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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): NOVEMBER 27, 1995
BROOKE GROUP LTD.
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
1-5759 51-0255124
(Commission File Number) (I.R.S. Employer Identification No.)
100 S.E. SECOND STREET, MIAMI, FLORIDA 33131
(Address of principal executive offices) (Zip Code)
(305) 579-8000
(Registrant's telephone number, including area code)
(NOT APPLICABLE)
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On November 27, 1995, Brooke Group Ltd. issued a press release, a copy
of which is attached as Exhibit 99.1 and incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) Exhibits.
10.1 Exchange Agreement dated as of November 21,
1995 among BGLS Inc., Brooke Group Ltd., AIF
II, L.P., Artemis America Partnership,
Tortoise Corp., Starfire Holding Corporation
and Mainstay High Yield Corporate Bond Fund.
99.1 Press Release of Brooke Group Ltd. dated
November 27, 1995.
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
BROOKE GROUP LTD.
/s/ Gerald E. Sauter
---------------------------------
Date: November 29, 1995 Gerald E. Sauter
Vice President and
Chief Financial Officer
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EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description Sequentially Numbered Page
- ---------- ----------- --------------------------
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10.1 Exchange Agreement dated as of 5
November 21, 1995 among BGLS Inc.,
Brooke Group Ltd., AIF II, L.P.,
Artemis America Partnership, Tortoise
Corp., Starfire Holding Corporation
and Mainstay High Yield Corporate
Bond Fund.
99.1 Press Release of Brooke Group Ltd. 344
dated November 27, 1995.
</TABLE>
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EXHIBIT 10.1
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[EXECUTION COUNTERPART]
- --------------------------------------------------------------------------------
EXCHANGE AGREEMENT
dated as of November 21, 1995
among
BGLS INC.,
BROOKE GROUP LTD.,
AIF II, L.P.,
ARTEMIS AMERICA PARTNERSHIP,
TORTOISE CORP.,
STARFIRE HOLDING CORPORATION
and
MAINSTAY HIGH YIELD
CORPORATE BOND FUND
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<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page
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<S> <C> <C>
RECITALS . . . . . . . . . . . . . . . . . 1
ARTICLE 1
DEFINITIONS AND USAGE . . . . . . . . . . . . . . . . . . . 1
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.2. Usage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 2
EXCHANGE . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.1. Agreement of Each Participating Holder to Exchange . . . . . . . . . . . . . . . . . . . 8
Section 2.2. Agreement by the Company to Make and Consummate the Exchange Offer . . . . . . . . . . . 11
Section 2.3. Payment of Legal Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
ARTICLE 3
CERTAIN AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.1. Prior Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.2. Delivery of Certain Information as to the Company . . . . . . . . . . . . . . . . . . . . 13
Section 3.3. Agreement as to Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.4. Transactions between the Company and Brooke . . . . . . . . . . . . . . . . . . . . . . . 13
Section 3.5. Exchange Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.6. Redemption of Reset Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.7. Redemption of Series 2 Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.8. Offering Circular . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Section 3.9. Amendments and Supplements of the Offering Circular . . . . . . . . . . . . . . . . . . . 15
Section 3.10. The Offer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 4
INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.1. Basic Obligations of Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.2. Exceptions to Obligations of Indemnitor . . . . . . . . . . . . . . . . . . . . . . . . . 16
</TABLE>
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<TABLE>
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Section 4.3. Settlement of Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.4. Indemnification Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.5. Contribution . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.6. Cumulative Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
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<TABLE>
<S> <C> <C>
ARTICLE 5
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . 19
Section 5.1. Representations and Warranties of Each Party . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.2. Representations and Warranties of the Company and Brooke . . . . . . . . . . . . . . . . 21
ARTICLE 6
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.1. Publicity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.2. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.3. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.4. Parties Entitled to Benefit, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Section 6.5. Transfer and Assignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.6. Notices, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 6.7. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.8. Further Assurances; Cooperation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.9. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.10. Entire Agreement; Severability of Provisions . . . . . . . . . . . . . . . . . . . . . . 26
Section 6.11. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
</TABLE>
EXHIBITS
Exhibit A Debt Schedule
Exhibit B-1 Form of Reset Indenture Amendment
Exhibit B-2 Form of Subordinated Debenture Indenture Amendment
Exhibit C Form of Indenture
Exhibit D Form of Company Pledge Agreement
Exhibit E Form of NV Holdings Pledge Agreement
Exhibit F Form of Registration Rights Agreement
Exhibit G Form of New Valley Registration Rights Agreement
Exhibit H Form of Opinion of General Counsel of the Company
Exhibit I Form of Opinion of Milbank, Tweed, Hadley & McCloy
Exhibit J Terms of Exchange Offer
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EXCHANGE AGREEMENT (this "Agreement") dated as of November 21,
1995 among BGLS INC., a Delaware corporation (the "Company"), BROOKE GROUP
LTD., a Delaware corporation ("Brooke" and, together with the Company, the
"Brooke Parties"), AIF II, L.P., a Delaware limited partnership ("AIF II"),
ARTEMIS AMERICA PARTNERSHIP, a Delaware partnership (as successor to Artemis
America LLC, a Delaware limited liability company) ("Artemis" and, together
with AIF II, the "Apollo Holders"), TORTOISE CORP., a New York corporation
("Tortoise"), STARFIRE HOLDING CORPORATION, a Delaware corporation ("SHC"), and
MAINSTAY HIGH YIELD CORPORATE BOND FUND, a series of a Massachusetts business
trust ("Mainstay"; together with the Apollo Holders and Tortoise, the
"Participating Holders").
RECITALS
A. The Participating Holders (directly or through one or
more Nominees) own Series 2 Notes (as defined below) and Subordinated
Debentures (as defined below).
B. The parties wish to make certain agreements in
connection with the exchange of such Series 2 Notes and Subordinated Debentures
for certain New Securities (as defined below).
NOW, THEREFORE, in consideration of these premises and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereby agree as follows:
ARTICLE 1
DEFINITIONS AND USAGE
Section 1.1 Definitions. Unless otherwise defined herein,
capitalized terms used herein shall have the following meanings:
"A/B Exchange Offer" means the "Exchange Offer" as defined in
the Registration Rights Agreement.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling, controlled by or under common control with
such specified Person. For the purposes of this definition, "control"
(including, with correlative meanings,
<PAGE> 7
the terms "controlled by" and "under common control with"), as applied to any
Person, means the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting securities, by agreement or otherwise.
"AIF II" has the meaning set forth in the preamble.
"Amended Apollo Indemnification Agreement" means the letter
agreement dated as of October 4, 1993 among AIF II, Artemis Finance SNC and
Brooke entitled "Re: Indemnification and Related Matters" as amended by the
amendment dated as of March 1, 1994 among AIF II, Artemis (as successor in
interest to Artemis Finance SNC) and Brooke.
"Apollo Holders" has the meaning set forth in the preamble.
"Artemis" has the meaning set forth in the preamble.
"Associate" has the meaning provided in Rule 12b-2 promulgated
by the SEC under the Exchange Act.
"BOL" means Brooke (Overseas) Ltd., a Delaware corporation.
"Brooke Parties" has the meaning set forth in the preamble.
"Company Pledge Agreement" means the Pledge and Security
Agreement between the Company and Shawmut Bank, N.A., as trustee, substantially
in the form of Exhibit D hereto, with such changes prior to the Exchange Date
as to which the parties hereto shall agree in writing.
"Debt" means any indebtedness for borrowed money or any
obligation that would appear as indebtedness on a balance sheet prepared in
accordance with generally accepted accounting principles, guaranties of
indebtedness, conditional sales obligations and capitalized lease obligations.
"Equity Ownership" means, with respect to any corporation,
fully diluted equity ownership of such corporation,
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the amount or percentage of which shall be calculated on the basis of economic
and voting power, on a fully diluted basis, of such corporation.
"Exchange Act" means the Securities Exchange Act of 1934.
"Exchange and Termination Agreement" means the Exchange and
Termination Agreement dated as of September 30, 1994 among the Brooke Parties,
the Apollo Holders and Mainstay.
"Exchange Date" has the meaning set forth in Exhibit J.
"Exchange Offer" means the offer by the Company, in accordance
with the terms set forth in Exhibit J hereto, to exchange New Securities for
the Existing Securities.
"Existing Securities" means the Reset Notes, the Series 2
Notes and the Subordinated Debentures.
"Expiration Date" has the meaning specified in Exhibit J.
"Governmental Rule" has the meaning specified in the
definition of "Indemnification Event" in this Section 1.1.
"hold" means hold or beneficially own, and correlative words
shall have correlative meanings.
"Indemnification Event" means an actual or threatened or
potential claim, action, suit or proceeding against or affecting an Indemnitee
that at any time results from, relates to or arises out of:
(i) except with respect to the matters that are subject
to indemnification under Article 5 of the Registration Rights
Agreement, an allegation or an adjudication (whether or not final)
that any of the following violated or contravened or would violate or
contravene (x) any statute, regulation, common law, equitable
principle or other law, governmental rule or quasi-governmental rule
(collectively, "Governmental Rule") or (y) any indenture, mortgage,
bond, debenture, note or other agreement or instrument binding on or
otherwise
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affecting the Company, Brooke or any subsidiary or other Affiliate
thereof ("Violation"): (A) (I) any discussion, negotiation, agreement
or understanding relating to the transactions contemplated hereby or
(II) the consummation of any such transaction; (B) any modification,
termination or abandonment of any such discussion, negotiation,
agreement or understanding; or (C) any other action taken by any
Indemnitee in connection with any transaction contemplated hereby or
by any Prior Agreement;
(ii) except with respect to the matters that are subject
to indemnification under Article 5 of the Registration Rights
Agreement, any breach by an Indemnitor or any subsidiary or other
Affiliate thereof of any agreement or understanding (including this
Agreement) with an Indemnitee or any other Indemnitee relating to any
transaction contemplated hereby;
(iii) except with respect to the matters that are subject
to indemnification under Article 5 of the Registration Rights
Agreement, any actual or alleged misstatement or omission of, or any
other actual or alleged Violation by, the Company or Brooke or any
subsidiary or other Affiliate thereof in connection with any filing
under any Governmental Rule or any communication or other
dissemination of information to security holders (including, without
limitation, any written communications to holders of Existing
Securities in connection with the Exchange Offer) or made generally
available by press release or similar communication of any such
parties in connection with the transactions contemplated hereby; or
(iv) in connection with any sale of Series A Notes by a
Participating Holder prior to the earlier of (i) the consummation of
the A/B Exchange Offer and (ii) the effectiveness of a Shelf
Registration in accordance with the Registration Rights Agreement, (x)
any untrue or alleged untrue statement of a material fact contained in
the Offering Circular or any filing by the Company under the Exchange
Act or (y) any omission or alleged omission of a material fact
required to be stated in the Offering Circular or any filing by the
Company under the Exchange Act necessary to make the statements
therein, in the light of
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the circumstances under which they were made, not misleading.
"Indemnitee" has the meaning specified in Section 4.1.
"Indemnitor" has the meaning specified in Section 4.1.
"Indenture" means the Indenture, between the Company and
Shawmut Bank, N.A., as trustee, substantially in the form of Exhibit C hereto,
with such changes as to which the parties hereto shall agree in writing.
"June 1990 Agreement" has the meaning specified in Section
5.2(h).
"Liens" means all pledges, liens, security interests or other
charges or encumbrances.
"Liggett" means Liggett Group Inc., a Delaware corporation.
"Losses and Expenses" has the meaning specified in Section 4.1.
"Mainstay" has the meaning specified in the preamble.
"New Securities" has the meaning specified in Exhibit J.
"New Valley" means New Valley Corporation, a New York
corporation.
"New Valley Bankruptcy" means In re New Valley Corporation,
Case No. 91-27704 NW, adjudicated in the United States Bankruptcy Court for the
District of New Jersey.
"New Valley Class A Preferred Shares" means the $15 Class A
Increasing Rate Cumulative Senior Preferred Shares, par value $0.01 per share,
of New Valley.
"New Valley Class B Preferred Shares" means the $3 Class B
Cumulative Convertible Preferred Shares, par value $0.10 per share, of New
Valley.
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"New Valley Common Shares" means the common stock, par value
$0.01 per share, of New Valley.
"New Valley Registration Rights Agreement" means the
Registration Rights Agreement, between New Valley, the Company, Brooke and
Shawmut Bank, N.A., as trustee, substantially in the form of Exhibit G hereto,
with such changes as to which the parties hereto shall agree.
"Nominee", with respect to any Participating Holder, means
such Participating Holder's nominee, custodian or nominee's custodian, as
applicable.
"NV Holdings" means New Valley Holdings, Inc., a Delaware
corporation.
"NV Holdings Pledge Agreement" means the Pledge and Security
Agreement between NV Holdings and Shawmut Bank, N.A., as trustee, substantially
in the form of Exhibit E hereto, with such changes as to which the parties
hereto shall agree.
"Offering Circular" means the Offering Circular and Consent
Solicitation of the Company, to be dated the date the Exchange Offer is
commenced, pursuant to which the Company will make the Exchange Offer.
"Operative Documents" means this Agreement, the Indenture, the
Company Pledge Agreement, the NV Holdings Pledge Agreement, the Registration
Rights Agreement, the New Valley Registration Rights Agreement, the
Subordinated Debenture Indenture Amendment, the Reset Indenture Amendment (if
applicable), the New Securities and the Acknowledgement and Undertakings
attached to the Indenture, the Company Pledge Agreement and the NV Holdings
Pledge Agreement.
"Participating Holder" has the meaning set forth in the
preamble.
"Person" or "person" means any individual, partnership,
corporation, limited liability company, business trust, joint stock company,
trust, unincorporated association, joint venture, governmental authority or
other entity of whatever nature.
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"Prior Agreements" means the Exchange and Termination
Agreement, the Amended Apollo Indemnification Agreement and the September 2
Icahn Agreement.
"Registration Rights Agreement" means the A/B Exchange and
Registration Rights Agreement between the Company, Brooke and the Participating
Holders, substantially in the form of Exhibit F hereto, with such changes as to
which the parties hereto shall agree.
"Representing Party" has the meaning set forth in Section 5.1.
"Reset Indenture" means the Indenture, dated as of April 1,
1988, among the Company (as successor to Brooke Partners L.P.) and Brooke
Capital Corp., as issuers, L Holdings Inc., as general partner, and Shawmut
Bank, N.A., as successor trustee to National Westminster Bank, USA, as amended,
modified or supplemented from time to time.
"Reset Indenture Amendment" means the Sixth Supplemental
Indenture to the Reset Indenture, substantially in the form of Exhibit B-1
hereto, with such changes as to which the parties hereto may agree in writing.
"Reset Notes" means the Company's 13.500% Senior Subordinated
Reset Notes due 1997 issued under the Reset Indenture, the interest rate on
which has been reset to 16 1/8%.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933.
"September 2 Icahn Agreement" means the Agreement dated as of
September 2, 1994 between SHC and the Brooke Parties, as amended, modified or
supplemented from time to time.
"Series A Notes" has the meaning specified in Exhibit J.
"Series 2 Indenture" means the Indenture, dated as of
September 30, 1994, between the Company and Shawmut Bank, N.A.,
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as trustee, as amended, modified or supplemented from time to time.
"Series 2 Notes" means the Company's 13.75% Series 2 Senior
Secured Notes due 1997 issued pursuant to the Series 2 Indenture.
"SHC" has the meaning set forth in the preamble.
"Shelf Registration" has the meaning specified in the
Registration Rights Agreement.
"Solvent", when used with respect to any Person, means, at the
time of determination, that: (a) (i) the fair value of such Person's assets
(both at fair valuation and at present fair saleable value) is in excess of the
total amount of its known liabilities, (ii) such Person is then able and
expects to be able to pay its debts as they mature (taking into account the
timing and amounts of cash to be received by such Person and the amounts to be
payable on or in respect of the debts of such Person) and (iii) such Person has
capital sufficient to carry on its business as conducted and as proposed to be
conducted, with contingent liabilities (such as, without limitation, guaranties
and pension plan liabilities), being computed for the purposes of the foregoing
at the amounts that, in light of all the facts and circumstances existing at
the time, represent the amounts that can reasonably be expected to become
actual or matured liabilities; and (b) in any case, such Person is not
"insolvent" within the meaning of (i) Section 2 of the Uniform Fraudulent
Transfer Act or Uniform Fraudulent Consequence Act of any applicable
jurisdiction (and, with respect to such Act, is not properly to be presumed to
be insolvent under Section 2(b) thereof), (ii) Section 101 of Title 11 of the
United States Code or (iii) any comparable law or regulation applicable in the
circumstances.
"Specified Persons" has the meaning specified in Section 4.1.
"Subordinated Debentures" means the Company's 14.500%
Subordinated Debentures due 1998 issued pursuant to the Subordinated Debenture
Indenture.
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"Subordinated Debenture Indenture" means the Indenture, dated
as of April 1, 1988, among the Company (as successor to Brooke Partners L.P.)
and Brooke Capital Corp., as issuers, L Holdings Inc., as general partner, and
First Trust National Association, as trustee, as amended, modified or
supplemented from time to time.
"Subordinated Debenture Indenture Amendment" means the Sixth
Supplemental Indenture to the Subordinated Debenture Indenture, substantially
in the form of Exhibit B-2 hereto, with such changes as to which the parties
hereto shall agree in writing.
"Tortoise" has the meaning set forth in the preamble.
"Trustee" means Shawmut Bank, N.A. in its capacity as trustee
under the Indenture.
"Violation" has the meaning specified in the definition of
"Indemnification Event" in this Section 1.1.
Section 1.2 Usage. As used herein, references to Articles,
Sections and Exhibits are to articles and sections hereof and exhibits hereto,
references to a Person are also references to its successors and assigns,
references to a document are to it as amended, waived and otherwise modified
from time to time, references to a statute or another governmental rule are to
it as amended and otherwise modified from time to time, and the word
"including" and correlative words shall be deemed to be followed by "without
limitation" if not followed by such words or words of like import. The
definitions set forth in Section 1.1 are equally applicable both to the
singular and plural forms and the feminine, masculine and neuter forms of the
terms defined. The headings of Articles and Sections and the table of contents
relating hereto have been included solely for convenience of reference and
shall not have any effect on the construction hereof.
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ARTICLE 2
EXCHANGE
Section 2.1 Agreement of Each Participating Holder to
Exchange. Upon the terms and subject to the conditions hereof, (i) on or
before the Expiration Date, each Participating Holder shall tender and not
withdraw all Existing Securities beneficially owned by such Participating
Holder pursuant to and in compliance with the Exchange Offer and (ii) on or
before the Exchange Date, each Participating Holder shall execute and deliver
each of the Operative Documents to which such Participating Holder is an
intended party other than any Operative Document executed and delivered on the
date hereof.
(a) Conditions to Acceptance of Exchange Offer. The
obligation of each Participating Holder to accept the Exchange Offer shall be
subject to the satisfaction or waiver by such Participating Holder of each of
the following conditions precedent on or before the Expiration Date:
(i) Accuracy of Representations; Compliance with
Covenants. Each of the representations and warranties of the Company
and Brooke contained herein or in the Registration Rights Agreement
shall be true and correct in all material respects on the Expiration
Date (except those explicitly stated to be made as of an earlier date)
as if made on such date (except for the failure of any representation
contained in Section 5.2(a) to be true and correct because of any
default occurring after the date hereof under the Reset Indenture and
except, with respect to Section 5.2(a) only, as affected by the
transactions contemplated hereby) and neither the Company nor Brooke
shall be in material breach of any of its covenants contained herein
or in the Registration Rights Agreement.
(ii) No Litigation. There shall not be threatened,
instituted or pending, by any governmental agency or other
governmental regulatory or administrative agency or commission, any
action or proceeding before, and no injunction, order, or decree shall
have been issued by, any court or governmental agency or other
governmental
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<PAGE> 16
regulatory or administrative agency or commission seeking to restrain
or prohibit the consummation of the Exchange Offer.
(iii) No Material Adverse Change. There shall not have
occurred, since the date hereof, a material adverse change to the
business, assets, financial condition, operations or prospects of the
Company and its Subsidiaries, taken as a whole.
(iv) Other Participating Holders. Each other
Participating Holder shall have tendered to the Company pursuant to
the Exchange Offer, and not withdrawn, all Existing Securities held by
such Participating Holder. Without limiting the foregoing, all
Existing Securities identified in Section 5.1(c) shall have been
tendered to the Company and not withdrawn pursuant to the Exchange
Offer.
(v) Qualification of Trust Indenture. The Indenture
shall have been duly qualified under the Trust Indenture Act of 1939,
as amended.
(vi) Limited Procedures Letters. Each Participating
Holder shall have received from the independent auditors of the
Company and New Valley limited procedures letters with respect to the
Exchange Offer documents covering matters customarily covered in such
letters, in form and substance reasonably satisfactory to such
Participating Holder.
(vii) Filing of Exchange Offer Registration Statement. The
Company shall have failed to file the Exchange Offer Registration
Statement (as defined in the Registration Rights Agreement) on or
before the Filing Date (as defined in the Registration Rights
Agreement) unless any injunction, order or decree shall have been
issued by any court or governmental agency or other governmental
regulatory or administrative agency or commission seeking to restrain
or prohibit such filing or the consummation of the Exchange Offer.
(b) Execution of Operative Documents. The obligation of
each Participating Holder to execute and deliver Operative Documents as
contemplated by the first paragraph of this Section 2.1 shall be subject to the
satisfaction or waiver by such
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Participating Holder of each of the following conditions precedent on or before
the Exchange Date:
(i) Execution of Operative Documents. Each of the
Operative Documents (other than the Reset Indenture Amendment and,
except for execution and delivery by the Company and the Participating
Holders, the Subordinated Debenture Indenture Amendment) shall have
been duly executed and delivered by each intended party thereto (other
than such Participating Holder).
(ii) Closing Documents. Each of the Participating Holders
shall have received certified copies of the charter and by-laws (or
equivalent documents) of each Brooke Party and each Affiliate thereof
(other than Bennett S. LeBow) intended to be a party to any Operative
Document, and of all corporate authority for each such Person with
respect to the execution, delivery and performance of such of the
Operative Documents to which such Person is intended to be a party and
such other customary closing documents as such Participating Holder
may reasonably request.
(iii) Opinions of Counsel to the Brooke Parties. Each of
the Participating Holders shall have received (i) an opinion, dated
the Exchange Date, of Marc Bell, General Counsel of the Company,
substantially in the form of Exhibit H hereto and (ii) an opinion,
dated the Exchange Date, of Milbank, Tweed, Hadley & McCloy, special
New York counsel to the Company, substantially in the form of Exhibit
I hereto; provided that any of the matters covered in such opinion of
Marc Bell may instead be covered in such opinion of Milbank, Tweed,
Hadley & McCloy.
(iv) Date of Exchange. The Exchange Date shall have
occurred on or before January 30, 1996, unless the failure of the
Exchange Date to occur by such date is attributable to the failure by
such Participating Holder to perform its obligations hereunder.
(v) Reset Notes. Either (x) the holders (other than
Brooke or any transferee thereof) of not less than a majority of the
aggregate unpaid principal amount of the Reset Notes that are entitled
to vote shall have tendered
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<PAGE> 18
such Reset Notes to the Company in accordance with the Exchange Offer
and shall have executed the Reset Indenture Amendment or (y) the
Company shall have delivered an irrevocable notice to the trustee
under the Reset Indenture to redeem the Reset Notes in full.
Section 2.2. Agreement by the Company to Make and Consummate
the Exchange Offer. Upon the terms and subject to the following conditions (i)
through (vii) (each of which may be waived by the Company), the Company shall
(A) make the Exchange Offer and accept all Existing Securities tendered in
accordance with the terms thereof and (B) execute and deliver, and cause each
of its Subsidiaries to execute and deliver and use its best efforts to cause
each of its Affiliates to execute and deliver each of the Operative Documents
to which the Company or any such Subsidiary or Affiliate is an intended party
or signatory:
(i) Accuracy of Representations; Compliance with
Covenants. Each of the representations and warranties of the
Participating Holders contained herein shall be true and correct in
all material respects and no Participating Holder shall be in breach
of any of its covenants contained herein.
(ii) No Litigation. There shall not be threatened,
instituted or pending, by any governmental agency or other
governmental regulatory or administrative agency or commission, any
action or proceeding before, and no injunction, order, or decree shall
have been issued by, any court or governmental agency or other
governmental regulatory or administrative agency or commission seeking
to restrain or prohibit the consummation of the Exchange Offer.
(iii) Illegality. The making and consummation of the
Exchange Offer shall not violate any Governmental Rule.
(iv) Other Participating Holders. Each Participating
Holder and each assignee thereof shall have tendered all Existing
Securities held by such Participating Holder in accordance with the
terms of the Exchange Offer. Without limiting the foregoing, all
Existing Securities identified in Section 5.1(c) shall have been
tendered to the Company and not withdrawn pursuant to the Exchange
Offer.
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<PAGE> 19
(v) Operative Documents. On or before the Exchange Date,
each party to the Operative Documents (other than the Company or any
Affiliate thereof) shall have duly executed and delivered each
Operative Document to which such Person is intended to be a party.
(vi) Qualification of Trust Indenture. The Indenture
shall have been duly qualified under the Trust Indenture Act of 1939,
as amended.
(vii) Date of Exchange. The Exchange Date shall have
occurred on or before January 30, 1996, unless each of the conditions
set forth in clauses (i) through (vi) of this Section 2.2 shall have
been satisfied on or prior to such date or unless the failure of the
Exchange Date to occur by such date is attributable to the failure of
any Brooke Party to perform its respective obligations hereunder or
under the Registration Rights Agreement.
Section 2.3. Payment of Legal Expenses. If the Exchange
Offer is not consummated for any of the following reasons:
(i) any representation or warranty made by the Company or
Brooke in Section 5.2 shall prove to have been false
in any material respect as of the time made;
(ii) the Company or Brooke shall have failed to comply in
any material respect with any of its agreements
contained herein or any of its agreements contained
in the Registration Rights Agreement;
(iii) the Company or Brooke shall have failed to deliver or
cause to be delivered any of the Closing Documents
required to be delivered pursuant to Section 2.1(b)
(unless said failure shall occur because of a change
of circumstances (other than a change of
circumstances caused solely by the Company or any of
its Affiliates) since the date hereof or a failure of
any of the conditions set forth in clauses (i)
through (vii) of Section 2.2); or
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<PAGE> 20
(iv) counsel to the Company shall not have delivered any
of the opinions required to be delivered pursuant to
Section 2.1(c) (unless said failure shall occur
because of a change of circumstances (other than a
change of circumstances caused solely by the Company
or any of its Affiliates) since the date hereof or a
failure of any of the conditions set forth in clauses
(i) through (vii) of Section 2.2);
then, the Company shall promptly compensate the Participating Holders, in
immediately available funds, for certain expenses as follows:
(a) The Company shall reimburse Apollo Advisors, L.P. and
Lion Advisors, L.P. (divided into equal amounts), on behalf of the
Apollo Holders and certain related persons, $1,000,000;
(b) The Company shall reimburse Tortoise, on behalf of
Tortoise, SHC and certain related persons, $1,000,000; and
(c) The Company shall reimburse Mainstay $75,000.
ARTICLE 3
CERTAIN AGREEMENTS
Section 3.1. Prior Agreements. The parties hereto that are
parties to any Prior Agreement hereby confirm that such Prior Agreement remains
in full force and effect, except that such parties agree that the following
provisions of the following Prior Agreements are hereby terminated as of the
Exchange Date (subject to the condition that the Exchange Offer shall have been
consummated): (i) Sections 2.1.3, 2.1.5, 2.1.6, 2.1.7, 2.3 and 3.1 of the
September 2 Icahn Agreement, including the related provisions of the amendments
and supplements thereto and the agreements of Bennett S. LeBow appended
thereto; (ii) Sections 2.14, 2.15, 2.16 and 2.17 of the Exchange and
Termination Agreement and the related provisions of the Agreement and
Undertaking of Bennett S. LeBow and NV Holdings relating thereto.
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<PAGE> 21
Section 3.2. Delivery of Certain Information as to the
Company. For so long as any Participating Holder continues to hold any New
Securities, the Company shall provide to such Participating Holder (i) in a
timely manner, audited annual and unaudited quarterly consolidated financial
statements for the Company and its subsidiaries in such scope as regularly
required to be provided under the Indenture pursuant to Section 4.10 thereof to
the Trustee thereunder, together with corresponding consolidating financial
statements prepared in accordance with generally accepted accounting
principles, (ii) promptly after the giving or receipt thereof by the Company,
copies of any notice or other communication given under Section 13.02 (or any
other provision) of the Indenture, Section 6.02 of the Company Pledge Agreement
or Section 6.02 of the NV Holdings Pledge Agreement and (iii) promptly after
the provision thereof to the Trustee, copies of any opinions, appraisals or
similar documents provided to the Trustee as contemplated by Section 4.20 of
the Indenture.
Section 3.3. Agreement as to Restricted Payments. From the
date hereof until the earlier of (x) the Exchange Date and (y) the date on
which the Company or any Participating Holder has elected, in accordance with
the terms hereof, to not consummate the Exchange, the Company agrees to comply
with Section 4.03 of the form of Indenture attached as Exhibit C hereto;
provided that from November 1, 1995 until December 31, 1995, the Company may
make Restricted Payments (as defined in the Indenture) in an amount up to but
not exceeding $1,500,000.
Section 3.4. Transactions between the Company and Brooke.
For so long as any Participating Holder shall hold any New Securities, the
Company shall (i) maintain timely, accessible records of any payments made by
the Company or any of its Subsidiaries to Brooke (other than Restricted
Payments made in accordance with Section 4.03 of the Indenture) including,
without limitation, a copy of each invoice against which each such payment was
made or the appropriate payroll records, (ii) upon the reasonable request of
any Participating Holder made upon reasonable intervals, permit a
representative of such Participating Holder to inspect, audit and/or photocopy
such records and (iii) provide such other information regarding such payment to
any Participating Holder as such Participating Holder may reasonably request,
including, without limitation, the purpose of any such payment.
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<PAGE> 22
Section 3.5. Exchange Offer. The Company agrees to make and
consummate the Exchange Offer materially in accordance with all applicable
laws.
Section 3.6. Redemption of Reset Notes. The Company agrees
that if, on or before the Exchange Date, the holders of less than a majority of
the aggregate unpaid principal amount of the Reset Notes shall have validly
tendered and not withdrawn such Reset Notes pursuant to the Exchange Offer and
all other conditions precedent to the obligation of the Company to consummate
the Exchange Offer shall have been satisfied or waived (other than as
contemplated by Section 3.7), the Company shall deliver an irrevocable notice
to the trustee under the Reset Indenture to redeem the Reset Notes in full.
