Exhibit 10.10
 
DATED     APRIL 2014
 
VICTORY ELECTRONIC CIGARETTES CORPORATION
as Borrower
 
MUST HAVE LIMITED
as Guarantor
 
[                          ]
as Senior Creditor
 
[                      ]
as Security Trustee for the Senior Creditor
 
THE PERSONS NAMED IN SCHEDULE 1
as Subordinated Creditors
 
AND
 
[                      ]
as Security Trustee for the Subordinated Creditors

 
INTER-CREDITOR DEED
 
[img001.jpg]
 
 
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Contents
 
1
Definitions and interpretation
3
2
Priorities
7
3
Borrower and Guarantor covenants
9
4
Subordinated Creditors and Junior Security Trustee covenants
10
5
Permitted Payments
11
6
Waiver and Amendments of Debt Documents
11
7
Subordination on Insolvency
12
8
Treatment of Distributions
13
9
Preservation of rights
13
10
Co-operation by Borrower, the Guarantor, the Subordinated Creditors and the
Junior Security Trustee
13
11
Preservation of subordination
14
12
Book debts, insurance and custody of documents
15
13
Senior Debt enforcement
16
14
Enforcement by the Subordinated Creditors and/or the Junior Security Trustee
16
15
Information by Subordinated Creditor
16
16
Application of proceeds
17
17
Refinancing of Senior Debt
17
18
Power of attorney
18
19
Expenses
18
20
Duration
20
21
Restrictions on assignments
20
22
Borrower's and Guarantor’s acknowledgements
20
23
Endorsement on Debt Documents
21
24
Remedies, waivers, amendments and consents
21
25
Severance
22
26
Counterparts
22
27
Third party rights
22
28
Perpetuity period
22
29
Notices
22
30
Governing law and jurisdiction
24
Schedule 1   Subordinated Creditors
25
Schedule 2   Senior Debt Documents
26
Part 1.   Senior lending documents
26
Part 2.   Senior Security Documents
26
Schedule 3   Junior Debt Documents
26
Part 1.   Junior lending documents
26
Part 2.   Junior Security Documents
26

 
 
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THIS AGREEMENT is dated        April 2014 and made between:
 
(1)  
VICTORY ELECTRONIC CIGARETTES CORPORATION, registered in the State of Nevada,
USA under number C13461-2004 whose registered office is at 11335 Apple Drive,
Spring Lake, Michigan 49448, USA ("Borrower");

 
(2)  
MUST HAVE LIMITED, a limited liability company incorporated in England and Wales
with company number 05101019 whose registered office is at Unit 14, Dale Street
Industrial Estate, Radcliffe, Manchester M26 1AD (“Guarantor”).

 
(3)  
[                                    ] ("Senior Creditor").

 
(4)  
[                                    ] (“Senior Security Trustee”).

 
(5)  
The persons whose names and addresses are set out in column (1) of Schedule 1
("Subordinated Creditors").

 
(6)  
[                                    ] ("Junior Security Trustee").

 
Background
 
(A)  
The Senior Creditor has agreed to provide the Senior Debt, and the Subordinated
Creditors have agreed to provide the Junior Debt, to the Borrower and/or the
Guarantor (as applicable). The Senior Security Trustee acts as security agent
and trustee for the Senior Creditor in respect of the Senior Security and the
Junior Security Trustee acts as security agent and trustee for the Subordinated
Creditors in respect of the Junior Security. The parties have agreed that the
priority of their debts of the Creditors shall be as set out in this deed.

 
(B)  
The Borrower and the Guarantor have agreed to enter this deed to acknowledge its
terms and to give certain covenants to the Creditors.

 
Agreed terms
 
1.  
Definitions and interpretation

 
1.1  
Definitions

 
The following definitions apply in this deed.
 
Ancillary Liabilities: in relation to the Senior Debt or the Junior Debt means:
 
(a)  
any refinancing, novation, refunding, restructuring, deferral or extension of
any of those liabilities;

 
(b)  
any further advance which may be made under any agreement supplemental to the
relevant facilities or credit agreement plus all interest, indemnities, fees and
costs in connection therewith;

 
(c)  
any claim for damages or restitution in the event of rescission of any such
liabilities or otherwise in connection with any relevant facilities or credit
agreement;

 
(d)  
any claim against the Borrower and/or the Guarantor (and in relation to the
Senior Debt, the Subordinated Creditors) flowing from any recovery by the
Borrower and/or the Guarantor (and in relation to the Senior Debt, the
Subordinated Creditor) of a payment or discharge in respect of those liabilities
on the grounds of preference or otherwise; and

 
 
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(e)  
any amounts (including post-insolvency interest) which would be included in any
of the above but for any discharge, non-provability, unenforceability or
non-allowability of the same in any insolvency or other proceedings.

 
Borrower Equity Capital Raising: a public offering of the Borrower’s Common
Stock made after the date of this deed, which raises gross proceeds for the
Borrower of at least US$40,000,000.
 
Business Day: a day other than a Saturday, Sunday or public holiday in England
when banks in London are open for business.
 
Creditors: the Senior Creditor (and the Senior Security Trustee acting as
security agent and trustee for the Senior Creditor) and the Subordinated
Creditors (and the Junior Security Trustee acting as security agent and trustee
for the Subordinated Creditors) together, and Creditor means any of the
Creditors.
 
Debt Document: each of the Junior Debt Documents and the Senior Debt Documents.
 
Distressed Disposal: a disposal of an asset of the Borrower or the Guarantor
which is being effected as result of the enforcement of the Senior Security
and/or the Junior Security.
 
Enforcement Date: the Business Day following the date on which a Creditor
receives written notice from the Senior Creditor that the Senior Creditor and/or
the Senior Security Trustee has taken action to:
 
(a)  
demand repayment, or payment, of any of the Liabilities secured by the Security
constituted by any of its Security Documents;

 
(b)  
enforce any of the Security constituted by any of its Security Documents; or

 
(c)  
take possession of any asset subject to any of the Security constituted by any
of its Security Documents.

 
Initial Period: the period of 174 days from the date of this deed.
 
Insolvency: in respect of any person means:
 
(a)  
that person's bankruptcy, dissolution, liquidation, winding-up or
administration, an application is made/or an interim order in respect of that
person or that person entering into any voluntary arrangement or composition
with creditors;

 
(b)  
the appointment of a receiver or administrative receiver in respect of all or
part of the person's asset; and

 
(c)  
any event having a similar effect under the laws of any relevant jurisdiction,

 
and the term "Insolvent" shall be interpreted accordingly.
 
Junior Debt: all Liabilities which are or may become payable or owing by the
Borrower and/or the Guarantor to any of the Subordinated Parties under the
Junior Debt Documents, or otherwise, together with all Ancillary Liabilities
relating thereto.
 
Junior Debt Document: any document referred to in Schedule 3.
 
Junior Loan Notes: Secured Loan Notes 2014, in the aggregate principal amount of
US$11,000,000, issued by the Borrower to the Subordinated Creditors on or about
the date of this deed.
 
Junior Loan Note Instrument: the instrument dated on or about the date of this
deed pursuant to which the Junior Loan Notes are, or are to be, constituted.
 
Junior Security Document: any document referred to in Part 2 of Schedule 3 and
any document under which Security is taken pursuant thereto and any other
document under which Security is created, whether at the date of this deed or at
any later date, which secures any of the Junior Debt and is permitted to be
taken pursuant to this deed.
 
 
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Junior Security: any Security in favour of any or all of the Subordinated
Parties created by a Junior Security Document.
 
Liabilities: all present or future monies, obligations or liabilities, whether
actual or contingent and whether owed jointly or severally, as principal or
surety and/or in any other capacity.
 
Losses: all losses (including loss of profit), claims, demands, actions,
proceedings, damages and other payments, costs, charges, expenses and other
liabilities of any kind.
 
Permitted Payment: any payment of amounts owing to the Subordinated Parties
permitted under clause 5.1 or clause 5.3 of this deed.
 
