Vector Group Ltd. July 14, 2006
Exhibit
10.1
VECTOR GROUP LTD LOGO)"/>
Vector
Group Ltd.
July 14, 2006
Dear Xx. Xxxxxx:
This letter agreement will confirm the understanding between Vector Group Ltd. (“Vector”) and you,
as a stockholder of Vector, in connection with Vector’s private placement of $110 million of 3 7/8%
Variable Interest Senior Convertible Debentures due 2026 (the “Debentures”), which closed on July
12, 2006. Prior to the offering, Jefferies & Company (“Jefferies”), the initial purchaser of the
Debentures, advised Vector that, to successfully market the offering, purchasers of Debentures must
be able to borrow shares of Vector common stock on normal terms in order to hedge purchases of the
Debentures. Based on the existing public float of Vector’s stock, Jefferies indicated that there
may not be a sufficient number of shares available in the market to effect such loans. If Vector so
requests, you or your affiliates may open, and deposit shares of Vector’s common stock (“Margin
Shares”) into, one or more margin accounts with Jefferies (the “Margin Accounts”) which may be
borrowed by purchasers of the Debentures (“Purchasers”), to facilitate hedging transactions entered
into by Purchasers. You and your affiliates, however, have no obligation to maintain any Margin
Shares in the Margin Accounts and may withdraw such Margin Shares, if any, from the Margin Accounts
at any time.
In connection with the potential deposit by you or your affiliates of the Margin Shares in the
Margin Accounts, Vector hereby agrees as follows:
(i) For a period of two years following the date of this letter agreement, it will hold
you and your affiliates harmless, on an after-tax basis, against the increase, if any, in
the income tax rate applicable to payments to you or your affiliates in respect of
dividends paid by Vector on the Margin Shares as a result of you or your affiliates having
deposited the Margin Shares in the Margin Accounts or the Margins Shares being borrowed by
Purchasers, provided that (x) the Margin Shares are only borrowed by Purchasers
and (y) the aggregate number of Margin Shares, together with any other shares similarly
deposited by other executive officers or principal stockholders of Vector into margin
accounts with Jefferies to be borrowed by Purchasers, does not exceed 2,000,000 shares.
Any such indemnification against additional income tax shall fully consider the income tax
effect of receiving any and all such payments.
VECTOR GROUP LTD. LOGO)"/>
Xx. Xxxxxx X. Xxxxxx
July 14, 2006
Page 2
July 14, 2006
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(ii) Promptly following the date hereof, Vector will use all reasonable efforts to file
and keep in effect a Registration Statement on Form S-3 or other applicable form to
register the resale of the Margin Shares under the Securities Act of 1933, as amended.
In the event of any change in capitalization affecting the Vector common stock, including, without
limitation, a stock dividend or other distribution, stock split, spin-off, reorganization or
recapitalization, the aggregate number of shares upon which any tax indemnity shall be computed
shall be appropriately adjusted.
Vector represents to you that (i) Vector has the requisite corporate power and authority to enter
into and perform its obligations under this letter agreement; (ii) this letter agreement has been
approved by the Audit Committee of Vector’s Board of Directors; and (iii) any necessary exceptions
or waivers under Vector’s Code of Business Conduct and Ethics have been obtained in order to permit
Vector to enter into and perform its obligations under this letter agreement.
This letter agreement contains all the understandings between Vector and you pertaining to the
matters referred to herein, and supercedes all undertakings and agreements, whether oral or in
writing, previously entered into by Vector and you with respect hereto. No provision of this letter
agreement may be amended or waived unless such amendment or waiver is agreed to in writing signed
by you and a duly authorized officer of Vector. No waiver by Vector or you of any breach by the
other party hereto of any condition or provision of this letter agreement to be performed by such
other party shall be deemed a waiver of another similar or dissimilar condition or provision at the
same time, any prior time or any subsequent time. If any provision of this letter agreement or the
application of any such provision to any party or circumstances shall be determined by any court of
competent jurisdiction to be invalid and unenforceable to any extent, the remainder of this letter
agreement or the application of such provision to such person or circumstances other than those to
which it is so determined to be invalid and unenforceable, shall not be affected thereby, and each
provision hereof shall be validated and shall be enforced to the fullest extent permitted by law.
This letter agreement will be governed by and construed in accordance with the laws of the State of
Delaware, without regard to its conflicts of laws principles. This letter agreement may be executed
in counterparts, each of which shall be deemed an original, but both of which together shall
constitute one and the same instrument.
VECTOR GROUP LTD. LOGO)"/>
Xx. Xxxxxx X. Xxxxxx
July 14, 2006
Page 3
July 14, 2006
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Please indicate your agreement with the foregoing by signing this letter agreement in the space
provided below.
| Very truly yours, | ||||||
| VECTOR GROUP LTD. | ||||||
| By: | /s/ XXXXXXX X. XXXXXX
|
|||||
| Executive Vice President | ||||||
The foregoing letter agreement
is consented and agreed to as of the
date first written above.
is consented and agreed to as of the
date first written above.
/s/ XXXXXX X. XXXXXX
|
