Document:

ecig_ex103.htm

Exhibit 10.3

 

Dated                                                                                    2014

 

(1) MUST HAVE LIMITED

 

- and -

 

(2) THE PERSONS NAMED IN SCHEDULE 1

 

	
 

CORPORATE GUARANTEE

 

 

	
Mishcon de Reya

Summit House

12 Red Lion Square

London WC1R 4QD

Tel: 020 7440 7000

Fax: 020 7404 5982

Ref: KEM/SS/43296.1

E-mail: sarah.spurling@mishcon.com

 

 

  

1

  

 

TABLE OF CONTENTS

 

	
No.

	 	
Heading

	 	
Page

	  	 	  	 	  
	
1

	 	
DEFINITIONS AND Interpretation

	 	
3

	
2

	 	
Guarantee and indemnity

	 	
5

	
3

	 	
Restrictions on release and discharge

	 	
6

	
4

	 	
Non-Competition

	 	
7

	
5

	 	
ASSIGNMENT AND TRANSFER

	 	
8

	
6

	 	
PARTIAL INVALIDITY

	 	
8

	
7

	 	
Cumulative rights

	 	
9

	
8

	 	
COSTS

	 	
9

	
9

	 	
PAYMENTS

	 	
9

	
10

	 	
Notices

	 	
9

	
11

	 	
counterparts

	 	
10

	
12

	 	
Governing law and jurisdiction

	 	
10

	
Schedule 1 The BENEFICIARIES

	 	11

 

  

2

  

 

THIS GUARANTEE is dated                                                                                                           2014

 

BY:

 

	
(1)  

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

 

IN FAVOUR OF:

 

	
(2)  

	
The persons whose names and addresses are set out in Schedule 1 (the Beneficiaries and each a Beneficiary)

 

BACKGROUND

 

	
(A)  

	
The Principal has issued Loan Notes to the Beneficiaries in the aggregate amount of $11,000,000 under the terms of the Loan Note Instrument.

 

	
(B)  

	
It is agreed that the Guarantor execute and deliver this Guarantee, guaranteeing the obligations of the Principal to the Beneficiaries pursuant to the Earn-out Consideration, the Loan Note Documents and the Registration Rights Agreement, on the terms more particularly set out below.

 

AGREED TERMS

 

	
1.  

	
DEFINITIONS AND INTERPRETATION

 

	
1.1  

	
In this Guarantee (including in the Background) the following definitions apply:

 

Business Day means a day (other than a Saturday or a Sunday) on which commercial banks are open for general business in the City of London.

 

Earn-out Consideration has the meaning given to that term in the Share Purchase Agreement.

 

Guaranteed Obligations means all the monies, debts, liabilities, Liquidated Damages and obligations which are from time to time due, owing or payable by the Principal to the Beneficiaries pursuant to:

 

	
(a)  

	
the Share Purchase Agreement by way of the Earn-out Consideration;

 

	
(b)  

	
the Loan Note Documents; and/or

 

	
(c)  

	
the Registration Rights Agreement,

 

in any currency and whether present or future, actual or contingent and including (without limitation):

 

	
(a)  

	
all costs, charges and expenses incurred by the Beneficiaries in connection with the protection, preservation or enforcement of its rights under or in connection with the Earn Out Consideration or the Loan Note Documents;

 

	
(b)  

	
any refinancing, novation, refunding, deferral or extension of any of those obligations or liabilities;

 

  

3

  

 

	
(c)  

	
any claim for Liquidated Damages or damages in connection with the Earn Out consideration, the Loan Note Documents or the Registration Rights Agreement;

 

	
(d)  

	
all interest (including, without limitation, default interest) accruing in respect of those monies or liabilities; and

 

	
(e)  

	
any amounts which would be included in any of the foregoing but for any discharge, non-provability, unenforceability or non-allowability of the same in any insolvency or other proceedings.

 

Liquidated Damages means amounts in cash which the Principal is obligated to pay the Beneficiaries as liquidated damages upon an occurrence of:

 

	
(a)  

	
an Event as defined in the Registration Rights Agreement for failure to file an initial registration statement in accordance with the Principal’s obligations in the Registration Rights Agreement; or

 

	
(b)  

	
a Public Information Failure for breach of the Principal's undertaking in the Share Purchase Agreement to satisfy the current public information requirement under Rule 144(c) of the US Securities Act 1933.

 

Loan Note Documents means the Loan Notes and Loan Note Instrument.

 

Loan Note Instrument means the instrument dated on or about the date of this Guarantee pursuant to which the Loan Notes are, or are to be, constituted.

 

Loan Notes means the $11,000,000 secured loan notes due 2014 of the Principal issued to the Beneficiaries on or about the date of this Guarantee.

 

Other Security means any other Security or Rights from or against any person in respect of the Guaranteed Obligations.

 

Principal means Victory Electronic Cigarettes Corporation (a company registered in the State of Nevada, USA under number C13461-2004 whose registered office is at 11335 Apple Drive, Spring Lake, Michigan 49448, USA).

 

Relevant Documents means:

 

(a) the Loan Note Documents;

 

(b) the Share Purchase Agreement; and

 

(c) the Registration Rights Agreement.

 

Registration Rights Agreement means the Registration Rights Agreement entered into between the Principal and each of the Beneficiaries on the date of the Share Purchase Agreement.

 

Rights means any Security or any guarantee or other right or benefit whether arising by set-off, counterclaim, subrogation, indemnity, right to retention of title, proof in liquidation or otherwise and whether from contribution or otherwise.

 

Security means any security, mortgage, charge (fixed or floating), pledge, lien, assignment, encumbrance or other security interest securing any obligation of any person or any deposit, note, right or remedy, or any other agreement having a similar effect.

 

  

4

  

 

Share Purchase Agreement means the share purchase agreement dated on or about the date of this Guarantee between the Principal and the Beneficiaries, pursuant to which inter alia the Principal shall acquire the entire issued share capital of the Guarantor from the Beneficiaries.

 

	
1.2  

	
Clause and schedule headings do not affect the interpretation of this Guarantee.

 

	
1.3  

	
A person includes a corporate or unincorporated body (whether or not having a separate legal personality).

 

	
1.4  

	
Words in the singular shall include the plural and vice versa.

 

	
1.5  

	
A reference to this Guarantee (or any specified provision of it) or any other document or agreement shall be construed as a reference to this Guarantee, that provision or that document or agreement as amended, varied, supplemented, extended, restated or novated from time to time.

 

	
1.6  

	
Any undertaking, representation, warranty or indemnity by two or more parties binds them jointly and severally.

 

	
1.7  

	
A reference to a statute, statutory provision or subordinate legislation is a reference to it as it is in force for the time being taking account of any amendment, extension, application or re-enactment and includes any subordinate legislation for the time being in force made under it and any former statute or statutory provision which it amends or re-enacts.

 

	
1.8  

	
A reference to writing or written includes faxes but not e-mails.

 

	
1.9  

	
References to clauses and schedules are to the clauses and schedules of this guarantee.

 

	
1.10  

	
The expression the Guarantor, Principal or Beneficiary or any other person or party shall include a reference to that person's or party's successors in title and/or permitted assigns.

 

	
1.11  

	
A person who is not a party to this Guarantee has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or enjoy the benefit of any term of this Guarantee.

 

	
2.  

	
GUARANTEE AND INDEMNITY

 

	
2.1  

	
In consideration of the Beneficiaries making or continuing to make credit, accommodation or time available to the Principal, the Guarantor hereby irrevocably and unconditionally jointly and severally:

 

	
2.1.1  

	
guarantees to the Beneficiaries, as a continuing obligation, the proper and punctual payment, observance and performance by the Principal of all the Guaranteed Obligations; and

 

	
2.1.2  

	
as principal debtor undertakes to each Beneficiaries that wherever the Principal does not pay or perform any of the Guaranteed Obligations when due, the Guarantor shall on demand from the Beneficiaries pay that amount to the relevant Beneficiary as if it was the principal obligor.

 

	
2.2  

	
As a separate and independent obligation, the Guarantor agrees that if any principal obligation or liability of the Principal, which would have been within the Guaranteed Obligations had it been valid and enforceable, is not or ceases to be valid or enforceable against such Principal on any ground whatsoever, whether or not known to the Beneficiaries, the Guarantor shall nevertheless be liable to the Beneficiaries as a principal debtor by way of indemnity for the same amount as that for which the Guarantor would have been liable had the purported obligation or liability been fully valid and enforceable as a Guaranteed Obligation.  The Guarantor further agrees to keep the Beneficiaries fully indemnified against all damages, losses, costs and expenses arising from any failure by the Principal to perform or discharge any such purported obligation or liability. The amount payable by the Guarantor under this indemnity will not exceed the amount it would have had to pay under Clause 2.1 if the amount claimed had been recoverable on the basis of a guarantee.

 

  

5

  

 

	
3.  

