EXHIBIT 10.3
PLEDGE AGREEMENT
PLEDGE AND SECURITY AGREEMENT dated as of June 16, 2005 (this
"Agreement"), made by the Borrowers and each of the Guarantors referred to below
(each a "Pledgor" and, collectively, the "Pledgors"), 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" thereunder or otherwise guaranties all or any part of the
Obligations, 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"), pursuant to which the
Lenders have agreed to make certain loans (collectively, the "Loans") to the
Borrowers;
WHEREAS, the Pledgors and the Agent entered into a Security
Agreement, dated the date hereof (the "Security Agreement"), in favor of Agent,
as agent for itself and the Lenders;
WHEREAS, it is a condition precedent to the making of any Loan by the
Lenders pursuant to the Financing Agreement that each Pledgor shall have
executed and delivered this Agreement to the Agent;
WHEREAS, the Pledgors 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 Pledgor often being provided through
financing obtained by the other Pledgors and the ability to obtain such
financing being dependent on the successful operations of all of the Pledgors as
a whole; and
WHEREAS, each Pledgor has determined that the execution, delivery and
performance of this Agreement directly benefit, and are in the best interest of
such Pledgor;
NOW, THEREFORE, in consideration of the premises and the agreements
herein and in order to induce the Lenders to make and maintain the Loans
pursuant to the Financing Agreement, each Pledgor hereby jointly and severally
agrees with the Agent, for the benefit of the Agent and the Lenders, as follows:
SECTION 1. Definitions. Reference is hereby made to the Financing
Agreement for a statement of the terms thereof. All terms used in this Agreement
which are defined in the Financing Agreement or in Article 8 or Article 9 of the
Uniform Commercial Code (the "Code") 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.
SECTION 2. Pledge and Grant of Security Interest. As collateral
security for all of the Obligations (as defined in Section 3 hereof), each
Pledgor hereby pledges and assigns to the Agent, for the benefit of the Agent
and the Lenders, a continuing security interest in and Lien on such Pledgor's
right, title and interest in and to the following (the "Pledged Collateral"):
(a) the indebtedness described in Schedule I hereto and all
indebtedness from time to time required to be pledged to the Agent pursuant to
the terms of the Financing Agreement (the "Pledged Debt"), the promissory notes
and other instruments evidencing the Pledged Debt and all interest, cash,
instruments, investment property and other property from time to time received,
receivable or otherwise distributed in respect of or in exchange for any or all
of the Pledged Debt;
(b) the shares of stock, partnership interests, membership interests
and other equity interests described in Schedule II hereto (the "Pledged
Shares"), whether or not evidenced or represented by any stock certificate,
certificated security or other instrument, issued by the Persons described in
such Schedule II (the "Existing Issuers"), the certificates representing the
Pledged Shares, all options and other rights, contractual or otherwise, in
respect thereof and all dividends, distributions, cash, instruments, investment
property and other property (including but not limited to, any stock dividend
and any distribution in connection with a stock split) from time to time
received, receivable or otherwise distributed in respect of or in exchange for
any or all of the Pledged Shares;
(c) the shares of stock, partnership interests, membership interests
or other equity interests at any time and from time to time acquired by such
Pledgor of any and all Persons now or hereafter existing (such Persons, together
with the Existing Issuers, being hereinafter referred to collectively as the
"Pledged Issuers" and individually as a "Pledged Issuer"), the certificates
representing such shares of stock, partnership interests, membership interests
or other equity interests, all options and other rights, contractual or
otherwise, in respect thereof and all dividends, distributions, cash,
instruments, investment property (including but not limited to, any stock
dividend and any distribution in connection with a stock split) and other
property from time to time received, receivable or otherwise distributed in
respect of or in exchange for any or all of the foregoing;
(d) all additional shares of stock, partnership interests, membership
interests or other equity interests from time to time acquired by such Pledgor,
of any Pledged Issuer, the certificates representing such additional shares, all
options and other rights, contractual or otherwise, in respect thereof and all
dividends, distributions, cash, instruments, investment property and other
property (including but not limited to, any stock dividend and any distribution
in connection with a stock split) from time to time received, receivable or
otherwise distributed in respect of or in exchange for any or all of the
foregoing;
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(e) all investment property, financial assets, securities, Capital
Stock, other equity interests and stock options of such Pledgor, all notes,
debentures, bonds, promissory notes or other evidences of indebtedness in excess
of $100,000 (excluding each of the promissory notes issued in favor of NATC as
listed on Schedule 7.02(e) to the Financing Agreement) to such Pledgor, and all
other assets now or hereafter received or receivable with respect to the
foregoing;
(f) all security entitlements of such Pledgor in any and all of the
foregoing; and
(g) all proceeds (including proceeds of proceeds) of any and all of
the foregoing;
in each case, whether now owned or hereafter acquired by such Pledgor and
howsoever its interest therein may arise or appear (whether by ownership,
security interest, Lien, claim or otherwise).
