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Exhibit 10.3
NON-COMPETITION AGREEMENT (this "Agreement"), dated as of July 30,
2004,
between Reynolds American Inc., a North
Carolina corporation ("Reynolds
American"), and British American Tobacco
p.l.c., a public limited company
organized under the laws of England and
Wales ("BAT").
RECITALS:
A.
Reynolds American, Brown & Williamson Tobacco Corporation,
a
Delaware corporation and wholly-owned
subsidiary of BAT ("B&W"), and R.J.
Reynolds Tobacco Holdings, Inc., a Delaware
corporation ("RJR"), have entered
into a Business Combination Agreement,
dated as of October 27, 2003, as amended
("Combination Agreement"), pursuant to
which each of B&W and RJR and certain of
their affiliates have agreed to engage in a
series of transactions resulting in
the combination of R. J. Reynolds Tobacco
Company, a New Jersey corporation
("RJR Tobacco"), and the U.S. tobacco
business of B&W.
B. As a
condition to the consummation of the transactions contemplated
by
the Combination Agreement, the parties
hereto have agreed to enter into this
Agreement.
C.
Capitalized terms used herein and not otherwise defined in this
Agreement shall have the meanings ascribed
to such terms in the Combination
Agreement.
NOW,
THEREFORE, in consideration of the premises and the mutual
covenants
and agreements set forth in this Agreement,
the consummation of the transactions
contemplated by the Combination Agreement
and for other good and valuable
consideration the receipt and sufficiency
of which are hereby acknowledged, the
parties hereto agree as follows:
1.
Definitions.
"BAT
Restricted Business" means the manufacture, sale, distribution
or
other transfer for sale of BAT Restricted
Products in the BAT Restricted
Territory, but does not include (a) the
continuation of any arrangements
existing as of the date of the Combination
Agreement relating to the manufacture
of BAT Restricted Products for, and sale
to, third parties who own or have
rights to use the intellectual property
associated with the brand of BAT
Restricted Products to be manufactured as
long as such products are not also
sold, distributed or otherwise transferred
for sale by BAT or any of its
Controlled Affiliates
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or (b) the manufacture of BAT Restricted
Products in the BAT Restricted
Territory by Reynolds American or any of
its Controlled Affiliates on behalf of
BAT or any of its Controlled Affiliates as
long as those products are not also
sold, distributed or otherwise transferred
for sale in the BAT Restricted
Territory.
"BAT
Restricted Period" means the period beginning on the date of
this
Agreement and ending on the 10th
anniversary of the date of this Agreement.
"BAT
Restricted Products" means manufactured cigarettes, "roll your
own"
cigarette tobacco, cigars, cigarillos and
pipe tobacco.
"BAT
Restricted Territory" means the United States.
"B&W
Business" means the business acquired by Reynolds American from
B&W
pursuant to the Combination Agreement.
"Control"
means beneficial or record ownership of a majority of the
voting
power of the equity securities having the
right to vote generally for the
election or removal of directors, managers
or members of a similar governing
body of the entity being Controlled or the
right to appoint or remove a majority
of the members of such governing body. As
used herein, "control" has the common
meaning associated with such term and, may
include, but is not limited to, the
meaning assigned to the term "Control."
"Controlled Affiliate" means, with respect to any entity, any other
entity
directly or indirectly Controlled by such
person but, with respect to BAT, does
not include Reynolds American or any of its
Controlled Affiliates.
"Manufacturing Intellectual Property" means all patents, patent
applications, inventions, trade secrets,
proprietary processes, databases,
software, and formulae, and all other
proprietary technical information,
know-how and processes, whether registered,
patentable or unpatentable, in each
case to the extent such manufacturing
intellectual property was available for
use in the B&W Business on or prior to
the date of this Agreement. For the
avoidance of doubt, Manufacturing
Intellectual Property shall not include
service marks and service mark
applications, trademarks and trademark
applications, trade dress, logos and
slogans.
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"Reynolds
American Restricted Business" means the manufacture, sale,
distribution or other transfer for sale of
Reynolds American Restricted Products
in the Reynolds American Restricted
Territory, but does not include (a) the
sale, distribution or other transfer for
sale of Reynolds American Restricted
Products at duty free shops in the United
States and United States military
bases anywhere in the world, (b) the sale,
distribution or other transfer for
sale of KOOL, PALL MALL, PALL MALL RED,
PALL MALL Filter, CAPRI, MISTY, KENT and
NEWPORT cigarettes in the Republic of
Palau, (c) the sale, distribution or other
transfer for sale of PALL MALL BOX and KOOL
cigarettes in duty free shops in
Canada, (d) the sale, distribution or other
transfer for sale of KOOL, PALL MALL
RED, PALL MALL Filter, CAPRI and MISTY
cigarettes in the Federated States of
Micronesia, (e) the manufacture of Reynolds
American Restricted Products for,
and sale to, third parties who own or have
rights to use the intellectual
property associated with the brand of
Reynolds American Restricted Products to
be manufactured as long as such products
are not also sold, distributed or
otherwise transferred for sale by Reynolds
American or any of its Controlled
Affiliates, (f) the manufacture of Reynolds
American Restricted Products in the
Reynolds American Restricted Territory as
long as those products are not also
sold, distributed or otherwise transferred
for sale in the Reynolds American
Restricted Territory, or (g) the continued
manufacture, sale, distribution or
other transfer for sale of Reynolds
American Restricted Products in the Reynolds
American Restricted Territory by Lane
Limited, but only to the extent Lane
Limited engaged in such activities between
October 27, 2003 and the date of this
Agreement and only for a period ending 60
calendar days following the date of
this Agreement.
