Exhibit 10.1
EMPLOYMENT AGREEMENT
     AGREEMENT made as of November 11, 2005 between RONALD J. BERNSTEIN
(“Executive”) and LIGGETT GROUP INC. (the “Company”).
     WHEREAS, the Board of Directors of the Company (the “Board”) wishes
Executive to continue to serve as the President and Chief Executive Officer of
the Company; and
     WHEREAS, Executive is willing to continue to provide his services and
experience to the Company, Liggett Vector Brands Inc. and their affiliates in
such capacities upon the terms and conditions herein set forth.
     NOW, THEREFORE, in consideration of the mutual promises and agreements set
forth herein, the parties agree as follows:
1. TERM.
     (a) Subject to paragraph (b) of this Section 1, the term of employment
under this Agreement (the “Contract Term”) will commence on October 1, 2005 (the
“Employment Date”) and will expire on December 31, 2008, unless earlier
terminated as provided in Section 6.
     (b) The Contract Term shall automatically be extended on December 31, 2008
and each subsequent December 31 for an additional year unless, not later than at
least six (6) months prior to any such date, either party to this Agreement,
shall have given written notice to the other party that he or it does not wish
to extend the Contract Term, in which case no further extension of the Contract
Term shall occur pursuant hereto.
2. POSITION AND DUTIES.
     (a) General. During the Contract Term the Company agrees to employ
Executive as, and Executive agrees to accept the office of, and serve as, the
President and Chief Executive Officer of the Company. In such position,
Executive shall have the duties, responsibilities and authorities normally
associated with the office and position of president and chief executive officer
of a corporation including, but not limited to management authority and
responsibility for the day-to-day operations and business affairs of the
Company. Executive shall report to the Board and to the Chairman of the Board
and the Chief Executive Officer of the Company’s

 

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indirect parent, Vector Group Ltd. (“VGR”). Commencing with the Employment Date,
Executive shall perform his duties and conduct his business at the principal
executive offices of the Company in North Carolina, except for required travel
on the Company’s behalf. Executive may also, from time to time, be requested to
oversee operations of other of the Company’s and its affiliate’s businesses,
without additional compensation, all as may be determined by the Board and VGR
and reasonably acceptable to Executive. Executive shall serve other positions
with the Company’s affiliates, as may be mutually determined from time to time,
without additional compensation. During the Contract Term, Executive shall
serve, without additional compensation, on the Board and, if elected, on the
board of VGR.
     (b) Exclusive Services. Commencing with the Employment Date, Executive
shall, except as hereinafter provided and except for vacation periods, holidays
recognized by the Company and periods of illness, serve on a full-time basis,
devoting his skill and experience to the affairs of the Company and its
affiliates and, for so long as he serves as President and Chief Executive
Officer of the Company, faithfully discharge the duties of those offices.
Executive shall not, directly or indirectly, render services to any other person
or organization for which he receives compensation without the prior written
consent of the Board, or otherwise engage in any activity (including, without
limitation, acting as a director, partner, joint venturer, advisor or
shareholder) that substantially interferes or is reasonably likely to interfere
substantially with his faithful performance of his duties and responsibilities
hereunder.
     (c) Charitable and Other Activities. Executive shall be allowed, to the
extent such activities do not substantially interfere with the performance of
his duties and responsibilities hereunder, (i) to manage his personal, financial
and legal affairs, and (ii) to be engaged in civic, charitable, religious and
educational activities.
3. COMPENSATION AND OTHER BENEFITS.
     (a) Salary. During the Contract Term, commencing with the Employment Date,
the Company shall pay Executive a base salary of $750,000 per annum, as the same
may be increased from time to time as provided herein (the “Salary”), payable in
installments at such regular intervals as the Company customarily pays its other
executives (but in no event less often than monthly). The Salary shall be
increased, as of January 1 of each year commencing January

