AGREEMENT
This AGREEMENT among New Valley Corporation, a New York
corporation ("New Valley"), ALKI Corp., a Delaware corporation
and a direct wholly owned subsidiary of New Valley ("NV Sub"),
and High River Limited Partnership, a Delaware limited
partnership ("High River"), dated October 17, 1995.
W I T N E S S E T H:
WHEREAS, each of the parties hereto, directly or
indirectly, is a stockholder of RJR Nabisco Holdings Corp., a
Delaware corporation ("RJRN");
WHEREAS, the parties hereto believe that the value of
RJRN stockholders' investment can be substantially increased
through a spinoff (the "Spinoff") of all or substantially all of
RJRN's remaining investment in Nabisco Holding Corp., a Delaware
corporation ("Nabisco");
WHEREAS, New Valley and NV Sub desire to obtain the
assistance and advice of High River with respect to measures
designed to effectuate the Spinoff at the earliest possible date;
WHEREAS, High River is willing to give such assistance
and advice to New Valley and NV Sub (the "New Valley Group") in
consideration of the agreements by the New Valley Group set forth
herein;
NOW, THEREFORE, in consideration of the foregoing and
of the mutual promises set forth herein, the parties hereto,
intending to be legally bound, agree as follows:
Section 1. Investment. (a) High River hereby agrees
to purchase from New Valley and NV Sub, and New Valley and NV Sub
hereby agree to sell, assign, transfer and deliver to High River,
at the Closing (as defined below), 1,611,550 shares of common
stock, par value $.01 per share ("Shares"), of RJRN (the
"Purchased Shares"). The closing of the purchase and sale of the
Purchased Shares (the "Closing") shall occur at 10:00 a.m. on
October 23, 1995 (the "Closing Date") at the offices of Milbank,
Tweed, Xxxxxx & XxXxxx, One Xxxxx Manhattan Plaza, New York, New
York. At the Closing, High River will pay to New Valley
$50,976,921 (the "Purchase Price"), by wire transfer of
immediately available funds to an account designated by New
Valley, against delivery to High River of the Purchased Shares in
a commercially customary manner such that, upon the payment of
the Purchase Price for such Purchased Shares, High River shall
have acquired good and marketable title to such Shares, free and
clear of all encumbrances and liens whatsoever.
(b) It is the intention of the New Valley Group and
High River to cooperate to invest a minimum of at least $300
million ($150 million each) in Shares, and they may further
increase their investment to a minimum of at least $500 million
in Shares ($250 million each), in accordance with the following
plan:
(i) Each of the New Valley Group and High River
and its affiliates (the "High River Group") is expected to
make a minimum equity investment in Shares of $75 million
(the "First Stage Equity Investments").
(ii) In addition to their respective First Stage
Equity Investments, each of the New Valley Group and the
High River Group is expected to invest in Shares at least a
minimum additional amount (the "First Stage Margin
Investments" and, together with the First Stage Equity
Investments, the "First Stage Investments") equal to the
lesser of (A) $75 million and (B) the maximum additional
amount that such group would lawfully have been able to
invest in Shares if (I) the Shares acquired pursuant to such
group's First Stage Equity Investment had been acquired with
funds not obtained from the proceeds of "purpose credit"
secured directly or indirectly by "margin stock" (as such
terms are defined in Regulation T and Regulation U
promulgated by the Board of Governors of the Federal Reserve
System (the "Margin Rules")) ("Margin Loans") and (II) such
group had used its best efforts to borrow additional funds
by pledging the Shares so acquired as collateral to secure
Margin Loans to the extent that such Margin Loans could have
been obtained lawfully and on reasonable commercial terms
and had used the proceeds of such Margin Loans to acquire
additional Shares, which had been similarly pledged to
secure additional Margin Loans and to acquire further
Shares, and so forth until no further such Margin Loans had
been lawfully available.
(iii) Following the completion of the First Stage
Investments, each of the New Valley Group and the High River
Group may make a further investment in Shares of up to the
sum of (A) $50 million of equity (the "Second Stage Equity
Investment") plus (B) an additional amount (the "Second
Stage Margin Investments" and, together with the Second
Stage Equity Investments, the "Second Stage Investments")
equal to the lesser of (I) $50 million and (II) the maximum
amount that such group would lawfully have been able to
invest in Shares, in the manner described in Section
1(b)(ii)(B), using the Shares acquired through the Second
Stage Equity Investment as collateral.
(c) In order to effectuate the objectives of the
parties hereto described in Section 1(b), each of the New Valley
Group and High River agrees that it shall (or shall cause its
affiliates to) make the following investments in Shares:
(i) Promptly after the close of business on
each business day during the term of this Agreement,
each of New Valley and High River shall notify the
other of (A) the number of Shares acquired or sold by
the New Valley Group and the High River Group,
respectively, since the last such notice, (B) the
purchase price or sale price of each Share so acquired
or sold and (C) the amount of brokerage fees or
commissions incurred in acquiring or selling each such
Share.
(ii) On the last business day of each second
calendar week (commencing with the end of the second full
calendar week following the date of this Agreement) prior to
such time as the High River Group has made an investment in
Shares equal to at least the Second Stage Investment (the
"Second Stage Completion Date"), promptly after the exchange
of notices described in Section 1(c)(i), the parties hereto
shall calculate the aggregate number and the average price
of all Shares acquired during such two calendar weeks by
either the New Valley Group or the High River Group at a
price per Share equal to the Hurdle Price (as defined below
in this paragraph (ii)) or less (exclusive of brokerage fees
and commissions incurred in such acquisition) ("Qualifying
Shares"). Thereupon, each party shall make or cause to be
made to the other party (or the other party's designee) such
transfers of Shares and such payments in immediately
available funds (in each case in the manner described in
Section 1(c)(iv)) as would have been necessary so that,
after giving effect to such transfers and payments, the New
Valley Group and the High River Group would have acquired
the same number of Qualifying Shares during such two
calendar weeks and the aggregate investment (excluding
brokerage fees and commissions incurred in the acquisition
of Shares) of the New Valley Group and the High River Group
in Qualifying Shares during such week would have been
identical. For purposes of this Agreement, "Hurdle Price"
means (x) prior to the time that both the new Valley Group
and the High River Group have made investments in Shares
equal to at least the First Stage Investment (the "First
Stage Completion Date"), $35.50 per Share and (y) at all
times from and after the First Stage Completion Date and
prior to the Second Stage Completion Date, $31.00 per Share.
