Portions of this exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions marked by [**] have been separately
filed with the Commission.
RESTATED AMENDMENT, dated as of June 25, 1997 (the "Agreement") between
Bollore Technologies S.A., a corporation organized under the laws of the
Republic of France ("Bollore"), and North Atlantic Operating Company, Inc., a
Delaware corporation ("NAOC") (as successor by merger to all rights and
obligations of North Atlantic Trading Company, Inc.). Capitalized terms used but
not defined herein shall have the meanings ascribed to them in the Distribution
Agreements (defined below).
WHEREAS, the parties hereto are parties to three Amended and Restated
Distribution and License Agreements, dated as of November 30, 1992, relating to
the distribution of Zig Zag cigarette paper booklets in each of the United
States (the "U.S. Agreement"), Canada (the "Canadian Agreement") and Hong Kong
and certain other territories (the "Asian Agreement"), as amended by agreements
dated January 28, 1993, March 31, 1993, June 10, 1996 and September 25, 1996
(collectively, the "Prior Amendments"; and the U.S. Agreement, the Canadian
Agreement and the Asian Agreement sometimes collectively referred to as the
"Distribution Agreements"); and
WHEREAS. the parties have entered into a Consent Agreement, dated April 4,
1997, as amended by Amendments Nos. 1 and 2, dated April 9, 1997 and June 25,
1997, respectively (collectively, the "Consent Agreement"), which provides that
the Distribution Agreements be further amended as provided herein, and this
Restated Amendment satisfies the parties' obligations under the Consent
Agreement with regard to amending the Distribution Agreements; and
WHEREAS, the parties hereto accordingly wish to further amend the
Distribution Agreements and supersede and restate the Prior Amendments in their
entirety as provided herein;
NOW, THEREFORE, for good and valuable consideration, receipt of which is
hereby acknowledged, the parties hereby agree to amend the Distribution
Agreements, and restate the Prior Amendments in their entirety, as follows:
1. Sections 3(c) and 3(d) of each of the Distribution Agreements shall be
amended by deleting all references to the date "December 31, 2001" and
substituting in lieu thereof the date "December 31, 2004."
2. The last sentence of Section 3(b) of each of the U.S. Agreement and the
Asian Agreement shall be deleted in its entirety and the following shall be
inserted in lieu thereof:
[**], the price set forth on Schedule A shall be adjusted as of the first
day of each year by a percentage equal to the percentage increase in the
United States Consumer Price Index of the Northeast urban region during the
12 month period ended August 31 of the immediately preceding year. The
foregoing percentage increase shall also apply to the amount of the Price
Reduction referred to in Schedule A.
3. The last sentence of Section 3(b) of the Canadian Agreement shall be
deleted in its entirety and the following shall be inserted in lieu thereof:
[**], the price set forth on Schedule A shall be adjusted as of the first
day of each year by a percentage equal to the percentage increase in the
Canadian Consumer Price Index during the 12 month period ended August 31 of
the immediately preceding year. The foregoing percentage increase shall
also apply to the amount of the Price Reduction referred to on Schedule A.
4. Section 3(h) of the U.S. Agreement and Section 3(g) of each of the other
Distribution Agreements are hereby deleted in their entirety.
2
5. Section 5 of each of the Distribution Agreements shall be amended to
read in its entirety as follows:
5. Exclusivity and Non-Competition.
(a) During the Term of this Agreement and for a period of five years after
termination of this Agreement:
(i) Neither the Distributor nor any Sole Parent (as defined below)
shall, directly or indirectly, engage in Purchasing Competitive Activities
(as defined below), including, but not limited to, owning any debt or
Equity Interest (as defined below) in any Purchasing Competitor (as defined
below) except for (a) the distribution and sale of products produced by
Bollore, an Alternate Supplier or by or for the benefit of the Distributor
as expressly permitted by this Agreement and (b) ownership of no more than
2% of the issued and outstanding capital stock of any class or debt
security of a company whose securities are publicly traded on a national
securities exchange or a recognized over-the-counter or similar public
market.