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1, 2006, as necessary to reflect year over year increases in the cost of living
since the prior Salary increase, determined by reference to the Consumer Price
Index, Northeast Region, All Items (1982-1984 = 100) (the “Index”), or, if
publication of the Index is terminated, any substantially equivalent successor
thereto.
     (b) Special Bonus. Executive will receive a $500,000 special bonus from the
Company within ten (10) days of execution of this Agreement.
     (c) Stock Options. Six (6) months and a day after the execution of this
Agreement and the letter attached hereto as Exhibit “A” (the “Grant Date”), if
Executive is employed under this Agreement on such date, VGR shall replace
Executive’s 2001 stock option grant with non-qualified stock options to purchase
250,000 shares of common stock of VGR (the “New Option Grant”) under the Vector
Group Ltd. Amended and Restated 1999 Long-Term Incentive Plan (the “LTIP”), at
an exercise price equal to the fair market value of VGR’s common stock on the
Grant Date, as more particularly described in the letter attached hereto as
Exhibit “A”. The New Option Grant will be governed by the Non-Qualified Stock
Option Agreement in substantially the form annexed hereto as Exhibit “B”.
     (d) Restricted Stock Grant. Upon execution of this Agreement, Executive
shall receive a restricted stock grant of 50,000 shares of common stock of VGR
(the “Restricted Stock Grant”), under the LTIP and pursuant to the Restricted
Share Award Agreement in substantially the form annexed hereto as Exhibit “C”.
     (e) Plans, Policies and Programs. During the Contract Term, Executive,
Executive’s wife and their eligible dependents shall be eligible to participate
in and be covered under any and all of the welfare, benefit and perquisite
plans, policies and programs maintained by the Company from time to time for its
executives and/or other employees, including, without limitation, 401(k), profit
sharing, incentive plan, medical, hospitalization, dental, disability, life,
accidental death and dismemberment and travel accident insurance plans and
programs, such participation and coverage to be on terms and conditions no less
favorable to Executive than to the Company’s other executives.
     (f) Annual Incentive Compensation. Subject to approval of VGR’s Senior
Executive Annual Bonus Plan (the “Plan”) at VGR’s 2006 annual shareholders’
meeting and approval by VGR’s Compensation Committee, Executive shall be
eligible under the Plan, commencing with

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the calendar year ending December 31, 2006, to receive an annual bonus of up to
100% of Salary, with the bonus beginning to accrue at 100% of target earnings
before interest and taxes (“EBIT”) for the Company, with a bonus equal to 50% of
Salary at 100% of target EBIT and 100% of Salary at 105% of target EBIT. Target
EBIT for the year shall be determined by VGR’s Compensation Committee in
accordance with the Plan, based on the performance goals for the Company and any
such bonus shall be paid in accordance with the terms of the Plan. Subject to
approval of VGR’s Compensation Committee, Executive shall be entitled to a bonus
for the calendar year ending December 31, 2005 as set forth in Exhibit “D”
annexed hereto. The bonus for 2005, if any, will be paid to Executive by the
Company as soon as practicable after the closing of the books of the Company for
such calendar year, but in no event later than March 15, 2006.
     (g) Vacation. Executive shall be entitled to not less than four (4) weeks
of paid vacation each year of his employment hereunder, but, shall not be
entitled to cash in lieu of vacation. Vacation shall not accrue from
year-to-year.
     (h) Waiver of Benefits. Executive shall be entitled to receive only those
benefits expressly provided herein. Executive waives his rights under the
Company’s Executive Termination Policy unless otherwise agreed to in writing by
the parties.
4. REIMBURSEMENT OF EXPENSES.
     In the course of performing his duties under this Agreement, Executive may
incur reasonable out-of-pocket travel, entertainment and other business expenses
for the account of the Company. Executive shall be entitled to prompt
reimbursement for all reasonable out-of-pocket business expenses so incurred,
upon submission to the Company of an adequate, written accounting which complies
in form and substance with the Company’s policy regarding records to support
reimbursement for business expenses incurred for the account of the Company.
Executive shall have access to the use of corporate aircraft in accordance with
VGR’s Corporate Aircraft Policy in effect from time to time.

