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8-K - FORM 8-K - Electronic Cigarettes International Group, Ltd.form8k.htm
EX-10.3 - EXHIBIT 10.3 - Electronic Cigarettes International Group, Ltd.exhibit10-3.htm
EX-10.2 - EXHIBIT 10.2 - Electronic Cigarettes International Group, Ltd.exhibit10-2.htm

January 31, 2013

VICTORY ELECTRONIC CIGARETTES LLC
1880 Airport Drive
Ball Ground GA 30107

Attention: Marc Hardgrove

Dear Sirs:

 
Commitment Letter

Teckmine Industries, Inc. (the “Lender”) has agreed to loan Victory Electronic Cigarettes LLC (the “Borrower”) USD$500,000 upon and subject to the terms and conditions contained in this commitment letter (“Commitment”).

1.

Definitions and Interpretation:

     
(a)

Unless there is something in the subject matter or context necessarily inconsistent therewith, capitalized words and terms used in this Commitment, in Schedule A hereto and in any amendment or supplement hereto will have the meanings ascribed to them herein or in Schedule A hereto, as the case may be.

     
(b)

The provisions of Schedule A attached hereto, are incorporated into this Commitment and form a part hereof.

     
2.

Amount of Loan:

     

Subject to the terms and conditions of this Commitment, the Lender will make a secured loan available to the Borrower in a principal amount (the “Principal”) not exceeding USD$500,000 (the “Loan”).

     
3.

Purpose:

     

To purchase inventory and the shipment of that inventory, finance trade accounts receivable, and the payment of business expenses except that no funds from the Loan may be used for a payment to a Non-Arm’s Length Party.

     
4.

Interest Rate and Payments:

     

The balance outstanding under the Loan will bear interest at a rate equal to 12% per annum. Interest shall be calculated monthly and payable monthly. The Borrower shall pay the estimated interest for each month not less than 5 days prior to the end of that month to the Lender. Any adjustments to the estimated interest shall be made at the same time as the next month’s estimated interest payment.



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5.

Disbursement:

   

Subject to the provisions of this Commitment, the Loan shall be made available to the Borrower in two tranches, the first tranche in the Principal sum of USD$200,000 promptly upon execution of this Commitment (the “First Tranche”) and the second tranche in the Principal sum of USD$300,000 promptly upon execution of the Security Documents (the “Second Tranche”). The Borrower acknowledges that the First Tranche will be secured by the Security Documents regardless of the fact that such documents will be executed subsequent to advancement of the First Tranche.

   
6.

Repayment:

   

The Loan, including Principal, interest, and any fees owing with respect thereto shall come due and be repaid in full on January 31, 2014, unless and until an Event of Default occurs, whereupon all of the Indebtedness outstanding shall, at the option of the Lender, immediately become due and payable, subject to any applicable cure period.

   
7.

Prepayment:

   

The Borrower will be entitled to prepay at any time, without penalty, the whole or any portion of the Principal balance outstanding under the Loan, provided that the Lender shall be provided with not less than 30 days written notice of the Borrower’s intent to pre-pay and provided further that such prepayment will not discharge any security in favour of the Lender while any Principal, interest or any other fee or amount is owed pursuant to this Commitment.

   
8.

Security:

   

As security for repayment of the Loan, the Borrower will provide or cause to be provided to and in favour of the Lender, in form and terms satisfactory to the Lender’s solicitors, the following security which will be negotiated and executed prior to advancing the Second Tranche. The security documentation to be provided will contain, among other things, all terms and conditions, including the covenants, warranties, and representations of the Borrower, in the Lender’s usual forms of security and supporting documents:


  (a)

General Security Agreement dated for reference January 31, 2013 granting to the Lender a first security interest in all presently owned and after acquired personal property and a floating charge over all of its other property, assets and undertaking;

     
  (b)

if, on the date of entry into the Security Documents, the Borrower is a:


  (i)

LLC, a Collateral Assignment Agreement signed by each member of the Borrower (the “Members”) assigning each member’s entire interest in the Borrower to the Lender, or

     
  (ii)

corporation, a Pledge and Assignment of Securities made by each shareholder of the Borrower (the “Shareholders”) in favour of the Lender with respect to the Shares;


  (c)

USD$500,000 Debenture made by the Borrower in favour of the Lender; and



Page 3

(d)

all such supporting certificates, resolutions and solicitor opinions as the Lender may reasonably require. If the circumstances set out in section 8(b)(i) apply, each member of the Borrower will, immediately upon conversion of the Borrower from a LLC to a corporation, provide the documents set out in section 8(b)(ii).