SECTION 3. Security for Obligations. The security interest created
hereby in the Pledged Collateral constitutes continuing collateral security for
all of the Obligations (as defined in the Financing Agreement).
SECTION 4. Delivery of the Pledged Collateral.
(a) (i) All promissory notes currently evidencing the Pledged Debt
and all certificates currently representing the Pledged Shares shall be
delivered to the Agent on or prior to the execution and delivery of this
Agreement. All other promissory notes, certificates and instruments constituting
Pledged Collateral from time to time required to be pledged to the Agent
pursuant to the terms hereof (the "Additional Collateral") shall be delivered to
the Agent promptly upon receipt thereof by or on behalf of any of the Pledgors.
All such promissory notes, certificates and instruments shall be held by or on
behalf of the Agent pursuant hereto and shall be delivered in suitable form for
transfer by delivery, or shall be accompanied by duly executed instruments of
transfer or assignment or undated stock powers executed in blank, all in form
and substance reasonably satisfactory to the Agent. If any Pledged Collateral
consists of uncertificated securities, unless the immediately following sentence
is applicable thereto, such Pledgor shall cause the Agent (or its custodian,
nominee or other designee) to become the registered holder thereof, or cause
each issuer of such securities to agree that, upon written notice from the
Agent, it will comply with instructions originated by the Agent with respect to
such securities without further consent by such Pledgor. If any Pledged
Collateral consists of security entitlements, such Pledgor shall transfer such
security entitlements to the Agent (or its custodian, nominee or other designee)
or cause the applicable securities intermediary to agree that, upon written
notice from Agent, it will comply with entitlement orders by the Agent without
further consent by such Pledgor.
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(ii) Within 10 days of the receipt by a Pledgor of any
Additional Collateral, a Pledge Amendment, duly executed by such Pledgor, in
substantially the form of Annex I hereto (a "Pledge Amendment"), shall be
delivered to the Agent in respect of the Additional Collateral to be pledged
pursuant to this Agreement and the Financing Agreement. The Pledge Amendment
shall from and after delivery thereof constitute part of Schedules I and II
hereto. Each Pledgor hereby authorizes the Agent to attach each Pledge Amendment
to this Agreement and agrees that all promissory notes, certificates or
instruments listed on any Pledge Amendment delivered to the Agent shall for all
purposes hereunder constitute Pledged Collateral and such Pledgor shall be
deemed upon delivery thereof to have made the representations and warranties set
forth in Section 5 with respect to such Additional Collateral.
