Exhibit 10.6

 

Dated                                                                                                
2015

 

(1)          David Steven Levin

 

(2)          Melanie Levin

 

(3)          Miguel Carlos Corral

 

(4)          David Ryder

 

(5)          ELECTRONIC CIGARETTES INTERNATIONAL GROUP, LTD.

 

 

 

SECOND deed of variation 

In respect of Share Purchase  

Agreement dated 22 april 2014 and loan note
instrument dated 22 april 2014

 

 

 

Mishcon de Reya

Summit House

12 Red Lion Square 

London WC1R 4QD

Tel: 020 7440 7000

Fax: 020 7404 5982

Ref: KEM/LJ/43296.1

 

 

 

 

TABLE OF CONTENTS

 

No. Heading Page       1. DEFINITIONS AND INTERPRETATION 1       2. VARIATIONS
TO THE AGREEMENT AND WAIVER 2       3. VARIATIONS TO THE INSTRUMENT AND WAIVER 3
      4. SHARE OPTIONS 5       5. SENIOR DEBT 6       6. COSTS 6       7.
GOVERNING LAW AND JURISDICTION 7       8. COUNTERPARTS 7       SCHEDULE 1 – THE
AGREEMENT 10     SCHEDULE 2 – THE INSTRUMENT 11     SCHEDULE 3 – FIRST DEED OF
VARIATION 12     SCHEDULE 4 – DEED OF AMENDMENT 13

 

i

 

 

 

THIS DEED is dated 2015

 

PARTIES

 

(1)DAVID STEVEN LEVIN of 7 Ringley Chase, Whitefield, Manchester, M45 7UA (DSL).

 

(2)MELANIE LEVIN of 7 Ringley Chase, Whitefield, Manchester, M45 7UA (ML).

 

(3)MIGUEL CARLOS CORRAL of 1 Sergeants Lane, Whitefield, Manchester, M45 7TR
(MCC).

 

(4)DAVID RYDER of 6 Greenock Close, Ladybridge, Bolton BL3 4UD (DR and together
with DSL, ML and MCC, the Sellers or the Noteholders).

 

(5)ELECTRONIC CIGARETTES INTERNATIONAL GROUP, LTD. (formerly Victory Electronic
Cigarettes Corporation) a company registered in State of Nevada, USA under
number C13461-2004 whose registered office is at 11335 Apple Drive, Spring Lake,
Michigan 49448, USA (the Buyer or the Company).

 

(6)MUST HAVE LIMITED a company registered in England and Wales with company
number 05101019 whose registered office is at Units 3-8 Bury South Business Park
Riverview Close, Dumers Lane, Radcliffe Manchester M26 2AD (Must Have).

 

BACKGROUND

 

(A)The Sellers and the Buyer are parties to a share purchase agreement dated 22
April 2014 for the sale (by the Sellers) and acquisition (by the Buyer) of the
whole of the issued share capital of Must Have (the Agreement), as amended by a
deed of variation and acknowledgement dated 3 October 2014 (the First Deed of
Variation) and a deed of amendment dated 15 October 2014 (the Deed of
Amendment). Copies of the Agreement, the First Deed of Variation and the Deed of
Amendment are contained in Schedule 1, Schedule 3 and Schedule 4 of this deed
respectively.

 

(B)The Company is party to a loan note instrument dated 22 April 2014
constituting up to US$11,000,000 secured loan notes 2014 (the Instrument), as
amended by the First Deed of Variation. A copy of the Instrument is contained in
Schedule 2 of this deed. All of the loan notes constituted by the Instrument are
held by the Noteholders.

 

(C)The Company and the Noteholders wish to further amend the Agreement and the
Instrument as set out in this deed with effect from the date hereof (the
Variation Date). This deed is supplemental to the Agreement, the Instrument, the
First Deed of Variation and the Deed of Amendment.

 

(D)The Company has agreed to create and issue share options to certain
individuals, including the Noteholders. This deed sets out the intention to
create such share options.