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5. TERMINATION OF EMPLOYMENT.
     (a) Voluntary Termination.
     (i) Executive has the right to voluntarily terminate his employment
hereunder at any time during the Contract Term upon not less than three
(3) months’ prior written notice to the Company (which the Company may in its
sole discretion make effective earlier), unless his termination is for Good
Reason (as defined below) in which event only thirty (30) business days’ prior
written notice is required. In the event of a voluntary termination of
employment, unless Executive has terminated his employment for Good Reason (in
which case he shall receive the amounts and benefits set forth in, and subject
to the terms of, Section 5(b)(i)), the Contract Term shall terminate immediately
after the three (3) month notice period, unless sooner terminated by the
Company, and Executive shall only be entitled to receive within thirty (30) days
of such termination or such later date as otherwise provided for herein or in
accordance with the then applicable plan, policy or program:

  (A)   any accrued but unpaid Salary to and including the date of termination
of his employment;     (B)   any benefits under Section 3(e) except to the
extent Executive is not eligible to receive such benefits pursuant to the terms
and conditions of the Company’s plans, policies and programs because Executive
is no longer employed by the Company;     (C)   reimbursement for expenses
incurred by Executive, but not yet reimbursed, in accordance with Section 4; and
    (D)   any vested options pursuant to the Non-Qualified Stock Option
Agreement or other option grants to Executive and vested stock pursuant to the
Restricted Stock Grant.

     (ii) For purposes of this Agreement, “Good Reason” shall exist if, at any
time prior to the expiration of the Contract Term, without the prior written
consent of the Executive;

  (A)   the Board shall remove Executive as President and Chief Executive
Officer of the Company (other than in connection with the termination of his
employment);

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  (B)   Executive shall not be appointed to, or maintained as a member of, the
Board;     (C)   the Board shall reduce the Executive’s rate of Salary or Annual
Incentive Compensation opportunity or shall materially reduce Executive’s
benefits described in Section 3(e);     (D)   Executive’s duties and
responsibilities at the Company shall be significantly diminished or there shall
be assigned to him duties and responsibilities materially inconsistent with his
position;     (E)   the Company shall fail to obtain a written agreement
reasonably satisfactory to Executive from any successor of the Company to assume
and perform this Agreement; or     (F)   there occurs a Change of Control as
defined in the Restricted Share Award Agreement and Executive is required to
relocate more than fifty (50) miles from the Executive’s current work location:

provided, however, that the term “Good Reason” shall not include the occurrence
of any of the above if such occurrence is remedied by the Company or any
successor within thirty (30) business days after receipt of Executive’s written
notice of resignation for Good Reason setting forth in specific detail the facts
and circumstances resulting in the Good Reason upon which his resignation is
based.
     (b) Involuntary Termination.
          (i) The Company has the right to terminate Executive’s employment, on
written notice to Executive, at any time without Cause (as defined below). In
the event the Company terminates Executive’s employment without Cause during the
Contract Term, the Contract Term shall terminate immediately and Executive shall
only be entitled to receive in cash, within thirty (30) days of such termination
or such later date as otherwise provided for herein or in accordance with the
then applicable plan, policy or program:

  (A)   any accrued but unpaid Salary to and including the date of termination
of his employment;     (B)   Salary from the date of termination for twenty four
(24) months, payable in installments at regular intervals pursuant to
Section 3(a);

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  (C)   any benefits under Section 3(e), during such time as Salary is being
paid (or would be paid but for Section 5 (h)), except to the extent Executive is
not eligible to receive such benefits pursuant to the terms and conditions of
the Company’s plans, policies and programs because Executive is no longer
employed by the Company;     (D)   reimbursement for expenses incurred by
Executive, but not yet reimbursed, in accordance with Section 4;     (E)   any
vested options pursuant to the Non-Qualified Stock Option Agreement or other
option grants to Executive and vested stock pursuant to the Restricted Stock
Grant; and     (F)   any Annual Incentive Compensation if earned in accordance
with Section 3(f), pro rata, up to the date of termination; provided Executive
is terminated on or after July 1st of a year and bonuses are otherwise paid to
the management of the Company for that year.