Section 3.7. Redemption of Series 2 Notes. The Company
agrees that if fewer than 100% of the Series 2 Notes are validly tendered and
not withdrawn pursuant to the Exchange Offer and all conditions precedent to
the obligation of the Company to consummate the Exchange Offer shall have been
satisfied or waived (other than as contemplated by Section 3.6 and other than
the condition that 100% of the Series 2 Notes shall have been so tendered and
not withdrawn), the Company shall redeem such Series 2 Notes not so tendered
prior to the Exchange Date, provided that each Participating Holder and each
assignee thereof shall have waived any rights to have the Series 2 Notes held
by such Participating Holder or any such assignee redeemed in connection with
such redemption.
Section 3.8. Offering Circular. Except as required by
applicable law and except as set forth in the draft Offering Circular dated
November 21, 1995, the Company agrees that it shall not include any references
to any Participating Holder in any offering circular delivered in connection
with the Exchange Offer without the consent of such Participating Holder.
Except as required by applicable law, the Company will not make any material
changes to the draft Offering Circular dated November 21, 1995 without
providing each original Participating Holder a reasonable opportunity to review
such changes and comment thereon. Consent pursuant to the second preceding
sentence shall be presumed to have been received from such Participating Holder
unless such Participating Holder objects within three business
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<PAGE> 23
days of receipt by such Participating Holder of any such proposed change.
Section 3.9. Amendments and Supplements of the Offering
Circular. Prior to the earlier of (i) the consummation of the A/B Exchange
Offer and (ii) the effectiveness of a Shelf Registration in accordance with the
Registration Rights Agreement, upon the happening of any event or any
information becoming known that requires the making of any changes in the
Offering Circular or any filing by the Company under the Exchange Act, so that
the Offering Circular will not contain any untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they were made, not misleading (in each
case, a "Disclosure Event"), the Company shall (A) notify the Participating
Holders to such effect, and (B) as promptly as practicable prepare, and if
applicable file with the SEC, an amendment or supplement to the Offering
Circular or such filing under the Exchange Act or file any other document under
the Exchange Act or provide the Participating Holders with additional written
information so that the Offering Circular as amended or supplemented,
collectively with such filings with the SEC or such additional written
information, will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading; provided that the Company shall, if applicable, file such
amendment or supplement or provide such other document no later than the date
the Company or any Affiliate thereof has made any similar filing with the SEC.
Notwithstanding the foregoing, the Company may postpone for a reasonable period
(x) preparation of any amendment or supplement to the Offering Circular, (y)
any filing under the Exchange Act, or (z) providing such additional written
information to the Participating Holders, if in the good faith opinion of its
Board of Directors any such action would adversely affect a material financing,
acquisition, disposition of assets or stock, merger or other comparable
transaction or would require the Company to make public disclosure of
information the public disclosure of which would have a material adverse effect
upon the Company; it being understood that notification by the Company to the
Participating Holders that the Offering Circular or any filing under the
Exchange Act is not current pursuant to this Section 3.9 shall relieve the
Company of
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<PAGE> 24
all liability relating to the Disclosure Event causing such notification to the
Participating Holders with respect to their subsequent use of the Offering
Circular or any such filing under the Exchange Act. The Company represents and
warrants to each Participating Holder that, as of the date hereof, there is no
transaction or information of the type specified in the last sentence of
2.3.1(k) of the Registration Rights Agreement.
Section 3.10. The Offer. Provided that neither of the
conditions set forth in clauses (ii) or (iii) of Section 2.2 shall have failed
to be satisfied, the Company agrees that it shall use its reasonable best
efforts to commence (within the meaning of Rule 14d-2 under the Exchange Act)
as promptly as practicable after the date hereto, but in no event later than
ten business days after the date hereof, the Exchange Offer.
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<PAGE> 25
ARTICLE 4
INDEMNIFICATION
Section 4.1. Basic Obligations of Indemnification. Subject
to Section 4.2, the Company and Brooke (each, an "Indemnitor") shall: (i)
indemnify, defend and hold harmless each Participating Holder, Apollo
Investment Fund, L.P., Apollo Advisors, L.P., Lion Advisors, L.P., Altus
Finance, SHC, MacKay-Shields Financial Corporation and their Affiliates and any
investment funds managed thereby ("Specified Persons"), the respective
partners, stockholders, directors, officers, agents (including Nominees),
attorneys and employees of the Specified Persons and each other person, if any,
directly or indirectly controlling the Specified Persons and the successors and
assigns of the foregoing (including transferees and pledgees of the New
Securities) (each, "Indemnitee") from and against all losses, claims, damages,
liabilities and reasonably incurred expenses incurred at any time by such
Indemnitee (including reasonably incurred fees and disbursements of counsel)
that result from, are related to or arise out of an Indemnification Event
("Losses and Expenses"); and (ii) reimburse such Indemnitee for all reasonably
incurred expenses (including reasonably incurred fees and disbursements of
counsel) as they are incurred by such Indemnitee in connection with
investigating, preparing or defending any claim, action, suit or proceeding in
respect of which indemnification may be sought hereunder to which the
Indemnitee is or may become a party.
The obligations of the Indemnitors under this Article 4 shall
be joint and several.
Section 4.2. Exceptions to Obligations of Indemnitor. No
Indemnitor shall be responsible for any Losses or Expenses pursuant to Section
4.1 to the extent that: (i) such Losses or Expenses are finally judicially
determined to have resulted from the willful misconduct or gross negligence of
such Indemnitee or from any untrue statement of a material fact, or omission of
a material fact required to make the statements made, in light of the
circumstances under which they were made, not misleading, by such Indemnitee in
the Operative Documents or in any information furnished in writing to the
Indemnitor expressly for inclusion in any offering circular, registration
statement or other filing prepared in connection with the Exchange Offer, (ii)
in the case
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<PAGE> 26
of clause (iv) of the definition of "Indemnification Event", such Losses or
Expenses result from an untrue or alleged untrue statement or omission or
alleged omission made in the Offering Circular or any filing by the Company
under the Exchange Act after the Company or Brooke shall have given the
Participating Holders specific notice of a Disclosure Event pursuant to Section
3.9. or (iii) such Losses or Expenses constitute losses on the investment in or
the disposition of an interest in the Company or any Affiliate thereof held by
such Indemnitee, except to the extent that any such disposition results from,
is related to or arises out of any settlement, compromise or other resolution
of an Indemnification Event and the loss on such disposition is one which, in
the absence of such disposition, would nevertheless have been incurred by the
Indemnitee and for which indemnification would have been available under this
Article 4.
Section 4.3. Settlement of Claims. No Indemnitor shall,
without the prior written consent of the applicable Indemnitee (not to be
unreasonably withheld, delayed or conditioned), settle, compromise or consent
to the entry of any judgment in any pending or threatened claim, action, suit
or proceeding in respect of which indemnification has been sought hereunder
(whether or not any Indemnitee is an actual or potential party to such claim,
action, suit or proceeding) unless such settlement, compromise or consent: (i)
includes an unconditional release of each Indemnitee from all liability arising
out of such claim, action, suit or proceeding; and (ii) has no material adverse
effect on any Indemnitee, it being understood that a settlement, compromise or
consent involving injunctive relief binding upon an Indemnitee shall be
presumed to have such a material adverse effect.
Section 4.4. Indemnification Procedures. Promptly after
receipt by an Indemnitee of notice of any complaint or the commencement of any
claim, action, suit or proceeding with respect to which indemnification is
being sought hereunder, such Indemnitee shall notify each Indemnitor in writing
of such complaint or of the commencement of such claim, action, suit or
proceeding, but failure so to notify shall relieve such Indemnitor from any
liability which such Indemnitor may have hereunder only if and to the extent
that such failure results in the forfeiture by such Indemnitor of substantial
rights and defenses (or otherwise substantially prejudices the Indemnitor)
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<PAGE> 27
and shall not in any event relieve such Indemnitor from any other obligation or
liability that such Indemnitor may have to any Indemnitee otherwise than under
this Article 4. If such Indemnitor so elects or is requested by such
Indemnitee, such Indemnitor shall assume the defense of such claim, action,
suit or proceeding, including the employment of counsel reasonably satisfactory
to the applicable Participating Holders and the payment of the reasonable fees
and disbursements of such counsel. Such Indemnitee shall not be entitled to
reimbursement of any further fees and disbursements of counsel during the
assumption of the defense of such action by the Indemnitor as aforesaid, unless
(i) such Indemnitee or the applicable Participating Holders reasonably
determine in their judgment that having common counsel would present such
counsel with a conflict of interest, or (ii) the defendants in or targets of
any such claim, action, suit or proceeding include both an Indemnitee and such
Indemnitor, and such Indemnitee reasonably determines that there may be legal
defenses available to it or other Indemnitees that are substantively different
from or in addition to those available to such Indemnitor. In the foregoing
events or if the Indemnitor fails to assume the defense of the claim, action or
proceeding or to employ counsel reasonably satisfactory to such Indemnitee, in
any such case in a timely manner, such Indemnitee may employ separate counsel
to represent or defend it in any such claim, action, suit or proceeding, and
the Indemnitors shall pay the reasonably incurred fees and disbursements of
such counsel in accordance with the terms of this Article 4; provided, however,
that such counsel to the Indemnitee under this sentence shall be, to the extent
reasonably practicable, the same counsel in each jurisdiction as that employed
by other Indemnitees pursuant to this sentence.
The Indemnitors and each Indemnitee shall cooperate fully with
each other and each other's counsel in connection with any claim, action, suit
or proceeding with respect to which indemnification is sought hereunder.
Section 4.5. Contribution. If any indemnification or
reimbursement sought by an Indemnitee pursuant to this Article 4 is held by a
court to be unavailable for any reason other than as specified by the terms
hereof, the Indemnitors, on the one hand, and the relevant Indemnitees, on the
other hand, shall contribute to the Losses and Expenses for which such
indemnification or
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<PAGE> 28
reimbursement is held unavailable in such proportion as is appropriate: (i) to
reflect such parties' relative fault in connection with such Indemnification
Event; and (ii) if the allocation referred to in clause (i) is held by such
court to be unavailable for any reason, to reflect a fair and equitable
allocation as determined by such court; provided, however, that in any event
the aggregate contribution of all Indemnitees to all Losses and Expenses with
respect to which contribution is available hereunder shall not exceed the fair
value of all Indemnitees' interests in the Company (to be determined by the
court by reference to the person or persons to which the Indemnification Event
relates) at the time of such Indemnification Event minus the aggregate cost
thereof.
Section 4.6. Cumulative Rights. The rights of an Indemnitee
hereunder shall be in addition to any other rights that any Indemnitee may have
under any statute, at common law, by contract (including the Amended Apollo
Indemnification Agreement and the Exchange and Termination Agreement) or
otherwise. If, for any reason, any such right hereunder is not available to
any Indemnitee, any such other rights shall not be affected thereby.
Notwithstanding anything in this Agreement to the contrary, an Indemnitee shall
not be entitled to receive duplicate indemnification or contribution for the
same Losses or Expenses (except to the extent that they are incurred more than
once).
ARTICLE 5
REPRESENTATIONS AND WARRANTIES
Section 5.1. Representations and Warranties of Each Party.
Each Participating Holder hereby represents and warrants to each Brooke Party,
and (in the case of Sections 5.1(a) and 5.1(b)) each Brooke Party hereby
represents and warrants to each Participating Holder and SHC, as follows (with
the party making such representation being sometimes referred to herein as the
"Representing Party"):
(a) Authorization and Non-Contravention. Such
Representing Party has duly authorized by all necessary action the
execution, delivery and performance of this Agreement and each of the
other Operative Documents to which it is or will be a party, and
neither the execution and
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<PAGE> 29
delivery thereof nor the consummation of the transactions contemplated
hereby and thereby nor the compliance herewith and therewith does or
will (i) require any approval of its stockholders or partners or any
approval or consent of any trustee or holders of any of its debt or
obligations (other than the Existing Securities), except such as have
been duly obtained, (ii) contravene any Governmental Rule applicable
to or binding on it or any of its properties if such contravention
would have a material adverse effect on its financial condition,
business or operations or its ability to perform any of its material
obligations under any such document or (iii) except as disclosed to
the Participating Holders in the draft Offering Circular with respect
to the Reset Notes, contravene or result in any breach of or
constitute any default under, or result in the creation of any Lien
(except as contemplated by the Operative Documents) upon any of its
property under, any indenture, mortgage, chattel mortgage, deed of
trust, conditional sales contract, loan or credit agreement, charter,
by- law, partnership agreement or other agreement or document to which
it is a party or by which it or any of its properties are bound or
affected.
(b) Enforceability. Such Representing Party has duly
executed and delivered this Agreement, and this Agreement is, and when
executed and delivered each other Operative Document to which such
Representing Party is to be a party will be, its legal, valid and
binding obligation, enforceable against it in accordance with its
terms.
(c) Ownership of Debt Securities.
(i) Each Participating Holder beneficially owns, as of
the date hereof, Series 2 Notes and Subordinated Debentures, free and
clear of any Lien not previously disclosed to the Company or other
option or right to acquire the same, in an aggregate principal amount
equal to the amount set forth opposite its name in the table below:
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<PAGE> 30
<TABLE>
<CAPTION>
Participating
Holder Series 2 Notes Subordinated Debentures
------------- -------------- -----------------------
<S> <C> <C>
AIF II $31,878,000 $20,250,000
Artemis $20,610,000 $20,250,000
Tortoise $33,374,000 $60,875,000
Mainstay $ 5,217,000 $10,345,000
</TABLE>
(ii) Except as set forth in Section 5.1(c)(i) no
Participating Holder owns any Debt of the Company.
(iii) Without the consent of the Company, each
Participating Holder will not, prior to the Exchange, directly or
indirectly, convey, sell, transfer, assign or otherwise dispose of any
Debt of the Company that it owns unless the transferee thereof agrees
to be bound by this Agreement, pursuant to a written agreement
reasonably satisfactory to the Company, to the same extent as such
Participating Holder.
(d) Confidentiality. Each Participating Holder agrees
(on behalf of itself and each of its directors, officers, employees,
representatives and affiliates controlled by it) to use reasonable
precautions to keep confidential, in accordance with their customary
procedures for handling confidential information of the same nature
and in accordance with safe and sound business practices, any
non-public information supplied to it by the Company or any of its
Affiliates pursuant to this Agreement that is identified by such
Person as being confidential at the time the same is delivered to such
Participating Holder, provided that nothing herein shall limit the
disclosure of any such information (i) to the extent required by
statute, rule, regulation or judicial process, (ii) to counsel for any
of the Participating Holders, (iii) to auditors or accountants engaged
by the Participating Holders, (iv) to any other Participating Holder,
(v) in connection with any litigation to which any one or more of the
Participating Holders is a party or (vi) to a subsidiary or affiliate
of such Participating Holder, or any investment funds managed thereby,
the respective partners, stockholders, directors, officers and agents
(including Nominees) of such person and
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<PAGE> 31
each other person, if any, controlling such persons, and the
successors and assigns of the foregoing.
In connection with any confidential information provided to
the Participating Holders pursuant to this Agreement, the Company
shall use its reasonable best efforts to advise the Participating
Holders whether any information to be provided is likely to include
material, non-public information with regard to any company whose
securities are publicly traded and afford the Participating Holders an
opportunity to elect not to receive any such material, non-public
information in connection with the exercise of their rights under this
Agreement.
(e) Acquisition of Securities. (i) Any New Securities
received by such Participating Holder will be acquired in the ordinary
course of its business, (ii) at the time of the consummation of the
Exchange Offer, such Participating Holder will have no arrangement or
understanding with any Person to participate in the distribution
(within the meaning of the Securities Act) of the New Securities and
(iii) such Participating Holder is not an Affiliate of the Company
(within the meaning of the Securities Act), provided that this
representation shall not be deemed to limit the transferability of the
Existing Securities or the exercise of the rights of the Participating
Holders under the Registration Rights Agreement.
Section 5.2. Representations and Warranties of the Company
and Brooke. The Company and Brooke each represents and warrants to each
Participating Holder as follows:
(a) Absence of Brooke and the Company Debt Defaults.
There is no continuing "Event of Default" under any Existing
Indenture, and no material default has occurred and is continuing
under any other instrument evidencing Debt of Brooke or Liggett's debt
indenture.
(b) Financial Statements. Brooke, the Company and
Liggett have each previously delivered to the Participating Holders
copies of its individual and consolidating financial statements for
the annual periods ending December 31, 1994 and 1993 and quarterly
statements for the first two calendar
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<PAGE> 32
quarters of 1995, which have been prepared in accordance with
generally accepted accounting principles consistently applied or, in
the case of interim financial statements, in accordance with the
requirements of Form 10-Q under the Exchange Act.
(c) Accuracy of Information. All written information
furnished to the Participating Holders by Brooke or the Company in
connection with their evaluation of the transactions contemplated
hereby is, taken as a whole, true and correct in all material
respects, including the Debt Schedule of the Company attached as
Exhibit A.
(d) Solvency. Each Brooke Party, NV Holdings, New
Valley, Liggett and BOL is and after giving effect to the Exchange,
will be Solvent.
(e) Assets Owned by BOL. BOL owns directly or indirectly
substantially all of Brooke's direct and indirect current interests in
business operations and properties in the former Soviet Union.
(f) Equity Ownership. Brooke owns all the Equity
Ownership of the Company. The Company owns all the Equity Ownership
of NV Holdings, of BOL and of Liggett free and clear of any Lien other
than the Lien of the NV Holdings Pledge Agreement and the Company
Pledge Agreement. NV Holdings owns, as of the date hereof, 618,326 of
the New Valley Class A Preferred Shares and 79,399,254 of the New
Valley Common Shares, free and clear of any Lien but subject to (i)
the Lien of the Pledge Agreement and (ii) outstanding options held by
Pacific Asset Holdings, L.P. and M.D.C. Western Corporation Inc. to
purchase an aggregate of 9,000,000 of such New Valley Common Shares
pursuant to Option Agreements dated as of May 7, 1987, as amended
(true and correct copies of which have been delivered to the
Participating Holders); and neither Brooke nor the Company nor any
subsidiary of either thereof owns, as of the date hereof, any other
Equity Ownership of New Valley, except that the Company owns, as of
the date hereof, 394,975 of the New Valley Common Shares and 250,885
of the New Valley Class B Preferred Shares free and clear of any Lien
but subject to the Lien of the Pledge Agreement. There are
outstanding as
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<PAGE> 33
of the date hereof 1,107,566 New Valley Class A Preferred Shares, and
there were outstanding as of September 30, 1995 191,601,437 New Valley
Common Shares and 2,790,776 New Valley Class B Preferred Shares, and
no material change has occurred since September 30, 1995 in the equity
capitalization (including any convertible or exchangeable securities,
options, warrants or other equity interests) of New Valley from that
described in the Form 10-Q of New Valley for the period ended on such
date.
(g) NV Holdings. NV Holdings has no material assets
other than as described in Section 5.2(f) and has no material
liabilities other than pursuant to the Operative Documents to which it
is a party.
(h) June 1990 Agreement. The Company has caused a true
and correct copy to be furnished to each Participating Holder of the
Agreement dated as of June 29, 1990 by and among Liggett, Liggett &
Myers Tobacco Company, Eve Holdings Inc., Harrington Holdings Inc.,
Impel Marketing Inc., Chesterfield Assets, Inc. and BGI Subsidiary
Corp. (the "June 1990 Agreement"). There has been no amendment or
modification, whether or not in writing, of the June 1990 Agreement,
and there is no other material tax sharing agreement or arrangement,
whether or not in writing, among the affiliated group of corporations
of which Brooke is the common parent other than the Agreement dated as
of October 27, 1986 by and among B.S. Lebow, Inc., L Holdings Inc. and
Liggett Group Inc., which is effective only with respect to the
taxable years preceding 1990 and with respect to which no further
amounts are or could be payable. The net operating loss, capital loss
and tax credit carryovers utilizable by all the direct or indirect
subsidiaries of the Company for purposes of determining the amount due
under the June 1990 Agreement in the aggregate does not exceed
$56,000,000, $0 and $0, respectively.
(i) Authorization and Non-Contravention. Each Affiliate
of each Brooke Party intended to be a party to any Operative Document
has duly authorized by all necessary action the execution, delivery
and performance of each of the Operative Documents to be executed and
delivered by it, and neither its execution and delivery thereof nor
its
-28-
<PAGE> 34
consummation of the transactions contemplated hereby and thereby nor
its compliance herewith and therewith does or will (i) require any
approval of its stockholders or any approval or consent of any trustee
or holders of any of its debt or obligations, except as have been duly
obtained or disclosed to the Participating Holders in the draft
Offering Circular with respect to the Reset Notes, (ii) contravene any
Governmental Rule applicable to or binding on it or any of its
properties if such contravention would have a material adverse effect
on its financial condition, business, operations or prospects or its
ability to perform any of its material obligations under any such
document or (iii) except as disclosed to the Participating Holders in
the draft Offering Circular with respect to the Reset Notes,
contravene or result in any breach of or constitute any default under,
or result in the creation of any Lien (except as contemplated by the
Operative Documents) upon any of its property under, any indenture,
mortgage, chattel mortgage, deed of trust, conditional sales contract,
loan or credit agreement, charter, by-law or other agreement or
document to which it is a party or by which it or any of its
properties are bound or affected (including in the case of New Valley,
any order, judgment or agreement related to the New Valley
Bankruptcy).
(j) Enforceability. When executed and delivered, each
Operative Document to which any Affiliate of a Brooke Party is to be a
party will be its legal, valid and binding obligation, enforceable
against it in accordance with its terms.
(k) Ownership of Debt Securities. As of the date hereof,
Brooke owns $13,705,000 of Subordinated Debentures, and no other
Affiliate or Associate of either the Company or Brooke owns any Reset
Notes or Subordinated Debentures. Concurrently with the consummation
of the Exchange Offer, Brooke shall tender such Subordinated
Debentures and any other Existing Securities held by such Brooke at
such time to the Company for cancellation and the Company shall
promptly cancel such Existing Securities.
(l) Merger of Brooke Capital Corp. Prior to the date
hereof, Brooke Capital Corp., a Delaware corporation, was merged with
and into the Company.
-29-
<PAGE> 35
ARTICLE 6
MISCELLANEOUS
Section 6.1. Publicity. Neither the Brooke Parties nor the
Participating Holders, directly or indirectly, shall make any press release or
other public announcement relating to the transactions contemplated hereby
without affording the others a reasonable opportunity to comment thereon and
without the written consent of the others, except as is otherwise required by
law or Governmental Rule.
Section 6.2. Amendments. No amendment or waiver of any
provision of this Agreement nor any consent to any departure therefrom shall in
any event be effective unless the same shall be in writing and signed by the
parties hereto, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given.
Section 6.3. No Waiver; Remedies. No failure on the part of
any party to this Agreement to exercise, and no delay in exercising, any right
thereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right. The remedies therein provided are
cumulative and not exclusive of any remedies provided by law.
Section 6.4. Parties Entitled to Benefit, etc. This
Agreement shall be binding upon, and inure to the benefit of, the respective
successors of the parties hereto. All the understandings, covenants and
agreements contained herein are solely for the benefit of such parties and
their respective successors and permitted assigns, and there are no other
Persons that are intended to be benefitted by, or entitled to enforce, any
provision of this Agreement except as expressly provided herein.
Section 6.5. Transfer and Assignment. No party to this
Agreement may transfer or assign its rights or obligations hereunder to any
Person, except any Participating Holder may assign such rights in connection
with a disposition of Existing Securities by such Participating Holder
permitted by Section 5.1(c)(iii).
-30-
<PAGE> 36
Section 6.6. Notices, etc. All notices, consents and other
communications provided for hereunder shall be in writing (including facsimile,
telegraphic or cable communication) and telecopied, telegraphed, telexed,
cabled or delivered, (x) (i) if to the Company, to it c/o Brooke Group Ltd.,
100 S.E. Second Street, 32nd Floor, Miami, Florida 33131, attention: Bennett S.
LeBow, telecopy (305) 579-8001, with a copy to Milbank, Tweed, Hadley & McCloy,
1 Chase Manhattan Plaza, New York, New York 10005, attention: Michael L.
Hirschfeld, telecopy (212) 530-5219, (ii) if to Brooke, to 100 S.E. Second
Street, 32nd Floor, Miami, Florida 33131, attention: Bennett S. LeBow, telecopy
(305) 579-8001, with a copy to Milbank, Tweed, Hadley & McCloy, 1 Chase
Manhattan Plaza, New York, New York 10005, attention: Michael L. Hirschfeld,
telecopy (212) 530-5219, (iii) if to AIF II, to it c/o Apollo Advisors, L.P.,
1999 Avenue of the Stars, Suite 1900, Los Angeles, California 90067, attention:
Michael D. Weiner, telecopy (310) 201-4166, with a copy to Sidley & Austin, 875
Third Avenue, New York, New York 10022, attention: Myles C. Pollin, telecopy
(212) 906-2021; (iv) if to Artemis, to it c/o Lion Advisors, L.P., 2
Manhattanville Road, Purchase, New York 10577, attention: Tony Tortorelli,
telecopy (914) 694-8032, with a copy to Sidley & Austin, 875 Third Avenue, New
York, New York 10022, attention: Myles C. Pollin, telecopy (212) 906-2021, (v)
if to Tortoise, to Icahn Associates, 114 West 47th Street, New York, New York,
10036, attention: Mark Rachesky, telecopy (212) 768-0542, with a copy to Gordon
Altman Butowsky Weitzen Shalov & Wien, 114 West 47th Street, New York, New York
10036, attention: Marc Weitzen, telecopy (212) 626-0799, (vi) if to SHC, to
Icahn Associates, 114 West 47th Street, New York, New York, 10036, attention:
Mark Rachesky, telecopy (212) 768-0542, with a copy to Gordon Altman Butowsky
Weitzen Shalov & Wien, 114 West 47th Street, New York, New York 10036,
attention: Marc Weitzen, telecopy (212) 626-0799, and (vii) if to Mainstay, to
c/o MacKay-Shields Financial Corporation, 9 West 57th Street, New York, New
York 10019, attention: Jeffry Platt, telecopy (212) 935-1359, with a copy to
Kleinberg, Kaplan, Wolff & Cohen, P.C., 551 Fifth Avenue, New York, New York,
10176, attention: Fredric Kleinberg, telecopy (212) 986-8866, or (y) at such
other address as shall be designated by any such party in a written notice to
the other parties. All such notices, consents and communications shall, when
telecopied, telegraphed, telexed or cabled, be effective when received.
-31-
<PAGE> 37
Section 6.7. Payments. All payments hereunder shall be made
by wire transfer of immediately available funds to a bank account in the United
States specified, by reasonable prior notice given to the payor in connection
with the payment in question.
Section 6.8. Further Assurances; Cooperation. At any time
and from time to time, the parties hereto shall promptly and duly execute and
deliver any and all such further instruments and documents and take such
further action as is reasonably necessary to cause the Exchange to occur and to
enable the parties hereto to exercise and enforce their respective rights and
remedies hereunder.
Section 6.9. Execution in Counterparts. This Agreement may
be executed in any number of counterparts or in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. One or more counterparts
of this Agreement (or portions hereof) may be delivered via facsimile, with the
intention that they shall have the same effect as an original counterpart
hereof (or such portions hereof). All signatures need not be on the same
counterpart.
Section 6.10. Entire Agreement; Severability of Provisions.
This Agreement, together with the other Operative Documents, contains the
entire agreement of the parties hereto and, subject to Section 3.1, supersedes
all prior agreements and understandings, oral or otherwise, among the parties
hereto with respect to the matters contained herein. Notwithstanding the
foregoing, the Amended Apollo Indemnification Agreement shall remain
enforceable in accordance with the terms thereof. If any provision of this
Agreement or the application thereof to any Person or circumstance is invalid
or unenforceable, or contravenes any law, regulation or document applicable to
such Person, such provision or application shall be deemed ineffective ab
initio, but the remainder of this Agreement and the application of such
provision to other Persons or circumstances shall not be affected thereby, and
the provisions of this Agreement shall be severable in any such instances.
Section 6.11. Governing Law. This Agreement shall be
governed by, and interpreted and construed in accordance with, the
-32-
<PAGE> 38
laws (excluding principles of conflict of laws) of the State of New York.
Section 6.12. Participating Holders Acting Independently.
The Participating Holders are acting severally, and not jointly, in connection
with the transactions contemplated hereby, and no Participating Holder is
liable or responsible for the acts, omissions, defaults or misrepresentations
of any other Participating Holder. Each Participating Holder has made its own
independent investment decision to participate in the Exchange.
-33-
<PAGE> 39
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives as of the
date first above written.
BGLS INC.
By_______________________
Name: Bennett S. LeBow
Title: Chairman and President
BROOKE GROUP LTD.
By_______________________
Name: Bennett S. LeBow
Title: Chairman and President
AIF II, L.P.
By APOLLO ADVISORS, L.P.
Managing General Partner
By APOLLO CAPITAL MANAGEMENT, INC.
General Partner
By ____________________________
Name:
Title:
ARTEMIS AMERICA PARTNERSHIP
By LION ADVISORS, L.P.
Attorney-in-Fact
By LION CAPITAL MANAGEMENT, INC.
General Partner
-34-
<PAGE> 40
By _________________________
Name:
Title:
[EXCHANGE AGREEMENT]
-35-
<PAGE> 41
TORTOISE CORP.
By __________________________
Name:
Title:
STARFIRE HOLDING CORPORATION
By __________________________
Name:
Title:
MAINSTAY HIGH YIELD
CORPORATE BOND FUND
By MACKAY-SHIELDS FINANCIAL CORPORATION
By ___________________________
Name:
Title:
-36-
<PAGE> 42
[EXCHANGE AGREEMENT]
-37-
<PAGE> 43
EXHIBIT A
DEBT SCHEDULE
BGLS INC.
INDEBTEDNESS
<TABLE>
<CAPTION>
Long-term Debt
<S> <C>
13.750% Series 2 Senior Secured Notes due 1997 91,179,000
16.125% Senior Subordinated Reset Notes 5,670,000
14.500% Subordinated Debentures due 1998 140,000,000 (1)
Liability with respect to MAI's banks' foreclosure
on its European subsidiaries 7,500,000 (2)
Other 1,415,564
-----------
245,764,564
===========
</TABLE>
(1) Amount includes $13,705,000 of the Subordinated Debt currently held by
Brooke which would be retired under the new indenture.
