Exhibit 10.1
 
VALUATION PAYMENT
SETTLEMENT AGREEMENT
 

 

--------------------------------------------------------------------------------

 

This Agreement is made on 20 February 2008
Between

(1)   R.J. Reynolds tobacco C.V., a limited partnership organised under the law
of The Netherlands (Reynolds); and

(2)   Gallaher limited, a company incorporated in England and Wales with company
number 1501573 and having its registered office at Members Hill, Brooklands
Road, Weybridge, Surrey KT13 0QU, England (Gallaher),       each a Party and
together the Parties.

Recitals
(A) R.J. Reynolds Tobacco Holdings, Inc., the parent company of Reynolds, and
Gallaher Group plc, the parent company of Gallaher, are parties to a Joint
Venture Participation Agreement dated 19 June 2002 pursuant to which R.J.
Reynolds — Gallaher International Sàrl (RGI), a Swiss limited liability company,
was formed to conduct the manufacturing, marketing, distribution and sale of
American Blend cigarette products in specified territories.
(B) Pursuant to a Limited Liability Company Agreement dated 12 July 2002 (the
LLC Agreement), Gallaher (Austria) GmbH and Reynolds agreed terms relating to
the management and operation of RGI on the basis that each member of RGI or its
affiliates would by 12 July 2002 have licensed or sub-licensed to RGI various
trademarks and associated rights for use on American Blend cigarettes in
specified territories.
(C) Under Trade Mark Licences dated 12 July 2002, the Parties licensed or
sub-licensed various trademarks and associated rights owned by them to RGI (the
Trade Mark Licences).
(D) The Parties entered into a License Buyout Agreement dated 12 July 2002, as
subsequently amended on 1 March 2004, (the LBA), pursuant to which they agreed a
mechanism for payment of an amount from one Party to the other calculated by
reference to the relative aggregate Valuations of each Party’s trademarks and
associated rights licensed or sub-licensed to RGI under the Trade Mark Licences.
Page 2 of 9

 

--------------------------------------------------------------------------------

 

(E) Reynolds served notice of termination of the LLC Agreement on 15 May 2007
specifying the effective date of termination as 30 November 2007, which became
the Valuation Date under the LBA.
(F) Following exchange of the Valuations on 29 January 2008 and subsequent
negotiations in accordance with the provisions of the LBA, the Parties have
agreed on the amount of the Valuation Payment due under the LBA and on the
identity of the paying Party and wish to record the terms of their agreement on
a binding basis in this Agreement.
(G) The Parties have agreed to enter into this Agreement in consideration of the
mutual covenants and other valuable consideration set out below.
1. Definitions and interpretation
1.1 In this Agreement, the following terms shall have the following meaning:

(a)   Agreement means this agreement as may be amended in writing by or on
behalf of the Parties from time to time.

(b)   Claim means any or all claims, potential claims, counterclaims, potential
counterclaims, rights of set-off, indemnities, challenges, causes of action,
rights or interests of any kind or nature whatsoever (including Claims for
interest or costs), whether known or unknown, suspected or unsuspected, however
and whenever arising and in whatever capacity and jurisdiction, whether secured,
proprietary, and whether by way of contribution or subrogation or otherwise, and
whether direct or indirect, oral or written, foreseen or unforeseen, known or
unknown, latent or patent, actual or potential, present or future and howsoever
arising.

(c)   Effective Date means the date appearing at the head of this Agreement.

(d)   Valuation Payment Sum means the sum of €265,000,000 (two hundred and sixty
five million Euros) payable by Gallaher to Reynolds in accordance with clauses 2
and 3 of this Agreement.