(ii) The Distributor's Affiliates (as defined below) shall not, and
the Distributor shall cause its Affiliates not to, directly, or indirectly
engage in Investment Competitive Activities (as defined below), including,
without limitation, owning any Equity Interest in an Investment Competitor
(as defined below) except for the ownership of less than 10% of any class
of Equity Interest of a company whose securities are publicly traded on a
national securities exchange or a recognized over-the-counter or similar
public market and less than 10% of whose assets and revenues are derived
from Investment Competitive Activities.
(b) If any Affiliate of the Distributor violates the terms of Subsection
(a)(ii) above solely due to the fact that (i) after the acquisition of an Equity
Interest in an Entity (as defined below) that is not an Investment Competitor at
the time of such acquisition (A) that Entity becomes or acquires an Investment
Competitor, (B) the assets or revenues attributable to Investment Competitive
Activities increases to equal or exceed 10% of such Entity's assets or revenues
or (C) such Affiliate's Equity Interest in that Entity increases to equal or
exceed 10% of a class of securities due to any event other than a voluntary
purchase of an Equity Interest, including but not limited to, a merger,
consolidation or other reorganization or (ii) in the case only of an Entity
which derives less than 10% of its assets and revenues from Investment
Competitive Activities, the Entity the Affiliate has invested in is not on a
list of Investment Competitors contemplated under Subsection (d) below and the
Affiliate did not know and could not have determined with reasonable diligence
that such Entity was an Investment Competitor, then the Affiliate shall have a
period of 45 days from the date it first becomes aware that it is in violation
of Subsection (a)(ii) to cure such violation by divesting itself of all or a
portion of its Equity Interest in such Entity as necessary to comply with this
Section, after which period, if the
3
Affiliate has not cured the violation, the Distributor shall be deemed to be in
default under this Section. Such 45-day cure period shall run concurrently with
the cure period granted under Section 6(b)(iv) of the Distribution Agreements,
if applicable. As used in this Subsection (b), the term "reasonable diligence"
shall mean reviewing periodic reports and other documents filed with the
Securities and Exchange Commission, conducting a Nexis or similar on-line
computer search and reviewing corporate summaries compiled by Dun & Bradstreet
Corporation; it being understood that an Affiliate will be deemed to know that
an Entity is an Investment Competitor if that Entity derives 10% or more of its
assets or revenues from Investment Competitive Activities. The provisions of
this Subsection (b) shall not apply to any Affiliate which has an Equity
Interest in an Entity which is an Investment Competitor if such Affiliate either
has the ability to designate a majority of the members of the board of directors
of such Entity or any Parent of such Entity or owns a majority Equity Interest
in any class of securities of such Entity or any Parent of such Entity.
(c) The Distributor acknowledges that there may be no adequate remedy at
law, and that money damages may not be an adequate remedy for breach of this
Section. Therefore, the Distributor agrees that Bollore shall have the right, in
addition to any other rights it may have under this Agreement (including any
termination rights) or otherwise, to injunctive relief and specific performance
in the event of the Distributor's breach of this Section. This remedy (including
any termination rights) shall be cumulative and shall in no way limit any other
remedy Bollore may have at law, in equity or under this Agreement.
