EXHIBIT 10.2
SECURITY AGREEMENT
SECURITY AGREEMENT dated as of June 16, 2005 (this "Agreement"), made
by the Borrowers and each of the Guarantors referred to below (each a "Grantor"
and, collectively, the "Grantors"), in favor of Fortress Credit Corp., a
Delaware corporation, in its capacity as agent (in such capacity, together with
any successor in such capacity, the "Agent") on behalf of itself and the Lenders
referred to below.
W I T N E S S E T H:
WHEREAS, North Atlantic Holding Company, Inc., a Delaware corporation
(the "Parent"), North Atlantic Trading Company, Inc., a Delaware corporation
("NATC"), National Tobacco Company, L.P., a Delaware limited partnership
("NTC"), North Atlantic Operating Company, Inc., a Delaware corporation
("NAOC"), North Atlantic Cigarette Company, Inc., a Delaware corporation
("NACC"), National Tobacco Finance Corporation, a Delaware corporation ("NTFC"),
RBJ Sales, Inc., a Tennessee corporation ("RB"), Xxxx Xxxxxx & Sons, Inc., a
Tennessee corporation ("Xxxx Xxxxxx") and Xxxxxx, Inc., a Tennessee corporation
("Xxxxxx" and together with NATC, NTC, NAOC, NACC, NTFC, RB and Xxxx Xxxxxx,
each a "Borrower" and collectively, the "Borrowers"), each subsidiary of the
Parent listed as a "Guarantor" on the signature pages thereto (together with the
Parent and each other Person that executes a joinder agreement and becomes a
"Guarantor" hereunder or otherwise guaranties all or any part of the Obligations
(as hereinafter defined), each a "Guarantor" and collectively, the
"Guarantors"), the financial institutions from time to time party thereto as
lenders (each a "Lender" and collectively, the "Lenders"), and the Agent are
parties to the Financing Agreement, dated as of the date hereof (such agreement,
as amended, restated, supplemented or otherwise modified from time to time,
being hereinafter referred to as the "Financing Agreement");
WHEREAS, pursuant to the Financing Agreement the Lenders have agreed
to make certain term loans and certain revolving loans, which will include a
subfacility for the issuance of letters of credit (each a "Loan" and
collectively, the "Loans") to the Borrowers in an aggregate principal amount at
any one time outstanding not to exceed the Total Commitment (as defined in the
Financing Agreement);
WHEREAS, it is a condition precedent to the making of any Loan and
issuing any Letter of Credit to the Borrowers pursuant to the Financing
Agreement that each Grantor shall have executed and delivered to the Agent this
Agreement;
WHEREAS, the Grantors are mutually dependent on each other in the
conduct of their respective businesses as an integrated operation, with the
credit needed from time to time by each Grantor often being provided through
financing obtained by the other Grantors and the ability to obtain such
financing being dependent on the successful operations of all of the Grantors as
a whole; and
WHEREAS, each Grantor has determined that the execution, delivery and
performance of this Agreement directly benefit, and are in the best interest of,
such Grantor;
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Lenders to make and maintain the Loans and
issue the Letters of Credit to the Borrowers pursuant to the Financing
Agreement, each Grantor hereby jointly and severally agrees with the Agent, for
the benefit of the Agent, the Lenders and the L/C Issuer as follows:
SECTION 1. Definitions.
(a) Reference is hereby made to the Financing Agreement for a
statement of the terms thereof. All terms used in this Agreement and the
recitals hereto which are defined in the Financing Agreement or in Article 9 of
the Uniform Commercial Code (the "Code") as in effect from time to time in the
State of New York and which are not otherwise defined herein shall have the same
meanings herein as set forth therein; provided that terms used herein which are
defined in the Code as in effect in the State of New York on the date hereof
shall continue to have the same meaning notwithstanding any replacement or
amendment of such statute except as the Agent may otherwise determine.
(b) The following terms shall have the respective meanings provided
for in the Code: "Accounts", "Cash Proceeds", "Chattel Paper", "Commercial Tort
Claim", "Commodity Account", "Commodity Contracts", "Deposit Account",
"Documents", "Equipment", "Fixtures", "General Intangibles", "Goods",
"Instruments", "Inventory", "Investment Property", "Letter-of-Credit Rights",
"Noncash Proceeds", "Payment Intangibles", "Proceeds", "Promissory Notes",
"Record", "Security Account", "Software", and "Supporting Obligations".
(c) As used in this Agreement, the following terms shall have the
respective meanings indicated below, such meanings to be applicable equally to
both the singular and plural forms of such terms:
"Copyright Licenses" means all licenses, whether written or oral,
naming any Grantor as licensee or licensor and providing for the grant of any
right to use or sell any works covered by any copyright (including, without
limitation, all Copyright Licenses set forth in Schedule II hereto).
"Copyrights" means all domestic and foreign copyrights, whether
registered or unregistered, including, without limitation, all copyright rights
throughout the universe (whether now or hereafter arising) in any and all media
(whether now or hereafter developed), in and to all original works of authorship
fixed in any tangible medium of expression, owned by any Grantor (including,
without limitation, all copyrights described in Schedule II hereto), all
applications, registrations and recordings thereof (including, without
limitation, applications, registrations and recordings in the United States
Copyright Office or in any similar office or agency of the United States or any
other country or any political subdivision thereof), and all reissues, renewals,
restorations, extensions or revisions thereof.
"Intellectual Property" means the Copyrights, Trademarks and Patents.
"Licenses" means the Copyright Licenses, the Trademark Licenses and
the Patent Licenses.
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"Patent Licenses" means all licenses, whether written or oral, naming
any Grantor as licensee or licensor and providing for the grant of any right to
manufacture, use or sell any invention covered by any Patent (including, without
limitation, all Patent Licenses set forth in Schedule II hereto).
"Patents" means all domestic and foreign letters patent, design
patents, utility patents, industrial designs, inventions, trade secrets, ideas,
concepts, methods, techniques, processes, proprietary information, technology,
know-how, formulae, rights of publicity and other general intangibles of like
nature, now existing or hereafter acquired (including, without limitation, all
domestic and foreign letters patent, design patents, utility patents, industrial
designs, inventions, trade secrets, ideas, concepts, methods, techniques,
processes, proprietary information, technology, know-how and formulae described
in Schedule II hereto), all applications, registrations and recordings thereof
(including, without limitation, applications, registrations and recordings in
the United States Patent and Trademark Office, or in any similar office or
agency of the United States or any other country or any political subdivision
thereof), and all reissues, divisions, continuations, continuations in part and
extensions or renewals thereof.
"Trademark Licenses" means all licenses, whether written or oral,
naming any Grantor as licensor or licensee and providing for the grant of any
right concerning any Trademark, and the right to prepare for sale or lease and
sell or lease any and all Inventory now or hereafter owned by any Grantor and
now or hereafter covered by such licenses (including, without limitation, all
Trademark Licenses described in Schedule II hereto).
"Trademarks" means all domestic and foreign trademarks, service
marks, collective marks, certification marks, trade names, business names,
d/b/a's, Internet domain names, trade styles, designs, logos and other source or
business identifiers and all general intangibles of like nature, now or
hereafter owned, adopted, acquired or used by any Grantor (including, without
limitation, all domestic and foreign trademarks, service marks, collective
marks, certification marks, trade names, business names, d/b/a's, Internet
domain names, trade styles, designs, logos and other source or business
identifiers described in Schedule II hereto), all applications, registrations
and recordings thereof (including, without limitation, applications,
registrations and recordings in the United States Patent and Trademark Office or
in any similar office or agency of the United States, any state thereof or any
other country or any political subdivision thereof), and all reissues,
extensions or renewals thereof, together with all goodwill of the business
symbolized by such marks and all customer lists, formulae and other Records of
any Grantor relating to the distribution of products and services in connection
with which any of such marks are used.