(2) Amount accrued in respect of disputed potential liability.
-38-
<PAGE> 44
EXHIBIT B-1
________________________________________________________________________________
BGLS INC.,
as successor to BROOKE PARTNERS, L.P. and
BROOKE CAPITAL CORP.,
Issuer,
L HOLDINGS INC.,
General Partner,
and
SHAWMUT BANK, N.A.,
Successor Trustee
_____________
Sixth Supplemental Indenture
Dated as of December __, 1995
to
Indenture
Dated as of April 1, 1988
_____________
$184,000,000
<PAGE> 45
2
13.500% Senior Subordinated Reset Notes due 1997
<PAGE> 46
SIXTH SUPPLEMENTAL INDENTURE, dated as of December __, 1995,
among BGLS Inc., a Delaware corporation ("BGLS") and successor to Brooke
Partners L.P. and Brooke Capital Corp., a Delaware corporation, L Holdings
Inc., a Delaware corporation and the general Partner (such term and other
capitalized terms used herein and not otherwise defined having the respective
meanings specified in the Indenture (as hereinafter defined)), and Shawmut
Bank, N.A., a national banking association, as successor trustee (the
"Trustee") to National Westminster Bank, USA, a national banking association,
under the Indenture dated as of April 1, 1988, for the 13.500% Senior
Subordinated Reset Notes due 1997 (as amended through the date hereof, the
"Indenture").
RECITALS
WHEREAS, the parties have entered into the Indenture; and
WHEREAS, the Indenture and the Securities may be amended
pursuant to Section 11.02 of the Indenture with the consent of the
Securityholders; and
WHEREAS, BGLS, the General Partner and the Trustee desire to
enter into this Sixth Supplemental Indenture pursuant to said Section 11.02 in
order to amend certain provisions of the Indenture and the Securities;
NOW, THEREFORE, the parties hereto agree as follows for the
benefit of each other party and for the equal and ratable benefit of the
Securityholders:
SECTION 1. Amendments to the Indenture. The Indenture is
hereby amended as follows:
1.1. By adding to Section 1.01 the following defined terms
in the appropriate alphabetical order:
"'Exchange Offer' means the exchange offer and consent
solicitation conducted by the Issuers pursuant to the Offering
Circular and Consent Solicitation of BGLS dated as of November
__, 1995".
"'Exchange Offer Consummation Date' means the date the
Exchange Offer is consummated".
<PAGE> 47
2
"'Tangible Net Worth' of any person at any date means the
Equityholders' Equity of such person at such date, less the
sum of the following: any writedown to reflect an impairment
in value that is other than temporary and the book value of
all assets which should be classified as intangibles (without
duplication of deductions in respect of items already deducted
in arriving at surplus and retained earnings) including
goodwill, minority interests, research and development costs,
trademarks, trade names, copyrights, patents and franchises,
unamortized debt discount and expense, such calculation to be
reviewed by such person's independent public accountants based
on such procedures as are necessary to enable such
accountants, under professional accounting standards, to
report to the Trustee in writing that in connection with such
procedures no matter came to their attention that caused them
to believe that such calculations should be adjusted."
1.2. By deleting the second sentence of the definition of
Senior Indebtedness in Section 1.01 and inserting in its place the following:
"In any event, Senior Indebtedness shall include the
Indebtedness under the Revolving Loan Agreement, dated as of
March 11, 1988, among Holdings, Fidelity Bank National
Association ("Fidelity"), and Canadian Imperial Bank of
Commerce (New York), as the Banks and Fidelity, as Agent for
the Banks, and Indebtedness under the Senior Secured Notes.
1.3. By deleting the definition of Senior Secured Notes in its
entirety and by inserting in its place the following:
"'Senior Secured Notes' means any of the 15.75% Senior Secured
Notes due 2000 of BGLS, as amended or supplemented from time
to time, issued under the Indenture dated as of December __,
1995 as amended or supplemented from time to time between BGLS
and Shawmut Bank, N.A., as trustee thereunder."
<PAGE> 48
3
"[Intentionally Omitted]."
1.4. By deleting the heading and the provisions of Sections
5.03, 5.04, 5.05, 5.07, 5.09, 5.10, 5.18 and 5.19 in their entirety and by
inserting in place of each the following:
"[Intentionally Omitted]."
1.5. By deleting the heading and the provisions of Sections
6.02, 6.03, 6.04, 6.05, 6.06 and 6.08 in their entirety and by inserting in
place of each the following:
"[Intentionally Omitted]."
1.6. By deleting Sections 7.01 and 7.02 in their entirety and
by inserting in their place the following:
"SECTION 7.01. Mergers, Consolidations.
The Issuers shall not (i) consolidate with or merge with or
into any other person, (ii) transfer (by lease, assignment, sale or
otherwise) in a single transaction or through a series of
transactions, all or substantially all of its properties and assets,
as an entirety or substantially as an entirety, to another person or
group of affiliated persons (a 'Disposition of Assets', it being
recognized for purposes of this Section 7.01 that the sale or transfer
(by lease, assignment, sale or otherwise) of substantially all of the
assets of BGLS other than the equity interests of Liggett to a person
controlled by Bennett S. LeBow shall constitute a 'Disposition of
Assets') or (iii) adopt a Plan of Liquidation, unless:
(1) the Issuer shall be the continuing person, or
the person (if other than the Issuer) (or, in the case of
(ii), one person to which assets are transferred) formed by
such consolidation or into which the Issuer is merged or to
which the properties and assets of the Issuer are transferred
or leased as an entirety or substantially as an entirety or
pursuant to a Plan of Liquidation, shall be a corporation
organized and existing under the laws of the United States or
any
<PAGE> 49
4
State thereof or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee,
all the obligations of the Issuer under the Securities and
this Indenture;
(2) the person (or, in the case of (ii), one person
to which assets are transferred) formed by such consolidation
or surviving such merger or to which the properties and assets
of the Issuer, are transferred or leased as an entirety or
substantially as an entirety or pursuant to a Plan of
Liquidation shall have a Tangible Net Worth immediately after
such transaction, equal to or greater than that of the Issuer,
immediately preceding, and without giving effect to, such
transaction;
(3) immediately before and immediately after giving
effect to such transaction, no Default or Event of Default
shall have occurred and be continuing; and
(4) the Issuer shall have delivered to the Trustee
an Officers' Certificate of the Issuer and an Opinion of
Counsel, each stating that such consolidation, merger,
transfer or lease and such supplemental indenture comply with
this Article Seven and that all conditions precedent herein
provided relating to such transaction have been complied with.
SECTION 7.02. Successor Person Substituted.
Upon any consolidation or merger, or any transfer or lease of
assets of the Issuer in accordance with Section 7.01, the successor
person formed by such consolidation or into which the Issuer is merged
or to which such transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Issuer under this
Indenture with the same effect as if such successor person had been
named as the Issuer herein. When a successor person assumes all of
the obligations of the Issuer hereunder and under the Securities,
except in the case of
<PAGE> 50
5
succession by lease, the Issuer shall be released from such
obligations."
1.7. By deleting the phrase ", pursuant to Section 3.07, 3.08
or 5.03 hereof" in clause (2) of Section 8.01.
1.8. By deleting the provisions of clauses (4) and (7) of
Section 8.01 in their entirety and by inserting in place of each the following:
"[Intentionally Omitted]."
1.9. By deleting the second paragraph of Section 8.01 in its
entirety.
1.10. By deleting the references to Sections 5.03, 5.04, 5.05,
5.07, 6.02, 6.03, 6.04, 6.05, 6.06, and 6.08, in the fourth paragraph of
Section 8.01.
1.11. By deleting the headings and the provisions of Sections
13.01, 13.02, 13.03, 13.04, 13.05, 13.06, 13.07, 13.08, and 13.09 in their
entirety and by inserting in place of each the following:
"[Intentionally Omitted]."
1.12. By deleting the headings and the provisions of Sections
14.01, 14.02, 14.03, 14.04, 14.05, and 14.06 in their entirety and by inserting
in place of each the following:
"[Intentionally Omitted]."
1.13. By deleting Section 15.11 in its entirety and by
inserting in its place the following:
<PAGE> 51
6
"SECTION 15.11. Release of Holdings.
Anything in this Indenture to the contrary
notwithstanding, from and after the Exchange Offer
Consummation Date, Holdings shall be released from any and all
obligations or liability with respect to the Securities and
any and all obligations under the Indenture, either directly
or indirectly or by virtue of its status as General Partner
and all references in the Securities and the Indenture to the
Issuers shall be deemed to be references solely to BGLS."
SECTION 2. Amendments to the Securities. Each of the
Securities is hereby amended as follows:
2.1. By deleting Paragraph 9 on the reverse of the
Securities in its entirety and inserting in its place the following:
"8. [Intentionally Omitted]."
2.2. By deleting Paragraph 10 on the reverse of the
Securities in its entirety and inserting in its place the following:
"9. [Intentionally Omitted]."
2.3. By deleting Paragraph 11 on the reverse of the
Securities in its entirety and inserting in its place the following:
"10. [Intentionally Omitted]."
2.4. By deleting Paragraph 16 on the reverse of the Securities
in its entirety and inserting in its place the following:
<PAGE> 52
7
"16. Restrictive Covenants.
The Indenture limits the ability of the Issuers to merge or
consolidate with, or transfer all or substantially all of its
properties and assets to, any other person. Such limitation does not
apply to subsidiaries of the Issuers. Such limitation is subject to a
number of important qualifications and exceptions."
2.5. By deleting Paragraph 20 on the reverse of the
Securities in its entirety and inserting in its place the following:
"20. [Intentionally Omitted]."
2.6. By deleting Paragraph 24 on the reverse of the Securities
in its entirety and inserting in its place the following:
24. "Release of Holdings.
Anything in the Indenture to the contrary
notwithstanding, from and after the Exchange Offer
Consummation Date, Holdings shall be released from any and all
obligations or liability with respect to the Securities and
any and all obligations under the Indenture, either directly
or indirectly or by virtue of its status as General Partner
and all references in the Securities and the Indenture to the
Issuers shall be deemed to be references solely to BGLS."
SECTION 3. Governing Law. This Sixth Supplemental Indenture
shall be governed by and construed in accordance with the laws of the State of
New York without regard to principles of conflicts of law.
SECTION 4. Duplicate Originals. All parties may sign any
number of copies of this Sixth Supplemental Indenture. Each signed copy shall
be an original, but all of them together represent the same agreement.
<PAGE> 53
8
SECTION 5. Severability. In case any provision in this Sixth
Supplemental Indenture shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby, and a Holder shall have no claim
therefor against any party hereto.
SECTION 6. Effectiveness. This Sixth Supplemental Indenture
shall become effective upon its execution and delivery by each of the parties
hereto provided, that if the Exchange Offer is not consummated the amendments
provided in Section 1 and Section 2 shall be null and void.
SECTION 7. Ratification. This Sixth Supplemental Indenture
is executed pursuant to the provisions of Section 11.02 of the Indenture, and
the terms and conditions hereof shall be and shall be deemed to be part of the
terms and conditions of the Indenture for any and all purposes. Subject to
Section 6, the Indenture, as supplemented by this Sixth Supplemental Indenture,
is in all respects hereby adopted, ratified and confirmed by the parties
hereto.
SECTION 8. Acceptance of Trust. The Trustee hereby accepts
the trust in the Indenture declared and provided, upon the terms and conditions
set forth in the Indenture, as amended by this Sixth Supplemental Indenture.
The Trustee assumes no responsibility for the correctness of the recitals
herein and makes no representation and shall have no responsibility as to the
validity or the sufficiency of this Sixth Supplemental Indenture or the due
authorization and execution hereof by BGLS.
<PAGE> 54
9
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Sixth
Supplemental Indenture to be executed, and their respective corporate seals to
be hereunto affixed and attested, all as of the date first above written.
BGLS INC.
By:____________________
Title:
[Seal]
Attest: ___________________
Assistant Secretary
L HOLDINGS INC.
By:____________________
Title:
[Seal]
Attest: ___________________
Assistant Secretary
SHAWMUT BANK, N.A., as Trustee
By:____________________
Title:
[Seal]
Attest: ___________________
Assistant Secretary
<PAGE> 55
STATE OF NEW YORK )
:ss
COUNTY OF NEW YORK )
On this ____ day of December, 1995, before me personally came
______________, to me known, who, being sworn, did depose and say that he is
___________________ of BGLS Inc., one of the corporations described in and
which executed the above instrument; that he knows the corporate seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was affixed by the authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
[Notarial Seal] _________________________
Notary Public
My commission expires:
<PAGE> 56
STATE OF NEW YORK )
:ss
COUNTY OF NEW YORK )
On this ____ day of December, 1995, before me personally came
______________, to me known, who, being sworn, did depose and say that he is
___________________ of L Holdings Inc., one of the corporations described in
and which executed the above instrument; that he knows the corporate seal of
said corporation; that the seal affixed to said instrument is such corporate
seal; that it was affixed by the authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
[Notarial Seal] _________________________
Notary Public
My commission expires:
STATE OF )
:ss
COUNTY OF )
On this ____ day of December, 1995, before me personally came
______________, to me known, who being duly sworn, did depose and say that he
is ___________________ of Shawmut Bank, N.A., the national banking association
described in and which executed the above instrument; that he knows the seal of
said national banking association; that the seal affixed to said instrument is
such seal; that it was affixed by the authority of the Board of Directors of
said national banking association; and that he signed his name thereto by like
authority.
[Notarial Seal] _________________________
Notary Public
My commission expires:
<PAGE> 57
EXHIBIT B-2
________________________________________________________________________________
BGLS INC.,
as successor to BROOKE PARTNERS, L.P. and
BROOKE CAPITAL CORP.,
Issuer,
L HOLDINGS INC.,
General Partner,
and
FIRST TRUST NATIONAL ASSOCIATION,
Trustee
_____________
Sixth Supplemental Indenture
Dated as of December __, 1995
to
Indenture
Dated as of April 1, 1988
_____________
$161,000,000
<PAGE> 58
2
14.500% Subordinated Debentures due 1998
<PAGE> 59
SIXTH SUPPLEMENTAL INDENTURE, dated as of December __, 1995,
among BGLS Inc., a Delaware corporation ("BGLS") and successor to Brooke
Partners L.P. and Brooke Capital Corp., a Delaware corporation, L Holdings
Inc., a Delaware corporation and the General Partner (such term and other
capitalized terms used herein and not otherwise defined having the respective
meanings specified in the Indenture (as hereinafter defined)), and First Trust
National Association, a national banking association, as trustee (the
"Trustee") under the Indenture dated as of April 1, 1988, for the 14.500%
Subordinated Debentures due 1998 (as amended through the date hereof, the
"Indenture").
RECITALS
WHEREAS, the parties have entered into the Indenture; and
WHEREAS, the Indenture and the Securities may be amended
pursuant to Section 11.02 of the Indenture with the consent of the
Securityholders; and
WHEREAS, the consents required to be obtained by Section 11.02
have been obtained; and
WHEREAS, BGLS, the General Partner and the Trustee desire to
enter into this Sixth Supplemental Indenture pursuant to said Section 11.02 in
order to amend certain provisions of the Indenture and the Securities;
NOW, THEREFORE, the parties hereto agree as follows for the
benefit of each other party and for the equal and ratable benefit of the
Securityholders:
SECTION 1. Amendments to the Indenture. The Indenture is
hereby amended as follows:
1.1. By adding to Section 1.01 the following defined terms
in the appropriate alphabetical order:
"'Exchange Offer' means the exchange offer and consent
solicitation conducted by the Issuers pursuant to the Offering
Circular and Consent Solicitation of BGLS dated as of November
__, 1995".
"'Exchange Offer Consummation Date' means the date the
Exchange Offer is consummated".
<PAGE> 60
2
"'Tangible Net Worth' of any person at any date means the
Equityholders' Equity of such person at such date, less the
sum of the following: any writedown to reflect an impairment
in value that is other than temporary and the book value of
all assets which should be classified as intangibles (without
duplication of deductions in respect of items already deducted
in arriving at surplus and retained earnings) including
goodwill, minority interests, research and development costs,
trademarks, trade names, copyrights, patents and franchises,
unamortized debt discount and expense, such calculation to be
reviewed by such person's independent public accountants based
on such procedures as are necessary to enable such
accountants, under professional accounting standards, to
report to the Trustee in writing that in connection with such
procedures no matter came to their attention that caused them
to believe that such calculations should be adjusted."
1.2. By deleting the second sentence of the definition of
Senior Indebtedness in Section 1.01 and inserting in its place the following:
"In any event, Senior Indebtedness shall include the
Indebtedness under the Revolving Loan Agreement, dated as of
March 11, 1988, among Holdings, Fidelity Bank National
Association ("Fidelity"), and Canadian Imperial Bank of
Commerce (New York), as the Banks and Fidelity, as Agent for
the Banks, and Indebtedness under the Senior Secured Notes and
the Senior Subordinated Notes.
1.3. By deleting the definition of Senior Secured Notes in its
entirety and by inserting in its place the following:
"'Senior Secured Notes' means any of the 15.75% Senior Secured
Notes due 2000 of BGLS, as amended or supplemented from time
to time, issued under the Indenture dated as of December __,
1995 as amended or
<PAGE> 61
3
supplemented from time to time between BGLS and Shawmut Bank,
N.A., as trustee thereunder."
1.4. By deleting the heading and the provisions of Sections
5.03, 5.04, 5.05, 5.07, 5.09, 5.10, 5.18 and 5.19 in their entirety and by
inserting in place of each the following:
"[Intentionally Omitted]."
1.5. By deleting the heading and the provisions of Sections
6.02, 6.03, 6.04, 6.05, 6.06 and 6.08 in their entirety and by inserting in
place of each the following:
"[Intentionally Omitted]."
1.6. By deleting Sections 7.01 and 7.02 in their entirety and
by inserting in their place the following:
"SECTION 7.01. Mergers, Consolidations.
The Issuers shall not (i) consolidate with or merge with or
into any other person, (ii) transfer (by lease, assignment, sale or
otherwise) in a single transaction or through a series of
transactions, all or substantially all of its properties and assets,
as an entirety or substantially as an entirety, to another person or
group of affiliated persons (a 'Disposition of Assets', it being
recognized for purposes of this Section 7.01 that the sale or transfer
(by lease, assignment, sale or otherwise) of substantially all of the
assets of BGLS other than the equity interests of Liggett to a person
controlled by Bennett S. LeBow shall constitute a 'Disposition of
Assets') or (iii) adopt a Plan of Liquidation, unless:
(1) the Issuer shall be the continuing person, or
the person (if other than the Issuer) (or, in the case of
(ii), one person to which assets are transferred) formed by
such consolidation or into which the Issuer is merged or to
which the properties and assets of the Issuer are transferred
or leased as an entirety or substantially as an entirety or
pursuant to a Plan of Liquidation, shall be a corporation
organized and
<PAGE> 62
4
existing under the laws of the United States or any State
thereof or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto, executed and
delivered to the Trustee, in form satisfactory to the Trustee,
all the obligations of the Issuer under the Securities and
this Indenture;
(2) the person (or, in the case of (ii), one person
to which assets are transferred) formed by such consolidation
or surviving such merger or to which the properties and assets
of the Issuer, are transferred or leased as an entirety or
substantially as an entirety or pursuant to a Plan of
Liquidation shall have a Tangible Net Worth immediately after
such transaction, equal to or greater than that of the Issuer,
immediately preceding, and without giving effect to, such
transaction;
(3) immediately before and immediately after giving
effect to such transaction, no Default or Event of Default
shall have occurred and be continuing; and
(4) the Issuer shall have delivered to the Trustee
an Officers' Certificate of the Issuer and an Opinion of
Counsel, each stating that such consolidation, merger,
transfer or lease and such supplemental indenture comply with
this Article Seven and that all conditions precedent herein
provided relating to such transaction have been complied with.
<PAGE> 63
5
SECTION 7.02. Successor Person Substituted.
Upon any consolidation or merger, or any transfer or lease of
assets of the Issuer in accordance with Section 7.01, the successor
person formed by such consolidation or into which the Issuer is merged
or to which such transfer is made shall succeed to, and be substituted
for, and may exercise every right and power of, the Issuer under this
Indenture with the same effect as if such successor person had been
named as the Issuer herein. When a successor person assumes all of
the obligations of the Issuer hereunder and under the Securities,
except in the case of succession by lease, the Issuer shall be
released from such obligations."
1.7. By deleting the phrase ", pursuant to Section 3.07, 3.08
or 5.03 hereof" in clause (2) of Section 8.01.
1.8. By deleting the provisions of clauses (4) and (7) of
Section 8.01 in their entirety and by inserting in place of each the following:
"[Intentionally Omitted]."
1.9. By deleting the second paragraph of Section 8.01 in its
entirety.
1.10. By deleting the references to Sections 5.03, 5.04, 5.05,
5.07, 6.02, 6.03, 6.04, 6.05, 6.06, and 6.08, in the fourth paragraph of
Section 8.01.
1.11. By deleting the headings and the provisions of Sections
13.01, 13.02, 13.03, 13.04, 13.05, 13.06, 13.07, 13.08, and 13.09 in their
entirety and by inserting in place of each the following:
"[Intentionally Omitted]."
1.12. By deleting the headings and the provisions of Sections
14.01, 14.02, 14.03, 14.04, 14.05, and 14.06 in their entirety and by inserting
in place of each the following:
<PAGE> 64
6
"[Intentionally Omitted]."
1.13. By deleting Section 15.11 in its entirety and by
inserting in its place the following:
"SECTION 15.11. Release of Holdings.
Anything in this Indenture to the contrary
notwithstanding, from and after the Exchange Offer
Consummation Date, Holdings shall be released from any and all
obligations or liability with respect to the Securities and
any and all obligations under the Indenture, either directly
or indirectly or by virtue of its status as General Partner
and all references in the Securities and the Indenture to the
Issuers shall be deemed to be references solely to BGLS."
SECTION 2. Amendments to the Securities. Each of the
Securities is hereby amended as follows:
2.1. By deleting Paragraph 8 on the reverse of the
Securities in its entirety and inserting in its place the following:
"8. [Intentionally Omitted]."
2.2. By deleting Paragraph 9 on the reverse of the
Securities in its entirety and inserting in its place the following:
"9. [Intentionally Omitted]."
2.3. By deleting Paragraph 10 on the reverse of the
Securities in its entirety and inserting in its place the following:
"10. [Intentionally Omitted]."
2.4. By deleting Paragraph 15 on the reverse of the Securities
in its entirety and inserting in its place the following:
<PAGE> 65
7
"15. Restrictive Covenants.
The Indenture limits the ability of the Issuers to merge or
consolidate with, or transfer all or substantially all of its
properties and assets to, any other person. Such limitation does not
apply to subsidiaries of the Issuers. Such limitation is subject to a
number of important qualifications and exceptions."
2.5. By deleting Paragraph 19 on the reverse of the
Securities in its entirety and inserting in its place the following:
"19. [Intentionally Omitted]."
2.6. By deleting Paragraph 23 on the reverse of the Securities
in its entirety and inserting in its place the following:
23. "Release of Holdings.
Anything in the Indenture to the contrary
notwithstanding, from and after the Exchange Offer
Consummation Date, Holdings shall be released from any and all
obligations or liability with respect to the Securities and
any and all obligations under the Indenture, either directly
or indirectly or by virtue of its status as General Partner
and all references in the Securities and the Indenture to the
Issuers shall be deemed to be references solely to BGLS."
SECTION 3. Governing Law. This Sixth Supplemental Indenture
shall be governed by and construed in accordance with the laws of the State of
New York without regard to principles of conflicts of law.
SECTION 4. Duplicate Originals. All parties may sign any
number of copies of this Sixth Supplemental Indenture. Each signed copy shall
be an original, but all of them together represent the same agreement.
<PAGE> 66
8
SECTION 5. Severability. In case any provision in this Sixth
Supplemental Indenture shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby, and a Holder shall have no claim
therefor against any party hereto.
SECTION 6. Effectiveness. This Sixth Supplemental Indenture
shall become effective upon its execution and delivery by each of the parties
hereto provided, that if the Exchange Offer is not consummated the amendments
provided in Section 1 and Section 2 shall be null and void.
SECTION 7. Ratification. This Sixth Supplemental Indenture
is executed pursuant to the provisions of Section 11.02 of the Indenture, and
the terms and conditions hereof shall be and shall be deemed to be part of the
terms and conditions of the Indenture for any and all purposes. Subject to
Section 6, the Indenture, as supplemented by this Sixth Supplemental Indenture,
is in all respects hereby adopted, ratified and confirmed by the parties
hereto.
SECTION 8. Acceptance of Trust. The Trustee hereby accepts
the trust in the Indenture declared and provided, upon the terms and conditions
set forth in the Indenture, as amended by this Sixth Supplemental Indenture.
The Trustee assumes no responsibility for the correctness of the recitals
herein and makes no representation and shall have no responsibility as to the
validity or the sufficiency of this Sixth Supplemental Indenture or the due
authorization and execution hereof BGLS.
<PAGE> 67
9
SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Sixth
Supplemental Indenture to be executed, and their respective corporate seals to
be hereunto affixed and attested, all as of the date first above written.
BGLS INC.
By:____________________
Title:
[Seal]
Attest: ___________________
Assistant Secretary
L HOLDINGS INC.
By:____________________
Title:
[Seal]
Attest: ___________________
Assistant Secretary
FIRST TRUST NATIONAL ASSOCIATION,
as Trustee
By:____________________
Title:
[Seal]
Attest: ___________________
Assistant Secretary
<PAGE> 68
STATE OF NEW YORK )
:ss
COUNTY OF NEW YORK )
On this ____ day of December, 1995, before me personally came
______________, to me known, who, being sworn, did depose and say that he is
___________________ of BGLS Inc., one of the corporations described in and
which executed the above instrument; that he knows the corporate seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was affixed by the authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
[Notarial Seal] _________________________
Notary Public
My commission expires:
<PAGE> 69
STATE OF NEW YORK )
:ss
COUNTY OF NEW YORK )
On this ____ day of December, 1995, before me personally came
______________, to me known, who, being sworn, did depose and say that he is
___________________ of L Holdings Inc., one of the corporations described in
and which executed the above instrument; that he knows the corporate seal of
said corporation; that the seal affixed to said instrument is such corporate
seal; that it was affixed by the authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
[Notarial Seal] _________________________
Notary Public
My commission expires:
STATE OF )
:ss
COUNTY OF )
On this ____ day of December, 1995, before me personally came
______________, to me known, who being duly sworn, did depose and say that he
is ___________________ of First Trust National Association, the national
banking association described in and which executed the above instrument; that
he knows the seal of said national banking association; that the seal affixed
to said instrument is such seal; that it was affixed by the authority of the
Board of Directors of said national banking association; and that he signed his
name thereto by like authority.
[Notarial Seal] _________________________
Notary Public
My commission expires:
<PAGE> 70
EXHIBIT C
================================================================================
BGLS INC.
Company,
and
SHAWMUT BANK, N.A.
Trustee
Indenture
Dated as of December __, 1995
$___,000,000
15.75% Series A Senior Secured Notes due 2000
15.75% Series B Senior Secured Notes due 2000
================================================================================
<PAGE> 71
TABLE OF CONTENTS*
PAGE
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
<TABLE>
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SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Incorporation by Reference of TIA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
SECTION 1.03. Rules of Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.02. Execution and Authentication . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
SECTION 2.03. Registrar and Paying Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 2.04. Paying Agent to Hold Assets in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.05. Securityholder Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.06. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
SECTION 2.07. Replacement Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.08. Outstanding Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
SECTION 2.09. Treasury Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.10. Temporary Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.11. Cancellation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
SECTION 2.12. Defaulted Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.13. Interest Rate; Interest Payment Dates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 2.14 Two Series Pari Passu, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE THREE
REDEMPTION; PURCHASE
SECTION 3.01. Optional Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
SECTION 3.02. Notices to Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.03. Selection of Securities to be Redeemed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.04. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
SECTION 3.05. Effect of Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.06. Deposit of Redemption Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.07. Securities Redeemed in Part . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
SECTION 3.08. Holders' Right to Cause Repurchase Upon Change of Control . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
____________________
*NOTE: This Table of Contents shall not, for any purpose,
be deemed to be a part of the Indenture
i
<PAGE> 72
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SECTION 3.09. Mandatory Offer to Purchase upon Triggering Asset Sale . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
SECTION 4.02. Maintenance of Office or Agency. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.03. Limitations on Restricted Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.04. Limitation on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 4.05. Limitation on Transactions with Affiliates and Investments. . . . . . . . . . . . . . . . . . . . . . 31
SECTION 4.06. Investment Company Act . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.07. No Liens on Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.08. No Violation of the Margin Rules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.09. Recording of Security Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
SECTION 4.10. Financial Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
SECTION 4.11. Waiver of Stay, Extension or Usury Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
SECTION 4.12. Notice of Acceleration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.13. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.14. Existence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.15. Payment of Taxes and Other Claims . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
SECTION 4.16. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.17. Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 37
SECTION 4.18. Ownership of NV Holdings; Additional Covenants Relating
to NV Holdings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
SECTION 4.19. Restrictions on Issuance of Additional Stock of Liggett or
Brooke Overseas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
SECTION 4.20. Opinions, Appraisals, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.21. Ownership of Liggett, Brooke Overseas and Liggett
Holding Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
SECTION 4.22. Escrows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.23. Excluded Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
SECTION 4.24. Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
ARTICLE FIVE
ADDITIONAL COVENANTS
SECTION 5.01. Restrictions on Sold Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5.02. Restrictions on Transactions with New Valley . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
SECTION 5.03. Tax Sharing Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
SECTION 5.04. Tax Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
SECTION 5.05. Purchases of Existing Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
</TABLE>
ii
<PAGE> 73
ARTICLE SIX
SUCCESSOR PERSON
<TABLE>
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SECTION 6.01. Mergers, Consolidations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49
SECTION 6.02. Successor Person Substituted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ARTICLE SEVEN
DEFAULT AND REMEDIES
SECTION 7.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
SECTION 7.02. Acceleration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 7.03. Other Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 7.04. Waiver of Past Defaults. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.05. Control by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.06. Limitation on Suits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
SECTION 7.07. Rights of Holders to Receive Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.08. Collection Suit by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.09. Trustee May File Proofs of Claim . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
SECTION 7.10. Priorities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
SECTION 7.11. Undertaking for Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
ARTICLE EIGHT
TRUSTEE
SECTION 8.01. Duties of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
SECTION 8.02. Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8.03. Individual Rights of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
SECTION 8.04. Trustee's Disclaimer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.05. Notice of Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.06. Reports by Trustee to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.07. Compensation and Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
SECTION 8.08. Replacement of Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 60
SECTION 8.09. Successor Trustee by Merger, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 8.10. Eligibility; Disqualification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
SECTION 8.11. Preferential Collection of Claims against Company . . . . . . . . . . . . . . . . . . . . . . . . . . 61
ARTICLE NINE
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 9.01. Satisfaction, Discharge of the Indenture and
Defeasance of the Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
SECTION 9.02. Termination of the Company's Obligations upon Cancellation
</TABLE>
iii
<PAGE> 74
<TABLE>
<S> <C> <C>
of the Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63
SECTION 9.03. Survival of Certain Obligations 63
SECTION 9.04. Acknowledgment of Discharge by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.05. Application of Trust Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.06. Repayment to the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
SECTION 9.07. Reinstatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
SECTION 10.02. With Consent of Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
SECTION 10.03. Compliance with TIA. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 10.04. Revocation and Effect of Consents. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 67
SECTION 10.05. Notation on or Exchange of Securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 10.06. Trustee to Sign Amendments, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
ARTICLE ELEVEN
MEETINGS OF SECURITYHOLDERS . . . . . . . . . . . . . . . . . . . . . 68
SECTION 11.01. Purposes for Which Meetings May Be Called. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 68
SECTION 11.02. Manner of Calling Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 11.03. Call of Meetings by the Company or Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
SECTION 11.04. Who May Attend and Vote at Meetings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 11.05. Regulations May be Made by Trustee; Conduct of the Meeting;
Voting Rights; Adjournment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
SECTION 11.06. Voting at the Meeting and Record to be Kept. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 11.07. Exercise of Rights of Trustee or Securityholders May
Not Be Hindered or Delayed by Call of Meeting. . . . . . . . . . . . . . . . . . . . . . . . . 71
ARTICLE TWELVE
SECURITY INTEREST
SECTION 12.01. Pledge and Security Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
SECTION 12.02. Release of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 12.03. Reliance on Opinion of Counsel. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
SECTION 12.04. Purchaser May Rely. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 12.05. Payment of Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 12.06. Suits to Protect the Collateral. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 12.07. Trustee's Duties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
SECTION 12.08. Sale of Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
SECTION 12.09. Dealings with Collateral . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
</TABLE>
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<PAGE> 75
ARTICLE THIRTEEN
MISCELLANEOUS
<TABLE>
<S> <C> <C>
SECTION 13.01. TIA Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 13.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
SECTION 13.03. Communications by Holders with Other Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 13.04. Certificate and Opinion as to Conditions Precedent . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 13.05. Statements Required in Certificate or Opinion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 13.07. Legal Holidays . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 13.08. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 13.09. No Adverse Interpretation of Other Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 77
SECTION 13.10. No Recourse against Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 13.11. Successors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 13.12. Duplicate Originals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 13.13. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
SECTION 13.14. Actions by Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
</TABLE>
v
<PAGE> 76
EXHIBIT A-1 - Form of Series A Note
EXHIBIT A-2 - Form of Series B Note
EXHIBIT B-1 - Form of BGLS Pledge Agreement
EXHIBIT B-2 - Form of NV Holdings Pledge Agreement
SCHEDULE 1 - List of Existing Indebtedness
vi
<PAGE> 77
INDENTURE dated as of _________, 1995, between BGLS Inc., a Delaware
corporation (the "Company"), and Shawmut Bank N.A., a national banking
association, as Trustee.
