EXHIBIT 10.2
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), NOR UNDER ANY APPLICABLE STATE SECURITIES LAWS. THIS
PROMISSORY NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT
WITH RESPECT TO THIS PROMISSORY NOTE OR AN OPINION OF COUNSEL OR OTHER EVIDENCE
REASONABLY ACCEPTABLE TO MAKER THAT SUCH SALE OR TRANSFER IS EXEMPT FROM
REGISTRATION UNDER THE ACT.
VECTOR TOBACCO INC.
PROMISSORY NOTE
$________________ _____________, 2002
FOR VALUE RECEIVED, Vector Tobacco Inc., a Delaware corporation
("Maker"), promises to pay ___________________________________ ("Payee"), in
lawful money of the United States of America, the principal sum of _________
Million Dollars ($____________), together with interest in arrears on the unpaid
principal balance at an annual rate of 6 1/2%, in the manner provided below.
Interest shall be calculated on the basis of a year of 365 or 366 days, as
applicable, and charged for the actual number of days elapsed.
This Note has been executed and delivered pursuant to and in
accordance with the terms and conditions of the Agreement and Plan of Merger,
dated as of November 14, 2001, among Maker, Payee, The Medallion Company Inc.
(the "Company") and the other stockholders of the Company (the "Agreement"), and
is subject to the terms and conditions of the Agreement, which are, by this
reference, incorporated herein and made a part hereof. Capitalized terms used in
this Note without definition shall have the respective meanings set forth in the
Agreement.
1. PAYMENTS
1.1 Principal and Interest
The principal amount of this Note shall be due and payable on
[the fifth anniversary of the Closing Date]. Interest in arrears on the unpaid
principal balance of this Note shall be due and payable semi-annually on
__________ and __________, with the first payment on ________, 2002.
1.2 Manner of Payment
All payments of principal and interest on this Note shall be made
by wire transfer of immediately available funds to an account designated by
Payee in writing. If any payment of principal and interest on this Note is due
on a day that is not a Business Day, such payment shall be due on the next
succeeding Business Day, and such extension of time shall not be taken into
account in calculating the amount of interest payable under this Note. "Business
Day" means any day other than a Saturday, Sunday or legal holiday in the State
of New York.
1.3 Prepayment
Maker may, without premium or penalty, at any time and from time
to time, prepay all or any portion of the outstanding principal balance due
under this Note, provided that each such prepayment is accompanied by accrued
interest on the amount of principal prepaid calculated to the date of such
prepayment.
1.4 Right of Set-Off
Maker shall have the right to withhold and set-off against any
amount due hereunder the amount of any claim for indemnification or payment of
damages to which Maker may be entitled under the Agreement, as provided in
Section 9.03 thereof.
2. DEFAULTS
2.1 Events of Default
The occurrence of any one or more of the following events with
respect to Maker shall constitute an event of default hereunder ("Event of
Default"):
(a) If Maker shall fail to pay when due any payment of principal
or interest on this Note and such failure continues for 30 days after Payee
notifies Maker in writing; PROVIDED, HOWEVER, that the exercise by Maker in good
faith of its right of set-off pursuant to Section 1.4 above, whether or not
ultimately determined to be justified, shall not constitute an Event of Default.
(b) If, pursuant to or within the meaning of the United States
Bankruptcy Code or any other federal or state law relating to insolvency or
relief of debtors (a "Bankruptcy Law"), Maker shall (i) commence a voluntary
case or proceeding; (ii) consent to the entry of an order for relief against it
in an involuntary case; (iii) consent to the appointment of a trustee, receiver,
assignee, liquidator or similar official for all or substantially all its
assets; or (iv) make a general assignment for the benefit of its creditors.
(c) If a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that (i) is for relief against Maker in an
involuntary case; (ii) appoints a trustee, receiver, assignee, liquidator or
similar official for Maker or substantially all of Maker's properties; or (iii)
orders the liquidation of Maker, and in each case the order or decree is not
dismissed within 120 days.