Potential Event of Default: in respect of a Debt Document, any event or
circumstance which would (with the expiry of a grace period, the giving of
notice, the making of any determination under the Debt Document, the fulfilment
of any other condition or any combination of any of the foregoing) be an Event
of Default under the Debt Document;
 
Receiver: a receiver, receiver and manager or administrative receiver appointed
by a Senior Party pursuant to the provisions of its Security Documents.
 
Right: any Security or other right or benefit whether arising by set-off,
counterclaim, subrogation, indemnity, proof in liquidation or otherwise and
whether from contribution or otherwise.
 
Security Document: any Senior Security Document and any Junior Security
Document.
 
Security: any mortgage, charge (whether fixed or floating, legal or equitable),
pledge, lien, assignment by way of security or other security interest securing
any obligation of any person, or any other agreement or arrangement having a
similar effect.
 
Senior Debt: all Liabilities which are or may become payable or owing by the
Borrower and/or the Guarantor to any or all of the Senior Parties under the
Senior Debt Documents together with all Ancillary Liabilities relating thereto.
 
Senior Debt Document: any document referred to in Schedule 2.
 
Senior Discharge Date: means the date, as determined by the Senior Security
Trustee, on which all Senior Debt has been unconditionally and irrevocably paid
and discharged in full to the satisfaction of the Senior Security Trustee,
whether or not by enforcement and on which no commitment is in force under the
Senior Debt Documents.
 
Senior Convertible Loan Notes: 6% Secured Loan Notes 2014, in the aggregate
principal amount of US$ $24,175,824, issued by the Borrower to the Senior
Creditor, on or about the date of this deed;
 
Senior Convertible Note Instrument: the instrument dated on or about the date of
this deed pursuant to which the Senior Convertible Loan Notes are, or are to be,
constituted.
 
Senior Parties: means the Senior Creditor and the Senior Security Trustee and a
Senior Party means any of the Senior Parties.
 
Senior Security Document: any document referred to in Part 2 of Schedule 2 and
any document under which Security is taken pursuant thereto and any other
document under which Security is created, whether at the date of this deed or at
any later date, which secures any of the Senior Debt.
 
Senior Security: any Security in favour of any or all of the Senior Parties
created by a Senior Security Document.
 
Share Purchase Agreement: the share purchase agreement dated on or about the
date of this deed between the Borrower and the Subordinated Creditors, pursuant
to which inter alia the Borrower shall acquire the entire issued share capital
of the Guarantor from the Subordinated Creditors.
 
Subordinated Parties: means the Subordinated Creditors and the Junior Security
Trustee and a Subordinated Party means any of the Subordinated Parties.
 
 
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Subsidiary: means, a subsidiary undertaking within the meaning of section 1162
of the Companies act 2006;
 
1.2  
Interpretation

 
In this deed:
 
(a)  
clause, Schedule and paragraph headings shall not affect the interpretation of
this deed;

 
(b)  
a reference to a person shall include a reference to an individual, firm,
company, corporation, partnership, unincorporated body of persons, government,
state or agency of a state or any association, trust, joint venture or
consortium (whether or not having separate legal personality) and that person's
personal representatives, successors, permitted assigns and permitted
transferees;

 
(c)  
unless the context otherwise requires, words in the singular shall include the
plural and in the plural shall include the singular;

 
(d)  
unless the context otherwise requires, a reference to one gender shall include a
reference to the other genders;

 
(e)  
a reference to a party shall include that party's successors, permitted assigns
and permitted transferees;

 
(f)  
a reference to a statute or statutory provision is a reference to it as amended,
extended or re-enacted from time to time;

 
(g)  
a reference to a statute or statutory provision shall include all subordinate
legislation made from time to time under that statute or statutory provision;

 
(h)  
a reference to writing or written includes fax and e-mail;

 
(i)  
an obligation on a party not to do something includes an obligation not to allow
that thing to be done;

 
(j)  
a reference to this deed (or any provision of it) or to any other agreement or
document referred to in this deed is a reference to this deed, that provision or
such other agreement or document as amended (in each case, other than in breach
of the provisions of this deed) from time to time;

 
(k)  
unless the context otherwise requires, a reference to a clause or Schedule is to
a clause of, or Schedule to, this deed and a reference to a paragraph is to a
paragraph of the relevant Schedule;

 
(l)  
any words following the terms including, include, in particular, for example or
any similar expression shall be construed as illustrative and shall not limit
the sense of the words, description, definition, phrase or term preceding those
terms;

 
(m)  
a reference to an amendment includes a novation, re-enactment, supplement or
variation (and amended shall be construed accordingly);

 
(n)  
a reference to assets includes present and future properties, undertakings,
revenues, rights and benefits of every description; and

 
(o)  
a reference to determines or determined means, unless the contrary is indicated,
a determination made at the absolute discretion of the person making it.

 
1.3  
Schedules

 
The Schedules form part of this deed and shall have effect as if set out in full
in the body of this deed. Any reference to this deed includes the Schedules.
 
1.4  
Clawback

 
If the Senior Security Trustee considers that an amount paid in respect of the
Senior Debt is capable of being avoided or otherwise set aside on the
liquidation or administration of the Borrower, the Guarantor or otherwise, then
that amount shall not be considered to have been irrevocably paid for the
purposes of this deed.
 
 
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2.  
Priorities

 
2.1  
Senior Parties consent to Junior Security

 
Each of the Senior Parties:
 
(a)  
consents to the creation or subsistence (as appropriate) of the Junior Security
and the Junior Debt under the Junior Debt Documents; and

 
(b)  
confirms that the creation or subsistence of the Junior Security and/or the
Junior Debt under the Junior Debt Documents do not constitute a default by the
Borrower or Guarantor under any of the Senior Debt Documents.

 
2.2  
Subordinated Parties consent to Senior Security

 
Each of the Subordinated Parties:
 
(a)  
consents to the creation of the Senior Security; and

 
(b)  
confirms that the creation or subsistence of the Senior Security does not
constitute a default by the Borrower or Guarantor under any of the Junior Debt
Documents.

 
2.3  
Ranking and subordination of debt

 
Each of the parties agree that:
 
(a)  
the Senior Debt ranks and shall rank in priority to the Junior Debt in all
respects;

 
(b)  
the Junior Debt is and shall be subordinated to the Senior Debt; and

 
(c)  
no payments shall (except as otherwise provided in this deed) be made by any
person in respect of the Junior Debt while the Senior Debt is outstanding.

 
2.4  
Ranking and subordination of security

 
Each of the parties agree that:
 
(a)  
the Senior Security shall rank in priority to the Junior Security; and

 
(b)  
the Junior Security is and shall be subordinated to, and rank after, the Senior
Security.

 
2.5  
Monies received by Subordinated Party

 
If before the Senior Discharge Date:
 
(a)  
any Subordinated Party receives a payment or distribution in cash or in any
other form in respect of, or on account of the Junior Debt from the Borrower or
the Guarantor or any other source;

 
(b)  
any Subordinated Party receives the proceeds of any enforcement of any security,
or payment under any guarantee, for any Junior Debt; or

 
(c)  
the Borrower or the Guarantor makes any payment or distribution in cash or in
any other form on account of the purchase or other acquisition of any of the
Junior Debt,

 
in each case in contravention of this deed (and, for the avoidance of doubt,
this Clause shall not apply to any Permitted Payment), the relevant Subordinated
Party shall forthwith pay any and all such amounts to the Senior Security
Trustee for application against the Senior Debt and until it does so shall hold
all such amounts on trust for the Senior Creditor.
 
 
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2.6  
Non-permitted set-off

 
If, for any reason, the Junior Debt is discharged in whole or in part by set-off
in contravention of this deed, the Subordinated Creditors will forthwith pay an
amount equal to the amount of the Junior Debt discharged by the set-off to the
Senior Security Trustee for application against the Senior Debt.
 
2.7  
Failure of trust

 
If for any reason, a trust in favour of, or a holding of property for, the
Senior Creditor under this deed is invalid or unenforceable, the Subordinated
Creditors shall pay and deliver to the Senior Security Trustee in cash or in
kind an amount (or, if in kind, a value) equal to the payment, receipt or
recovery which it would otherwise have been bound to hold in trust for, or as
property of, the Senior Creditor.
 