1.2 Terms used but not otherwise defined in this Agreement shall have the
meanings given to them in the LBA and the LLC Agreement.
Page 3 of 9

 

--------------------------------------------------------------------------------

 

1.3 For the purposes of clauses 2 and 5 of this Agreement, any reference to any
Party includes any parents, subsidiaries, affiliates, assigns, successors,
transferees, representatives, principals, agents, officers or directors of that
Party.
1.4 Save where the context requires otherwise, clause headings are for
convenience only and shall not be taken into account in the interpretation of
this Agreement.
2. Full and final settlement
2.1 Subject to the terms of this Agreement, Reynolds accepts payment of the
Valuation Payment Sum in full and final settlement of Gallaher’s obligations
under the LBA.
2.2 Each Party releases and discharges the other Party from liability for any
and all Claims arising out of or in any way relating to, whether contractual,
tortious or other in respect of, the LBA, save in relation to enforcement of
obligations arising under this Agreement.
3. Payment Details
3.1 Subject to clause 3.4 below, by 4pm London time on 20 April 2008, Gallaher
shall initiate the transmission of payment to Reynolds the sum of €106,000,000
(one hundred and six million Euros) representing 40% (forty per cent) of the
Valuation Payment Sum.
3.2 Subject to clause 3.4 below, by the dates and times specified in (a)-(f)
below, Gallaher shall initiate the transmission of payment to Reynolds the sum
of €26,500,000 (twenty six million and five hundred thousand Euros), each
payment representing 10% (ten per cent) of the Valuation Payment Sum.

(a)   4pm London time on 20 April 2009;   (b)   4pm London time on 20
April 2010;   (c)   4pm London time on 20 April 2011;   (d)   4pm London time on
20 April 2012;

Page 4 of 9

 

--------------------------------------------------------------------------------

 

(e)   4pm London time on 20 April 2013; and   (f)   4pm London time on 20
April 2014.

3.3 Payments under clauses 3.1 and 3.2 shall be made by bank transfer to the
account nominated in writing by Reynolds (such notification to be provided to
Gallaher by fax (attention: Lorenzo Pillinini) at fax number +44 1932 372 571
not later than 30 (thirty) days prior to the date by which transmission of the
relevant payment is to be initiated by Gallaher in accordance with clause 3.1 or
3.2). In the absence of such notification, payments shall be made to the account
to which payment was last made under this Agreement.
3.4 All sums payable under clauses 3.1 and 3.2 shall be paid free and clear of
any deductions, withholdings, set offs or counterclaims whatsoever, except any
deduction or withholding which may be required by law in relation to any tax, in
which case Gallaher:

(a)   shall ensure that the amount by which the payment is reduced (the Required
Amount) does not exceed the minimum legally required;

(b)   shall account in full for the Required Amount to the relevant taxation or
other competent authority on or before its due date; and

(c)   shall provide to Reynolds on or before such due date an official receipt
of the relevant taxation or other competent authority for the Required Amount or
if such receipts are not issued by the authority concerned a certificate of
deduction or equivalent evidence relating to the Required Amount.

4. Termination of the LBA
4.1 The Parties agree that the LBA will automatically terminate on the Effective
Date.
5. Confidentiality
5.1 Each Party agrees that it shall keep this Agreement confidential and shall
not disclose this Agreement or otherwise make any announcement or disclosure in
connection with the existence or subject matter of this Agreement or the
substance of
Page 5 of 9

 

--------------------------------------------------------------------------------

 

negotiations in connection with it (the Confidential Information), without the
prior written consent of the other Party, provided however that the obligation
under this clause shall not apply if and to the extent that:

(a)   such announcement or disclosure is required by any law or regulation or by
any court, stock exchange or any regulatory, governmental, antitrust body or tax
authority, provided that in such circumstances the Parties shall, as appropriate
and to the extent reasonably practicable and legally permissible, consult with
each other in advance of any such announcement or disclosure as to the proposed
form, timing and content of the announcement or disclosure; or

(b)   the Confidential Information is disclosed to the Parties’ legal or
financial advisers, where it is reasonably required for the purposes of
exercising the rights or performing the obligations under this Agreement or of
complying with announcements or disclosures required by sub-paragraph (a) of
this clause 5.1 and the advisers are informed of the confidential nature of the
disclosure; or

(c)   the Confidential Information has come into the public domain other than
through its fault (or that of its representatives).