SECTION 2. Grant of Security Interest. As collateral security for all
of the Obligations (as defined in Section 3 hereof), each Grantor hereby pledges
and assigns to the Agent, and grants to the Agent for the benefit of the Agent
and the Lenders a continuing security interest in, all personal property of such
Grantor, wherever located and whether now or hereafter existing and whether now
owned or hereafter acquired, of every kind and description, tangible or
intangible (the "Collateral"), including, without limitation, the following:
(a) all Accounts;
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(b) all Chattel Paper (whether tangible or electronic);
(c) the Commercial Tort Claims specified on Schedule VI hereto;
(d) all Deposit Accounts, all cash, and all other property from time
to time deposited therein and the monies and property in the possession or under
the control of the Agent or any Lender or any affiliate, representative, agent
or correspondent of the Agent or any Lender;
(e) all Documents;
(f) all Equipment;
(g) all Fixtures;
(h) all General Intangibles (including, without limitation, all
Payment Intangibles);
(i) all Goods;
(j) all Instruments (including, without limitation, Promissory
Notes);
(k) all Inventory;
(l) all Investment Property;
(m) all Copyrights, Patents and Trademarks, and all Licenses;
(n) all Letter-of-Credit Rights;
(o) all Supporting Obligations;
(p) all other tangible and intangible personal property of such
Grantor (whether or not subject to the Code), including, without limitation, all
bank and other accounts and all cash and all investments therein, all proceeds,
products, offspring, accessions, rents, profits, income, benefits, substitutions
and replacements of and to any of the property of such Grantor described in the
preceding clauses of this Section 2 (including, without limitation, any proceeds
of insurance thereon and all causes of action, claims and warranties now or
hereafter held by such Grantor in respect of any of the items listed above), and
all books, correspondence, files and other Records, including, without
limitation, all tapes, disks, cards, Software, data and computer programs in the
possession of or under the control of such Grantor or any other Person from time
to time acting for such Grantor that at any time evidence or contain information
relating to any of the property described in the preceding clauses of this
Section 2 or are otherwise necessary or helpful in the collection or realization
thereof; and
(q) all Proceeds, including all Cash Proceeds and Noncash Proceeds,
and products of any and all of the foregoing Collateral;
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in each case howsoever such Grantor's interest therein may arise or appear
(whether by ownership, security interest, claim or otherwise). Notwithstanding
anything contained in this Agreement to the contrary, in no event shall the
Collateral include, and no Grantor shall be deemed to have granted a security
interest in, any of such Grantor's right, title or interest in any license,
contract or agreement to which such Grantor is a party as of the date hereof or
any of its right, title or interest thereunder to the extent, but only to the
extent, that such a grant would, under the terms of such license, contract or
agreement on the date hereof result in a breach of the terms of, or constitute a
default under, such license, contract or agreement (other than to the extent
that any such term (x) has been waived or (y) would be rendered ineffective
pursuant to Sections 9-406, 9-408, 9-409 or other applicable provisions of the
Code of any relevant jurisdiction or any other applicable law (including the
Bankruptcy Code) or principles of equity); provided, that (A) immediately upon
the ineffectiveness, lapse or termination of any such provision, the Collateral
shall include, and such Grantor shall be deemed to have granted a security
interest in, all such right, title and interest as if such provision had never
been in effect and (B) the foregoing exclusion shall in no way be construed so
as to limit, impair or otherwise affect the Agent's unconditional continuing
security interest in and liens upon any rights or interests of the Grantor in or
to monies due or to become due under any such license, contract or agreement.
SECTION 3. Security for Obligations. The security interest created
hereby in the Collateral constitutes continuing collateral security for all of
the following obligations, whether now existing or hereafter incurred (the
"Obligations"):
(a) the prompt payment by each Grantor, as and when due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise), of all amounts from time to time owing by it in respect of the
Financing Agreement and the other Loan Documents, including, without limitation,
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(i) all principal of and interest on the Loans (including, without limitation,
all interest that accrues after the commencement of any Insolvency Proceeding of
any Grantor, whether or not the payment of such interest is unenforceable or is
not allowable due to the existence of such Insolvency Proceeding), (ii) all
Letter of Credit Obligations, (iii) in the case of a Guarantor, all amounts from
time to time owing by such Grantor in respect of its guaranty made pursuant to
Article XI of the Financing Agreement or under any other Guaranty to which it is
a party, including all obligations under the Financing Agreement or any other
Loan Documents guaranteed by such Grantor and (iv) all fees, commissions,
expense reimbursements, indemnifications and all other amounts due or to become
due under any Loan Document; and
(b) the due performance and observance by each Grantor of all of its
other obligations from time to time existing in respect of the Loan Documents.
SECTION 4. Representations and Warranties. Each Grantor jointly and
severally represents and warrants as follows:
(a) Schedule I hereto sets forth (i) the exact legal name of each
Grantor and (ii) the organizational identification number of each Grantor or
states that no such organizational identification number exists.
(b) Each Grantor (i) is a corporation, limited liability company or
limited partnership duly organized, validly existing and in good standing under
the laws of the state or jurisdiction of its organization as set forth on
Schedule I hereto, (ii) has all requisite power and authority to execute,
deliver and perform this Agreement and each other Loan Document to be executed
and delivered by it pursuant hereto and to consummate the transactions
contemplated hereby and thereby, and (iii) is duly qualified to do business and
is in good standing in each jurisdiction in which the character of the
properties owned or leased by it or in which the transaction of its business
makes such qualification necessary.
(c) The execution, delivery and performance by each Grantor of this
Agreement and each other Loan Document to which such Grantor is a party or will
be a party (i) have been duly authorized by all necessary action of such
Grantor, (ii) do not and will not contravene its charter or by-laws, its limited
liability company or operating agreement or its certificate of partnership or
partnership agreement, as applicable, or any applicable law or any contractual
restriction binding on or otherwise affecting such Grantor or its properties,
(iii) do not and will not result in or require the creation of any Lien upon or
with respect to any of its properties other than pursuant to any Loan Document
and (iv) do not and will not result in any default, noncompliance, suspension,
revocation, impairment, forfeiture or nonrenewal of any permit, license,
authorization or approval applicable to it or its operations or any of its
properties.
(d) This Agreement is, and each other Loan Document to which any
Grantor is or will be a party, when executed and delivered pursuant hereto, will
be, a legal, valid and binding obligation of such Grantor, enforceable against
such Grantor in accordance with its terms, except as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws.
(e) Except as set forth on Schedule 6.01(f) of the Financing
Agreement, there is no pending or, to the knowledge of any Grantor, threatened
action, suit, proceeding or claim affecting any Grantor or to which any of the
properties of any Grantor is subject, before any Governmental Authority or any
arbitrator, or any order, judgment or award by any Governmental Authority or
arbitrator, that may adversely affect the grant by any Grantor, or the
perfection, of the security interest purported to be created hereby in the
Collateral, or the exercise by the Agent of any of its rights or remedies
hereunder.
(f) All taxes, assessments and other governmental charges imposed
upon any Grantor or any property of such Grantor (including, without limitation,
all federal income and social security taxes on employees' wages) and which have
become due and payable on or prior to the date hereof have been paid, except to
the extent contested in good faith by proper proceedings which stay the
imposition of any penalty, fine or Lien resulting from the non-payment thereof
and with respect to which adequate reserves have been set aside for the payment
thereof on the Financial Statements in accordance with GAAP.
(g) All Equipment, Fixtures, Goods and Inventory (except for
Inventory in transit) now existing are, and all Equipment, Fixtures, Goods and
Inventory (except for Inventory in transit) hereafter existing will be, located
at the addresses specified therefor in Schedule III hereto. Each Grantor's chief
place of business and chief executive office, the place where such Grantor keeps
its Records concerning Accounts and all originals of all Chattel Paper are
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located at the addresses specified therefor in Schedule III hereto. None of the
Accounts is evidenced by Promissory Notes or other Instruments. Set forth in
Schedule IV hereto is a complete and accurate list, as of the date of this
Agreement, of each Deposit Account, Securities Account and Commodities Account
of each Grantor, together with the name and address of each institution at which
each such Account is maintained, the account number for each such Account and a
description of the purpose of each such Account. Set forth in Schedule II hereto
is a complete and correct list of each trade name used by each Grantor and the
name of, and each trade name used by, each person from which such Grantor has
acquired any substantial part of the Collateral.