2.8  
Continuing status of security

 
Nothing in this deed shall affect the status of the Security Documents as
continuing security, nor shall the ranking of the Security in clause 2.4 be
affected by any act, omission, transaction, limitation, matter, thing or
circumstance whatsoever which but for this provision might operate to affect the
relative priorities of the Security constituted by the Security Documents,
including, but not limited to:
 
(a)  
the nature of the Security constituted by the Security Documents and the order
of their execution or registration;

 
(b)  
any provision contained in any of the Security Documents;

 
(c)  
the respective date (or dates) on which any person received notice of the
existence or creation of any Security constituted by any Security Document;

 
(d)  
the respective date (or dates) on which monies may be, or have been, advanced or
become owing or payable under a Debt Document or secured under a Security
Document;

 
(e)  
any fluctuation from time to time in the amount of Liabilities secured by a
Security Document and in particular, without limitation, any reduction to nil of
the Liabilities so secured;

 
(f)  
the existence at any time of a credit balance on any current or other account of
the Borrower or the Guarantor;

 
(g)  
the appointment of any liquidator, Receiver, administrator or other similar
officer either in respect of the Borrower or the Guarantor or over all or any
part of the Borrower's or the Guarantor’s assets (as applicable); and/or

 
(h)  
any amendment or supplement to, or variation of, any Debt Document.

 
2.9  
Invalidity of security

 
If all or any of the Senior Security or Junior Security:
 
(a)  
is released; or

 
(b)  
is or becomes wholly or partly invalid or unenforceable,

 
the Senior Creditor or Subordinated Creditors (respectively) shall bear the
resulting loss and shall not be entitled to share in monies derived from assets
over which it has no effective security.
 
 
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2.10  
No challenge to security

 
No Creditor shall challenge or question:
 
(a)  
the validity or enforceability of any Security constituted by a Security
Document;

 
(b)  
the nature of any Security constituted by a Security Document; or

 
(c)  
without prejudice to the generality of the foregoing, whether any Security
constituted by a Security Document is fixed or floating.

 
2.11  
Conflict with provision in Debt Documents

 
The parties agree that if there is an inconsistency between any of the
provisions of this deed and the provisions of a Debt Document, the provisions of
this deed shall prevail.
 
3.  
Borrower and Guarantor covenants

 
3.1  
Borrower and Guarantor covenants

 
So long as the Senior Debt is outstanding, neither the Borrower nor the
Guarantor shall, and each shall procure that none of its Subsidiaries shall (in
each case, except as the Senior Security Trustee has previously consented to in
writing):
 
(a)  
make a loan or provide credit to the Subordinated Creditors;

 
(b)  
pay or repay, or make any distribution in respect of, or purchase or acquire,
any of the Junior Debt in cash or kind;

 
(c)  
purchase or acquire, or permit any Subsidiary to purchase or acquire, any of the
Junior Debt;

 
(d)  
permit any Subsidiary to purchase or acquire any of the Junior Debt;

 
(e)  
exercise any right of set-off against the Junior Debt;

 
(f)  
create, subsist, or allow to exist, any Security (other than Junior Security)
over any of its assets for, or any guarantee for or in respect of, any of the
Junior Debt or in respect of a loan or credit provided to the Subordinated
Creditors by another person;

 
(g)  
amend, waive or release any term of the Junior Debt Documents;

 
(h)  
vary the Junior Debt Documents; or

 
(i)  
take, or omit to take, any action which may impair the ranking or the
subordination set out in this deed.

 
Provided that the provisions of this Clause 3.1 shall not apply to any Permitted
Payment.
 
 
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4.  
Subordinated Creditors and Junior Security Trustee covenants

 
4.1  
No payment, Security or guarantee

 
Each Subordinated Creditor and the Junior Security Trustee covenants with the
Senior Parties that, so long as the Senior Debt is outstanding, it shall not
(except with the prior consent of the Senior Security Trustee):
 
(a)  
demand payment, prepayment or repayment of, or any distribution in respect of
(or on account of) any of the Junior Debt in cash or in kind from the Borrower
or Guarantor or any other source or apply any money or property in discharge of
any Junior Debt;

 
(b)  
receive payment of, or any distribution in respect of (or an account of) any of
the Junior Debt in cash or in kind from the Borrower or Guarantor or any other
source or apply any money or property in discharge of any Junior Debt;

 
(c)  
discharge any of the Junior Debt by set-off;

 
(d)  
allow to exist or subsist or receive the benefit of any Security, guarantee,
indemnity or other assurance against financial loss for, or in respect of, or
receive the benefit of any guarantee, from any person in respect of the Junior
Debt (other than Junior Security);

 
(e)  
take, or omit to take, any action which may impair the ranking or the
subordination set out in this deed;

 
(f)  
modify, amend, waive or release any term of the Junior Debt Documents, except
for an amendment which does not prejudice any Senior Debt, the Senior Parties or
impair the subordination contemplated by this deed;

 
(g)  
accelerate any of the Junior Debt or otherwise declare any of the Junior Debt
prematurely payable (other than in accordance with clause 14 of this deed);

 
(h)  
either alone or in conjunction with any other person, commence or take any
action against the Borrower or Guarantor for the enforcement of, or in
connection with, any Junior Debt Document (including for the payment of any
amount thereunder) or for the termination thereof (other than in accordance with
clause 14 of this deed);

 
(i)  
take any step, or support any step, which may lead to the Insolvency of the
Borrower or Guarantor (other than in accordance with clause 14 of this deed) ;
and/or

 
(j)  
otherwise exercise any remedy for the recovery or enforcement of the Junior
Debt.

 
Provided that the provisions of this Clause 4.1 shall not apply to any Permitted
Payment.
 
4.2  
No set-off

 
Each of the Subordinated Parties shall not claim any right of set-off, abatement
or any other extinction or reduction in respect of any liability which it has to
the Borrower or Guarantor.
 
4.3  
No other arrangements

 
Each of the Subordinated Parties shall not make any arrangement which would
place, or which aims to place, the Subordinated Creditors in a position similar
to that in which it would be if:
 
(a)  
it had received a payment in respect of the Junior Debt (other than a Permitted
Payment); or

 
(b)  
the Junior Debt had been secured by Security (other than the Junior Security).

 
 
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4.4  
No Security

 
Nothing in clause 2 or this clause 4 shall create, or be deemed to create,
Security.
 
5.  
Permitted Payments

 
5.1  
Following the expiry of the Initial Period, the Borrower (or the Guarantor, in
discharge of the obligations of the Borrower) may, subject to clause 5.2:

 
(a)  
make each payment of interest, and all amounts relating to interest, on the
Junior Loan Notes on the relevant due date; and/or

 
(b)  
make each scheduled repayment of principal of the Junior Loan Notes (excluding,
for avoidance of doubt, any voluntary early repayment) in accordance with the
Junior Loan Note Instrument; and/or

 
(c)  
make any payments in respect of the Initial Consideration and Earn-out
Consideration (in each case, as defined in the Share Purchase Agreement) due to
the Subordinated Creditors pursuant to the Share Purchase Agreement.

 
5.2  
The payments permitted by clause 5.1 may only be made if:

 
(a)  
no step has been taken to enforce any Senior Security or Junior Security;

 
(b)  
no event of default, other termination event or Potential Event of Default has
occurred, is continuing and has not been remedied or waived in respect of any
Senior Debt Document or would occur as result of the making of the relevant
payments; and

 
(c)  
no step has been taken for the winding up, dissolution, administration or
reorganisation of the Borrower and/or the Guarantor or the appointment of a
liquidator, Receiver, administrator or other similar officer of the Borrower
and/or the Guarantor or any of the assets of the Borrower and/or the Guarantor.

 
5.3  
Without prejudice to clause 5.1 above, following a Borrower Equity Capital
Raising, the Borrower may, subject to clause 5.4, make all payments pursuant to
the Junior Debt Documents (including, for the avoidance of doubt and without
limitation, all payments of capital, interest and all amounts relating to
interest) out of the net proceeds of the Borrower Equity Capital Raising.

