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, ▇▇▇▇▇▇ & ▇▇▇▇▇▇, One ▇▇▇▇▇
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 ofthe 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
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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
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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
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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
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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
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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
7
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.
8
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:
9
(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
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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
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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.
12
(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
13
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
14
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
15
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,
16
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
17
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
18
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.
19
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:
▇▇▇ ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esq.
Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
20
If to High River:
c/o/ Icahn Associates Corp.
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. Icahn
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇ ▇▇▇▇▇▇ Butowsky ▇▇▇▇▇▇▇
Shalov & ▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(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 ▇▇▇▇ ▇. 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.
21
(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.
22
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: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman, President and
Chief Executive Officer
ALKI CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman, President and
Chief Executive Officer
HIGH RIVER LIMITED PARTNERSHIP
By: RIVERDALE INVESTORS CORP., INC.
General Partner
By: /s/ ▇▇▇▇▇▇ ▇.▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
[Signature page to Agreement among New Valley Corporation,
ALKI Corp. and High River Limited Partnership dated
October 17, 1995
23
NEW VALLEY CORPORATION
ALKI CORP.
▇▇▇ ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
October 17, 1995
High River Limited Partnership
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. Icahn
Dear ▇▇▇▇:
By executing this letter in the space provided below, 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"),
each hereby agree as follows:
1. Notwithstanding the terms of Sections 1(c)(ii)- (iv) of the
Agreement by and among New Valley, NV Sub and High River, dated October 17,
1995 (the "New Valley Agreement"), New Valley and NV Sub ("New Valley
Group") and High River and its affiliates ("High River Group") will
calculate the aggregate number and the average price of all shares of
common stock, par value $.01 per share, of RJR Nabisco Holding Corp.
("Shares") owned by New Valley Group and High River Group, respectively, on
a periodic basis, with emphasis on doing so when the parties own a similar
number of Shares, and make payments to one another in immediately available
funds, so that after giving effect to such payments, the New Valley Group
and the High River Group will have invested the same amount in Shares
(exclusive of brokerage fees and commissions incurred in such
acquisitions).
2. Strict compliance with Section 1(c)(ii)-(iv) of the New Valley
Agreement is not required, notwithstanding the terms thereof.
3. Nothing herein contained shall be construed to otherwise abrogate
the rights and obligations of the parties to this letter agreement with
respect to all other provisions of the New Valley Agreement.
Please indicate your agreement with and acceptance of the terms and
provisions of this letter by signing below.
If the foregoing reflects your understanding, please sign this letter
below. Upon your execution hereof, this letter agreement will become a binding
contract between us.
Very truly yours,
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Accepted and Agreed to:
HIGH RIVER LIMITED PARTNERSHIP
By: RIVERDALE INVESTORS CORP., INC.
General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
President
[Signature page for letter agreement
by and among New Valley Corporation,
ALKI Corp. and High River Limited
Partnership]
High River Limited Partnership
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
November 5, 1995
New Valley Corporation
ALKI Corp.
▇▇▇ ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Dear ▇▇▇▇▇▇▇:
By executing this letter in the space provided below, 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"),
each hereby agree as follows:
1. All capitalized terms used herein and not otherwise defined shall have
the meanings ascribed to such terms in the Agreement by and among New Valley, NV
Sub and High River, dated October 17, 1995 (the "New Valley Agreement").
2. Section 1(b)(iii) of the New Valley Agreement is hereby amended to add
the following to the end of the subsection:
"; provided, however, that neither High River nor the New Valley Group
shall have any obligation to make a Second Stage Investment unless and
until the New Valley Group gives notice ("Second Stage Notice") to High
River of the New Valley Group's intention to proceed with and make its
Second Stage Investment."