(b) If any Pledgor shall receive, by virtue of such Pledgor's being
or having been an owner of any Pledged Collateral, any (i) stock certificate
(including, without limitation, any certificate representing a stock dividend or
distribution in connection with any increase or reduction of capital,
reclassification, merger, consolidation, sale of assets, combination of shares,
stock split, spin-off or split-off), promissory note or other instrument, (ii)
option or right, whether as an addition to, substitution for, or in exchange
for, any Pledged Collateral, or otherwise, (iii) dividends payable in cash or in
securities or other property or (iv) dividends or other distributions in
connection with a partial or total liquidation or dissolution or in connection
with a reduction of capital, capital surplus or paid-in surplus, in each case
except for such distributions permitted to be retained by such Pledgor pursuant
to Section 7 hereof, such Pledgor shall receive such stock certificate,
promissory note, instrument, option, right, payment or distribution in trust for
the benefit of the Agent, shall segregate it from such Pledgor's other property
and shall deliver it forthwith to the Agent, in the exact form received, with
any necessary endorsement and/or appropriate stock powers duly executed in
blank, to be held by the Agent as Pledged Collateral and as further collateral
security for the Obligations.
SECTION 5. Representations and Warranties. Each Pledgor jointly and
severally represents and warrants as follows:
(a) Each Pledgor (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, and (ii) has all
requisite power and authority to execute, deliver and perform this Agreement.
(b) The execution, delivery and performance by each Pledgor of this
Agreement (i) have been duly authorized by all necessary action of such Pledgor,
(ii) do not and will not contravene its charter or bylaws, 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 affecting it or any of its properties, and (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 this Agreement.
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(c) The Existing Issuers set forth in Schedule II hereto are the
Pledgors' only Subsidiaries existing on the date hereof. To such Pledgor's
knowledge, the Pledged Shares have been duly authorized and validly issued and
are fully paid and nonassessable and the holders thereof are not entitled to any
preemptive, first refusal or other similar rights. Except as noted in Schedule
II hereto, the Pledged Shares constitute 100% of the issued shares of Capital
Stock, partnership interests, membership interests or other equity interests, as
applicable, of the Existing Issuers as of the date hereof. All other shares of
stock constituting Pledged Collateral will be duly authorized and validly
issued, fully paid and nonassessable.
(d) The promissory notes currently evidencing the Pledged Debt have
been, and all other promissory notes from time to time evidencing Pledged Debt,
when executed and delivered, will, to such Pledgor's knowledge, have been, duly
authorized, executed and delivered by the respective makers thereof, and all
such promissory notes are or will be, as the case may be, legal, valid and
binding obligations of such makers, enforceable against such makers in
accordance with their respective terms, except as may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other similar laws.
(e) Prior to any Disposition thereof permitted by any Loan Document,
each Pledgor is and will be at all times the legal and beneficial owner of its
Pledged Collateral free and clear of all Liens, except for the Lien created by
this Agreement and Permitted Liens.
(f) 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 affecting any Pledgor or any of the
properties of any Pledgor and will not result in or require the creation of any
Lien upon or with respect to any of the properties of such Pledgor other than
pursuant to or as permitted by this Agreement or the other Loan Documents.
(g) No authorization or approval or other action by, and no notice to
or filing with, any Governmental Authority is required to be obtained or made by
any Pledgor for (i) the due execution, delivery and performance by any Pledgor
of this Agreement, (ii) the grant by any Pledgor, or the perfection, of the Lien
created hereby in the Pledged Collateral or (iii) the exercise by the Agent of
any of its rights and remedies hereunder, except as may be required in
connection with any sale of any Pledged Collateral by laws affecting the
offering and sale of securities generally.
(h) This Agreement creates a valid Lien in favor of the Agent in the
Pledged Collateral as security for the Obligations. The Agent's having
possession of the promissory notes evidencing the Pledged Debt, the certificates
representing the Pledged Shares and all other certificates, instruments and cash
constituting Pledged Collateral from time to time results in the perfection of
such Lien. Such Lien is, or in the case of Pledged Collateral in which any of
the Pledgors obtains rights after the date hereof, will be, a perfected, first
priority Lien, subject only to Permitted Liens. All action necessary or
desirable to perfect and protect such Lien has been duly taken, except for the
Agent's having possession of certificates, instruments and cash constituting
Pledged Collateral after the date hereof.