 
5.4  
The payments permitted by clause 5.3 may only be made if no Event of Default (as
that term is defined in any of the Senior Debt Documents) has occurred, is
continuing and has not been remedied or waived.

 
6.  
Waiver and Amendments of Debt Documents

 
6.1  
No waiver or amendments of Junior Debt Documents

 
Without prejudice to the generality of the provisions of clauses 3 and 4,
neither the Borrower, the Guarantor nor any Subordinated Party shall agree any
modification, waiver or amendment to, or make any other agreement affecting, any
Junior Debt Document which would:
 
(a)  
increase the margin or change the basis on which the interest payable is
calculated under a Junior Debt Document;

 
(b)  
increase the commitments of the Subordinated Creditors under any Junior Debt
Document; or

 
(c)  
amend or vary the gross-up or substitute basis provisions in a Junior Debt
Document.

 
 
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6.2  
No waiver or amendments of Senior Debt Documents

 
Without prejudice to the generality of the provisions of clauses 3 and 4,
neither the Borrower, the Guarantor nor any Senior Party shall agree any
modification, waiver or amendment to, or make any other agreement affecting, any
Senior Debt Document which would:
 
(a)  
increase the amount of interest payable under a Senior Debt Document in excess
of the amount payable under the Senior Convertible Loan Notes on the occurrence
and continuance of an Event of Default (as defined in the Senior Convertible
Loan Notes); or

 
(b)  
extend the Maturity Date (as defined in the Senior Convertible Loan Notes) by
more than six months or increase the amount of principal payable to the Senior
Creditor under Senior Convertible Loan Notes.

 
7.  
Subordination on Insolvency

 
Until the Senior Discharge Date, if the Borrower and/or the Guarantor becomes
Insolvent, the following provisions shall apply:
 
(a)  
the Junior Debt shall be postponed and subordinated in right of payment to the
Senior Debt

 
(b)  
no Subordinated Party shall take any action in respect of the Junior Debt except
with the consent and on the direction of the Senior Security Trustee (other than
in accordance with clause 14 of this deed);

 
(c)  
the Senior Security Trustee may, and is irrevocably authorised on behalf of the
Subordinated Parties to:

 
 
(i)
claim, enforce and prove for the Junior Debt;

 
 
(ii)
file claims and proofs, give receipts and take all such proceedings and do all
such things as the Senior Parties see fit to recover the Junior Debt;

 
 
(iii)
receive all distributions on the Junior Debt for application towards the Senior
Debt; and/or

 
 
(iv)
hold all monies received by them under clause 7 in a suspense account and shall,
as soon as it is reasonably apparent to it that the Senior Debt will not be
fully discharged, apply them in reduction of the Senior Debt or otherwise.

 
(d)  
if and to the extent that the Senior Security Trustee is not entitled to, or
does not wish to, claim, enforce, prove, file claims or proofs, or take
proceedings for the Junior Debt, the Subordinated Parties shall do so in good
time as requested by the Senior Security Trustee acting in accordance with the
instructions of the Senior Security Trustee;

 
(e)  
the Subordinated Parties shall:

 
 
(i)
hold any payment or distribution in cash or in kind received or receivable by it
in respect of the Junior Debt (other than any Permitted Payment received) from
the Borrower and/or the Guarantor or its estate or from any other source on
trust for the Senior Creditor; and

 
 
(ii)
upon demand promptly pay and transfer any such payment to the Senior Security
Trustee for application against the Senior Debt;

 
(f)  
the trustee in bankruptcy, liquidator, Receiver, assignee or other person
distributing the assets of the Borrower and/or the Guarantor or their proceeds
is directed to pay distributions on the Junior Debt direct to the Senior
Security Trustee until the Senior Debt is irrevocably paid in full and each
Subordinated Party shall give all such directions and/or instructions as the
Senior Security Trustee may reasonably require to give effect to this
sub-clause;

 
(g)  
the Senior Security Trustee may (and is hereby irrevocably authorised to)
exercise all powers of convening meetings, voting and representation in respect
of the Junior Debt and the Subordinated Parties shall provide the Senior
Security Trustee with all necessary forms of proxy and of representation; and

 
 
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(h)  
if and to the extent that the Senior Security Trustee is not entitled to
exercise a power conferred by this clause 7, the Subordinated Parties:

 
 
(i)
shall exercise the power as the Senior Security Trustee directs; and

 
 
(ii)
shall not exercise any power so as to impair this subordination.

 
8.  
Treatment of Distributions

 
8.1  
Realisation of distribution

 
(a)  
If any Senior Party receives any distribution otherwise than in cash in respect
of the Junior Debt from the Borrower, the Guarantor or any other source, such
Senior Party may realise the distribution as it sees fit and the Senior Debt
shall not be deemed reduced by the distribution until and except to the extent
that the realisation proceeds are applied towards the Senior Debt.

 
(b)  
Each Subordinated Party will at its own expense do all such things as the Senior
Security Trustee may require as being necessary or desirable to transfer to the
Senior Security Trustee all payments and distributions which must be turned over
or held in trust for the Senior Creditor, including endorsements and execution
of formal transfers, and will pay all costs and stamp duties in connection
therewith.

 
8.2  
Currency exchange

 
If any Senior Party receives any payment required to be paid by a Subordinated
Creditor under this deed or paid in respect of the Junior Debt in a currency
other than the currency of the Senior Debt, such Senior Party may convert the
currency received into the currency of the Senior Debt at a prevailing market
rate of exchange and the Senior Debt shall not be deemed reduced by the payment
until and except to the extent that the proceeds of conversion are applied
toward the Senior Debt.
 
9.  
Preservation of rights

 
9.1  
No waiver of rights

 
No delay in exercising rights and remedies in respect of the Senior Debt or the
Junior Debt, or the Senior Security or the Junior Security, because of any term
of this deed postponing, restricting or preventing such exercise shall operate
as a waiver of any of those rights and remedies.
 
9.2  
Junior Debt remains due and payable

 
The Junior Debt shall remain owing, or due and payable, from the Borrower and/or
the Guarantor, and interest and default interest will accrue on missed payments
in accordance with the terms of the Junior Debt Documents, despite any term of
this deed that might postpone, subordinate or prevent payment of the Junior
Debt.
 
10.  
Co-operation by Borrower, the Guarantor, the Subordinated Creditors and the
Junior Security Trustee

 
10.1  
Co-operation by Borrower, the Guarantor, the Subordinated Creditors and the
Junior Security Trustee

 
The Senior Security Trustee may require the Borrower, the Guarantor, the
Subordinated Creditors and/or the Junior Security Trustee, either jointly or
severally, to sign any document and take any steps to protect or give effect to
any of the Senior Parties’ rights under this deed, or any similar or related
purpose.
 
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11.  
Preservation of subordination

 
11.1  
Continuing subordination

 
The subordination and priority provisions in this deed constitute continuing
subordination and priority arrangements and benefit the ultimate balance of the
Senior Debt, regardless of any intermediate payment or discharge of the Senior
Debt in whole or in part.
 