     In the event of termination of employment without Cause, Executive shall
take all reasonable measures to mitigate the amount of any payment of Salary
provided for in Section 5(b)(i)(B) by seeking other employment or consulting
work during any period in which monthly payments of Salary are being made to
Executive under such section; provided, however, that no duty to mitigate shall
exist with respect to the first twelve (12) monthly payments of Salary provided
for in Section 5(b)(i)(B). Amounts of Salary due Executive under
Section 5(b)(i)(B) during the second twelve (12) month period from the date of
termination shall be reduced by any compensation or remuneration received by
Executive from any subsequent employment or consulting work during such period.
Executive shall provide to the Company, within ten (10) days after the end of
each month, an affidavit from Executive certifying the amount of such
compensation or consulting fees actually received by Executive during the
previous month.
          (ii) The Company has the right to terminate Executive’s employment at
any time for Cause, on written notice to Executive, setting forth in reasonable
detail the facts and circumstances resulting in the Cause upon which such
termination is based. In the event of termination for Cause, the Contract Term
shall terminate immediately and Executive shall be entitled to those amounts and
benefits specified in Section 5(a)(i). For purposes of this Agreement, Cause
shall mean:

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  (A)   a material breach by Executive of his duties and obligations under this
Agreement which is not remedied to the satisfaction of the Board within thirty
(30) days after receipt by Executive of written notice of such breach from the
Board;     (B)   Executive’s conviction or indictment for a felony;     (C)   an
act or acts of personal dishonesty by Executive intended to result in personal
enrichment of Executive at the expense of the Company or any of its affiliates
or any other material breach or violation of Executive’s fiduciary duty owed to
the Company or any of its affiliates;     (D)   a material violation of any
Company or VGR policy or Code of Business Conduct and Ethics; or     (E)   any
grossly negligent act or omission or any willful and deliberate misconduct by
Executive that results, or is likely to result, in material economic, or other
harm, to the Company or any of its affiliates; provided, however, that any act
or omission by Executive shall not fall within the scope of this clause (E) if
it was done or omitted to be done by Executive in good faith and with a
reasonable belief that such action or omission was in the best interests of the
Company.

     (c) Disability. Executive shall be considered to be “Disabled” if, during
the Contract Term, in the reasonable opinion of the Board after receiving the
written report of an independent physician selected by the Company, Executive is
incapable, due to mental or physical illness, of performing the essential
functions of his duties as President and Chief Executive Officer for a period of
one hundred eighty (180) days (whether or not consecutive) during any period of
three hundred sixty (360) consecutive days. In the event Executive shall become
Disabled during the Contract Term, the Contract Term shall terminate and the
Company shall have no further obligation or liabilities to Executive, except
those set forth in Section 5(b)(i), subject to a maximum payment of Salary for a
period of twelve (12) months under Section 5(b)(i)(B).
     (d) Death. In the event of Executive’s death during the Contract Term, the
Contract Term shall terminate immediately thereafter, and Executive’s
beneficiary or estate shall be entitled to receive those payments set forth in
Section 5(b)(i), subject to a maximum payment of Salary for a period of twelve
(12) months under Section 5(b)(i)(B).

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     (e) Non-Renewal. In the event Company elects to not renew this Agreement,
then Executive shall be entitled to receive the payments and benefits set forth
in, and subject to, Section 5(b)(i); provided, however, that the period
specified in Section 5(b)(i)(B) shall terminate on the second anniversary of the
date of notice of non-renewal; provided, further, that if such notice of
non-renewal is delivered more than six (6) months prior to the end of the
Contract Term, it shall be deemed for this purpose to have been delivered six
(6) months prior to the end of the Contract Term.
     (f) Termination Payments. Provided the Company makes the payments required
under this Agreement, that are attributable to the termination of Executive’s
employment, such payments shall be in full and complete satisfaction and release
of any and all claims Executive or his beneficiary, estate or legal
representative may have against the Company and/or its subsidiaries or
affiliates hereunder, and Executive shall execute and deliver a full release in
form and substance satisfactory to Company, confirming same.
     (g) Retirement. Any termination of Executive’s employment pursuant to
Sections 5(a)(ii), 5(b)(i), 5(c), 5(d) and 5(e) above shall be deemed a
“Retirement” for purposes of Section 7 of this Agreement.
     (h) Timing of Payments. Notwithstanding the other provisions of this
Agreement, any payment required to be made to or provided to Executive under
this Agreement upon his termination of employment shall be made or provided
promptly after the six (6) month anniversary of Executive’s date of termination
of employment to the extent necessary to avoid imposition upon Executive of any
tax penalty imposed under Section 409A of the Internal Revenue Code of 1986, as
amended. All payments due and owing for the six (6) month period shall be paid
on the first day following the six (6) month anniversary of Executive’s date of
termination.
6. RESTRICTIVE COVENANTS.
     (a) Confidentiality. Executive covenants and agrees with the Company that
he will not, directly or indirectly, at any time, except in the good faith
performance of Executive’s obligations to the Company hereunder or with the
prior express written consent of the Board, disclose any Confidential
Information that he may learn or has learned by reason of his