(h) Each Grantor has delivered to the Agent complete and correct
copies of each License described in Schedule II hereto, including all schedules
and exhibits thereto, which represents all of the Licenses existing on the date
of this Agreement. Each such License sets forth the entire agreement and
understanding of the parties thereto relating to the subject matter thereof, and
there are no other agreements, arrangements or understandings, written or oral,
relating to the matters covered thereby or the rights of any Grantor or any of
its affiliates in respect thereof. To the knowledge of such Grantor, each
License now existing is, and each other License will be, the legal, valid and
binding obligation of the parties thereto, enforceable against such parties in
accordance with its terms except as may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws. No default
thereunder by any such party has occurred, nor does any defense, offset,
deduction or counterclaim exist thereunder in favor of any such party.
(i) The Grantors own and control, intends to use or otherwise
possesses adequate rights to use, all Trademarks, Patents and Copyrights, which
are the only trademarks, patents, copyrights, inventions, trade secrets,
proprietary information and technology, know-how, formulae, rights of publicity
necessary to conduct its business in substantially the same manner as conducted
as of the date hereof. Schedule II hereto sets forth a true and complete list of
all material Intellectual Property and Licenses owned or used by each Grantor as
of the date hereof provided, that each Grantor uses a variety of items in the
ordinary course of its businesses that are included within the term Intellectual
Property, as defined herein, that are not the subject of registration and
otherwise are not subject to ready identification. All Intellectual Property
listed on Schedule II is subsisting and in full force and effect, has not been
adjudged invalid or unenforceable, and has not been abandoned in whole or in
part. Except as set forth in Schedule II, no such Intellectual Property is the
subject of any licensing or franchising agreement. Except as set forth on
Schedule 6.01(w) of the Financing Agreement, no Grantor has any knowledge of any
conflict with the rights of others to any Intellectual Property and, to the
knowledge of each Grantor and no Grantor is now infringing or in conflict with
any such rights of others in any material respect. No Grantor has received any
unresolved notice that it is violating or has violated the trademarks, patents,
copyrights, inventions, trade secrets, proprietary information and technology,
know-how, formulae, rights of publicity or other intellectual property rights of
any third party.
(j) The Grantors are, and prior to the Disposition thereof to the
extent permitted by any Loan Document, will be at all times the sole and
exclusive owners of, or otherwise have and will have adequate rights in, the
Collateral free and clear of any Lien except for (i) the Lien created by this
Agreement and (ii) the Permitted Liens. No effective financing statement or
other instrument similar in effect covering all or any part of the Collateral is
on file in any recording or filing office except (A) such as may have been filed
in favor of the Agent relating to this Agreement and (B) such as may have been
filed to perfect or protect any security interests relating to Permitted Liens
or other Liens permitted by the Financing Agreement.
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(k) The exercise by the Agent of any of its rights and remedies in
accordance with the terms of this Agreement will not contravene any law or any
contractual restriction binding on or otherwise affecting any Grantor or any of
its properties and will not result in or require the creation of any Lien, upon
or with respect to any of its properties other than pursuant to or as permitted
by this Agreement or the other Loan Documents.
(l) No authorization or approval or other action by, and no notice to
or filing with, any Governmental Authority or other regulatory body, or any
other Person, is required for (i) the grant by any Grantor, or the perfection,
of the security interest purported to be created hereby in the Collateral or
(ii) the exercise by the Agent of any of its rights and remedies hereunder,
except (A) for the filing under the Uniform Commercial Code as in effect in the
applicable jurisdiction of the financing statements described in Schedule V
hereto, all of which financing statements have been duly filed and are in full
force and effect, (B) with respect to the perfection of the security interest
created hereby in the United States Intellectual Property, for the recording of
the appropriate Assignment for Security, substantially in the form of Exhibit A
hereto in the United States Patent and Trademark Office or the United States
Copyright Office, as applicable, (C) with respect to the perfection of the
security interest created hereby in foreign Intellectual Property and Licenses,
for registrations and filings in jurisdictions located outside of the United
States and covering rights in such jurisdictions relating to the Intellectual
Property and Licenses, (D) with respect to the perfection of the security
interest created hereby in motor vehicles for which the title to such motor
vehicles is governed by a certificate of title or ownership (collectively, the
"Motor Vehicles"), for the submission of an appropriate application requesting
that the Lien of the Agent be noted on the certificate of title or ownership,
completed and authenticated by the applicable Grantor, together with the
certificate of title, with respect to each Motor Vehicle, to the appropriate
state agency, (E) with respect to any action that may be necessary to obtain
control in Collateral described in Sections 5(i) and 5(k) hereof, the taking of
such action and (F) the taking possession of all Documents, Chattel Paper,
Instruments and cash constituting Collateral.
(m) This Agreement creates in favor of the Agent a legal, valid and
enforceable security interest in the Collateral, as security for the
Obligations. The Agent's having possession of all Instruments, Documents,
Chattel Paper and cash constituting Collateral and obtaining control of all
Collateral described in Sections 5(i) and 5(k) hereof from time to time, the
recording of the appropriate Assignment for Security executed pursuant hereto in
the United States Patent and Trademark Office and the United States Copyright
Office, as applicable, the submission of an appropriate application requesting
that the Lien of the Agent be noted on the certificate of title or ownership,
completed and authenticated by the applicable Grantor, together with the
certificate of title or ownership, with respect to such Motor Vehicles, to the
applicable state agency, and the filing of the financing statements described in
Schedule V hereto and, with respect to the Intellectual Property hereafter
existing and not covered by an appropriate Assignment for Security, the
recording in the United States Patent and Trademark Office or the United States
Copyright Office, as applicable, of appropriate instruments of assignment,
result in the perfection of such security interests. Such security interests
are, or in the case of Collateral in which any Grantor obtains rights after the
date hereof, will be, perfected, first priority security interests, subject only
to the Permitted Liens and the recording of such instruments of assignment. Such
recordings and filings and all other action necessary or desirable to perfect
and protect such security interest have been duly taken, except for (i) the
Agent's having possession of Instruments, Documents, Chattel Paper and cash
constituting Collateral after the date hereof, (ii) the Agent obtaining control
of any Collateral described in Sections 5(i) and 5(k) hereof and (iii) the other
filings and recordations described in Section 4(l) hereof.
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(n) No Grantor holds any Commercial Tort Claims or is aware of any
such pending claims, except for such claims described in Schedule VI.
SECTION 5. Covenants as to the Collateral. So long as any of the
Obligations shall remain outstanding and all Commitments shall not have expired
or terminated, unless the Agent shall otherwise consent in writing:
(a) Further Assurances. Each Grantor will at its expense, at any time
and from time to time, promptly execute and deliver all further instruments and
documents and take all further action that may be necessary or desirable or that
the Agent may reasonably request in order to (i) perfect and protect the
security interest purported to be created hereby; (ii) enable the Agent to
exercise and enforce its rights and remedies hereunder in respect of the
Collateral; or (iii) otherwise effect the purposes of this Agreement, including,
without limitation: (A) marking conspicuously all Chattel Paper and each License
and, at the reasonable request of the Agent, each of its Records pertaining to
the Collateral with a legend, in form and substance reasonably satisfactory to
the Agent, indicating that such Chattel Paper, License or Collateral is subject
to the security interest created hereby, (B) if any Account shall be evidenced
by Promissory Notes (excluding each of the four Promissory Notes issued in favor
of NATC as listed on Schedule 7.02(e) to the Financing Agreement) or other
Instruments or Chattel Paper representing an Indebtedness of $100,000 or more,
delivering and pledging to the Agent hereunder such Promissory Notes,
Instruments or Chattel Paper, duly endorsed and accompanied by executed
instruments of transfer or assignment, all in form and substance reasonably
satisfactory to the Agent, (C) executing and filing (to the extent, if any, that
such Grantor's signature is required thereon) or authenticating the filing of,
such financing or continuation statements, or amendments thereto, as may be
necessary or desirable or that the Agent may reasonably request in order to
perfect and preserve the security interest purported to be created hereby, (D)
furnishing to the Agent from time to time statements and schedules further
identifying and describing the Collateral and such other reports in connection
with the Collateral as the Agent may reasonably request, all in reasonable
detail, (E) if any Collateral in excess of $1,000,000 (when aggregated with all
other Collateral at the same location) shall be in the possession of a third
party, notifying such Person of the Agent's security interest created hereby and
use commercially reasonable efforts to obtain a written acknowledgment from such
Person that such Person holds possession of the Collateral for the benefit of
the Agent, which such written acknowledgement shall be in form and substance
satisfactory to the Agent, (F) if at any time after the date hereof, any Grantor
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acquires or holds any Commercial Tort Claim, immediately notifying the Agent in
a writing signed by such Grantor setting forth a brief description of such
Commercial Tort Claim and granting to the Agent a security interest therein and
in the proceeds thereof, which writing shall incorporate the provisions hereof
and shall be in form and substance reasonably satisfactory to the Agent, (G) if
requested by Agent after the occurrence or during the continuance of an Event of
Default, causing the Agent to be listed as the lienholder, for the benefit of
the Agent and the Lenders, on each certificate of title or ownership with
respect to each Motor Vehicle or other item of Equipment subject to a
certificate of title or ownership (other than a Motor Vehicle or item of
Equipment that is subject to a purchase money security interest permitted by
Section 7.02(a) of the Financing Agreement) and within 45 days of such request
deliver evidence of the same to the Agent and (H) taking all actions required by
any earlier versions of the Uniform Commercial Code or by other law, as
applicable, in any relevant Uniform Commercial Code jurisdiction, or by other
law as applicable in any foreign jurisdiction.