	
RESTRICTIONS ON RELEASE AND DISCHARGE

 

	
3.1  

	
Action or inaction by the Beneficiaries

 

The Beneficiaries may, without the consent of or notice to the Guarantor and without affecting the Guarantor’s liability to the Beneficiaries under this Guarantee, do any of the following:

 

	
(a)  

	
renew, extend, increase, discontinue, reduce or otherwise vary in any way any financial accommodation made available to the Principal or any other person or extend or vary the purposes for which financial accommodation is granted or grant to the Principal or any other person for any purpose any new facility or financial accommodation;

 

	
(b)  

	
increase or otherwise vary the rate of interest, fees or charges payable by the Principal or any other person to the Beneficiaries;

 

	
(c)  

	
give the Principal or any other person any time, consideration, release, waiver or consent or make any concession to or compound with the Principal or any other person; or

 

	
(d)  

	
enter into, renew, vary, supplement, extend, rescind or terminate any agreement, including any of the Relevant Documents, or any other arrangement with the Principal or any other person or take, renew, vary, release or refrain from taking, perfecting or enforcing any present or future security, guarantee, indemnity or other rights granted by or available from any other Principal or any other person or refrain from observing any formality or other requirement in respect of any instrument or fail to realise the full value of any Security.

 

	
3.2  

	
Restrictions on release

 

The Guarantor agrees that its liability under this Guarantee shall not be released or discharged, nor shall any of its obligations be diminished, prejudiced or affected, by reason of any of the following:

 

	
3.2.1  

	
the liquidation, insolvency, entering into administration or bankruptcy of the Principal or the presentation of a petition for the making of an administration order or a winding up order in respect of the Principal, or the Principal becoming subject to a company voluntary arrangement or scheme of arrangement or undergoing a merger or amalgamation or any change in its name or constitution or any analogous proceedings in any jurisdiction;

 

	
3.2.2  

	
the Beneficiaries having or taking or failing to take Other Security;

 

	
3.2.3  

	
any Other Security being or becoming invalid or unenforceable for any reason;

 

	
3.2.4  

	
any failure by the Beneficiaries to enforce or perfect (or delay by the Beneficiaries in enforcing) any Other Security or any amendment, exchange, variation, waiver or release of or in relation to any Other Security;

 

	
3.2.5  

	
the giving of any time, indulgence, waiver or concession to the Principal or any other person or the making of any compromise or arrangement with the Principal or any other person;

 

	
3.2.6  

	
any amendment or variation of the Relevant Documents or any of the terms of any of the Guaranteed Obligations (however fundamental) or any other document which creates, evidences or gives rise to any Guaranteed Obligation; or

 

	
3.2.7  

	
anything which would not have discharged or affected or prejudiced the Guarantor's liability if the Guarantor had been a principal debtor to the Beneficiaries instead of a surety.

 

	
3.2.8  

	
any variation, extension, discharge, compromise, dealing with, exchange or renewal of any right or remedy which the Beneficiaries may have now or in the future from or against the Principal or any other person in respect of the Guaranteed Obligations;

 

	
3.2.9  

	
any act or omission by the Beneficiaries, or any other person in taking up, perfecting or enforcing any security or guarantee from or against the Beneficiaries or any other person or the invalidity or unenforceability of any such security or guarantee;

 

	
3.2.10  

	
any arrangement or compromise entered into between the Beneficiaries  and the Principal or any other person; and

 

  

6

  

 

	
3.2.11  

	
the invalidity, illegality, unenforceability, irregularity or frustration of the Guaranteed Obligations.

 

	
3.3  

	
Guarantor intent

 

Without prejudice to the generality of Clauses 3.1 (Action or Inaction by the Beneficiaries) or 3.2 (Restrictions on Release), the Guarantor confirms that its obligations under this Guarantee will extend from time to time to any variation, increase, extension or addition of or to any of the agreements or arrangements comprising the Guaranteed Obligations.

 

	
3.4  

	
Immediate recourse

 

	
3.4.1  

	
The Guarantor waives any rights it may have of first requiring the Beneficiaries to proceed against or enforce any other rights or Security or claim payment from any person before claiming from the Guarantor under Clause 2 (Guarantee and Indemnity).

 

	
3.4.2  

	
The Beneficiaries shall take all reasonable steps to mitigate any amounts payable by the Guarantor under this Guarantee.

 

	
3.5  

	
Reinstatement

 

Any release, discharge or settlement between the Beneficiaries and the Guarantor in relation to this Guarantee shall be subject to the condition that it shall be of no effect if any payment or discharge of any of the Guaranteed Obligations by the Principal or any other person shall be avoided, invalidated or reduced by virtue of any enactment or rule of law.  If there should be any such avoidance, invalidation or reduction, the Beneficiaries shall be entitled to enforce this Guarantee subsequently against the Guarantor so as to recover from the Guarantor the full value of the payment avoided, invalidated or reduced as if the release, discharge or settlement had not occurred.  Similarly, any release, discharge or settlement in relation to this Guarantee which is avoided, invalidated or reduced by virtue of any enactment or rule of law shall not affect the right of the Beneficiaries to enforce any other Security against the Guarantor.

 

	
3.6  

	
Preservation of security and rights

 

This Guarantee is in addition to any Other Security or Rights held at any time by the Beneficiaries or any other person in connection with the Guaranteed Obligations and will not merge with or prejudice or be prejudiced by any such guarantee, security, indemnity or rights.

 

	
3.7  

	
Continuing Guarantee

 

This Guarantee is a continuing guarantee notwithstanding any intermediate payment or settlement of all or any of the Guaranteed Obligations, will extend to the ultimate balance of sums payable by the Principal to the Beneficiaries and is in addition to any other right, remedy or security of whatever sort which the Beneficiaries may hold at any time for the Guaranteed Obligations or any other obligation whatsoever and will not be affected by any release, reassignment or discharge of such other right remedy or action.

 

	
4.  

	
NON-COMPETITION

 

	
4.1  

	
Non-Competition

 

Prior to the date on which the Guaranteed Obligations are unconditionally and irrevocably paid in full the Guarantor shall not:

 

	
4.1.1  

	
take or receive the benefit of any Security or Rights of whatsoever nature from (i) the Principal in respect of the Principal's counter-indemnity obligations to the Guarantor arising in relation to this Guarantee or in respect of any other obligations to the Guarantor howsoever arising and (ii) from any co-surety in respect of any obligation on the part of the co-surety to indemnify the Guarantor in relation to the Guarantee or in respect of any other obligation howsoever arising;

 

	
4.1.2  

	
be subrogated to any rights of the Beneficiaries or Security held by the Beneficiaries on account of the Guaranteed Obligations and/or the obligations of any co-surety by reason of any payment made (or liable to be made) by the Guarantor under this Guarantee; or

 

  

7

  

 

	
4.1.3  

	
claim, receive or take the benefit of any payment from or on account of the Principal or any co-surety or be entitled to any right of contribution or indemnity from the Principal or any co-surety or claim, rank, prove or vote as a creditor of the Principal or any co-surety or exercise any right of set-off against the Principal or any co-surety, in each case by reason of any payment made (or liable to be made) by the Guarantor under this Guarantee.

 

	
4.2  

	
Beneficiaries as creditor

 

If the Principal is wound up or reconstructed in insolvency proceedings, or such Principal makes any composition or arrangement with its creditors, then notwithstanding any payment which may have been made under this Guarantee, the Beneficiaries may rank as creditors and prove for the full amount of the Guaranteed Obligations.  Any dividends or payments which the Beneficiaries may receive from such Principal or its estate or any other person shall be taken and applied as payments in gross and shall not prejudice the right of the Beneficiaries to recover from the Guarantor to the full extent of the security hereby created the ultimate balance of the Guaranteed Obligations which, after the receipt of such dividends or payments, remains outstanding.

 

	
4.3  

	
Direction of application

 

The Guarantor may not direct the application by the Beneficiaries of any moneys received by the Beneficiaries from the Guarantor or on account of the Guarantor's liability under this Guarantee and the Beneficiaries may appropriate all payments received in respect of the Guaranteed Obligations in reduction of any part of the Guaranteed Obligations as the Beneficiaries decides.

 

	
4.4  

	
Security in trust

 

Any Security or Rights that are or have been taken by the Guarantor or the benefit of which have been received by the Guarantor and the proceeds of any payment received by the Guarantor, in each case in breach of this Clause 4 (Non-Competition) shall be held in trust for the Beneficiaries.

 

	
4.5  

	
Perpetuity Period

 

The trusts created by this Guarantee have a perpetuity period of 125 years.

 

	
5.  

	
ASSIGNMENT AND TRANSFER

 

	
5.1  

	
Assignment by the Beneficiaries

 

Other than in connection with a transfer of a Beneficiary’s rights under the Loan Note Instrument no Beneficiary may assign any of its rights or transfer any of its obligations under this Guarantee or enter into any transaction which would result in any of these rights or obligations passing to another person.