 

AGREED TERMS

 

1.DEFINitions and interpretation

 

1.1Expressions defined in the Agreement and used in clause 2 of this deed will
have the meaning set out in the Agreement.

 

1.2Expressions defined in the Instrument and used in clause 3 of this deed will
have the meaning set out in the Instrument, subject to any variation pursuant to
clause 3 of this deed.

 

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2.variations to the agreement AND Waiver

 

2.1With effect from the Variation Date and in accordance with clause 23.1 of the
Agreement, in consideration of the payment of £1.00 by the Buyer to the Sellers
(receipt of which is hereby acknowledged) the parties agree the following
amendments to the Agreement:

 

2.1.1Amending clause 1.13 by deleting the words “, clause 3.1.5 or Schedule 8”;

 

2.1.2Amending paragraph 4.3.1 of Part A of Schedule 8 by deleting the words “on
or prior to 13 December 2014” and replacing them with “in accordance with
paragraph 4.4 below”;

 

2.1.3deleting paragraph 4.4 of Part A of Schedule 8 in its entirety and
replacing it with the following new paragraph 4.4:

 

“4.4Subject to the provisions of clause 4.4(A), the Earn-out Payment shall be
paid (in the same manner as set out in paragraph 4.3 above) as follows:

 

4.4.1in the event that the Last Repayment Date (as defined in the Loan Note
Instrument (as amended from time to time)) occurs prior to 1 December 2017, an
amount equal to US$300,000 less the sum paid on the Last Repayment Date pursuant
to the Loan Note Instrument (as amended from time to time) on the Last Repayment
Date (as defined in the Loan Note Instrument (as amended from time to time);

 

4.4.2save where the Last Repayment Date occurs on 1 November 2017 (in which
case, for the avoidance of doubt, this paragraph 4.4.2 shall not apply),
US$300,000 on the first day of each month from and including the month
immediately following the Last Repayment Date to and including 1 November 2017;
and

 

4.4.3the balance of the outstanding Earn-out Payment on 1 December 2017,
together with all interest accrued during the period beginning on 1 May 2015,

 

provided that if any payment falls on a day that is not a Business Day then the
relevant amount shall be paid on the next following Business Day.”; and

 

2.1.4inserting the following new paragraph 4.4(A) in Part A of Schedule 8:

 

“4.4(A)On a Change of Control of the Buyer or a Listing or Initial Registered
Offering (as such terms are defined in the Loan Note Instrument) pursuant to
which the Buyer raises not less than US$50,000,000 by way of equity offering,
any and all remaining amount of the Earn-Out Consideration and any interest
accrued but unpaid thereon shall be immediately due and payable by the Buyer,
where for the purposes of this paragraph 4.4(A) “Change of Control” shall mean
the acquisition (by any means) by a third party of any interest in the share
capital of the Buyer if, upon completion of that acquisition, that third party
(together with any person connected with or acting in concert with that third
party) would be entitled to exercise more than 50% of the voting rights normally
exercisable at any shareholder meeting of the Buyer”.

 

2

 

 

2.1.5inserting the following new paragraphs 4.4(B) and 4.4(C) in Part A of
Schedule 8:

 

“4.4(B)If any payment required to be made under paragraph 4.4 above is not paid
by the Buyer on the relevant payment date then daily interest at the Prescribed
Rate shall accrue on that unpaid principal amount from the due date until the
date of payment of that amount. Interest shall be calculated on the basis of a
365 day year and any such interest accrued shall be paid at the same time as
payment of the relevant unpaid principal amount. The provisions of clause 25.1
shall not apply to any payment of the Earn-out Payment.”.

 

“4.4(C)If two or more payments required to be made under paragraph 4.4 above are
not paid by the Buyer on the relevant payment date then any and all remaining
amount of the Earn-Out Consideration and any interest accrued but unpaid thereon
shall be immediately due and payable by the Buyer”

 

2.2As security for the payment of the Earn-Out Consideration by the Buyer and
any interest due and payable thereon, the Buyer shall grant to the Sellers a
second ranking charge over the shares held by the Buyer in Must Have.