(b) Location of Equipment and Inventory. Each Grantor will keep the
Equipment and Inventory (other than used Equipment and Inventory sold in the
ordinary course of business in accordance with this Agreement and Section
7.02(c) of the Financing Agreement) at the locations specified therefor in
Section 4(g) hereof or, upon not less than 30 days' prior written notice to the
Agent accompanied by a new Schedule III indicating each new location of the
Equipment and Inventory, at such other locations in the continental United
States as the Grantors may elect, provided that (i) all action has been taken to
grant to the Agent a perfected, first priority security interest in such
Equipment and Inventory (subject only to Permitted Liens), and (ii) the Agent's
rights in such Equipment and Inventory, including, without limitation, the
existence, perfection and priority of the security interest created hereby in
such Equipment and Inventory, are not adversely affected thereby.
(c) Condition of Equipment. Each Grantor will maintain or cause the
Equipment to be maintained and preserved in good condition, repair and working
order and in accordance with any manufacturer's manual, ordinary wear and tear
excepted, and will forthwith, or in the case of any loss or damage to any
Equipment as quickly as practicable after the occurrence thereof, make or cause
to be made all repairs, replacements and other improvements in connection
therewith which are necessary or desirable, consistent with past practice, or
which the Agent may request to such end. Each Grantor will promptly furnish to
the Agent a statement describing in reasonable detail any loss or damage in
excess of $100,000 to any Equipment.
(d) Taxes, Etc. Each Grantor jointly and severally agrees to pay
promptly when due all property and other taxes, assessments and governmental
charges or levies imposed upon, and all claims (including claims for labor,
materials and supplies) against, the Equipment and Inventory, except to the
extent the validity thereof is being contested in good faith by proper
proceedings which stay the imposition of any penalty, fine or Lien resulting
from the non-payment thereof and with respect to which adequate reserves in
accordance with GAAP have been set aside for the payment thereof.
(e) Insurance.
(i) In accordance with Section 7.01(h) of the Financing
Agreement, each Grantor will, at its own expense, maintain insurance (including,
without limitation, comprehensive general liability and property insurance) with
respect to the Equipment and Inventory in such amounts, against such risks, in
such form and with responsible and reputable insurance companies or associations
as is required by any Governmental Authority having jurisdiction with respect
thereto or as is carried generally in accordance with sound business practice by
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companies in similar businesses similarly situated and in any event, in amount,
adequacy and scope reasonably satisfactory to the Agent. Each policy for
liability insurance shall provide for all losses to be paid on behalf of the
Agent and the Grantors as their respective interests may appear, and each policy
for property damage insurance shall provide for all losses (except for losses of
less than $50,000 per occurrence) to be adjusted with, and paid directly to, the
Agent. Each such policy shall in addition (A) name each Grantor and the Agent as
insured parties thereunder (without any representation or warranty by or
obligation upon the Agent) as their interests may appear, (B) contain an
agreement by the insurer that any loss thereunder shall be payable to the Agent
on its own account notwithstanding any action, inaction or breach of
representation or warranty by any Grantor, (C) provide that there shall be no
recourse against the Agent for payment of premiums or other amounts with respect
thereto and (D) provide that at least 30 days' prior written notice of
cancellation, lapse, expiration or other adverse change shall be given to the
Agent by the insurer. Each Grantor will, if so requested by the Agent, deliver
to the Agent original or duplicate policies of such insurance and, as often as
the Agent may reasonably request, a report of a reputable insurance broker with
respect to such insurance. Upon the occurrence and during the continuance of an
Event of Default, each Grantor will also, at the request of the Agent, execute
and deliver instruments of assignment of such insurance policies and cause the
respective insurers to acknowledge notice of such assignment.
(ii) Reimbursement under any liability insurance maintained by
any Grantor pursuant to this Section 5(e) may be paid directly to the Person who
shall have incurred liability covered by such insurance. In the case of any loss
involving damage to Equipment or Inventory, any proceeds of insurance maintained
by a Grantor pursuant to this Section 5(e) shall be paid to the Agent (except as
to which paragraph (iii) of this Section 5(e) is not applicable), such Grantor
will make or cause to be made the necessary repairs to or replacements of such
Equipment or Inventory, and any proceeds of insurance maintained by such Grantor
pursuant to this Section 5(e) shall be paid by the Agent to such Grantor as
reimbursement for the costs of such repairs or replacements.
(iii) Upon the occurrence and during the continuance of a
Default or Event of Default, all insurance payments shall be paid to the Agent
and applied as specified in Section 7(b) hereof.
(f) Provisions Concerning the Accounts and the Licenses.
(i) No Grantor shall, without providing the Agent with 10
Business Days prior written notice, change (A) its name, identity or
organizational structure, or (B) its jurisdiction of incorporation as set forth
in Section 4(b) hereto. Each Grantor shall (x) immediately notify the Agent upon
obtaining an organizational identification number, if on the date hereof such
Grantor did not have such identification number, and (y) keep adequate records
concerning the Accounts and Chattel Paper and permit representatives of the
Agent pursuant to the terms of the Financing Agreement to inspect and make
abstracts from such Records and Chattel Paper.
(ii) Each Grantor will, except as otherwise provided in this
subsection (f), continue to collect, at its own expense, all amounts due or to
become due under the Accounts. In connection with such collections, each Grantor
may (and, after the occurrence and during the continuance of an Event of
Default, at the Agent's direction, will) take such action as such Grantor (or
after the occurrence and during the continuance of an Event of Default, the
Agent) may deem necessary or advisable to enforce collection or performance of
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the Accounts; provided, however, that the Agent shall have the right at any
time, upon the occurrence and during the continuance of an Event of Default, to
notify the Account Debtors or obligors under any Accounts of the assignment of
such Accounts to the Agent and to direct such Account Debtors or obligors to
make payment of all amounts due or to become due to such Grantor thereunder
directly to the Agent or its designated agent and, upon such notification and at
the expense of such Grantor and to the extent permitted by law, to enforce
collection of any such Accounts and to adjust, settle or compromise the amount
or payment thereof, in the same manner and to the same extent as such Grantor
might have done. After the occurrence and during the continuance of an Event of
Default and after receipt by any Grantor of a notice from the Agent that the
Agent has notified, intends to notify, or has enforced or intends to enforce a
Grantor's rights against the Account Debtors or obligors under any Accounts as
referred to in the proviso to the immediately preceding sentence, (A) all
amounts and proceeds (including Instruments) received by such Grantor in respect
of the Accounts shall be received in trust for the benefit of the Agent
hereunder, shall be segregated from other funds of such Grantor and shall be
forthwith paid over to the Agent in the same form as so received (with any
necessary endorsement) to be held as cash collateral and either (i) credited to
the Loan Account so long as no Event of Default shall have occurred and be
continuing or (ii) if an Event of Default shall have occurred and be continuing,
applied as specified in Section 7(b) hereof, and (B) such Grantor will not
adjust, settle or compromise the amount or payment of any Account or release
wholly or partly any Account Debtor or obligor thereof or allow any credit or
discount thereon. In addition, upon the occurrence and during the continuance of
an Event of Default, the Agent may (in its sole and absolute discretion) direct
any or all of the banks and financial institutions with which any Grantor either
maintains a Deposit Account or a lockbox or deposits the proceeds of any
Accounts to send immediately to the Agent by wire transfer (to such account as
the Agent shall specify, or in such other manner as the Agent shall direct) all
or a portion of such securities, cash, investments and other items held by such
institution. After the occurrence and during the continuance of an Event of
Default, any such securities, cash, investments and other items so received by
the Agent shall (in the sole and absolute discretion of the Agent) be held as
additional Collateral for the Obligations or distributed in accordance with
Section 7 hereof.