(iii) In addition to the obligations of the
parties hereto under Section 1(c)(ii), for each business day
prior to the Second Stage Completion Date, New Valley may,
in its sole discretion, by notice to High River promptly
after the exchange of the notices with respect to such
business day described in Section 1(c)(i), put to High River
a number of Shares equal to or less than one-half of the
excess, if any, of (A) the aggregate number of Shares other
than Qualifying Shares ("Non-Qualifying Shares") acquired by
the New Valley Group since the close of business on the
previous business day over (B) the number of Non-Qualifying
Shares acquired by the High River Group since the close of
business on the previous business day. The put price per
Share shall be equal to the Hurdle Price. Thereupon, the
New Valley Group shall sell and transfer or cause to be sold
and transferred to High River or another member of the High
River Group designated by High River the number of Shares so
put to High River, and High River shall purchase or cause
such designee to purchase such Shares and shall pay or cause
to be paid to New Valley or New Valley's designee a purchase
price equal to the put price of such Shares, in each case in
the manner described in Section 1(c)(iv).
(iv) All payments required to be made under
Section 1(c)(ii) or Section 1(c)(iii) shall be made in
immediately available funds before the opening of
business on the fourth New York Stock Exchange trading
day after (A) in the case of Section 1(c)(ii), the last
business day of each second calendar week in which the
exchange of notices referred to therein is made and (B)
in the case of Section 1(c)(iii), the last business day
of the calendar week in which New Valley delivers the
notice referred to therein. All transfers of Shares
required by Section 1(c)(ii) and Section 1(c)(iii)
shall be made simultaneously with such payment in a
commercially customary manner such that upon the
payment of the purchase price for such Shares, the
transferee shall have acquired good and marketable
title to such Shares, free and clear of all
encumbrances and liens whatsoever.
(v) As promptly as practicable following the
close of business on November 27, 1995 (in the case of the
First Stage Investments) and January 11, 1996 (in the case
of the Second Stage Investments), but in each case prior to
the close of business on the next business day, each of New
Valley and High River shall notify the other of (A) the date
of purchase of any Shares acquired by the New Valley Group
and the High River Group, respectively, since the date of
this Agreement, (B) the number of Shares purchased on each
such date and (C) the purchase price of each Share so
acquired. If prior to January 17, 1996, either New Valley
or High River believes that the other has breached any of
its obligations under Section 1(c)(ii) or Section 1(c)(iii),
such party (the "Notifying Party") shall deliver to the
other party (the "Receiving Party") a notice setting forth
in reasonable detail the nature of the breach and the
reasons for such belief (the "Notice of Breach"). The
Notice of Breach shall specifically describe the number of
Shares that the Receiving Party must transfer to the
Notifying Party, or that the Notifying Party must transfer
to the Receiving Party, and the amount of the payments that
the Receiving Party must make to the Notifying Party, or
that the Notifying Party must make to the Receiving Party,
in order to cure such breach, and shall demand performance
of such transfers and payments. Prior to the close of
business on the third business day after receiving the
Notice of Breach, the Receiving Party shall either (x) pay
the amounts and transfer the Shares described in the Notice
of Breach, against receipt of the amounts to be paid and/or
the Shares to be transferred by the Notifying Party as
described in the Notice of Breach or (y) deliver to the
Notifying Party a notice stating that the Receiving Party
disputes the demand made in the Notice of Breach (the
"Notice of Dispute"). In the event that the Receiving Party
delivers a Notice of Dispute, then prior to the close of
business on the next business day, the parties hereto shall
by mutual agreement choose an independent, nationally
recognized public accounting firm, which shall be retained
by the parties hereto to arbitrate the dispute (the
"Arbitrator"), or if they cannot agree, each of New Valley
and High River shall choose one such accounting firm, and
such firms shall choose a third such accounting firm to
serve as Arbitrator. The fees and expenses of the
Arbitrator shall be shared equally by New Valley and High
River. The parties hereto shall make available to the
Arbitrator all information which the Arbitrator may
reasonably request for the purpose of arbitrating the
dispute. Prior to the close of business on the fifth
business day after being retained, the Arbitrator shall make
its own independent calculations and shall notify New Valley
and High River in writing of its decision, indicating the
amounts to be paid and the number of Shares to be
transferred by each of the parties hereto to cure any breach
of Section 1(c)(ii) or 1(c)(iii), identified by the
Arbitrator as having occurred. Prior to the close of
business on the third business day after receiving the
notice of such decision, each party hereto shall make
payments and transfer Shares in accordance with such
decision. In each case where a party is required to make
any payment pursuant to this Section 1(c)(v) by reason of
any breach by such party of Section 1(c)(ii) or Section
1(c)(iii), the amount of such payment shall be based on a
purchase price per Share, without interest, equal to the
Hurdle Price in effect at the time that the relevant
transfer of Shares would have originally occurred if not for
the relevant breach.
