Exhibit 10.5
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PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT, dated as of March 31, 2002,
between Xxxxxx X. Xxxxx, Xx., an individual residing at 0 Xxxx 00xx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 ("Xxxxx"), Xxxxx Management Corp., a Kentucky corporation
(the "Pledgor"), and North Atlantic Trading Company, Inc., a Delaware
corporation with an office at 000 Xxxx Xxxxxx Xxxxx, Xxx Xxxx, Xxx Xxxx
00000-0000 (the "Secured Party").
W I T N E S S E T H:
WHEREAS, all of the voting capital stock of Pledgor is owned
by Xxxxx and all of the non-voting capital stock of Pledgor is owned by a trust
established by Xxxxx for the benefit of his children; and
WHEREAS, Pledgor is the owner of 271,300 shares of Common
Stock (defined below), 30,000 shares of which (the "Pledged Securities") shall
be security for the Secured Obligations (defined below); and
WHEREAS, each of Xxxxx and Pledgor has issued and delivered to
the Secured Party a promissory note (each the "Note," and collectively, the
"Notes") of even date herewith in the aggregate principal amount of
$1,433,570.03 in respect of loans heretofore made by the Secured Party to the
Pledgor (each a "Loan" and, collectively, the "Loans"); and
WHEREAS, as security for all of the obligations of Xxxxx and
Pledgor under the Notes, Secured Party is requiring that Pledgor execute and
deliver this Pledge and Security Agreement and grant the security interest
contemplated hereby;
NOW, THEREFORE, in consideration of the premises and the
covenants hereinafter contained, it is agreed as follows:
1. Definitions. The following shall have (unless otherwise
provided elsewhere in this Pledge and Security Agreement) the following
respective meanings (such meanings being equally applicable to both the singular
and plural form of the terms defined):
"Agreement" means this Pledge and Security Agreement,
including all amendments, modifications and supplements hereto and any exhibits
or schedules to any of the foregoing, and shall refer to the Agreement as the
same may be in effect at the time such reference becomes operative.
"Common Stock" means the voting common stock, $.01 par value,
of the Secured Party.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, deposit arrangement, encumbrance, lien (statutory or
other), security interest or preference, priority or other security agreement or
preferential arrangement of any kind or nature whatsoever intended to assure
payment of any indebtedness or other obligation.
"Pledged Collateral" has the meaning assigned to such term in
Section 2 hereof.
"Pledged Securities" has the meaning assigned to such term in
the second recital.
"Secured Obligations" has the meaning assigned to such term in
Section 3 hereof.
2. Pledge. Pledgor hereby pledges to Secured Party, and grants
to Secured Party, a first priority security interest in the Pledged Securities
and the certificates representing the Pledged Securities and all dividends,
distributions, cash, instruments and other property or proceeds from time to
time received, receivable or otherwise distributed in respect of or in exchange
for (including, without limitation, by way of conversion) any or all of such
Pledged Securities (collectively, the "Pledged Collateral").
3. Security for Obligations. This Agreement secures, and the
Pledged Collateral is security for, the prompt payment in full when due, whether
at stated maturity, by acceleration or otherwise, and performance of the
obligations, whether for principal, interest, fees, costs and expenses, and all
obligations of Xxxxx and Pledgor now or hereafter existing under the Notes and
under this Agreement (collectively, the "Secured Obligations").
4. Delivery of Pledged Collateral. As soon as practicable, all
certificates representing or evidencing the Pledged Collateral shall be
delivered to and held by or on behalf of Secured Party pursuant hereto and shall
be accompanied by duly executed instruments of transfer or assignment in blank,
all in form and substance satisfactory to Secured Party. Following the
occurrence of an Event of Default as provided in Section 8, Secured Party shall
have the right, at any time in its discretion and without notice to Pledgor, (i)
to transfer to or to register in the name of Secured Party or any of its
nominees any or all of the Pledged Securities and (ii) to exchange certificates
or instruments representing or evidencing Pledged Securities for certificates or
instruments of smaller or larger denominations.
5. Representations and Warranties. Pledgor represents and
warrants to Secured Party that:
(a) Pledgor is, and at the time of delivery of the Pledged
Securities to Secured Party pursuant to Section 4 hereof will be, the sole
holder of record and the sole beneficial owner of the Pledged Collateral pledged
by it free and clear of any Lien thereon or affecting the title thereto, except
for the Lien created by this Agreement.
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(b) All of the Pledged Securities have been duly authorized,
validly issued and are fully paid and nonassessable.
(c) None of the Pledged Securities has been issued or
transferred in violation of the securities registration, securities disclosure
or similar laws of any jurisdiction to which such issuance or transfer may be
subject.
