Document:

Ex-10.3 Closing Agreement

 

Exhibit 10.3

“ORIGINAL”

CLOSING AGREEMENT ON FINAL DETERMINATION

COVERING SPECIFIC MATTERS

     Under Section 7121 of the Internal Revenue Code Vector Group Ltd., TIN 65-0949535 (f/k/a
Brooke Group Ltd., TIN 51-0255124) and Subsidiaries, 100 S.E. 2nd Street,
32nd Floor, Miami, Florida 33131 (Vector Group Ltd. and its Subsidiaries hereinafter
referred to as the “Taxpayer”) and the Commissioner of Internal Revenue make the following closing
agreement:

     WHEREAS, the Taxpayer, through its indirect subsidiary corporation, Eve Holdings Inc. (“Eve”),
a Delaware corporation, contributed its rights to certain specified trademarks and registrations
thereof, and that part of the goodwill of the business connected with the use of and symbolized by
said trademarks (hereinafter collectively referred to as the “Marks”) to Trademarks LLC
(“Trademarks”), a Delaware limited liability company, in exchange for one hundred percent (100%) of
two (2) classes of membership interests in Trademarks; Class A shares (the “Class A Shares”) and
Class B shares (the “Class B Shares”); and

WHEREAS, the value of Eve’s contribution of the Marks to Trademarks was $300,000,000; and

     WHEREAS, in December 1998, Philip Morris Incorporated (“PM”) paid Eve $5,000,000 to acquire an
option with respect to the Class A Shares (the “Class A Option”) and $145,000,000 to acquire an
option with respect to the Class B Shares (the “Class B Option”) (such $145,000,000 payment
hereinafter referred to as the “Class B Option Premium”). The Class A Option entitled PM to
purchase the Class A Shares for $10,100,000. The Class A Option was generally exercisable by PM no
later than the tenth (10th) day following clearance of the transaction under applicable
federal law. The Class B Option entitled PM to purchase the Class B Shares for $139,900,000. The
Class B Option was generally exercisable by PM during the period beginning on December 2, 2008 and
ending on March 1, 2009; and

     WHEREAS, on March 19, 1999, PM exercised the Class A Option and the closing thereof occurred
on May 24, 1999. In connection with the purchase and sale of the Class A Shares, PM paid Eve the
$10,100,000 purchase price for the Class A Shares; and

     WHEREAS, on May 24, 1999, Trademarks entered into a $134,900,000 term loan agreement with
Citibank, N.A. (the “Loan”). Thereafter, Trademarks distributed the $134,900,000 loan proceeds to
Eve pursuant to terms of Trademark’s Operating Agreement (the “Distribution”); and

     WHEREAS, Eve’s sale of the Class A Shares resulted in the Taxpayer reporting gross income of
$15,052,799 (net of expenses of $47,201) for its taxable year ended December 31, 1999, which
represented the net gain recognized by Eve on the sale of the Class A Shares; and

     WHEREAS, the Taxpayer did not report as an item of gross income for its taxable years ended
December 31, 1998 or December 31, 1999, Eve’s receipt of the Class B Option Premium or the
Distribution from Trademarks:

 

 

     NOW IT IS HEREBY DETERMINED AND AGREED for federal income tax purposes that:

     (1) The Recitals set forth above are true and correct and are hereby incorporated into this
Closing Agreement by reference.

     (2) $87,000,000 of the Class B Option Premium constitutes gross income to the Taxpayer in the
taxable year ended December 31, 1999.

     (3) The balance or remaining portion of the Class B Option Premium of $58,000,000 (i.e., the
Class B Option Premium of $145,000,000 decreased by the $87,000,000 adjustment described in
paragraph (2) preceding) shall be recognized as gross income by the Taxpayer at the earlier of the
sale of the Class B Shares or March 1, 2009.

     (4) The Taxpayer is entitled to deduct $927,739 of costs associated with the transactions
described in this closing agreement, which were capitalized in 1999, at the same time the income in
paragraph (3) preceding is recognized.