(d) (i) If Maker shall fail to make any payment at the final
stated maturity, including any applicable grace period, in respect of any
Designated Senior Credit Facility (as defined in Section 4.3) of Maker, in an
amount in excess of $1,000,000 and such failure continues for 30 days or (ii) if
Maker shall default with respect to any Designated Senior Credit Facility of
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Maker, which default results in the acceleration of indebtedness under any
Designated Senior Credit Facility of Maker in an amount in excess of $1,000,000
without such indebtedness having been discharged or such acceleration having
been rescinded or annulled for 30 days (it being understood that this Event of
Default and any related payment Event of Default will be deemed cured if the
acceleration of indebtedness under the Designed Senior Credit Facility is
rescinded or annulled thereafter).
(e) If Maker shall fail to observe any of the covenants contained
in this Note (other than the covenants to pay principal and interest), which
failure is not cured within 30 days after notice thereof is given to Maker by
Payee.
2.2 Notice by Maker
Maker shall notify Payee in writing within five days after the
occurrence of any Event of Default of which Maker acquires knowledge.
2.3 Remedies
Upon the occurrence of an Event of Default hereunder (unless all
Events of Default have been cured or waived by Payee), Payee may, at its option,
(i) by written notice to Maker, declare the entire unpaid principal balance of
this Note, together with all accrued interest thereon, immediately due and
payable regardless of any prior forbearance, and (ii) exercise any and all
rights and remedies available to it under applicable law, including, without
limitation, the right to collect from Maker all sums due under this Note. Maker
shall pay all reasonable costs and expenses incurred by or on behalf of Payee in
connection with Payee's exercise of any or all of its rights and remedies under
this Note, including, without limitation, reasonable attorneys' fees.
3. SENIOR DEBT COVENANT
So long as any amount under this Note remains outstanding and
unpaid, Maker will not, unless otherwise consented to in writing by Payee,
create, incur or assume more than $50,000,000 principal amount of indebtedness
outstanding under all Designated Senior Credit Facilities of Maker prior to
_____ and not more than $________ principal amount thereafter. *
4. SUBORDINATION
4.1 Subordination
Maker and Payee hereby covenant and agree, for the benefit of the
holders of Designated Senior Credit Facilities (the "Senior Lenders"), that:
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* The Designated Senior Credit Facilities will provide for principal
amortization during the term of this Note on a basis to be negotiated by
Maker and the Senior Lenders and reasonably satisfactory to Payee.
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(a) This Note, as amended, supplemented or otherwise modified
from time to time, including but not limited to all payment Obligations
hereunder, shall be subordinated in right of payment, to the prior payment in
full in cash of all existing and future indebtedness under all Designated Senior
Credit Facilities ("Senior Indebtedness") on the terms set forth herein;
(b) Without the Senior Lenders' prior written consent, Payee will
not receive or accept any principal payment from Maker in respect of the
Obligations until all of the Senior Indebtedness has been paid in full in cash,
and Payee will not receive or accept any interest payment from Maker in respect
of the Obligations if at the time of payment a payment default or an event of
default by Maker has occurred and is continuing in any respect on any of its
then existing Senior Indebtedness.
(c) In the event that Payee shall receive any payment in cash,
securities or other property on the Obligations, including by way of offset or
counterclaim, which Payee is not entitled to receive under the provisions of
this Section 4, Payee will hold the amount so received in trust for the Senior
Lenders and will forthwith turn over such payment to the Senior Lenders pro rata
in accordance with each Senior Lender's percentage of the outstanding Senior
Indebtedness ("Senior Lender Pro Rata Share") in the form received (except for
the endorsement of Payee where necessary) for application on the then existing
Senior Indebtedness (whether due or not due), in such manner of application as
each such Senior Lender may deem appropriate.