11.2  
Waiver of defences

 
The subordination and priority arrangements in this deed and the obligations of
the Subordinated Creditors and the Junior Security Trustee under this deed will
not be affected by any act, omission, matter or thing which but for this
provision, might operate to reduce, release or prejudice the subordination or
any of those obligations in whole or in part, including (without limitation and
whether or not known to any party):
 
(a)  
any variation, extension, discharge, compromise, dealing with, exchange or
renewal of any right or remedy which a Creditor and/or the Junior Security
Trustee may now, or after the date of this deed, have from or against the
Borrower, the Guarantor or any other person;

 
(b)  
any grant of time, waiver or indulgence granted to or composition with the
Borrower, the Guarantor or any other person;

 
(c)  
any act or omission by a Creditor and/or the Junior Security Trustee or any
other person in varying, compromising, exchanging, renewing, releasing, taking
up, perfecting or enforcing or any right, any Security, indemnity, or guarantee
or any other security interest from or against the Borrower, the Guarantor or
any other person or any non-presentation or non-observance of any formality or
other requirement in respect of any instruments or any failure to realise the
full value of any security;

 
(d)  
any termination, amendment, variation, novation or supplement of or to any Debt
Document;

 
(e)  
any Insolvency, bankruptcy, liquidation, administration, winding up, incapacity,
limitation, disability, discharge by operation of law, or similar proceedings or
any change in the constitution, name or style of or in relation to the Borrower,
the Guarantor or any other person;

 
(f)  
the release of the Borrower, the Guarantor or any other person under the terms
of any composition or arrangement;

 
(g)  
any incapacity or lack of power, authority or legal personality of or
dissolution or change in the members or status of the Borrower, the Guarantor or
any other person;

 
(h)  
any amendment (however fundamental) or replacement of a Debt Document or any
other document or security;

 
(i)  
any invalidity, illegality, unenforceability, irregularity or frustration of any
actual or purported obligation of, or Security held from, the Borrower, the
Guarantor or any other person under any Debt Document or any other document or
security; and/or

 
(j)  
any claim or enforcement of payment from the Borrower, the Guarantor or any
other person.

 
11.3  
Immediate recourse

 
Each of the Subordinated Creditors and the Junior Security Trustee waives any
right it may have to require any Senior Party (or any trustee or agent on its
behalf) to:
 
(a)  
take any action or obtain judgment in any court against the Borrower, the
Guarantor or any other person;

 
(b)  
make or file any claim in a bankruptcy, liquidation, administration or
Insolvency of the Borrower, the Guarantor or any other person; or

 
(c)  
proceed against, make, demand, enforce or seek to enforce any claim, security,
right or remedy against the Borrower, the Guarantor or any other person,

 
 
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(d)  
to proceed against or enforce any other rights or security or claim payment from
any person

 
before claiming the benefit of this subordination, of the security conferred by
the Security Documents or of the obligations of the Subordinated Creditors or
the Junior Security Trustee under this deed.  A Senior Party (or any trustee or
agent on its behalf) may refrain from applying or enforcing any money, rights or
security.
 
11.4  
Non-competition

 
Each of the Subordinated Creditor and the Junior Security Trustee warrants to
the Senior Parties that it has not taken or received, and shall not take,
exercise or receive the benefit of any Right from or against the Borrower, the
Guarantor or a liquidator or administrator of the Borrower or the Guarantor or
any other person in connection with any liability of, or payment by, the
Subordinated Creditors or the Junior Security Trustee under this deed but:
 
(a)  
if any such Right is taken, exercised or received by the Subordinated Creditors
or the Junior Security Trustee, that Right and all monies at any time received
or held in respect of that Right shall be held by the Subordinated Creditors
and/or the Junior Security Trustee on trust for the Senior Creditor for
application in or towards the discharge of the Senior Debt; and

 
(b)  
on demand by the Senior Security Trustee, each of the Subordinated Creditors and
the Junior Security Trustee shall promptly transfer, assign or pay to the Senior
Security Trustee all Rights and all monies from time to time held on trust by
the Subordinated Creditors and/or the Junior Security Trustee under this clause
11.4.

 
12.  
Book debts, insurance and custody of documents

 
12.1  
Book debts

 
Notwithstanding the terms of any charge over book or other debts contained in
any Security Document, and any covenant by the Borrower or the Guarantor to pay
those debts into any particular account, the parties agree that:
 
(a)  
the Borrower and/or the Guarantor (as applicable) shall not be deemed to be in
breach of any such covenant so long as it complies with any such covenant in the
Senior Debt Documents;

 
(b)  
the Senior Security Trustee may credit any payments received by a Senior Party
in respect of book and other debts to any account of the Borrower or the
Guarantor with the Senior Parties; and

 
(c)  
the Senior Security Trustee may, in respect of any credit balances on any of the
Borrower's or the Guarantor’s accounts, notwithstanding any charge over those
credit balances created by any Junior Security Document:

 
(i)  
permit the Borrower and/or the Guarantor to draw on any credit balance and
otherwise permit any such account to continue to be operated as a current
account; and

 
(ii)  
to the extent permitted by the relevant Senior Debt Document, exercise any right
of set-off or combination it may have against any account of the Borrower and/or
the Guarantor without regard to the other provisions of this deed or any Junior
Debt Document.

 
12.2  
Insurance

 
The Senior Security Trustee may require the Borrower and/or the Guarantor to
insure its assets and, prior to the Enforcement Date, apply any monies received
or recovered in respect of any claim under any relevant insurance policy in
accordance with the terms of the Senior Debt Documents or such other insurance
provisions in the Debt Documents as the Senior Security Trustee may select. The
Creditors acknowledge that the Borrower's or the Guarantor’s (as applicable)
compliance with the insurance obligations so selected shall be a full discharge
by the Borrower or the Guarantor (as applicable) of its insurance obligations
under the Debt Documents.
 
12.3  
Title documents

 
The Senior Security Trustee shall be entitled, but not obliged, to hold each
title or other document relating to any asset subject to Senior Security. The
Subordinated Parties may inspect any such documents provided it gives reasonable
prior written notice to the Senior Security Trustee.
 
 
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13.  
Senior Debt enforcement

 
13.1  
Co-operation by Subordinated Creditors and Junior Security Trustee

 
The Subordinated Creditors and Junior Security Trustee will, at the request of
the Senior Security Trustee or any Receiver appointed by the Senior Security
Trustee, join in such documents or otherwise take such action as may be
reasonably required by the Senior Security Trustee or such Receiver to
facilitate the disposal of any asset subject to Senior Security whether or not
there will be any balance of proceeds available for the Subordinated Creditors
and/or Junior Security Trustee arising from that disposal.
 
13.2  
Distressed Disposal

 
If a Distressed Disposal is being effected, the Senior Security Trustee is
irrevocably authorised by the parties hereto to release the Senior Security
and/or the Junior Security over the asset and/or to execute and deliver or enter
into any release of that Security that may, in the discretion of the Senior
Security Trustee, be considered necessary or desirable in order to effect the
Distressed Disposal.
 
14.  
Enforcement by the Subordinated Creditors and/or the Junior Security Trustee

 
14.1  
Subject to clause 14.2 below, until the Senior Discharge Date, unless the Senior
Security Trustee has previously consented in writing, none of the Subordinated
Creditors or the Junior Security Trustee shall:

 
(a)  
accelerate any of the Junior Debt or otherwise declare any of the Junior Debt
prematurely payable on an event of default or otherwise;

 
(b)  
enforce the Junior Debt by execution or otherwise; or

 
(c)  
initiate or support or take any steps with a view to any Insolvency,
liquidation, reorganisation, administration or dissolution proceedings or any
voluntary arrangement or assignment for the benefit of creditors or any similar
proceedings involving the Borrower, whether by petition, filing or service of a
notice, convening a meeting, voting for a resolution or otherwise.

 
14.2  
The restrictions in clause 14.1 will not apply to the Subordinated Creditor or
the Junior Security Trustee if an Event of Default as defined in the Junior
Document has occurred following the expiry of the Initial Period (a "Junior
Default") and:

 
(a)  
the Senior Creditor and Senior Security Trustee have received notice of the
Junior Default from the Subordinated Parties (or any of them); and

 
(b)  
a period of not less than 90 days has passed from the date of the notice of the
relevant Junior Default ("Junior Standstill Period"); and

 
(c)  
at the end of the relevant Junior Standstill Period, the relevant Junior Default
is continuing and has not been waived by the Subordinated Parties; and

 
(d)  
a Senior Party has not taken any steps to enforce the security conferred by
the  Senior Security Documents (or any of them).

 
15.  
Information by Subordinated Creditor

 
15.1  
Defaults

 
Each Subordinated Party will, promptly upon becoming aware of the same, notify
the Senior Security Trustee of the occurrence of any event of default or
potential event of default (howsoever described) or mandatory prepayment event
or other event entitling that Subordinated Party to demand prepayment or
repayment of any Junior Debt prior to its specified maturity under the Junior
Debt Documents.
 