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employment or association with the Company, or use any such information for his
own personal benefit or gain. The term “Confidential Information” includes,
without limitation, information with respect to the operations, facilities and
methods, trade secrets and other intellectual property, systems, procedures,
manuals, confidential reports, pricing information, financial information
(including, without limitation, the revenues, costs or profits) associated with
any activities or products of the Company and/or its affiliates, business plans,
prospects, opportunities or other information of or relating to the Company
and/or its affiliates. Confidential Information shall not include information
which (i) is or becomes generally available to the public other than as a result
of disclosure by Executive in violation of this section or (ii) Executive is
required to disclose under any applicable laws, regulations or directives of any
government agency, tribunal or authority having jurisdiction in the matter or
under subpoena or other process of law.
     (b) Non-Solicitation. Executive, shall not, directly or indirectly, for the
period commencing on the Employment Date and ending twenty-four (24) months
following the last payment received under this Agreement (a) take any action to
solicit or divert any business (or potential business) or clients or customers
(or potential clients or potential customers) away from the Company or any
affiliate and/or (b) induce any person in the employment of the Company or any
affiliate or any consultant to the Company or any affiliate to (i) terminate
such employment or consulting arrangement, (ii) accept employment, or enter into
any consulting arrangement, with anyone other than the Company or any affiliate,
and/or (iii) interfere with (x) the business relations between the Company or
any affiliate and each of their respective customers or suppliers in any manner
or (y) the business of the Company or any affiliate in any manner.
     (c) Non-Disparagement. Subject to the requirements of any applicable
securities or other laws, Executive agrees that, during and after the Contract
Term, he shall not at any time make any statement or representation, written or
oral, which Executive knows or should know will, or which he knows or should
know is reasonably likely to, impair, bring into disrepute, or adversely affect
in any way the reputation, good will, business, or public relations of the
Company, or any affiliate, and/or any person or entity which Executive knows or
should know is one of the following: (i) an employee or a member of the boards
of directors of the Company, or any affiliate, (ii) a person or entity who has
or has had a legal or beneficial ownership interest in

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the shares of the Company, or any affiliate (an “Owner”), and/or (iii) an owner,
employee, director, partner, representative of, and/or adviser to, any such
Owner.
     (d) Non-Competition. Executive agrees that for the period commencing on the
Employment Date and ending twenty-four (24) months following the last payment
received under this Agreement, he shall not as an employee, consultant or in any
other capacity, provide services, in the geographic areas listed below, that are
the same as or similar to the services he provided to the Company or its
affiliates, to any business that then engages in the development or manufacture
of cigarette products or reduced risk or cessation products or is in the same,
similar or otherwise competitive business as the Company or any affiliate. The
restrictions set forth in this provision apply to the following geographic
areas: (1) the United States; (2) North America; (3) North America and Europe;
(4) North America, South America and Europe; (5) North America, South America,
Europe and Asia; (6) the world; provided however, that the restrictive covenant
contained herein, as its relates to the conventional tobacco business, shall
only be applicable to the United States and North America if at the time this
Agreement is terminated, the Company or any affiliate is not engaged in the
conventional tobacco business other that in the United States and North America.
Executive acknowledges and agrees that the Company’s market for research,
development and sale of cigarette products is located throughout the United
States and that the foregoing restrictions are reasonable and necessary to
protect the Company’s legitimate business interests. The foregoing covenant
shall not prohibit Executive from owning securities traded on any national or
international exchange provided that Executive owns such securities for
investment purposes only and that such securities represent less than one
percent (1%) of the total outstanding shares of such securities.
     (e) Equitable Relief. Executive understands and agrees that the rights and
obligations set forth in this Section 6 shall extend beyond the Contract Term
and the termination of employment. Without intending to limit the remedies
available to the Company, Executive acknowledges that a breach of the covenants
contained in this Section 6 may result in material irreparable injury to the
Company, its parent or their respective affiliates or subsidiaries for which
there is no adequate remedy at law, that it may not be possible to measure
damages for such injuries precisely and that, in the event of such a breach or
threat thereof, the Company shall be entitled to obtain a temporary restraining
order and/or a preliminary or permanent injunction