(iii) Upon the occurrence and during the continuance of any
breach or default under any License referred to in Schedule II hereto by any
party thereto other than a Grantor, (A) the relevant Grantor will, promptly
after obtaining knowledge thereof, give the Agent written notice of the nature
and duration thereof, specifying what action, if any, it has taken and proposes
to take with respect thereto, (B) no Grantor will, without the prior written
consent of the Agent, declare or waive any such breach or default or
affirmatively consent to the cure thereof or exercise any of its remedies in
respect thereof, and (C) each Grantor will, upon written instructions from the
Agent and at such Grantor's expense, take such action as the Agent may deem
necessary or advisable in respect thereof.
(iv) Each Grantor will, at its expense, promptly deliver to the
Agent a copy of each notice or other communication received by it by which any
other party to any License referred to in Schedule II hereto purports to
exercise any of its rights to terminate or materially alter or materially affect
any of its obligations thereunder, together with a copy of any reply by such
Grantor thereto.
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(v) Each Grantor will perform and observe in all material
respects all of its obligations under each License and will take all action
necessary to maintain the Licenses in full force and effect. No Grantor will,
without the prior written consent of the Agent, cancel, terminate, amend or
otherwise modify in any respect, or waive any provision of, any License referred
to in Schedule II hereto (other than amendments to the Bollore Distribution
Agreements relating to the quantity and cost of the cigarette paper booklets
subject to the distribution provisions thereunder), except in the ordinary
course of its business.
(g) Transfers and Other Liens.
(i) Except to the extent expressly permitted by the Financing
Agreement, no Grantor will sell, assign (by operation of law or otherwise),
lease, license, exchange or otherwise transfer or dispose of any of the
Collateral.
(ii) Except to the extent expressly permitted by Section 7.02(a)
of the Financing Agreement, no Grantor will create, suffer to exist or grant any
Lien upon or with respect to any Collateral.
(h) Intellectual Property.
(i) If applicable, each Grantor has duly executed and delivered
the applicable Assignment for Security in the form attached hereto as Exhibit A.
Each Grantor (either itself or through licensees) will, and will cause each
licensee thereof to, take all action necessary to maintain all of the
Intellectual Property in full force and effect, including, without limitation,
using any required statutory notices and markings and using the Trademarks on
each applicable trademark class of goods in order to so maintain the Trademarks
in full force free, from any claim of abandonment for non-use, and no Grantor
will (nor permit any licensee thereof to) do any act or knowingly omit to do any
act whereby any Intellectual Property may become invalidated; provided, however,
that, no Grantor shall have an obligation to use or to maintain any Intellectual
Property (A) that relates solely to any product or work, that has been, or is in
the process of being, discontinued, abandoned or terminated, (B) that is being
replaced with Intellectual Property substantially similar to the Intellectual
Property that may be abandoned or otherwise become invalid, so long as the
failure to use or maintain such Intellectual Property does not materially
adversely affect the validity of such replacement Intellectual Property and so
long as such replacement Intellectual Property is subject to the Lien created by
this Agreement or (C) that is substantially the same as another Intellectual
Property that is in full force, so long as the failure to use or maintain such
Intellectual Property does not materially adversely affect the validity of such
replacement Intellectual Property and so long as such other Intellectual
Property is subject to the Lien and security interest created by this Agreement.
Each Grantor will cause to be taken all necessary steps in any proceeding before
the United States Patent and Trademark Office and the United States Copyright
Office or any similar office or agency in any other country or political
subdivision thereof to maintain each registration of the Intellectual Property
(other than the Intellectual Property described in the proviso to the
immediately preceding sentence), including, without limitation, filing of
renewals, affidavits of use, affidavits of incontestability and opposition,
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interference and cancellation proceedings and payment of maintenance fees,
filing fees, taxes or other governmental fees. If any Intellectual Property is
infringed, misappropriated, diluted or otherwise violated in any material
respect by a third party, the Grantors shall (x) upon learning of such
infringement, misappropriation, dilution or other violation, promptly notify the
Agent and (y) to the extent the Grantors shall deem appropriate under the
circumstances, promptly xxx for infringement, misappropriation, dilution or
other violation, seek injunctive relief where appropriate and seek to recover
any and all damages for such infringement, misappropriation, dilution or other
violation, or take such other actions as the Grantors shall deem appropriate
under the circumstances to protect such Intellectual Property. Each Grantor
shall furnish to the Agent from time to time (but, unless an Event of Default
has occurred and is continuing, no more frequently than quarterly) statements
and schedules further identifying and describing the Intellectual Property and
Licenses and such other reports in connection with the Intellectual Property and
Licenses as the Agent may reasonably request, all in reasonable detail and
promptly upon request of the Agent, following receipt by the Agent of any such
statements, schedules or reports, the Grantors shall modify this Agreement by
amending Schedule II hereto to include any Intellectual Property or License, as
the case may be, which becomes part of the Collateral under this Agreement and
shall execute and authenticate such documents and do such acts as shall be
necessary or, in the judgment of the Agent, desirable to subject such
Intellectual Property and Licenses to the Lien and security interest created by
this Agreement. Notwithstanding anything herein to the contrary, upon the
occurrence and during the continuance of an Event of Default, no Grantor may
abandon or otherwise permit any Intellectual Property to become invalid without
the prior written consent of the Agent, and if any Intellectual Property is
infringed, misappropriated, diluted or otherwise violated in any material
respect by a third party, the Grantors will take such action as the Agent shall
deem appropriate under the circumstances to protect such Intellectual Property.
(ii) In no event shall any Grantor, either itself or through any
agent, employee, licensee or designee, file an application for the registration
of any Trademark or Copyright or the issuance of any Patent with the United
States Patent and Trademark Office or the United States Copyright Office, as
applicable, or in any similar office or agency of the United States or any
country or any political subdivision thereof unless it gives the Agent prior
written notice thereof. Upon request of the Agent, each Grantor shall execute,
authenticate and deliver any and all assignments, agreements, instruments,
documents and papers as the Agent may reasonably request to evidence the Agent's
security interest hereunder in such Intellectual Property and the General
Intangibles of such Grantor relating thereto or represented thereby, and each
Grantor hereby appoints the Agent its attorney-in-fact to execute and/or
authenticate and file all such writings for the foregoing purposes, all acts of
such attorney being hereby ratified and confirmed, and such power (being coupled
with an interest) shall be irrevocable until the termination of all Commitments,
the repayment of all of the Obligations in full and the termination of each of
the Loan Documents.
(i) Deposit, Commodities and Securities Accounts. Prior to the date
hereof, each Grantor shall cause each bank and other financial institution
referred to in Schedule IV hereto to execute and deliver to the Agent a control
agreement, in form and substance reasonably satisfactory to the Agent, duly
executed by such Grantor and such bank or financial institution, or enter into
other arrangements in form and substance satisfactory to the Agent, pursuant to
which such institution shall irrevocably agree, inter alia, that (i) it will
comply at any time with the instructions originated by the Agent to such bank or
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financial institution directing the disposition of cash, Commodity Contracts,
securities, Investment Property and other items from time to time credited to
such account, without further consent of such Grantor, which instructions the
Agent will not give to such bank or other financial institution in the absence
of a continuing Event of Default, (ii) except as otherwise set forth in the
Financing Agreement, all cash, Commodity Contracts, securities, Investment
Property and other items of such Grantor deposited with such institution shall
be subject to a perfected, first priority security interest in favor of the
Agent, (iii) any right of set off, banker's Lien or other similar Lien, security
interest or encumbrance shall be fully waived as against the Agent, and (iv)
upon receipt of written notice from the Agent during the continuance of an Event
of Default, such bank or financial institution shall immediately send to the
Agent's Account by wire transfer (or in such other manner as the Agent shall
direct) all such cash, the value of any Commodity Contracts, securities,
Investment Property and other items held by it. Without the prior written
consent of the Agent, no Grantor shall make or maintain any Deposit Account,
Commodity Account or Securities Account except for the accounts set forth in
Schedule IV hereto. The provisions of this paragraph 5(i) shall not apply to (i)
Deposit Accounts for which the Agent is the depositary and (ii) Deposit Accounts
specially and exclusively used for payroll, payroll taxes and other employee
wage and benefit payments to or for the benefit of a Grantor's salaried
employees.