 

	
5.2  

	
Assignment by the Guarantor

 

The Guarantor may not assign any of its rights or transfer any of its obligations under this Guarantee or enter into any transaction which would result in any of these rights or obligations passing to another person.

 

	
6.  

	
PARTIAL INVALIDITY

 

If, at any time, any provision of this Guarantee is or becomes illegal, invalid or unenforceable in any respect under any law of any jurisdiction, neither the legality, validity or enforceability of the remaining provisions nor the legality, validity or enforceability of such provision under the law of any other jurisdiction will in any way be affected or impaired.

 

  

8

  

 

	
7.  

	
CUMULATIVE RIGHTS

 

All powers of the Beneficiaries shall be cumulative and any express power conferred on the Beneficiaries under this Guarantee may be exercised without prejudicing or being limited by any other express or implied power of the Beneficiaries.

 

	
8.  

	
COSTS

 

The Guarantor shall, on demand by the Beneficiaries, pay or reimburse (on a full indemnity basis) to the Beneficiaries all costs charges and expenses of whatsoever nature (including, without prejudice to the generality of the foregoing, legal fees and disbursements) which the Beneficiaries or its agents may incur in protecting or preserving, exercising or enforcing its rights and/or powers under this Guarantee or attempting to do so which costs, charges and expenses shall form part of the Guaranteed Obligations.

 

	
9.  

	
PAYMENTS

 

	
9.1  

	
Manner of payment

 

All payments to be made under this Guarantee shall be made in the currency and manner and at the place in and at which the relevant Guaranteed Obligations are to be paid or performed.

 

	
9.2  

	
No deductions

 

All payments to be made under this Guarantee shall be made in full:

 

	
9.2.1  

	
without any set-off or counterclaim; and

 

	
9.2.2  

	
without any deduction or withholding, except as required by applicable law.

 

	
9.3  

	
Currency conversion

 

If any sum due from the Guarantor under this Guarantee or any order or judgment given or made in relation thereto has to be converted from the currency (the "first currency") in which the same is payable under this Guarantee or under such order or judgment into another currency (the "second currency") for the purpose of (i) making or filing a claim or proof against the Guarantor, (ii) obtaining an order or judgment in any court or other tribunal or (iii) enforcing any order or judgment given or made in relation thereto, the Guarantor shall indemnify and hold harmless the Beneficiaries from and against any loss suffered as a result of any discrepancy between (a) the rate of exchange used for such purpose to convert the sum in question from the first currency into the second currency and (b) the rate or rates of exchange at which the Beneficiaries may in the ordinary course of business purchase the first currency with the second currency upon receipt of a sum paid to it in satisfaction, in whole or in part, of any such order, judgment, claim or proof.

 

	
9.4  

	
Separate debt

 

Any amount due from the Guarantor under Clause 9.3 (Currency conversion) shall be due as a separate debt and shall not be affected by judgment being obtained for any other sums due under or in respect of this Guarantee and the term "rate of exchange" includes any premium and costs of exchange payable in connection with the purchase of the first currency with the second currency.

 

	
10.  

	
NOTICES

 

	
10.1  

	
Any notice or other communication given or made in connection with this Guarantee must be in writing and in English.

 

  

9

  

 

	
10.2  

	
Any demand for payment and any other demand, notice, consent or communication in writing made by the Beneficiaries hereunder must be served by delivering it personally or sending it by pre-paid recorded or special delivery (or pre-paid international recorded airmail if being sent to or from a place outside the United Kingdom) to the address set out on page 1 (or any other address as may be notified by at least five Business Days' notice in writing from time to time by the relevant party to the other parties in accordance with this Clause 10).

 

	
10.3  

	
Provided that it has been correctly addressed as set out in clause 10.2, the notice or communication will (in the absence of earlier receipt) be deemed to have been received:

 

	
10.3.1  

	
if delivered personally, at the time of delivery; and

 

	
10.3.2  

	
in the case of pre-paid first class post, two Business Days after the date of posting or in the case of airmail five Business Days after the date of posting,

 

Provided that if receipt would under this clause be deemed to occur outside 9.30 a.m. to 5.30 p.m. (London time) on a Business Day (Working Hours) the notice or communication will instead be deemed to have been received at the start of the next period of Working Hours.

 

	
11.  

	
COUNTERPARTS

 

This Guarantee may be executed and delivered in any number of counterparts, each of which is an original and which, together, have the same effect as if each party had signed the same document.

 

	
12.  

	
GOVERNING LAW AND JURISDICTION

 

	
12.1  

	
Governing Law

 

This Guarantee and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with English law.

 

	
12.2  

	
Jurisdiction of English courts

 

	
12.2.1  

	
The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Guarantee (including a dispute regarding the existence, validity or termination of this Guarantee) (a Dispute).

 

	
12.2.2  

	
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.

 

In Witness whereof this Guarantee has been executed by the parties and is intended to be and is hereby delivered as a deed the day and year first above written.

 

  

10

  

 

SCHEDULE 1

 

THE BENEFICIARIES

 

GUARANTOR

 

	
EXECUTED as a deed and DELIVERED when dated by MUST HAVE LIMITED acting by a director in the presence of:

 

	
Signature

 

 

	 	Director
	 	 	 
	
Witness signature

	  	  
	
Name (in BLOCK CAPITALS)

	  	  
	
Address

	  	  
	  	  	  

 

BENEFICIARIES

 

	
SIGNED as a deed by                                                        in the presence of:

	
Signature

 

	
Witness signature

	  
	
Name (in BLOCK CAPITALS)

	  
	
Address

	  
	  	  

 

	
SIGNED as a deed by                                                       in the presence of:

	
Signature

 

	
Witness signature

	  
	
Name (in BLOCK CAPITALS)

	  
	
Address

	  
	  	  

 

	
SIGNED as a deed by                                                      in the presence of:

	
Signature

 

	
Witness signature

	  
	
Name (in BLOCK CAPITALS)

	  
	
Address

	  
	  	  

 

	
SIGNED as a deed by                                                         in the presence of:

	
Signature

 

	
Witness signature

	  
	
Name (in BLOCK CAPITALS)

	  
	
Address

	  
	  	  

11ecig_ex104.htm

Exhibit 10.4

 

Dated                                                                                    2014

(1) MUST HAVE LIMITED

- and -

 

(2)                                             (AS SECURITY TRUSTEE)

	
 

DEBENTURE

 

	
Mishcon de Reya

Summit House

12 Red Lion Square

London WC1R 4QD

Tel: 020 7440 7000

Fax: 020 7404 5982

Ref: KEM/SS/43296.1

E-mail: sarah.spurling@mishcon.com

 

 

  

1

  

 

TABLE OF CONTENTS

 

	
No.

	 	
Heading

	 	
Page

	  	 	  	 	  
	
1

	 	
Definitions and interpretation

	 	
3

	
2

	 	
Covenant to pay

	 	
7

	
3

	 	
Grant of security

	 	
7

	
4

	 	
Restrictions on dealing

	 	
9

	
5

	 	
positive covenants

	 	
9

	
6

	 	
Representations and warranties

	 	
11

	
7

	 	
Power to remedy

	 	
11

	
8

	 	
Enforcement

	 	
11

	
9

	 	
Administrator and Receiver

	 	
13

	
10

	 	
Scope and Powers of Administrator and Receiver

	 	
14

	
11

	 	
Amounts received

	 	
15

	
12

	 	
Power of attorney

	 	
15

	
13

	 	
Protection of security and further assurance

	 	
16

	
14

	 	
Costs and indemnity

	 	
16

	
15

	 	
Miscellaneous

	 	
17

	
16

	 	
Demands and notices

	 	
17

	
17

	 	
Assignment and transfer

	 	
18

	
18

	 	
Release of Security

	 	
18

	
19

	 	
Governing law and enforcement

	 	
18

	
20

	 	
Counterparts

	 	
19

	
Schedule 1 the beneficiaries

	 	20
	
Schedule 2 Properties

	 	21
	
Schedule 3 Securities

	 	22

 

  

2

  

 

DEBENTURE

 

DATE                                                                2014

 

PARTIES

 

	
(1)  

	
MUST HAVE LIMITED incorporated in England and Wales with company number 05101019 whose registered office is at Unit 14, Dale Street Industrial Estate, Radcliffe, Manchester M26 1AD  (the "Chargor");

 

	
(2)  

	
                                         as security agent and trustee for the Beneficiaries (the "Security Trustee").

 

IT IS AGREED as follows:

 

	
1.  

	
DEFINITIONS AND INTERPRETATION

 

	
1.1  

	
Definitions

 

In this Deed, unless the context otherwise requires:

 

Accounts: means all accounts, and all moneys from time to time standing to the credit (including any interest thereon) of such accounts and all rights in relation thereto (including the right to interest), with any bank, financial institution or other person in any jurisdiction now or at any time hereafter (and from time to time) owned, operated or held by the Chargor or in which the Chargor has an interest;

 

Administrator: means a person appointed in accordance with schedule B1 to the Insolvency Act 1986 to manage the Chargor's affairs, business and property;

 

Beneficiaries: means the Security Trustee and the persons whose names and addresses are set out in Schedule 1 (each a Beneficiary);

 

Business Day means a day (other than a Saturday or a Sunday) on which commercial banks are open for general business in the City of London.