     (5) Except for the $87,000,000 adjustment to the Taxpayer’s taxable income for the taxable
year ended December 31, 1999, the Taxpayer’s characterization, treatment and reporting for federal
income tax purposes of (i) Eve’s grant of the Class B Option, (ii) Eve’s receipt of the Class B
Option Premium and (iii) Eve’s receipt of the Distribution shall be respected for each of the
taxable years during which the Class B Option is outstanding.

     This Closing Agreement is final and conclusive except:

     (1) the matter it relates to may be reopened in the event of fraud, malfeasance, or
misrepresentation of material fact;

     (2) it is subject to the Code sections that expressly provide that effect be given to their
provisions (including any stated exception for Code section 7122) notwithstanding any other law or
rule of law; and

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     (3) if it relates to a tax period ending after the date of this Closing Agreement, it is
subject to any law, enacted after the date hereof, that applies to that tax period.

     By signing, the above parties certify that they have read and agreed to the terms of this
document.

	 	 	 
	VECTOR GROUP LTD. AND SUBSIDIARIES
	 	 
	 
	 	 
	By: /s/ Bryant Kirkland, III

	 	Date Signed: July 20, 2006
	 

Bryant Kirkland, III

	 	 

	 
	 	 
	Title

 

Vice President
	 	 
	 
	 	 
	COMMISSIONER OF INTERNAL REVENUE
	 	 
	 
	 	 
	By: /s/ Jay L. Wein

	 	Date Signed: July 20, 2006
	 

Jay L. Wein

	 	 

	 
	 	 
	Title

 

Appeals Team Case Leader
	 	 

3EX-10.51

 

EXHIBIT
10.51

RELEASE AND

SEPARATION AGREEMENT

     In consideration of the mutual promises and agreements, and subject to the terms and
conditions set forth below in this agreement, National City Corporation, a Delaware corporation
(“National City”), and John D. Gellhausen (“Executive”) hereby agree as follows:

	1.	 	Executive’s last day of active work shall be January 5, 2007 (the “Separation Date”).
Executive shall be placed on an unpaid leave of absence from the Separation Date until six (6)
months following the Separation Date. National City shall pay to Executive a lump-sum payment
of $190,545.75 [12 times $15,666.66 plus interest on six (6) months of delayed salary
continuation at an annual interest rate of 5%] six months following the Separation Date.
National City shall also pay to Executive bi-monthly salary continuation payments of
$15,666.66 subject to the limitations contained in paragraphs 12 and 32 herein, beginning on
the first pay period following the sixth month after the Separation Date and ending on the
later of (i) the first anniversary of the Separation Date or, (ii) the time Executive accepts
any form of employment, not to go beyond the second anniversary of the Separation Date (the
“Salary Continuation Period”), in the same manner as Executive’s base salary was paid prior to
the Separation Date.
	 
	2.	 	During the Executive’s unpaid leave of absence and Salary Continuation Period, National City
shall provide Executive those medical and dental benefits that are provided to employees
generally without regard to officer title, salary grade, level or status, to the extent that
those benefits were provided to Executive prior to the Separation Date (the “Welfare
Benefits”). In the event that the Executive becomes employed by a new employer and is
eligible to receive health insurance and/or dental benefits (“New coverage”) the Welfare
Benefits coverage shall be secondary to such New Coverage. National City shall provide no
other Welfare Benefits or expense reimbursements other than those set forth in this agreement.
	 
	3.	 	For purposes of the National City Corporation Deferred Compensation Plan, Amended and
Restated Effective January 1, 2005 and the National City Corporation Executive Savings Plan
(together, the “Deferred Plans”), Executive shall be deemed to be an active employee through
the Salary Continuation Period. Executive’s balances in the Deferred Plans shall be paid to
Executive in accordance with the Deferred Plans and Executive’s then current election(s). For
purposes of the National City Corporation 2004 Deferred Compensation Plan (the “2004 Plan”),
Executive shall be deemed to be an active employee through the Separation Date. Executive’s
balance in the 2004 Plan shall be paid to Executive in accordance with the 2004 Plan and
Executive’s then current election.
	 