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restraining Executive from engaging in activities prohibited by this Section 6
or such other relief as may be required to specifically enforce any of the
covenants in this Section 6. Executive shall also be required to pay all legal
fees and costs incurred by Company in connection with enforcing its rights under
this Section 6.
7. SERP.
     If a termination of Executive’s employment is deemed a Retirement for
purposes of this Agreement, such termination shall constitute one of the
following events, as appropriate, under the Vector Group Ltd. Supplemental
Retirement Plan (as in effect from time to time) (“SERP”): in the event of a
termination under Section 5(d) above, the death of Executive under Section 4.3
of the SERP; under Section 5(c) above, the Disability of Executive under
Section 4.2 of the SERP; and under Sections 5(a)(ii), 5(b)(i) and 5(e) above,
the termination of Executive without cause under Section 4.4 of the SERP. In the
event Executive’s employment is terminated under Section 5(b)(ii) above,
Executive shall not be entitled to any benefit under the SERP if the facts and
circumstances upon which such termination is based would constitute “cause”
under Section 4.4 of the SERP. If such facts and circumstances would not
constitute “cause” under Section 4.4 of the SERP, such termination of
Executive’s employment under Section 5(b)(ii) above will be treated as a
termination of Executive without cause under Section 4.4 of the SERP.
8. NOTICE.
     Any notice required hereunder shall, unless specified to the contrary, be
in writing. Any notice to be given by one party to the other, pursuant to this
Agreement, shall be deemed given: (a) when telecopied on a business day,
provided that receipt of such telecopy is confirmed by telephone immediately
thereafter, or (b) on the second business day after delivery to a nationally
recognized courier service, marked for overnight delivery, and addressed as
follows:
In the case of Liggett Group Inc.:
Liggett Group Inc.
100 Maple Lane
Mebane, NC 27302
Attn: Office of General Counsel
With a copy to:
Vector Group Ltd.
100 SE Second Street, 32nd Floor
Miami, FL 33131
Attn: Marc N. Bell, Vice President and General Counsel
In the case of Executive:
Ronald J. Bernstein
[               ]
[               ]
9. SUCCESSORS AND ASSIGNS.
     The Company and Executive agree that this Agreement is a personal agreement
and that Executive may not sell, transfer, assign, pledge or hypothecate his
obligations, duties, responsibilities, rights and interests hereunder, except
that his rights to compensation and benefits may be transferred by will or
intestate succession, pursuant to Section 15 below. This Agreement shall be
binding upon and inure to the benefit of Executive’s heirs, executors and
administrators and the Company’s successors and assigns. The Company may assign
or transfer its rights and obligations under this Agreement, provided that the
assignee or transferee is the successor to all or substantially all of the
assets of the Company and such assignee or transferee assumes the liabilities,
obligations and duties of the Company, as contained in this Agreement, either
contractually or as a matter of law.
10. REPRESENTATIONS.
     The Company represents and warrants that it is fully authorized and
empowered to enter into this Agreement and that the performance of its
obligations under this Agreement will not violate any agreement between the
Company and any other person, firm or organization. Executive represents and
warrants that the performance of Executive’s duties under this Agreement will
not violate any agreement between Executive and any other person, firm,
partnership, company or other organization or association.

