6.75%
Variable Interest Senior Convertible Exchange Notes Due
2014
FORM
OF ISSUANCE AND EXCHANGE AGREEMENT
Vector Group Ltd.,
a Delaware corporation (the “ Issuer ”), hereby
agrees with the Holder (as defined below), as follows:
1.
Agreement to Issue and Exchange Notes . Subject to the
terms and conditions set forth in this Issuance and Exchange
Agreement (this “ Agreement ”), (a) the
Issuer agrees, on the Closing Date (as defined below), to issue and
deliver to [___], (the “ Holder ”), an aggregate
principal amount of $[ ] of its 6.75% Variable Interest Senior
Convertible Exchange Notes due 2014, having terms set forth in
Exhibit A attached hereto (such notes, and all notes
from time to time replacing such Notes from time to time
outstanding, being the “ Notes ”; and this
Agreement, the Indenture (as defined below), and the Notes, being
collectively, the “ Operative Documents ”), and
(b) the Holder agrees, on the Closing Date, to deliver to the
Issuer (or as otherwise directed by the Issuer), an aggregate
principal amount of $[___] of its 5.0% Variable Interest Senior
Convertible Notes Due 2011 (the “ Old Notes ”),
for cancellation and to acquire and accept from the Issuer the
Notes in exchange for such Old Notes.
The Notes will be
convertible into shares of the Issuer’s common stock, par
value $0.10 per share (the “ Common Stock ”; the
Common Stock into which the Notes may be so converted, the “
Conversion Stock ”; and the Conversion Stock and the
Notes being, collectively, the “ Securities ”),
in accordance with the terms of the Indenture and the
Notes.
The Notes will be
offered, issued and exchanged to the Holder pursuant to an
exemption from the registration requirements under the Securities
Act of 1933, as amended (the “ Act ”). Upon
original issuance thereof, and so long as required under applicable
requirements of the Act, the Notes shall bear the legend regarding
transfer restrictions under the Act set forth in Section 4(l)
hereof.
2.
Closing; Delivery and Exchange
.
(a) Delivery
of the Notes to the Holder and the Old Notes to the Issuer (or its
designee) (the “ Closing ”), shall be made at
10:00 a.m., Eastern time, on June 30, 2009 or such other
date as may be agreed upon by the Holder and the Issuer (the
“ Closing Date ”), at the offices of McDermott
Will & Emery LLP, 340 Madison Avenue, New York, New York 10173,
or such other time or place as the Holder and the Issuer shall
designate, all in accordance with Section 2(b) hereof.
(b) At the
Closing, the Issuer shall deliver to the Holder (or to such other
designee(s) as the Holder shall direct at least one business day
prior to the Closing) (i) one or more original Notes in an
aggregate principal amount of $[___] (in each case with any
transfer taxes thereon duly paid by the Issuer), and (ii)
(A) accrued but unpaid interest on the Old Notes through the
Closing Date plus (B) against the tender and delivery to the
Issuer of $[___] aggregate principal amount of the Old
Notes.
3.
Representations and Warranties of the Issuer . The
Issuer represents and warrants to the Holder that:
(a)
Organization and Qualification . The Issuer and its “
Subsidiaries ” (which for purposes of this Agreement
means any entity in which the Issuer, directly or indirectly, owns
capital stock or holds an equity or similar interest that exceeds
50% of the aggregate outstanding equity or similar interests of
such entity) are entities duly organized and validly existing in
good standing under the laws of the jurisdiction in which they are
formed, and have the requisite power and authority to own their
material properties and to carry on their business as now being
conducted in all material respects. Each of the Issuer and its
Subsidiaries is duly qualified as a foreign entity to do business
and is in good standing in every jurisdiction in which its
ownership of property or the nature of the business conducted by it
makes such qualification necessary, except to the extent that the
failure to be so qualified or be in good standing would not
reasonably be expected to have a Material Adverse Effect. As used
in this Agreement, “ Material Adverse Effect ”
means any material adverse effect on the business, assets, results
of operations, or condition (financial or otherwise) of the Issuer
and its Subsidiaries, taken as a whole, or on the transactions
contemplated hereby and by the other Operative Documents taken as a
whole or by the agreements and instruments to be entered into in
connection herewith or therewith, or on the authority or ability of
the Issuer to perform its obligations under the Operative
Documents. The Issuer has no Subsidiaries except as set forth on
Schedule 3(a) .