	4.	 	Executive’s participation and any rights, benefits or claims he has in the National City
Corporation Management Incentive Plan for Senior Officers (“Short-Term Plan”) shall terminate
as of the date hereof. National City shall pay Executive a lump-sum payment of $376,000.00 in
lieu of any payments pursuant to the Short-Term Plan. This payment shall be made on the day
prior to the Separation Date.

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	5.	 	National City shall pay Executive a special performance bonus of a lump-sum payment of
$300,000.00 on the day prior to the Separation Date.
	 
	6.	 	For purposes of vesting of any awards that have been made pursuant to the National City
Corporation Retention Plan for Executive Officers (“Retention Plan”), Executive’s termination
is a result of action initiated by National City other than for termination for cause. Any
payment owed to Executive under the Retention Plan shall be paid in accordance with the
Retention Plan.
	 
	7.	 	Executive’s participation and any rights, benefits or claims he has in any plan cycle awards
granted pursuant to the National City Corporation Long-Term Cash and Equity Incentive Plan
(the “Long-Term Plan”) shall terminate as of the date hereof. National City shall pay
Executive a lump-sum payment of $574,000.00 on the day prior to the Separation Date and a
lump-sum payment of $178,000.00 on the second anniversary of the Separation Date with such
payments being made in lieu of any and all plan cycle awards under the Long-Term Plan.
Executive will not be recommended to participate in any future plan cycles of the Long-Term
Plan.
	 
	8.	 	Executive’s rights and any balances maintained under the Supplemental Cash Balance Pension
Plan shall terminate and shall be forfeited as of the Separation Date.
	 
	9.	 	National City shall provide Executive, at National City’s sole expense, outplacement services
through Challenger, Gray & Christmas, Inc., provided Executive begins using the outplacement
services by December 31, 2006. National City shall pay or reimburse Executive the legal fees
incurred for counseling and representation in connection with the termination of his
employment and the negotiation of this agreement up to a maximum of $20,000.00 to be paid by
National City no later than December 31, 2006.
	 
	10.	 	As approved by the Compensation and Organization Committee of the Board of Directors of
National City, the transferability restrictions on the below listed restricted stock grants
shall be terminated and the Executive shall become vested in the stock as of the Separation
Date:

	 	 	 	April 22, 2002 grant of 12,160 restricted shares that would have otherwise vested on
April 22, 2008;
	 
	 	 	 	August 31, 2005 grant of 4,772 restricted shares that would have otherwise vested on
August 31, 2008; and
	 
	 	 	 	March 15, 2006 grant of 5,064 restricted stock units that would have otherwise
vested on March 1, 2007.

	 	 	All other non-vested restricted stock grants or portions of grants shall be forfeited in
accordance with their terms.
	 
	11.	 	Executive’s separation of employment shall be treated as a “negotiated termination,” as that
term is used in the stock option award agreements by and between Executive and National City.

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	12.	 	All payments to be made and benefits provided to Executive shall be made less withholding for
all amounts that National City is required to withhold and for all additional amounts that
Executive has authorized National City to withhold.
	 
	13.	 	The Severance Agreement entered into by and between National City Corporation and Executive
dated December 16, 2002 shall terminate as of the Separation Date.
	 
	14.	 	By accepting the payments set forth in this agreement, Executive releases and waives any and
all rights and claims that he may have against National City and/or its Affiliates, arising
out of his employment with National City and/or its Affiliates, the cessation of his work
hereunder, the termination of his employment hereunder, or any circumstances surrounding or
statements made in connection with the cessation of his active work, or the termination of his
employment. This agreement includes, but is not limited to, rights, benefits or claims under
any federal, state, or local law concerning employment relationships or employment
discrimination including rights under the Age Discrimination in Employment Act of 1967, 29
U.S.C. Section 621, et seq., as amended.
	 