 

Charged Assets: means all the assets property and undertaking for the time being subject to the Security Interests created by this Deed (and references to the Charged Assets include references to any part of it);

 

Costs: means all present and future costs, charges, expenses and liabilities of any kind including, without limitation, costs and damages in connection with litigation, professional fees, disbursements and any value added tax charged on such costs;

 

Debts: means all book and other debts of any kind whatsoever now or at any time due, owing or payable to the Chargor or in which the Chargor has an interest and the proceeds of the same, including the benefit of any judgement or order to pay a sum of money, and the benefit of all rights, securities and guarantees of any nature enjoyed or held by it in relation to the same;

 

Equipment: means all present and future equipment, plant, machinery, tools, vehicles, furniture, furnishings, fittings, installations, apparatus and other chattels and tangible moveable property now or at any time hereafter (and from time to time) owned by the Chargor, and any part thereof, together with all spare parts, replacements, modifications and additions and the benefit of all contracts and warranties relating to the same;

 

Event of Default: means:

 

	
(i)  

	
if any of the Secured Obligations are not paid or discharged when the same ought to be paid or discharged by the Chargor (whether at scheduled maturity or by acceleration or otherwise as the case may be);

 

	
(ii)  

	
if any step is taken (including, without limitation, the making of an application or the giving of any notice) by the Company or by any other person to appoint an administrator in respect of the Company;

 

	
(iii)  

	
if any step is taken (including, without limitation, the making of an application or the giving of any notice) by the Company or any other person to wind up or dissolve the Company or to appoint a liquidator, trustee, receiver, administrative receiver or similar officer to the Company or any part of its undertaking or assets; and

 

  

3

  

 

	
(iv)  

	
the making of a request by the Company for the appointment of a Receiver or administrator.

 

Excluded Property: means each leasehold property held by the Chargor under a lease which either precludes absolutely, or requires consent of a third party to, the creation of a Security Interest over the Chargor's leasehold interest in that property;

 

Finance Documents: means the Guarantee and this Deed;

 

Financial Collateral: shall have the meaning given to that expression in the Financial Collateral Regulations;

 

Financial Collateral Regulations: means the Financial Collateral Arrangements (No. 2) Regulations 2003;

 

Floating Charge Assets: means all the assets property and undertaking for the time being subject to the floating charge created by this Deed (and references to the Floating Charge Assets include references to any part of it);

 

Goodwill: means all goodwill now or at any time hereafter (and from time to time) of or in the Chargor;

 

Guarantee: means the guarantee dated the date of this Deed and made between (1) the Chargor and (2) the Beneficiaries (as therein defined) pursuant to which the Chargor guarantees certain of the obligations of Victory Electronic Cigarettes Corporation;

 

Insurance Policies: means all contracts and policies of insurance or assurance effected or maintained by the Chargor from time to time or in which the Chargor has an interest (including without limitation, insurances relating to the Properties or the Equipment) and all moneys payable under or pursuant to such policies and all rights and interests in such contracts and policies including the right to the refund of any premium;

 

Intellectual Property: means the Chargor's present and future patents, rights to inventions, copyright and related rights, trade marks, business names and domain names, rights in get-up, goodwill and the right to sue for passing off, rights in designs, database rights, rights to use, and protect the confidentiality of, confidential information (including know-how), and all other intellectual property rights, in each case whether registered or unregistered and including all applications and rights to apply for and be granted, renewals or extensions of, and rights to claim priority from, such rights and all similar or equivalent rights or forms of protection which subsist or will subsist now or in the future in any part of the world, together with all fees, royalties and other rights derived from, or incidental to, these rights.

 

Intercreditor Deed: means the intercreditor deed between, amongst others, (1) the Chargor; (2) the Beneficiaries; and (3) [                   ] dated on or about the date of this Deed;

 

LPA: means the Law of Property Act 1925;

 

Permitted Security means:

 

	
(a)  

	
the Senior Security;

 

	
(b)  

	
any lien arising by operation of law and in the ordinary course of trading and not as a result of any default or omission by any member of the Chargor; and

 

	
(c)  

	
any Security Interest arising under any retention of title, hire purchase or conditional sale arrangement or arrangements having similar effect in respect of goods supplied to the Chargor in the ordinary course of trading and on the supplier's standard or usual terms and not arising as a result of any default or omission by the Chargor;

 

Properties: means all estates or interests in any freehold and leasehold properties (whether registered or unregistered) and all commonhold or other immoveable properties now or at any time hereafter (and from time to time) owned by the Chargor wherever situated and all buildings, structures and fixtures and the proceeds of sale of all or any part thereof including (without limitation) the properties which are briefly described in Schedule 1 (Properties);

 

  

4

  

 

Property Interests: means all interests in or over the Properties and all rights, licences, guarantees, rents, deposits, contracts, covenants and warranties relating to the Properties, in each case, now or at any time hereafter (and from time to time) owned or held by the Chargor;

 

Receiver: means a person appointed by the Security Trustee to be a receiver or receiver and manager or (if permitted by law) an administrative receiver of all or any part of the Charged Assets of the Chargor;

 

Rental Income: means the aggregate of all amounts payable to or for the account of the Chargor in connection with the letting of all or part of a Property;

 

Secured Obligations: means all present and future moneys, obligations and liabilities owed by the Chargor to the Beneficiaries under the Finance Documents (whether actual or contingent and whether owed jointly or severally, as principal or surety and/or in any other capacity whatsoever);

 

Securities: means all stocks, shares, loan capital, securities, bonds and investments of any kind whatsoever now or at any time hereafter (and from time to time) owned by the Chargor, or in which the Chargor has an interest, together with all allotments offered or arising in respect thereof or incidental thereto and all stocks, shares, loan capital, securities, bonds, investments, rights, income, money or property accruing, deriving, offered or paid from time to time by way of dividend, distribution, interest, exchange, capital reorganisation, conversion, redemption, bonus, rights, preference, option or otherwise in respect thereof (including the securities which are briefly described in Schedule 3 (Securities));

 

Security Financial Collateral Arrangement: shall have the meaning given to that expression in the Financial Collateral Regulations;

 

Security Interest:  means 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;

 

Security Period: means the period starting on the date of this Deed and ending on the date on which the Secured Obligations have been unconditionally and irrevocably paid and discharged in full and no further Secured Obligations are capable of being outstanding;

 

Senior Security: means the debenture between (1) the Chargor; and (2) [                             ] dated on or about the date of this Deed; and

 

Uncalled Capital: means all the uncalled capital now or at any time hereafter (and from time to time) of the Chargor.

 

	
1.2  

	
Construction

 

	
1.2.1  

	
In this Deed (unless the context requires otherwise) any reference to:

 

	
(a)  

	
the Chargor, the Security Trustee, any Administrator or Receiver or any other person shall be construed so as to include their successors in title, permitted assigns, permitted transferees and (in the case of any Administrator or Receiver) lawful substitutes and/or replacements;

 

	
(b)  

	
an "amendment" includes a supplement, restatement, variation, novation or re-enactment (and "amended" is to be construed accordingly);

 

	
(c)  

	
a Finance Document or any other agreement or instrument (or any specified provision of it) is a reference to that Finance Document or other agreement or instrument or provision as amended (however fundamentally, including any amendment providing for any increase in the amount of any facility or other liability) from time to time in accordance with the terms of the  relevant agreement or instrument;

 

	
(d)  

	
any reference to the Security Interests constituted by this Deed becoming "enforceable" shall mean that the Security Interests created under this Deed have become enforceable under Clause 8.1 (Enforcement events);

 

	
(e)  

	
a reference to a person shall include a reference to an individual, firm, corporation, unincorporated body of persons, or any state or any agency of a person;

 

	
(f)  

	
"including" means "including without limitation";

 

  

5

  

 

	
(g)  

	
"owned" includes having legal or equitable title to or a right to have legal or equitable title transferred;

 

	
(h)  

	
a "law" includes a reference to the common law, any statute, bye-law, regulation or instrument and any kind of subordinate legislation, and any order, requirement, code of practice, circular, guidance note, licence, consent or permission made or given pursuant to any of the foregoing;

 

	
(i)  

	
a provision of law is a reference to that provision as amended or re-enacted from time to time;

 

	
(j)  

	
a time of day is a reference to London time;

 

	
(k)  

	
any gender includes a reference to the other genders;

 

	
(l)  

	
the singular includes a reference to the plural and vice versa; and

 

	
(m)  

	
a Clause or Schedule is to a Clause or Schedule (as the case may be) of or to this Deed.

 

	
1.2.2  

	
Clause and Schedule headings are for ease of reference only.