(d) The pledge, assignment and delivery of the Pledged
Collateral pursuant to this Agreement will create a valid first priority Lien on
and a first priority perfected security interest in the Pledged Collateral
pledged by Pledgor, and the proceeds thereof, securing the payment of the
Secured Obligations, subject to no other Lien or security interest other than
the Voting Trust Agreement, dated as of December 17, 1997, between Xxxxx and
Xxxxx X. Xxxxxxx, as amended from time to time (the "Voting Trust"), and the
restrictions contained in that certain Stockholders' Agreement dated as of June
25, 1997, as amended.
The representations and warranties set forth in this Section 5
shall survive the execution and delivery of this Agreement.
6. Covenants. Pledgor covenants and agrees that:
(a) Without the prior written consent of Secured Party,
Pledgor will not sell, assign, transfer, pledge, or otherwise encumber any of
its rights in or to the Pledged Collateral pledged by it or any unpaid dividends
or other distributions or payments with respect thereto or xxxxx x Xxxx in any
therein.
(b) Pledgor will promptly execute, acknowledge and deliver all
such instruments and take all such action as Secured Party from time to time may
request in order to ensure to Secured Party the benefits of the Liens in and to
the Pledged Collateral intended to be created by this Agreement, including the
filing of any necessary Uniform Commercial Code financing statements, which may
be filed by Secured Party with or without the signature of Pledgor, and will
cooperate with Secured Party in obtaining all necessary approvals and making all
necessary filings under federal or state law in connection with such Liens or
any sale or transfer of the Pledged Collateral.
(c) Pledgor has and will defend the title to the Pledged
Collateral and the Liens of Secured Party thereon against the claim of any
person and will maintain and preserve such Liens.
(d) All dividends and all other distributions in respect of
any of the Pledged Collateral, whenever paid or made, shall be delivered to
Secured Party to hold as Pledged Collateral and shall, if received by Pledgor,
be received in trust for the benefit of Secured Party, be segregated from the
other property or funds of Pledgor, and be forthwith delivered to Secured Party
as Pledged Collateral in the same form as so received (with any necessary
indorsement).
7. Pledgor's Rights. As long as no Event of Default shall have
occurred and be continuing, Pledgor or the Voting Trustees (as defined in the
Voting Trust), as the case may be, shall have the right, from time to time, to
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vote and give consents with respect to the Pledged Collateral or any part
thereof for all purposes not inconsistent with the provisions of this Agreement;
provided, however, that no vote shall be cast, and no consent shall be given or
action taken, which would have the effect of impairing the position or interest
of Secured Party in respect of any of the Pledged Collateral.
8. Defaults and Remedies.
(a) The following shall constitute an "Event of
Default" under this Agreement:
(i) Xxxxx defaults in the punctual payment of
any sum payable under the Note;
(ii) Pledgor defaults in the punctual payment of
any sum payable under the Note; or
(iii) Xxxxx or Pledgor (A) fails or is unable to
pay his or its, as the case may be, debts
generally as they become due, (B) commences
a voluntary case in bankruptcy or any other
action or proceeding for any other relief
under the Federal Bankruptcy Code or any law
affecting creditors' rights that is similar
to a bankruptcy law, (C) files or there is
filed against him or it, as the case may be,
any petition under the Federal Bankruptcy
Code (D) applies for or consents to the
appointment of, or the taking of possession
by, a receiver, assignee, custodian,
trustee, conservator, sequestrator or other
similar official of or of any substantial
part of his or its, as the case may be,
property, (E) has a receiver, assignee,
custodian, trustee, conservator,
sequestrator or other similar official
appointed to take possession of any
substantial part of his or its, as the case
may be, property without his consent, or (F)
makes an assignment for the benefit of
creditors.
(b) Upon the occurrence of an Event of Default the
Secured Party shall have the right to take the following actions with respect to
the Pledged Collateral:
(i) collect by legal proceedings or otherwise
all dividends and other sums now or
hereafter payable on account of the Pledged
Collateral;
(ii) apply, set off, collect, or sell in one or
more sales upon the sending of ten (10)
days' notice to Pledgor, the whole or any
part of the Pledged Collateral in such order
as the Secured Party or any holder of the
Note may elect, and any such sale may be
made either in a public or private sale at
its place of business or elsewhere, or at
any broker's board or securities exchange,
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either for cash or upon credit or for future
delivery, and the Secured Party or any other
holder of the Note may be the purchaser of
any or all of the Pledged Collateral so sold
and hold the same thereafter in its own
right free from any claim of Pledgor; and
(iii) between the time of the occurrence of the
Event of Default and the date of sale of the
Pledged Collateral, exercise as to the
Pledged Collateral all the rights, powers
and remedies of an owner including, but not
limited to, the right to vote the Pledged
Collateral.