(d) In the event of any receivership, insolvency, bankruptcy,
assignment for the benefit of creditors, reorganization or arrangement with
creditors, whether or not pursuant to bankruptcy laws, the sale of all or
substantially all of the assets, dissolution, liquidation or any other
marshaling of the assets or liabilities of Maker, Payee will file all claims,
proofs of claim or other instruments of similar character necessary to enforce
the obligations of Maker in respect of the Obligations and will hold in trust
for the Senior Lenders and promptly pay over to each Senior Lender its Senior
Lender Pro Rata Share in the form received (except for the endorsement of Payee
where necessary) for application on the then existing Senior Indebtedness, any
and all moneys, dividends or other assets received in any such proceedings on
account of the Obligations, unless and until the Senior Indebtedness has been
paid in full.
(e) This Section 4 shall constitute a continuing agreement of
subordination, and any Senior Lender may, without the receipt of the consent by
Payee, make loans and extend other credit or financial accommodation to or for
the account of Maker in reliance upon this Section 4.
(f) Any Senior Lender may, at any time, and from time to time,
without the consent of or notice to Payee, without incurring responsibility to
Payee, and without impairing or releasing any of its rights, or any of the
obligations of Payee hereunder: (1) change the interest rate or change the
amount of payment or extend the time of payment or renew or otherwise alter the
terms of any Senior Indebtedness or any instrument evidencing the same in any
manner; (2) sell, exchange, release or otherwise deal with all or any part of
any property at any time securing payment of the Senior Indebtedness or any part
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thereof; (3) release any person liable in any manner for the payment or
collection of the Senior Indebtedness or any part thereof; (4) exercise or
refrain from exercising any right against Maker or others (including Payee); and
(5) apply any sums received by such Senior Lender, by whomsoever paid and
however realized, to the Senior Indebtedness in such manner as such Senior
Lender shall deem appropriate.
(g) On or after the date that all Senior Indebtedness is paid in
full in cash, to the extent that payments otherwise made or payable on
Obligations are made and credited against the Senior Indebtedness, in accordance
with the provisions of this Section 4 or otherwise, Payee shall be subrogated to
the rights of the holders of the Senior Indebtedness to receive payments or
distributions of assets of Maker applicable to the Senior Indebtedness until all
amounts owning on the Senior Indebtedness shall be paid in full. No such
payments applicable to the Senior Indebtedness shall, as between Maker and its
creditors, other than the holders of the Senior Indebtedness and Payee, be
deemed to be a payment by the Maker to or on account of this Note; and for the
purposes of such subrogation, no payments to the holders of the Senior
Indebtedness to which Payee would be entitled except for the provisions of this
Section 4 shall, as between Maker and its creditors, other than the holders of
the Senior Indebtedness and Payee, be deemed to be a payment by Maker to or on
account of the Senior Indebtedness.
4.2 Survival
This Section 4 shall remain in full force and effect as long as
any Senior Indebtedness is outstanding.
4.3 Definitions
The following terms used in this Section 4 shall have the
following meanings:
"Designated Senior Credit Facility" means any Senior Credit
Facility that is expressly designated by Maker as a Designated Senior Credit
Facility entitled to the subordination provisions set forth in Section 4 of this
Note.
"Obligations" means all obligations, liabilities and indebtedness
of every nature of Maker from time to time owed to Payee under this Note, as
amended, supplemented or modified from time to time, and otherwise arising or
acquired after the date of this Note, including, without limitation, the
principal amount of all debts, claims and indebtedness, accrued and unpaid
interest and all fees, costs and expenses, whether primary, secondary, direct,
contingent, fixed or otherwise, now and/or from time to time hereafter owing,
due or payable by Maker to Payee.