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(i) Each limited liability company or partnership interest of each
Pledgor that is a limited liability company or partnership or any of its
Subsidiaries that is a limited liability company or partnership is not dealt in
or traded on securities exchanges or in securities markets, is not a security
for purposes of Section 8-103 of any relevant Uniform Commercial Code, is not an
investment company security and is not evidenced by a certificate.
SECTION 6. Covenants as to the Pledged Collateral. So long as any
Obligation shall remain outstanding, each Pledgor will, unless the Agent shall
otherwise consent in writing:
(a) keep adequate records concerning the Pledged Collateral and
permit the Agent or any agents, designees or representatives thereof at any time
or from time to time to examine and make copies of and abstracts from such
records pursuant to the terms of the Financing Agreement;
(b) at the Pledgors' joint and several expense, promptly deliver to
the Agent a copy of each notice or other communication received by it in respect
of the Pledged Collateral;
(c) at the Pledgors' joint and several expense, defend the Agent's
right, title and security interest in and to the Pledged Collateral against the
claims of any Person;
(d) at the Pledgors' joint and several 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, or maintain the
perfection of, the security interest and Lien created hereby, (ii) enable the
Agent to exercise and enforce its rights and remedies hereunder in respect of
the Pledged Collateral or (iii) otherwise effect the purposes of this Agreement,
including, without limitation, delivering to the Agent, after the occurrence and
during the continuation of an Event of Default, irrevocable proxies in respect
of the Pledged Collateral;
(e) not sell, assign (by operation of law or otherwise), exchange or
otherwise dispose of any Pledged Collateral or any interest therein except as
expressly permitted by the Financing Agreement;
(f) not create or suffer to exist any Lien upon or with respect to
any Pledged Collateral, except for the Lien created hereby and any Permitted
Liens;
(g) not take or fail to take any action which would in any manner
impair the enforceability of the Agent's security interest in and Lien on any
Pledged Collateral; and
(h) Not permit any limited liability company interest of any Pledgor
that is a limited liability company to be dealt in or traded on securities
exchange or in securities markets, become a security for purposes of Section
8-103 of any relevant Uniform Commercial Code, become an investment company
security, or be represented by a certificate.
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SECTION 7. Voting Rights, Dividends, Etc. in Respect of the Pledged
Collateral.
(a) So long as no Event of Default shall have occurred and be
continuing:
(i) each Pledgor may exercise any and all voting and other
consensual rights pertaining to any Pledged Collateral for any purpose not
inconsistent with the terms of this Agreement, the Financing Agreement or the
other Loan Documents; provided, however, that (A) none of the Pledgors will
exercise or refrain from exercising any such right, as the case may be, if the
Agent gives it notice that, in the Agent's judgment, such action (or inaction)
could reasonably be expected to have a Material Adverse Effect and (B) each
Pledgor will give the Agent at least 5 Business Days' notice of the manner in
which it intends to exercise, or the reasons for refraining from exercising, any
such right which could reasonably be expected to have a Material Adverse Effect;
(ii) each of the Pledgors may receive and retain any and all
dividends, interest payments or other distributions paid in respect of the
Pledged Collateral to the extent permitted by the Financing Agreement; provided,
however, that any and all (A) dividends and interest paid or payable other than
in cash in respect of, and instruments and other property received, receivable
or otherwise distributed in respect of or in exchange for, any Pledged
Collateral, (B) dividends and other distributions paid or payable in cash in
respect of any Pledged Collateral in connection with a partial or total
liquidation or dissolution or in connection with a reduction of capital, capital
surplus or paid-in surplus, and (C) cash paid, payable or otherwise distributed
in redemption of, or in exchange for, any Pledged Collateral, together with any
dividend, interest payment or other distribution, in each case, which at the
time of such dividend, interest payment or other distribution was not permitted
by the Financing Agreement, shall be, and shall forthwith be delivered to the
Agent to hold as, Pledged Collateral and shall, if received by any of the
Pledgors, be received in trust for the benefit of the Agent, shall be segregated
from the other property or funds of the Pledgors, and shall be forthwith
delivered to the Agent in the exact form received with any necessary endorsement
and/or appropriate stock powers duly executed in blank, to be held by the Agent
as Pledged Collateral and as further collateral security for the Obligations;
and
(iii) the Agent will execute and deliver (or cause to be
executed and delivered) to a Pledgor all such proxies and other instruments as
such Pledgor may reasonably request for the purpose of enabling such Pledgor to
exercise the voting and other rights which it is entitled to exercise pursuant
to Section 7(a)(i) hereof and to receive the dividends, interest and/or other
distributions which it is authorized to receive and retain pursuant to Section
7(a)(ii) hereof.