(j) Motor Vehicles.
(i) If requested by the Agent after the occurrence and during
the continuance of a Default or Event of Default, each Grantor shall deliver to
the Agent originals of the certificates of title or ownership for all Motor
Vehicles owned by it with the Agent listed as lienholder, for the benefit of the
Agent and the Lenders; provided that the Agent shall not be required to be
listed as the lienholder if a Motor Vehicle is subject to a purchase money
security interest permitted by Section 7.02(a) of the Financing Agreement.
(ii) Each Grantor hereby appoints the Agent as its
attorney-in-fact, effective the date hereof and terminating upon the termination
of this Agreement, for the purpose of at any time after and during the
continuance of an Event of Default (A) executing on behalf of such Grantor title
or ownership applications for filing with appropriate state agencies to enable
Motor Vehicles now owned or hereafter acquired by such Grantor to be retitled
and the Agent listed as lienholder thereof, (B) filing such applications with
such state agencies, and (C) executing such other documents and instruments on
behalf of, and taking such other action in the name of, such Grantor as the
Agent may reasonably deem necessary or advisable to accomplish the purposes
hereof (including, without limitation, for the purpose of creating in favor of
the Agent a perfected Lien on the Motor Vehicles and exercising the rights and
remedies of the Agent hereunder). This appointment as attorney-in-fact is
coupled with an interest and is irrevocable until all of the outstanding
Obligations are paid in full after all Commitments have been terminated.
(iii) Any certificates of title or ownership delivered pursuant
to the terms hereof shall be accompanied by odometer statements for each Motor
Vehicle covered thereby.
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(iv) So long as no Event of Default shall have occurred and be
continuing, upon the request of any Grantor, the Agent shall execute and deliver
to such Grantor such instruments as such Grantor shall reasonably request to
remove the notation of the Agent as lienholder on any certificate of title for
any Motor Vehicle; provided that any such instruments shall be delivered, and
the release effective, only upon receipt by the Agent of a certificate from such
Grantor, stating that the Motor Vehicle, the Lien on which is to be released, is
to be sold or has suffered a casualty loss (with title thereto passing to the
casualty insurance company therefor in settlement of the claim for such loss),
the amount that such Grantor will receive as sale proceeds or insurance proceeds
and whether or not such sale proceeds or insurance proceeds are required by
Section 2.05 of the Financing Agreement to be paid to the Agent to be applied to
the Obligations and, to the extent required by Section 2.05 of the Financing
Agreement, any proceeds of such sale or casualty loss shall be paid to the Agent
hereunder to be applied to the Obligations then outstanding.
(k) Control. Each Grantor hereby agrees to take any or all action
that may be necessary or desirable or that the Agent may request in order for
the Agent to obtain control in accordance with Sections 9-105 - 9-107 of the
Code with respect to the following Collateral: (i) Electronic Chattel Paper,
(ii) Investment Property and (iii) Letter-of-Credit Rights.
(l) Inspection and Reporting. Each Grantor shall comply with Sections
4.01 and 7.01(f) of the Financing Agreement to allow Agent to visit the Grantors
and/or conduct audits, inspections, valuations and/or field examinations of any
or all of the Grantors in accordance with such provisions.
SECTION 6. Additional Provisions Concerning the Collateral.
(a) Each Grantor hereby (i) authorizes the Agent to file, one or more
financing or continuation statements, and amendments thereto, relating to the
Collateral and (ii) ratifies such authorization to the extent that the Agent has
filed any such financing or continuation statements, or amendments thereto,
prior to the date hereof. A photocopy or other reproduction of this Agreement or
any financing statement covering the Collateral or any part thereof shall be
sufficient as a financing statement where permitted by law.
(b) Each Grantor hereby irrevocably appoints the Agent as its
attorney-in-fact and proxy, with full authority in the place and stead of such
Grantor and in the name of such Grantor or otherwise, from time to time after
and during the continuance of an Event of Default in the Agent's reasonable
discretion, to take any action and to execute any instrument which the Agent may
deem necessary or advisable to accomplish the purposes of this Agreement
(subject to the rights of a Grantor under Section 5 hereof), including, without
limitation, (i) to obtain and adjust insurance required to be paid to the Agent
pursuant to Section 5(e) hereof, (ii) to ask, demand, collect, xxx for, recover,
compound, receive and give acquittance and receipts for moneys due and to become
due under or in respect of any Collateral, (iii) to receive, endorse, and
collect any drafts or other instruments, documents and chattel paper in
connection with clause (i) or (ii) above, (iv) to file any claims or take any
action or institute any proceedings which the Agent may deem necessary or
desirable for the collection of any Collateral or otherwise to enforce the
rights of the Agent and the Lenders with respect to any Collateral, and (v) to
execute assignments, licenses and other documents to enforce the rights of the
Agent and the Lenders with respect to any Collateral. This power is coupled with
an interest and is irrevocable until all of the Obligations are paid in full
after all Commitments have been terminated.
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(c) For the purpose of enabling the Agent to exercise rights and
remedies hereunder, at such time as the Agent shall be lawfully entitled to
exercise such rights and remedies, and for no other purpose, each Grantor hereby
grants to the Agent, to the extent assignable, an irrevocable, non-exclusive
license (exercisable without payment of royalty or other compensation to any
Grantor) at any time during the continuance of an Event of Default, to use any
Intellectual Property now owned or hereafter acquired by any Grantor, wherever
the same may be located, including in such license reasonable access to all
media in which any of the licensed items may be recorded or stored and to all
computer programs used for the compilation or printout thereof. Notwithstanding
anything contained herein to the contrary, but subject to the provisions of the
Financing Agreement that limit the right of a Grantor to dispose of its property
and Section 5(h) hereof, so long as no Event of Default shall have occurred and
be continuing, each Grantor may exploit, use, enjoy, protect, license,
sublicense, assign, sell, dispose of or take other actions with respect to the
Intellectual Property in the ordinary course of its business. In furtherance of
the foregoing, unless an Event of Default shall have occurred and be continuing,
the Agent shall from time to time, upon the request of a Grantor, execute and
deliver any instruments, certificates or other documents, in the form so
requested, which such Grantor shall have certified are appropriate (in such
Grantor's judgment) to allow it to take any action permitted above (including
relinquishment of the license provided pursuant to this clause (c) as to any
Intellectual Property). Further, upon the payment in full of all of the
outstanding Obligations after the cancellation or termination of the
Commitments, the Agent (subject to Section 11(e) hereof) shall release and
reassign to the Grantors all of the Agent's right, title and interest in and to
the Intellectual Property, and the Licenses, all without recourse,
representation or warranty whatsoever. The exercise of rights and remedies
hereunder by the Agent shall not terminate the rights of the holders of any
licenses or sublicenses theretofore granted by any Grantor in accordance with
the second sentence of this clause (c). Each Grantor hereby releases the Agent
from any claims, causes of action and demands at any time arising out of or with
respect to any actions taken or omitted to be taken by the Agent under the
powers of attorney granted herein other than actions taken or omitted to be
taken through the Agent's gross negligence or willful misconduct, as determined
by a final determination of a court of competent jurisdiction.
(d) Upon the occurrence and during the continuance of any Event of
Default, the Agent may itself perform, or cause performance of, any Grantor's
obligations contained herein, in the name of such Grantor, and the expenses of
the Agent incurred in connection therewith shall be jointly and severally
payable by the Grantors pursuant to Section 8 hereof and shall be secured by the
Collateral.
(e) The powers conferred on the Agent hereunder are solely to protect
its interest in the Collateral and shall not impose any duty upon it to exercise
any such powers. Subject to any applicable law, except for the safe custody of
any Collateral in its possession and the accounting for moneys actually received
by it hereunder, the Agent shall have no duty as to any Collateral or as to the
taking of any necessary steps to preserve rights against prior parties or any
other rights pertaining to any Collateral.