	15.	 	This agreement does not include and Executive does not waive any rights, benefits or claims
that Executive may have (a) under workers’ compensation laws, (b) pursuant to the
indemnification provisions contained in the by-laws of National City, (c) as an additional
insured under any director and officer policy that National City maintains or has maintained,
(d) under any qualified retirement plans in which Executive participated while employed by
National City, or (e) any claims arising under this agreement.
	 
	16.	 	Executive acknowledges and agrees that in the performance of his duties of employment
Executive has been brought into contact with customers, Potential Customers, as defined below,
and/or information about customers or Potential Customers of National City, either in person,
through the mails, by telephone or by other electronic means. Executive also acknowledges and
agrees that trade secrets and Confidential Information of the Employers, as defined in
Subsection 16(c) of this agreement, gained by Executive during his employment with National
City, has been developed by National City through substantial expenditures of time, effort and
financial resources and constitute valuable and unique property of National City. Executive
further understands, acknowledges and agrees that the foregoing makes it necessary for the
protection of National City’s businesses that Executive not divert business or customers from
National City and/or its affiliates and that the Executive maintain the confidentiality and
integrity of the Confidential Information:

	 	a.	 	Executive shall not, during his employment with National City and through the
Salary Continuation Period (the “Business Protection Period”):

	 	i.	 	Directly or indirectly solicit, divert, entice or take away any
customers, clients, businesses, patronage or orders from any customers, clients
or business with whom the Executive has had contact, involvement or
responsibility during Executive’s employment with National City and/or its
Affiliates, or attempt to do so, on behalf of any person (including Executive),
firm association, or corporation for the sale of any product or

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	 	 	 	service that is the same, similar to, or a substitute for, any product or
service offered by National City and/or its Affiliates.
	 
	 	ii.	 	Directly or indirectly solicit, divert, entice or take away any
potential customer identified, selected or targeted by National City and/or its
Affiliates with whom the Executive has had contact, involvement or
responsibility during Executive’s employment with National City (“Potential
Customers”), or attempt to do so, for the sale of any product or service that
is the same, similar to, or a substitute for, any product or service offered by
National City and/or its Affiliates, or
	 
	 	iii.	 	Accept or provide assistance in the accepting of (including,
but not limited to, providing any service, information, assistance or other
facilitation or other involvement) business, patronage or orders from customers
or any Potential Customers on behalf of any person (including Executive), firm,
association, or corporation involving the sale of any product or service that
is the same, similar to, or a substitute for, any product or service offered by
National City and/or its Affiliates.

	 	b.	 	Executive shall not directly or indirectly at any time during or after the term
of this agreement solicit, induce, confer or discuss with any employee of National City
and/or its Affiliates or attempt to solicit, induce, confer or discuss with any
employee of National City and/or its Affiliates the prospect of leaving the employ of
National City and/or its Affiliates, termination of his or her employment with National
City and/or its Affiliates, or the subject of employment by some other person or
organization. Executive further agrees that he will not directly or indirectly at any
time during or after the term of this agreement hire or attempt to hire any employee of
National City and/or its Affiliates.
	 
	 	c.	 	Executive shall keep in strict confidence, and shall not directly or
indirectly, at any time during or after the term of this agreement, disclose, furnish,
disseminate, make available or use (except in the course of performing his duties of
employment with National City and/or its Affiliates) any trade secrets or confidential
business or technical information of National City and/or its Affiliates or their
customers (the “Confidential Information”), without limitation as to when or how
Executive may have acquired such information. The Confidential Information shall
include the whole or any portion or phase of any scientific or technical information,
design, process, procedure, formula, pattern, compilation, program, device, method,
technique or improvement, or any business information or plans, financial information,
or listing of names, addresses or telephone numbers, including without limitation,
information relating to National City and/or its Affiliates’ customers or Potential
Customers, National City’s and/or its Affiliates’ customer lists, contract information
including terms, pricing and service provided, information received as a result of
customer contacts, National City’s and/or its Affiliates’ products and processing
capabilities, methods of operation, business plans, financials or strategy, and
agreements to which National City and/or its Affiliates may be a party. The
Confidential