(d) The Distributor shall, from time to time upon the request of Bollore,
use its best efforts to make due inquiry of its Affiliates and certify in
writing within 15 days after Bollore request that it and its Sole Parent and, to
the best of its knowledge, its other Affiliates are in full compliance with this
Section and that no Non-compete Default or Change in Control Default has
occurred (as such terms are defined below). The Distributor shall also deliver
to Bollore the certification described in the previous sentence annually
simultaneously with its yearly forecast pursuant to Section 3(e) of the
Distribution Agreements. In addition, the Distributor shall, except with respect
to Public Holders solely to the extent of their Public Securities, notify
Bollore in writing within 30 days after any change in the shareholdings of the
Distributor or any Parent of the Distributor of the nature of such change and
the identity of any new shareholders and provide Bollore promptly with such
information in connection therewith as Bollore may reasonably request. The
Distributor also shall, except with respect to Public Holders solely to the
extent of their Public Securities, within 15 days of any request by Bollore,
confirm to Bollore the shareholdings (and identity of all shareholders) of the
Distributor and any Parent of the Distributor and provide Bollore with such
information in connection therewith as Bollore may reasonably request. Bollore
shall periodically, and reasonably promptly upon request by the Distributor,
provide Distributor with a list of those Entities Bollore believes to be
Investment Competitors at such time. Bollore shall use its good faith efforts to
be as complete as possible in preparing such list, including using its good
faith efforts to identify which of such Investment Competitors are public
companies or Subsidiaries (as defined below) of public companies. The
Distributor shall use its best efforts to distribute such list
4
to its Affiliates, it being understood that delivery of such list from time to
time by Bollore shall not constitute a representation by Bollore that the
Entities on such list are the only Investment Competitors.
6. (a) Section 6(b) (ii) of the U.S. Agreement and of the Canadian
Agreement shall be amended to add the following proviso at the end of each of
such Sections:
; provided, however, that Bollore shall not have the option to terminate
under this Subsection (ii) if the Distributor shall fail to purchase the
minimum number of booklets in any calendar year in which an Alternate
Supplier is manufacturing and supplying Products or the Distributor is
manufacturing Products under this Agreement unless the aggregate number of
booklets purchased by the Distributor from the Alternate Supplier and
Bollore (or manufactured by the Distributor for sale within such period)
does not meet the minimum number of booklets required to be purchased,
except as provided in the last sentence of this paragraph. In any calendar
year in which an Alternate Supplier is being used or the Distributor is
manufacturing booklets, the Distributor and such Alternate Supplier shall,
within 15 days after the end of such calendar year, certify in writing to
Bollore the total number of booklets purchased from such Alternate Supplier
and manufactured by the Distributor for sale during such year. In addition
to meeting the minimum purchase requirement set forth above, for any
portion of a calendar year in which Bollore is manufacturing and supplying
Products for at least the last quarter of such year, the Distributor shall
be required to purchase from Bollore a number of booklets equal to the
minimum purchase requirement set forth in this Subsection (ii) for such
calendar year, reduced pro rata based on the number of months that such
Alternate Supplier has been used and/or the Distributor has been
manufacturing Products (the "Bollore Minimum") and Bollore shall have the
option to terminate if the Distributor fails to purchase such Bollore
Minimum during such portion of the calendar year during which Bollore
supplied Products.
(b) Section 6(a) of the Asian Agreement is amended to add the following to
the end of such Section:
For purposes of calculating whether the Renewal Requirement has been met in
any of the last three years, if an Alternate Supplier is being used or the
Distributor is manufacturing booklets under this Agreement during such
year, the number of booklets purchased from such Alternate Supplier or
manufactured by the Distributor for sale within the Territory during such
year shall be included. In addition, for any portion of a year in which
Bollore is manufacturing and supplying products for at least the last
quarter of such year, in order to be deemed to have met the Renewal
Requirement for such year, the Distributor shall also be required to have
purchased from Bollore a number of booklets equal to the Renewal
Requirement for such year, reduced pro rata based on the number of months
that such Alternate Supplier has been used and/or the Distributor has been
manufacturing products during such year.
5
7. Section 6(b)(ii) of the U.S. Agreement shall be amended to delete the
number [**] from the third line and insert in lieu thereof the number [**].