Each party hereto agrees as follows for the benefit of the other party
and for the equal and ratable benefit of the Holders of the 15.75% Series A
Senior Secured Notes due 2000 and the 15.75% Series B Senior Secured Notes due
2000:
ARTICLE ONE
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. Definitions.
"Accepting Holder" has the meaning provided in Section 3.09.
"Affiliate" of any specified person means any other person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified person. For the purposes of this definition,
"control" when used with respect to any person means the power to direct the
management and policies of such person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"affiliated," "controlling" and "controlled" have meanings correlative to the
foregoing.
"Affiliated Transaction" means, with respect to any person, (x) any
direct or indirect sale, lease, transfer, exchange, purchase or other
disposition of securities, assets, property or services to or from, or any
contract, agreement, understanding or other transaction or series of related
transactions with or for the benefit of, or any payment, loan or advance to or
for the benefit of, such person and (y) any transaction or series of related
transactions pursuant to, on account of or in connection with which such person
receives, obtains, or otherwise becomes entitled to, either immediately or in
the future, any form of economic benefit, regardless of whether or not such
person provides any consideration therefor (including, without limitation, the
payment of money, the transfer of property or rights, the waiver of claims or
rights, or the forbearance from exercising rights, asserting claims or the
like) and, in the case of a transaction or series of related transactions
described in either of the foregoing clauses (x) or (y), without regard to the
fairness of the terms of such transaction or series of related transactions;
provided, however, that a transaction which benefits the Company or any of its
Subsidiaries or New Valley generally shall not constitute an Affiliated
Transaction with respect to LeBow or any other holder of Equity Interests in
the Company for the foregoing purpose solely because it indirectly benefits
LeBow or such other holder solely as a result of LeBow's or such other holder's
direct or indirect ownership interests in the Company. With regard to clause
(y), which, as is the case with clause (x), is specifically intended to be
construed as broadly as possible and without limiting the generality thereof,
and by way of example only, a transaction would be an Affiliated Transaction
between New Valley and LeBow if, in connection therewith, LeBow received (a)
payment for a covenant not to compete, (b) payment for the cancellation of a
claim against, or a right to receive assets or
<PAGE> 78
property from, New Valley, (c) payment for the cancellation of or amendment to
a contract with New Valley, (d) payment with respect to employment with or
consulting services provided to New Valley, (e) a brokerage, investment banking
or finders fee or (f) the right to purchase or acquire securities of, or assets
or other property from, New Valley whether or not full value was to be paid
therefor.
"Agent" means any Registrar, Paying Agent or co-Registrar.
"Asset Sale" means (i) any conveyance, sale, transfer, assignment or
other disposition of any Collateral, (ii) any conveyance, sale, transfer,
assignment or other disposition of all or substantially all of the assets of
Liggett or Brooke Overseas, or (iii) any conveyance, sale, transfer, assignment
or other disposition by NV Holdings of any Equity Interests of New Valley;
provided that "Asset Sale" shall not include any Disposition of Assets effected
in compliance with Section 6.01.
"Associate" has the meaning provided in Rule 12b-2 promulgated by the
SEC under the Exchange Act.
"Bankruptcy Law" has the meaning provided in Section 7.01.
"BGL" means Brooke Group Ltd., a Delaware corporation, and any
successor thereto.
"BGL Group" means the affiliated group of corporations including the
Company which files a consolidated federal income tax return.
"BGLS" means BGLS Inc., a Delaware corporation, and any successor
thereto.
"BGLS Allocable Amount" has the meaning provided in Section
5.03(a)(1)(A).
"BGLS Pledge Agreement" means the Pledge and Security Agreement dated
as of the date hereof, between the Company and the Trustee for the benefit of
the Holders, as amended, modified or supplemented from time to time.
"Board of Directors" means the board of directors of a person or any
committee of the board of directors of such person authorized, with respect to
any particular matter, to exercise the power of the board of directors of such
person.
"Board Resolution" means a duly adopted resolution of the Board of
Directors of a person.
"Brooke Expanded Affiliate" means any director or employee of BGL or
any of its Affiliates or Associates.
2
<PAGE> 79
"Brooke Overseas" means Brooke (Overseas) Ltd., a Delaware
corporation, and any successor thereto.
"Business Day" means a day that is not a Legal Holiday.
"Capitalized Lease Obligation" means indebtedness represented by
obligations under a lease that is required to be capitalized for financial
reporting purposes in accordance with GAAP, and the amount of such indebtedness
shall be the capitalized amount of such obligations determined in accordance
with GAAP.
"Cash Collateral Account" means the Cash Collateral Accounts
maintained pursuant to the Pledge Agreement.
"cash or cash equivalents" means U.S. Legal Tender or U.S. Government
Obligations maturing as to principal and interest within one year of their
issuance.
"Change of Control" has the meaning provided in Section 3.08.
"Collateral" means the Property described in, or from time to time
subject to the Lien of, the Pledge Agreement.
"Common Stock Price" has the meaning provided in Section 4.05.
"Company" means BGLS Inc., a Delaware corporation, until a successor
replaces it pursuant to this Indenture and executes a supplemental indenture as
provided herein, and thereafter means such successor.
"Company Credits" means credits against tax liability available to
BGLS in the relevant period under the Internal Revenue Code of 1986, as
amended.
"Company Group" has the meaning provided in Section 5.04.
"Company Group Share" has the meaning provided in Section 5.03.
"Company Net Income" means the taxable income of BGLS (including
capital gains and capital losses, but as to capital losses, only to the extent
they do not exceed capital gains for the relevant period) determined as if BGLS
had filed a separate income tax return with respect to the relevant calendar
quarter or year, as the case may be, based on the amounts that would be, or
would be estimated to be, reported on the federal income tax return of BGLS for
the relevant calendar year and adjusted under the principles set forth in
Treasury Regulation Section 1.1552-1(a)(2)(ii) (and computed without regard to
any BGLS net operating loss carryforwards).
3
<PAGE> 80
"Company Request" means a written request or order signed in the name
of the Company by any two Officers of the Company and delivered to the Trustee.
"Consolidated Net Income (Loss)" of any person means, without
duplication, for any period, the after-tax net income (loss) of such person and
its subsidiaries for such period on a consolidated basis as determined in
accordance with GAAP, adjusted by excluding therefrom (a) net extraordinary
gains or net extraordinary losses, as the case may be, of such person and its
subsidiaries during such period, (b) net gains or losses (less all fees and
expenses relating thereto) in respect of dispositions of assets (other than in
the ordinary course of business) by such person and its subsidiaries during
such period, (c) the income (or loss) of any other person (other than a
subsidiary of such person) in which any other person (other than such person or
any subsidiary) has an ownership interest, except to the extent of the amount
of dividends or other distributions actually paid to such person or its
subsidiaries by such other person during such period, (d) net income of any
other person combined with such person or any subsidiary of such person on a
"pooling of interests" basis attributable to any period prior the date of
combination and (e) the net income of any subsidiary of such person during such
period to the extent that the declaration or payment of dividends or similar
distributions by that subsidiary of that income is not at the time permitted,
directly or indirectly, by operation of the terms of its charter or any
agreement (including any shareholder agreement), instrument, judgment, decree,
order, statute, rule or governmental regulations applicable to that subsidiary
(except to the extent of the amount of dividends or distributions to such
person or its subsidiaries from such subsidiary during such period).
"Cumulative Net Available Proceeds" means, at any time of
determination, the sum of (i) the Net Available Proceeds received by the
Company with respect to all Asset Sales consummated since (x) the Offer Date
immediately preceding such time of determination or (y) if no Offer Date shall
have occurred, the date hereof plus (ii) all amounts deemed to be Net Available
Proceeds since the Offer Date immediately preceding such time of determination
pursuant to clause (a) or (b) of the second proviso in the definition of "Net
Available Proceeds".
"Custodian" has the meaning provided in Section 7.01.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Designated Investment Bank" means any of Alex. Brown & Sons
Incorporated, Bankers Trust Company, Bear, Stearns & Co. Inc., Chase
Securities, Inc., CIBC Wood Gundy Securities, Inc., CS First Boston
Corporation, Dillon, Read & Co. Inc., Donaldson, Lufkin & Jenrette Securities
Corporation, Goldman, Sachs & Co., Hambrecht & Quist LLC, J.P. Morgan
Securities Inc., Lazard Freres & Co. LLC, Lehman Brothers Inc., Merrill Lynch &
Co., Montgomery Securities, Morgan Stanley & Co. Incorporated, Oppenheimer &
Co.,
4
<PAGE> 81
Inc., PaineWebber Incorporated, Prudential Securities Incorporated, Salomon
Brothers Inc, Schroder Wertheim & Co., Smith Barney Inc. or UBS Securities
Inc., or any successor thereto.
"Disposition of Assets" has the meaning provided in Section 6.01.
"Disqualified Equity Interest" means any Equity Interest of a person
that, by its terms or by the terms of any security into which it is convertible
or exchangeable, is, or upon the happening of an event would be, required to be
redeemed or retired, or at the option of the holder, repurchased, in whole or
in part by such person or any subsidiary of such person, or has, or upon the
happening of an event would have, a redemption or similar payment due, on or
prior to the last maturity date of the Securities then outstanding.
"Equity Interests" means, with respect to any Person, any capital
stock of such Person and shares, interests, participations or other ownership
interests (however designated) of any Person and any rights (other than debt
securities convertible into corporate stock), warrants and options to purchase
any of the foregoing, including (without limitation) each class of common stock
and preferred stock of such Person if such Person is a corporation and each
general and limited partnership interest of such Person if such Person is a
partnership.
"Equityholders' Equity" means at any date with respect to any person
the amount of consolidated stockholders' equity (deficit) or partners' capital
(excluding stockholders' equity or partners' capital attributable to
Disqualified Equity Interests of such person) that would appear on the balance
sheet of such person at such date, in accordance with GAAP.
"Estimated Tax Payments" has the meaning provided in Section 5.04.
"Event of Default" has the meaning provided in Section 7.01.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Excluded Cash" means, as of any date, any cash dividend or other
distribution on any security forming part of the Collateral that shall have
been received by the Company or NV Holdings less than 180 days prior to such
date, except to the extent such cash dividend or other distribution is
required, pursuant to the Pledge Agreement, to be deposited and held in the
Cash Collateral Account.
"Excluded Indebtedness" means the Reset Notes or Non-Recourse Indebtedness.
"Fair Market Value", at any time with respect to any Property, means
the sale value of such Property which could be realized in an arm's length sale
at such time between an informed and willing buyer and an informed and willing
seller, under no compulsion to buy or
5
<PAGE> 82
sell, respectively, all as determined by a nationally recognized investment
banking firm selected by the Company.
"GAAP" means generally accepted accounting principles, as in effect in
the United States of America on the date of this Indenture or which have been
promulgated in final form on or before the date of this Indenture to take
effect on a date later than the date of this Indenture, consistently applied.
"Holder" or "Securityholder" means the person in whose name a Security
is registered on the Registrar's books.
"Incapacity" means the inability to perform fully the duties of an
individual's office, which inability has continued for 90 consecutive days.
"Indebtedness" with respect to any person shall be determined on an
unconsolidated basis and means (i) any liability, contingent or otherwise, of
such person (A) for borrowed money (whether or not the recourse of the lender
is to the whole of the assets of such person or only to a portion thereof), (B)
evidenced by a bond, note, debenture, letter of credit or similar instrument,
including any of the foregoing given in connection with the acquisition of any
property or assets (other than inventory or similar property acquired in the
ordinary course of business), including securities, or (C) for the payment of
money relating to a Capitalized Lease Obligation; (ii) any liability of others
of the kind described in the preceding clause (i) which such person has
guaranteed or is otherwise the legal liability of such person; (iii) any
obligation of the kind described in the preceding clause (i) secured by a Lien
to which the property or assets of such person are subject, whether or not the
obligation secured thereby shall have been assumed by or shall otherwise be
such person's legal liability; and (iv) any and all deferrals, renewals,
extensions and refundings of, or amendments, modifications or supplements to,
any liability of the kind described in any of the preceding clauses (i), (ii)
or (iii).
"Indenture" means this Indenture, as amended, modified or supplemented
from time to time, including Exhibits A- 1, A-2, B-1 and B-2 hereto.
"Indenture Year" means the period from and including the date hereof
to but excluding the date of the first anniversary hereof, the period from and
including the date of the first anniversary hereof to but excluding the date of
the second anniversary date hereof, the period from and including the date of
the second anniversary hereof to but excluding the date of the third
anniversary hereof, the period from and including the date of the third
anniversary hereof to but excluding the date of the fourth anniversary hereof
and the period from and including the date of the fourth anniversary hereof to
and including the Maturity Date.
"Interest Payment Date" means the stated maturity of an installment of
interest on the Securities.
6
<PAGE> 83
"Investment" means, for any person, any loan, advance, stock purchase,
capital contribution, or other investment by such person in any other person
and includes any other direct or indirect investment of any kind (including,
without limitation, guarantees of indebtedness, provisions of letters of credit
and other similar items).
"Investment Company Act" means the Investment Company Act of 1940, as amended.
"LeBow" means (i) Bennett S. LeBow, (ii) his spouse, any of his
descendants, his parents or siblings, his mother-in-law or father-in-law, his
sons and daughters-in-law and his brothers and sisters-in-law, (iii) any trust
created by him or with regard to which he serves as a trustee or co-trustee,
(iv) any Affiliate of any of the foregoing and (v) any person in which any one
or more of the foregoing shall own more than a 10% economic interest or control
more than 10% of the voting power; provided, however, that the term LeBow shall
not include (a) the Company, (b) New Valley or (c) any person controlled by the
Company or New Valley if any one or more of the foregoing listed in clauses (i)
through (v) above do not have more than a 10% economic interest or control more
than 10% of the voting power in such person, in each case other than through
economic interests in or voting power in the Company or BGL.
"Legal Holiday" has the meaning provided in Section 13.07.
"Lien" means any mortgage, pledge, lien, encumbrance, charge or
adverse claim affecting title or resulting in an encumbrance against real or
personal property, or a security interest of any kind (including any
conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell and any filing of or agreement
to give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction).
"Liggett" means Liggett Group Inc., a Delaware corporation, and any
successor thereto.
"Liggett Holding Subsidiary" has the meaning provided in Section 4.21.
"Liggett Interests" has the meaning provided in Section 4.21.
"Margin Stock" means "margin stock" as such term is defined in
Regulation G of the Board of Governors of the Federal Reserve System.
"Market Value" means, when used in connection with the valuation of
U.S. Government Obligations, the fair value of such obligation as of the date
of their deposit with, or release by, the Trustee whichever is applicable, and,
when used in connection with the valuation of U.S. Legal Tender, the amount
thereof.
7
<PAGE> 84
"Maturity Date" means December 31, 2000.*
"Maximum New Valley Distribution Amount" means, as of any date, the
sum of (i) $25,000,000 plus (ii) $12,500,000 multiplied by the number of
January 1s that shall have occurred, as of such date, beginning with and
including January 1, 1998, plus (iii) the aggregate amount that would have been
payable to NV Holdings and the Company if New Valley had paid dividends, in
accordance with the terms and priority of the New Valley Equity, on the New
Valley Equity in an amount equal to 12 1/2% of New Valley Earnings; provided
that amounts described in clause (iii) above shall constitute part of the
"Maximum New Valley Distribution Amount" only if the Company shall have
notified the Trustee pursuant to Section 3.02, within 30 days of receipt of
such amount by NV Holdings, that it shall apply an equal amount to the
redemption of the Securities in accordance with Section 3.09 (mutatis mutandis)
and that such amount so to be applied to such redemption has, at the time of
such notification, been deposited in the Cash Collateral Account for such
purpose.
"Net Available Proceeds" means, with respect to any Asset Sale, the
aggregate amount of all cash and the fair market value (which, for this
purpose, shall mean the sale value of the Property conveyed, sold, transferred,
assigned or otherwise disposed of in such Asset Sale which could be realized in
an arm's length sale at such time between an informed and willing buyer and an
informed and willing seller, under no compulsion to buy or sell, respectively)
of all consideration received by the Company directly or indirectly (including
through any Subsidiary) in connection with such Asset Sale; provided that Net
Available Proceeds shall be net of (i) the amount of any legal, title and
recording tax expenses, commissions and other fees and expenses paid or payable
in cash by the Company or any of its Subsidiaries as a result of such Asset
Sale, (ii) the amount of any federal, state, local or foreign income or other
taxes estimated to be actually payable by the Company or any of its
Subsidiaries as a result of such Asset Sale which are attributable to the
Company Group under the principles of Treasury Regulation Sections
1.1552-1(a)(1) and 1.1502-33(d)(2), after taking into account all relevant tax
attributes, (iii) reasonable brokerage or other customary selling commissions
paid or payable in cash by the Company or any of its Subsidiaries, (iv)
reasonable third-party expenses incurred by the Company or any of its
Subsidiaries in preparing for sale the Property which is the subject of such
Asset Sale, (v) in the case of any sale of all or substantially all of the
assets of Liggett or Brooke Overseas, any repayment of Indebtedness of Liggett
or Brooke Overseas, respectively, provided that such Indebtedness is not owed
to the Company, such Indebtedness was not incurred in contemplation of such
Asset Sale (and the Company shall have provided to the Trustee a certificate of
an officer of the Company to such effect) and such Indebtedness when incurred
represented a borrowing by Liggett or Brooke Overseas of cash in an amount
equal to not less than the face amount of the
________________________
* If the Indenture is not executed prior to December 31, 1995, the Maturity
Date will be changed to the fifth anniversary of the last day of the month
of execution.
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Indebtedness and no more than $20,000,000 aggregate principal amount of such
Indebtedness owed to any Subsidiaries of the Company may be deducted pursuant
to this clause (v) in one or more successive applications of this clause (v) in
the aggregate and (vi) in the case of any sale of all or substantially all of
the assets of Liggett or Brooke Overseas, any consideration deemed received by
the Company or any of its Subsidiaries as a result of the assumption of any
Indebtedness by any person in connection with such Asset Sale, provided that
such Indebtedness was not incurred in contemplation of such Asset Sale (and the
Company shall have provided to the Trustee a certificate of an officer of the
Company to such effect); and provided, further, that (a) if any expenses,
commissions or fees deducted above from Net Available Proceeds are not actually
paid by the Company or any of its Subsidiaries within one year of the
applicable Asset Sale, such expenses, commissions or fees, to the extent not
paid, shall be deemed to constitute Net Available Proceeds for purposes of the
next Offer made by the Company (b) if at any date the sum of (I) any
Indebtedness owed to any Subsidiary and assumed as contemplated by clause (vi)
plus (II) the aggregate Indebtedness referred to in clause (v) owed to any
Subsidiary exceeds $20,000,000 cumulatively from the date of the original
issuance of the Securities (such excess, "Excess Indebtedness"), any direct or
indirect payment on or retirement of any Excess Indebtedness shall be deemed to
be Net Available Proceeds received on the date of such payment or retirement;
and (c) if any Indebtedness owed to the Company is assumed as contemplated by
clause (vi), any direct or indirect payment on or retirement of any such
Indebtedness shall be deemed to be Net Available Proceeds received on the date
of such payment or retirement; and provided, further, that Net Available
Proceeds shall include any earnings thereon received by the Company or any of
its Subsidiaries until such Net Available Proceeds are applied in accordance
with Section 3.09.
"New Valley" means New Valley Corporation, a New York corporation, and
any successor thereto.
"New Valley Assets" means any Equity Interest or other Investment in
New Valley.
"New Valley Common Shares" means the common stock, par value $0.01 per
share, of New Valley and any Equity Interests which may be issued in exchange
or replacement thereof.
"New Valley Earnings" means, as of any date of determination thereof,
the cumulative Consolidated Net Income (Loss) of New Valley during the period
beginning on January 1, 1996 and ending on the last day of the full fiscal year
occurring thereafter but immediately preceding such date of determination.
"New Valley Entity" has the meaning provided in Section 4.18.
"New Valley Equity" means any Equity Interests in New Valley.
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"New Valley Expenses" has the meaning provided in Section 5.02.
"New Valley Transferee" means (i) any subsidiary of New Valley or (ii)
any transferee of assets of New Valley if the value of all securities in such
transferee maintained by New Valley represents a material portion of the assets
of New Valley.
"Non-Recourse Indebtedness" means any Indebtedness of New Valley or
any New Valley Transferee incurred after September 30, 1995 to finance or
refinance the cost of any Property acquired by New Valley or such New Valley
Transferee after September 30, 1995 if such Indebtedness is recourse only to
the Property acquired and, if such Property constitutes substantially all of
the Property of such New Valley Transferee, any of the Equity Interests of such
New Valley Transferee.
"Non-Tax Sharing Subsidiary" has the meaning provided in Section 5.04.
"Notice of Option to Cause Repurchase Upon Change of Control" has the
meaning provided in Section 3.08.
"NV Holdings" means New Valley Holdings, Inc., a Delaware corporation,
and any successor thereto.
"NV Holdings Investments" has the meaning provided in Section 4.18.
"NV Holdings Pledge Agreement" means the Pledge and Security Agreement
dated as of the date hereof between NV Holdings and the Trustee for the benefit
of the Holders, as amended, modified or supplemented from time to time.
"NVH Allocable Amounts" has the meaning provided in Section 5.04.
"NVH Tax Agreement" has the meaning provided in Section 5.04.
"Offer" has the meaning provided in Section 3.09.
"Offer Date" has the meaning provided in Section 3.09.
"Offer Purchase Amount" means, with respect to any Offer, an amount
equal to the Cumulative Net Available Proceeds calculated as of the date of the
commencement of such Offer.
"Offer Purchase Price" has the meaning provided in Section 3.09.
"Officer" means the Chairman of the Board, the President, any Vice
President, the Treasurer, the Controller, the Secretary or the Assistant
Secretary of the Company.
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"Officers' Certificate" means a certificate signed by two Officers or
by an Officer and an Assistant Treasurer of the Company, and otherwise
complying with the requirements of Sections 13.04 and 13.05, except an
Officers' Certificate given pursuant to Section 4.17 shall be signed by a
principal operating officer, principal financial officer or a principal
accounting officer and shall be in compliance with TIA Section 314(a)(4) and
except that (i) for so long as Bennett S. LeBow is an officer or director of
the Company, he shall sign each Officers' Certificate delivered hereunder and
(ii) in case Bennett S. LeBow is not an officer or director of the Company, for
so long as Bennett S. LeBow is an officer or director of a Subsidiary or any
Person of which the Company is a subsidiary, he shall sign each Officers'
Certificate delivered hereunder in such capacity, in addition to the officers
of the Company otherwise required hereunder to sign such Officers' Certificate.
"Opinion of Counsel" means a written opinion from legal counsel who is
reasonably acceptable to the Trustee (which counsel may be an employee of or
counsel to the Company or the Trustee), and otherwise complying with the
requirements of Sections 13.04 and 13.05.
"Paying Agent" has the meaning provided in Section 2.03, except that
for the purposes of Articles Three, Four and Nine the Paying Agent shall not be
the Company or a Subsidiary.
"Permitted Lien" means:
(a) Liens created by the Pledge Agreement;
(b) Liens imposed by any governmental authority for taxes,
assessments or charges not yet due or that are being contested in good
faith and by appropriate proceedings if adequate reserves with respect
thereto are maintained on the books of the Company in accordance with
GAAP;
(c) carriers', warehousemen's, mechanics', materialmen's,
repairmen's or other like Liens arising in the ordinary course of
business that are not overdue for a period of more than 30 days or
that are being contested in good faith and by appropriate proceedings
and Liens securing judgments but only to the extent for an amount and
for a period not resulting in an Event of Default under clause (8) of
Section 7.01;
(d) pledges or deposits under worker's compensation,
unemployment insurance and other social security legislation;
(e) deposits to secure the performance of bids, trade
contracts (other than for Indebtedness), leases, statutory
obligations, surety and appeal bonds,
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performance bonds and other obligations of a like nature incurred in
the ordinary course of business; and
(f) easements, rights-of-way, restrictions and other similar
encumbrances incurred in the ordinary course of business and
encumbrances consisting of zoning restrictions, easements, licenses,
restrictions on the use of property or minor imperfections in title
thereto that, in the aggregate, are not material in amount, and that
do not in any case materially detract from the value of the property
subject thereto or interfere with the ordinary conduct of the business
of the Company.
"Permitted Operating Expenses" means any reasonable operating expenses
of the Company or any of its Subsidiaries or BGL incurred in the ordinary
course of business.
"Person" or "person" means any individual, corporation, partnership,
joint venture, association, joint-stock company, trust, unincorporated
organization or government or other agency or political subdivision thereof.
"Plan of Liquidation," with respect to a person, means a plan
(including by operation of law) that provides for, contemplates or the
effectuation of which is preceded or accompanied by (whether or not
substantially contemporaneously) (i) the sale, lease, conveyance or other
disposition of all or substantially all of the assets of such person otherwise
than as an entirety or substantially as an entirety and (ii) the distribution
of all or substantially all of the proceeds of such sale, lease, conveyance or
other disposition and all or substantially all of the remaining assets of such
person to holders of Equity Interests of such person.
"Pledge" means the pledge of the Collateral and delivery by the
Company or NV Holdings to the Trustee, for the equal and ratable benefit of the
Holders pursuant to the Pledge Agreement, of all of the Collateral.
"Pledge Agreement" means, collectively, the BGLS Pledge Agreement and
the NV Holdings Pledge Agreement and any other pledge agreement, mortgage,
security agreement or similar agreement which evidences the Lien granted by the
Company or NV Holdings on the Collateral.
"principal" of a debt security (including the Securities) means the
principal of such debt security plus, when appropriate, the premium, if any, on
such debt security.
"Property" or "property" means any property of any kind or nature
whatsoever, real, personal or mixed (including fixtures), whether tangible or
intangible.
"Publicly-held Company" means any corporation which has a class of
equity interests registered pursuant to Section 12(b) or 12(g) of the Exchange
Act.
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"Purchase Date" has the meaning provided in Section 3.09.
"Redemption Date," when used with respect to any Security to be
redeemed, means the date fixed for such redemption pursuant to this Indenture,
as set forth in the form of Security annexed hereto as Exhibit A.
"Redemption Price," when used with respect to any Security to be
redeemed, means the applicable price fixed for such redemption pursuant to this
Indenture, as set forth in the form of Security annexed hereto as Exhibit A,
plus accrued interest to the Redemption Date.
"Registrar" has the meaning provided in Section 2.03.
"Relevant Periods" has the meaning provided in Section 5.04.
"Reset Notes" means the Company's 13.500% Senior Subordinated Reset
Notes due 1997 (the interest rate on which has been reset to 16 1/8%) issued
under an Indenture, dated as of April 1, 1988, among the Company (as successor
to Brooke Partners L.P.) and Brooke Capital Corp., as Issuers, L Holdings Inc.,
as General Partner, and Shawmut Bank, N.A., as successor trustee to National
Westminster Bank, USA, as amended, modified or supplemented from time to time.
"Restricted Payment" means, with respect to any person, any
distribution on the Equity Interests of such person (other than any such
distribution consisting solely of additional Equity Interests of such person)
or any purchase, redemption or other acquisition or retirement for value or
defeasance of any of the Equity Interests of such person; provided that
"Restricted Payments" shall not include any payments permitted pursuant to
Section 5.03(a).