15.2  
Amounts of debt

 
Each Subordinated Party will on the written request by the Senior Security
Trustee notify the Senior Security Trustee in writing of details of the amount
of the Junior Debt.
 
 
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16.  
Application of proceeds

 
16.1  
Priorities

 
The priority of the Creditors shall stand (regardless of the order of execution,
registration or notice or otherwise) so that all amounts from time to time
received or recovered by a Creditor pursuant to the terms of any Debt Document
or in connection with the realisation or enforcement of all or any part of the
Security constituted by any of the Security Documents shall, after providing for
all reasonable outgoings, costs, charges, expenses and liabilities of
enforcement, exercising rights on winding up and payments ranking in priority as
a matter of law, be applied in the following order of priority:
 
(a)  
first, in or towards discharge of the Senior Debt;

 
(b)  
second, once the Senior Debt has been fully discharged, in or towards discharge
of the Junior Debt; and

 
(c)  
third, after the Junior Debt has been fully discharged, to the Borrower,
Guarantor or any other person entitled to it.

 
16.2  
Preferential payments

 
Each Subordinated Party shall bring into account any preferential payments
received by it under section 175 of the Insolvency Act 1986.
 
16.3  
Purchaser protection

 
No purchaser dealing with a Creditor or any Receiver shall be concerned in any
way with the provisions of this deed, but shall assume that the Creditor or
Receiver, as the case may be, is acting in accordance with the provisions of
this deed.
 
17.  
Refinancing of Senior Debt

 
17.1  
Refinancing of Senior Debt

 
Each of the Subordinated Parties agrees that, subject to clause 17.2:
 
(a)  
the Senior Debt may be refinanced at any time by any person, whether or not that
person is a Senior Party (provided that if that person is not a Senior Party, it
is a bank or banks of international repute and creditworthiness); and

 
(b)  
the new debt shall rank with the priority specified in this deed.

 
17.2  
Conditions of new Senior Debt

 
(a)  
The terms of any refinancing of the Senior Debt shall not be more onerous for
the Borrower and/or the Guarantor than the terms of the Senior Debt as at the
date of this deed.

 
(b)  
Any new lender of the refinanced Senior Debt shall, before, or at the same time
as, it becomes a lender of the refinanced Senior Debt, execute and deliver to
the Subordinated Parties (in a form acceptable to the Subordinated Parties) in
which that new lender undertakes to be bound by the terms of this deed.

 
 
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18.  
Power of attorney

 
18.1  
Appointment of attorney

 
By way of security, each of the Borrower, the Guarantor, the Subordinated
Creditors and the Junior Security Trustee irrevocably appoints the Senior
Security Trustee to be its attorney and, in its name, on its behalf and as its
act and deed, to execute any documents and do any acts and things which the
Borrower, the Guarantor, the Subordinated Creditors and/or the Junior Security
Trustee is required to execute and do under this deed.
 
18.2  
Ratification of acts of attorney

 
 
Each of the Borrower, the Guarantor, the Subordinated Creditors and the Junior
Security Trustee ratifies and confirms, and agrees to ratify and confirm,
anything which any of its attorneys may do in the proper and lawful exercise or
purported exercise of all or any of the powers, authorities and discretions
referred to in clause 18.1.
 
19.  
Expenses

 
19.1  
Negotiation and amendment costs and expenses

 
The Borrower and the Guarantor shall, within five Business Days of demand, pay
to, or reimburse, a Senior Party, on a full indemnity basis, all costs, charges,
expenses, taxes and liabilities of any kind (including, without limitation,
legal, printing and out-of-pocket expenses) properly incurred by that a Senior
Party in connection with:
 
(a)  
the negotiation, preparation and execution of this deed; or

 
(b)  
any amendment, extension, waiver, consent or suspension of rights (or any
proposal for any of these) relating to this deed,

 
together with interest, which shall accrue and be payable (without the need for
any demand for payment being made) from the date on which the relevant cost or
expense arose until full discharge of that cost or expense (whether before or
after judgment, liquidation, winding up or administration of the Borrower) at
the rate and in the manner provided for in the Senior Loan Note Instrument
respect of interest applying on the occurrence and continuance of an Event of
Default (as defined in the Senior Loan Note Instrument).
 
19.2  
Enforcement costs, expenses and Losses

 
The Borrower and the Guarantor shall, on demand, pay to each Creditor the amount
of all costs and expenses (including legal, printing and out-of-pocket expenses)
properly incurred by the relevant Creditor in connection with enforcing,
preserving any rights under, or monitoring the provisions of this deed.
 
The Subordinated Parties shall on demand indemnify and keep indemnified the
Senior Parties against all Losses suffered or incurred by any of them in respect
of any breach of any of the Subordinated Parties’ covenants or other obligations
under this deed.
 
19.3  
Legal expenses and taxes

 
The costs and expenses referred to in clause 19.2 above include, without
limitation, the fees and expenses of legal advisers and any value added tax or
similar tax, and are payable in the currency in which they are incurred.
 
 
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19.4  
Default interest

 
(a)  
If the Borrower, the Guarantor or any Subordinated Party fails to pay any amount
payable by it under this deed to a Senior Party, it must, on demand by the
Senior Security Trustee, pay interest on the overdue amount from the due date up
to the date of actual payment (both before and after judgment).

 
(b)  
Interest on an overdue amount is payable at a rate equal to the Default Rate.

 
(c)  
For the purpose of determining the relevant rate under clause 19.4 above, the
Senior Security Trustee may:

 
 
(i)
select successive periods of any duration up to three months; and

 
 
(ii)
determine the appropriate rate fixing day for that period.

 
(d)  
Interest (if unpaid) on an overdue amount will be compounded at the end of the
period selected by the Senior Security Trustee under paragraph (c) above but
will remain immediately due and payable.

 
(e)  
Any interest accruing under this clause 19.4 accrues from day to day and is
calculated on the basis of the actual number of days elapsed and a year of 360
days.

 
19.5  
Certificates and Determinations

 
Any certification or determination by the Senior Security Trustee of a rate or
amount under this deed is, in the absence of manifest error, conclusive evidence
of the matters to which it relates.
 
19.6  
No Deduction

 
All payments to be made by the Borrower, the Guarantor or any Creditor under
this deed shall be made without any set-off, counterclaim or equity and (subject
to the following sentence) free from, clear of and without deduction for any
taxes, duties, levies, imposts or charges whatsoever, present or future.  If the
Borrower, the Guarantor or any Creditor is compelled by the law of any
applicable jurisdiction (or by an order of any regulatory authority in such
jurisdiction) to withhold or deduct any sums in respect of taxes, duties,
levies, imposts or charges from any amount payable to a Creditor under this deed
or, if any such withholding or deduction is made in respect of any recovery from
the Borrower, the Guarantor or any Creditor under this deed, the relevant party
shall pay such additional amount so as to ensure that the net amount received by
the relevant Creditor shall equal the full amount due to it under the provisions
of this deed (had no such withholding or deduction been made).
 
19.7  
Currency of Payment

 
The obligation of the Borrower, the Guarantor or any Creditor under this deed to
make payments in any currency shall not be discharged or satisfied by any
tender, or recovery pursuant to any judgment or otherwise, expressed in or
converted into any other currency, except to the extent that tender or recovery
results in the effective receipt by the Senior Security Trustee of the full
amount of the currency expressed to be payable under this deed.
 
19.8  
Currency Indemnity

 
(a)  
If any sum due from the Borrower, the Guarantor or any Creditor under this deed
(a "Sum"), or any order, judgment or award given or made in relation to a Sum,
has to be converted from the currency (the "First Currency") in which that Sum
is payable into another currency (the "Second Currency") for the purpose of:

 
 
(i)
making or filing a claim or proof against the party;

 
 
(ii)
obtaining or enforcing an order, judgment or award in relation to any litigation
or arbitration proceedings; or

 
 
(iii)
applying the Sum in satisfaction of any amount due under this deed,

 
the relevant party shall, as an independent obligation, within three Business
Days of demand, indemnify the relevant Creditor against any cost, loss or
liability arising out of or as a result of the conversion including any
discrepancy between (A) the rate of exchange used to convert that Sum from the
First Currency into the Second Currency and (B) the rate or rates of exchange
available to the relevant Creditor at the time of its receipt of that Sum.
 
