RAAB, whose address is 429 Coolidge Road, Cherry Hill, New
Jersey 08002 (hereinafter referred to as "Payee") without defalcation or offset,
the principal sum of FIVE HUNDRED THOUSAND AND 00/100 ($500,000.00) DOLLARS
lawful money in the United States of America, together with interest calculated
at an interest rate as provided hereinafter.
The obligations evidenced by this Note arise pursuant to the terms,
conditions and provisions of that certain Stock Purchase Agreement ("Agreement")
dated September 15, 2000, among Philadelphia Foods, Inc., a New Jersey
Corporation ("Philadelphia Foods"), Maker and Payee for the purchase of the
stock ("Stock") of Philadelphia Foods, which Stock is owned by the Payee. This
Note represents payment for a portion of the cash payment as provided for in the
Agreement. The amount due hereunder shall be due and payable sixty (60) days
from the date hereof. If payment is not made within thirty (30) days of the date
hereof, interest shall accrue on this Note at the rate equal to one (1) point
above the prime rate of Chase Manhattan Bank, N.A. from the 31st day following
the date hereof until all amouts due hereunder are paid in full. All amounts
required to be paid hereunder shall be payable to Payee or his assigns or
designees at 429 Coolidge Road, Cherry Hill, New Jersey, 08002, or at such other
place as Payee may from time to time designate in writing. In the event Closing
(as defined in the Agreement) of the sale of the Stock is held on or before
November 15, 2000, and all amounts due to Payee under this Note are paid in
full, this Note shall automatically be cancelled and of no further force and
effect.
Concurrently with the execution of this Note, Maker is executing an
additional note in the amount of One Million Five Hundred Thousand
($1,500,000.00) Dollars ("Second Deposit Note") for payment of the balance of
the cash payment due under the terms of the Agreement.
As security for the payments due hereunder, Maker is providing an
Irrevocable Letter of Credit in the amount of Five Hundred Thousand
($500,000.00) Dollars ("LOC"), drawn on a bank ("Bank"), which is to be obtained
by September 22, 2000. If the entire outstanding principal balance and interest
is not paid within sixty (60) days of the date hereof, Payee shall have the
right to present the LOC to the Bank for payment in full upon presentation to
the Bank of written statement executed by the Payee that the Maker has not paid
the Note in full within such sixty (60) days or that another Event of Default
has occurred.
Alternatively, as security for the payments due hereunder in the
event the LOC is not obtained by September 22, 2000, then, as security for this
Note, Maker's parent company, Liberty Group Holdings, Inc., ("LGHI"), and
Liberty Food Group, LLC, a company owned by LGHI ("LFG") have pledged all of
their respective inventories and receivables pursuant to the terms of Security
Agreements and UCC-1 Financing Statements (collectively referred to as "Security
Agreements") dated even date herewith. Payee shall have a second security
position on the aforementioned assets of LGHI and LFG, second only to a debt of
LFG to SUAN INVESTMENTS in a principal amount of One Hundred Fifty Thousand
($150,000.00) Dollars and interest accruing thereon from April, 2000. If the
entire outstanding principal balance and interest is not paid within sixty (60)
days of the date hereof, Payee shall have the right to enforce all of its rights
under the Security Agreements.
The Note and Security Agreements shall sometimes hereinafter be
collectively referred to as the "Related Documents".
Notwithstanding anything contained herein to the contrary, in any
action commenced to enforce the obligations of the Maker created or arising
hereunder, the judgment shall not be enforceable against any assets of the Maker
other than the Collateral covered by the Security Agreement. Recourse for any
violation or breach of the terms of this Note or the Security Agreements shall
only be against the Collateral and any such judgment shall not be subject to
execution on, nor be a lien on, any other assets of the Maker or the Maker
itself. LGHI and LFG have represented to Payee that the value of the Collateral
is sufficient to cover the obligations under this Note. All of the agreements,
conditions, covenants, provisions and stipulations contained in the Related
Documents are to be kept and performed by Maker, and are hereby made a part of
this Note to the same extent and with the same force and effect as if they were
fully set forth herein, and the Maker covenants and agrees to keep and perform
them, or cause them to be kept and performed, strictly in accordance with their
terms.
Maker shall have the privilege of pre-paying any sums due under this
Note in whole or in part, at any time and from time to time, without premium or
penalty; provided, however, that such prepayment shall be accompanied by payment
of all accrued interest on the outstanding principal balance then due and owing
under this Note.
Each of the following is an "Event of Default" under this Note:
(a) If Maker fails to make payment in full of the
outstanding principal and interest under this Note within sixty (60) days of the
date of this Note.
(b) If (i) LGHI and/or LFG fails to deliver the Security
Agreements by September 22, 2000, if the LOC is not obtained; or if (ii) Payee's
security interest as aforementioned is not a second position on the inventory
and accounts receivable of LGHI and LFG; or if (iii) the amounts owed by LGHI
and LFG to SUAN INVESTMENT exceeds the principal amount of One Hundred Fifty
Thousand ($150,000.00) Dollars and interest accruing thereon from April, 2000.