"Restricted Payment Basket" means (i) $6,000,000 or (ii) $12,000,000
from and after the time that less than 50% of the original aggregate principal
amount of the Securities issued pursuant to this Indenture shall remain
outstanding; provided that if the Company does not make Restricted Payments in
an amount equal to the Restricted Payment Basket in any Indenture Year, the
difference shall carry over to a succeeding Indenture Year or Indenture Years
and shall constitute an accretion to the amount otherwise payable in such
succeeding Indenture Year or Indenture Years.
"SEC" means the Securities and Exchange Commission.
"Securities" means the Series A Securities and the Series B Securities.
"Securities Act" means the Securities Act of 1933, as amended.
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"Securities Register" has the meaning provided in Section 2.03.
"Security Interest" means the Lien on the Collateral which may be
created by the Pledge Agreement in favor of the Trustee for the benefit of the
Holders.
"Security Proceeds" has the meaning provided in Section 12.08.
"Series A Securities" means any of the 15.75% Series A Senior Secured
Notes due 2000, as amended, modified or supplemented from time to time, that
are issued under this Indenture.
"Series B Securities" means any of the 15.75% Series B Senior Secured
Notes due 2000, as amended, modified or supplemented from time to time, that
are issued under this Indenture.
"State Combined Taxes" has the meaning provided in Section 5.04.
"Subordinated Debentures" means the 14.500% Subordinated Debentures
due 1998 issued under an Indenture, dated as of April 1, 1988, among the
Company (as successor to Brooke Partners L.P.) and Brooke Capital Corp., as
Issuers, L Holdings Inc., as General Partner and First Trust National
Association, as Trustee, as amended, modified or supplemented from time to
time.
"subsidiary" of any person means (i) a corporation a majority of whose
Equity Interests with voting power, under ordinary circumstances to elect
directors, is at the time, directly or indirectly, owned by such person, by one
or more subsidiaries of such person or by such person and one or more
subsidiaries of such person or (ii) any other person (other than a corporation)
a majority of whose Equity Interests with voting power including for this
purpose limited partnership interests with or without the power to vote, or
other power to control the management and direction of the business and affairs
of such person, is at the time, directly or indirectly, owned by such person,
by one or more subsidiaries of such person or by such person and one or more
subsidiaries of such person.
"Subsidiary" means any subsidiary of the Company.
"Tangible Net Worth" of any person at any date means the
Equityholders' Equity of such person at such date, less the sum of the
following: any writedown to reflect an impairment in value that is other than
temporary and the book value of all assets which should be classified as
intangibles (without duplication of deductions in respect of items already
deducted in arriving at surplus and retained earnings) including goodwill,
minority interests, research and development costs, trademarks, trade names,
copyrights, patents and franchises, unamortized debt discount and expense, such
calculation to be reviewed by such person's independent public accountants
based on such procedures as are necessary to enable such
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<PAGE> 91
accountants, under professional accounting standards, to report to the Trustee
in writing that in connection with such procedures no matter came to their
attention that caused them to believe that such calculations should be
adjusted.
"Tax Payment" has the meaning provided in Section 5.03(a)(1)(A).
"Tax Percentage" means the maximum combined marginal rate of Federal,
state and local income tax applicable in the relevant year to a Delaware
corporation the principal place of business of which is in New York City (the
rate applicable to corporations doing business in New York City being selected
solely because the laws of the State of New York govern the terms of this
Indenture).
"Tax Sharing Attributes" has the meaning provided in Section 4.10.
"Tax Sharing Payment" has the meaning provided in Section 5.03.
"TIA" means the Trust Indenture Act of 1939 (15 U.S. Code Section
Section 77aaa-77bbbb), as amended and as in effect on the date of this
Indenture.
"Triggering Asset Sale" means an Asset Sale (i) the Net Available
Proceeds of which equal or exceed $5,000,000 or (ii) the Net Available Proceeds
of which will cause the Cumulative Net Available Proceeds, as of the date such
Asset Sale is consummated, to equal or exceed $5,000,000.
"Trust Officer" means the Chairman of the Board, the President or any
other officer or assistant officer of the Trustee assigned by the Trustee to
administer its corporate trust matters.
"Trustee" means the party named as such in this Indenture until a
successor replaces it in accordance with the provisions of this Indenture and
thereafter means such successor.
"U.S. Government Obligations" has the meaning provided in Section 9.01.
"U.S. Legal Tender" means such coin or currency of the United States
of America as at the time of payment is legal tender for the payment of public
and private debts.
SECTION 1.02. Incorporation by Reference of TIA.
Whenever this Indenture refers to a provision of the TIA, such
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following meanings:
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"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Holder or a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company or any other
obligor on the Securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule and not
otherwise defined herein have the meanings assigned to them therein.
SECTION 1.03. Rules of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and words in the
plural include the singular;
(5) provisions apply to successive events and transactions;
(6) "herein," "hereof" and other words of similar import refer
to this Indenture as a whole and not to any particular Article,
Section or other subdivision; and
(7) when referencing the date upon which interest ceases to
accrue, the phrase "to the . . . . date" means up to, but not
including the referenced date.
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ARTICLE TWO
THE SECURITIES
SECTION 2.01. Form and Dating.
The Series A Securities and the Series B Securities and the Trustee's
certificates of authentication shall be substantially in the form of Exhibit
A-1 and A-2, respectively. The Securities may have notations, legends or
endorsements required by law, stock exchange rule or usage. The Company shall
approve the form of the Securities and any notation, legend or endorsement on
them. Each Security shall be dated the date of its authentication. The Series
A Securities shall bear a legend substantially in the form set forth in Exhibit
A-1, except to the extent that counsel for the Company (or counsel to a Holder
reasonably acceptable to the Company in an opinion addressed and delivered to
the Company) opines that such legending is no longer required, which opinion
the Company shall use best efforts to obtain promptly after the reasonable
request of a Holder, if in fact this is the case.
The terms and provisions contained in the Securities shall constitute,
and are hereby expressly made, a part of this Indenture and to the extent
applicable, the Company and the Trustee, by their execution and delivery of
this Indenture, expressly agree to such terms and provisions and to be bound
thereby.
SECTION 2.02. Execution and Authentication.
Two Officers shall sign, or one Officer shall sign and one Officer
shall attest to, the Securities for the Company by manual or facsimile
signature. The seal of the Company shall be reproduced on the Securities.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall
be valid nevertheless.
A Security shall not be valid until the Trustee manually signs the
certificate of authentication on the Security. The signature shall be
conclusive evidence that the Security has been authenticated under this
Indenture.
The Trustee shall authenticate Securities for original issue and
additional Securities only as provided in the next sentence (except as
contemplated by Section 2.06 or 2.07) upon receipt in either case of a Company
Request specifying the amount of Securities to be authenticated and the date on
which such Securities are to be authenticated. Upon receipt of a Company
Request stating that (a) the Company has elected to redeem or otherwise
purchase Reset Notes or Subordinated Debentures, (b) Series A Securities are
being exchanged for Series B Securities or (c) the Company has elected to issue
Series B Securities in an aggregate principal amount of not more than
$1,000,000 in exchange for the termination of
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some or all of the options referred to in the proviso to Section 4.18 (d), the
Trustee shall authenticate and deliver Series B Securities in an aggregate
principal amount equal to (i) in the case of such a redemption or purchase of
the Reset Notes or Subordinated Debentures, the aggregate principal amount of
Securities that would have been issued in exchange for such Reset Notes or
Subordinated Debentures in the exchange offer pursuant to which the Securities
were initially issued hereunder plus the accrued interest on such Reset Notes
or Subordinated Debentures as of the date of such exchange, (ii) in the case of
such an exchange of Series A Securities, the aggregate principal amount of such
Series A Securities or (iii) in the case of any such termination of such
options, the aggregate principal amount of Series B Securities specified in
such Company Request. The aggregate principal amount of Securities outstanding
at any time may not exceed $232,869,000 except as provided in Section 2.07 or
10.02. Upon receipt of a Company Request, the Trustee shall authenticate
Securities in substitution of Securities originally issued to reflect any name
change of the Company.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Securities. Unless otherwise provided in the
appointment, an authenticating agent may authenticate Securities whenever the
Trustee may do so. Each reference in this Indenture to authentication by the
Trustee includes authentication by such agent. An authenticating agent has the
same rights as an Agent to deal with the Company or an Affiliate of the
Company.
The Securities shall be issuable only in registered form and only in
denominations of $1,000 and any integral multiple thereof.
SECTION 2.03. Registrar and Paying Agent.
The Company shall maintain an office or agency where Securities may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Securities may be presented for payment ("Paying
Agent"). The Company or a Subsidiary may act as Registrar or Paying Agent
except that, for the purposes of Articles Three, Four and Nine, neither the
Company nor a Subsidiary shall act as Paying Agent. The Registrar shall keep a
register of the Series A Securities and Series B Securities, respectively, and
of their transfer and exchange (the "Securities Register"). The Company may
have one or more co-Registrars and one or more additional paying agents. The
term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Agent not a party to this Indenture, which agreement shall implement the
provisions of this Indenture that relate to such Agent. The Company shall
notify the Trustee of the name and address of any such Agent. If the Company
fails to maintain a Registrar or Paying Agent, the Trustee shall act as such.
The Company initially appoints the Trustee as Registrar and Paying
Agent.
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SECTION 2.04. Paying Agent to Hold Assets in Trust.
The Company shall require each Paying Agent other than the Trustee to
agree in writing that such Paying Agent shall hold in trust for the benefit of
Securityholders or the Trustee all money held by such Paying Agent for the
payment of principal of or interest on the Securities (whether such assets have
been distributed to it by the Company or any other obligor on the Securities),
and shall notify the Trustee of any Default by the Company (or any other
obligor on the Securities) in making any such payment. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate the money and hold it as a
separate trust fund. The Company at any time may require a Paying Agent to
distribute all money held by it to the Trustee and account for any funds
disbursed and the Trustee may at any time during the continuance of any payment
Default, upon written request to a Paying Agent, require such Paying Agent to
distribute all money held by it to the Trustee and to account for any money
distributed. Upon payment of all funds held by it to the Trustee, the Paying
Agent shall have no further liability for such money.
SECTION 2.05. Securityholder Lists.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
the Holders of Series A Securities and Series B Securities, respectively. If
the Trustee is not the Registrar, the Company shall furnish to the Trustee on
or before each Interest Payment Date and at such times as the Trustee may
request in writing a list in such form and as of such date as the Trustee may
reasonably require of the names and addresses of Securityholders.
SECTION 2.06. Transfer and Exchange.
When Securities are presented to the Registrar or a co-Registrar with
a request to register the transfer of such Securities or to exchange such
Securities for an equal principal amount of Securities of the same series of
other authorized denominations, the Registrar or co-Registrar shall register
the transfer or make the exchange as requested. To permit registrations of
transfers and exchanges, the Company shall execute and the Trustee shall
authenticate Securities at the Registrar's or co-Registrar's request. No
service charge shall be made for any registration of transfer or exchange, but
the Company may require payment of a sum sufficient to cover any transfer tax
or similar governmental charge payable in connection therewith (other than any
such transfer taxes or similar governmental charge payable upon exchanges
pursuant to Sections 2.10, 3.07 or 10.05).
The Registrar or co-Registrar shall not be required (i) to issue or
register the transfer or exchange of any Security during a period beginning at
the opening of business 15 days before the mailing of a notice of redemption of
Securities and ending at the close of business on the day of such mailing, or
(ii) to register the transfer or exchange of any Security
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selected for redemption in whole or in part, except the unredeemed portion of
any Security being redeemed in part.
All Securities presented or surrendered for exchange, registration of
transfer, redemption or payment shall, if so required by the Trustee or the
Company, be accompanied by a written instrument or instruments of transfer,
satisfactory in form to the Company and the Trustee, duly executed by the
registered owner or by his attorney authorized in writing.
Anything in this Indenture to the contrary notwithstanding, the
parties hereto and any agent thereof may deem and treat the registered Holder
of any Security, prior to due presentment thereof for registration of transfer,
as the absolute owner of such Security for all purposes (whether or not payment
with respect to such Security is past due and notwithstanding any notation of
ownership or other writing thereon), and neither the Company, the Trustee nor
any agent of the Company or the Trustee shall be affected by any notice to the
contrary.
SECTION 2.07. Replacement Securities.
If a mutilated Security is surrendered to the Trustee or if the Holder
of a Security claims that the Security has been lost, destroyed or wrongfully
taken, the Company shall issue and the Trustee shall authenticate a replacement
Security if the Trustee's requirements are met. If required by the Trustee or
the Company, such Holder must provide an indemnity bond or other indemnity,
sufficient in the judgment of the Company and the Trustee, to protect the
Company, the Trustee or any Agent from any loss which any of them may suffer if
a Security is replaced. The Company may charge such Holder for its expenses in
replacing a Security.
Every replacement Security is an additional obligation of the Company
and shall be entitled to all benefits of this Indenture equally and
proportionately with all other Securities duly issued hereunder.
SECTION 2.08. Outstanding Securities.
Subject to Section 2.09, Securities outstanding at any time are all
Securities that have been authenticated by the Trustee, except those canceled
by it, those delivered to it for cancellation and those described in this
Section as not outstanding.
If a Security is replaced pursuant to Section 2.07 (other than a
mutilated Security surrendered for replacement), it ceases to be outstanding
unless the Trustee receives proof satisfactory to it that the replaced Security
is held by a bona fide purchaser. A mutilated Security ceases to be
outstanding upon surrender of such Security and replacement thereof pursuant to
Section 2.07.
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If on a Redemption Date or the Maturity Date, the Paying Agent (other
than the Company or a Subsidiary) holds U.S. Legal Tender or U.S. Government
Obligations sufficient to pay all of the principal and interest due on the
Securities payable on that date, then on and after that date such Securities
cease to be outstanding and interest on them shall cease to accrue.
SECTION 2.09. Treasury Securities.
Any Securities beneficially owned, purchased, redeemed or otherwise
acquired or retired for value by the Company or any of its Subsidiaries shall
cease to be outstanding for purposes of this Indenture and shall be promptly
delivered to the Trustee for cancellation and the Company agrees that it shall
not issue new Securities to replace any such Securities so delivered to the
Trustee for cancellation. In determining whether the Holders of the required
principal amount of Securities have concurred in any direction, waiver or
consent, Securities owned by the Company or a Subsidiary or other Affiliate of
the Company shall be disregarded, except that for the purposes of determining
whether the Trustee shall be protected in relying on any such direction, waiver
or consent, only Securities that the Trustee knows or has reason to know are so
owned shall be disregarded.
SECTION 2.10. Temporary Securities.
Until definitive Securities are ready for delivery, the Company may
prepare and the Trustee shall authenticate temporary Securities. Temporary
Securities shall be substantially in the form of definitive Securities but may
have variations that the Company considers appropriate for temporary Securities
as conclusively evidenced by the execution of such Temporary Securities by an
Officer or Officers of the Company in accordance with Section 2.02. Without
unreasonable delay, the Company shall prepare definitive Securities.
After the preparation of definitive Securities, the temporary
Securities shall be exchangeable for definitive Securities upon surrender of
the temporary Securities at the office or agency of the Company designated for
such purpose pursuant to Section 4.02 hereof, without charge to the Holder.
Upon surrender for cancellation of any one or more temporary Securities the
Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor a like principal amount of definitive Securities of
authorized denominations. Until so exchanged the temporary Securities shall in
all respects be entitled to the same benefits under this Indenture as
definitive Securities.
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SECTION 2.11. Cancellation.
The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for transfer, exchange or payment. The
Trustee, or at the direction of the Trustee, the Registrar or the Paying Agent
(other than the Company or a Subsidiary) and no one else, shall cancel and
shall destroy all Securities surrendered for transfer, exchange, payment or
cancellation and deliver a certificate of such destruction to the Company
unless the Company directs the Trustee to deliver the canceled securities to
the Company. Subject to Section 2.07, the Company may not issue new Securities
to replace Securities it has paid, redeemed or delivered to the Trustee for
cancellation.
SECTION 2.12. Defaulted Interest.
If the Company defaults in a payment of interest on the Securities, it
shall pay the defaulted interest, plus (to the extent lawful) any interest
payable on the defaulted interest, to the persons who are Securityholders on a
subsequent special record date, which date shall be the fifteenth day next
preceding the date fixed by the Company for the payment of defaulted interest,
whether or not such day is a Business Day. At least 15 days before the
subsequent special record date, the Company shall mail to each Securityholder
and deliver to the Trustee a notice that states the subsequent special record
date, the payment date and the amount of defaulted interest, and interest
payable on such defaulted interest, if any, to be paid. Notwithstanding the
foregoing, any interest which is paid prior to the expiration of the 30-day
period set forth in Section 7.01(1) hereof shall be paid to the Securityholders
as of the regular record date for the Interest Payment Date for which interest
has not been paid.
SECTION 2.13. Interest Rate; Interest Payment Dates.
Interest shall be paid semiannually on June 30 and December 31, in
each year, commencing June 30, 1996, until the principal of the Securities is
paid, all as set forth in the Securities. Each Security shall bear interest
from the most recent date to which interest has been paid or, if none has been
paid, from the date hereof, at the rate of 15.75% per annum. Interest on the
Securities shall be computed on the basis of a 360-day year comprised of twelve
30 day months.
SECTION 2.14 Two Series Pari Passu, Etc.
The Series A Securities and the Series B Securities will rank pari
passu with each other in right of payment and in respect of the Collateral and
all other respects and Holders of the Securities of both series will vote and
exercise remedies together as if one class.
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<PAGE> 99
ARTICLE THREE
REDEMPTION; PURCHASE
SECTION 3.01. Optional Redemption.
The Securities may be redeemed at any time, in whole or from time to
time in part, at Redemption Prices equal to the percentages of principal amount
thereof set forth below if redeemed during the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1995 101.00
1996 101.00
1997 101.00
1998 101.00
1999 101.00
and thereafter 100.00
</TABLE>
in each case together with accrued interest to the Redemption Date.
SECTION 3.02. Notices to Trustee.
If the Company elects to redeem Securities pursuant to Section 3.01 of
this Indenture and/or Paragraph 6 of the Securities, it shall notify the
Trustee in writing of the Redemption Date and the principal amount of
Securities to be redeemed and whether it wants the Trustee to give notice of
redemption to the Holders.
The Company shall give each notice provided for in this Section 3.02
at least 60 days before the Redemption Date (unless a shorter notice shall be
satisfactory to the Trustee).
SECTION 3.03. Selection of Securities to be Redeemed.
If less than all the Securities are to be redeemed pursuant to Section
3.01 of this Indenture and/or Paragraph 6 of the Securities, the Trustee shall
select such Securities to be redeemed from the Securities outstanding and not
previously called for redemption by lot or by such other method as the Trustee
shall deem fair and appropriate (other than pro rata, unless required by
applicable legal or stock exchange requirements) and in such manner as complies
with applicable legal and stock exchange requirements, if any.
The Trustee shall promptly notify the Company in writing of the
Securities selected for redemption and, in the case of any Security selected
for partial redemption, the principal amount thereof to be redeemed.
Securities and portions of Securities selected shall
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<PAGE> 100
be in amounts of $1,000 or whole multiples of $1,000. Provisions of this
Indenture that apply to Securities called for redemption also apply to portions
of Securities called for redemption.
SECTION 3.04. Notice of Redemption.
(a) The Company shall mail a notice of redemption by first-class mail
to each Holder whose Securities are to be redeemed pursuant to Section 3.01 of
this Indenture and/or Paragraph 6 of the Securities at least 30 days but not
more than 60 days before a Redemption Date.
(b) Each notice of redemption pursuant to Section 3.01 of this
Indenture and/or Paragraph 6 of the Securities shall identify the Securities to
be redeemed and shall state:
(1) the Redemption Date;
(2) the Redemption Price;
(3) the Paying Agent;
(4) that Securities called for redemption must be surrendered
to the Paying Agent in order to collect the Redemption Price;
(5) that, unless the Company defaults in making the
redemption payment, interest on Securities called for redemption
ceases to accrue on and after the Redemption Date and the only
remaining right of the Holders of such Securities is to receive
payment of the Redemption Price upon surrender to the Trustee of the
Securities redeemed;
(6) if any Security is being redeemed in part, the portion of
the principal amount of such Security to be redeemed and that, after
the Redemption Date, and upon surrender of such Security, a new
Security or Securities in aggregate principal amount equal to the
unredeemed portion thereof will be issued;
(7) if less than all the Securities are to be redeemed, the
identification (by serial and by CUSIP number) of the particular
Securities (or portion thereof) to be redeemed, as well as the
aggregate principal amount of Securities to be redeemed and the
aggregate principal amount of Securities estimated to be outstanding
after such partial redemption; and
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<PAGE> 101
(8) whether the Securities are being redeemed pursuant to the
mandatory redemption or the optional redemption provisions contained
in the Securities or herein.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense.
SECTION 3.05. Effect of Notice of Redemption.
Once notice of redemption is mailed pursuant to Section 3.04(a), the
Securities covered by such notice become due and payable on the Redemption Date
and at the Redemption Price.
SECTION 3.06. Deposit of Redemption Price.
On or before 11:00 a.m., New York City time, on the Redemption Date,
the Company shall deposit with the Paying Agent U.S. Legal Tender sufficient to
pay the Redemption Price of all Securities to be redeemed on that date, other
than Securities or portions thereof called for redemption on that date which
have been delivered by the Company to the Trustee for cancellation. The
Trustee or Paying Agent shall return to the Company, not later than three
Business Days after the Redemption Date, any U.S. Legal Tender not required for
that purpose.
If the Company complies with the preceding paragraph, interest on the
Securities to be redeemed will cease to accrue on the applicable Redemption
Date, whether or not such Securities are presented for payment.
If any Security surrendered for redemption in the manner provided in
the Securities shall not be so paid upon surrender for redemption, interest
will continue to accrue from the Redemption Date until such payment is made on
the unpaid principal, in each case at the rate and in the manner provided in
the Securities.
SECTION 3.07. Securities Redeemed in Part.
Upon surrender of a Security that is to be redeemed in part, the
Trustee shall authenticate and deliver to the Holder a new Security or
Securities equal in principal amount to the unredeemed portion of the Security
surrendered.
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<PAGE> 102
SECTION 3.08. Holders' Right to Cause Repurchase Upon Change of Control.
In the event that Bennett S. LeBow ceases to control the Company
(including, for the avoidance of doubt, any successor thereto under Article
Six) (other than by his death or Incapacity) (a "Change of Control"), each
Holder shall have the option to cause the Company to repurchase the Securities
held by such Holder in whole but not in part, at 100% of the principal amount
thereof, plus accrued interest to the Repurchase Date. Within five Business
Days after any Change of Control, the Company shall notify the Trustee in
writing at its corporate trust office (i) of such Change of Control and (ii)
that each Holder has the option to cause the Company to repurchase the
Securities owned by such Holder pursuant to this Section 3.08. Within ten days
after it receives such notice from the Company, the Trustee shall give notice
of such option to the Holders at their addresses as shown in the Securities
Register and shall publish, at least once in each of two successive weeks
commencing within ten days following notice to the Trustee, in The Wall Street
Journal (National Edition), or the national edition of a reasonably equivalent
publication, a notice (the "Notice of Option to Cause Repurchase Upon Change of
Control") setting forth (i) that a Change of Control has occurred, (ii) that
each Holder has the option to cause the Company to repurchase the Securities
owned by such Holder, (iii) the Repurchase Date selected by the Company (which
date shall be no less than 25 Business Days and no more than 50 Business Days
following the earlier of the date of the first mailing or publication of such
Notice of Option to Cause Repurchase Upon Change of Control) and (iv) the
procedures to be followed by Holders who desire to have their Securities
repurchased. Each Holder electing to have his Securities repurchased pursuant
to this Section 3.08 is required to deliver to the Paying Agent (or, if there
is no Paying Agent, the Trustee), no later than 5:00 p.m., New York City time,
on the date that is five Business Days prior to the Repurchase Date, his
Securities with the form provided on the reverse side of the Securities
entitled "Option to Cause Repurchase Upon Change of Control" duly executed and
completed. Each Holder who elects to cause repurchase shall be entitled to
revoke his election by delivering a written notice of such revocation to the
Paying Agent prior to 5:00 p.m., New York City time, on the date that is five
Business Days prior to the Repurchase Date. To the extent permitted by law,
such revocation shall be irrevocable. All questions as to the validity,
eligibility (including time of receipt) and acceptance of any Security for
repurchase or any notice of revocation will be determined by the Company, whose
determination shall be final and binding. If the option to cause repurchase is
revoked by the Holder as aforesaid, the Company or the Paying Agent will
promptly return the Securities to such Holder. The Securities surrendered for
repurchase (which repurchase has not been properly revoked) become due and
payable on the Repurchase Date at 100% of principal amount thereof, plus
accrued interest to the Repurchase Date.
For the purposes of this Section 3.08, "control," when used with
respect to any person, means the power to direct the management and policies of
such person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise.
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<PAGE> 103
SECTION 3.09. Mandatory Offer to Purchase upon Triggering Asset Sale.
Within (i) 30 days following the consummation of a Triggering Asset
Sale, other than a Triggering Asset Sale referred to in clause (ii) or (iii)
below, (ii) 90 days following the consummation of a Triggering Asset Sale if
10% or more of the consideration (not including any assumption of Indebtedness)
actually received by the Company, directly or indirectly (including through any
Subsidiary), in respect of such Triggering Asset Sale consists of non-cash
consideration, or (iii) 180 days following the consummation of a Triggering
Asset Sale if such sale involves a sale of the Equity Interests of or all or
substantially all of the assets of Liggett and 10% or more of the consideration
(not including any assumption of Indebtedness) actually received by the
Company, directly or indirectly (including through any Subsidiary), in respect
of such Triggering Asset Sale consists of non-cash consideration (the "Offer
Date"), the Company shall make an offer to all Holders (an "Offer") to apply
the applicable Offer Purchase Amount to the acquisition of Securities at a
purchase price (the "Offer Purchase Price") equal to the Redemption Price
payable if the Company were redeeming such Securities pursuant to Section 3.01
plus accrued interest to the date of such acquisition (the "Purchase Date").
The Company shall give the Trustee notice that it is making an Offer
pursuant to this Section 3.09. The Trustee shall notify the Holders that it
has received such a notice from the Company within ten days after it receives
such notice. Notice of an Offer shall be mailed by the Company to all Holders
not less than 30 days nor more than 60 days before the Purchase Date at their
last registered addresses appearing in the Securities Register. The Offer
shall remain open from the time of mailing until five days before the Purchase
Date. The notice shall contain all instructions and materials necessary to
enable such Holders to tender Securities pursuant to the Offer. The notice,
which shall govern the terms of the Offer, shall state:
(1) that the Offer is being made pursuant to this Section
3.09;
(2) the aggregate principal amount of Securities for which
the Offer is being made, the amount of the interest that shall have
accrued thereon to the Purchase Date, the purchase price (including
the amount of accrued interest) for the Securities, the Offer Purchase
Amount and the Purchase Date;
(3) that any Security not tendered or accepted for payment
will continue to accrue interest;
(4) that any Security accepted for payment and for which
payment is made pursuant to the Offer shall cease to accrue interest
after the Purchase Date;
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<PAGE> 104
(5) that Holders electing to have a Security purchased
pursuant to an Offer will be required to surrender the Security, with
the form entitled "Option of Holder to Elect Purchase Pursuant to
Section 3.09 of the Indenture upon Triggering Asset Sale" on the
reverse of the Security completed, to the Paying Agent at the address
specified in the notice at least five days before the Purchase Date;
(6) that Holders will be entitled to withdraw their election
if the Paying Agent receives, not later than five days prior to the
Purchase Date, a telegram, telex, facsimile transmission or letter
setting forth the name of the Holder, the principal amount of the
Security the Holder delivered for purchase and a statement that such
Holder is withdrawing his election to have the Security purchased;
(7) (x) that if Securities in a principal amount in excess of
the principal amount of Securities for which the Offer is being made
are tendered pursuant to the Offer, the Company shall purchase such
Securities on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Securities in denominations of
$1,000 or integral multiples of $1,000 shall be acquired) and (y) the
procedures set forth in the second full succeeding paragraph; and
(8) that Holders whose Securities were purchased only in part
will be issued new Securities equal in principal amount to the
unpurchased portion of the Securities surrendered.
Each such notice shall be accompanied by a copy of the information
regarding the Company required to be contained in a Quarterly Report on Form
10-Q for the fiscal quarter of the Company ended immediately prior to the Offer
Date or, if such fiscal quarter ended less than 45 days prior to the Offer Date
in the case of the first three fiscal quarters or 90 days prior to the Offer
Date in the case of the fourth fiscal quarter, for the preceding fiscal
quarter. Notwithstanding the foregoing, if the Offer Date is during the second
fiscal quarter of the Company, such notice may include only a copy of the
information required to be contained in an Annual Report to Shareholders
pursuant to Rule 14a-3 under the Exchange Act for the fiscal year of the
Company ending immediately prior to such Offer Date.
Each holder accepting an Offer (an "Accepting Holder") may include in
such notice of acceptance an agreement to have prepaid, in addition to the
Offer Purchase Amount allocable to each Security of such Holder, all or any
part of the balance of the principal amount of each such Security, specifying
the maximum principal amount of each such Security, which such Accepting Holder
is willing to have prepaid. Upon receipt of all timely acceptances from
Accepting Holders, the Company shall allocate that portion of the Offer
Purchase Amount that would have been allocated to the Holders who did not
accept the Offer
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<PAGE> 105
among the Securities of Accepting Holders in proportion to the respective Offer
Purchase Amount allocated to the Securities of Accepting Holders. If the
portion of the Offer Purchase Amount thus allocated to the Securities of an
Accepting Holder would exceed the maximum principal amount of such Securities
which such Accepting Holder has agreed to have prepaid, such excess shall be
allocated among the Securities of Accepting Holders who have agreed to accept
prepayments in an amount which still exceeds the amount of prepayments
previously allocated to them pursuant to this paragraph in proportion to the
respective Offer Purchase Amount allocable to the Securities of such Accepting
Holders; and such allocation shall be repeated as many times as shall be
necessary until the Offer Purchase Amount has been fully allocated or until it
is no longer possible to allocate the Offer Purchase Amount without exceeding
the maximum principal amount of the Securities which all Accepting Holders
respectively have agreed to have prepaid.