"Senior Credit Facility" means any (one or more) lending,
borrowing or financing arrangement to which Maker may become party or which may
encumber or affect any of Maker's assets, including but not limited to a sale
leaseback, synthetic lease, or any financing arrangement whatsoever, and all
replacements, extensions, refundings, renewals, modifications and refinancings
of any of the foregoing; PROVIDED, HOWEVER, that (i) the maximum principal
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amount of such indebtedness (or equivalent amount financed or outstanding
thereunder) shall not exceed $50 million, (ii) all of the proceeds of such
facility shall be used to fund, replace or refinance a portion of the Merger
consideration payable pursuant to Section 1.06 of the Agreement, and (iii) no
replacement, extension, refunding, renewal, modification or refinancing shall
result in or allow any increase in the principal amount of the facility then
outstanding.
5. MISCELLANEOUS
5.1 Waiver
The rights and remedies of Payee under this Note shall be
cumulative and not alternative. No waiver by Payee of any right or remedy under
this Note shall be effective unless in a writing signed by Payee. Neither the
failure nor any delay in exercising any right, power or privilege under this
Note will operate as a waiver of such right, power or privilege and no single or
partial exercise of any such right, power or privilege by Payee will preclude
any other or further exercise of such right, power or privilege or the exercise
of any other right, power or privilege. To the maximum extent permitted by
applicable law, (a) no claim or right of Payee arising out of this Note can be
discharged by Payee, in whole or in part, by a waiver or renunciation of the
claim or right unless in a writing, signed by Payee; (b) no waiver that may be
given by Payee will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on Maker will be deemed to be a waiver
of any obligation of Maker or of the right of Payee to take further action
without notice or demand as provided in this Note. Maker hereby waives
presentment, demand, protest and notice of dishonor and protest.
5.2 Notices
Any notice required or permitted to be given hereunder shall be
given in accordance with Section 11.08 of the Agreement.
5.3 Severability
If any provision in this Note is held invalid or unenforceable by
any court of competent jurisdiction, the other provisions of this Note will
remain in full force and effect. Any provision of this Note held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
5.4 Governing Law
This Note will be governed by the laws of the State of New York
without regard to conflicts of laws principles that would require the
application of any other law. The provisions of Section 11.10 (Consent to
Jurisdiction) of the Agreement shall apply to this Note as if fully set forth
herein.
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5.5 Parties in Interest
This Note shall not be assigned or transferred by Payee without
the express prior written consent of Maker, except the Payee may assign this
Note to a family trust of Payee provided such assignment shall not adversely
affect, and such assignee shall acknowledge in writing, Maker's rights under
Section 1.4 hereof. Subject to the preceding sentence, this Note will be binding
in all respects upon Maker and inure to the benefit of Payee and its successor
and assigns.
5.6 No Recourse Against Others
A director, officer, employee or stockholder, as such, of Maker
shall not have liability for any obligations of Maker under this Note or for any
claim based on, in respect of or by reason of such obligations or their
creation. By accepting this Note, Payee shall waive and release all such
liability. The waiver and release shall be part of the consideration for the
issue of this Note.
5.7 No Jury Trial
Maker hereby waives all right to trial by jury in any action,
proceeding or counterclaim arising out of this Note or any transaction relating
thereto and all right to plead as a defense any statute of limitations or other
similar law or equitable doctrine.
5.8 Section Headings, Construction
The headings of Sections in this Note are provided for
convenience only and will not affect its construction or interpretation. All
references to "Section" or "Sections" refer to the corresponding Section or
Sections of this Note unless otherwise specified.
All words used in this Note will be construed to be of such
gender or number as the circumstances require. Unless otherwise expressly
provided, the words "hereof" and "hereunder" and similar references refer to
this Note in its entirety and not to any specific section or subsection hereof,
the words "including" or "includes" do not limit the preceding words or terms
and the word "or" is used in the inclusive sense.
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IN WITNESS WHEREOF, Maker has executed and delivered this Note as
of the date first stated above.
VECTOR TOBACCO INC.
By:
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Name:
Title:
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