(c) The commencement of levy, execution or attachment
proceedings against Maker or any of its property, or the application for or
appointment of a liquidator, receiver, custodian, sequestrator, conservator,
trustee or other similar judicial officer (and such action commenced against
Maker continues for a period of thirty (30) days).
(d) The assignment for the benefit of creditors or the
admission in writing of any inability to pay any debts generally as they become
due, or the ordering the winding-up or liquidation of affairs by Maker.
(e) The commencement of a case by or against Maker under any
insolvency, bankruptcy, creditor adjustment, debtor rehabilitation or similar
proceeding, State or Federal (and such action commenced against Maker shall
continue for thirty (30) days, including without limitation the consent by Maker
to the appointment of or taking possession by a receiver, liquidator, assignee,
trustee, custodian, sequestrator or similar official for Maker or for any of
Maker's property or assets.
If any Event of Default occurs hereunder, the entire outstanding
principal indebtedness evidenced hereby, together with all arrearages of
interest hereon and other sums due hereunder, at the option of Payee, shall
become due and payable immediately, without presentation, demand or further
action and execution may forthwith issue for the collection of same, including
reasonable attorneys' fees and all other sums due by Maker hereunder. In such
case, Payee may also recover all costs of suit and other expenses in connection
therewith.
The remedies of Payee as provided hereunder and the warranties
contained herein shall be cumulative and concurrent, and may be pursued singly,
successively, or together at the sole discretion of Payee, and may be exercised
as often as occasion therefore shall occur; and the failure to exercise any such
right or remedy shall in no event be construed as a waiver or release thereof.
Maker hereby waives and releases all errors, defects and
imperfections in any proceedings by Payee under the terms of this Note as well
as all benefit that might accrue to Maker by virtue of any present or future
laws exempting personal property or any part of the proceeds arising from any
sale of such property, from attachment, levy, sale under execution, or providing
for any stay of execution, exemption from civil process or extension of time for
payment; and Maker agrees that any personal property that may be levied upon
pursuant to a judgment obtained by virtue hereof on any writ of execution issued
thereon may be sold upon any such writ in whole or in part in any order desired
by Payee.
Maker and all endorsers, sureties and other guarantors, hereby
jointly and severally waive presentation for payment, demand, notice of demand,
notice of nonpayment or dishonor, protest and notice of protest of this Note,
they agree that the liability of each of them shall be joint and several and
unconditional, without regard to the liability of any other party, and shall not
be affected in any manner by any indulgence, extension of time, renewal, waiver
or modification granted or consented to by Payee. Maker and all endorsers,
sureties and guarantors consent to any and all extensions of time, renewals,
waivers, or modifications that may be granted by Payee with respect to the
payment or other provisions of this Note, and to the release of any collateral
or any part hereof, with or without substitution, and agree that additional
makers, endorsers, guarantors or sureties may become parties hereto without
notice to them or affecting their liability hereunder.
Payee shall not be deemed, by any act of omission or commission, to
have waived any of its rights or remedies hereunder unless such waiver is in
writing and signed by Payee, and then only to the extent specifically set forth
in writing. A waiver on one event shall not be construed as continuing or as a
bar to or waiver of any right or remedy to a subsequent event.
Maker shall pay the cost of any revenue tax or other stamps now or
hereafter required by law at any time to be affixed to this Note.
Whenever used, the singular number shall include the plural and the
plural the singular, the use of any gender shall be applicable to all genders,
and the words "Payee" and "Maker" shall be deemed to include the respective
heirs, personal representatives, successors and assigns of Payee and Maker.
All notices required to be given shall be effectively given only if
in writing and sent by certified mail, return receipt requested, postage
prepaid, and addressed to the party entitled to receive the same at the address
specified on the first page of this Note or at such other address as may be
directed or by personal notice or by such party or by telefax. All notices sent
by mail shall be deemed given and received on the first mail delivery date after
such mailing. All notices given by telefax shall be deemed given and received on
the date the telefax is sent.
Nothing herein contained, nor any transaction related hereto, shall
be construed or so operate as to require Maker, or any other person liable for
repayment of same, to pay interest at a greater rate than is lawful in such case
to contract for, or to make payment, or to do any act contrary to law. Should
any interest or other charges paid by Maker, or parties liable for the payment
of this Note, result in the computation or earning of interest in excess of the
maximum rate of interest which is legally permitted under the laws of the
applicable jurisdiction, then any and all excess shall be and the same is hereby
waived by Payee, and any and all such excess automatically shall be credited
against and in reduction of the balance due under this Note, but such crediting
shall not cure or waive the default occasioning acceleration, and the portion of
said excess which exceeds the balance due under the Note shall be paid by Payee
to Maker and other parties liable for the payment of this Note. If any clause or
provision herein contained shall be unenforceable under applicable law, in whole
or in part, then only such clause or provision or part thereof shall be held
void as though not contained herein and the remainder of this Note shall remain
operative and in full force and effect.
This Note shall be governed by and construed in accordance with the Laws
of the State of New York and the Courts of New York, or the Federal District
Court in New York, shall have jurisdiction for enforcement of this Note.
IN WITNESS WHEREOF, Maker has caused these presents to be duly
executed the day and year first above written.
LIBERTY PROCESSING AND
DISTRIBUTION, INC.,
a Delaware Corporation
By:__________________________
, President