 
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(b)  
Each of the Borrower, the Guarantor and the Creditors waives any right it may
have in any jurisdiction to pay any amount under this deed in a currency or
currency unit other than that in which it is expressed to be payable.

 
20.  
Duration

 
20.1  
Duration

 
This deed shall cease to have effect when the Senior Debt has, to the
satisfaction of the Senior Security Trustee, been irrevocably and
unconditionally paid and discharged in full.
 
21.  
Restrictions on assignments

 
21.1  
Successors and assigns

 
This Deed is binding on the successors and assigns of the parties hereto.
 
21.2  
Borrower and Guarantor

 
The Borrower and Guarantor may not assign or transfer any of their rights (if
any) or obligations under this deed.
 
21.3  
Subordinated Creditors and Junior Security Trustee

 
None of the Subordinated Creditors or the Junior Security Trustee shall, in the
Initial Period:
 
(a)  
assign or dispose of, or create or permit to subsist any security or trust over,
any of the Junior Debt owing to it or its proceeds or any interest in that
Junior Debt or its proceeds, or any security therefor, to or in favour of any
person or attempt to do any of the foregoing; or

 
(b)  
subordinate any of the Junior Debt owing to it or its proceeds to any sums owing
by the Borrower and/or the Guarantor to any person other than the Senior
Creditor; or

 
(c)  
transfer by novation or otherwise any of its rights or obligations under the
Junior Debt Documents or this deed to any person.

 
From the expiry of the Initial Period, the Subordinated Creditors or the Junior
Security Trustee may assign or otherwise dispose of all or any of its rights
under this deed provided that: (i) the relevant assignee or transferee executes
and delivers to the Senior Parties a deed (in a form acceptable to the Senior
Parties) pursuant to which the assignee or transferee agrees to be bound by the
terms of this deed; and (ii) there is no event of default under any Debt
Document subsisting as at the date of the proposed assignment and/or transfer.
 
21.4  
The Senior Parties

 
A Senior Party may, at any time, assign or otherwise dispose of all or any of
its rights under this deed in accordance with the Debt Documents to which it is
a party provided that the relevant assignee or transferee executes and delivers
to the Subordinated Parties a deed (in a form acceptable to the Subordinated
Parties) pursuant to which the assignee or transferee agrees to be bound by the
terms of this deed.
 
22.  
Borrower's and Guarantor’s acknowledgements

 
22.1  
Borrower's and Guarantor’s acknowledgement and consent

 
Each of the Borrower and the Guarantor acknowledges the terms of this deed and
consents to the Creditors communicating with each other about the Borrower's
and/or the Guarantor’s affairs for the purposes of this deed.
 
 
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22.2  
No reliance by Borrower or Guarantor

 
Each of the Borrower and the Guarantor further acknowledges that none of the
provisions entered into by the Creditors are for the benefit of the Borrower
and/or the Guarantor, nor may they be enforced or relied on by the Borrower
and/or the Guarantor.
 
23.  
Endorsement on Debt Documents

 
23.1  
Endorsement on Debt Documents

 
Each of the Creditors agrees to endorse a memorandum of this deed on each Debt
Document entered into, or to be entered into, in its favour, and acknowledges
the right of the other Creditors to the production and delivery of a copy of any
such Debt Document as soon as reasonably practicable.
 
24.  
Remedies, waivers, amendments and consents

 
24.1  
Amendments

 
Any amendment to this deed shall be in writing and signed by, or on behalf of,
each party, except that:
 
(a)  
the Senior Parties do not need the consent of any party other than the Borrower
(and no other party, other than the Borrower, need be party to any amendment
document) to an amendment to this deed that only alters the Borrower's
obligations to the Senior Creditor and the corresponding rights of the Senior
Creditor;

 
(b)  
the Senior Parties do not need the consent of any party other than the Guarantor
(and no other party, other than the Guarantor, need be party to any amendment
document) to an amendment to this deed that only alters the Guarantor's
obligations to the Senior Creditor and the corresponding rights of the Senior
Creditor;

 
(c)  
the Senior Parties do not need the consent of any party other than the Borrower
and the Guarantor (and no other party, other than the Borrower and the
Guarantor, need be party to any amendment document) to an amendment to this deed
that only alters the Borrower's and the Guarantor’s obligations to the Senior
Creditor and the corresponding rights of the Senior Creditor; and

 
(d)  
the Creditors do not need the consent of the Borrower or the Guarantor (and no
party, other than the Creditors, need to be party to any amendment document)  to
an amendment to this deed that only alters the obligations of the Creditors to
each other and the corresponding rights of the Creditors.

 
24.2  
Waivers and consents

 
(a)  
A waiver of any right or remedy under this deed or by law, or any consent given
under this deed, is only effective if given in writing by the waiving or
consenting party and shall not be deemed a waiver of any other breach or
default. It only applies in the circumstances for which it is given and shall
not prevent the party giving it from subsequently relying on the relevant
provision.

 
(b)  
A failure or delay by a party to exercise any right or remedy provided under
this deed or by law shall not constitute a waiver of that or any other right or
remedy, prevent or restrict any further exercise of that or any other right or
remedy or constitute an election to affirm this deed. No single or partial
exercise of any right or remedy provided under this deed or by law shall prevent
or restrict the further exercise of that or any other right or remedy. No
election to affirm this deed by a Creditor shall be effective unless it is in
writing.

 
24.3  
Rights and remedies

 
The rights and remedies provided under this deed are cumulative and are in
addition to, and not exclusive of, any rights and remedies provided by law.
 
 
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25.  
Severance

 
25.1  
Severance

 
If any provision (or part of a provision) of this deed is or becomes invalid,
illegal or unenforceable, it shall be deemed modified to the minimum extent
necessary to make it valid, legal and enforceable. If such modification is not
possible, the relevant provision (or part of a provision) shall be deemed
deleted. Any modification to or deletion of a provision (or part of a provision)
under this clause shall not affect the legality, validity and enforceability of
the rest of this deed.
 
26.  
Counterparts

 
26.1  
Counterparts

 
(a)  
This deed may be executed in any number of counterparts, each of which when
executed and delivered shall constitute a duplicate original, but all the
counterparts shall together constitute one deed.

 
(b)  
Transmission of the executed signature page of a counterpart of this deed by fax
or e-mail (in PDF, JPEG or other agreed format) shall take effect as delivery of
an executed counterpart of this deed. If either method of delivery is adopted,
without prejudice to the validity of the deed thus made, each party shall
provide the others with the original of such counterpart as soon as reasonably
possible thereafter.

 
(c)  
No counterpart shall be effective until each party has executed and delivered at
least one counterpart.

 
27.  
Third party rights

 
27.1  
Third party rights

 
(a)  
Except as expressly provided in this deed, a person who is not a party to this
deed shall not have any rights under the Contracts (Rights of Third Parties) Act
1999 to enforce, or enjoy the benefit of, any term of this deed. This does not
affect any right or remedy of a third party which exists, or is available, apart
from that Act.

 
(b)  
The rights of the parties to rescind or agree any amendment or waiver under this
deed are not subject to the consent of any other person.

 
28.  
Perpetuity period

 
28.1  
Perpetuity period

 
If the rule against perpetuities applies to any trust created by this deed, the
perpetuity period shall be 125 years (as specified by section 5(1) of the
Perpetuities and Accumulations Act 2009).
 
29.  
Notices

 
29.1  
Delivery

 
Each notice or other communication required to be given under or in connection
with this deed shall be:
 
(a)  
in writing;

 
(b)  
delivered by hand, by pre-paid first-class post or other next working day
delivery service or sent by fax or e-mail; and

 
 
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(c)  
sent to:

 
(i)  
the Senior Creditor at the address set out in the first page of this deed, with
a copy by e-mail to [                                    ].