Proceeds of the sale of any of the Pledged Collateral and any and all sums
received or collected by the Secured Party from or on account of the Pledged
Collateral shall be applied to the payment of reasonable expenses incurred or
paid in connection with any sale, transfer or delivery of the Pledged
Collateral, to the payment of any other reasonable costs, charges, attorneys'
fees or expenses mentioned herein and to the payment of the Secured Obligations
or any part thereof, all in such order and manner as Secured Party in its
discretion may determine. The balance of such proceeds, if any, shall be
returned to the record owner of the Pledged Securities.
9. Waiver. No delay on Secured Party's part in exercising any
power of sale, Lien, option or other right hereunder, and no notice or demand
which may be given to or made upon Pledgor by Secured Party with respect to any
power of sale, Lien, option or other right hereunder, shall constitute a waiver
thereof, or limit or impair Secured Party's right to take any action or to
exercise any power of sale, Lien, option, or any other right hereunder, without
notice or demand, or prejudice Secured Party's rights as against Pledgor in any
respect.
10. Assignment. Secured Party may not assign, indorse or
transfer any instrument evidencing all or any part of the Secured Obligations
and the holder of such instrument shall be entitled to the benefits of this
Agreement.
11. Termination. Immediately following the payment of all
Secured Obligations, Secured Party shall deliver to Pledgor the Pledged
Collateral at the time subject to this Agreement and all instruments of
assignment executed in connection therewith, free and clear of the Liens hereof
and, except as otherwise provided herein, all of Pledgor's obligations hereunder
shall at such time terminate.
12. Lien Absolute. All rights of Secured Party hereunder, and
all obligations of Pledgor hereunder, shall be absolute and unconditional
irrespective of:
(a) any lack of validity or enforceability of the Notes, or
any other agreement or instrument governing or evidencing any Secured
Obligations;
(b) any change in the time, manner or place of payment of, or
in any other term of, all or any part of the Secured Obligations, or any other
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amendment or waiver of or any consent to any departure from the Notes or any
other agreement or instrument governing or evidencing any Secured Obligations;
(c) any exchange, release or non-perfection of any other
collateral, or any release or amendment or waiver of or consent to departure
from any guaranty, for all or any of the Secured Obligations; or
(d) any other circumstance which might otherwise constitute a
defense available to, or a discharge of, Pledgor.
13. Release. Pledgor consents and agrees that Secured Party
may at any time, or from time to time, in its discretion (a) renew, extend or
change the time of payment, and/or the manner, place or terms of payment of all
or any part of the Secured Obligations and (b) exchange, release and/or
surrender all or any of the Pledged Collateral, or any part thereof, by
whomsoever deposited, which is now or may hereafter be held by Secured Party in
connection with all or any of the Secured Obligations; all in such manner and
upon such terms as Secured Party may deem proper, and without notice to or
further assent from Pledgor, it being hereby agreed that Pledgor shall be and
remain bound upon this Agreement, irrespective of the existence, value or
condition of any of the Pledged Collateral, and notwithstanding any such change,
exchange, settlement, compromise, surrender, release, renewal or extension, and
notwithstanding also that the Secured Obligations may, at any time, exceed the
aggregate principal amount thereof set forth in the Notes, or any other
agreement governing any Secured Obligations. Pledgor hereby waives notice of
acceptance of this Agreement, and also presentment, demand, protest and notice
of dishonor of any and all of the Secured Obligations, and promptness in
commencing suit against any party hereto or liable hereon, and in giving any
notice to or of making any claim or demand hereunder upon Pledgor. No act or
omission of any kind on Secured Party's part shall in any event affect or impair
this Agreement.
14. Indemnification. Pledgor agrees to indemnify and hold
Secured Party harmless from and against any taxes, liabilities, claims and
damages, including reasonable attorney's fees and disbursements, and other
expenses incurred or arising by reason of the taking or the failure to take
action by Secured Party, in good faith, in respect of any transaction effected
under this Agreement or in connection with the Lien provided for herein,
including, without limitation, any taxes payable in connection with the delivery
or registration of any of the Pledged Collateral as provided herein. Following
the occurrence of an Event of Default, Pledgor agrees to pay to Secured Party
all out-of-pocket costs and expenses incurred in connection with this Agreement
and all reasonable fees, expenses and disbursements, including registration
costs and the reasonable fees of Secured Party's agents or representatives,
incurred in connection with the execution and delivery of this Agreement and the
performance by Secured Party of the provisions of this Agreement and of any
transactions effected in connection with this Agreement. The obligations of
Pledgor under this Section 14 shall survive the termination of this Agreement.