(d) (i) Except as provided in subpart (ii) of this
subparagraph (d), until the termination of this Agreement,
(i) the New Valley Group shall not make or agree to make any
sale, transfer or other disposition (a "Transfer") of Shares
beneficially owned by it, if following such Transfer the New
Valley Group's total investment in Shares would be less than
the sum of the First Stage Investment plus the Second Stage
Investment and (ii) High River shall not (and shall cause
the High River Group not to) make or agree to make any
Transfer of Shares beneficially owned by it, if following
such Transfer the High River Group's total investment in
Shares would be less than the sum of the First Stage
Investment plus the Second Stage Investment; provided,
however, that (x) the New Valley Group and the High River
Group may sell Shares to an unaffiliated third party on an
arms'-length basis if (1) such sale is made solely in
response to a demand for repayment or additional collateral
(other than Shares) of the sort usually made by a lender
extending Margin Loans secured by such Shares, which demand
results from a decline in the market price of the Shares so
that the account with the lender falls below the lender's
pre-established maintenance requirement for the New Valley
Group or the High River Group, as the case may be, (2) the
proceeds of such sale are used solely to repay Margin Loans,
(3) the total number of Shares sold does not exceed the
minimum number that must be sold in order to satisfy such
demand and (y) in the event the New Valley Group or the High
River Group (each, a "Group") sells any Shares pursuant to
clause (x) of this proviso and following such sale such
first Group's investment in Shares is less than the second
Group's investment in Shares, then the second Group may
Transfer Shares so long as following such Transfer the
second Group's investment in Shares is equal to or greater
than the first Group's investment in Shares; and provided
further that each member of the New Valley Group and the
High River Group may Transfer Shares to any other member of
the New Valley Group or the High River Group (but only if,
in the case of a Transfer to another member of the High
River Group, such member agrees to be bound by the
provisions of this Agreement to the same extent as High
River). Following a sale by either the New Valley Group or
the High River Group pursuant to clause (x) of the first
proviso to the preceding sentence, neither Group shall be
obligated to purchase any additional Shares pursuant to
Section 1(c)(ii) or Section 1(c)(iii), but the provisions of
Section 1(c)(v) shall continue to be applicable with respect
to any purchases that were required to be made prior to such
sale pursuant to Section 1(c)(ii) or Section 1(c)(iii).
(ii) In addition, notwithstanding the terms of
subpart (i) of this subparagraph (d), in the event that the
lender extending Margin Loans to a member of the New Valley
Group or the High River Group, as the case may be (the
"Borrower"), for any reason other than as set forth in
clause (x) of the first proviso to the first sentence of
subpart (i) of this subparagraph (d), terminates or reduces
the loan facility or otherwise requires the sale of Shares
by Borrower (such Shares required as a result to be sold,
together with a number of Shares equal to the number of
Shares (if any) sold pursuant to such clause (x), during the
thirty consecutive calendar days immediately following the
date that the Borrower is informed of such required sale,
being hereinafter referred to as the "Selloff Shares") and
after exercise of best efforts to replace such loan facility
Borrower is unable to do so, then the Borrower shall
irrevocably offer to the other party hereto the right for a
five business day period, at the election of the other
party, either (A) to acquire the Selloff Shares at a price
equal to the lower (such lower price being referred to
herein as the "Selloff Price") of (I) 90% of the Weighted-
Average Cost (calculated as set forth in Section 4(h) but
without giving effect to the interest factor described in
Section 4(h)(i) or Section 4(h)(ii)(B)) of the Selloff
Shares, and (II) 90% of the then current market price of the
Selloff Shares, as measured by the average closing sales
price of Shares on the New York Stock Exchange in the five
business days preceding said offer, or (B) to receive
payment from the Borrower in immediately available funds in
an amount equal to the excess of the then current market
price of the Selloff Shares, as so measured, over the
Selloff Price. In the event the other party exercises its
right to acquire the Selloff Shares, the closing shall take
place prior to the close of business on the third business
day after such party exercises its right to purchase the
Selloff Shares, and the party electing to exercise its right
to purchase shall be entitled to an order of specific
performance in the event of a failure by the Borrower to
close as hereinabove provided. In the event the other party
does not exercise its right to acquire the Selloff Shares
within such five business day period, or shall affirmatively
elect to receive payment from the Borrower, the Borrower
shall thereafter have the right to sell the Selloff Shares
to an unaffiliated third party on an arms'-length basis. In
the event the other party exercises its right to receive
payment from the Borrower, such payment shall be made within
five business days of notice to the Borrower of the other
party's election to exercise its right thereto.
(e) For purposes of this Section 1 and Section 4(c),
in calculating the amount of the investment in Shares by the New
Valley Group and the High River Group at any time, (i) each
Group's acquisition of Shares shall be deemed to increase such
Group's investment by the actual cost, including all brokerage
fees and commissions incurred in the acquisition of such Shares,
and (ii) each Group's sale of Shares shall be deemed to decrease
such Group's investment by the actual price realized, net of all
brokerage fees and commissions incurred in such sale.
(f) In addition to the investments required by Section
1(c), each of the parties hereto and its affiliates may, in its
sole discretion, invest additional amounts from time to time to
acquire additional Shares. Notwithstanding any other provision
of this Agreement, the funds invested by any party hereto or its
affiliates in Shares, either pursuant to Section 1(c) or to this
Section 1(f), may be obtained through any lawful method,
including, without limitation, Margin Loans and other loans or
borrowings subject to the Margin Rules.
(g) Notwithstanding anything in this Agreement to the
contrary, (i) all Shares acquired by any party hereto shall be
held by it for its own account and not for the account of any
other party hereto, (ii) except as set forth in Section 5(d), no
party hereto shall have any right or obligation to share in the
profits or losses of any other party hereto arising from the
acquisition, holding or disposition of Shares beneficially owned
by such other party or its affiliates and (iii) all transfers of
Shares pursuant to Section 1(c)(ii) or Section 1(c)(iii), and all
payments in respect of such Shares pursuant to Section 1(c)(ii)
or Section 1(c)(iii), shall be made simultaneously on the
respective dates such transfers and payments are required to be
made pursuant to Section 1(c)(iv), and no party hereto shall be
deemed to own or to have any rights of ownership in any such
Shares (including, without limitation, any right to vote such
Shares or to receive dividends paid in respect of such Shares)
until such transfer and payment are made.