 
(ii)  
the Senior Security Trustee at the address set out in the first page of this
deed, with a copy by e-mail to [                                    ].

 
(iii)  
the Subordinated Creditors at the addresses set out in Schedule 1 of this deed,
with a copy by e-mail to [                                    ].

 
(iv)  
the Junior Security Trustee at:

 
[                                    ].
 
Attention: [                                    ]
 
  Email: [                                    ]
 
  Copy by email to [                                    ]
 
(v)  
the Borrower at:

 
11335 Apple Drive, Spring Lake, Michigan 49448, USA
 
E-mail:brent@victoryecigs.com
 
Copy by e-mail to: ded@robinsonbrog.com and to kevin.mccarthy@mishcon.com
 
Attention: Brent David Willis
 
(vi)  
the Guarantor at:

 
Unit 14 Dale Street Industrial Estate, Radcliffe, Manchester, Greater Manchester
United Kingdom
 
For the attention of:       Brent David Willis
 
E-mail:  brent@victoryecigs.com
 
Copy by e-mail to ded@robinsonbrog.com and to kevin.mccarthy@mishcon.com
 
Attention: Brent David Willis
 
or to such other address or fax number as is notified in writing by one party to
the others from time to time.
 
 
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29.2  
Receipt

 
Any notice or other communication given under or in connection with this deed
shall be deemed to be received:
 
(a)  
if delivered by hand, at the time it is left at the relevant address;

 
(b)  
if posted by pre-paid first-class post or other next working day delivery
service, on the second Business Day after posting; and

 
(c)  
if sent by fax, when received in legible form.

 
A notice or other communication given as described in clause 29.2(a) or clause
29.2(c) on a day which is not a Business Day, or after normal business hours, in
the place it is received, shall be deemed to have been received on the next
Business Day.
 
29.3  
Service of proceedings

 
This clause 29 does not apply to the service of any proceedings or other
documents in any legal action or, where applicable, any arbitration or other
method of dispute resolution.
 
30.  
Governing law and jurisdiction

 
30.1  
Governing law

 
This deed and any dispute or claim arising out of or in connection with it or
its subject matter or formation (including non-contractual disputes or claims)
shall be governed by, and construed in accordance with, the law of England and
Wales.
 
30.2  
Jurisdiction

 
(a)  
The courts of England have exclusive jurisdiction to settle any dispute,
controversy, proceedings, claim or obligation of whatever nature arising out of
or in connection with this Agreement (whether contractual or non-contractual)
including a dispute regarding the existence, validity or termination of this
Agreement (a "Dispute").

 
(b)  
The Parties agree that the courts of England are the most appropriate and
convenient courts to settle Disputes and accordingly no party will argue to the
contrary.

 
(c)  
This clause 30.2 is for the benefit of the Senior Parties only.  As a result,
the Senior Parties shall not be prevented from taking proceedings relating to a
Dispute in any other courts with jurisdiction.  To the extent allowed by law,
the Senior Parties may take concurrent proceedings in any number of
jurisdictions.

 
30.3  
Other service

 
Each of the Borrower, the Guarantor, the Junior Security Trustee and each
Subordinated Creditor irrevocably consents to any process in any legal action or
proceedings under clause 30.2 being served on it in accordance with the
provisions of this deed relating to service of notices. Nothing contained in
this deed shall affect the right to serve process in any other manner permitted
by law.
 
30.4  
Agent for service

 
The Borrower irrevocably appoints Vapestick Holdings Limited for service at 25
Harley Street, London, W1G 9BR (for the attention of Brent Willis) as its agent
to receive on its behalf in England or Wales service of any proceedings under
clause ‎30. Such service shall be deemed completed on delivery to such agent
(whether or not it is forwarded to and received by the Borrower) and shall be
valid until such time as the Creditors have received prior written notice from
the Borrower that such agent has ceased to act as agent. If for any reason such
agent ceases to be able to act as agent or no longer has an address in England
or Wales, the Borrower shall forthwith appoint a substitute acceptable to the
Creditors and deliver to the Creditors the new agent's name and address within
England and Wales.
 
This document has been executed as a deed and is delivered and takes effect on
the date stated at the beginning of it.
 
 
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Schedule 1
Subordinated Creditors

Name
 
Address
                       

 
 
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Schedule 2
Senior Debt Documents
 
Part 1.
Senior lending documents

 
Senior Convertible Loan Notes.

Senior Convertible Loan Note Instrument.

The Securities Purchase Agreement in respect of (inter alia) the purchase of the
Senior Secured Convertible Notes, between the Borrower, the Senior Creditor and
the Senior Security Trustee, dated on or about the date of this deed (the
“Securities Purchase Agreement”).

The Registration Rights Agreement entered into between the Borrower and the
Senior Creditor on the date of the Securities Purchase Agreement.
 
Part 2.
Senior Security Documents

 
Share Charge between the Borrower and the Senior Security Trustee, dated on or
about the date of this deed.

Guarantee between the Guarantor and the Senior Creditor, dated on or about the
date of this deed.

Debenture between the Guarantor and the Senior Security Trustee, dated on or
about the date of this deed.
 
Schedule 3
Junior Debt Documents

 
Part 1.
Junior lending documents

 
Junior Loan Notes.

Junior Loan Note Instrument.

Share Purchase Agreement.

The Registration Rights Agreement entered into between the Borrower and each of
the Subordinated Creditors on the date of the Share Purchase Agreement.
 
Part 2.
Junior Security Documents

 
Guarantee between the Guarantor and the Subordinated Creditors, dated on or
about the date of this deed.

Debenture between the Guarantor and the Junior Security Trustee, dated on or
about the date of this deed.

 
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Executed as a deed by VICTORY ELECTRONIC CIGARETTES
CORPORATION          )                                                                acting
by ………………................ ................,       )       a director, in the
presence of:
 
Witness signature:…..….....................................
Witness name:……….….....................................
Witness address: .………....................................
………………………….....................................
Witness occupation:…….....................................
 
 
 
........................................
Director
 
 
 
 
 
 
Executed as a deed by MUST HAVE
LIMITED    )                                                                acting
by ………………................ ................,       )       a director, in the
presence of:
 
Witness signature:…..….....................................
Witness name:……….….....................................
Witness address: .………....................................
………………………….....................................
Witness occupation:…….....................................
 
 
........................................
Director
 
 
Executed as a deed
by [                                    ]  )                                                                as
Senior Security Trustee, acting by ………………................
................,           )        a director, in the presence of:
 
Witness signature:…..….....................................
Witness name:……….….....................................
Witness address: .………....................................
………………………….....................................
Witness occupation:…….....................................
 
 
 
........................................
Director
 
 
 
Executed as a deed by [                     ]
 )                                                                acting by
………………................ ................,             )        a director, in the
presence of:
 
Witness signature:…..….....................................
Witness name:……….….....................................
Witness address: .………....................................
………………………….....................................
Witness occupation:…….....................................
 
 
........................................
Director
 
 
 
Executed as a deed by [                                    ]             
)                                                                as Junior
Security Trustee, in the presence of:            )
 
Witness signature:…..….....................................
Witness name:……….….....................................
Witness address: .………....................................
………………………….....................................
Witness occupation:…….....................................
 
 
........................................
Signature
 
 
Executed as a deed
by [                        ] )                                                                in
the presence of:                                                    )
 
Witness signature:…..….....................................
Witness name:……….….....................................
Witness address: .………....................................
………………………….....................................
Witness occupation:…….....................................
 
 
........................................
Signature 
 
Executed as a deed
by [                                    ] )                                                                in
the presence of:                                                      )
 
Witness signature:…..….....................................
Witness name:……….….....................................
Witness address: .………....................................
………………………….....................................
Witness occupation:…….....................................
 
 
........................................
Signature
 
 
Executed as a deed
by [                            ] )                                                                in
the presence of:                                                    )
 
Witness signature:…..….....................................
Witness name:……….….....................................
Witness address: .………....................................
………………………….....................................
Witness occupation:…….....................................
 
 
........................................
Signature
 

27

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