8. Section 6(c) of each Distribution Agreement shall be deemed to be
amended by adding the following to the end of such Section:
Anything contained in this Agreement to the contrary notwithstanding, in
the event that Distributor shall fail to pay to Bollore any installment of
the Remainder Payment when due (as defined and provided for in the Consent
Agreement), then Bollore shall have the same rights and remedies pursuant
to this Agreement as if Distributor had failed to pay to Bollore when due
the purchase price for any products shipped to Distributor by Bollore
pursuant to this Agreement, except that Distributor shall not have the
right to dispute whether such amount is due (unless it has actually paid
such amount when due).
9. Section 11 of the U.S. Agreement and Section 10 of each of the other
Distribution Agreements shall be amended to read in their entirety as follows.
(a) For purposes of this Section and Section 5, the following definitions
shall apply:
"Affiliate" shall mean any Entity that (i) is a director or a beneficial or
record holder, either directly or indirectly through one or more Subsidiaries,
of at least 20% of any class of Equity Interest of the Distributor or any Parent
of the Distributor or any spouse of the foregoing, (ii) has the power or right
(by contract or otherwise) to appoint at least one member of the Board of
Directors of the Distributor or any Parent of the Distributor, (iii) 20% or more
of whose Equity Interests of any class are owned, beneficially or of record,
either directly or indirectly through one or more Subsidiaries, by the
Distributor or any Parent of the Distributor, (iv) the Distributor or any Parent
or Subsidiary of the Distributor have the power or right (by contract or
otherwise) to designate a majority of the members of the Board of Directors (or
similar governing body) of that Entity, (v) is an Original Stockholder or (vi)
any Entity which is, directly or indirectly through Parents or Subsidiaries, a
Parent or Subsidiary of the foregoing. For purposes of this definition,
"beneficial" holder shall have the meaning set forth in Rule 13d-3 of the
Securities and Exchange Act of 1934. Notwithstanding the foregoing, the
following shall not be deemed an Affiliate for purposes of this Agreement: (x)
any pledgee of the Distributor's shares pursuant to a pledge agreement between
Newco and National Westminster Bank Plc., as agent, in connection with certain
loans made to Newco and/or
6
the Distributor with respect to Newco's acquisition of the Distributor's capital
stock (or refinancings thereof to the extent permitted by this Agreement or any
written consent thereunder given by Bollore), unless and until such pledgee
forecloses on such shares or otherwise has the right to vote or dispose of any
such shares pursuant to its rights and remedies under the pledge agreement and
provided further that the pledgee shall be a commercial bank, insurance company
or similar financial institution, and (y) a director of the Distributor or a
Parent of the Distributor if such director is a designee of the holders of the
12% PIK Preferred Stock described on Exhibit B hereto, appointed upon a default
relating to the Preferred Stock in accordance with the terms of such Preferred
Stock as of the date hereof.
"Applicable Percentage" shall mean twenty percent (20%) unless and until
Distributor or any Parent of Distributor shall have consummated a registered
public offering of any of its Equity Interests pursuant to the Securities Act of
1933, as amended, at which time the term "Applicable Percentage" shall mean
fifteen percent (15%).
"Change in Control" shall mean a failure of (i) the Original Stockholders
(and any Entity in which the Original Stockholders own not less than 98% of all
classes of the outstanding Equity Interests), and their Permitted Transferees to
own beneficially, directly or indirectly (and solely control the voting of), in
the aggregate, at least 51% of the issued and outstanding capital stock (whether
common or preferred) of all classes of the Sole Parent, and retain the ability
to designate a majority of the directors of the Sole Parent; or (ii) the Sole
Parent to own and solely control the voting of, in the aggregate, 100% of the
issued and outstanding capital stock (whether common or preferred) of all
classes of the Distributor and retain the ability to designate a majority of the
directors of the Distributor.
"Change in Control Default" shall mean any violation of any provision of
this Section.
"Competitor" shall mean an Investment Competitor or a Purchasing
Competitor, as the context shall indicate.
"Consent Agreement" shall mean the Consent Agreement, dated as of April 4,
1997, between Bollore and Distributor, as amended.