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	 	 	 	Information shall not include information that is or becomes publicly available
other than as a result of disclosure by the Executive. Executive specifically
acknowledges that the Confidential Information, whether reduced to writing or
maintained in the mind or memory of Executive and whether compiled by the National
City and/or its Affiliates and/or Executive, derives independent economic value from
not being readily known to or ascertainable by proper means by others who can obtain
economic value from its disclosure or use, that reasonable efforts have been put
forth by National City and/or its Affiliates to maintain the secrecy of such
information, that such information is the sole property of National City and that
any retention and use of such information during or after the Executive’s employment
with National City and/or its Affiliates (except in the course of performing his
duties of employment with National City and/or its Affiliates) shall constitute a
misappropriation of National City’s and/or its Affiliates’ trade secrets. Executive
further agrees that, on or before the Separation Date he will return to National
City and/or its Affiliates, in good condition, all property of National City and/or
its Affiliates, including, without limitation, the Confidential Information. In the
event that said items are not so returned, National City and/or its Affiliates shall
have the right to charge Executive for all reasonable damages, costs, attorney’s
fees and other expenses incurred in searching for, taking, removing, and/or
recovering such property. If Executive is requested or required (either orally or
in writing) to disclose any Confidential Information, he shall promptly notify
National City and/or its Affiliates of this request, and he shall promptly provide
National City and/or its Affiliates with a copy of the written request or a
description of any oral request so that National City and/or its Affiliates may seek
a protective order or other appropriate remedy. If a protective order or other
appropriate remedy is not obtained in a reasonable period of time, the Executive may
furnish only that portion of the Confidential Information that he is legally
required to disclose.

	17.	 	Executive acknowledges that his obligations under this agreement are reasonable in the
context of the nature of National City’s business and the competitive injuries likely to be
sustained by National City if Executive violated such obligations. Executive further
acknowledges that this agreement is made in consideration of, and is adequately supported by
this agreement, which Executive acknowledges constitutes new and/or good, valuable and
sufficient consideration.
	 
	18.	 	If it shall be judicially determined that Executive has violated any of his obligations under
paragraph 16 of this agreement, then the period applicable to the obligation which he shall
have been determined to have violated shall automatically be extended by a period of time
equal in length to the period during which said violation(s) occurred.
	 
	19.	 	It is expressly understood and agreed that although Executive and National City consider the
restrictions contained in paragraph 16 hereof to be reasonable, if a final judicial
determination is made by a court of competent jurisdiction that the time or territory or any
other restriction contained in this agreement is an unenforceable restriction against
Executive, the provisions of this agreement shall not be rendered void but shall be deemed
amended to apply as to such maximum time and territory and to such maximum

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	 	 	extent as such court may judicially determine or indicate to be enforceable. Alternatively,
if any court of competent jurisdiction finds that any restriction contained in this
agreement is unenforceable, and such restriction cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the other
restrictions contained herein.
	 
	20.	 	During the Business Protection Period (and for any extended period as provided in paragraph
18), Executive agrees to communicate the contents of paragraph 16 of this agreement to any
person, firm, association, or corporation that Executive intends to be employed by, associated
with, or represent, that is engaged in a business that is competitive to National City and/or
its Affiliates.
	 
	21.	 	Executive acknowledges and agrees that the remedy at law available to National City and/or
its Affiliates for breach of any of his obligations under this agreement would be inadequate,
and agrees and consents that in addition to any other rights or remedies that National City
and/or its Affiliates may have at law or in equity, temporary and permanent injunctive relief
may be granted in any proceeding that may be brought to enforce any provision contained in
paragraph 16 of this agreement, without the necessity of proof of actual damage.
	 
	22.	 	The payments and benefits to be provided to Executive pursuant to this agreement shall
terminate immediately upon such breach of this agreement and/or any stock option award
agreement.
	 
	23.	 	Executive acknowledges that he has been advised to consult an attorney and represents that he
has consulted an attorney prior to executing this agreement. Executive acknowledges that he
has been given a period of twenty-one (21) days, commencing September 6, 2006, to consider
this agreement and the benefits he will be receiving prior to signing it.
	 