       
9.

Events of Default:

       
(a)

At the option of the Lender, the whole of the outstanding balance of the Loan will immediately become payable and the Security Documents will become enforceable upon the happening of any of the following events:

       
(i)

Default - if the Borrower makes default in any payment of Principal, interest, or other money payable by it hereunder or under any of the Security Documents when the same becomes due hereunder or thereunder, or if the Borrower makes default in the observance or performance of something required to be done or some covenant or condition required to be observed or performed herein or in the Security Documents and, if such default is capable of being cured by the Borrower, the same is not cured within 15 calendar days (or, if such default is capable of being cured by the Borrower but not within such period of time and the Borrower has commenced taking action to cure such default within such period of time and diligently and in good faith continues taking such action, such greater period of time, not exceeding an additional 15 calendar days as may be necessary to cure such default);

       
(ii)

Misrepresentation - if any representation or warranty given by the Borrower to the Lender is untrue in any material respect;

       
(iii)

Winding-Up - if an order is made or a resolution passed for the winding-up of the Borrower, or if a petition is filed for the winding-up of the Borrower;

       
(iv)

Bankruptcy – if the Borrower commits or threatens to commit any act of bankruptcy or becomes insolvent or makes an assignment or proposal under any jurisdiction, or a general assignment in favour of its creditors, a bulk sale of its assets, or if a bankruptcy petition is filed or presented against the Borrower that is not contested by the Borrower in good faith;

       
(v)

Receivership - if a receiver, receiver and manager or receiver-manager or any person with like powers is appointed for all or any of the assets of the Borrower;

       
(vi)

Arrangement - if any proceedings with respect to the Borrower are commenced under the Companies Creditors Arrangement Act or the Bankruptcy and Insolvency Act or equivalent legislation;

       
(vii)

Cease Business – if the Borrower ceases or threaten to cease to carry on its business;

       
(viii)

Change of Control – if, in the opinion of the Lender, effective control of the Borrower changes, other than the Acquisition;



Page 4

  (ix)

Transfer of Property – if, without the prior written consent of the Lender, the Borrower transfers a material portion of its property to any person other than in the ordinary course of business;

     
  (x)

Property in Jeopardy - if the Lender in good faith believes, and has commercially reasonable grounds to believe, that the prospect of repayment of the Loan is impaired or that any of the property of the Borrower is, or is about to be, placed in jeopardy;

     
  (xi)

Execution - if any execution, sequestration, extent, or any other process of any kind is levied or enforced upon or against the property of the Borrower or any material part thereof and remains unsatisfied for a period of 15 days as to personal property or 4 weeks as to real property, unless such process is disputed in good faith and in the reasonable opinion of the Lender does not jeopardise or impair the security constituted by the Security Documents in any material way;

     
  (xii)

Distress - if a distress or analogous process is levied upon the property of the Borrower or any material part thereof, unless the process is disputed in good faith and adequate security is given to pay the amount claimed in full;

     
  (xiii)

Subsequent Encumbrances - if, without the prior written consent of the Lender, the Borrower further mortgages, charges, or otherwise encumbers a material portion of its property to any person other than the Lender; or

     
  (xiv)

Pledge of Shares –if one or more members of the Borrower fails to provide the documents contemplated in section 8(b)(ii) within 15 days following conversion of the LLC into a corporation but only in the circumstances where the Borrower originally executed the Security Documents as a LLC and subsequently converts into a corporation.

Nothing contained herein will be construed or interpreted as imposing an express or implied limitation upon or to prejudice the Lender’s right to demand payment of the Loan in full at any time.

10.

Negative Covenants:

     

At all times during the term of the Loan, the Borrower will not, without the prior written consent of the Lender:

     
(a)

make revolving loans to or investments in, or provide guarantees or indemnities or otherwise give financial assistance to, any person, other than in the ordinary course of business;

     
(b)

grant or allow any lien, charge, lease or any other encumbrance, whether fixed or floating, other than a purchase money security interest, to be registered against the assets of the Borrower, except in favour of the Lender; or

     
(c)

issue, grant, permit or incur any debt except in favour of the Lender, other than in the ordinary course of business.



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11.