 

	
1.2.3  

	
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,

 

	
1.3  

	
Nature of security over real property

 

A reference in this Deed to any freehold, leasehold or commonhold property includes:

 

	
1.3.1  

	
all buildings and fixtures (including trade and tenant's fixtures) which are at any time situated on that property;

 

	
1.3.2  

	
the proceeds of sale of any part of that property; and

 

	
1.3.3  

	
the benefit of any covenants for title given or entered into by any predecessor in title of the Chargor in respect of that property or any monies paid or payable in respect of those covenants.

 

	
1.4  

	
Rights of the Beneficiaries

 

	
1.4.1  

	
All of the representations, covenants and undertakings given by the Chargor pursuant to this Deed are given to the Security Trustee for the benefit of each Beneficiary.

 

	
1.4.2  

	
All of the security created by the Chargor pursuant to the terms of this Deed is created in favour of the Security Trustee as security trustee for each of the Beneficiaries and the Security Trustee holds the benefit of this Deed on trust for itself and each of the other Beneficiaries.

 

	
1.5  

	
Intercreditor Deed

 

The provisions of this Deed are in all respects subject to the provisions of the Intercreditor Deed and where a provision of this Deed conflicts with a provision of the Intercreditor Deed then the relevant provision of the Intercreditor Deed shall prevail.

 

  

6

  

 

	
2.  

	
COVENANT TO PAY

 

The Chargor as principal debtor hereby covenants with the Security Trustee (for the benefit of itself and the other Beneficiaries) that it will on demand pay and discharge all Secured Obligations owing or incurred from or by it to the Beneficiaries when the same become due whether by acceleration or otherwise.

 

	
3.  

	
GRANT OF SECURITY

 

	
3.1  

	
Fixed security

 

As a continuing security for the payment or discharge of the Secured Obligations, the Chargor with full title guarantee hereby:

 

	
3.1.1  

	
grants to the Security Trustee, a charge by way of legal mortgage over all its Properties which are listed in Schedule 2 (Properties), if any;

 

	
3.1.2  

	
charges to the Security Trustee, by way of fixed charge, all its:

 

	
(a)  

	
Properties acquired by it after the date of this Deed;

 

	
(b)  

	
Property Interests;

 

	
(c)  

	
Equipment;

 

	
(d)  

	
Securities (including but not limited to any Securities which are listed in Schedule 2 (Securities) opposite its name (if any));

 

	
(e)  

	
Intellectual Property;

 

	
(f)  

	
Accounts;

 

	
(g)  

	
Debts;

 

	
(h)  

	
Rental Income;

 

	
(i)  

	
Goodwill and Uncalled Capital; and

 

	
3.1.3  

	
assigns to the Security Trustee by way of security, subject to a proviso for reassignment on redemption, all of its right, title and interest in and to the Insurance Policies.

 

	
3.2  

	
Floating Security

 

	
3.2.1  

	
Floating Charge

 

As a continuing security for the payment or discharge of the Secured Obligations, the Chargor with full title guarantee hereby charges to the Security Trustee, by way of floating charge, all of its undertaking, property, assets and rights at any time not effectively mortgaged, charged or assigned pursuant to Clauses 3.1.1 to 3.1.3 inclusive above.

 

  

7

  

 

	
3.2.2  

	
Qualifying floating charge

 

Paragraph 14 of schedule B1 to the Insolvency Act 1986 (as inserted by section 248 of, and schedule 16 to, the Enterprise Act 2002) applies to the floating charge created by this Deed.

 

	
3.2.3  

	
Automatic conversion of floating charge

 

The floating charge created by this Deed shall automatically and immediately (without notice) be converted into a fixed charge over the relevant Charged Assets if:

 

	
(a)  

	
the Chargor creates, or attempts to create, on all or any part of the Charged Assets a Security Interest other than Permitted Security without the prior written consent of the Security Trustee; or

 

	
(b)  

	
a receiver is appointed over all or any of the Charged Assets that is subject to the floating charge; or

 

	
(c)  

	
any person levies (or attempts to levy) any distress, attachment, execution or other process against all or any part of the Charged Assets; or

 

	
(d)  

	
the Security Trustee receives notice of the appointment of, or a proposal or an intention to appoint, an administrator of the Chargor.

 

	
3.2.4  

	
Conversion of floating charge by notice

 

Notwithstanding anything express or implied in this Deed, if an Event of Default has occurred the Security Trustee may at any time thereafter, by notice to the Chargor, convert the floating charge created by this Deed with immediate effect into a fixed charge over all or any of the Floating Charge Assets of the Chargor specified in such notice (but without prejudice to the Security Trustee's rights to serve a notice in respect of any other Floating Charge Assets and any other rights of the Security Trustee whatsoever).

 

	
3.2.5  

	
Assets acquired after any floating charge conversion

 

Any asset acquired by the Chargor after any conversion of the floating charge created under this Deed into a fixed charge which but for such conversion would be subject to a floating charge shall, (unless the Security Trustee confirms in writing to the contrary) be charged to the Security Trustee by way of fixed charge.

 

	
3.2.6  

	
Reconversion of fixed charge assets into floating charge assets

 

The Security Trustee may at any time after any conversion of the floating charge created under this Deed over any Charged Assets into a fixed charge reconvert such fixed charge into a floating charge by notice to the Chargor.

 

	
3.3  

	
Leasehold security restrictions

 

	
3.3.1  

	
Subject to clauses 3.3.2 and 3.3.3 the security created by clause 3.1 and 3.2 shall not apply to an Excluded Property.

 

	
3.3.2  

	
In relation to each Excluded Property, the Chargor undertakes to:

 

	
(a)  

	
apply for the relevant consent or waiver of prohibition written 5 Business Days of the date of this Deed and use its reasonable endeavours to obtain that consent or waiver of prohibition as soon as possible;

 

	
(b)  

	
keep the Security Trustee informed of its progress in obtaining such consent or waiver; and

 

	
(c)  

	
immediately on receipt of such consent or waiver, provide the Security Trustee with a copy of that consent or waiver.

 

  

8

  

 

	
3.3.3  

	
Immediately on receipt by the Chargor of the relevant consent or waiver, that Excluded Property shall become the subject of a mortgage or charge (as appropriate) pursuant to clause 3.1 or 3.2 (as appropriate).

 

	
4.  

	
RESTRICTIONS ON DEALING

 

	
4.1  

	
Negative pledge and restriction on disposal

 

The Chargor hereby covenants with the Security Trustee that it will not at any time except with the prior written consent of the Security Trustee:

 

	
4.1.1  

	
create or purport to create or permit to subsist any Security Interest on or in relation to the Charged Assets other than the Security Interests created by this Deed and the Permitted Security; or

 

	
4.1.2  

	
enter into a single transaction or a series of transactions (whether related or not) and whether voluntary or involuntary to sell, lease, transfer, factor, surrender or otherwise dispose of or cease to exercise control of any interest in any Charged Assets which are charged by way of legal mortgage or fixed charge under this Deed.

 

	
5.  

	
POSITIVE COVENANTS

 

	
5.1  

	
Maintenance and Insurance

 

The Chargor hereby covenants with the Security Trustee that it will:

 

	
5.1.1  

	
keep the Charged Assets in good and substantial repair and condition (fair wear and tear accepted) and not do, or permit to be done, any act or thing that would or might jeopardise or otherwise prejudice the Security held by the Security Trustee or the effectiveness of the security created by this Deed;

 

	
5.1.2  

	
maintain insurances on and in relation to the Charged Assets against those risks and to the extent as is usual for companies carrying on the same or substantially similar business as the Chargor with reputable independent insurance companies or underwriters;

 

	
5.1.3  

	
promptly pay all taxes, fees, licence duties, registration charges, insurance premiums and other outgoings in respect of the Charged Assets; and

 

	
5.1.4  

	
at the request of the Security Trustee, produce to or deposit with the Security Trustee copies of all Insurance Policies and copies of the receipts for all premiums and other payments necessary for effecting and keeping up the Insurance Policies.