(b)
Authorization; Enforcement; Validity . The Issuer has the
requisite corporate power and authority to enter into and perform
its obligations under each of the Operative Documents and to issue
the Notes in accordance with the terms hereof. The execution and
delivery of this Agreement and the other Operative Documents by the
Issuer and the consummation by the Issuer of the transactions
contemplated hereby and thereby, including, without limitation, the
issuance of the Notes, the reservation for issuance, and the
issuance of the Conversion Stock issuable upon conversion of any
Notes, have been duly authorized by the Issuer’s Board of
Directors and (other than the filing with the Securities and
Exchange Commission (the “ SEC ”) of one or more
registration statements as may be required by federal and state
securities laws with respect to the Issuer’s registration
obligations under the Notes and such filings as may be required by
and with the New York Stock Exchange LLC (the “ Principal
Market ”) with respect to the transactions contemplated
hereby), no further consent or authorization by the Issuer, its
Board of Directors or its stockholders is required. This Agreement
has been duly executed and delivered by the Issuer and is, and upon
execution and delivery of the other Operative Documents by the
Issuer, each of the Operative Documents will be, the legal, valid
and binding obligations of the Issuer, enforceable against the
Issuer in
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accordance with
their respective terms, except as such enforceability may be
limited by general principles of equity or applicable bankruptcy,
insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting creditors’ rights and remedies
generally.
(c)
Issuance of Notes . The Notes are duly authorized and upon
issuance, shall be free from all taxes, liens and charges with
respect to the issue thereof. As of the Closing Date, a number of
shares of Common Stock shall have been duly authorized and reserved
for issuance, free of pre-emptive rights, and sufficient for the
purpose of enabling the Issuer to satisfy all obligations to issue
the Conversion Stock upon conversion of all of the Notes. Upon
conversion of Notes into Conversion Stock in accordance with their
terms, the Conversion Stock will be validly issued, fully paid and
nonassessable and free from all preemptive or similar rights,
taxes, liens and charges with respect to the issue thereof, with
the holders thereof being entitled to all rights accorded to a
holder of Common Stock.
(d) No
Conflicts . The execution, delivery and performance of this
Agreement and the other Operative Documents by the Issuer and the
consummation by the Issuer of the transactions contemplated hereby
and thereby (including, without limitation, the issuance of the
Notes and reservation for issuance and issuance of the Conversion
Stock) will not (i) result in a violation of the
Issuer’s Certificate of Incorporation, as amended and as in
effect on the date hereof (the “ Certificate of
Incorporation ”), or the Issuer’s Bylaws, as
amended and as in effect on the date hereof (the “
Bylaws ”), (ii) conflict with, or constitute a
default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any
agreement, indenture or instrument to which the Issuer or any of
its Subsidiaries is a party, or (iii) (so long as the Issuer
obtains all consents, authorizations and orders and makes all
filings and registrations specified in Section 3(e) below) result
in a violation of any law, rule, regulation, order, judgment or
decree (including federal and state securities laws and regulations
and the rules and regulations of the Principal Market) applicable
to the Issuer or any of its Subsidiaries or by which any property
or asset of the Issuer or any of its Subsidiaries is bound or
affected, except, in the case of clauses (ii) and (iii), such
conflicts, defaults, rights, or violations that would not
reasonably be expected to have a Material Adverse
Effect.
(e)
Consents . The Issuer is not required to obtain any consent,
authorization or order of, or make any filing or registration with,
any court, governmental agency or any regulatory or self-regulatory
agency or any other person in order for it to execute, deliver or
perform any of its obligations under or contemplated by this
Agreement or the other Operative Documents, in each case in
accordance with the terms hereof or thereof, other than as may be
required by federal and state securities laws and the rules and
regulations of the Principal Market with respect to the
Issuer’s registration obligations under the Notes. All
consents, authorizations, orders, filings and registrations which
the Issuer is required to obtain or make pursuant to the preceding
sentence have been (or will be) obtained or made on or prior to the
Closing Date.
(f) No General
Solicitation . Neither of the Issuer nor any of its respective
affiliates or other persons acting on behalf of the Issuer have
offered or sold the Notes by means of any general solicitation or
general advertising within the meaning of Rule 502(c) under the Act
or, with respect to Notes sold outside the United States to
non-U.S. persons (as defined in Rule 902 under the Act), by means
of any directed selling efforts within the meaning of Rule 902
under
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the Act, and
the Issuer, any affiliate of the Issuer and any person acting on
behalf of the Issuer have complied with and will implement the
“offering restrictions” within the meaning of such
Rule 902; provided that no representation is made in
this subsection with respect to the actions of the
Holder.
(g) No
Broker’s Fees . Except as set forth on
Schedule 3(g) , the Issuer has not engaged any broker,
finder, commission agent or other person in connection with the
transactions contemplated in the Operative Documents, and the
Issuer is not under any obligation to pay any broker’s fee or
commission in connection with such transactions.
(h)
Reasonable Best Efforts . The Issuer agrees to use its
reasonable best efforts to do and perform all things required or
necessary to be done and performed under this Agreement thereby
prior to the Closing Date and to satisfy all conditions precedent
to the sale of the Notes set forth in Section 5(a).