Section 2. Agreement to Vote. In the event that
Brooke Group Ltd. ("BGL") or BGLS Inc. ("BGLS") determines to
solicit Stockholder Demands, Written Consents or Proxies (as such
terms are defined in the Agreement dated as of October 17, 1995
among BGL, BGLS and High River (the "BGL Agreement")), the New
Valley Group shall execute and deliver to BGL or BGLS a valid
Stockholder Demand, Written Consent or Proxy, as the case may be
(and not withdraw such Stockholder Demand, Written Consent or
Proxy) with respect to all of the Shares, and all of the
depositary shares representing Series C Conversion Preferred
Stock, par value $.01 per share, of RJRN, that it beneficially
owns or has the right to vote.
Section 3. Termination. (a) This Agreement shall
automatically terminate upon the earlier of (i) the first
anniversary of the date hereof and (ii) the termination of the
BGL Agreement by High River, and any party hereto may terminate
this Agreement sooner at any time in its sole discretion by
written notice to the other parties hereto; provided, however,
that if BGL or BGLS terminates the BGL Agreement, then New Valley
and NV Sub shall be deemed to have simultaneously terminated this
Agreement.
(b) If this Agreement is terminated pursuant to this
Section 3, this Agreement shall forthwith become null and void,
and there shall be no liability or obligation on the part of any
party hereto, except that (i) the obligations of the parties
hereto pursuant to Section 5 and Section 6 shall remain in full
force and effect following any termination of this Agreement for
the periods set forth therein and (ii) if (A) either the New
Valley Group or the BGL Group sells any Shares under the
circumstances described in clause (x) of the first proviso to the
first sentence of Section 1(d)(i) of this Agreement, or is
required to offer any Shares to another party pursuant to the
first sentence of Section 1(d)(ii) of this Agreement, and (B) a
party hereto which is not a member of such Group thereafter
terminates this Agreement prior to or on the tenth day after the
first date that such party becomes aware that such event has
occurred, then the obligations of any member of such Group
pursuant to Section 1(d)(ii) shall remain in full force and
effect following such termination until the later of (I) the end
of the 30-day period set forth in Section 1(d)(ii) or (II) the
time that the Selloff Shares are delivered at the closing
described in the second sentence of Section 1(d)(ii), or the time
when payment is made pursuant to the fourth sentence of Section
1(d)(ii), as the case may be.
Section 4. Certain Definitions. For purposes of this
Agreement, the following terms shall have the meanings indicated
below:
(a) "Termination Event" shall have the meaning
assigned to it in the BGL Agreement.
(b) "Other Securities" means any securities or assets
(other than cash) received by the New Valley Group from RJRN in
respect of any Shares held by the New Valley Group, whether by
way of a dividend or other distribution in respect of such
Shares, in exchange for such Shares, pursuant to a
reclassification of such Shares, or otherwise.
(c) The "Trading Profit" realized in any sale of any
Shares or any Other Securities of any class or series by any
member of the New Valley Group or by BGL, BGLS or any of their
affiliates (the "BGL Group") means the excess, if any, of the
actual price realized in such sale, net of all brokerage fees and
commissions incurred in such sale, over the Weighted-Average Cost
(as defined below in Section 4(h) and Section 4(i)) of the Shares
or the Other Securities of such class or series sold. The
"Trading Profit" existing on the Reference Date (as defined below
in Section 5(a)) in respect of any Shares or Other Securities of
any class or series held by the New Valley Group or the BGL Group
as of such date means the excess, if any, of the Market Value (as
defined below in Section 4(j) and Section 4(k)) as of the
Reference Date of the Shares or the Other Securities of such
class or series so held over the Weighted-Average Cost of such
Shares or such Other Securities. Notwithstanding the foregoing,
if the aggregate investment in Shares and Other Securities made
at any time, either before or after the date of termination of
this Agreement, by the New Valley Group, before giving effect to
any sales of Shares and Other Securities held by the New Valley
Group (the "Aggregate New Valley Investment"), exceeds the
greater of (x) the sum of the First Stage Investment plus the
Second Stage Investment and (y) the aggregate investment of the
High River Group in Shares and Other Securities made prior to the
date of the termination of this Agreement (the greater of such
amounts being referred to herein as the "Target Investment"),
then the "Trading Profit" realized on any sale of Shares or any
Other Securities of any class or series, or existing on the
Reference Date in respect of any Shares or any Other Securities
of any class or series held by the New Valley Group on the
Reference Date, means the product of (x) the "Trading Profit,"
calculated as set forth in the previous two sentences, multiplied
by (y) a fraction, the numerator of which is the Target
Investment and the denominator of which is the Aggregate New
Valley Investment.
(d) The "New Valley Expenses" means the out-of-pocket
costs and expenses incurred by the New Valley Group or the BGL
Group in connection with the preparation, negotiation and
execution of this Agreement and the BGL Agreement, the
consummation of the transactions contemplated hereby or thereby
and the solicitation of Stockholder Demands, Written Consents and
Proxies from the stockholders of RJRN (including without
limitation, to the extent incurred in connection therewith, (i)
all registration and filing fees under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or the Securities
Act of 1933, as amended (the "Securities Act"), (ii) all
printing, messenger, telephone and delivery expenses, (iii) all
fees and disbursements of counsel and (iv) all fees and
disbursements of public relations firms, proxy solicitation
firms, investment bankers and other financial advisors), plus an
amount equivalent to simple interest on each such cost and
expense at the rate of 10% per annum from the date of payment
thereof; provided, however, that "New Valley Expenses" shall
exclude, without duplication, (x) all costs and expenses relating
to the acquisition of the Shares beneficially owned or hereafter
acquired by the New Valley Group, (y) all internal costs and
expenses (including, without limitation, all salaries and
expenses of its officers and employees performing duties relating
to the transactions contemplated by this Agreement and the BGL
Agreement) and (z) all costs and expenses paid to the New Valley
Group, or the BGL Group, except as reimbursement for out-of-
pocket costs and expenses incurred by the New Valley Group or the
BGL Group to unaffiliated third parties.