 

	
5.1.5  

	
at all times comply with the terms of this debenture;

 

	
5.1.6  

	
comply in all material respects with the terms of all applicable laws and regulations including (without limitation) all environmental laws, legislation relating to public health, town & country planning, control and handling of hazardous substances or waste, fire precautions and health and safety at work;

 

	
5.1.7  

	
promptly notify the Security Trustee of the acquisition by the Company of any estate or interest in any freehold or leasehold property;

 

	
5.1.8  

	
deposit with the Security Trustee all deeds, certificates and documents of title relating to the Charged Assets or any part thereof charged by this debenture;

 

	
5.1.9  

	
promptly pay or cause to be paid and indemnify the Security Trustee and any Receiver against all present and future rent, rates, taxes, duties, charges, assessments, impositions and outgoings whatsoever now or at any time in the future payable in respect of any of its properties (or any part thereof) or by the owner or occupier thereof;

 

  

9

  

 

	
5.1.10  

	
not make any structural or material alteration to or to the user of any of its properties or do or permit to be done any act, matter or thing where to do so would have a material and adverse effect on the value of any of its properties or on the marketability of any of such properties;

 

	
5.1.11  

	
not grant any lease of, part with possession or share occupation of, the whole or any part of any of its properties or confer any licence, right or interest to occupy or grant any licence or permission to assign, under-let or part with possession of the same in any way which is likely to have a material and adverse effect upon the value of any of such properties;

 

	
5.1.12  

	
not vary, surrender, cancel or dispose of, or permit to be forfeit, any leasehold interest in any of its properties;

 

	
5.1.13  

	
notify the Security Trustee immediately in the event of any creditor executing diligence against the Company or any distress or execution is levied or enforced against the Company or any third party debt order or freezing order is made and served on the  Company;

 

	
5.1.14  

	
notify the Security Trustee immediately if any steps (including, without limitation, the making of any application or the giving of any notice) are taken by any person (including, without limitation, the Company) in relation to the administration, receivership, winding-up or dissolution of the Company;

 

	
5.1.15  

	
not to allow any person other than itself to be registered under the Land Registration Act 1925 or Land Registration Act 2002 (as appropriate) as proprietor of any of its properties (or any part thereof) or create or permit to arise any overriding interest (as specified in Section 70(1) of the Land Registration Act 1925 or as specified in Schedule 1 or Schedule 3 to the Land Registration Act 2002) affecting any such property; and

 

	
5.1.16  

	
not do or cause or permit to be done anything which may in any way depreciate, jeopardise or otherwise prejudice the value or marketability of any of its Assets.

 

	
5.2  

	
Properties

 

The Chargor hereby covenants with the Security Trustee that it will

 

	
5.2.1  

	
observe and perform all covenants, stipulations and conditions to which each Property is now or may hereafter be subjected; and

 

	
5.2.2  

	
perform and observe all covenants and conditions on its part contained in any lease, agreement for lease, licence or other agreement under which any Property or part of any Property is held,

 

where a failure to do so has or is reasonably likely to have a material adverse effect on the validity or enforceability of, or the effectiveness or ranking of any Security Interests granted or purporting to be granted pursuant to this Deed.

 

	
5.3  

	
Book Debts

 

The Chargor shall collect in and realise all Debts in the ordinary course of its business in a proper and efficient manner.

 

	
5.4  

	
Intellectual Property

 

The Chargor shall:

 

	
5.4.1  

	
observe and perform all material covenants and stipulations form time to time affecting the Intellectual Property or the way it is used or enjoyed;

 

	
5.4.2  

	
make all such payments, carry out and seek all registrations, grants or renewals of the Intellectual Property, or of any licences or other interests affecting such Intellectual Property;

 

	
5.4.3  

	
generally take all such steps necessary to preserve, maintain and renew when necessary all of the Intellectual Property, present or future,

 

  

10

  

 

where a failure to do so has or is reasonably likely to have a material adverse effect on the validity or enforceability of, or the effectiveness or ranking of any Security Interests granted or purporting to be granted pursuant to this Deed.

 

	
5.5  

	
Provisions relating to the Securities

 

Subject to the Senior Security, the Security Trustee may at any time after the occurrence of an Event of Default cause any or all of the Securities to be registered in the name of the Security Trustee or its nominee.  The Chargor agrees promptly to execute and deliver all such transfers and other documents and do all such things as may be necessary or desirable to achieve such registration.

 

	
6.  

	
REPRESENTATIONS AND WARRANTIES

 

The Chargor represents and warrants to the Security Trustee as follows:

 

	
6.1.1  

	
it is the legal and beneficial owner of the Charged Assets;

 

	
6.1.2  

	
the Charged Assets are free from any Security Interests other than the Security Interests created by this Deed and the Permitted Security; and

 

	
6.1.3  

	
all authorisations required for the Chargor's entry into this Deed have been obtained and are in full force and effect.

 

	
7.  

	
POWER TO REMEDY

 

If the Chargor is at any time in breach of any of its obligations contained in this Deed, the Security Trustee shall be entitled (but shall not be bound) to remedy such breach and the Chargor hereby irrevocably authorises the Security Trustee and its agents to do all such things necessary or desirable in connection therewith.  The Chargor shall be liable to the Security Trustee for the expenses of the Security Trustee in so doing.  The rights of the Security Trustee contained in this Clause 7 are without prejudice to any other rights of the Security Trustee hereunder.  The exercise by the Security Trustee of its rights under this Clause shall not make the Security Trustee liable to account as a mortgagee in possession.

 

	
8.  

	
ENFORCEMENT

 

	
8.1  

	
Enforcement events

 

The security constituted by this Deed shall be immediately enforceable on the occurrence of an Event of Default, and thereupon and at any time thereafter, without prejudice to any other rights of the Security Trustee, the powers of sale under the LPA and all other powers of the Security Trustee shall immediately be exercisable and the Security Trustee may in its absolute discretion enforce all or any part of the security created by this Deed as it sees fit.

 

	
8.2  

	
Statutory power of sale

 

The statutory power of sale shall arise on the execution of this Deed (and the Secured Obligations shall be deemed to have become due and payable for that purpose) but shall not be exercised by the Security Trustee until the security constituted by this Deed has become enforceable.

 

	
8.3  

	
Extension of statutory powers

 

	
8.3.1  

	
Any restriction imposed by law on the power of sale (including under section 103 of the LPA) or the right of a mortgagee to consolidate mortgages (including under section 93 of the LPA) does not apply to the security constituted by this Deed and the Security Trustee or any Receiver shall have the right to consolidate all or any of the security constituted by this Deed with any other Security Interests in existence at any time and to make any applications to the Land Registry in support of the same.

 

	
8.3.2  

	
Any powers of leasing conferred on the Security Trustee or any Receiver by law are extended so as to authorise the Security Trustee or any Receiver to lease, make agreements for leases, accept surrenders of leases and grant options as the Security Trustee or Receiver may think fit and without the need to comply with any restrictions conferred by law (including under section 99 or 100 of the LPA).

 

  

11

  

 

	
8.4  

	
No obligation to enquire

 

No person dealing with the Security Trustee, any Administrator or any Receiver appointed hereunder, or its agents or brokers, shall be concerned to enquire:

 

	
8.4.1  

	
whether the security constituted by this Deed has become enforceable;

 

	
8.4.2  

	
whether any power exercised or purported to be exercised has become exercisable;

 

	
8.4.3  

	
whether any money remains due under the Finance Documents;

 

	
8.4.4  

	
as to the necessity or expediency of the stipulations and conditions subject to which any sale of any Charged Assets shall be made, or otherwise as to the propriety or regularity of any sale of any of the Charged Assets; or

 

	
8.4.5  

	
how any money paid to the Security Trustee, Administrator or Receiver, or its agents or brokers is to be applied.

 

	
8.5  

	
No liability as mortgagee in possession

 

None of the Security Trustee, any Administrator or any Receiver shall be liable to account as mortgagee in possession in respect of all or any of the Charged Assets.

 

	
8.6  

	
Redemption of Prior Security Interests

 

At any time after the security constituted by this Deed shall have become enforceable the Security Trustee may:

 

	
8.6.1  

	
redeem any prior Security Interests;

 

	
8.6.2  

	
procure the transfer thereof to itself; and/or

 

	
8.6.3  

	
may settle and pass the accounts of the prior encumbrancer and any account so settled and passed shall be conclusive and binding on the Chargor and all monies paid by the Security Trustee to the prior encumbrancer in accordance with such accounts shall as from such payment be due from the Chargor to the Security Trustee on current account and shall bear interest and be secured as part of the Secured Obligations.

 

	
8.7  

	
Right of appropriation

 

	
8.7.1  

	
To the extent that:

 

	
(a)  

	
the Charged Assets constitute Financial Collateral; and

 

	
(b)  

	
this Deed and the obligations or the Chargor hereunder constitute a Security Financial Collateral Arrangement,

 

the Security Trustee shall have the right, at any time after the security constituted by this Deed has become enforceable, to appropriate all or any of those Charged Assets in or towards payment or discharge of the Secured Obligations in such order as the Security Trustee may, in its absolute discretion, determine.

 

  

12

  

 

	
8.7.2  

	
The value of any Charged Assets appropriated in accordance with this clause shall be the price of such Charged Assets at the time the right of appropriation is exercised as listed on any recognised market index, or determined by such other method as the Security Trustee may select (including independent valuation).

 

	
8.7.3  

	
The Chargor agrees that the methods of valuation provided for in this clause are commercially reasonable for the purposes of the Financial Collateral Regulations.

 

	
9.  