(b) Upon the occurrence and during the continuance of an Event of
Default and subject to any applicable law:
(i) all rights of each Pledgor to exercise the voting and other
consensual rights which it would otherwise be entitled to exercise pursuant to
Section 7(a)(i) hereof, and to receive the dividends, distributions, interest
and other payments which it would otherwise be authorized to receive and retain
pursuant to Section 7(a)(ii) hereof, shall cease, and all such rights shall
thereupon become vested in the Agent, which shall thereupon have the sole right
to exercise such voting and other consensual rights and to receive and hold as
Pledged Collateral such dividends and interest payments;
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(ii) the Agent is authorized to notify each debtor with respect
to the Pledged Debt to make payment directly to the Agent and may collect any
and all moneys due or to become due to any Pledgor in respect of the Pledged
Debt, and each of the Pledgors hereby authorizes each such debtor to make such
payment directly to the Agent without any duty of inquiry;
(iii) without limiting the generality of the foregoing, the
Agent may at its option exercise any and all rights of conversion, exchange,
subscription or any other rights, privileges or options pertaining to any of the
Pledged Collateral as if it were the absolute owner thereof, including, without
limitation, the right to exchange, in its discretion, any and all of the Pledged
Collateral upon the merger, consolidation, reorganization, recapitalization or
other adjustment of any Pledged Issuer, or upon the exercise by any Pledged
Issuer of any right, privilege or option pertaining to any Pledged Collateral,
and, in connection therewith, to deposit and deliver any and all of the Pledged
Collateral with any committee, depository, transfer agent, registrar or other
designated agent upon such terms and conditions as it may determine; and
(iv) all dividends, distributions, interest and other payments
which are received by any of the Pledgors contrary to the provisions of Section
7(b)(i) hereof shall be received in trust for the benefit of the Agent, shall be
segregated from other funds of the Pledgors, and shall be forthwith paid over to
the Agent as Pledged Collateral in the exact form received with any necessary
endorsement and/or appropriate stock powers duly executed in blank, to be held
by the Agent as Pledged Collateral and as further collateral security for the
Obligations.
SECTION 8. Additional Provisions Concerning the Pledged Collateral.
(a) To the maximum extent permitted by applicable law, each Pledgor
(i) upon the occurrence and during the continuance of an Event of Default,
authorizes the Agent to execute any such agreements, instruments or other
documents in such Pledgor's name and to file such agreements, instruments or
other documents in such Pledgor's name in any appropriate filing office, (ii)
authorizes the Agent to file any financing statements required hereunder or
under any other Loan Document, and any continuation statements or amendments
with respect thereto, in any appropriate filing office without the signature of
such Pledgor and (iii) ratifies the filing of any financing statement, and any
continuation statement or amendment with respect thereto, filed without the
signature of such Pledgor prior to the date hereof. A photocopy or other
reproduction of this Agreement or any financing statement covering the Pledge
Collateral or any part thereof shall be sufficient as a financing statement
where permitted by law.