(i) SEC
Documents; Financial Statements . During the two (2) years
prior to the date hereof, the Issuer has filed all reports,
schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of
the Securities Exchange Act of 1934, as amended (the “
Exchange Act ”) (all of the foregoing filed prior to
the date hereof and all exhibits included therein and financial
statements, notes and schedules thereto and documents incorporated
by reference therein being hereinafter referred to as the “
SEC Documents ”) and none of the SEC Documents, when
filed by the Issuer and as of the date such statements were made,
contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in
order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. As of
their respective dates, the SEC Documents, as they may have been
subsequently amended by filings made by the Issuer with the SEC
prior to the date hereof, complied in all material respects with
the requirements of the Exchange Act and the rules and regulations
of the SEC promulgated thereunder applicable to the SEC Documents.
As of their respective dates, the financial statements of the
Issuer included in the SEC Documents complied as to form in all
material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto.
Such financial statements have been prepared in accordance with
generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise
indicated in such financial statements or the notes thereto, or
(ii) in the case of unaudited interim statements, to the
extent they may exclude footnotes or may be condensed or summary
statements) and fairly present in all material respects the
financial position of the Issuer as of the dates thereof and the
results of its operations and cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end
audit adjustments).
(j) Full
Disclosure . No representation or warranty or other statement
made by the Issuer or any affiliate of the Issuer in this Agreement
or the Operative Documents contains any untrue statement or omits
to state a material fact necessary to make any of them, in light of
the circumstances in which it was made, not misleading.
(k) Accounting
Controls and Disclosure Controls . The Issuer and each of its
Subsidiaries maintain a system of internal accounting controls
sufficient to provide reasonable
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assurances that
(i) transactions are executed in accordance with
management’s general or specific authorization;
(ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for
assets; (iii) access to assets is permitted only in accordance
with management’s general or specific authorization; and
(iv) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
The Issuer and its
Subsidiaries have established and maintain “internal control
over financial reporting” and “disclosure controls and
procedures,” in each case as required by Rule 13a-15
under the Exchange Act. To the knowledge of the Issuer, the
Issuer’s internal control over financial reporting and
disclosure controls and procedures are effective at a reasonable
assurance level to perform the functions for which they were
designed and established. Since the end of the Issuer’s most
recent audited fiscal year, there has been (i) no material
weakness in the Issuer’s internal control over financial
reporting (whether or not remediated) and (ii) no change in
the Issuer’s internal control over financial reporting that
has materially affected, or is reasonably likely to materially
affect, the Issuer’s internal control over financial
reporting.
(l)
Compliance with the Sarbanes-Oxley Act . During the two
(2) years prior to the date hereof, there has been no failure
on the part of the Issuer or, to the knowledge of the Issuer, any
of the Issuer’s directors or officers, in their capacities as
such, to comply in all material respects with any provision of the
Sarbanes-Oxley Act of 2002 and the rules and regulations
promulgated in connection therewith, including Section 402
thereof related to loans and Sections 302 and 906 thereof
related to certifications.
(m) The
exchange of the Old Notes for the Notes is being made in reliance
upon the exemption from registration provided by
Section 3(a)(9) of the Act. For the purposes of Rule 144
promulgated under the Act, the Issuer acknowledges that the holding
period of the Notes may be tacked onto the holding period of the
New Notes, and the Issuer agrees not to take a position contrary to
this Section 3(m).
The Issuer
acknowledges that the Holder will rely upon the accuracy and truth
of the foregoing representations and hereby consents to such
reliance.
4.
Representations, Warranties and Agreements of the Holder
. The Holder represents and warrants to, and agrees with, the
Issuer that:
(a)
Organization and Qualification . The Holder is a limited
liability company duly organized or formed and validly existing in
good standing under the laws of the jurisdiction in which it is
organized or formed (as applicable), validly existing in good
standing under the laws of the jurisdiction in which it is
organized or formed, and has the requisite power and authority to
own its material properties and to carry on its business as now
being conducted in all material respects.
(b)
Authorization; Enforcement; Validity . The Holder has the
requisite power and authority to enter into and perform its
obligations under each of the Operative Documents to
5
which it is a
party. The execution and delivery by the Holder of this Agreement
and the other Operative Documents to which it is a party, and the
consummation by the Holder of the transactions contemplated hereby
and thereby, have been duly authorized by the Holder and no further
consent or authorization is required by the Holder or its equity
holders, as the case may be. This Agreement has been duly executed
and delivered by the Holder and is, and upon execution and delivery
by the Holder of the other Operative Documents to which it is a
party, such Operative Documents will be, the legal, valid and
binding oblig
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