Before 5:00 p.m., New York City time, on the Business Day immediately
preceding a Purchase Date, the Company shall (i) accept for payment Securities
or portions thereof tendered pursuant to the Offer (on a pro rata basis if
required pursuant to paragraph (7) above), (ii) deposit with the Paying Agent
U.S. Legal Tender sufficient to pay the Offer Purchase Price of all Securities
or portions thereof so accepted and (iii) deliver to the Trustee Securities so
accepted together with an Officers' Certificate of the Company stating the
aggregate principal amount of the Securities tendered and the aggregate
principal amount of each of the Securities or portions thereof accepted for
payment by the Company. The Paying Agent shall promptly mail or deliver to
Holders of Securities so accepted payment in an amount equal to the Offer
Purchase Price and the Trustee shall promptly authenticate and mail or deliver
to such Holders a new Security equal in principal amount to any unpurchased
portion of the Security surrendered. Any Securities not so accepted shall be
promptly mailed or delivered by the Paying Agent to the Holder thereof. The
Company shall publicly announce the results of the Offer on the Purchase Date.
For purposes of this Section 3.09, the Trustee shall act as the Paying Agent.
The Offer shall be made by the Company in compliance with all
applicable laws, including, without limitation, the requirements of Rule 14e-1
under the Exchange Act, any other tender offer rules under the Exchange Act and
all other applicable Federal and state securities laws.
Subject to applicable escheat laws, the Trustee and the Paying Agent
shall return to the Company any cash that remains unclaimed, together with
interest, if any, thereon, held by them for the payment of the Offer Purchase
Price no later than two weeks after the Purchase Date; provided, however, that
(x) to the extent that the aggregate amount of an Offer exceeds the aggregate
Offer Purchase Price of the Securities or portions thereof to be purchased, the
Trustee shall hold such excess for the Company and (y) unless otherwise
directed by the Company in writing, promptly after the Business Day following
the Purchase Date the Trustee shall return any such excess to the Company
together with interest, if any, thereon.
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<PAGE> 106
ARTICLE FOUR
COVENANTS
SECTION 4.01. Payment of Securities.
The Company shall pay the principal of and interest on the Securities
on the dates and in the manner provided in the Securities. An installment of
principal of or interest on the Securities shall be considered paid on the date
it is due if the Trustee or Paying Agent (other than the Company or any
Subsidiary) holds on that date U.S. Legal Tender designated for and sufficient
to pay the installment.
The Company shall pay interest on overdue principal at the rate borne
by the Securities plus 1% and shall pay interest on overdue installments of
interest at the same rate, to the extent lawful, in accordance with Section
2.12.
SECTION 4.02. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, the City of New
York, an office or agency where Securities may be presented or surrendered for
payment, where Securities may be surrendered for registration of transfer or
exchange and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company hereby initially
appoints Shawmut Trust Company, 14 Wall Street, New York, New York 10005 as its
office or agent for each of said purposes. The Company will give prompt
written notice to the Trustee of the location, and any change in the location,
of such office or agency. If at any time the Company shall fail to maintain
any such required office or agency or shall fail to furnish the Trustee with
the address thereof, such presentations, surrenders, notices and demands may be
made or served at the address of the Trustee set forth in Section 13.02.
The Company may also from time to time designate one or more other
offices or agencies where the Securities may be presented or surrendered for
any or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York, for such purposes.
SECTION 4.03. Limitations on Restricted Payments.
(a) The Company shall not, directly or indirectly, including without
limitation through any Subsidiary thereof, make any Restricted Payment unless
after giving effect to any such Restricted Payment (a) no Default or Event of
Default shall have occurred and be
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<PAGE> 107
continuing and (b) the aggregate amount of all Restricted Payments made in any
Indenture Year shall not exceed the Restricted Payment Basket. Notwithstanding
the foregoing, no Restricted Payments shall be made unless made in cash.
(b) Notwithstanding the foregoing, (i) no Restricted Payment may be
made, directly or indirectly, if, at the time of such Restricted Payment, or
after giving effect thereto, a Default or an Event of Default shall have
occurred and be continuing and (ii) these provisions will not prevent (1) the
payment of any dividend or distribution within 60 days after the date of its
declaration if the dividend or distribution would have been permitted on the
date of its declaration and is not prohibited by the foregoing clause (i) or
(2) the acquisition of any Equity Interests of the Company by an exchange for,
or out of the proceeds of the substantially concurrent sale (other than to a
Subsidiary) of, Equity Interests of the Company.
SECTION 4.04. Limitation on Indebtedness.
The Company shall not create, incur, issue, assume or directly or
indirectly guarantee or become liable for the payment of any Indebtedness other
than:
(a) Indebtedness of the Company outstanding on the date of
this Indenture and listed on Schedule 1 hereto and any Indebtedness
refinancing, refunding or replacing such Indebtedness, provided that
the principal amount of the Indebtedness so refinanced, refunded or
replaced is not thereby increased;
(b) guarantees of Indebtedness of Subsidiaries of the Company
provided, that the aggregate outstanding principal amount of such
Indebtedness so guaranteed shall not exceed $50,000,000;
(c) additional Indebtedness of the Company not exceeding
$10,000,000 in aggregate principal amount at any one time outstanding;
and
(d) the Securities.
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<PAGE> 108
SECTION 4.05. Limitation on Transactions with Affiliates and Investments.
(a) The Company shall not, and shall not permit any of its
Subsidiaries to, directly or indirectly, engage in any Affiliated Transaction
with an Affiliate of the Company (other than the Company, any Subsidiary, New
Valley or any other person controlled by the Company or New Valley), except (i)
any transaction or any series of related transactions in the ordinary course of
business involving in the aggregate for all such transactions not more than
$2,000,000 in any Indenture Year, (ii) the direct payment or reimbursement by
the Company or any of its Subsidiaries of Permitted Operating Expenses of BGL
not exceeding $6,500,000 in any Indenture Year, (iii) the direct payment or
reimbursement after the date hereof by the Company or any of its Subsidiaries
of other actual reasonable expenses of BGL payable to unrelated parties and not
exceeding $5,000,000 for the period beginning on November 1, 1995 and ending on
April 30, 1997, which expenses were incurred in connection with any investment
or investments by the Company or any of its controlled Affiliates and (iv) as
contemplated in Section 4.05(b)(ii) or (d). The Company shall not, and shall
not permit any of its Subsidiaries to, directly or indirectly, engage in any
Affiliated Transaction with a person controlled by the Company or New Valley
(other than any Subsidiary or New Valley) unless the terms of such Affiliated
Transaction are no less favorable to the Company or such Subsidiary, as the
case may be, than would have been obtainable in an arms-length transaction
with unrelated persons. The Company shall not, and shall not permit any
Subsidiaries to, directly or indirectly, make an Investment in an Affiliate of
the Company (other than the Company, any Subsidiary, New Valley or other person
controlled by the Company).
(b) So long as any Securities remain outstanding, (i) the Company
shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, enter into any Affiliated Transaction with LeBow (except (I) as
permitted by paragraph (a) above or paragraph (d) below, (II) salaries and
bonuses payable pursuant to clause (ii) below and (III), if and for so long as
New Valley shall be a Subsidiary, transactions specifically permitted in clause
(x) or (y) of Section 5.02(a)) and (ii) Bennett S. LeBow's aggregate salary and
bonus payable by BGL, the Company and their respective subsidiaries in any year
(except for salaries and bonuses payable by New Valley and any of its
subsidiaries, if and for so long as New Valley shall be a Subsidiary, pursuant
to clause (x) or (y) of Section 5.02(a)) may not be increased from one year to
the next by more than 10% per annum, except that his salary and bonus may be
increased in the same percentage amount as any increase in the Common Stock
Price (as defined below) during the employment contract term just expired, up
to a maximum increase in salary and bonus of 25% per annum, provided that his
salary and bonus shall be decreased in the same percentage as any decrease in
the Common Stock Price during the employment contract term just expired in
excess of 10% per annum, up to a maximum of 25% per annum, but in no event
shall the foregoing require that his salary and bonus be decreased by such
adjustment below their level as of October 28, 1994. For purposes of the
above, "Common Stock Price" means the average closing price of a share of the
Common Stock of BGL during the final 30 days of a calendar year.
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<PAGE> 109
(c) Except as set forth in the immediately succeeding sentence but
notwithstanding anything else to the contrary contained in this Indenture, the
Company shall not, and shall not permit any of its Subsidiaries to, directly or
indirectly, enter into any transaction or series of related transactions with
New Valley or any of its subsidiaries involving $1,000,000 or more in any
Indenture Year unless New Valley shall have received an opinion from a
Designated Investment Bank that such transaction is fair to New Valley or its
subsidiary from a financial point of view. Notwithstanding the preceding
sentence, the Company shall not be required to comply with the immediately
preceding sentence with respect to (i) pro rata dividends or redemptions in
respect of any class of Equity Interests of New Valley in accordance with the
terms thereof and (ii) any purchase of Equity Interests of New Valley in the
open market or in privately negotiated transactions or on terms offered pro
rata to all holders of that class for cash or other Property.
(d) The foregoing paragraphs (a), (b) and (c) shall not prevent (i)
the Company from paying LeBow (other than Bennett S. LeBow) management and
consulting fees or salaries if such fees and salaries, together with fees and
salaries paid pursuant to clause (z) of Section 5.02(a), do not exceed $500,000
per annum and reimbursing Bennett S. LeBow and his Affiliates for all expenses
reasonably incurred by them in providing services to the Company; (ii) Liggett
from making payments to Bennett S. LeBow and his Affiliates (other than the
Company) according to the payment schedules (including any renewals or
extensions thereof on materially the same terms) set forth in existing
management service agreements filed by the Company or Liggett with the SEC on
or prior to September 30, 1995 without giving effect to any modification or
supplement thereto accelerating any such payment schedules for management and
consulting fees (or any other fees or payments of a similar nature for services
provided) in an aggregate amount not exceeding (1) $5,000,000 times (2) the
number of fiscal years of Liggett that have occurred, as of the date of
determination, since January 1, 1995 (any portion of a fiscal year shall be
deemed to be an entire fiscal year for purposes of this calculation), provided
that no such payments shall be made on or after the date on which (I) the
Equity Interests of Liggett are sold, transferred or otherwise disposed of in
accordance with Section 12.08(a) or (II) all or substantially all of the assets
of Liggett are transferred or Liggett is liquidated; (iii) Com Products Inc.
from paying management and consulting fees to BGL in an aggregate amount not
exceeding $300,000 in any Indenture Year; (iv) the Company from making
Restricted Payments in accordance with Section 4.03; (v) the Company and any of
its Subsidiaries or Affiliates from entering into securities brokerage and
securities underwriting transactions with Ladenburg, Thalmann & Co., Inc.
("LTC") at LTC's usual and customary rates and on usual and customary terms, so
long as such rates and terms are in accordance with securities industry
practice for comparable brokerage firms and so long as New Valley beneficially
owns, directly or indirectly, a majority of the shares of capital stock of LTC
(other than any such shares issued to any officer or director of LTC who would
not be a Brooke Expanded Affiliate but for such status as an officer or
director); (vi) any Disposition of Assets effected in compliance with Section
6.01; (vii) payments of the type permitted pursuant to Section 5.03(a); and
(viii) guarantees of Indebtedness of Subsidiaries of the Company by BGL.
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<PAGE> 110
SECTION 4.06. Investment Company Act.
The Company shall not register as, or be required to register as, an
"investment company" as defined under the Investment Company Act of 1940. The
Company shall deliver to the Trustee within 30 days after the date thereof
written notice of any event which, but for the provisions of Rule 3a-2 (or any
successor rule) under the Investment Company Act, would have caused it to be
deemed an "investment company" as defined in the Investment Company Act.
SECTION 4.07. No Liens on Collateral.
Except for Permitted Liens, the Company shall not, directly or
indirectly, create, incur, assume or permit to exist any Lien on or with
respect to any Collateral or any income or profits therefrom.
SECTION 4.08. No Violation of the Margin Rules.
The Company shall not, directly or indirectly, use the proceeds of the
Securities to purchase or carry, or to extend credit to others for the purpose
of purchasing or carrying, any Margin Stock in violation of Regulations G or X
of the Board of Governors of the Federal Reserve System.
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SECTION 4.09. Recording of Security Interest.
On or before the date the Pledge is made by the Company or NV
Holdings, the Company shall and shall cause NV Holdings, as applicable, to
cause the Pledge Agreement, and all necessary financing statements,
notifications of secured transactions and other instruments, to be promptly
recorded, registered and filed and to be kept, recorded, registered and filed
in such manner and in such places as may be required by law, and take all such
other action as may be required in order to make effective the Security
Interest intended to be created in connection with this Indenture; provided
that the foregoing obligations of the Company shall not be a condition
precedent to the authentication and delivery of the Securities. The Company
shall furnish to the Trustee promptly after the execution and delivery of this
Indenture, one or more Opinions of Counsel (1) stating that in the opinion of
such counsel all such financing statements, notifications and other instruments
have been properly recorded, registered and filed so as to make effective the
Security Interest intended to be created hereby and by the Pledge Agreement,
and reciting the details of such action, or stating that in the opinion of such
counsel no such action is necessary to make such Security Interest effective
and (2) stating what, if any, action of the foregoing character may reasonably
be expected to become necessary during the next year to so maintain the
Security Interest contemplated by this Indenture and the Pledge Agreement. On
or within 30 days before each anniversary of the date of execution and delivery
of this Indenture, the Company shall furnish to the Trustee, one or more
Opinions of Counsel (1) stating that such action has been taken with respect to
the recording, registering, filing, rerecording, reregistering and refiling of
the Indenture and the Pledge Agreement and all necessary financing statements,
notifications of secured transactions and other instruments as may be necessary
to make effective and maintain the Security Interest contemplated hereby and
thereby and reciting the details of such action (including the jurisdictions in
which such actions were taken), or stating that no such action is required, and
(2) stating what, if any, action of the foregoing character may reasonably be
expected to become necessary during the next year to so maintain the Security
Interest contemplated by this Indenture and the Pledge Agreement.
SECTION 4.10. Financial Reports.
The Company shall file with the Trustee within 15 days after it files
with the SEC, copies of the quarterly and annual reports and the information,
documents, and other reports (or copies of such portions of any of the
foregoing as the SEC may by rules and regulations prescribe) which the Company
is required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act. If the Company is not subject to the requirements of Section 13
or 15(d) of the Exchange Act, then it shall file with the Trustee, within 15
days after it would have been required to file with the SEC, financial
statements, including any notes thereto (and, in the case of a fiscal year end,
an auditors' report by a firm of established national reputation reasonably
satisfactory to the Trustee), comparable to that which it would have been
required to include in such quarterly or annual reports, information, documents
or other reports, as the case may be, if it were subject to the requirements of
Section 13 or 15(d)
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of the Exchange Act. The Company also shall comply with the other provisions
of TIA Section 314(a).
So long as the Securities remain outstanding, the Company shall cause
any annual reports to stockholders, containing audited consolidated financial
statements, and any other financial reports furnished by the Company to
stockholders and quarterly or other financial reports filed with the SEC and
furnished by the Company to stockholders or proxy or information statements
furnished to stockholders, to be mailed to the Holders (no later than 10
Business Days after the date such materials are mailed or made available to the
stockholders) at their addresses appearing in the Securities Register and will
cause to be disclosed in such annual reports as of the date of the most recent
financial statements in each such report the amount available for dividends and
other payments pursuant to Section 4.03.
All annual consolidated financial statements of the Company and its
Subsidiaries shall be accompanied by a report thereon from any one of Coopers &
Lybrand, Arthur Andersen, Deloitte & Touche, Ernst & Young, KPMG Peat Marwick,
or Price Waterhouse (or any successor to any of the above).
The Company shall provide to the Trustee within 10 Business Days of
filing with the Trustee the reports or financial statements referred to in the
first paragraph of this Section 4.10, an Officers' Certificate setting forth
for the fiscal quarter or fiscal year, as the case may be, covered by such
report or financial statement, (i) the aggregate amount of all dividends paid
by the Company, (ii) the estimated amount (reasonably determined) as of the
last day of such fiscal year or quarter of net operating loss, capital loss and
tax credit carryover ("Tax Sharing Attributes") utilizable by each Subsidiary
of the Company which is included in the BGL Group for purposes of determining
the amount due under any tax sharing agreement or arrangement whether or not in
writing, with respect to which any such Subsidiary may be required to make a
payment, (iii) all Restricted Payments, (iv) all salaries and management and
consulting fees payable by the Company or any of its Subsidiaries to LeBow, (v)
the computation of all payments in respect of tax sharing arrangements and (vi)
the calculation of the Net Available Proceeds of all Asset Sales consummated in
such fiscal quarter or fiscal year; provided that any such information (other
than the calculation of Net Available Proceeds) with respect to Brooke Overseas
shall be so furnished only to the extent available to the Company. The Trustee
shall promptly furnish such report to each Securityholder but shall have no
duty to determine its conformity with the requirements of this Indenture or
other duties with respect thereto. The Company shall provide to the Trustee a
schedule of the actual Tax Sharing Attributes of the Subsidiaries of the
Company not later than 15 days after the filing of the consolidated federal
income tax return of the BGL Group and the Trustee shall promptly furnish such
schedule to each Securityholder but shall have no duty to determine its
conformity with the requirements of this Indenture or other duties with respect
thereto.
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SECTION 4.11. Waiver of Stay, Extension or Usury Laws.
The Company covenants (to the extent that it may lawfully do so) that
it will not at any time insist upon, plead, or in any manner whatsoever claim
or take the benefit or advantage of any stay or extension law or any usury law
or other law which would prohibit or forgive the Company from paying all or any
portion of the principal of or interest on the Securities as contemplated
herein, wherever enacted, now or at any time hereafter in force, or which may
affect the covenants or the performance of this Indenture; and (to the extent
that it may lawfully do so) the Company hereby expressly waives all benefit or
advantage of any such law, and covenants that it will not hinder, delay or
impede the execution of any power herein granted to the Trustee, but will
suffer and permit the execution of every such power as though no such law had
been enacted.
SECTION 4.12. Notice of Acceleration.
In the event that any Indebtedness of the Company is declared due and
payable before its maturity because of the occurrence of any default (or any
event which, with notice or the lapse of time, or both, shall constitute such
default) under such Indebtedness, the Company shall promptly give written
notice to the Trustee of such declaration. The Trustee shall promptly notify
each Securityholder of such occurrence.
SECTION 4.13. Compliance with Laws.
The Company shall comply with all applicable statutes, rules,
regulations, orders and restrictions of the United States of America, states
and municipalities, and of any governmental department, commission, board,
regulatory authority, bureau, agency and instrumentality of the foregoing, in
respect of the conduct of its businesses and the ownership of its properties,
except such as are being contested in good faith and by appropriate proceedings
in such manner as not to cause any material adverse effect upon the business,
properties, operations, condition (financial or other) of the Company and the
Subsidiaries taken as a whole and except for such noncompliances as will not in
the aggregate have a material adverse effect on the business, properties,
operations, condition (financial or other) of the Company and the Subsidiaries
taken as a whole.
SECTION 4.14. Existence.
Subject to Article Six, the Company shall do or cause to be done all
things necessary to preserve and keep in full force and effect its corporate or
other existence and its rights (charter and statutory) and franchises;
provided, however, that the Company shall not be required to preserve any right
or franchise if the Board of Directors of the Company shall determine that the
preservation thereof is no longer desirable in the conduct of the business of
the Company and that the loss thereof is not disadvantageous in any material
respect to the Holders.
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SECTION 4.15. Payment of Taxes and Other Claims.
The Company shall pay or discharge or cause to be paid or discharged,
before the same shall become delinquent, (1) all taxes, assessments and
governmental charges (including withholding taxes and any penalties, interest
and additions to taxes) levied or imposed upon the Company or any Subsidiary or
upon the income, profits or property of the Company or any Subsidiary
(including, without limitation, any taxes levied on, or in respect of, the
Collateral) and (2) all lawful claims for labor, materials and supplies which,
if unpaid, might by law become a Lien upon the property of the Company or any
Subsidiary; provided, however, that the Company or any Subsidiary shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings and for which disputed
amounts adequate reserves have been made.
SECTION 4.16. Maintenance of Properties.
(a) The Company shall cause all properties used or useful in the
conduct of its business or the business of any Subsidiary to be maintained and
kept in good condition, repair and working order and supplied with all
necessary equipment and shall cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof, all as in the judgment of
the Company may be necessary, so that the business carried on in connection
therewith may be properly and advantageously conducted at all times; provided,
however, that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any of such properties, if such
discontinuance is, in the judgment of the Board of Directors of the Company,
desirable in the conduct of the business of the Company and not disadvantageous
in any material respect to the Holders.
(b) The Company shall not substitute or exchange any Equity Interests
of New Valley included in the Collateral for other Property (except for any
Collateral received in connection with a conversion, exchange or other
reconstitution, reclassification or restructuring applying generally to all New
Valley Class A Preferred Shares and/or New Valley Class B Preferred Shares)
other than in connection with any sale permitted by Section 12.08.
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SECTION 4.17. Compliance Certificate
The Company shall deliver to the Trustee within 90 days after the end
of its fiscal year (which on the date hereof is the calendar year) an Officers'
Certificate of the Company stating that a review of its activities during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether it has kept, observed, performed
and fulfilled its obligations under this Indenture and further stating, as to
each such Officer signing such certificate, that to the best of his or her
knowledge, during such preceding fiscal year it has kept, observed, performed
and fulfilled each and every such covenant and no Default occurred during such
year. If such signers do know of such a Default, such certificates shall
describe the Default and its status with particularity and the action the
Company or the Subsidiary concerned is taking with respect thereto.
The Company shall deliver to the Trustee, forthwith upon becoming
aware of (i) any Default or Event of Default in the performance of any
covenant, agreement or condition contained in this Indenture; or (ii) any
default under any other mortgage, indenture or instrument (as that term is used
in Section 7.01(5)), an Officers' Certificate specifying with particularity
such Default, Event of Default or default.
SECTION 4.18. Ownership of NV Holdings; Additional Covenants Relating to NV
Holdings.
(a) So long as the Securities are outstanding and except as permitted
by Section 6.01, the Company shall continue to own all the Equity Interests of
NV Holdings and any options, warrants or other rights to acquire such Equity
Interests.
(b) The Company shall cause NV Holdings' sole function to be to hold
Equity Interests and Investments in New Valley and other Investments permitted
pursuant to this Section 4.18 and to hold cash and make payments as permitted
by Section 4.23. The Company will not permit NV Holdings to conduct any
business activities other than to hold such Equity Interests, Investments and
cash, to make such payments and to conduct those incidental and customary
activities required in order to oversee and manage its interests in New Valley
and other Investments permitted pursuant to this Section 4.18.
(c) The Company will not permit NV Holdings to incur any Indebtedness.
(d) Except as contemplated by the NV Holdings Pledge Agreement, the
Company will not permit NV Holdings to, directly or indirectly, create, incur,
assume or permit to exist any Lien (other than Liens described in clauses (a)
through (c) of the definition of "Permitted Liens") on or with respect to any
of its assets, including, without limitation, the New Valley Assets, or any
income or profits therefrom including any dividends and distributions received
thereon or distributable with respect thereto, or interest therein; provided,
however, that the foregoing shall not prevent the existence or the exercise of
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options, as in effect on the date hereof, to acquire an aggregate of 9,000,000
New Valley Common Shares pursuant to options granted to Pacific Asset Holdings
and M.D.C. Western Holdings Inc.
(e) NV Holdings will not make, directly or indirectly, any
Investments in cash or by delivery of Property (x) in any Person, whether by
the acquisition of Indebtedness or other obligation, security or Equity
Interest, or by loan, advance, extension of credit or capital contribution, or
otherwise, or (y) in any Property (items (x) and (y) herein called "NV Holdings
Investments"), except the following:
(1) Investments in direct obligations of the United States of
America or any agency thereof or obligations guaranteed by the United
States of America, provided that such obligations mature within one
year from the date the Investment is made or acquired;
(2) Investments maturing within one year from the date the
Investment is made or acquired in time deposits with or certificates
of deposit issued by a bank or trust company organized under the laws
of the United States of America or any state thereof having a capital
and surplus and undivided profits aggregating at least $250,000,000;
(3) purchases of Equity Interests in New Valley so long as
New Valley shall continue to be a Publicly-held Company and so long
as such Equity Interests shall be pledged hereunder; and
(4) Investments in Publicly-held Companies to the extent
received as a result of any dividend in kind, distribution, spin-off,
split-up, corporate reorganization or similar transaction with respect
to New Valley in which such Investment is received without the payment
of further consideration by NV Holdings (a "New Valley Entity").
(f) The Company will not permit NV Holdings to (i) consolidate with
or merge with or into any other person, (ii) transfer (by lease, assignment,
sale or otherwise) in a single transaction or through a series of transactions,
all or substantially all of its properties and assets, as an entirety or
substantially as an entirety, to another person or group of persons or (iii)
adopt a Plan of Liquidation.
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SECTION 4.19. Restrictions on Issuance of Additional Stock of Liggett or
Brooke Overseas.
(a) So long as any Securities remain outstanding, the Company shall
not permit Liggett, any Liggett Holding Subsidiary or Brooke Overseas to issue,
directly or indirectly, any additional Equity Interests or options, warrants,
convertible or exchangeable securities or other rights to acquire such Equity
Interests to any Person other than the Company or any Liggett Holding
Subsidiary, except (other than in the case of any Liggett Holding Subsidiary)
for shares of non-voting, non-convertible, non-exchangeable preferred stock the
issuance of which (i) would not at the time of issuance or thereafter cause
such Subsidiary to cease to be a member of a hypothetical affiliated group for
federal income tax purposes of which the Company is the parent and (ii)
complies with paragraph (b) below.
(b) So long as any Securities remain outstanding, the Company shall
not permit Liggett or Brooke Overseas or any of their respective subsidiaries
to issue, directly or indirectly, in one transaction or in a series of related
transactions, any preferred stock for proceeds of $5,000,000 in cash and/or
other consideration or more unless (i) such preferred stock is not issued to
LeBow or any other Brooke Expanded Affiliate (other than the Company, any of
its Subsidiaries or any officer or director of such Subsidiary who would not be
a Brooke Expanded Affiliate but for such status as an officer or director),
(ii) the Board of Directors of such Subsidiary shall have determined that such
transaction is fair to such Subsidiary from a financial point of view and (iii)
such Subsidiary shall have received an opinion from a Designated Investment
Bank or, in the case of any such issuance by Brooke Overseas or any of its
subsidiaries, an internationally recognized investment banking firm, that such
transaction is fair to such Subsidiary.
SECTION 4.20. Opinions, Appraisals, Etc.
Whenever an opinion, appraisal or similar document (other than an
Officers' Certificate or a Company Request) is required to be provided to the
Trustee hereunder, under the Pledge Agreement or otherwise in connection with a
transaction contemplated hereby, the person providing such opinion, appraisal
or similar document shall not be an Affiliate or Associate of the Company or
LeBow or any other Brooke Expanded Affiliate nor a person subject to an
agreement to cause such person to become such an Affiliate or Associate or any
other Brooke Expanded Affiliate. The Trustee is entitled to rely on a written
representation to the foregoing effect given by the person providing any such
opinion, appraisal or similar document. The Trustee agrees to make any such
opinion, appraisal or similar document available for inspection by any Holder
upon reasonable notice and during normal business hours.
SECTION 4.21. Ownership of Liggett, Brooke Overseas and Liggett Holding
Subsidiaries.
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Except as permitted under Sections 4.19(a) and 12.08 and so long as
the Securities are outstanding, the Company shall continue to own all of the
Equity Interests and any options, warrants or other rights to acquire such
Equity Interests of Liggett, Brooke Overseas, and each Liggett Holding
Subsidiary, and such ownership shall be directly held by the Company
(including, for the avoidance of doubt, any successor thereto under Article
Six) or in the case of Brooke Overseas, Liggett (unless one or more Liggett
Holding Subsidiaries shall own Equity Interests of Liggett or options, warrants
or other rights with respect thereto (collectively, "Liggett Interests")) and
the ultimate Liggett Holding Subsidiary; provided, however, that in one
transaction or in a series of substantially contemporaneous related
transactions resulting in the termination of the direct ownership of the
Liggett Interests by the Company, the Liggett Interests may be transferred to
or caused to be owned by any wholly-owned Subsidiary of the Company, and such
wholly owned Subsidiary of the Company may be owned by another wholly-owned
Subsidiary of the Company (any such wholly-owned Subsidiary of the Company
directly or indirectly owning Liggett Interests, a "Liggett Holding
Subsidiary") if (i) no Default or Event of Default shall be continuing, (ii)
after giving effect to such transaction or transactions, the Liggett Interests
and the Equity Interests and any such related options, warrants and rights of
each Liggett Holding Subsidiary are the subject of the Pledge or have otherwise
been pledged to the Trustee for the benefit of the Holders pursuant to a pledge
agreement substantially similar to the Pledge Agreement and in form and
substance reasonably satisfactory to the Trustee, (iii) the Company shall have
furnished one or more Opinions of Counsel, in form and substance reasonably
satisfactory to the Trustee, as to the enforceability of the Pledge and the
perfection of the Liens intended to be created thereby or, as the case may be,
as to the due authorization, execution, delivery and enforceability of such
other pledge agreement or pledge agreements, the creation and perfection of the
Liens intended to be created thereby and such other matters as the Trustee may
reasonably request, (iv) any such transaction shall be permitted by this
Indenture and the Trustee shall have received an Opinion of Counsel (from
outside counsel to the Company) delivered to the Company as to such transaction
not violating this Indenture as in effect immediately prior to the date of such
transaction and stating that the Trustee can rely on such Opinion of Counsel as
if addressed to it, (v) no Liggett Holding Subsidiary may engage in any
business other than that of owning the Liggett Interests or Equity Interests of
another Liggett Holding Subsidiary, (vi) all Liggett Holding Subsidiaries and
Liggett shall be treated as a consolidated person and (vii) the rights of the
Company under Section 5.04 are not materially adversely affected.
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SECTION 4.22. Escrows.
The Company shall deposit into the Cash Collateral Account or one or
more escrow accounts subject to the lien of the Pledge Agreement and on terms
reasonably satisfactory to the Trustee (i) an amount equal to the aggregate of
any federal, state, local and foreign income taxes estimated to be payable by
the Company or any of its Subsidiaries in connection with each Asset Sale and
(ii) all consideration received by the Company or any Subsidiary in connection
with each Asset Sale (which in any event shall include any sale of Collateral
or any Triggering Asset Sale) or other amounts constituting Net Available
Proceeds and such amounts and consideration shall remain on deposit therein
until used to pay any of the taxes referred to in clause (i) above or any fees,
expenses or commissions otherwise permitted to be deducted from the proceeds of
such Asset Sale in determining the applicable Net Available Proceeds or until
applied in accordance with Section 3.09.