	24.	 	Executive understands that he has seven (7) days after he signs this agreement to revoke it,
and that National City cannot enforce this agreement until the seven (7) days have passed and
Executive has not revoked it. Executive’s pay and benefits under this agreement may be
delayed until the seven (7) days have passed and Executive has not revoked this agreement.
	 
	25.	 	Executive represents and warrants that, during his employment with National City and/or its
Affiliates, he complied with the National City Code of Ethics. Executive agrees to make no
statements, whether written or oral, nor take any action that would result in the injury or
impairment of the reputation or goodwill of National City and/or its Affiliates; provided that
no statement made in connection with a civil, administrative or other legal proceeding in
which Executive is a party shall be a breach of this provision.
	 
	26.	 	Effective as of the Separation Date, Executive hereby resigns all officer titles, positions
and director positions he may hold with National City and/or its Affiliates.

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	27.	 	For purposes of this agreement the term “National City and/or its Affiliates” means National
City, its subsidiaries and affiliates, and their current and former officers, directors, and
employees.
	 
	28.	 	The release and waiver of all rights, benefits and claims covered by this agreement applies
to Executive and his estate.
	 
	29.	 	Executive acknowledges that he has completely read, fully understands, and voluntarily signed
this agreement.
	 
	30.	 	Executive acknowledges that he waives any and all rights to any payment, benefit, program,
perquisite, award or compensation to which Executive is or may be entitled except as expressly
provided in this agreement and agreements referred to herein.
	 
	31.	 	In the event that any one or more of the provisions of this agreement shall be or become
invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions of this agreement shall not be affected thereby.
	 
	32.	 	National City shall have the right to delay the payment, or to limit the form of payment, of
any amount under this agreement, or any plan referenced herein, to the extent that National
City, in good faith, determines that such delay or limitation is necessary to avoid adverse
tax consequences under Section 409A of the Internal Revenue Code and the regulations
promulgated thereunder. Further, Executive understands that any participation in any
qualified retirement plan maintained by National City, including but not limited to the
Savings and Investment Plan, is subject to the limitation and restrictions set forth in the
Internal Revenue Code of 1986, as amended, and regulations promulgated thereunder, and that
nothing in this agreement affects his rights to any benefits accrued under such plans at any
time.
	 
	33.	 	This agreement shall be governed by, and construed in accordance with, the laws of the State
of Ohio. Executive agrees that any action, claim, counterclaim, cross claim, proceeding, or
suit, whether at law or in equity, whether sounding in tort, contract, or otherwise at any
time arising out of or relating to this agreement including, but not limited to, the
administration, enforcement, or negotiation of this agreement, or the performance of any
obligations in respect of this agreement (each such action, claim, counterclaim, cross claim,
proceeding, or suit, an “Action”) shall be brought exclusively in a federal court or state
court located in the city of Cleveland, Ohio. Each of the parties unconditionally hereby: (i)
submits to the personal jurisdiction of such courts; (ii) consents to service of process in
connection with any action, suit or proceeding against Executive; and (iii) waives any other
requirement (whether imposed by statute, rule of court or otherwise) with respect to personal
jurisdiction, venue or service of process.
	 
	34.	 	This agreement contains the entire understanding of the parties with respect to the subject
matter herein. There are no restrictions, agreements, promises, warranties, covenants or
undertakings between the parties with respect to the subject matter herein other than those
expressly set forth herein. This agreement binds and benefits the parties and their

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	 	 	successors, heirs, beneficiaries and assigns. This agreement may not be altered, modified,
or amended except by written instrument signed by each party.

IN WITNESS WHEREOF, the parties hereto have duly executed this agreement on this 6th day
of September, 2006.

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 
	 	 
	 

	 	Jon N. Couture
	 	John D. Gellhausen

(“Executive”)
	 
	 	 	 	 
	Title:

	 	Senior Vice President

 

National City Corporation

(“National City”)	 	 

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