Financial Statements and Reports:

       

The Borrower will provide the following management prepared financial information to the Lender prepared in accordance with United States GAAP applied on a consistent basis with respect to prior periods:

       
(a)

annual financial statements for the Borrower’s most recently completed financial year;

       
(b)

applicable interim financial statements for any completed quarterly period subsequent to the year-end set out in Section 11(a); and

       
(c)

applicable month-end financial statements for any completed monthly period subsequent to the quarterly period set out in Section 11(b).

       
12.

Fees and Costs:

       
(a)

Subject to waiver of the loan fee by the Lender upon the closing of the Acquisition as described below, the Borrower will pay to the Lender a non-refundable loan fee of USD$200,000 (the “Loan Fee”). The Borrower acknowledges and agrees that the Loan Fee is payable to the Lender as consideration for the time, effort and expenses of the Lender and its employees and agents to:

       
(i)

review and/or study documents pertaining to the transaction(s) contemplated hereby (including but not limited to any credit reports and financial statements);

       
(ii)

reserve funds in contemplation of the Loan; and

       
(iii)

forego any opportunities to use the funds elsewhere.

       
(b)

The Borrower agrees that the actual determination of the costs and expenses so incurred by the Lender is not feasible and the Loan Fee represents a reasonable estimate thereof and is payable to the Lender in the manner set out below without set-off, abatement or deduction.

       

The Borrower further agrees that the Loan Fee will be earned by the Lender on the issuance of this Commitment to the Borrower and payable to the Lender on the earlier of:

       
(i)

the occurrence of an Event of Default, subject to any applicable cure period; or

       
(ii)

on the date that the Formal Agreement is terminated in accordance with its terms, or, if the Formal Agreement is not entered into, on the date that the Borrower and the Lender decide not to proceed with the Acquisition in accordance with the terms of the Letter of Intent (a “Termination Event”), unless extended by the Lender in writing in its sole discretion.

       

Notwithstanding the above, upon the closing of the Acquisition, the Lender will waive the Loan Fee in its entirety. In the event of a Termination Event and provided such event is not the result of any breach of any term of the Formal Agreement by the Borrower, and is not the result of the Borrower being unable or unwilling to close the Acquisition or proceed with the Letter of Intent, as applicable, (the “No-Fault Event”), then the Loan Fee shall be reduced to USD$15,000. Additionally, and in the event only the First Tranche is advanced, the applicable Loan Fee payable in accordance with this Section 12 shall be reduced by 40% (i.e. USD$80,000 in the circumstances set out in Section 12(b)(i) and USD$6,000 in the circumstances involving a No-Fault Event.



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In that regard the Borrower acknowledges and agrees that the Loan Fee represents a genuine pre-estimate of such liquidated damages and is not a penalty and that the consequences of a breach of the provisions of this Commitment are such as to make precise pre-estimation of such damages very difficult.

     
 

It is also understood and agreed that the Lender will have the right to enforce payment of any outstanding balance of the Loan Fee and, except as explicitly set out herein, nothing herein contained shall release any person from liability to pay the balance of the Loan Fee.

     
 

The foregoing is without prejudice to the rights of the Lender to obtain from the Borrower by legal action, specific performance of the Borrower’s covenants and obligations hereunder, or any other remedies available at law or in equity to the Lender.

     
  (c)

The Borrower will pay, whether or not funds are disbursed under the Loan, all legal costs, registration fees and other costs incurred by the Lender in investigating title and perfecting the Security Documents.


13.

Collateral Assignment/Pledge of Shares

   

Following entry into this Commitment, each of the Members or Shareholders, as applicable, agrees to undertake commercially reasonable efforts to negotiate and execute the Collateral Assignment or Pledge and Assignment of Securities, as applicable, and documents related thereto.

   
14.

Non-Merger:

   

It is understood and agreed that the execution and delivery of the Security Documents, the registration of the Security Documents and the disbursement of funds under the Loan will in no way merge or extinguish this Commitment or the terms and conditions hereof, which will continue in full force and effect. In the event of any inconsistency or conflict between any of the provisions of this Commitment and any provision or provisions of the Security Documents, the provisions of this Commitment will prevail.

   
15.

Taxes:

   

All payments to be made by the Borrower pursuant to this Commitment are to be made without set-off, compensation or counterclaim, free and clear of and without deduction for or on account of any Tax, including but not limited to withholding taxes, except for Taxes on the overall net income of the Lender.

   
16.