 

2.3On the Variation Date the Buyer shall pay to the Sellers an amount equal to
$273,270.47, which shall be in full and final settlement of all accrued but
unpaid interest on the Earn-Out Consideration and the Loan Notes up to and
including 30 April 2015.

 

2.4Subject to the payment of the amount pursuant to clause 2.3 above, the
Sellers unconditionally and irrevocably:

 

2.4.1waive any and all unpaid interest accrued in respect of the Earn-out
Payment on or prior to 30 April 2015 under the Agreement (whether through
non-payment of the Earn-out Payment at the relevant time(s) or otherwise); and

 

2.4.2release the Buyer from any obligation to pay such interest.

 

2.5The Agreement (as varied by the First Deed of Variation and the Deed of
Amendment) will remain fully effective as varied by this deed.

 

3.variations to the instrument AND Waiver

 

3.1With effect from the Variation Date and in accordance with clause 17 of the
Instrument, in consideration of the payment of £1.00 by the Company to the
Noteholders (receipt of which is hereby acknowledged), the parties agree the
following amendments to the Instrument:

 

3.1.1inserting the following new definition in clause 1.1:

 

“First Repayment Date means the Variation Date;”;

 

3.1.2deleting the definitions of “Exchange Rate”, and “Interest Start Date” in
clause 1.1;

 

3.1.3inserting the following new definition in clause 1.1:

 

“Last Repayment Date means the first day of the month immediately following the
Penultimate Repayment Date, provided that if such date falls on a day that is
not a Business Day then the relevant amount shall be paid on the next following
Business Day”;

3

 

 

3.1.4inserting the following new definition in clause 1.1:

 

“Penultimate Repayment Date means the first day of the month in which the final
payment of $300,000 is to be made by the Company for the redemption of principal
of the Notes such that the balance of the Notes following such payment is less
than $300,000, provided that if such date falls on a day that is not a Business
Day then the relevant amount shall be paid on the next following Business Day;”;

 

3.1.5deleting the definition of “Repayment Date” in clause 1.1 in its entirety
and replacing it with the following new definition of “Repayment Date”:

 

“Repayment Date means the first day of each month from and including 1 October
2016 up to and including the Penultimate Repayment Date (and Repayment Dates
shall be construed accordingly), provided that if such date falls on a day that
is not a Business Day then the relevant amount shall be paid on the next
following Business Day;”;

 

3.1.6deleting clause 5.1 in its entirety and replacing it with the following new
clause 5.1:

 

“5.1When the Notes become payable in accordance with the provisions of this
instrument, the Company shall pay to the Noteholders the full principal amount
of the Notes to be repaid together with any accrued interest on such Notes (less
any tax which the Company is required by law to deduct or withhold from such
payment).”;

  

3.1.7deleting clauses 5.4 and 5.5 in their entirety;

 

3.1.8deleting clause 11.1.5 (beginning “if the Initial Registration Statement…”)
in its entirety;

 

3.1.9inserting as a new clause 11.1.5:

 

“11.1.5if the Company fails to make any two or more repayments due under
paragraph 1.1 to 1.4 of Schedule 2;”;

  

3.1.10deleting paragraph 1 of Schedule 2 in its entirety and replacing it with
the following new paragraphs 1.1 to 1.9 (inclusive):

 

“1.1On the First Repayment Date, the Company shall redeem US$8,000,000 of the
principal amount of the Notes.

 

1.2On each Repayment Date from 1 October 2016 up to and including the
Penultimate Repayment Date but excluding 1 December 2016, the Company shall
redeem US$300,000 of the principal amount of the Notes.

 

1.3On 1 December 2016 the Company shall redeem a principal amount of the Notes
equal to the greater of: (i) 50% of the unencumbered cash available to the
Company on that date (if any); and (ii) US$300,000.

 

1.4On the Last Repayment Date or 1 December 2017 (whichever is the earlier), the
Company shall redeem any outstanding principal amount of the Notes.