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(f) Anything herein to the contrary notwithstanding (i) each Grantor
shall remain liable under the Licenses and otherwise with respect to any of the
Collateral to the extent set forth therein to perform all of its obligations
thereunder to the same extent as if this Agreement had not been executed, (ii)
the exercise by the Agent of any of its rights hereunder shall not release any
Grantor from any of its obligations under the Licenses or otherwise in respect
of the Collateral, and (iii) subject to applicable law, the Agent shall not have
any obligation or liability by reason of this Agreement under the Licenses or
with respect to any of the other Collateral, nor shall the Agent be obligated to
perform any of the obligations or duties of any Grantor thereunder or to take
any action to collect or enforce any claim for payment assigned hereunder.
SECTION 7. Remedies Upon Default. If any Event of Default shall have
occurred and be continuing:
(a) The Agent may exercise in respect of the Collateral, in addition
to any other rights and remedies provided for herein or otherwise available to
it, all of the rights and remedies of a secured party upon default as provided
by the Code, and also may (i) take absolute control of the Collateral,
including, without limitation, transfer into the Agent's name or into the name
of its nominee or nominees (to the extent the Agent has not theretofore done so)
and thereafter receive, for the benefit of the Agent, all payments made thereon,
give all consents, waivers and ratifications in respect thereof and otherwise
act with respect thereto as though it were the outright owner thereof, (ii)
require each Grantor to, and each Grantor hereby agrees that it will at its
expense and upon written request of the Agent forthwith, assemble all or part of
the Collateral as directed by the Agent and make it available to the Agent at a
place or places to be designated by the Agent that is reasonably convenient to
both parties, and the Agent may enter into and occupy any premises owned or
leased by any Grantor where the Collateral or any part thereof is located or
assembled for a reasonable period in order to effectuate the Agent's rights and
remedies hereunder or under law, without obligation to any Grantor in respect of
such occupation, and (iii) subject to any applicable law, without notice except
as specified below and without any obligation to prepare or process the
Collateral for sale, (A) sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any of the Agent's offices or elsewhere,
for cash, on credit or for future delivery, and at such price or prices and upon
such other terms as the Agent may deem commercially reasonable and/or (B) lease,
license or dispose of the Collateral or any part thereof upon commercially
reasonable terms. Each Grantor agrees that, to the extent notice of sale or any
other disposition of the Collateral shall be required by law, at least 10 days'
notice to a Grantor of the time and place of any public sale or the time after
which any private sale or other disposition of the Collateral is to be made
shall constitute reasonable notification. The Agent shall not be obligated to
make any sale or other disposition of Collateral regardless of notice of sale
having been given. The Agent may adjourn any public or private sale from time to
time by announcement at the time and place fixed therefor, and such sale may,
without further notice, unless required by applicable law, be made at the time
and place to which it was so adjourned. Subject to any applicable law, each
Grantor hereby waives any claims against the Agent and the Lenders arising by
reason of the fact that the price at which the Collateral may have been sold at
a private sale was less than the price which might have been obtained at a
public sale or was less than the aggregate amount of the Obligations, even if
the Agent accepts the first offer received and does not offer the Collateral to
more than one offeree, and waives all rights that such Grantor may have to
18
require that all or any part of the Collateral be marshalled upon any sale
(public or private) thereof. Each Grantor hereby acknowledges that (i) any such
sale of the Collateral by the Agent shall be made without warranty, (ii) the
Agent may specifically disclaim any warranties of title, possession, quiet
enjoyment or the like, and (iii) such actions set forth in clauses (i) and (ii)
above shall not adversely effect the commercial reasonableness of any such sale
of the Collateral. In addition to the foregoing, (i) upon written notice to any
Grantor from the Agent, each Grantor shall cease any use of the Intellectual
Property or any trademark, patent or copyright similar thereto for any purpose
described in such notice; (ii) the Agent may, at any time and from time to time,
upon 10 days' prior notice to any Grantor, license, whether general, special or
otherwise, and whether on an exclusive or non-exclusive basis, any of the
Intellectual Property, throughout the universe for such term or terms, on such
conditions, and in such manner, as the Agent shall in its sole discretion
determine; and (iii) the Agent may, at any time, pursuant to the authority
granted in Section 6 hereof (such authority being effective upon the occurrence
and during the continuance of an Event of Default), execute and deliver on
behalf of a Grantor, one or more instruments of assignment of the Intellectual
Property (or any application or registration thereof), in form suitable for
filing, recording or registration in any country.
(b) Any cash held by the Agent as Collateral and all Cash Proceeds
received by the Agent in respect of any sale of or collection from, or other
realization upon, all or any part of the Collateral shall be applied (after
payment of any amounts payable to the Agent pursuant to Section 8 hereof) by the
Agent against, all or any part of the Obligations, consistent with the
provisions of the Financing Agreement. Any surplus of such cash or Cash Proceeds
held by the Agent and remaining after payment in full of all of the outstanding
Obligations after all Commitments have been terminated shall be paid over to
whomsoever shall be lawfully entitled to receive the same or as a court of
competent jurisdiction shall direct.
(c) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Agent and the
Lenders are legally entitled, the Grantors shall be jointly and severally liable
for the deficiency, together with interest thereon at the highest rate specified
in any applicable Loan Document for interest on overdue principal thereof or
such other rate as shall be fixed by applicable law, together with the costs of
collection and the reasonable fees, costs, expenses and other client charges of
any attorneys employed by the Agent to collect such deficiency.
(d) The Agent shall not be required to marshal any present or future
collateral security (including, but not limited to, this Agreement and the
Collateral) for, or other assurances of payment of, the Obligations or any of
them or to resort to such collateral security or other assurances of payment in
any particular order, and all of the Agent's rights hereunder and in respect of
such collateral security and other assurances of payment shall be cumulative and
in addition to all other rights, however existing or arising. To the extent that
any Grantor lawfully may, such Grantor hereby agrees that it will not invoke any
law relating to the marshalling of collateral which might cause delay in or
impede the enforcement of the Agent's rights under this Agreement or under any
other instrument creating or evidencing any of the Obligations or under which
any of the Obligations is outstanding or by which any of the Obligations is
secured or payment thereof is otherwise assured, and, to the extent that it
lawfully may, each Grantor hereby irrevocably waives the benefits of all such
laws.
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SECTION 8. Indemnity and Expenses.
(a) Each Grantor jointly and severally agrees to defend, protect,
indemnify and hold the Agent harmless from and against any and all claims,
damages, losses, liabilities, obligations, penalties, reasonable fees, costs and
expenses (including, without limitation, reasonable legal fees, costs, expenses,
and disbursements of Agent's counsel) to the extent that they arise out of or
otherwise result from this Agreement (including, without limitation, enforcement
of this Agreement), except claims, losses or liabilities resulting solely and
directly from the Agent's gross negligence or willful misconduct, as determined
by a final judgment of a court of competent jurisdiction.
(b) The Grantors will upon demand pay to the Agent the amount of any
and all reasonable costs and expenses, including the reasonable fees, costs,
expenses and disbursements of counsel for the Agent and of any experts and
agents (including, without limitation, any collateral trustee which may act as
agent of the Agent), which the Agent may incur in connection with (i) the
preparation, negotiation, execution, delivery, recordation, administration,
amendment, waiver or other modification or termination of this Agreement, (ii)
the custody, preservation, use or operation of, or the sale of, collection from,
or other realization upon, any Collateral, (iii) the exercise or enforcement of
any of the rights of the Agent hereunder, or (iv) the failure by any Grantor to
perform or observe any of the provisions hereof.
SECTION 9. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing and shall be mailed (by certified
mail, postage prepaid and return receipt requested), telecopied or delivered by
hand, Federal Express or other reputable overnight courier, if to a Grantor, to
it in care of the Administrative Borrower at its address specified in the
Financing Agreement and if to the Agent to it, at its address specified in the
Financing Agreement; or as to any such Person, at such other address as shall be
designated by such Person in a written notice to such other Person complying as
to delivery with the terms of this Section 9. All such notices and other
communications shall be effective, (a) if mailed (certified mail, postage
prepaid and return receipt requested), when received or 3 days after deposited
in the mails, whichever occurs first, (b) if telecopied, when transmitted and
confirmation received, or (c) if delivered by hand, Federal Express or other
reputable overnight courier, upon delivery.