Maximum Interest Rate:

   

The Borrower agrees that, notwithstanding any provision in this Commitment to the contrary, no interest on the credit advanced under this Commitment will be payable in excess of that permitted by applicable law. If the effective annual rate of interest, calculated in accordance with generally accepted actuarial practices and principles, would exceed the amount permitted by applicable law on the Loan advanced, then:



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  (a)

any excess that has been paid will be credited towards prepayment of the Loan; and

     
  (b)

any overpayment that may remain after such crediting will be returned forthwith to the Borrower upon demand.


17.

Assignment:

   

This Commitment and any benefits hereunder may not be transferred, assigned or otherwise disposed of by the Borrower to any other party without the prior written consent of the Lender.

   
18.

Further Assurances:

   

The Borrower shall at all times, do, execute, acknowledge and deliver or cause to be done, executed, acknowledged or delivered all such further acts, deeds, transfers, assignments, security agreements and assurances as the Lender may require in order to give effect to the provisions hereof and for the better granting, transferring, assigning, charging, setting over, assuring, confirming or perfecting the security interests hereby created and the priority accorded to them by law or under this Commitment, including but not limited to the registration of the charges created by the Security Documents in all jurisdictions requested by the Lender.

   
19.

Currency:

   

All monetary amounts set out herein are stated in United States dollars.

   
20.

Public Statements:

   

Except as required by applicable law, the Borrower shall not make or cause to make any public announcement or statement with respect to the Acquisition, this Commitment, or the Security Documents without the approval of the Lender, such approval not to be unreasonably withheld or delayed. The Borrower acknowledges that, promptly after the entering into of this Commitment, the Lender is required to issue a press release announcing the entering into of this Commitment and the Acquisition.

   
21.

Enurement:

   

This Commitment will enure to the benefit of and be binding upon the parties and their respective heirs, executors, administrators, successors, and permitted assigns, as applicable.

   
22.

Counterparts

   

This Commitment may be executed in counterparts and delivered by fax or other electronic means capable of producing a printed copy and shall be deemed effective for all purposes.



Page 8

This Commitment and the Loan offered will expire if the Borrower has not accepted the terms and conditions hereof by signing and returning the enclosed copy of this letter on or before January 31, 2013.

Yours truly,

TECKMINE INDUSTRIES, INC.

Per: /s/ Nathan Woods  
  Authorized Signatory  


Page 9

ACCEPTANCE

     The Borrower hereby accepts the offer of TECKMINE INDUSTRIES, INC. to provide financing as set forth above and agrees to borrow the monies representing the Loan upon and subject to the terms of this Commitment.

     For good and valuable consideration (the receipt and sufficiency of which is hereby acknowledged), the Borrower hereby promises and agrees to pay the Indebtedness (including the Loan Fee and all other costs and charges and expenses required to be paid to the Lender) and to keep, observe and perform (or to cause to be kept, observed and performed) all of their other covenants and agreements set forth herein and in the Security Documents to which it is a party, in the manner respectively contemplated hereby and thereby.

     The Borrower authorizes the Lender to instruct its solicitors to prepare the Security Documents and to register a UCC Financing Statement with respect thereto at the registries in the applicable jurisdictions in which the Borrower holds its assets and conducts its business as determined by the Lender.

Accepted and agreed to this 31st day of January, 2013.

VICTORY ELECTRONIC CIGARETTES LLC

Per: /s/ Marc Hardgrove  
  Authorized Signatory  

Each of the undersigned Members hereby executes this Commitment Letter solely to acknowledge and agree to the obligations set out in sections 8(d) and section 13 of this Commitment Letter.

WITNESSED BY: )  
  )  
  )  
Name )  
  )  
Address ) /s/ Marc Hardgrove
  ) MARC HARDGROVE
  )  
  )  
Occupation )  


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WITNESSED BY: )  
  )  
  )  
Name )  
  )  
Address ) /s/ David Martin
  ) DAVID MARTIN
  )  
  )  
Occupation )  
     
     
WITNESSED BY: )  
  )  
  )  
Name )  
  )  
Address ) /s/ Brent Willis
  ) BRENT WILLIS
  )  
  )  
Occupation )  
     
     
WITNESSED BY: )  
  )  
  )  
Name )  
  )  
Address ) /s/ Paul Simon
  ) PAUL SIMON
  )  
  )  
Occupation )  
     
     
WITNESSED BY: )  
  )  
  )  
Name )  
  )  
Address ) /s/ Paul Dillman
  ) PAUL DILLMAN
  )  
  )  
Occupation )  