5.2 The Parties hereby agree to take all reasonable steps to make their
employees and agents aware of the terms of this clause and to ensure compliance
with such terms.
6. Conflicts between this Agreement and the License Buyout Agreement
6.1 In the case of any conflict between the terms of the LBA and the terms of
this Agreement, the terms of this Agreement shall prevail.
7. Successors and Assigns
7.1 This Agreement shall be binding upon and inure for the benefit of each
Party’s successors and assigns.
Page 6 of 9

 

--------------------------------------------------------------------------------

 

8. Representations and Warranties
8.1 Each Party represents and warrants that the person signing on its behalf has
the authority to execute this Agreement and bind that Party.
8.2 Each Party represents and warrants that it has not previously assigned any
Claim or cause of action belonging to it, or which it has had the right to
assert on behalf of others or that could have been asserted which arose out of
or in connection with the LBA or out of the subject matter of the LBA or this
Agreement.
8.3 Neither Party makes any representation or warranty, express or implied,
other than those made in this clause 8.
9. No rights of rescission or termination
9.1 Neither Party shall be entitled to rescind or terminate this Agreement in
any circumstances whatsoever (whether before or after termination of the LBA)
for breach of any of the obligations under this Agreement, other than pursuant
to any such rights which arise in respect of fraudulent misrepresentation.
10. Entire Agreement
10.1 Each Party confirms that this Agreement constitutes the entire agreement
and understanding between the Parties in connection with the settlement of any
and all matters arising under or in connection with or out of the subject matter
of the LBA or this Agreement.
10.2 Each Party confirms that it is not relying upon any statement or
representation made by and on behalf of any of the other Parties, whether or not
in writing, at any time prior to execution of this Agreement which is not
expressly set out herein. Each Party expressly agrees that it will not have any
right of action in relation to any statement or representation, whether oral or
written, made by or on behalf of any of the other Parties in the course of any
negotiations which preceded the execution hereof, unless such statements or
representations were made fraudulently.
Page 7 of 9

 

--------------------------------------------------------------------------------

 

11. Contracts (Rights of Third Parties) Act 1999
11.1 The Parties agree that the terms of this agreement are not enforceable by
any third party under the Contracts (Rights of Third Parties) Act 1999.
12. Variation
12.1 No amendment of this Agreement shall be valid unless it is in writing and
duly executed by or on behalf of each of the Parties.
13. Invalidity
13.1 Each of the provisions of this Agreement is severable. If any such
provision is held to be or becomes invalid or unenforceable in any respect under
the law of any jurisdiction, it shall have no effect in that respect and the
Parties shall use all reasonable efforts to replace it in that respect with a
valid and enforceable substitute provision the effect of which is as close to
its intended effect as possible.
14. Further assurances
14.1 The Parties shall perform (or procure the performance of) all further acts
and things and execute and deliver (or procure the execution and delivery of)
such further documents as may be required by law or as may be necessary or
reasonably required to implement and give effect to this Agreement and to
terminate the LBA.
15. Counterparts
15.1 This Agreement may be executed in any number of counterparts, and all of
such counterparts taken together, shall be deemed to constitute one and the same
instrument.
16. Governing Law
16.1 This Agreement shall be governed by and be construed in accordance with
English law. Any dispute arising out of or in connection with, or concerning the
carrying into effect of, this Agreement shall be subject to the exclusive
jurisdiction of the High Court of England, and the parties hereby submit to the
exclusive jurisdiction of that court for these purposes.
Page 8 of 9

 

--------------------------------------------------------------------------------

 

IN WITNESS of which the Parties have executed this Agreement on the date first
mentioned above.
R.J. REYNOLDS TOBACCO C.V.
By: R. J. REYNOLDS GLOBAL PRODUCTS, INC., Its General Partner
by /s/ McDara P. Folan, III
Name: McDara P. Folan, III
Position: Director and Secretary
by /s/ Godefridus Vranken
Name: Godefridus Vranken
Position: Director
for and on behalf of GALLAHER LIMITED
Page 9 of 9