SECTION 10. Security Interest Absolute. All rights of the Agent, the
Lenders and the L/C Issuer, all Liens and all obligations of each of the
Grantors hereunder shall be absolute and unconditional irrespective of (a) any
lack of validity or enforceability of the Financing Agreement, any other Loan
Document or any other agreement or instrument relating thereto, (b) any change
in the time, manner or place of payment of, or in any other term in respect of,
all or any of the Obligations, or any other amendment or waiver of or consent to
any departure from the Financing Agreement or any other Loan Document, (c) any
exchange or release of, or non-perfection of any Lien on any Collateral, or any
release or amendment or waiver of or consent to departure from any guaranty, for
all or any of the Obligations, or (d) any other circumstance (other than the
discharge of the Obligations) which might otherwise constitute a defense
available to, or a discharge of, any of the Grantors in respect of the
Obligations. All authorizations and agencies contained herein with respect to
any of the Collateral are irrevocable and powers coupled with an interest.
20
SECTION 11. Miscellaneous.
(a) No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by each Grantor and the Agent, and
no waiver of any provision of this Agreement, and no consent to any departure by
any Grantor therefrom, shall be effective unless it is in writing and signed by
the Agent, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
(b) No failure on the part of the Agent, any Lender or the L/C Issuer
to exercise, and no delay in exercising, any right hereunder or under any other
Loan Document shall operate as a waiver thereof; nor shall any single or partial
exercise of any such right preclude any other or further exercise thereof or the
exercise of any other right. The rights and remedies of the Agent, the Lenders
and the L/C Issuer provided herein and in the other Loan Documents are
cumulative and are in addition to, and not exclusive of, any rights or remedies
provided by law. The rights of the Agent, the Lenders and the L/C Issuer under
any Loan Document against any party thereto are not conditional or contingent on
any attempt by such Person to exercise any of its rights under any other Loan
Document against such party or against any other Person, including but not
limited to, any Grantor.
(c) Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining portions hereof or thereof or affecting the validity or enforceability
of such provision in any other jurisdiction.
(d) This Agreement shall create a continuing security interest in the
Collateral and shall (i) remain in full force and effect until the later of (A)
the payment in full of the outstanding Obligations and (B) the termination of
all of the Commitments, and (ii) be binding on each Grantor and all other
Persons who become bound as debtor to this Agreement in accordance with Section
9-203(d) of the Code and shall inure, together with all rights and remedies of
the Agent, the Lenders and the L/C Issuer hereunder, to the benefit of the
Agent, the Lenders and the L/C Issuer and their respective permitted successors,
transferees and assigns. Upon any such assignment or transfer, all references in
this Agreement to the Agent, any such Lender or the L/C Issuer shall mean the
assignee of the Agent, such Lender or the L/C Issuer. None of the rights or
obligations of any Grantor hereunder may be assigned or otherwise transferred
without the prior written consent of the Agent, and any such assignment or
transfer shall be null and void.
(e) Upon the satisfaction in full of the outstanding Obligations and
the termination of all of the Commitments, (i) this Agreement and the security
interests created hereby shall terminate and all rights to the Collateral shall
revert to the Grantors and (ii) the Agent will, upon the Grantors' request and
at the Grantors' expense, (A) return to the Grantors such of the Collateral as
shall not have been sold or otherwise disposed of or applied pursuant to the
terms hereof and (B) execute and deliver to the Grantors such documents as the
Grantors shall reasonably request to evidence such termination, all without any
representation, warranty or recourse whatsoever.
21
(f) THIS AGREEMENT SHALL BE GOVERNED BY, CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(g) ANY LEGAL ACTION, SUIT OR PROCEEDING WITH RESPECT TO THIS
AGREEMENT OR ANY DOCUMENT RELATED THERETO MAY BE BROUGHT IN XXX XXXXXX XX XXX
XXXXX XX XXX XXXX IN THE COUNTY OF NEW YORK OR THE UNITED STATES OF AMERICA FOR
THE SOUTHERN DISTRICT OF NEW YORK, AND APPELLATE COURTS THEREOF, AND, BY
EXECUTION AND DELIVERY OF THIS AGREEMENT, EACH PARTY HERETO HEREBY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS. EACH PARTY HERETO HEREBY EXPRESSLY AND
IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION,
INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON
THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY SUCH ACTION, SUIT OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS
AND CONSENTS TO THE GRANTING OF SUCH LEGAL OR EQUITABLE RELIEF AS IS DEEMED
APPROPRIATE BY THE COURT.
(h) EACH OF THE GRANTORS AND (BY ITS ACCEPTANCE OF THE BENEFITS OF
THIS AGREEMENT) THE AGENT WAIVES ANY RIGHT IT MAY HAVE TO TRIAL BY JURY IN
RESPECT OF ANY LITIGATION BASED ON, ARISING OUT OF, UNDER OR IN CONNECTION WITH
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, VERBAL OR WRITTEN STATEMENT OR OTHER ACTION OF THE PARTIES HERETO.
(i) Each party hereto irrevocably consents to the service of process
of any of the aforesaid courts in any such action, suit or proceeding by the
mailing of copies thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to such party at its address provided
herein, such service to become effective 10 days after such mailing.
(j) Nothing contained herein shall affect the right of the Agent to
serve process in any other manner permitted by law or commence legal proceedings
or otherwise proceed against any Grantor or any property of any Grantor in any
other jurisdiction.
(k) Each party hereto irrevocably and unconditionally waives any
right it may have to claim or recover in any legal action, suit or proceeding
referred to in this Section any special, exemplary, punitive or consequential
damages.
(l) Section headings herein are included for convenience of reference
only and shall not constitute a part of this Agreement for any other purpose.
22
(m) This Agreement may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which shall be
deemed to be an original, but all of which taken together constitute one in the
same Agreement. Delivery of an executed counterpart of this Agreement by
telecopier or electronic transmission shall be equally as effective as delivery
of an original executed counterpart of this Agreement.
(n) All of the obligations of the Grantors hereunder are joint and
several. The Agent may, in its sole and absolute discretion, enforce the
provisions hereof against any of the Grantors and shall not be required to
proceed against all Grantors jointly or seek payment from the Grantors ratably.
In addition, the Agent may, in its sole and absolute discretion, select the
Collateral of any one or more of the Grantors for sale or application to the
Obligations, without regard to the ownership of such Collateral, and shall not
be required to make such selection ratably from the Collateral owned by all of
the Grantors. The release or discharge of any Grantor by the Agent shall not
release or discharge any other Grantor from the obligations of such Person
hereunder.
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23
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be
executed and delivered by its officer thereunto duly authorized, as of the date
first above written.
GRANTORS:
---------
NORTH ATLANTIC TRADING COMPANY, INC.
By: /s/ Xxxx Xxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxxx
Title: CEO
NORTH ATLANTIC OPERATING COMPANY, INC.
By: /s/ Xxxx Xxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxxx
Title: CEO
NATIONAL TOBACCO COMPANY, L.P.
By: National Tobacco Finance Corporation,
as its general partner
By: /s/ Xxxx Xxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxxx
Title: CEO
NATIONAL TOBACCO FINANCE CORPORATION
By: /s/ Xxxx Xxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxxx
Title: CEO
NORTH ATLANTIC CIGARETTE COMPANY, INC.
By: /s/ Xxxx Xxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxxx
Title: CEO
XXXXXX, INC.
By: /s/ Xxxx Xxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxxx
Title: CEO
RBJ SALES, INC.
By: /s/ Xxxx Xxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxxx
Title: CEO
XXXX XXXXXX & SONS, INC.
By: /s/ Xxxx Xxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxxx
Title: CEO
NORTH ATLANTIC HOLDING COMPANY, INC.
By: /s/ Xxxx Xxxxxxxx
-----------------------------------------
Name: Xxxx Xxxxxxxx
Title: CEO
AGENT:
------
FORTRESS CREDIT CORP.
By: /s/ Xxxx X. Xxxxxxxx
-----------------------------------------
Name: Xxxx X. Xxxxxxxx
Title: Chief Operating Officer