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WITNESSED BY: )  
  )  
  )  
Name )  
  )  
Address ) /s/ John Perner
  ) JOHN PERNER
  )  
  )  
Occupation )  
     
     
WITNESSED BY: )  
  )  
  )  
Name )  
  )  
Address ) /s/ Steve Riffle
  ) STEVE RIFFLE
  )  
  )  
Occupation )  



SCHEDULE A
 
DEFINITIONS AND INTERPRETATION
FORMING PART OF THAT CERTAIN COMMITMENT LETTER
DATED JANUARY 31, 2013
FROM TECKMINE INDUSTRIES, INC.
TO VICTORY ELECTRONIC CIGARETTES LLC

1.                     DEFINITIONS

1.1                  “Acquisition” has the meaning set out in the Letter of Intent.

1.2                  “Affiliate” when used to indicate a relationship with a person, an entity is an “Affiliate” of another entity if one of them is a subsidiary of the other or each of them is controlled by the same person.

1.3                  “Associate” when used to indicate a relationship with a person, means:

  (a)

an entity of which the person beneficially owns or controls, directly or indirectly, voting securities entitling the person to more than 10% of the voting rights attached to all outstanding voting securities of the entity; or

     
  (b)

in the case of a person who is an individual, that person’s spouse or child or any relative of that person or of his or her spouse who has the same residence as that person.

1.4                  “Commitment” means this commitment letter dated January 31, 2013 and every schedule thereto.

1.5                  “Events of Default” means any of the events referred to in Section 9 and “Event of Default” means any one of them.

1.6                  “Formal Agreement” has the meaning set out in the Letter of Intent.

1.7                  “Indebtedness” means all present and future indebtedness and liability, direct or indirect, of the Borrower to the Lender arising under and pursuant to this Commitment and the Security Documents (including, without limitation, the amount outstanding under the Loan and all accrued interest thereon and all fees and costs payable in connection therewith).

1.8                  “Insider” means:

  (a)

a director, officer or manager of the Borrower, as applicable;

     
  (b)

a director, officer or manager of a company that is an Insider or subsidiary of the Borrower, as applicable; or

     
  (c)

a person that beneficially owns or controls, directly or indirectly, voting Shares or membership interests carrying more than 10% of the voting rights attached to all outstanding voting Shares or membership interests of the Borrower.

1.9                  “Letter of Intent” means the letter of intent dated January 17, 2013 between the Issuer and the Borrower.


1.10                “Non-Arm’s Length Party” means, in relation to the Borrower:

  (a)

a promoter, director, officer, manager or Insider of the Borrower and any Associates or Affiliates of any such person; or

     
  (b)

another entity or an Affiliate of that entity, if that entity or its Affiliate have the same promoter, director, officer, manager, Insider as the Borrower.

1.11                “Security Documents” means the security documents set out in Section 8 of the Commitment, and “Security Document” means any one of them.

1.12                “Shares” means the issued and outstanding common shares in the capital of the Borrower.

1.13                “Taxes” means all taxes, levies, imposts, stamp taxes, duties, deductions, withholdings and similar impositions payable, levied, collected, withheld or assessed as of the date of this Commitment or at any time in the future under the laws of Canada or any political subdivision thereof, and “Tax” shall have a corresponding meaning.

1.14                “USD$” and “$” means lawful currency of the United States.

2.                     INTERPRETATION

2.1                  “Herein”, “hereunder”, and similar terms refer to the Commitment as a whole and not to any specific Clause or provision thereof.

2.2                  The word “person” includes in its meaning any firm or corporation.

2.3                  When the context makes it possible, the singular includes the plural and vice versa, and all references to any person, whether a party to this Commitment or not, will be read with such changes in number or gender as the party or reference requires.

2.4                  If any provision, covenant, or agreement contained in this Commitment is invalid or unenforceable in whole or in part, then such invalid or unenforceable provision, covenant, or agreement or part thereof will be severed from and will not affect the validity or enforceability of the remainder of this Commitment.

2.5                  Any reference in this Commitment to a statute will include any amendment or successor statute and any regulations thereunder in force from time to time.

2.6                  The headings appearing in this Commitment have been inserted for convenience of reference only and in no way define, limit, or enlarge the scope or meaning of the provisions of this Commitment.

2.7                  This Commitment will enure to the benefit of the Lender and be binding upon the Borrower and its successors, permitted assigns, executors and administrators, as applicable.