(e) The "Net Profit" realized on any sale of Shares or
any Other Securities of any class or series, or existing on the
Reference Date in respect of any Shares or any Other Securities
of any class or series held by the New Valley Group or the BGL
Group on the Reference Date, means the excess, if any, of (i) the
Trading Profit realized on such sale or existing on the Reference
Date with respect to such Shares or such class or series of Other
Securities, as the case may be, together with the aggregate
Trading Profit realized on all previous or simultaneous sales (if
any) of any Shares or any Other Securities of such class or
series, over (ii) the sum of (A) the aggregate New Valley
Expenses incurred on or prior to such sale or the Reference Date,
as the case may be, and (B) five times the excess, if any of (I)
the aggregate percentage payments (if any) that High River would
have been entitled to receive under Section 5(d) of this
Agreement and Section 4(c) of the BGL Agreement with respect to
such previous or simultaneous sales if not for the effect of
clauses (x) and (y) of the provisos to such Sections over (II)
any repayment that New Valley or BGLS would have been entitled to
receive under clause (z) of such provisos.
(f) The "Net Loss" realized on any sale of Shares or
any Other Securities of any class or series, or existing on the
Reference Date in respect of any Shares or any Other Securities
of any class or series held by the New Valley Group or the BGL
Group on the Reference Date, means the excess, if any, of (i) the
sum of (A) the aggregate New Valley Expenses incurred on or prior
to such sale or the Reference Date, as the case may be, and (B)
five times the excess, if any of (I) the aggregate percentage
payments (if any) that High River would have been entitled to
receive under Section 5(d) of this Agreement and Section 4(c) of
the BGL Agreement with respect to any previous or simultaneous
sale of Shares or any Other Securities of such class or series if
not for the effect of clauses (x) and (y) of the provisos to such
Sections over (II) any repayment that New Valley or BGLS would
have been entitled to receive under clause (z) of such provisos
over (ii) the Trading Profit realized on such sale or existing on
the Reference Date with respect to such Shares or such class or
series of Other Securities, as the case may be, together with the
aggregate Trading Profit realized on all previous or simultaneous
sales (if any) of any Shares or any Other Securities of such
class or series, as the case may be.
(g) The "Net Profit Override" on any sale of Shares or
any Other Securities of any class or series, or existing on the
Reference Date in respect of any Shares or any Other Securities
of any class or series held by the New Valley Group or the BGL
Group on the Reference Date, means 20% of the Net Profit, if any,
on such sale or existing on such date.
(h) The "Weighted-Average Cost" of any Shares means
(i) the weighted-average cost of all Shares owned by the New
Valley Group and the BGL Group as of the date hereof, or acquired
by the New Valley Group and the BGL Group hereafter prior to or
at the time that the aggregate investment of the New Valley Group
in Shares first exceeds the Target Investment (including in each
case all brokerage fees and commissions incurred in the
acquisition of such Shares and including an amount equivalent to
simple interest on the cost of any Shares at the rate of 8-1/2%
per annum from the date of payment for such Shares, but excluding
any other interest, fees, premiums and other costs of any loans
or borrowings incurred or maintained to acquire or carry such
Shares), calculated in accordance with generally accepted
accounting principles, reduced by (ii) the sum of (A) the amount
of any cash dividends or distributions received in respect of
such Shares and the Market Value (as of the date received) of any
Other Securities received in respect of such Shares by way of any
dividend or distribution, plus (B) an amount equivalent to simple
interest on such amount and such Market Value at the rate of 8-
1/2% per annum from such date received; provided, however, that
any exchange of Shares for Other Securities or reclassification
of Shares into Other Securities shall be treated for purposes of
calculating the Weighted-Average Cost of the remaining Shares as
a sale of the Shares so exchanged or reclassified at a price
equal to their Weighted-Average Cost.
(i) The "Weighted-Average Cost" of any Other
Securities received by the New Valley Group and the BGL Group
means (i) in the case of any Other Securities received by way of
any dividend or distribution, the Market Value of such Other
Securities as of the date received, plus an amount equivalent to
simple interest on such Market Value at the rate of 8-1/2% per
annum from the date of receipt of such Other Securities, but
excluding any other interest, fees, premiums and other costs of
any loans or borrowings incurred or maintained to carry such
Other Securities and (ii) in the case of any Other Securities
received by the New Valley Group and the BGL Group by way of any
exchange of Shares for Other Securities or reclassification of
Shares into Other Securities, an amount equal to the Weighted-
Average Cost of the Shares so exchanged or reclassified, plus an
amount equivalent to simple interest on such amount at the rate
of 8-1/2% per annum from the date of receipt of such Other
Securities, but excluding any other interest, fees, premiums and
other costs of any loans or borrowings incurred or maintained to
carry such Other Securities; provided, however, that the
Weighted-Average Cost of any Other Securities shall be reduced by
the sum of (A) the amount of any cash dividends or distributions
received by the New Valley Group and the BGL Group in respect of
such Other Securities and the Market Value (as of the date
received) of any securities or assets (other than cash) received
by the New Valley Group and the BGL Group in respect of such
Other Securities by way of any dividend or distribution plus (B)
an amount equivalent to simple interest on the amount of such
cash or the Market Value of such securities or other assets at
the rate of 8-1/2% per annum from the date received.