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15. Miscellaneous. (a) Secured Party may execute any of its
duties hereunder by or through agents or employees and shall be entitled to
advice of counsel concerning all matters pertaining to its duties hereunder.
(b) Pledgor agrees to promptly reimburse Secured Party for
actual out-of-pocket expenses, including, without limitation, reasonable counsel
fees, incurred by Secured Party in connection with the administration and
enforcement of this Agreement following the occurrence of any Event of Default.
(c) Neither Secured Party nor any of its officers, directors,
employees, agents or counsel shall be liable for any action lawfully taken or
omitted to be taken by it or them hereunder or in connection herewith, except
for its or their own gross negligence or willful misconduct.
(d) This Agreement shall be binding upon Pledgor and its
successors, heirs and assigns, and shall inure to the benefit of, and be
enforceable by, Secured Party and its successors and assigns, and shall be
governed by, and construed and enforced in accordance with, the internal laws in
effect in the State of New York without giving effect to principles of conflict
of laws, and none of the terms or provisions of this Agreement may be waived,
altered, modified or amended except in writing duly signed for and on behalf of
Secured Party and Pledgor.
(e) This Agreement shall remain in full force and effect and
continue to be effective should any petition be filed by or against Pledgor for
bankruptcy or any other action or proceeding under the Federal Bankruptcy Code
or any law affecting creditors' rights that is similar to a bankruptcy law,
should any debtor become insolvent or bankrupt or make an assignment for the
benefit of creditors or should a receiver, sequestrator, custodian, trustee or
any similar official be appointed for all or any significant part of Pledgor's
assets, and shall continue to be effective or be reinstated, as the case may be,
if at any time payment and performance of the Secured Obligations, or any part
thereof, is, pursuant to applicable law, rescinded or reduced in amount, or must
otherwise be restored or returned by any obligee of the Secured Obligations,
whether as a "voidable preference," "fraudulent conveyance," or otherwise, all
as though such payment or performance had not been made. In the event that any
payment, or any part thereof, is rescinded, reduced, restored or returned, the
Secured Obligations shall be reinstated and deemed reduced only by such amount
paid and not so rescinded, reduced, restored or returned.
16. Severability. If for any reason any provision or
provisions hereof are determined to be invalid and contrary to any existing or
future law, such invalidity shall not impair the operation of or affect those
portions of this Agreement which are valid.
17. Notices. Except as otherwise provided herein, whenever it
is provided herein that any notice, demand, request, consent, approval,
declaration or other communication shall or may be given to or served upon any
of the parties by any other party, or whenever any of the parties desires to
give or serve upon any other a communication with respect to this Agreement,
each such notice, demand, request, consent, approval, declaration or other
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communication shall be in writing and either shall be delivered in person with
receipt acknowledged or sent by registered or certified mail, return receipt
requested, postage prepaid at the addresses set forth hereinabove or at such
other address as may be substituted by notice given as herein provided. The
giving of any notice required hereunder may be waived in writing by the party
entitled to receive such notice. Every notice, demand, request, consent,
approval, declaration or other communication hereunder shall be deemed to have
been duly given or served on the date on which personally delivered, with
receipt acknowledged, or three (3) business days after the same shall have been
deposited in the United States mail by registered or certified mail. Failure or
delay in delivering copies of any notice, demand, request, consent, approval,
declaration or other communication to the persons designated above to receive
copies shall in no way adversely affect the effectiveness of such notice,
demand, request, consent, approval, declaration or other communication.
18. Section Titles. The Section titles contained in this
Agreement are and shall be without substantive meaning or content of any kind
whatsoever and are not a part of the agreement between the parties hereto.
19. Counterparts. This Agreement may be executed in any number
of counterparts, which shall, collectively and separately, constitute one
agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Pledge
and Security Agreement to be duly executed as of the date first written above.
XXXXX MANAGEMENT CORP.
By: /s/ Xxxxxx X. Xxxxx, Xx.
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Name: Xxxxxx X. Xxxxx, Xx.
Title: President
Accepted and Acknowledged by:
NORTH ATLANTIC TRADING COMPANY, INC.
By:/s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
Title: President
Accepted and Acknowledged soley for
purposes of Sections 7 and 8(b)(iii) hereof:
/s/ Xxxxxx X. Xxxxx, Xx.
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Name: Xxxxxx X. Xxxxx, Xx.
Title: Voting Trustee
/s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
Title: Voting Trustee
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