	
ADMINISTRATOR AND RECEIVER

 

	
9.1  

	
Appointment of Administrator or Receiver

 

At any time after:

 

	
9.1.1  

	
the security constituted by this Deed becomes enforceable;

 

	
9.1.2  

	
any corporate action or any other steps are taken or legal proceedings started by or in respect of the Chargor with a view to the appointment of an Administrator; or

 

	
9.1.3  

	
at the request of the Chargor,

 

the Security Trustee may without further notice, under seal or by writing under hand of a duly authorised officer of the Security Trustee:

 

	
(a)  

	
appoint any person or persons to be an Administrator of the Chargor; or

 

	
(b)  

	
appoint any person or persons to be a Receiver of all or any part of the Charged Assets of the Chargor; and

 

	
(c)  

	
(subject to Section 45 of the Insolvency Act 1986) from time to time remove any person appointed to be Receiver and appoint another in his place.

 

	
9.2  

	
More than one appointment

 

Where more than one person is appointed Administrator or Receiver, they will have power to act separately (unless the appointment by the Security Trustee specifies to the contrary).

 

	
9.3  

	
Additional powers

 

	
9.3.1  

	
The powers of appointing an Administrator or a Receiver conferred by this Deed shall be in addition to all statutory and other powers of the Security Trustee under the Insolvency Act 1986 and the LPA or otherwise and shall be exercisable without the restrictions contained in Section 109 of the LPA or otherwise.

 

	
9.3.2  

	
The power to appoint an Administrator or a Receiver (whether conferred by this Deed or by statute) shall be and remain exercisable by the Security Trustee notwithstanding any prior appointment in respect of all or any part of the Charged Assets.

 

	
9.4  

	
Agent of the Chargor

 

	
9.4.1  

	
Any Administrator or Receiver shall be the agent of the Chargor and the Chargor shall be solely responsible for his acts and remuneration as well as for any defaults committed by him.

 

	
9.4.2  

	
The Security Trustee will not incur any liability (either to the Chargor or to any other person) by reason of the appointment of an Administrator or Receiver.

 

  

13

  

 

	
10.  

	
SCOPE AND POWERS OF ADMINISTRATOR AND RECEIVER

 

	
10.1  

	
Powers of Administrators and Receiver

 

Any Administrator or Receiver shall in addition to the powers conferred on him by the LPA and (if applicable) the Insolvency Act 1986 have power to do all such acts and things as an absolute owner could do in the management of such of the Charged Assets over which he is appointed and in particular:

 

	
10.1.1  

	
to undertake or complete any works of repair, building or development on the Property;

 

	
10.1.2  

	
to grant or to accept surrenders of any leases or tenancies affecting the Property upon such terms and subject to such conditions as he thinks fit;

 

	
10.1.3  

	
to provide services and employ or engage such managers, contractors and other personnel and professional advisors on such terms as he deems expedient;

 

	
10.1.4  

	
to make such elections for value added tax purposes as he thinks fit;

 

	
10.1.5  

	
to charge and receive such sum by way of remuneration (in addition to all costs, charges and expenses incurred by him) as the Security Trustee may prescribe or agree with him;

 

	
10.1.6  

	
to collect and get in such Charged Assets or any part thereof and for that purpose to make such demands and take any proceedings as may seem expedient and to take possession of such Charged Assets with like rights;

 

	
10.1.7  

	
to carry on, manage, develop, reconstruct, amalgamate or diversify or concur in carrying on, managing, developing, reconstructing, amalgamating or diversifying the business of the Chargor;

 

	
10.1.8  

	
to grant options and licences over all or any part of such Charged Assets, sell or concur in selling, assign or concur in assigning, lease or concur in leasing and accept or concur in accepting surrenders of leases of, all or any of such Charged Assets in such manner and generally on such terms and conditions as he thinks fit (fixtures and plant and machinery may be severed and sold separately from the premises in which they are contained without the consent of the Chargor) and to carry any such sale, assignment, leasing or surrender into effect.  Any such sale may be for such consideration as he shall think fit and he may promote or concur in promoting a company to purchase the property to be sold;

 

	
10.1.9  

	
to sell and assign all or any of the Debts in respect of which he is appointed in such manner and generally on such terms and conditions as he thinks fit;

 

	
10.1.10  

	
to make any arrangement, settlement or compromise between the Chargor and any other person which he may think expedient;

 

	
10.1.11  

	
to make and effect such substitutions of or improvements to the Equipment as he may think expedient;

 

	
10.1.12  

	
to make calls conditionally or unconditionally on the members of the Chargor in respect of the uncalled capital with such and the same powers for that purpose and for the purpose of enforcing payments of any calls so made as are conferred by the Articles of Association of the Chargor on its directors in respect of calls authorised to be made by them;

 

	
10.1.13  

	
to appoint managers, officers, servants, workmen and agents for the aforesaid purposes at such salaries and for such periods and on such terms as he may determine;

 

	
10.1.14  

	
if he thinks fit, but without prejudice to the indemnity contained in Clause 14 (Costs and Indemnity), to effect with any insurer any policy or policies of insurance either in lieu or satisfaction of or in addition to such indemnity;

 

	
10.1.15  

	
to exercise all powers provided for in the LPA in the same way as if he had been duly appointed thereunder and to exercise all powers provided for an administrative receiver in Schedule 1 to the Insolvency Act 1986;

 

	
10.1.16  

	
for any of the purposes authorised by this Clause to raise money by borrowing from the Security Trustee or from any other person on the security of all or any of the Charged Assets in respect of which he is appointed upon such terms (including, if the Security Trustee shall consent, terms under which such security ranks in priority to this Deed) as he shall think fit;

 

  

14

  

 

	
10.1.17  

	
to redeem any prior Security Interest and to settle and pass the accounts to which the Security Interest relates and any accounts so settled and passed will be conclusive and binding on the Chargor and the moneys so paid will be deemed to be an expense properly incurred by him;

 

	
10.1.18  

	
to acquire additional assets as necessary to enhance the value of the Charged Assets; and

 

	
10.1.19  

	
to do all such other acts and things as he may consider to be incidental or conducive to any of the matters or powers aforesaid or which he lawfully may or can do as agent for the Chargor.

 

	
10.2  

	
Scope of powers

 

The Administrator or Receiver may exercise any of the above powers on behalf of the Chargor or on his own behalf or in the case of the power contained in Clause 10.1.12 on behalf of the directors of the Chargor.

 

	
11.  

	
AMOUNTS RECEIVED

 

	
11.1  

	
Application of proceeds

 

The Receiver shall apply all monies received by him:

 

	
11.1.1  

	
first in paying all rents, taxes, rates and outgoings affecting any Charged Assets;

 

	
11.1.2  

	
secondly in paying all costs, charges and expenses of and incidental to his appointment and the exercise of his powers and all outgoings paid by him;

 

	
11.1.3  

	
thirdly in paying his remuneration (as agreed between him and the Security Trustee);

 

	
11.1.4  

	
fourthly in or towards discharge of the Secured Obligations; and

 

	
11.1.5  

	
finally in paying any surplus to the Chargor or any other person entitled to it.

 

	
11.2  

	
Section 109(8) Law of Property Act 1925

 

Neither the Security Trustee nor any Receiver or Administrator shall be bound (whether by virtue of Section 109(8) of the LPA, which is hereby varied accordingly, or otherwise) to pay or appropriate any receipt or payment first towards interest rather than principal or otherwise in any particular order as between any of the Secured Obligations.

 

	
12.  

	
POWER OF ATTORNEY

 

	
12.1  

	
Power of attorney

 

The Chargor hereby by way of security irrevocably appoints the Security Trustee and (jointly and severally) each and every Administrator or Receiver of this Deed to be the attorney of the Chargor and in its name and on its behalf and as its act and deed or otherwise at any time after the security constituted by this Deed becomes enforceable, to sign, execute, seal, deliver, complete any blanks in and otherwise perfect any deed, transfer, assurance, agreement, instrument or act which such Administrator or Receiver or the Security Trustee may consider expedient in the exercise of any of his or its powers or in respect of the Chargor's obligations under this Deed.  The power of attorney hereby granted is to secure the performance of obligations owed to the donees within the meaning of the Powers of Attorney Act 1971.

 

  

15

  

 

	
12.2  

	
Ratification

 

The Chargor ratifies and confirms, and agrees to ratify and confirm, anything that any of its attorneys may do in the proper and lawful exercise, or purported exercise, of all or any of the rights, powers, authorities and discretions referred to in Clause 12.1 (Power of Attorney).

 

	
13.  

	
PROTECTION OF SECURITY AND FURTHER ASSURANCE

 

	
13.1  

	
Independent security

 

This Deed shall be in addition to and independent of every other security or guarantee which the Security Trustee may at any time hold for any of the Secured Obligations and it is hereby declared that no prior security held by the Security Trustee over the whole or any part of the Charged Assets shall merge in the security created by this Deed.

 

	
13.2  

	
Continuing security

 

This Deed shall remain in full force and effect as a continuing security for the Secured Obligations, notwithstanding any settlement of account or intermediate payment or discharge in whole or in part.