3. Notwithstanding the terms of Sections 1(c)(ii)- (iv) of the New Valley
Agreement and the letter agreement by and among New Valley, NV Sub and High
River, dated October 17, 1995 (the "Letter Agreement"), following the First
Stage Completion Date and prior to the earlier of (i) such time that New Valley,
NV Sub and any assignee of the foregoing ("New Valley Group") beneficially own a
number of shares of common stock, par value $.01 per share, of RJR Nabisco
Holdings Corp. ("Shares") equal to or greater than the number of Shares
beneficially owned by High River and its affiliates ("High River Group") (the
"Catch Up Date") and (ii) both New Valley Group and High River Group have made
investments in Shares equal to at least the Second Stage
Investment (the "Second Stage Completion Date"), neither High River Group nor
New Valley Group shall be obligated to make or cause to be made to the other
party:
(i) such transfer of Shares and such payments as would have been necessary
so that, after giving effect to such transfers and payments, New Valley
Group and High River Group would have acquired the same number of
Qualifying Shares;
(ii) such payments as would have been necessary so that, after giving
effect to such payments, New Valley Group and High River Group would have
invested the same amount in Qualifying Shares (exclusive of brokerage fees
and commissions incurred in such acquisitions); or
(iii) such transfer of Non-Qualifying Shares or payment for Non-Qualifying
Shares in accordance with Section 1(c)(iii) of the New Valley Agreement.
In the event that the Catch Up Date precedes the Second Stage Completion Date
and following the Catch Up Date (but prior to the Second Stage Completion Date)
New Valley Group purchases Shares, then (x) the parties shall calculate the
aggregate number and the average price of all Qualifying Shares acquired after
the Catch Up Date by New Valley Group and High River Group, respectively, on a
periodic basis, with emphasis on doing so when the parties own a similar number
of Shares, and make payments to one another in immediately available funds, so
that after giving effect to such payments, New Valley Group and High River Group
will have invested the same amount in Qualifying Shares acquired after the Catch
Up Date (exclusive of brokerage fees and commissions incurred in such
acquisitions); (y) New Valley Group may, in accordance with Section 1(c)(iii) of
the New Valley Agreement, put to High River Non-Qualifying Shares at the Hurdle
Price; and (z) the parties shall follow the even up procedures set forth in
Section 1(c)(v) of the New Valley Agreement. In the event that following the
Catch Up Date, New Valley does not purchase Shares, then clauses (i)-(iii) of
this Paragraph 3 shall remain in effect.
4. Section 1(d)(i) of the New Valley Agreement is hereby amended to delete
the first two lines in their entirety and to substitute in lieu thereof the
following:
"Except as provided in subpart (ii) of this subparagraph (d) and except as
provided in Section 9(g) of this Agreement, until the termination of this
Agreement,"
5. Notwithstanding Section 1(d) of the New Valley Agreement, if at any time
subsequent to the First Stage Completion Date but prior to the Second Stage
Completion Date, High River Group beneficially owns more Shares than New Valley
Group, then High River Group may sell, transfer or otherwise
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dispose of ("Transfer") Shares beneficially owned by it, provided that following
such Transfer, the number of Shares beneficially owned by High River Group would
not be less than the number of Shares beneficially owned by New Valley Group, as
reflected in New Valley Group's last written notice to High River Group in
accordance with Section 1(c)(i) of the New Valley Agreement.
6. Section 3(b)(ii)(B) of the New Valley Agreement is hereby amended to
delete the subsection in its entirety and to substitute in lieu thereof the
following:
"(B) a party hereto which is not a member of such selling or offering 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,"
7. New Valley Group shall promptly make any payments due under Section 5(d)
of the New Valley Agreement and Section 4(c) of the Agreement among Brooke Group
Ltd., BGLS Inc. and High River dated October 17, 1995 (the "BGL Agreement"). In
the event that High River Group believes that New Valley Group has breached any
of its obligations under Section 5(d) of the New Valley Agreement or Section
4(c) of the BGL Agreement, the parties shall promptly follow the procedures set
forth in Section 1(c)(v) of the New Valley Agreement in order to resolve the
dispute. If the Arbitrator determines that (i) New Valley Group is required to
make a payment pursuant to Section 5(d) of the New Valley Agreement and/or
Section 4(c) of the BGL Agreement, New Valley Group shall make or cause to be
made such payment within twenty (20) days after receiving the Arbitrator's
notice of decision. In the event that New Valley Group fails to make such
payment within twenty (20) days after receipt of the Arbitrator's notice of
decision, New Valley Group shall immediately pay or cause to be paid to High
River Group an additional sum in the amount of $50 million.