(j) The "Market Value" of any securities as of any
date means the product obtained by multiplying (i) the number or
amount of such securities by (ii) the average of the daily
closing prices per share or other unit of such securities for the
ten consecutive trading days (or, if such securities have not
traded for ten consecutive trading days, such lesser number of
trading days as they have traded) on or prior to such date. For
this purpose, the "closing price" of any securities as of any
date means, the closing sale price, regular way, or, in case no
such sale takes place on such day, the average of the closing bid
and asked prices per share or other unit for such securities,
regular way, in either case as reported in the principal
consolidated transaction reporting system with respect to
securities listed or admitted to trading on the New York Stock
Exchange or, if such securities are not then listed or admitted
to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect
to securities listed on the principal national securities
exchange on which such securities are listed or admitted to
trading or, if such securities are not then listed or admitted to
trading on any national securities exchange, the last quoted
price or, if not so quoted, the average of the high bid and low
asked prices, per share or other unit for such securities in the
over-the-counter market, as reported by the NASDAQ system or, if
such system is not in use, any other similar system then in use,
or, if on any such date such securities are not then quoted by
any such system, the average of the closing bid and asked prices
per share or other unit for such securities as furnished by a
professional market maker making a market in such securities
selected by mutual agreement of New Valley and High River or, if
no such person then makes a market in such securities, the fair
market value of such securities, as determined by an independent,
nationally recognized investment banking or appraisal firm
selected by mutual agreement of New Valley and High River;
provided, however, that if any dividend or distribution shall
have been declared but not paid in respect of such securities as
of the date in question, and the ex-dividend date for the
determination of the holders of securities entitled to receive
such dividend or distribution shall occur prior to the date of
valuation, the "Market Value" of such securities shall be
appropriately increased by the value of such dividend or
distribution (as determined by mutual agreement of New Valley and
High River, or if they cannot agree, by an independent,
nationally recognized investment banking or appraisal firm
selected by mutual agreement of New Valley and High River, or if
they cannot agree, selected by the American Arbitration
Association).
(k) The "Market Value" of any assets other than
securities means the fair market value of such assets, as
determined by an independent, nationally recognized investment
banking or appraisal firm selected by mutual agreement of New
Valley and High River, or if they cannot agree, selected by the
American Arbitration Association).
Section 5. Certain Fees and Percentage Payments. (a)
Subject to Section 5(c), New Valley shall pay or cause to be paid
to High River the sum of $50 million promptly upon
(i) any termination of this Agreement by High
River at a time when (A) no Termination Event has occurred,
(B) New Valley or NV Sub is in material breach of its
obligations (the "New Valley Obligations") under Section
1(a), the fourth sentence of Section 1(c)(v), the ninth
sentence of Section 1(c)(v), Section 1(d)(i) or Section 2 of
this Agreement and (C) High River is not in material breach
of its obligations (the "High River Obligations") under
Section 1(a), the fourth sentence of Section 1(c)(v), the
ninth sentence of Section 1(c)(v) or Section 1(d)(i) of this
Agreement or Section 1(c)(iii) or Section 8 of the BGL
Agreement;
(ii) any termination of this Agreement by New
Valley or NV Sub at a time when (A) no Termination Event has
occurred and (B) High River is not in material breach of the
High River Obligations; or
(iii) the consummation of any Business Combination
(as defined in the BGL Agreement), including any Permitted
Business Combination (as defined in the BGL Agreement), with
respect to the New Valley Group, if (A) such Business
Combination is consummated prior to the later of (I) the
date of RJRN's annual meeting of stockholders for 1997 and
(II) the first anniversary of the date of termination of
this Agreement (the later of such dates being referred to
herein as the "Reference Date"), or (B) a legally binding
agreement to enter into such Business Combination or any
other Business Combination is entered into prior to the
Reference Date and such Business Combination is consummated
prior to the second anniversary of the date of such
agreement or (C) the BGL Nominees (as such term is defined
in the BGL Agreement) are elected to constitute a majority
of the Board of Directors of RJRN and such Business
Combination is consummated prior to the fifth anniversary of
the date of such election;
provided, however, that (x) High River shall not be entitled to
more than one fee under this Section 5(a), (y) High River shall
not be entitled to any fee under this Section 5(a) if New Valley
shall have previously or shall concurrently become entitled to
the fee described in Section 5(b) of this Agreement or if BGL
shall have previously become entitled to the fee described in
Section 4(b) of the BGL Agreement and (z) the amount of any fee
to which High River may be entitled at any time pursuant to this
Agreement shall be reduced by the amount of any fee which High
River shall theretofore have been paid pursuant to Section 4(a)
of the BGL Agreement and by the amounts of any percentage
payments which High River shall theretofore have been paid
pursuant to Section 5(d) of this Agreement or pursuant to Section
4(c) of the BGL Agreement.
(b) Subject to Section 5(c), High River shall pay or
cause to be paid to New Valley the sum of $50 million promptly
upon:
(i) any termination of this Agreement by High
River at a time when (A) no Termination Event has occurred,
(B) New Valley and NV Sub are not in material breach of the
New Valley Obligations and (C) BGL and BGLS are not in
material breach of their obligations under Section 1(c)(iii)
of the BGL Agreement (the "BGL Obligations"); or
(ii) any termination of this Agreement by New
Valley or NV Sub at a time when (A) no Termination Event has
occurred, (B) High River is in material breach of its
obligations under Section 1(a), the fourth sentence of
Section 1(c)(v), the ninth sentence of Section 1(c)(v) or
Section 1(d)(i) of this Agreement, (C) New Valley and NV Sub
are not in material breach of the New Valley Obligations and
(D) BGL and BGLS are not in material breach of the BGL
Obligations;
provided, however, that (x) New Valley shall not be entitled to
more than one fee under this Section 5(b), (y) New Valley shall
not be entitled to any fee under this Section 5(b) if High River
shall have previously or shall concurrently become entitled to
the fee described in Section 5(a) of this Agreement or the fee
described in Section 4(a) of the BGL Agreement and (z) the amount
of any fee to which New Valley may be entitled at any time
pursuant to this Agreement shall be reduced by the amount of any
fee which BGL shall theretofore have been paid pursuant to
Section 4(b) of the BGL Agreement.
(c) Each of New Valley and High River shall give
notice to the other promptly upon becoming aware that any
Termination Event has occurred, or that any event has occurred
that would be a Termination Event but for the giving of notice or
the termination of this Agreement. Such notice shall specify in
reasonable detail the facts giving rise to such Termination
Event.