SECTION 4.23. Excluded Cash.
Any Excluded Cash received by the Company or any of its Subsidiaries
shall be immediately transferred to NV Holdings (unless already held by NV
Holdings) and may be applied by NV Holdings (or transferred by NV Holdings to
the Company or any of its Subsidiaries for immediate application by the Company
or any such Subsidiary) only to (i) Permitted Operating Expenses and
Investments of the Company in any of its Subsidiaries or other expenses the
payment of which is permitted pursuant to clause (iii) of Section 4.05(a), (ii)
payments permitted pursuant to Section 4.03 or (iii) the payment of principal
of or interest on any Indebtedness of the Company (other than Indebtedness
incurred solely in contemplation of the receipt of such Excluded Cash);
provided that not more than an amount of Excluded Cash consisting of dividends
or other distributions on New Valley Equity equal to the Maximum New Valley
Distribution Amount may be applied to Permitted Operating Expenses and
Investments of the Company in any of its Subsidiaries; and provided, further,
that an additional $5,000,000 of dividends and distributions on New Valley
Equity may be applied, at any time prior to April 30, 1997, to expenses
permitted pursuant to clause (iii) of Section 4.05(a).
SECTION 4.24. Fiscal Year.
The Company will not, for purposes of determining compliance with this
Indenture, change the last day of its fiscal year from December 31 of each
year.
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ARTICLE FIVE
ADDITIONAL COVENANTS
SECTION 5.01. Restrictions on Sold Assets.
(a) If at any time any property of the Company or any of its
Subsidiaries is sold, conveyed or otherwise transferred, whether directly or
indirectly, Bennett S. LeBow agrees that he will not, directly or indirectly,
whether by himself or through any Affiliate, Associate or any other Brooke
Expanded Affiliate (other than the Company or any of its Subsidiaries), engage
in any transaction involving, directly or indirectly, such property until at
least one year has elapsed since such sale, conveyance or transfer.
(b) If at any time any property of the Company or any of its
Subsidiaries is sold, conveyed or transferred, whether directly or indirectly,
BGL agrees that it will not, directly or indirectly, whether by itself or
through any Affiliate, Associate or any other Brooke Expanded Affiliate (other
than the Company or any of its Subsidiaries), engage in any transaction
involving, directly or indirectly, such property until at least one year has
elapsed since such sale, conveyance or transfer.
SECTION 5.02. Restrictions on Transactions with New Valley.
(a) Bennett S. LeBow agrees that he shall not, directly or
indirectly, whether or not by himself or through any of his Affiliates or
Associates (other than in each case, the Company or any of its Subsidiaries or
any person controlled by New Valley) and shall not, to the extent within his
reasonable power, permit any of his Affiliates or Associates (other than the
Company or any of its Subsidiaries or any person controlled by New Valley) to,
engage in any Affiliated Transaction with New Valley or any of its subsidiaries
except any transaction or series of related transactions in the ordinary course
of business involving in the aggregate for all such transactions not more than
$2,000,000 in any Indenture Year if the terms of such transaction or
transactions are no less favorable to New Valley or its Subsidiaries than would
be available in an arms-length transaction between unrelated persons and
provided that New Valley and any of its subsidiaries (x) may (1) reimburse
Bennett S. LeBow and any of his Affiliates or Associates for reasonable
ordinary business expenses ("New Valley Expenses") incurred on behalf of, or
for the benefit of, New Valley or any of its subsidiaries, provided that the
expense for which reimbursement is sought arose in dealings with a person that
is not an Affiliate of Bennett S. LeBow and (2) pay Bennett S. LeBow
compensation for services rendered to New Valley as an employee, officer or
director of New Valley, (y) may pay such other amounts to Bennett S. LeBow,
provided that the aggregate amount of all payments made pursuant to this clause
(y) and clause (x)(2) of this Section 5.02(a) shall not exceed $2,000,000 in
any calendar year (or, for the year 2001, the amount equal to $2,000,000
multiplied by a fraction the numerator of which is the number of days that have
elapsed in such year as of the date of determination and the denominator of
which is 365) and (z) may pay Affiliates or
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Associates of Bennett S. LeBow management and consulting fees and salaries if
such fees and salaries, together with fees and salaries paid pursuant to clause
(i) of paragraph (d) of Section 4.05, do not exceed $500,000 in any Indenture
Year. Without limiting the foregoing, Bennett S. LeBow agrees that he shall
not, directly or indirectly, whether or not by himself or through any
Affiliate, Associate or any other Brooke Expanded Affiliate (other than the
Company, NV Holdings or New Valley), and shall not, to the extent within his
reasonable power, permit any Affiliate or Associate (other than the Company, NV
Holdings or New Valley) to, acquire any Equity Interests in New Valley.
(b) BGL agrees that it shall not, directly or indirectly, whether or
not by itself or through any Affiliate or Associate (other than in each case,
the Company or any of its Subsidiaries), and shall not, to the extent within
its reasonable power, permit any Affiliate or Associate (other than the Company
or any of its Subsidiaries or any person controlled by New Valley), to engage
in any Affiliated Transaction with New Valley or any of its subsidiaries, other
than as specifically permitted under Section 5.02(a). BGL agrees that it shall
not, directly or indirectly, whether or not by itself or through any Affiliate,
Associate or any other Brooke Expanded Affiliate (other than the Company, NV
Holdings or New Valley) and shall not, to the extent within its reasonable
power, permit any Affiliate or Associate (other than the Company, NV Holdings
or New Valley) to, acquire any Equity Interests in New Valley.
SECTION 5.03. Tax Sharing Payments.
(a)(i)(A) Within 120 days after the last day of each calendar year of
BGLS, BGLS shall pay to BGL with respect to such calendar year, an amount up to
or equal to the greater of (x) the amount for such calendar year determined
pursuant to clause (1) below (the "Tax Payment") and (y) the amount for such
calendar year determined pursuant to clause (2) below (the "BGLS Allocable
Amount"):
(1) the Tax Payment for a calendar year shall equal (x) the
Tax Percentage for such calendar year multiplied by (y) Company Net
Income for such calendar year, and deducting therefrom Company Credits
for such calendar year.
(2) The BGLS Allocable Amount for a calendar year shall be
determined as follows:
First, compute the cumulative amount (the "Company Group Share") of
any federal income taxes (and, where, applicable, State Combined Taxes)
actually payable by BGL (and not refundable as the result of a loss carryback
or otherwise) which are attributable to the Company Group (including BGLS)
under the principles set forth in Treasury Regulation Sections 1.1552-1(a)(1)
and 1.1502-33(d)(2) applied as if the Company Group were a single corporation
and the Subsidiaries of the Company which are members of the Company Group
(including BGLS if it is a Subsidiary at such time) were divisions of such
corporations and
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taking into account taxable years beginning on or after January 1, 1995. Then,
allocate the Company Group Share among the members of the Company Group
(including BGLS) in proportion to the amounts that would be their respective
shares of the Company Group's tax liability, with such shares determined under
the principles set forth in Treasury Regulation Sections 1.1552-1(a)(1) and
1.1502-33(d)(2) applied as if the Company Group were a separate affiliated
group of corporations filing a consolidated federal (and, where applicable,
consolidated or combined state or local) income tax return for all taxable
years beginning on or after January 1, 1995. The amounts so allocated to BGLS
in excess of amounts previously allocated to BGLS in prior taxable years
beginning on or after January 1, 1995 pursuant to this Section 5.03(a)(i)(A)(2)
shall be the BGLS Allocable Amount for such taxable year.
(B) Within 45 days after the last day of each of the first three
calendar quarters of BGLS, BGLS may make interest free advances to BGL in an
amount not exceeding the greater of (x) the Tax Payment for such quarter (as
determined pursuant to clause (1) below) and (y) the BGLS Allocable Amount for
such quarter (as determined pursuant to clause (2) below):
(1) The Tax Payment for such quarter shall equal an amount
not exceeding the amount determined by multiplying the Tax Percentage
for the calendar year of BGLS in which such quarter ends by Company
Net Income for such quarter as reasonably, and in good faith,
determined by the Board of Directors of BGLS (whose determination
shall be evidenced by a Board Resolution of BGLS) and deducting
therefrom Company Credits, as reasonably, and in good faith,
determined by the Board of Directors of BGLS (whose determination
shall be evidenced by a Board Resolution of BGLS).
(2) The BGLS Allocable Amount for such quarter shall equal
the BGLS Allocable Amount for the portion of the calendar year ending
on the last day of such quarter, calculated in accordance with Section
5.03(a)(i)(A)(2) as if such portion of the calendar year were a
complete taxable year and taking into account any payments with
respect to prior quarters in the taxable year as if they were payments
pursuant to Section 5.03(a)(i)(A)(2),
(C) Any advances with respect to a calendar year under Section
5.03(a)(i)(B) above less than or equal to the amount determined for such
calendar year under Section 5.03(a)(i)(A) above shall be considered forgiven
and treated as a distribution to BGL. If the advances under Section
5.03(a)(i)(B) above exceed the amount determined under Section 5.03(a)(i)(A)
above, the excess shall be repaid to BGLS within 15 days of notice from BGLS to
BGL of such excess. Such notice shall be mailed by BGLS no less than five days
after the filing of the federal income tax return of BGLS for the relevant
calendar year with the Internal Revenue Service.
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(ii) Within ten days prior to the due date of any actual tax payment
by BGL with respect to any combined, consolidated or unitary state and/or local
intangibles tax payable with respect to a combined, consolidated or unitary
group which includes BGLS, BGLS may remit to BGL the amount of such tax so
payable except to the extent such tax is attributable to BGL on a separate
company basis.
(b) Notwithstanding anything provided herein to the contrary, neither
the Company nor any Subsidiary (other than NV Holdings) shall make any payment
(including, without limitation, any distribution or advance computed under
Section 5.03(a)(i) hereof but excluding any payments referred to in Section
5.03(a)(ii) hereof) with respect to any tax sharing or similar agreement or
arrangement, whether or not in writing ("Tax Sharing Payment"), unless
immediately upon the receipt of any such Tax Sharing Payment, BGL shall make or
cause to be made the cash capital contributions or payments required under
Section 5.04.
SECTION 5.04. Tax Matters.
(a) BGL shall not, and BGL shall not permit any other current or
future member of the BGL Group to, amend or modify any tax sharing or similar
agreement or arrangement, whether or not in writing, or enter into any tax
sharing or similar agreement or arrangement other than the NVH Tax Agreement,
the agreements or arrangements provided for in this Section 5.04 and an
agreement with existing or new members of the BGL Group substantially similar
to the arrangement described in Section 5.03(a)(i).
(b) Immediately upon the receipt of any Tax Sharing Payments, and, in
any event, no later than November 5, 1996 and November 5 of any fiscal year
thereafter, BGL shall make a cash capital contribution to the Company in an
amount equal to the excess of (i) the cumulative amount of any Tax Sharing
Payments to BGL from the Company and its Subsidiaries (including NV Holdings)
made on or after January 1, 1995 through receipt of such Tax Sharing Payment,
as reduced by any prior capital contributions from BGL pursuant to this Section
5.04, over (ii) the cumulative amount of any federal income taxes (and, where
the relevant Tax Sharing Payment includes an amount with respect to state or
local income taxes determined on a consolidated or combined basis ("State
Combined Taxes"), the amount of such State Combined Taxes) actually payable by
BGL (and not refundable to BGL as the result of a loss carryback or otherwise)
to the relevant taxing authority with respect to the periods beginning on or
after January 1, 1995 through and including the period with respect to which
such Tax Sharing Payment was made ("Relevant Periods") which are attributable
to the Company and its Subsidiaries (which would be eligible to join in a
consolidated federal (and, where applicable, consolidated or combined state or
local) income tax return with the Company (the "Company Group")) including NV
Holdings under the principles set forth in Treasury Regulation Sections
1.1552-1(a)(1) and 1.1502-33(d)(2) applied as if the Company Group were a
single corporation and the Subsidiaries of the Company which are members of the
Company Group were divisions of such corporation and taking into account
taxable years
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beginning on or after January 1, 1995. The amount of the capital contributions
described in the preceding sentence shall be reduced by the cumulative amounts
actually refunded by BGL to the Subsidiaries of the Company with respect to the
Relevant Periods pursuant to the applicable tax sharing agreement or
arrangement. The amount of the capital contributions required under this
Section 5.04 with respect to any Tax Sharing Payment made with respect to
estimated tax liability by any Subsidiary of the Company or as an advance from
the Company to BGL computed with reference to the Tax Percentage under Section
5.03(a) ("Estimated Tax Payments") shall be made on an estimated basis at the
time such Estimated Tax Payments are made. To the extent such estimated
capital contributions with respect to a taxable year exceed the amount of
capital contributions determined to be required based on a complete taxable
year, the Company shall pay to BGL the amount of such excess.
(c) Effective as of January 1, 1995, NV Holdings on the date hereof
shall enter into a tax sharing agreement or arrangement with BGL (the "NVH Tax
Agreement") which provides that NV Holdings pay to BGL with respect to any
taxable year beginning on or after January 1, 1995, on a basis which takes into
account the obligation to pay estimated taxes, amounts (the "NVH Allocable
Amounts") determined as follows:
First, compute the Company Group Share. Then, allocate the Company
Group Share among the members of the Company Group (including NV Holdings) in
proportion to the amounts that would be their respective shares of the Company
Group's tax liability, with such shares determined under the principles set
forth in Treasury Regulation Sections 1.1552-1(a)(1) and 1.1502-33(e)(2)
applied as if the Company Group were a separate affiliated group of
corporations filing a consolidated federal (and, where applicable, consolidated
or combined state of local) income tax return for all taxable years beginning
on or after January 1, 1995.
The amounts so allocated to NV Holdings in excess of amounts
previously paid by NV Holdings pursuant to this Section 5.04(c) shall be the
NVH Allocable Amounts for such taxable year.
(d) In the event that BGL is no longer the common parent of the BGL
Group and, pursuant to a transaction described in Section 6.01, the obligor
hereunder becomes the direct or indirect owner of the stock of BGL, remains a
member of the BGL Group and is the common parent of the BGL Group: (i) Sections
5.03(a)(ii) and 5.04(b) shall cease to apply as of the time BGL ceases to be
the common parent, (ii) any Tax Sharing Payments thereafter received by BGL
shall immediately be paid to the obligor hereunder, (iii) each Subsidiary of
the obligor hereunder which is a member of the BGL Group which is not a party
to a tax sharing agreement or arrangement (including, for this purpose, BGL)
("Non-Tax Sharing Subsidiary") shall enter into a separate tax sharing
agreement or arrangement with the obligor hereunder substantially identical to
the arrangement described in Section 5.03(a)(i) and 5.03(a)(ii) (except that
payments, distributions and advances shall be mandatory and any payments
pursuant to a provision substantially identical to Section 5.03(a)(ii) shall be
computed by considering only an intangibles tax attributable to the Non-Tax
Sharing
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Subsidiary) which new agreement or arrangement shall provide for payments,
advances and distributions from such Non-Tax Sharing Subsidiaries to the
obligor hereunder to be determined (unless such Non-Tax Sharing Subsidiary is
BGLS) by substituting any such Non-Tax Sharing Subsidiary for BGLS for purposes
of determining Company Net Income and by substituting the new common parent for
BGL and the Non-Tax Sharing Subsidiary for BGLS in determining the Non-Tax
Sharing Subsidiary's counterpart to BGLS Allocable Amount, (iv) BGL and NV
Holdings shall cancel the NVH Tax Agreement as of the time BGL ceases to be the
common parent, and (v) NV Holdings shall enter into a tax sharing agreement or
arrangement with the obligor hereunder which provides that NV Holdings pay, on
a basis which takes into account the obligation to pay estimated taxes, to the
obligor hereunder with respect to any taxable year, an amount equal to federal
income taxes (and, where applicable, State Combined Taxes) actually payable by
the obligor hereunder which are attributable to NV Holdings under the
principles set forth in Treasury Regulation Sections 1.1552-1(a)(1) and 1.1502-
33(d)(2) and taking into account taxable years beginning on or after January 1,
1995.
In the event that BGL is no longer the common parent of the BGL Group
and, pursuant to a transaction described in Section 6.01, the obligor hereunder
becomes the direct or indirect owner of the stock of BGL, remains a member of
the BGL Group, but is not the common parent of the BGL Group: (i) Sections
5.03(a)(ii) and 5.04(b) shall cease to apply as of the time BGL ceases to be
the common parent, (ii) any Tax Sharing Payments thereafter received by BGL
shall immediately be paid to the new common parent, (iii) each Non-Tax Sharing
Subsidiary shall enter into a separate tax sharing agreement or arrangement
with the new common parent substantially identical to the arrangement described
in Section 5.03(a)(i) and 5.03(a)(ii) (except that payments, distributions and
advances shall be mandatory and any payments pursuant to a provision
substantially identical to Section 5.03(a)(ii) shall be computed by considering
only an intangibles tax attributable to the Non-Tax Sharing Subsidiary) which
new agreements or arrangements shall provide for payments, advances and
distributions from such Non-Tax Sharing Subsidiaries to the new common parent
to be determined (unless such Non-Tax Sharing Subsidiary is BGLS) by
substituting any such Non-Tax Sharing Subsidiary for BGLS for purposes of
determining Company Net Income and by substituting the new common parent for
BGL and the Non-Tax Sharing Subsidiary for BGLS in determining the Non-Tax
Sharing Subsidiary's counterpart to BGLS Allocable Amount, (iv) the new common
parent shall make capital contributions to the obligor hereunder (either
directly or by causing contributions to be made through an appropriate chain of
subsidiaries) in the amount, if any, required by Section 5.04(b), calculated by
substituting (x) the new common parent for BGL and (y) the obligor hereunder
for the Company in Section 5.04(b) and taking into account contributions by BGL
as if they were contributed by the new common parent and the taxes of BGL
attributable to the Company Group as if they were taxes of the new common
parent attributable to the obligor and its subsidiaries (which would be
eligible to join in a consolidated federal (and, where applicable, consolidated
or combined state or local income tax return with the obligor) during such
period as Section 5.04(b) was applicable, (v) BGL and NV Holdings shall cancel
the NVH Tax Agreement as of the time BGL ceases to be the common parent and
(vi) NV Holdings shall enter into a tax sharing agreement or
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arrangement with the new common parent which provides that NV Holdings shall
pay to the new common parent with respect to any taxable year, on a basis which
takes into account the obligation to pay estimated taxes, amounts determined in
the same manner as the NVH Allocable Amounts are determined under Section
5.04(c), calculated by substituting the new common parent for BGL.
In the event of a change of the obligor or a change in the position of
the obligor within the BGL Group not otherwise taken into account under this
Section 5.04, BGL agrees to cause tax sharing agreements or arrangements to be
entered into among members of the BGL Group (to the extent any such member is
not prohibited from entering into such agreements or arrangements under the
terms of any indenture or other debt agreement to which is it a party) so that
the position of the obligor as to its receipt of the excess of the Tax Sharing
Payments payable by it and its direct and indirect subsidiaries over the
amounts actually payable by the tax-paying entity of the consolidated
tax-paying group which are attributable to the obligor and such subsidiaries
under the principles set forth in Section 5.04(b) and the position of NV
Holdings as to the timing of payments and the amounts payable by NV Holdings
under this Section 5.04 are not materially adversely affected.
(e) Whenever any payment is made by any corporation to the common
parent on an estimated basis, the payment shall, to the extent not remitted to
the appropriate taxing authority on the first business day following the day of
receipt by the common parent, be immediately contributed by the common parent
to the obligor hereunder; provided that if the estimated tax payment is made by
NV Holdings, such payment shall be contributed by the common parent to NV
Holdings.
(f) Any amounts paid by NV Holdings under this Section 5.04 on an
estimated basis (and not recontributed to NV Holdings under Section 5.04(e)) in
excess of the amounts payable by NV Holdings under this Section 5.04 with
respect to its entire taxable year shall be repaid to NV Holdings by the
recipient thereof no later than November 5 of the succeeding year. To the
extent, after any taxable year, the amount of cumulative payments by NV
Holdings under this Section 5.04 exceeds NV Holdings' cumulative share of the
federal income tax liability (and, where applicable, State Combined Taxes) of
the Company Group (determined under the principles set forth in Treasury
Regulation Sections 1.1552-1(a)(1) and 1.1502-33(d)(2) applied as if the
Company Group were a separate affiliated group of corporations filing a
consolidated federal (and, where applicable, consolidated or combined state or
local) income tax return for all periods beginning on or after January 1,
1995), the obligor hereunder shall make, or cause to be made, a capital
contribution to NV Holdings in the amount of such excess.
SECTION 5.05. Purchases of Existing Debt.
(a) Bennett S. LeBow agrees, and agrees to cause any of his
Affiliates (other than New Valley or any subsidiary thereof) to the extent
within his reasonable power, to
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deliver to the Trustee for cancellation any Securities purchased or otherwise
acquired by him or such Affiliate.
(b) BGL agrees, and agrees to cause any of its Affiliates (other than
New Valley or any subsidiary thereof) to the extent within its reasonable
power, to deliver to the Trustee for cancellation any Securities purchased or
otherwise acquired by BGL or such Affiliate.
ARTICLE SIX
SUCCESSOR PERSON
SECTION 6.01. Mergers, Consolidations.
The Company shall not (i) consolidate with or merge with or into any
other person, (ii) transfer (by lease, assignment, sale or otherwise) in a
single transaction or through a series of transactions, all or substantially
all of its properties and assets, as an entirety or substantially as an
entirety, to another person or group of affiliated persons (a "Disposition of
Assets", it being recognized for purposes of this Section 6.01 that the sale or
transfer (by lease, assignment, sale or otherwise) of substantially all of the
assets of the Company other than the Equity Interests of Liggett to a person
controlled by Bennett S. LeBow shall constitute a "Disposition of Assets") or
(iii) adopt a Plan of Liquidation, unless:
(1) the Company shall be the continuing person, or the person
(if other than the Company) (or, in the case of (ii), one person to
which assets are transferred) formed by such consolidation or into
which the Company is merged or to which the properties and assets of
the Company are transferred or leased as an entirety or substantially
as an entirety or pursuant to a Plan of Liquidation, shall be a
corporation organized and existing under the laws of the United States
or any State thereof or the District of Columbia and shall expressly
assume, by an indenture supplemental hereto, executed and delivered to
the Trustee, in form satisfactory to the Trustee, all the obligations
of the Company under the Securities, this Indenture and the Pledge
Agreement;
(2) the person (or, in the case of (ii), one person to which
assets are transferred, which person shall be the same person
fulfilling the conditions set forth in clause (1)) formed by such
consolidation or surviving such merger or to which the properties and
assets of the Company, are transferred or leased as an entirety or
substantially as an entirety or pursuant to a Plan of Liquidation
shall have a Tangible Net Worth immediately after such transaction,
equal to or greater than that of the Company, immediately preceding,
and without giving effect to, such transaction;
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(3) immediately before and immediately after giving effect to
such transaction, no Default or Event of Default shall have occurred
and be continuing; and
(4) the Company shall have delivered to the Trustee an
Officers' Certificate of the Company and an Opinion of Counsel, each
stating that such consolidation, merger, transfer or lease and such
supplemental indenture comply with this Article Six and that all
conditions precedent herein provided relating to such transaction have
been complied with.
SECTION 6.02. Successor Person Substituted.
Upon any consolidation or merger, or any transfer or lease of assets
of the Company in accordance with Section 6.01, the successor person formed by
such consolidation or into which the Company is merged or to which such
transfer is made shall succeed to, and be substituted for, and may exercise
every right and power of, the Company under this Indenture with the same effect
as if such successor person had been named as the Company herein. When a
successor person assumes all of the obligations of the Company hereunder and
under the Securities, except in the case of succession by lease, the Company
shall be released from such obligations.
ARTICLE SEVEN
DEFAULT AND REMEDIES
SECTION 7.01. Events of Default.
An "Event of Default" occurs if:
(1) the Company defaults in the payment of interest on any
Securities when the same becomes due and payable and the default
continues for a period of 30 days;
(2) the Company defaults in the payment of the principal of
any Securities when the same becomes due and payable at maturity, upon
acceleration, upon redemption, pursuant to Section 3.01, 3.08 or 3.09
hereof or otherwise;
(3) the Company or NV Holdings fails to comply with any of
its other agreements contained in the Securities, this Indenture or
the Pledge Agreement and the default continues for the period and
after the notice specified below or
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any representation or warranty made by the Company or NV Holdings in
the Pledge Agreement shall have been untrue in any material respect
when made;
(4) Bennett S. LeBow or BGL or any other person, as
applicable, fails to comply with their respective agreements contained
in Section 5.01, 5.02, 5.03 or 5.04, as the case may be, or their
respective Acknowledgment and Undertakings dated as of the date hereof
and the default continues for the period and after the notice
specified below;
(5) (A) the Company, NV Holdings, New Valley or any New
Valley Transferee, as the case may be, defaults in the payment of any
principal of or interest on any bond, debenture, note or other
evidence of Indebtedness (other than Excluded Indebtedness) or under
any mortgage, indenture or other instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness
(other than Excluded Indebtedness) of the Company, NV Holdings, New
Valley or any New Valley Transferee, as the case may be, in an
aggregate principal amount of at least $3,000,000, and such default
extends beyond any period of grace provided with respect thereto, or,
if the Company, NV Holdings, New Valley or any New Valley Transferee,
as the case may be, defaults on any obligation, other than the
obligation to pay the principal of or interest on any such
Indebtedness, and as a result of such default such Indebtedness
becomes due prior to its stated maturity, whether or not subordinated
or (B) the Company fails to make a redemption payment on the Reset
Notes when such payment is due; provided that no such default by any
New Valley Transferee referred to in this clause (5) shall constitute
an "Event of Default" unless such default and all other such defaults
by any New Valley Transferee have a material adverse effect on the
financial condition of New Valley and its subsidiaries taken as a
whole;
(6) the Company, NV Holdings, New Valley or any New Valley
Transferee pursuant to or within the meaning of any Bankruptcy Law (A)
becomes insolvent, (B) fails generally to pay its debts as they become
due, (C) admits in writing its inability to pay its debts generally as
they become due, (D) commences a voluntary case or proceeding, (E)
consents to the entry of a judgment, decree or order for relief
against it in an involuntary case or proceeding, (F) consents to or
acquiesces to the appointment of a Custodian of it or for any part of
its property, (G) consents to or acquiesces in the institution of a
bankruptcy or an insolvency proceeding against it, (H) applies for,
consents to or acquiesces in the appointment of or taking possession
by a Custodian of it or for any part of its property, (I) makes a
general assignment for the benefit of its creditors or (J) takes any
corporate action in furtherance of or to facilitate, conditionally or
otherwise, any of the foregoing; provided that no such event with
respect to any New Valley Transferee referred to in this clause (6)
shall
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constitute an "Event of Default" unless such event and all other such
events with respect to any New Valley Transferee have a material
adverse effect on the financial condition of New Valley and its
subsidiaries taken as a whole;
(7) a court of competent jurisdiction enters a judgment,
decree or order for relief in respect of the Company, NV Holdings, New
Valley or any New Valley Transferee in an involuntary case or
proceeding under any Bankruptcy Law which shall (A) approve as
properly filed a petition seeking reorganization, arrangement,
adjustment or composition of it, (B) appoint a Custodian of it or for
any part of its property or (C) order the winding-up or liquidation of
its affairs; and such judgment, decree or order shall remain unstayed
and in effect for a period of 30 consecutive days; or any bankruptcy
or insolvency petition or application is filed, or any bankruptcy or
insolvency proceeding is commenced, against the Company, NV Holdings,
New Valley or any New Valley Transferee and such petition, application
or proceeding is not dismissed within 60 days; or any warrant of
attachment is issued against any portion of the property of the
Company, NV Holdings, New Valley or any New Valley Transferee which is
not released within 60 days of service; provided that no such event
with respect to any New Valley Transferee referred to in this clause
(7) shall constitute an "Event of Default" unless such event and all
other such events with respect to any New Valley Transferee have a
material adverse effect on the financial condition of New Valley and
its subsidiaries taken as a whole;
(8) final judgments not covered by insurance for the payment
of money which, in the case of any one of the Company, NV Holdings,
New Valley or any New Valley Transferee considered individually or in
the aggregate at any one time exceed $250,000 shall be rendered
against the Company, NV Holdings, New Valley or any New Valley
Transferee by a court of competent jurisdiction and shall remain
undischarged or unbonded for a period (during which execution shall
not be effectively stayed) of 45 days after such judgment becomes
final and nonappealable and the default continues for the period and
after the notice specified below; provided that no such judgment with
respect to any New Valley Transferee referred to in this clause (8)
shall constitute an "Event of Default" unless such default and all
other such judgements with respect to any New Valley Transferee have
a material adverse effect on the financial condition of New Valley and
its subsidiaries taken as a whole; or
(9) the Lien of the Pledge Agreement shall at any time not
constitute a valid and perfected Lien on the Collateral intended to be
covered thereby.
The term "Bankruptcy Law" means Title 11, U.S. Code or any similar
Federal or state law for the relief of debtors. The term "Custodian" means any
receiver, trustee, assignee, liquidator, sequestrator or similar official under
any Bankruptcy Law.
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A Default under clause (3), (4) or (8) above (other than any Defaults
under Sections 4.03, 4.04, 4.05, 4.06, 4.07, 4.08, and 6.01 of this Indenture,
which Defaults shall be Events of Default without the notice or passage of time
specified in this paragraph) is not an Event of Default until the Trustee
notifies the Company, or the Holders of at least 25% in principal amount of the
outstanding Securities notify the Trustee and the Company, or, in the case of a
Default under said clause (4), Bennett S. LeBow or BGL, the Company and the
Trustee, of the Default, and the Company does not cure the Default within 30
days after receipt of the notice. The notice must specify the Default, demand
that it be remedied and state that the notice is a "Notice of Default". Such
notice shall be given by the Trustee if so requested by the Holders of at least
25% in principal amount of the Securities then outstanding.
SECTION 7.02. Acceleration.
If an Event of Default (other than an Event of Default specified in
Section 7.01(6) or (7) as a result of a case or proceeding in which the Company
is the subject debtor) occurs and is continuing, the Trustee may, by notice to
the Company, or the Holders of at least 25% in principal amount of the
Securities then outstanding may, by notice to the Company and the Trustee,
declare all unpaid principal and accrued interest to the date of acceleration
on the Securities then outstanding (if not then due and payable) to be and
become due and payable and, upon any such declaration, the same shall be and
become due and payable. If an Event of Default specified in Section 7.01(6) or
(7) as a result of a case or proceeding in which the Company is the subject
debtor occurs, all unpaid principal and accrued interest on the Securities then
outstanding shall ipso facto become and be immediately due and payable without
any declaration or other act on the part of the Trustee or any Securityholder.