8. The first sentence of Section 9(g) of the New Valley Agreement is hereby
amended to add the following to the end of the sentence:
"; and provided, however, that the New Valley Group 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 100% of the
shares of each class of capital stock of such corporation are owned by New
Valley (a "wholly-owned New Valley subsidiary"), either directly or through
one or more wholly-owned New Valley subsidiaries or (ii) any partnership,
the partners of which are all wholly-owned New Valley subsidiaries; and
provided, further, that no such assignment shall relieve the New Valley
Group of any of its obligations hereunder."
9. In the event that prior to February 1, 1996 (i) New Valley Group
provides High River Group with notice of
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termination of the New Valley Agreement or BGL Group provides High River with
notice of termination of the BGL Agreement at a time when a Termination Event
(as defined in the BGL Agreement) set forth in Section 3(c)(vii) or 3(c)(viii)
of the BGL Agreement has occurred or (ii) High River Group provides New Valley
Group with notice of termination of the New Valley Agreement or provides BGL
Group with notice of termination of the BGL Agreement at a time when a
Termination Event set forth in Section 3(c)(ix)(A) of the BGL Agreement has
occurred, New Valley Group shall not transfer any Shares beneficially owned by
New Valley Group until February 1, 1996 in consequence of or in reliance upon
such notice of termination. If the notice of termination specified in clause (i)
of the preceding sentence is provided after January 16, 1996, and the aggregate
number of Shares beneficially owned by High River Group exceeds the aggregate
number of Shares beneficially owned by New Valley Group plus BGL Group
(collectively, the "Aggregate ▇▇▇▇▇ Shares"), New Valley Group shall not
Transfer any Shares beneficially owned by New Valley Group for fifteen (15) days
following receipt by High River Group of New Valley Group's or BGL Group's
notice of termination; provided, however, that on such date not before February
1, 1996 that the aggregate number of Shares beneficially owned by High River
Group is equal to or less than the Aggregate ▇▇▇▇▇ Shares, and thereafter, New
Valley Group may Transfer any Shares beneficially owned by New Valley Group.
10. In the event that High River Group provides New Valley Group with
notice of termination of the New Valley Agreement or provides BGL Group with
notice of termination of the BGL Agreement at a time when a Termination Event
under any of Sections 3(c)(ix)(B) through (E) of the New Valley Agreement has
occurred and the aggregate number of shares beneficially owned by High River
Group exceeds the Aggregate ▇▇▇▇▇ Shares, New Valley Group shall not Transfer
any Shares beneficially owned by New Valley Group in consequence of or in
reliance upon such notice of termination until the earlier of (i) fifteen (15)
days following receipt by New Valley Group or BGL Group of High River Group's
notice of termination specified in the preceding sentence and (ii) the date that
the aggregate number of Shares beneficially owned by High River Group is equal
to or less than the Aggregate ▇▇▇▇▇ Shares.
11. Nothing herein contained shall be construed to otherwise abrogate the
rights and obligations of the parties to this letter agreement with respect to
all other provisions of the New Valley Agreement, the BGL Agreement and the
Letter Agreement.
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If the foregoing reflects your understanding, please sign this letter
below. Upon your execution hereof, this letter agreement will become a binding
contract between us.
Very truly yours,
HIGH RIVER LIMITED PARTNERSHIP
By: RIVERDALE INVESTORS CORP., INC.
Its: General Partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: President
Agreed to and Accepted:
NEW VALLEY CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman and Chief
Executive Officer
ALKI CORP.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman, President and
Chief Executive Officer
[Signature page for letter agreement by and among New Valley
Corporation, ALKI Corp. and High River Limited Partnership, dated
November 5, 1995]
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