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11. ENTIRE AGREEMENT.
     This Agreement and the exhibits thereto contain the entire understanding
and agreement between the parties concerning the subject matter hereof and
supersedes all prior agreements, understandings, discussions, negotiations and
undertakings, whether written or oral, between Executive and the Company, in
respect thereof, including, without limitation, the Letter Agreement dated
September 1, 2000, between Executive and the Company, but excluding, to the
extent not expressly modified by the provisions of this Agreement, the SERP.
12. AMENDMENT; WAIVER.
     No provision in this Agreement may be amended unless such amendment is
agreed to in writing and signed by both Executive and an authorized officer or
director of the Company. No waiver by either party of any breach by the other
party of any condition or provision contained in this Agreement to be performed
by such other party shall be deemed a waiver of a similar or dissimilar
condition or provision at the same or any prior or subsequent time. Any waiver
must be in writing and signed by Executive or an authorized officer or director
of the Company, as the case may be. Without limiting the generality of the
above, the failure to enforce at any time any of the provisions of this
Agreement or the failure to require at any time performance by the other party
of any of the provisions hereof shall in no way be construed to be a waiver of
such provisions or to affect the validity of this Agreement, or any part hereof,
or the right of either party thereafter to enforce each and every such provision
in accordance with the terms of this Agreement.
13. SEVERABILITY.
     In the event that any provision or portion of this Agreement shall be
determined to be invalid or unenforceable for any reason, in whole or in part,
the remaining provisions of this Agreement shall be unaffected thereby and shall
remain in force and effect to the fullest extent permitted by law.

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14. SURVIVORSHIP.
     The respective rights and obligations of the parties hereunder shall
survive any termination of Executive’s employment and any termination or
expiration of the Contract Term to the extent necessary for the intended
preservation of such rights and obligations.
15. BENEFICIARIES.
     Except as provided in any plan, program or policy of the Company, Executive
shall be entitled to select (and change, to the extent permitted under any
applicable law) a beneficiary or beneficiaries to receive any compensation or
benefit payable hereunder following his death by giving the Company written
notice thereof. In the absence of such designation or if such designation shall
be ineffective, Executive’s wife shall be such beneficiary and if she shall not
survive to receive payment, Executive’s estate shall be the beneficiary of
payments to be made hereunder. In the event of Executive’s death or a judicial
determination of his incompetence, reference in this Agreement to Executive
shall be deemed, where appropriate, to refer to his beneficiary, estate or other
legal representative.
16. INDEMNIFICATION.
     The Company agrees that if Executive is made, or is threatened to be made,
a party to any action or proceeding, whether civil or criminal, by reason of the
fact that he is or was a director or officer of the Company or, at the request
of the Company, serves or served any other company, partnership, joint venture,
trust or other enterprise in any capacity, the Company shall indemnify him to
the fullest extent permitted by the Certificate of Incorporation and by-laws of
the Company or, if greater, by the applicable laws of the State of Delaware,
against all costs, expenses, liabilities and losses reasonably incurred or
suffered by Executive in connection therewith. The Company shall advance to
Executive all reasonable costs and expenses incurred by him in connection with
any such proceeding upon receipt of an itemized list of such costs and expenses,
provided he executes an undertaking to repay such amounts if, and to the extent,
required to do so by applicable law.

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17. WITHHOLDINGS.
     Any payments that the Company agrees to make to Executive, or to anyone
else, under this Agreement or any plan or program, will be reduced by such
amounts as are required to be withheld with respect thereto under present and
future social security, old age pension, hospitalization insurance, tax or other
laws or regulations that may be applicable to such payments.
18. GOVERNING LAW.
     This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of New York without reference to
principles of conflict of laws. Any dispute regarding this Agreement shall be
resolved by a court of competent jurisdiction in the State of New York.
19. HEADINGS.
     The headings of the Sections contained in this Agreement are for
convenience only and shall not be deemed to control or affect the meaning or
construction of any provision of this Agreement.
20. COUNTERPARTS.
     This Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original but all such counterparts shall together
constitute one and the same instrument.
21. LEGAL FEES.
     The Company shall promptly reimburse Executive for reasonable attorneys’
fees and expenses incurred by Executive in connection with the negotiation and
execution of this Agreement, subject to a limit of $2,500.00.

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     IN WITNESS WHEREOF, the parties hereto have caused Agreement to be executed
as of the date first above written.

                  /s/ Ronald J. Bernstein       RONALD J. BERNSTEIN             
LIGGETT GROUP INC.
      By:   /s/ John R. Long         Name:   John R. Long        Title:   Vice
President, General Counsel and Secretary     

      VECTOR GROUP LTD
(as to Section 3(c), 3(d), 3(f) and 7 only)   LIGGETT VECTOR BRANDS INC.
    By: /s/ Richard J. Lampen
 
Name: Richard J. Lampen
Title: Executive Vice President   By: /s/ William H. Marks
 
Name: William H. Marks
Title: Vice President of Finance and Administration

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