"Reynolds
American Restricted Period" means the period beginning on the
date of this Agreement and ending on the
5th anniversary of the date of this
Agreement.
"Reynolds
American Restricted Products" means manufactured cigarettes and
"roll your own" cigarette tobacco, cigars,
cigarillos and pipe tobacco.
"Reynolds
American Restricted Territory" means any place in the world
outside of the United States.
"Santa Fe"
means Santa Fe Natural Tobacco Company, Inc., a New Mexico
corporation and a wholly-owned subsidiary
of Reynolds American.
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"Santa Fe
Brands" means the brands "American Spirit," "Natural American
Spirit" and any natural extension
thereof.
"Santa Fe
Restricted Territory" means any country other than the
countries
listed on Exhibit A.
"United
States" means the United States of America and its territories
and
possessions.
2. BAT
Noncompete.
(a) Except
as provided in Section 2(b) or 2(c) of this Agreement, during
the BAT Restricted Period, BAT will not,
and will cause its Controlled
Affiliates not to, directly or indirectly,
engage in, carry on, own, lease,
manage, operate, control, share any
revenues of or have any profit or other
equity interest in any business or entity
engaged in the BAT Restricted
Business.
(b)
Notwithstanding anything to the contrary in this Section 2, BAT
and
any of its Controlled Affiliates may own
beneficially or of record (i)
securities of Reynolds American, (ii) a
non-Controlling interest in Skandinavisk
Tobakskampagni AS (Denmark), ITC Ltd.
(India) and VST Industries Ltd. (India),
and (iii) no more than five percent of the
issued and outstanding capital stock
or equity interests of an entity which has
issued securities that are publicly
traded and which is engaged in the BAT
Restricted Business.
(c)
Notwithstanding anything to the contrary in this Section 2, BAT
will
not be in violation of this Section 2 for
any sale, distribution or other
transfer for sale of BAT Restricted
Products in any jurisdiction if such BAT
Restricted Products (i) do not satisfy all
applicable packaging and labeling
requirements in such jurisdiction (provided
that any such sale, distribution or
other transfer is (A) not the result of
acts taken by means and persons
controlled by BAT or any of its Controlled
Affiliates and (B) contrary to
representations of the known customers of
BAT and its Controlled Affiliates) or
(ii) do satisfy all applicable packaging
and labeling requirements in such
jurisdiction but are present in such
jurisdiction (A) by means and persons not
controlled by BAT and its Controlled
Affiliates and (B) contrary to
representations of the known customers of
BAT and its Controlled Affiliates. In
addition to the exceptions provided in the
preceding sentence or otherwise in
this Section 2, BAT will not be in
violation of this Section 2 for sales,
distribution or transfers for sale of BAT
Restricted Products in the BAT
Restricted Territory that do
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not exceed in the aggregate 2 billion
individual cigarettes in any calendar
year, including any such sale, distribution
or transfer for sale that is known
or controllable by BAT and its Controlled
Affiliates.
(d) BAT
acknowledges and agrees that the foregoing restrictions are
reasonable given the nature of the
transactions contemplated by the Combination
Agreement.
3.
Reynolds American Noncompete.
(a) Except
as provided in Section 3(b) or 3(c) of this Agreement, during
the Reynolds American Restricted Period,
Reynolds American will not, and will
cause its Controlled Affiliates not to,
directly or indirectly, engage in, carry
on, own, lease, manage, operate, control,
share any revenues of or have any
profit or other equity interest in any
business or entity engaged in the
Reynolds American Restricted Business.
(b)
Notwithstanding anything to the contrary in this Section 3, (i)
Reynolds American and any of its Controlled
Affiliates may own beneficially or
of record no more than five percent of the
issued and outstanding capital stock
or equity interests of an entity which has
issued securities that are publicly
traded and which is engaged in the Reynolds
American Restricted Business, (ii)
Reynolds American will not be in violation
of this Section 3 solely as a result
of (A) Reynolds American's relationship
with R.J. Reynolds-Gallaher
International Sarl, a Swiss limited
liability company ("JV"), (B) JV's business,
or (C) if the JV has been terminated, the
manufacture, sale, marketing or
distribution of a brand listed on Exhibit C
in any country listed on Exhibit B
in which the JV was distributing such brand
prior to termination of the JV;
provided, however, that, for purposes of
this clause (ii), Reynolds American and
its Controlled Affiliates will not
contribute or license or otherwise transfer
any additional brands to the JV, except to
the extent required by the agreements
relating to the JV (as in effect on the
date hereof); and (iii) Santa Fe may
sell, distribute or otherwise transfer for
sale Reynolds American Restricted
Products under the Santa Fe Brands in the
countries listed on Exhibit A and,
subject to compliance with Section 6, may
sell, distribute or otherwise transfer
for sale Reynolds American Restricted
Products under the Santa Fe Brands in the
Santa Fe Restricted Territory.
(c)
Notwithstanding anything to the contrary in this Section 3,