"Entity" shall mean any person, corporation, partnership or other entity.
"Equity Interest" shall mean the ownership of any class of equity security
of an Entity (whether common or preferred and whether voting or non-voting), any
security that is convertible into any class of equity security of an Entity
(including, but not limited to, any warrant, option, convertible note or
contract right to acquire any equity security) or any partnership or other
equity ownership interest in an Entity.
"Investment Competitive Activities" shall mean manufacturing, selling,
distributing, marketing or otherwise promoting in the Territory cigarette paper
booklets.
7
"Investment Competitor" shall mean any Entity that, directly or indirectly,
manufactures, sells, markets, distributes or otherwise promotes cigarette paper
booklets in the Territory; owns, directly or indirectly, 20% or more of an
Equity Interest of any class in any other Investment Competitor; or which has
the right to appoint a majority of the members of the Board of Directors of an
Investment Competitor or its Parent.
"Newco" shall mean North Atlantic Trading Co., Inc, the Sole Parent of the
Distributor.
"Non-Compete Default" shall mean any violation by Distributor, any Parent
of the Distributor or any other Affiliate of any provision of Section 5.
"Non-Compete Parties" shall mean the Distributor, its Sole Parent and its
Affiliates.
"Original Stockholder" shall mean each of the persons listed on Exhibit A
hereto.
"Parent" shall mean any Entity which owns directly or indirectly 50% or
more of the Equity Interests of any class of any Entity or of another Parent of
such Entity and/or has the ability to elect a majority of the directors of the
Entity or another Parent of such Entity.
"Permitted Transferee" shall mean any spouse or lineal descendent of an
Original Stockholder or any trust or other similar entity (such as a limited
liability company) for the sole benefit of any spouse or lineal descendant where
the trustees or similar controlling persons consist solely of Original
Stockholders or Permitted Transferees or a bank, trust company or
attorney-at-law, which is not a Competitor.
"Public Holder" shall mean any owner of a Public Security, but solely to
the extent and in the capacity as owner of such Public Security, it being
understood that no Public Holder who owns any other Equity Interest will be
considered a Public Holder for purposes of such other Equity Interest.
"Public Securities" shall mean the Units, the 12% PIK Preferred Stock, the
Warrants and the Warrant Shares described on Exhibit B hereto, solely to the
extent outstanding on the date hereof or, in the case of the Warrant Shares,
reserved for issuance as of the date hereof under the terms of the Warrants.
"Purchasing Competitive Activities" shall mean manufacturing, selling,
distributing, marketing or otherwise promoting in the Territory cigarette paper
or cigarette paper booklets.
"Purchasing Competitor" shall mean any Entity that, directly or indirectly,
manufactures, sells, markets, distributes or otherwise promotes cigarette paper
or cigarette paper booklets in the Territory; owns, directly or indirectly, more
than a 20% Equity Interest in any other Purchasing Competitor, or which serves
as a director or officer or which has the right to appoint an officer or
director to the Board of Directors of a
8
Purchasing Competitor or its Parent, other than the ownership of an Equity
Interest in the Distributor, its Subsidiaries, or the Sole Parent.
"Sole Parent" shall mean any Parent which owns directly or indirectly 100%
of all classes of all classes of capital stock of the Distributor or of another
Sole Parent of the Distributor; as of the date that this amended definition
shall become effective, Newco is the ultimate Sole Parent.
"Subsidiary" shall mean any Entity 50% or more of whose Equity Interests of
any class are owned by another Entity or by another Entity together with any
Parent or Subsidiary of that Entity and any Subsidiaries of the foregoing.
"Testamentary Transfer" shall mean a transfer of any Equity Interest of any
class in the Distributor or a Parent upon the death of the owner thereof by
testamentary bequest or other disposition by the estate of such owner.