 

1.5On a Change of Control of the Buyer or a Listing or Initial Registered
Offering pursuant to which the Buyer raises not less than US$50,000,000 by way
of equity offering, any and all remaining amount of the Earn-Out Consideration
and any interest accrued but unpaid thereon shall be immediately due and payable
by the Buyer, where for the purposes of this Condition 1.5 “Change of Control”
shall mean the acquisition (by any means) by a third party of any interest in
the share capital of the Buyer if, upon completion of that acquisition, that
third party (together with any person connected with or acting in concert with
that third party) would be entitled to exercise more than 50% of the voting
rights normally exercisable at any shareholder meeting of the Buyer, any and all
remaining amount of the principal of the Notes and any interest accrued but
unpaid thereon shall be due and payable by the Company.

 

4

 

 

1.6Any redemption of the Notes under Conditions 1.1 to 1.5 above shall be in
cash and shall be made pro rata to the holdings of all Noteholders, together
with any accrued and unpaid interest (less any tax required by law to be
deducted or withheld from such payment) on the relevant Notes.

 

1.7Should any amount due on any of the First Repayment Date, any Repayment Date
or the Last Repayment Date not be paid when due, then such payment shall be made
by the Company on the next Repayment Date (the “Following Repayment Date”)
together with the amount which was already due to be paid on the Following
Repayment Date.”

 

3.1.11Deleting paragraph 4.2 of Schedule 2 in its entirety and replacing it with
the following new paragraph 4.2:

 

“4.2For the period from and including the Variation Date to and including the
Last Repayment Date interest on the principal amount of the Notes outstanding
shall accrue at the rate of 10% per annum.”

 

3.4As security for the payment of the principal of the Notes by the Buyer and
any interest due and payable thereon, the Buyer shall grant to the Sellers a
second ranking charge over the shares held by the Buyer in Must Have.

 

3.5The Instrument (as varied by the First Deed of Variation) will remain fully
effective as varied by this deed.

 

3.6The parties acknowledge and agree that this deed shall constitute a
resolution in writing of the Noteholders (pursuant to paragraph 18 of Schedule 4
of the Instrument), and that, for the purposes of clause 17 of the Instrument,
such resolution (which approves certain amendments to the Instrument) shall be
as valid and effectual as a Special Resolution.

 

3.7Subject to the payment of the amount pursuant to clause 2.3 above, the
Noteholders unconditionally and irrevocably:

 

3.7.1waive any and all unpaid interest accrued in respect of the Notes on or
prior to the Variation Date under the Instrument (whether through non-repayment
of the Notes at the relevant time(s) or otherwise); and

 

3.7.2release the Company from any obligation to pay such interest.

 

4.SHARE OPTIONS

 

4.1Within 60 days of the date of this deed, the Company shall establish a share
option plan pursuant to which share options with the following vesting periods
shall be created:

 

4.1.1Year 1: 10%;

 

4.1.2Year 2 15%;

 

4.1.3Year 3 25%; and

 

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4.1.4Year 4 50% (the Share Options and each of Year 1, Year 2, Year 3 and Year 4
being a Vesting Period).

 

The exercise price of the Share Options shall be $0.05 and the remaining terms
of the Share Options shall be as set out in the document pursuant to which the
Share Options are created.

 

4.2Within 30 days of the Share Options being established, the Company shall
grant Share Options representing an aggregate amount of 30,000,000 shares in the
Company (ranking pair passu with the existing ordinary shares in the Company) to
employees of Must Have, with the allocation per individual being determined by
Must Have in its sole discretion save that DSL shall be granted options
representing an aggregate of 6,375,000 shares.

 

4.3The creation and grant of the Share Options shall be undertaken in as tax
efficient manner as reasonably practicable.