(b) Upon the occurrence and during the continuance of an Event of
Default, each Pledgor hereby irrevocably appoints the Agent as such Pledgor's
attorney-in-fact and proxy, with full authority in the place and stead of such
Pledgor and in the name of such Pledgor or otherwise, from time to time in the
Agent's discretion, to take any action and to execute any agreement, instrument
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or other document which the Agent may deem reasonably necessary or advisable to
accomplish the purposes of this Agreement, including, without limitation, to
receive, endorse and collect all instruments made payable to such Pledgor
representing any dividend, distribution, interest or other payment in respect of
any Pledged Collateral and to give full discharge for the same. This power is
coupled with an interest and is irrevocable until all of the outstanding
Obligations are paid in full after the termination of all of the Commitments.
(c) Upon the occurrence and during the continuance of an Event of
Default, if any Pledgor fails to perform any agreement or obligation contained
herein, the Agent itself may perform, or cause performance of, such agreement or
obligation, and the expenses of the Agent incurred in connection therewith shall
be jointly and severally payable by the Pledgors pursuant to Section 10 hereof
and shall be secured by the Pledged Collateral.
(d) The powers conferred on the Agent hereunder are solely to protect
its interest in the Pledged Collateral and except as provided by any applicable
law shall not impose any duty upon it to exercise any such powers. Except for
the safe custody of any Pledged Collateral in its possession and the accounting
for monies actually received by it hereunder and except as provided by any
applicable law, the Agent shall have no duty as to any Pledged Collateral or as
to the taking of any necessary steps to preserve rights against prior parties or
any other rights pertaining to any Pledged Collateral and shall be relieved of
all responsibility for the Pledged Collateral upon surrendering it or tendering
surrender of it to any Pledgor. Subject to any applicable law, the Agent shall
be deemed to have exercised reasonable care in the custody and preservation of
the Pledged Collateral in its possession if the Pledged Collateral is accorded
treatment substantially equal to that which the Agent accords its own property,
it being understood that the Agent shall, subject to any applicable law, not
have responsibility for (i) ascertaining or taking action with respect to calls,
conversions, exchanges, maturities, tenders or other matters relating to any
Pledged Collateral, whether or not the Agent has or is deemed to have knowledge
of such matters or (ii) taking any necessary steps to preserve rights against
any parties with respect to any Pledged Collateral.
(e) The Agent may in its reasonable discretion at any time after the
occurrence and during the continuation of an Event of Default (i) without notice
to any Pledgor, transfer or register in the name of the Agent or any of its
nominees any or all of the Pledged Collateral, subject only to the revocable
rights of such Pledgor under Section 7(a) hereof and (ii) exchange certificates
or instruments constituting Pledged Collateral for certificates or instruments
of smaller or larger denominations.
SECTION 9. Remedies Upon Default. If any Event of Default shall have
occurred and be continuing:
(a) The Agent may exercise in respect of the Pledged 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 on default
under the Code then in effect in the State of New York; and without limiting the
generality of the foregoing and, subject to any applicable law, without notice
except as specified below, sell the Pledged Collateral or any part thereof in
one or more parcels at public or private sale, at any exchange or broker's board
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or elsewhere, at such price or prices and on commercially reasonable terms. Each
Pledgor agrees that, to the extent notice of sale shall be required by law, at
least 10 days' notice to such Pledgor of the time and place of any public sale
of Pledged Collateral owned by such Pledgor or the time after which any private
sale is to be made shall constitute reasonable notification. The Agent shall not
be obligated to make any sale of Pledged Collateral regardless of whether or not
notice of sale has 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.