 

	
13.3  

	
Rights Cumulative

 

No failure to exercise, nor delay in exercising, on the part of the Security Trustee, any right or remedy under this Deed shall operate as a waiver, nor shall any single or partial exercise of any right or remedy prevent any further or other exercise, or the exercise of any right or remedy. The rights and remedies of the Security Trustee provided in this Deed are cumulative and not exclusive of any rights or remedies provided by law.

 

	
13.4  

	
Further assurance

 

The Chargor must, promptly upon request by the Security Trustee or any Receiver or Administrator, at its own expense, take whatever action the Security Trustee or a Receiver or Administrator may reasonably require for:

 

	
13.4.1  

	
creating, perfecting or protecting any security intended to be created by or pursuant to this Deed;

 

	
13.4.2  

	
facilitating the realisation of any Charged Asset at any time after the security constituted by this Deed has become enforceable; or

 

	
13.4.3  

	
exercising any right, power or discretion conferred on the Security Trustee, or any Receiver or any Administrator or any of their respective delegates or sub-delegates in respect of any Charged Asset.

 

	
14.  

	
COSTS AND INDEMNITY

 

	
14.1  

	
Costs

 

The Chargor shall pay to, or reimburse, the Security Trustee and any Receiver on demand, on a full indemnity basis, all Costs incurred by the Security Trustee or any Receiver in connection with:

 

	
14.1.1  

	
protecting, perfecting, preserving, enforcing or discharging (or attempting to do so) any of the Security Trustee's or Receiver's rights under this Deed;

 

	
14.1.2  

	
suing for, or recovering, any of the Secured Obligations,

 

(including, without limitation, the Costs of any proceedings in connection with this debenture or the Secured Obligations) and the Costs shall form part of the Secured Obligations.

 

  

16

  

 

	
14.2  

	
Indemnity

 

The Security Trustee and any Receiver, and their respective employees and agents, shall be indemnified on a full indemnity basis in respect of all actions, liabilities and Costs incurred or suffered in or as a result of any default by the Chargor in performing any of its obligations under this Deed.

 

	
15.  

	
MISCELLANEOUS

 

	
15.1  

	
Severability

 

If any of the provisions of this Deed is or becomes invalid or unenforceable, the validity and enforceability of the remaining provisions shall not be affected or impaired thereby.

 

	
15.2  

	
Third party rights

 

A third party (being any person other than the Chargor and the Security Trustee, the Beneficiaries and their permitted successors and assigns) has no right under the Contracts (Rights of Third Parties) Act 1999 to enforce or to enjoy the benefit of any term of this Deed

 

	
15.3  

	
Perpetuity period

 

The perpetuity period applicable to all trusts declared by this Deed shall be 125 years.

 

	
15.4  

	
Trustee Act 2000

 

The Chargor and the Security Trustee agree that the Security Trustee shall not be subject to the duty of care imposed on the trustees by the Trustee Act 2000.

 

	
16.  

	
DEMANDS AND NOTICES

 

	
16.1  

	
Form of notice

 

Any notice or other communication given or made in connection with this Debenture must be in writing and in English.

 

	
16.2  

	
Addresses

 

Any demand for payment and any other demand, notice, consent or communication hereunder must be served by delivering it personally or sending it by pre-paid recorded or special delivery (or pre-paid international recorded airmail if being sent to or from a place outside the United Kingdom) to the address of the Chargor or the Security Trustee (as appropriate) set out on page 1 (or any other address as may be notified by at least five Business Days' notice in writing from time to time by the relevant party to the other parties in accordance with this Clause 16).

 

	
16.3  

	
Delivery

 

Provided that it has been correctly addressed as set out in clause 16.2, the notice or communication will (in the absence of earlier receipt) be deemed to have been received:

 

	
16.3.1  

	
if delivered personally, at the time of delivery; and

 

	
16.3.2  

	
in the case of pre-paid first class post, two Business Days after the date of posting or in the case of airmail five Business Days after the date of posting,

 

provided that if receipt would under this clause be deemed to occur outside 9.30 a.m. to 5.30 p.m. (London time) on a Business Day (Working Hours) the notice or communication will instead be deemed to have been received at the start of the next period of Working Hours.

 

  

17

  

 

	
17.  

	
ASSIGNMENT AND TRANSFER

 

	
17.1  

	
Assignment by Security Trustee

 

The Security Trustee may not assign any of its rights or transfer any of its obligations under this Deed or enter into any transaction which would result in any of these rights or obligations passing to another person.

 

	
17.2  

	
Assignment by the Chargor

 

The Chargor may not assign any of its rights or transfer any of its obligations under this Deed or enter into any transaction which would result in any of these rights or obligations passing to another person.

 

	
18.  

	
RELEASE OF SECURITY

 

	
18.1  

	
Release

 

Subject to Clause 18.3 (Discharge conditional), upon the expiry of the Security Period the Security Trustee shall at the request and cost of the Chargor, take whatever action is necessary to release the Charged Assets from the security constituted by this Deed.

 

	
18.2  

	
Avoidance of payments and reinstatement

 

If any payment by the Chargor or any discharge given by the Security Trustee (whether in respect of the obligations of the Chargor or any security for those obligations or otherwise) is (a) capable of being avoided or reduced or (b) avoided or reduced in each case as a result of insolvency or any similar event:

 

	
18.2.1  

	
the liability of the Chargor will continue as if the payment, discharge, avoidance or reduction had not occurred;

 

	
18.2.2  

	
the Security Trustee will be entitled to recover the value or amount of that security or payment from the Chargor, as if the payment, discharge, avoidance or reduction had not occurred; and

 

	
18.2.3  

	
the Security Trustee shall be entitled to enforce this Deed subsequently as if such payment, discharge, avoidance or reduction had not occurred.

 

	
18.3  

	
Discharge conditional

 

Any release, discharge or settlement between the Chargor and the Security Trustee shall be deemed conditional upon no payment or security received by the Security Trustee in respect of the Secured Obligations being avoided or reduced or ordered to be refunded pursuant to any provision of any enactment relating to insolvency, bankruptcy, winding-up, administration or receivership and, notwithstanding any such release, discharge or settlement:

 

	
18.3.1  

	
the Security Trustee or its nominee shall be at liberty to retain this Deed and the security created by or pursuant to this Deed, including all certificates and documents relating to the Charged Assets or any part thereof, for such period as the Security Trustee shall deem necessary to provide the Security Trustee with security against any such avoidance or reduction or order for refund; and

 

	
18.3.2  

	
the Security Trustee shall be entitled to recover the value or amount of such security or payment from the Chargor subsequently as if such settlement, discharge or release had not occurred and the Chargor agrees with the Security Trustee accordingly and charges the Charged Assets and the proceeds of sale thereof with any liability under this Clause, whether actual or contingent.

 

	
19.  

	
GOVERNING LAW AND ENFORCEMENT

 

	
19.1  

	
Governing law

 

This Deed and any non-contractual obligations arising out of or in connection with it shall be governed by and construed in accordance with English law.

 

  

18

  

 

	
19.2  

	
Enforcement

 

	
19.2.1  

	
The courts of England have exclusive jurisdiction to settle any dispute arising out of or in connection with this Deed (including a dispute regarding the existence, validity or termination of this Deed) (a Dispute).

 

	
19.2.2  

	
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.

 

	
20.  

	
COUNTERPARTS

 

This Deed may be executed and delivered in any number of counterparts, each of which is an original and which, together, have the same effect as if each party had signed the same document.

 

In Witness whereof this Deed has been executed by the parties and is intended to be and is hereby delivered as a deed the day and year first above written.

 

.

  

19

  

 

SCHEDULE 1

 

THE BENEFICIARIES

 

 

  

20

  

 

SCHEDULE 2

 

PROPERTIES

 

	
(1)  

	
Lease of Unit 14 Dale Industrial Estate, Phoenix Way, Radcliffe, Manchester between (1) Max Industrial LP and Max Industrial Nominee Limited as Landlord and (2) Must Have Limited as Tenant for a term of 5 years from 16 November 2010.

 

	
(2)  

	
Sub-Sub-Underlease of Unit F5 MetroCentre, Swalwell, Gateshead, Tyne and Wear, between (1) MetroCentre (Nominee No. 1) Limited and MetroCentre Nominee No. 2) Limited as Landlord and (2) Must Have Limited as Tenant for a term of 5 years from 28 August 2013.

 

  

21

  

 

SCHEDULE 3

 

SECURITIES

 

None as at the date of this Deed.

 

SIGNATORIES TO DEED

 

THE CHARGOR

 

	
EXECUTED as a deed and DELIVERED when dated by MUST HAVE LIMITED acting by a director in the presence of:

 

	
Signature

 

 

                                                      

	  
	 	 Director	 
	  	
Witness signature

	  
	  	
Name (in BLOCK CAPITALS)

	  
	  	
Address

	  
	  	  	  

 

THE SECURITY TRUSTEE

 

	
SIGNED as a deed by                                              in the presence of:

	
Signature

 

	
Witness signature

	  
	
Name (in BLOCK CAPITALS)

	  
	
Address

	  
	  	  

 

22

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