(d) Notwithstanding anything in this Agreement or the
BGL Agreement to the contrary,
(i) if the New Valley Group or the BGL Group sells
any Shares or any Other Securities of any class or series
prior to the Reference Date, then New Valley shall pay or
cause to be paid to High River promptly upon the
consummation of such sale a percentage payment equal to the
product of (A) the Net Profit Override realized in such
sale, multiplied by (B) a fraction (the "Sale Fraction,"
which shall be calculated separately for the Shares and for
each class or series of Other Securities), the numerator of
which is the number of Shares or such Other Securities (as
the case may be) held as of the date hereof, or hereafter
acquired prior to such sale, by the New Valley Group and the
denominator of which is the number of Shares or such Other
Securities (as the case may be) held as of the date hereof,
or hereafter acquired prior to such sale, by the New Valley
Group and the BGL Group; and
(ii) if the New Valley Group or the BGL Group
holds any Shares or any Other Securities of any class or
series on the Reference Date, then New Valley shall pay or
cause to be paid to High River promptly upon the Reference
Date a percentage payment equal to the product of (A) the
Net Profit Override existing on the Reference Date in
respect of such Shares or such Other Securities, multiplied
by (B) a fraction (the "Holdings Fraction," which shall be
calculated separately for the Shares and for each class or
series of Other Securities), the numerator of which is the
number of Shares or such Other Securities (as the case may
be) held as of the date hereof, or hereafter acquired prior
to the Reference Date, by the New Valley Group and the
denominator of which is the number of Shares or such Other
Securities (as the case may be) held as of the date hereof,
or hereafter acquired prior to the Reference Date, by the
New Valley Group and the BGL Group;
provided, however, that (x) the amount of any percentage payment
to which High River is entitled at any time under this Section
5(d) shall be reduced by the product of (1) the amount of any fee
which High River shall have theretofore been paid by New Valley
under Section 5(a) of this Agreement or by BGLS under Section
4(a) of the BGL Agreement, multiplied by (2) the Sale Fraction or
the Holdings Fraction, as the case may be, (y) in the event that
(1) the New Valley Group or the BGL Group realizes a Net Loss on
any sale of Shares or any Other Securities of any class or
series, or a Net Loss exists on the Reference Date in respect of
any Shares or any Other Securities of any class or series held by
the New Valley Group or the BGL Group on the Reference Date, and
(2) High River has theretofore received any percentage payments
from New Valley pursuant to this Section 5(d) or from BGLS
pursuant to Section 4(c) of the BGL Agreement, then in each such
event High River shall repay or cause to be repaid to New Valley
promptly upon receipt of notice from New Valley an amount equal
to the product of (1) the excess, if any, of (X) 20% of such Net
Loss over (Y) the aggregate amount of such percentage payments
theretofore received by High River, multiplied by (2) a fraction,
the numerator of which is the aggregate amount of such percentage
payments theretofore paid by New Valley and the denominator of
which is the aggregate amount of such percentage payments
theretofore paid by New Valley and BGLS and (z) High River shall
not be entitled to any percentage payment under this Section 5(d)
if New Valley shall have previously become entitled to the fee
described in Section 5(b) of this Agreement or if BGL shall have
previously become entitled to the fee described in Section 4(b)
of the BGL Agreement. New Valley and NV Sub shall use their
reasonable best efforts to provide to High River (x) once each
calendar week, commencing with the date of this Agreement, a
report containing a reasonably detailed calculation of the number
of Shares and the amount of Other Securities then held by the New
Valley Group and the Weighted-Average Cost of such Shares and
Other Securities, as well as a reasonably detailed estimate
prepared in good faith of the New Valley Expenses incurred to
that date and (y) promptly after the close of business on each
business day on which any Shares are sold by the New Valley
Group, a report setting forth the number of Shares or Other
Securities sold since the close of business on the previous
business day, the aggregate price realized in such sales and the
aggregate commissions paid in such sales; provided, however, that
New Valley and NV Sub shall not incur any liability or suffer any
prejudice as a result of its provision of any such estimate.
(e) The parties hereto hereby acknowledge and agree
that the arrangements in Section 5(d) with respect to percentage
payments constitute a partnership for Federal income tax purposes
and that the parties hereto shall file income tax returns in a
consistent manner.
Section 6. Costs and Expenses. Each party hereto
shall be solely responsible for all of its costs and expenses
relating to this Agreement and the transactions contemplated
hereby.
Section 7. Required Filings; Publicity. (a) Each of
the parties hereto shall (and shall cause each of its affiliates
to) (i) take all actions necessary to comply promptly with all
legal requirements which may be imposed on such party (or its
affiliates) as a result of this Agreement or any of the
transactions contemplated hereby, and (ii) without limiting the
foregoing, make all required filings pursuant to the Securities
Act and the Exchange Act.
(b) To the extent reasonably practicable, the parties
hereto shall consult with each other prior to all public
statements or filings to be issued or made by any of them or
their affiliates with respect to this Agreement and the
transactions contemplated hereby.
Section 8. Representations and Warranties. (a) Each
of the parties hereto hereby represents and warrants to the other
parties hereto as follows:
(i) Such party is a corporation or partnership
duly organized, validly existing and in good standing under
the laws of the state of its incorporation or organization,
has full corporate or partnership power and authority to
execute and deliver this Agreement and to perform its
obligations hereunder and to consummate the transactions
contemplated hereby.
(ii) The execution and delivery by such party of
this Agreement and the performance by such party of its
obligations hereunder have been duly and validly authorized
by all necessary corporate or partnership action. This
Agreement has been duly and validly executed and delivered
by such party and constitutes a legal, valid and binding
obligation of such party enforceable against such party in
accordance with its terms.