(b) The following shall constitute violations of this Section:
(i) if at any time an Original Stockholder, any Permitted Transferee
or any Parent (as the case may be) transfers any Equity Interest of any
class in the Distributor or in a Parent of the Distributor to any Entity
which at the time of such transfer is a Purchasing Competitor, other than a
transfer of such Equity Interest pursuant to a registered public offering
of such Equity Interest pursuant to the Securities Act of 1933, as amended,
or Rule 144 promulgated thereunder (provided that such public offering is
not being effected for the purpose of transferring such Equity Interest to
a Purchasing Competitor);
(ii) if at any time a Purchasing Competitor acquires a total of at
least the Applicable Percentage of the outstanding Equity Interests of any
class in the Distributor or a Parent of the Distributor (whether from an
Original Stockholder, a Permitted Transferee, a Parent or otherwise);
(iii) if at any time before the third anniversary of the date of this
Restated Amendment, there is a Change in Control in either the Distributor
or a Parent without the consent of Bollore, which may be withheld for any
reason; provided, however, that if such a Change in Control resulted from a
Testamentary Transfer, such Change in Control shall be subject to Bollore's
consent, which may not be unreasonably withheld or delayed, it being
understood that Bollore's refusal to consent to a transfer to a Purchasing
Competitor shall conclusively be deemed reasonable;
(iv) if at any time after the third anniversary of the date of this
Restated Amendment there is a Change in Control in either the Distributor
or a Parent without the consent of Bollore, which may not be unreasonably
withheld or delayed, it being understood that Bollore's refusal to consent
to a transfer to a Purchasing Competitor shall conclusively be deemed
reasonable;
9
(v) if at any time any director of the Distributor or any director of
a Parent or a Subsidiary of the Distributor shall be a Competitor or an
officer, director or representative of a Competitor.
(c) In the event of a Change in Control permitted hereunder or otherwise
consented to in writing by Bollore, this provision shall thereafter apply to the
new stockholders of the Distributor or any Parent of the Distributor, and such
new stockholders shall be deemed to be the Original Stockholders for purposes of
this Agreement. It shall be a condition to any transfer of shares to such new
stockholders that the Distributor and Bollore shall enter into an amendment to
this Agreement to reflect such new ownership structure as reasonably required by
Bollore.
10. The paragraph beneath the caption "INITIAL PRICE FOR ALL PRODUCTS" set
forth on Schedule A to the U.S. Agreement and on Schedule A to the Asian
Agreement shall be deleted in its entirety and the following shall be inserted
in lieu thereof:
[**]
10
11. The paragraph beneath the caption "INITIAL PRICE FOR ALL PRODUCTS" set
forth on Schedule A to the Canadian Agreement shall be deleted in its entirety
and the following shall be inserted in lieu thereof:
[**]
12. Notwithstanding the amendments set forth in Sections 10 and 11 above,
the parties acknowledge that the price for all booklets shipped in 1994
(regardless of when paid) shall be calculated based on the terms of the
Distribution Agreements in effect prior to this Restated Amendment and that
accordingly the Distributor shall not be entitled to any Price Reduction for
1994.
11
13. Each Distribution Agreement shall be amended by adding Exhibits A and B
hereto as Exhibits to each such Agreement.
14. Except as set forth in this Restated Amendment, the Prior Amendments
are hereby superseded and terminated, and the terms and provisions of each of
the Distribution Agreements, as amended hereby, shall remain in full force and
effect.
15. Each of the parties represents and warrants to the other that this
Amendment has been duly authorized by all necessary corporate action and that
any consents required by either party in connection with this amendment have
been obtained by such party. Please sign in the space below to indicate your
agreement with the foregoing.
Very truly yours,
BOLLORE TECHNOLOGIES, S.A.
By
-------------------------------------
Name:
Title:
AGREED TO AND ACCEPTED:
NORTH ATLANTIC OPERATING COMPANY, INC.
By:
-----------------------------------
Name:
Title:
12