(b) In the event that the Agent determines to exercise its right to
sell all or any part of the Pledged Collateral pursuant to Section 9(a) hereof,
each Pledgor will, at such Pledgor's expense and upon written request by the
Agent: (i) execute and deliver, and cause each issuer of such Pledged Collateral
and the directors and officers thereof to execute and deliver, all such
instruments and documents, and do or cause to be done all such other acts and
things, as may be necessary or, in the opinion of the Agent, advisable to
register such Pledged Collateral under the provisions of the Securities Act of
1933, as amended (the "Securities Act"), and use commercially reasonable efforts
to cause the registration statement relating thereto to become effective and to
remain effective for such period as prospectuses are required by law to be
furnished, and to make all amendments and supplements thereto and to the related
prospectus which, in the opinion of the Agent, are necessary or advisable, all
in conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto, (ii)
use commercially reasonable efforts to cause each issuer of such Pledged
Collateral to qualify such Pledged Collateral under the state securities or
"Blue Sky" laws of each jurisdiction, and to obtain all necessary governmental
approvals for the sale of the Pledged Collateral, as requested by the Agent,
(iii) use commercially reasonable efforts to cause each Pledged Issuer to make
available to its securityholders, as soon as practicable, an earnings statement
which will satisfy the provisions of Section 11(a) of the Securities Act, and
(iv) do or use commercially reasonable efforts to cause to be done all such
other acts and things as may be necessary to make such sale of such Pledged
Collateral valid and binding and in compliance with applicable law. Each Pledgor
acknowledges the impossibility of ascertaining the amount of damages which would
be suffered by the Agent by reason of the failure by any Pledgor to perform any
of the covenants contained in this Section 9(b) and, consequently, agrees that,
if any Pledgor fails to perform any of such covenants, it shall pay, as
liquidated damages and not as a penalty, an amount equal to the value of the
Pledged Collateral on the date the Agent demands compliance with this Section
9(b); provided, however, that the payment of such amount shall not release any
Pledgor from any of its obligations under any of the other Loan Documents.
(c) Notwithstanding the provisions of Section 9(b) hereof, each
Pledgor recognizes that the Agent may deem it impracticable to effect a public
sale of all or any part of the Pledged Shares or any other securities
constituting Pledged Collateral and that the Agent may, therefore, determine to
make one or more private sales of any such securities to a restricted group of
purchasers who will be obligated to agree, among other things, to acquire such
securities for their own account, for investment and not with a view to the
distribution or resale thereof. Each Pledgor acknowledges that any such private
sale may be at prices and on terms less favorable to the seller than the prices
and other terms which might have been obtained at a public sale and,
notwithstanding the foregoing, agrees that, subject to any applicable law, such
private sales shall be deemed to have been made in a commercially reasonable
10
manner and that the Agent shall have no obligation to delay the sale of any such
securities for the period of time necessary to permit the issuer of such
securities to register such securities for public sale under the Securities Act.
Each Pledgor further acknowledges and agrees, subject to any applicable law,
that any offer to sell such securities which has been (i) publicly advertised on
a bona fide basis in a newspaper or other publication of general circulation in
the financial community of New York, New York (to the extent that such an offer
may be so advertised without prior registration under the Securities Act) or
(ii) made privately in the manner described above to not less than fifteen bona
fide offerees shall be deemed to involve a "public disposition" for the purposes
of Section 9-610(c) of the Code (or any successor or similar, applicable
statutory provision) as then in effect in the State of New York, notwithstanding
that such sale may not constitute a "public offering" under the Securities Act,
and that the Agent may, in such event, bid for the purchase of such securities.
(d) Any cash held by the Agent as Pledged Collateral and all cash
proceeds received by the Agent in respect of any sale of, collection from, or
other realization upon, all or any part of the Pledged Collateral shall be
applied (after payment of any amounts payable to the Agent pursuant to Section
10 hereof) in such order as the Agent shall elect 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 the
Pledgors or to such Person as may be lawfully entitled to receive such surplus.
(e) In the event that the proceeds of any such sale, collection or
realization are insufficient to pay all amounts to which the Agent is legally
entitled, the Pledgors shall be liable, jointly and severally, for the
deficiency, together with interest thereon at the highest rate specified in the
Financing Agreement 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 and expenses of any attorneys employed by the Agent
to collect such deficiency.
SECTION 10. Indemnity and Expenses.
(a) Each Pledgor jointly and severally agrees to indemnify and hold
harmless the Agent (and all of its respective officers, directors, employees,
attorneys, consultants and agents) from and against any and all claims, damages,
losses, liabilities obligations, penalties, reasonable costs and expenses
(including, without limitation, reasonable legal fees and disbursements of
counsel) to the extent that they arise out of or otherwise result from this
Agreement (including, without limitation, enforcement of this Agreement),
except, as to any such indemnified Person, claims, losses or liabilities
resulting solely and directly from such Person's gross negligence or willful
misconduct as determined by a final judgment of a court of competent
jurisdiction.