 

4.4Should any repayment of principal of Notes held by DSL, MCC or DR as set out
in paragraphs 1.1 to 1.4 of Schedule 2 of the Instrument or any payment of
Earn-Out Consideration to DSL, MCC or DR as set out in clause 4.4 of the
Agreement not be paid when due then the number of options held by DSL, MCC or DR
(as the case may be) which would have vested in the Vesting Period in which the
non-payment occurred (such Vesting Period being the “Breached Vesting Period”)
shall immediately vest together with such further number of options from the
Vesting Period immediately following the Breached Vesting Period (such Vesting
Period being the “Following Vesting Period”) as would increase the percentage
referred to in clause 4.1 above for the Breached Vesting Period by an additional
10% and will accordingly reduce the number of options capable of vesting in the
Following Vesting Period by 10% (for example, should the non-payment occur in
Year 2, then 15% of the relevant individual’s options (being the options which
should vest in Year 2) and a further 10% of the relevant individual’s options
(being 10% of the 25% of the options which should vest in Year 3, leaving 15% to
vest in Year 3) shall vest).

 

4.5For the avoidance of doubt, in the event that either:

 

4.5.1repayment in full of the principal (and any interest accrued thereon) of
Notes held by DSL, MCC or DR, as set out in paragraphs 1.1 to 1.4 of Schedule 2
of the Instrument; or

 

4.5.2payment in full of Earn-Out Consideration (and any interest accrued
thereon) to DSL, MCC or DR as set out in clause 4.4 of the Agreement

 

has not been made on or before 1 December 2017, then all options held by DSL,
MCC or DR shall vest immediately.

 

5.SENIOR DEBT

 

The Company hereby warrants and undertakes to the Sellers that the Senior Debt
(as defined in the Deed of Amendment) has been repaid in full and further
warrants and undertakes to the Sellers that the consent of the Senior Security
Trustee and the Senior Creditor (each as defined in the Deed of Amendment) is
not required for the purposes of the parties hereto entering into this deed.

 

6.COSTS

 

The Company shall pay the Sellers’ reasonably and properly incurred legal fees
in connection with the negotiation and settlement of this deed and any other
document or arrangement detailed herein, subject to an aggregate maximum amount
of £15,000 (plus VAT and reasonably and properly incurred disbursements), upon
the presentation of an appropriate invoice for such fees.

 

6

 

 

7.governing law and jurisdiction

 

This deed, and any non-contractual obligations arising out of or in connection
with it, will be governed by and construed in accordance with English law and
the parties irrevocably submit to the non-exclusive jurisdiction of the English
Courts in respect of any claim, dispute or difference arising out of or in
connection with this deed.

 

8.COUNTERPARTS

 

This deed may be executed in any number of counterparts and by the parties on
separate counterparts, but will not be effective until each party has executed
and delivered at least one counterpart. Each counterpart, when executed and
delivered, constitutes an original, but all counterparts together constitute the
same instrument.

 

The parties have executed and delivered this document as a deed on the date
stated at the beginning of it.

7

 

  

SIGNED as a deed by

DAVID STEVEN LEVIN

in the presence of:

Signature

 

 

  

Witness signature       Name (in BLOCK CAPITALS)       Address          

  

SIGNED as a deed by

MELANIE LEVIN

in the presence of: 

Signature 

 

 

  

Witness signature       Name (in BLOCK CAPITALS)       Address          

  

SIGNED as a deed by 

MIGUEL CARLOS CORRAL 

in the presence of: 

Signature 

 

 

  

Witness signature       Name (in BLOCK CAPITALS)       Address          

  

8

 

 

SIGNED as a deed by 

DAVID RYDER  

in the presence of: 

Signature 

 

 

  

Witness signature       Name (in BLOCK CAPITALS)       Address          

 

EXECUTED as a deed by 

ELECTRONIC CIGARETTES INTERNATIONAL GROUP, LTD. acting by a director, in the
presence of:

Signature

 

 

Director 

 

Print name 

 

 

      Witness signature         Name (in BLOCK CAPITALS)         Address        
             

EXECUTED as a deed by 

MUST HAVE LIMITED. acting by a director, in the presence of:

 

Signature

 

 

Director 

 

Print name 

 

 

      Witness signature         Name (in BLOCK CAPITALS)         Address        
             

 

9

 

   

Schedule 1 – The Agreement

10

 

  

Schedule 2 – The Instrument

11

 

  

Schedule 3 – First Deed of Variation

12

 

 

Schedule 4 – DEED OF AMENDMENT

13