(iii) The execution and delivery by such party of
this Agreement do not, and the performance by such party of
its obligations under this Agreement will not, conflict with
or result in a violation or breach of any of the provisions
of the certificate of incorporation, bylaws or other
organizational documents of such party, any law or order
applicable to such party or any of such party's contractual
obligations to other persons, in each case, in any manner
that would prevent or materially impede such party from
fulfilling its obligations hereunder.
(b) New Valley and NV Sub hereby represent and warrant
to High River that as of the date hereof the New Valley Group
owns beneficially and of record 4,278,700 Shares, free and clear
of all liens and encumbrances whatsoever, which Shares were
purchased by the New Valley Group at an aggregate cost (exclusive
of all brokerage fees and commissions incurred in the acquisition
of such Shares) of $129,572,796, and in respect of which New
Valley and NV Sub received dividends of $37,500 on July 3, 1995
and dividends of $298,387.50 on October 2, 1995. New Valley and
NV Sub further represent that, upon the consummation of the
purchase and sale of Purchased Shares contemplated by Section
1(a), High River will acquire title to the Purchased Shares, free
and clear of all encumbrances and liens whatsoever.
(c) High River hereby represents and warrants to New
Valley and NV Sub that as of the date hereof the High River Group
owns beneficially and of record 1,205,900 Shares, free and clear
of all liens and encumbrances whatsoever, which Shares were
purchased by the High River Group at an aggregate cost (including
all brokerage fees and commissions incurred in the acquisition of
such Shares) of $33,173,434.30, and in respect of which High
River received dividends of $452,212.50 on October 2, 1995. High
River further represents and warrants that it has as of the date
hereof, and will have on each date prior to the termination of
this Agreement, net stockholders' or partners' equity of at least
$22 million.
Section 9. Miscellaneous. (a) For purposes of this
Agreement, (i) the terms "affiliate" and "associate" have the
meanings assigned to them in Rule 12b-2 promulgated under the
Exchange Act, provided that the BGL Group shall not be deemed to
be "affiliates" or "associates" of the New Valley and NV Sub for
any purpose of this Agreement, (ii) the term "shall" is used
herein to refer to actions which are compulsory and thus to
create binding obligations among the parties hereto, (iii) the
terms "will," "expect," "expectation," "intend" and "intention,"
and other terms of similar import, are used herein solely to
refer to the aspirations and objectives of the parties hereto and
thus are not used herein to create binding obligations among the
parties hereto and (iv) the term "may" is used herein solely to
refer to conduct which is optional and not compulsory and thus is
not used herein to create binding obligations among the parties
hereto.
(b) The parties hereto shall have no rights, powers or
duties except as specified herein, and no such rights, powers or
duties shall be implied. Nothing herein shall give any party
hereto the power to bind any other party hereto to any contract,
agreement or obligation to any third party.
(c) All notices and other communications hereunder
shall be in writing and shall be deemed given when received by
the parties hereto at the following addresses (or at such other
address for a party as shall be specified by like notice):
If to New Valley or NV Sub:
000 X.X. Xxxxxx Xxxxxx
Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx X. XxXxx
Telecopy: (000) 000-0000
With a copy to:
Xxxxxxx X. Xxxxxxxxxx, Esq.
Milbank, Tweed, Xxxxxx & XxXxxx
0 Xxxxx Xxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Telecopy: (000) 000-0000
If to High River:
c/o/ Icahn Associates Corp.
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx X. Icahn
Telecopy: (000) 000-0000
With a copy to:
Xxxx Xxxxxxx, Esq.
Xxxxxx Xxxxxx Butowsky Xxxxxxx
Shalov & Xxxx
000 Xxxx 00xx Xxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telecopy: (000) 000-0000
(d) This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same
agreement.
(e) This Agreement constitutes the entire agreement
among the parties hereto and supersedes all prior agreements and
understandings among the parties hereto with respect to the
subject matter hereof.
(f) This Agreement shall be governed and construed in
accordance with the laws of the state of New York applicable to a
contract executed and performed in such State, without giving
effect to the conflicts of laws principles thereof.
(g) Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise)
without the prior written consent of the other parties hereto;
provided, however, that High River may assign any of its rights
and interests hereunder to (i) any corporation incorporated in
any state of the United States or in the District of Columbia if
at least 98.5% of the shares of each class of capital stock of
such corporation are owned by Xxxx X. Icahn (a "wholly-owned
Icahn subsidiary"), either directly or through one or more
wholly-owned Icahn subsidiaries or (ii) any partnership, the
partners of which are all wholly-owned Icahn subsidiaries; and
provided further that no such assignment shall relieve High River
of any of its obligations hereunder. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the
benefit of and be enforceable by the parties hereto and their
respective successors and assigns.
(h) This Agreement may be amended, supplemented or
modified only by a written instrument duly executed by or on
behalf of each party hereto. No waiver of any term or condition
in this Agreement shall be effective unless set forth in writing
and signed by or on behalf of the waiving party. No waiver by
any party hereto of any term or condition of this Agreement shall
be deemed to be or construed as a waiver of the same or any other
term or condition of this Agreement on any future occasion.
(i) The terms and provisions of this Agreement are
intended solely for the benefit of the parties hereto and their
successors and permitted assigns and are not intended to confer
upon any other person any rights or remedies hereunder.
(j) In the event that any party hereto prevails in any
action or proceeding alleging a breach of this Agreement, such
party shall be entitled to recover all reasonable attorney's fees
and other costs of prosecuting such action or proceeding and, in
addition, shall be entitled to receive simple interest on any
damages awarded in such action or proceeding at the rate of 10%
per annum from the date of such breach.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their representatives thereunto duly
authorized, all as of the date first above written.
NEW VALLEY CORPORATION
By:
ALKI CORP.
By:
HIGH RIVER LIMITED PARTNERSHIP
By: RIVERDALE INVESTORS CORP., INC.
General Partner
By:
[Signature page to Agreement among New Valley Corporation, ALKI
Corp. and High River Limited Partnership dated October 17, 1995]