(b) Each Pledgor jointly and severally agrees to pay to the Agent
upon demand the amount of any and all reasonable costs and expenses, including
the reasonable fees and disbursements of the Agent's counsel and of any experts
and agents, 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 Pledged Collateral, (iii) the exercise or enforcement of
any of the rights of the Agent hereunder, or (iv) the failure by any Pledgor to
perform or observe any of the provisions hereof.
11
SECTION 11. 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 Pledgor, 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 11. 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 12. Security Interest Absolute. All rights of the Agent and
the Lenders, all Liens and all obligations of each of the Pledgors hereunder
shall be absolute and unconditional irrespective of: (i) any lack of validity or
enforceability of the Financing Agreement or any other agreement or instrument
relating thereto, (ii) 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, (iii) 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
(iv) 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
Pledgors in respect of the Obligations. All authorizations and agencies
contained herein with respect to any of the Pledged Collateral are irrevocable
and powers coupled with an interest.
SECTION 13. Miscellaneous.
(a) No amendment of any provision of this Agreement shall be
effective unless it is in writing and signed by the Agent, and no waiver of any
provision of this Agreement, and no consent to any departure by any of the
Pledgors 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 or the Lenders to exercise,
and no delay in exercising, any right hereunder or under any 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 and the Lenders provided
herein and in the Loan Documents are cumulative and are in addition to, and not
exclusive of, any other rights or remedies provided by law. The rights of the
Agent and the Lenders under the applicable Loan Document against any party
thereto are not conditional or contingent on any attempt by the Agent or the
Lenders to exercise any of their rights under any other document against such
party or against any other Person.
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(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 and
Lien on the Pledged Collateral and shall (i) remain in full force and effect
until the payment in full or release of the outstanding Obligations after the
termination of all of the Commitments and (ii) be binding on each Pledgor and,
by its acceptance hereof, the Agent, and its respective successors and assigns,
and shall inure, together with all rights and remedies of the Agent and the
Lenders hereunder, to the benefit of the Agent and the Lenders and their
respective successors, transferees and assigns. Upon any such assignment or
transfer, all references in this Agreement to the Agent or any such Lender shall
mean the assignee of the Agent or such Lender. None of the rights or obligations
of any of the Pledgors 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
after the termination of all of the Commitments (i) this Agreement and the
security interest and Lien created hereby shall terminate and all rights to the
Pledged Collateral shall revert to the Pledgors and (ii) the Agent will, upon
the Pledgors' request and at the Pledgors' expense, (A) return to the Pledgors
such of the Pledged 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
Pledgors, without recourse, representation or warranty, such documents as the
Pledgors shall reasonably request to evidence such termination.
(f) This Agreement shall be governed by and construed in accordance
with the law of the State of New York.
(g) This Agreement may be executed in any number of counterparts and
by the different parties hereto on separate counterparts, each of which shall be
deemed an original, but all such counterparts shall constitute one and 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.
(h) All of the Obligations of the Pledgors hereunder are joint and
several. The Agent may, in its sole and absolute discretion, enforce the
provisions hereof against any of the Pledgors and shall not be required to
proceed against all Pledgors jointly or seek payment from the Pledgors ratably.
In addition, the Agent may, in its sole and absolute discretion, select the
Pledged Collateral of any one or more of the Pledgors for sale or application to
the Obligations, without regard to the ownership of such Pledged Collateral, and
shall not be required to make such selection ratably from the Pledged Collateral
owned by all of the Pledgors. The release or discharge of any Pledgor by the
Agent shall not release or discharge any other Pledgor from the obligations of
such Person hereunder.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered by their officer thereunto duly authorized, as of the
date first above written.
PLEDGORS:
---------
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