Subject to Section 9.03, upon payment of such principal amount and interest all
of the Company's obligations under the Securities and this Indenture, other
than obligations under Section 8.07, shall terminate. The Holders of at least
66-2/3% in principal amount of the Securities then outstanding by notice to the
Trustee may rescind an acceleration and its consequences if (i) all existing
Events of Default, other than the non-payment of the principal of the
Securities which has become due solely by such declaration of acceleration,
have been cured or waived, (ii) to the extent the payment of such interest is
lawful, interest on overdue installments of interest and overdue principal,
which has become due otherwise than by such declaration of acceleration, has
been paid, (iii) the rescission would not conflict with any judgment or decree
of a court of competent jurisdiction and (iv) all payments due to the Trustee
and any predecessor Trustee under Section 8.07 have been made.
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SECTION 7.03. Other Remedies.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy by proceeding at law or in equity to collect the
payment of principal of or interest on the Securities or to enforce the
performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay
or omission by the Trustee or any Securityholder in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy
or constitute a waiver of or acquiescence in the Event of Default. No remedy
is exclusive of any other remedy. All available remedies are cumulative to the
extent permitted by law.
SECTION 7.04. Waiver of Past Defaults.
Subject to Sections 7.07 and 10.02, the Holders of at least 66 2/3% in
aggregate principal amount of the outstanding Securities by notice to the
Trustee may waive an existing Default or Event of Default and its consequences,
except a Default in the payment of principal of or interest on any Security as
specified in clauses (1) and (2) of Section 7.01. When a Default or Event of
Default is waived, it is cured and ceases.
SECTION 7.05. Control by Holders.
The Holders of at least 66 2/3% in aggregate principal amount of the
outstanding Securities may direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on it. However, subject to Section 8.01, the Trustee may
refuse to follow any direction that conflicts with any law or this Indenture,
that the Trustee determines may be unduly prejudicial to the rights of another
Securityholder, or that may involve the Trustee in personal liability; provided
that the Trustee may take any other action deemed proper by the Trustee which
is not inconsistent with such direction.
SECTION 7.06. Limitation on Suits.
A Securityholder may not pursue any remedy with respect to this
indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice of a
continuing Event of Default;
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(2) the Holder or Holders of at least 25% in principal amount
of the outstanding Securities make a written request to the Trustee to
pursue the remedy;
(3) such Holder or Holders offer to the Trustee indemnity
satisfactory to the Trustee against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60
days after receipt of the request and the offer of indemnity; and
(5) during such 60-day period the Holder or Holders of a
majority in principal amount of the outstanding Securities do not give
the Trustee a direction which, in the opinion of the Trustee, is
inconsistent with the request.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over such other
Securityholder.
SECTION 7.07. Rights of Holders to Receive Payment.
Notwithstanding any other provision of this Indenture, the right of
any Holder to receive payment of principal of and interest on the Security, on
or after the respective due dates expressed in the Security, or to bring suit
for the enforcement of any such payment on or after such respective dates,
shall not be impaired or affected without the consent of the Holder.
SECTION 7.08. Collection Suit by Trustee.
If an Event of Default in payment of principal or interest specified
in Section 7.01(1) or (2) occurs and is continuing, the Trustee may recover
judgment in its own name and as trustee of an express trust against the
Company, or any other obligor on the Securities, or any one or more of them,
for the whole amount of principal and accrued interest remaining unpaid,
together with interest on overdue principal and, to the extent that payment of
such interest is lawful, interest on overdue installments of interest, in each
case at the rate per annum borne by the Securities and such further amount as
shall be sufficient to cover the costs and expenses of collection, including
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel.
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SECTION 7.09. Trustee May File Proofs of Claim.
The Trustee may file such proofs of claim and other papers or
documents as may be necessary or advisable in order to have the claims of the
Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel) and the
Securityholders allowed in any judicial proceedings relating to the Company (or
any other obligor upon the Securities), its creditors or its property and shall
be entitled and empowered to collect and receive any monies or other property
payable or deliverable on any such claims and to distribute the same, and any
Custodian in any such judicial proceedings is hereby authorized by each
Securityholder to make such payments to the Trustee and, in the event that the
Trustee shall consent to the making of such payments directly to the
Securityholders, to pay to the Trustee any amount due to it for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agent
and counsel, and any other amounts due the Trustee under Section 8.07. Nothing
herein contained shall be deemed to authorize the Trustee to authorize or
consent to or accept or adopt on behalf of any Securityholder any plan of
reorganization, arrangement, adjustment or composition affecting the Securities
or the rights of any Holder thereof, or to authorize the Trustee to vote in
respect of the claim of any Securityholder in any such proceedings.
SECTION 7.10. Priorities.
If the Trustee collects any money pursuant to this Article Seven
(other than those collected pursuant to the Pledge Agreement), it shall pay out
the money in the following order:
First: to the Trustee for amounts due under Section 8.07;
Second: to Holders of the Securities for amounts due and
unpaid on the Securities for principal and interest, ratably, without
preference or priority of any kind, according to the amounts due and
payable on the Securities for principal and interest, respectively;
and
Third: to the Company.
The Trustee, upon prior written notice to the Company, may fix a
record date and payment date for any payment to Securityholders pursuant to
this Section 7.10.
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SECTION 7.11. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 7.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 7.07, or a suit by a Holder or Holders of more than 10% in
principal amount of the outstanding Securities.
ARTICLE EIGHT
TRUSTEE
The Trustee hereby accepts the trust imposed upon it by this Indenture
and covenants and agrees to perform the same, as herein expressed.
SECTION 8.01. Duties of Trustee.
(a) If a Default or an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers vested in
it by this Indenture and the Pledge Agreement and use the same degree of care
and skill in its exercise as a prudent person would exercise or use under the
circumstances in the conduct of its own affairs.
(b) Except during the continuance of a Default or an Event of Default:
(1) The Trustee need perform only those duties as are
specifically set forth in this Indenture and no covenants or
obligations shall be implied in this Indenture or the Pledge Agreement
which are adverse to the Trustee.
(2) In the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the
correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements
of this Indenture. However, the Trustee shall examine the
certificates and opinions to determine whether or not they conform to
the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
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(1) This paragraph does not limit the effect of Paragraph (b)
of this Section 8.01.
(2) The Trustee shall not be liable for any error of judgment
made in good faith by a Trust Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts.
(3) The Trustee shall not be liable with respect to any
action it takes or omits to take in good faith in accordance with a
direction received by it pursuant to Section 7.05.
(d) No provision of this Indenture or the Pledge Agreement shall
require the Trustee to expend or risk its own funds or otherwise incur any
financial liability in the performance of any of its duties hereunder or in the
exercise of any of its rights or powers if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it.
(e) Every provision of this Indenture or the Pledge Agreement that in
any way relates to the Trustee is subject to paragraphs (a), (b), (c) and (d)
of this Section 8.01.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law.
SECTION 8.02. Rights of Trustee.
Subject to Section 8.01:
(a) The Trustee may rely on any document believed by it to be
genuine and to have been signed or presented by the proper person.
The Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Trustee acts or refrains from acting, it may
consult with counsel and may require an Officers' Certificate of the
Company or an Opinion of Counsel, which shall conform to Section
13.05. The Trustee shall not be liable for any action it takes or
omits to take in good faith in reliance on such certificate or
opinion.
(c) The Trustee may act through its attorneys and agents and
shall not be responsible for the misconduct or negligence of any agent
appointed with due care.
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(d) The Trustee shall not be liable for any action it takes
or omits to take in good faith which it believes to be authorized or
within its rights or powers.
(e) The Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, notice, request, direction, consent,
order, bond, debenture, or other paper or document, but the Trustee,
in its discretion, may make such further inquiry or investigation into
such facts or matters as it may see fit.
(f) The Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture or the Pledge
Agreement at the request, order or direction of any of the Holders,
pursuant to the provisions of this Indenture or the Pledge Agreement,
unless such Holders shall have offered to the Trustee reasonable
security or indemnity against the costs, expenses and liabilities
which may be incurred therein or thereby.
SECTION 8.03. Individual Rights of Trustee.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or any
of its Subsidiaries or other Affiliates with the same rights it would have if
it were not Trustee. Any Agent may do the same with like rights. However, the
Trustee must comply with Sections 8.10 and 8.11.
SECTION 8.04. Trustee's Disclaimer.
The Trustee makes no representation as to the validity or adequacy of
this Indenture, the Pledge Agreement or the Securities, it shall not be
accountable for the Company's use of the proceeds from the Securities, and it
shall not be responsible for any statement in the Securities other than the
Trustee's certificate of authentication.
SECTION 8.05. Notice of Defaults.
If a Default or an Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to each Securityholder notice
of the uncured Default or Event of Default within 90 days after it occurs.
Except in the case of a Default or an Event of Default in payment of principal
of, or interest on, any Security, the Trustee may withhold the notice if and so
long as a committee of its Trust Officers in good faith determines that
withholding the notice is in the interest of the Securityholders.
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SECTION 8.06. Reports by Trustee to Holders.
Within 60 days after each May 15 beginning with the May 15 following
the date of this Indenture, the Trustee shall if the TIA so requires, mail to
each Securityholder a brief report dated as of such May 15 that complies with
TIA Section 313(a)(1) through (7). The Trustee also shall comply with TIA
Section 313(b)(1) and (2) and 313(c).
A copy of each report at the time of its mailing to Securityholders
shall be mailed to the Company and filed with the SEC and each stock exchange,
if any, on which the Securities are listed.
The Company shall notify the Trustee if the Securities become listed
on any stock exchange.
SECTION 8.07. Compensation and Indemnity.
The Company shall pay to the Trustee from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable disbursements, expenses
and advances incurred or made by it. Such expenses shall include the
reasonable compensation, disbursements and expenses of the Trustee's agents and
counsel.
The Company shall indemnify the Trustee for, and hold it harmless
against, any claim, demand, expense (including but not limited to reasonable
attorneys' fees), loss or liability incurred by it without negligence or bad
faith on its part, arising out of or in connection with the administration of
this trust and its rights or duties hereunder or under the Pledge Agreement.
The Trustee shall notify the Company promptly of any claim asserted against the
Trustee for which it may seek indemnity, and shall consult with the Company in
respect of any material development in connection with any such claim. The
Trustee shall not unreasonably settle any such claim. The Company need not
reimburse any expense or indemnify against any loss or liability to the extent
incurred by the Trustee through its negligence or bad faith.
To secure the Company's payment obligations in this Section 8.07, the
Trustee shall have a Lien prior to the Securities on all money or property held
or collected by the Trustee, in its capacity as Trustee, including all funds
collected in connection with the Pledge, but except money or property held in
trust to pay principal of or interest on particular Securities.
When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 7.01(7) or (8) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.
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SECTION 8.08. Replacement of Trustee.
The Trustee may resign by so notifying the Company in writing. The
Holders of a majority in principal amount of the outstanding Securities may
remove the Trustee by so notifying the Company and the Trustee in writing and
may appoint a successor Trustee with the Company's consent. The Company may
remove the Trustee if:
(1) the Trustee fails to comply with Section 8.10;
(2) the Trustee is adjudged a bankrupt or an insolvent;
(3) a receiver or other public officer takes charge of the
Trustee or its property; or
(4) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of the Trustee for any reason, the Company shall promptly appoint a
successor Trustee. Within one year after the successor Trustee takes office,
the Holders of a majority in principal amount of the Securities may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company, at which time the
retiring Trustee shall transfer all property held by it as Trustee to the
successor Trustee, subject to the Lien provided in Section 8.07, the
resignation or removal of the retiring Trustee shall become effective and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. A successor Trustee shall mail notice of its succession
to each Securityholder.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company or
the Holders of at least 10% in principal amount of the outstanding Securities
may petition any court of competent jurisdiction for the appointment of a
successor Trustee.
If the Trustee fails to comply with Section 8.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding replacement of the Trustee pursuant to this Section
8.08, the Company's obligations under Section 8.07 shall continue for the
benefit of the retiring Trustee and the retiring Trustee shall have the same
rights with respect thereto as are given to the Trustee under Section 7.09.
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SECTION 8.09. Successor Trustee by Merger, Etc.
If the Trustee consolidates with, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation or national banking association, the resulting, surviving or
transferee corporation or national banking association without any further act
shall, if such resulting, surviving or transferee corporation or national
banking association is otherwise eligible hereunder, be the successor Trustee.
SECTION 8.10. Eligibility; Disqualification.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA Section 310(a)(1). The Trustee shall have a combined
capital and surplus of at least $50,000,000 as set forth in its most recent
published annual report of condition. The Trustee shall comply with TIA
Section 310(b), including the optional provision permitted by the second
sentence of TIA Section 310(b)(9); provided, however, that there shall be
excluded from the operation of TIA Section 310(b)(1) any indenture or
indentures if the requirements for such exclusion set forth in TIA Section
310(b)(1) are met.
SECTION 8.11. Preferential Collection of Claims against Company.
The Trustee shall comply with TIA Section 311(a), excluding any
creditor relationship listed in TIA Section 311(b). A Trustee who has resigned
or been removed shall be subject to TIA Section 311(a) to the extent
indicated.
ARTICLE NINE
SATISFACTION AND DISCHARGE OF INDENTURE
SECTION 9.01. Satisfaction, Discharge of the Indenture and Defeasance of the
Securities.
The Company shall be deemed to have paid and discharged the entire
Indebtedness on the Securities and the provisions of this Indenture and the
Pledge Agreement (subject to Section 9.03), if:
(1) The Company irrevocably deposits in trust with the
Trustee, pursuant to an irrevocable trust agreement in form and
substance reasonably satisfactory to the Trustee, U.S. Legal Tender or
direct noncallable obligations of, or noncallable obligations
guaranteed by, the United States of America for the timely payment of
which obligation or guarantee the full faith and credit of the United
States of America is pledged ("U.S. Government Obligations") maturing
as to principal and interest in such amounts and at such times as are
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sufficient, without consideration of the reinvestment of such interest
and after payment of all Federal, state and local taxes or other
charges or assessments in respect thereof payable by the Trustee, in
the opinion of a nationally recognized firm of independent public
accountants expressed in a written certification thereof (in form and
substance reasonably satisfactory to the Trustee) delivered to the
Trustee, to pay the principal of and interest on the outstanding
Securities on the dates on which any such payments are due and payable
in accordance with the terms of the Indenture and of the Securities;
(2) Such deposits shall not cause the Trustee to have a
conflicting interest as defined in and for purposes of the TIA;
(3) No Default or Event of Default shall have occurred or be
continuing on the date of such deposit or shall occur on or before the
91st day after the date of such deposit;
(4) Such deposit will not result in a breach or violation of,
or constitute a Default under, this Indenture or a default under any
other instrument to which the Company is a party or by which its
property is bound;
(5) The Company shall deliver to the Trustee an Opinion of
Counsel in form and substance reasonably satisfactory to the Trustee
to the effect that Holders of the Securities will not recognize
income, gain or loss for Federal income tax purposes as a result of
such deposit and the defeasance contemplated hereby and will be
subject to Federal income tax in the same amounts and in the same
manner and at the same times as would have been the case if such
deposit and defeasance had not occurred;
(6) The deposit shall not result in the Company, the Trustee
or the trust becoming or being deemed to be an "investment company"
under the Investment Company Act;
(7) The Holders shall have a perfected security interest
under applicable law in the U.S. Legal Tender or U.S. Government
Obligations deposited pursuant to Section 9.01(1) above;
(8) The Company shall have paid or caused to be paid all
other sums payable by the Company hereunder and under the Pledge
Agreement; and
(9) The Company has delivered to the Trustee an Officers'
Certificate of the Company and an Opinion of Counsel, each stating
that all conditions precedent specified herein relating to the
defeasance contemplated by this Section 9.01 have been complied with.
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In the event all or any portion of the Securities are to be redeemed
through such irrevocable trust, the Company must make arrangements satisfactory
to the Trustee, at the time of such deposit, for the giving of the notice of
such redemption or redemptions by the Trustee in the name and at the expense of
the Company.
SECTION 9.02. Termination of the Company's Obligations upon Cancellation of
the Securities.
In addition to its rights under Section 9.01, the Company may
terminate all of its obligations under this Indenture and the Pledge Agreement
(subject to Section 9.03) when:
(1) all Securities theretofore authenticated and delivered
(other than Securities which have been destroyed, lost or stolen and
which have been replaced or paid as provided in Section 2.07) have
been delivered to the Trustee for cancellation;
(2) the Company has paid or caused to be paid all other sums
payable by the Company hereunder and under the Pledge Agreement; and
(3) the Company has delivered to the Trustee an Officers'
Certificate of the Company and an Opinion of Counsel, each stating
that all conditions precedent specified herein relating to the
satisfaction and discharge of this Indenture have been complied with.
SECTION 9.03. Survival of Certain Obligations.
Notwithstanding the satisfaction and discharge of this Indenture or
the Pledge Agreement and of the Securities referred to in Sections 7.02, 9.01
or 9.02, the respective obligations of the Company and the Trustee under
Sections 2.02, 2.03, 2.04, 2.05, 2.06, 2.07, 4.01, 4.02, 7.07, 8.07, 8.08,
9.05, 9.06 and 9.07 shall survive until the Securities are no longer
outstanding, and thereafter the obligations of the Company and the Trustee
under Sections 8.07, 9.05, 9.06 and 9.07 shall survive. Nothing contained in
this Article Nine shall abrogate any of the obligations or duties of the
Trustee under this Indenture or the Pledge Agreement.
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SECTION 9.04. Acknowledgment of Discharge by Trustee.
After (i) the conditions of Section 9.01 or 9.02 have been satisfied,
(ii) the Company has paid or caused to be paid all other sums payable hereunder
by the Company and (iii) the Company has delivered to the Trustee an Officers'
Certificate of the Company and an Opinion of Counsel, each stating that all
conditions precedent referred to in clause (i) above relating to the
satisfaction and discharge of this Indenture and the Pledge Agreement have been
complied with, the Trustee upon request shall acknowledge in writing the
discharge of the Company's obligations under this Indenture and the Pledge
Agreement except for those surviving obligations specified in Section 9.03.
SECTION 9.05. Application of Trust Assets.
The Trustee shall hold any U.S. Legal Tender or U.S. Government
Obligations deposited with it in the irrevocable trust established pursuant to
Section 9.01. The Trustee shall apply the deposited U.S. Legal Tender or U.S.
Government Obligations, together with earnings thereon, through the Paying
Agent (other than the Company or the Subsidiaries), in accordance with this
Indenture and the terms of the irrevocable trust agreement, to the payment of
principal of and interest on the Securities. The U.S. Legal Tender or U.S.
Government Obligations so held in trust shall not be part of the trust estate
under this Indenture, but shall constitute a separate trust fund for the equal
and ratable benefit of all Holders entitled thereto.
SECTION 9.06. Repayment to the Company.
Upon termination of the trust established pursuant to Section 9.01,
the Trustee and the Paying Agent shall promptly pay to the Company upon request
any excess U.S. Legal Tender or U.S. Government Obligations held by them.
The Trustee and the Paying Agent shall pay to the Company upon
request, and, if applicable, in accordance with the irrevocable trust
established pursuant to Section 9.01 or 9.02, any U.S. Legal Tender or U.S.
Government Obligations held by them for the payment of principal of or interest
on the Securities that remain unclaimed for two years after the date on which
such payment shall have become due; provided, however, that the Trustee or such
Paying Agent, before being required to make any such repayment, may at the
expense of the Company cause to be published once in The Wall Street Journal
(National Edition), or the national edition of a reasonably equivalent
publication, or mail to each such Holder notice that such money remains
unclaimed and that, after a date specified therein, which shall not be less
than 30 days from the date of such publication or mailing, any unclaimed
balance of such money then remaining will be repaid to the Company. After
payment to the Company, Holders entitled to such payment must look to the
Company for such payment as general creditors unless an applicable abandoned
property law designates another person.
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SECTION 9.07. Reinstatement.
If the Trustee or Paying Agent is unable to apply any U.S. Legal
Tender or U.S. Government Obligations in accordance with Section 9.01 or 9.02
by reason of any legal proceeding or by reason of any order or judgment of any
court or governmental authority enjoining, restraining or otherwise prohibiting
such application, the Company's obligations under this Indenture, the Pledge
Agreement, and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to Section 9.01 or 9.02 until such time as the
Trustee or Paying Agent is permitted to apply all such U.S. Legal Tender or
U.S. Government Obligations in accordance with Section 9.01 or 9.02; provided,
however, that if the Company has made any payment of principal of or interest
on any Securities because of the reinstatement of its obligations, the Company
shall be subrogated to the rights of the Holders of such Securities to receive
such payment from the U.S. Legal Tender or U.S. Government Obligations held by
the Trustee or Paying Agent.
ARTICLE TEN
AMENDMENTS, SUPPLEMENTS AND WAIVERS
SECTION 10.01. Without Consent of Holders.
The Company, when authorized by a Board Resolution of the Company, and
the Trustee, together, may amend or supplement this Indenture, the Pledge
Agreement or the Securities without notice to or consent of any Securityholder:
(1) to cure any ambiguity, defect or inconsistency; provided
such amendment or supplement does not adversely affect the rights of
any Securityholder;
(2) to comply with Article Six or Section 13.11;
(3) to provide for uncertificated Securities in addition to
or in place of certificated Securities;
(4) to make any change that does not adversely affect the
rights of any Securityholder, provided that the Company has delivered
to the Trustee an Opinion of Counsel stating that such change does not
adversely affect the rights of any Securityholder; or
(5) to comply with the TIA.
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SECTION 10.02. With Consent of Holders.
Subject to Section 7.07, the Company, when authorized by a Board
Resolution of the Company, and the Trustee, together, with the written consent
of the Holder or Holders of at least 66 2/3% in aggregate principal amount of
the outstanding Securities, may amend or supplement this Indenture, the Pledge
Agreement or the Securities, without notice to any other Securityholders.
Subject to Section 7.07, the Holder or Holders of at least 66 2/3% in aggregate
principal amount of the outstanding Securities may waive compliance by the
Company with any provision of this Indenture, the Pledge Agreement or the
Securities without notice to any other Securityholder. No such amendment,
supplement or waiver may have a disproportionate adverse effect on one series
of Securities unless the Holder or Holders of at least 66 2/3% in aggregate
principal amount of the outstanding Securities of such series shall consent to
such action. However, without the consent of each Securityholder affected, no
amendment, supplement or waiver, including a waiver pursuant to Section 7.04,
may:
(1) change the principal amount of Securities whose Holders
must consent to an amendment, supplement or waiver of any provision of
this Indenture, the Securities or the Pledge Agreement;
(2) reduce the rate or extend the time for payment of
interest on any Security;
(3) reduce the principal amount of any Security;
(4) change the maturity date of any Security or alter the
redemption provisions with respect thereto in a manner adverse to any
Holder;
(5) waive a Default in the payment of the principal of,
interest on, or redemption payment with respect to, any Security;
(6) make any changes in Section 2.14, 7.04 or 7.07, the third
sentence of this Section 10.02 or the second sentence of Section
12.01; or
(7) make the principal of, or the interest on, any Security
payable with anything other than U.S. Legal Tender.
It shall not be necessary for the consent of the Holders under this
Section to approve the particular form of any proposed amendment, supplement,
waiver or consent, but it shall be sufficient if such consent approves the
substance thereof.
Any amendment, supplement, waiver or consent shall be effective upon
certification to the Trustee by the Company or any agent of the Company that
such amendment, supplement, waiver or consent has been authorized by the
Company and that the
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consent of the requisite principal amount of the Securities has been obtained,
unless such consents specify that they shall become effective at a later date,
in which case such amendment, supplement, waiver or consent shall become
effective in accordance with the terms of such consent.
After an amendment, supplement, waiver or consent under this Section
becomes effective, the Company shall mail to the Holders affected thereby a
notice briefly describing the amendment, supplement, waiver or consent. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amendment,
supplement, waiver or consent or any supplemental indenture with respect
thereto.
In connection with any amendment, supplement, waiver or consent under
this Article Ten, the Company may, but shall not be obligated to, offer to any
Holder who consents to such amendment, supplement, waiver or consent, or to all
Holders, consideration for such Holder's consent to such amendment, supplement,
waiver or consent.
SECTION 10.03. Compliance with TIA.
Every amendment, waiver, or supplement or consent under this Indenture
or the Securities shall comply with the Trust Indenture Act of 1939, as then in
effect.
SECTION 10.04. Revocation and Effect of Consents.
Until an amendment, waiver, supplement or consent becomes effective, a
consent to it by a Holder is a continuing consent by the Holder and every
subsequent Holder of a Security or portion of a Security that evidences the
same debt as the consenting Holder's Security, even if notation of the consent
is not made on any Security. However, any such Holder or subsequent Holder may
revoke the consent as to his Security or portion of a Security if the Trustee
receives the notice of such revocation before the date the amendment,
supplement, waiver or consent becomes effective.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Holders entitled to consent to any amendment,
supplement, waiver or consent. If a record date is fixed, then notwithstanding
the last two sentences of the immediately preceding paragraph, those persons
who were Holders at such record date (or their duly designated proxies), and
only those persons, shall be entitled to revoke any consent previously given,
whether or not such persons continue to be Holders after such record date. No
such consent shall be valid or effective for more than 90 days after such
record date.
After an amendment, supplement, waiver or consent becomes effective,
it shall bind every Securityholder, unless it makes a change described in any
of clauses (1) through (7) of Section 10.02, in which case, the amendment,
supplement, waiver or consent shall bind
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only each Holder of a Security who has consented to it and every subsequent
Holder of a Security or portion of a Security that evidences the same debt as
the consenting Holder's Security.
SECTION 10.05. Notation on or Exchange of Securities.
If an amendment, supplement or waiver changes the terms of a Security,
the Trustee may require the Holder of the Security to deliver it to the
Trustee. The Trustee may place an appropriate notation on the Security about
the changed terms and return it to the Holder. Alternatively, if the Trustee
or the Company so determines, the Company in exchange for the Security shall
issue and the Trustee shall authenticate a new Security that reflects the
changed terms. Failure to make the appropriate notation or to issue a new
Security shall not affect the validity and effect of such amendment, supplement
or waiver.
SECTION 10.06. Trustee to Sign Amendments, Etc.
The Trustee shall be entitled to receive, and shall be fully protected
in relying upon, an Opinion of Counsel stating that the execution of any
amendment, supplement, waiver or consent authorized pursuant to this Article
Ten is authorized or permitted by this Indenture. The Trustee may, but shall
not be obligated to, execute any such amendment, supplement, waiver or consent
which affects the Trustee's own rights, duties or immunities under this
Indenture or otherwise.
ARTICLE ELEVEN
MEETINGS OF SECURITYHOLDERS
SECTION 11.01. Purposes for Which Meetings May Be Called.
A meeting of Securityholders may be called at any time and from time
to time pursuant to the provisions of this Article Eleven for any of the
following purposes:
(a) to give any notice to the Company, or the Trustee, or to
give any directions to the Trustee, or to waive or to consent to the
waiving of any Default hereunder and its consequences, or to take any
other action authorized to be taken by Securityholders pursuant to any
of the provisions of Article Seven;
(b) to remove the Trustee or to appoint a successor Trustee
pursuant to the provisions of Article Eight; and
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(c) to take any other action (i) authorized to be taken by or
on behalf of the Holders of any specified aggregate principal amount
of the Securities under any other provision of this Indenture, or
authorized or permitted by law or (ii) which the Trustee deems
necessary or appropriate in connection with the administration of this
Indenture.
SECTION 11.02. Manner of Calling Meetings.
The Trustee may at any time call a meeting of Securityholders to take
any action specified in Section 11.01, to be held at such time and at such
place in the City of New York, New York or such other place as the Trustee
shall determine. Notice of every meeting of Securityholders, setting forth the
time and place of such meeting and in general terms the action proposed to be
taken at such meeting, shall be mailed by the Trustee, first-class postage
prepaid, to the Company, and to the Holders of the Securities at their last
addresses as they shall appear on the registration books of the Registrar, not
less than 10 nor more than 60 days prior to the date fixed for a meeting.
Any meeting of Securityholders shall be valid without notice if the
Holders of any Securities then outstanding are present in person or by proxy,
or if notice is waived before or after the meeting by the Holders of all
Securities outstanding, and if the Company and the Trustee are either present
by duly authorized representatives or have, before or after the meeting, waived
notice.
SECTION 11.03. Call of Meetings by the Company or Holders.
In case at any time the Company, pursuant to a Board Resolution, or
the Holders of not less than 10% in aggregate principal amount of the
Securities then outstanding, shall have requested the Trustee to call a meeting
of Securityholders to take any action specified in Section 11.01, by written
request setting forth in reasonable detail the action proposed to be taken at
the meeting, and the Trustee shall not have mailed the notice of such meeting
within 20 days after receipt of such request, then the Company or the Holders
of Securities in the amount above specified may determine the time and place in
the City of New York, New York for such meeting and may call such meeting for
the purpose of taking such action, by mailing or causing to be mailed notice
thereof as provided in Section 11.02, or by causing notice thereof to be
published at least once in each of two successive weeks in The Wall Street
Journal (National Edition), the first such publication to be not less than ten
nor more than 60 days prior to the date fixed for the meeting.
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SECTION 11.04. Who May Attend and Vote at Meetings.
To be entitled to vote at any meeting of Securityholders, a person
shall (a) be a registered Holder of one or more Securities, or (b) be a person
appointed by an instrument in writing as proxy for the registered Holder or
Holders of Securities. The only persons who shall be entitled to be present or
to speak at any meeting of Securityholders shall be the persons entitled to
vote at such meeting and their counsel and any representatives of the Trustee
and its counsel and any representatives of the Company and its counsel.
SECTION 11.05. Regulations May be Made by Trustee; Conduct of the Meeting;
Voting Rights; Adjournment.
Notwithstanding any other provision of this Indenture, the Trustee may
make such reasonable regulations as it may deem advisable for any meeting of
Securityholders, in regard to proof of the holding of Securities and of the
appointment of proxies, and in regard to the appointment and duties of
inspectors of votes, and submission and examination of proxies, certificates
and other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think appropriate. Such regulations may fix
a record date and time for determining the Holders of record of Securities
entitled to vote at such meeting, in which case those and only those persons
who are Holders of Securities at the record date and time so fixed, or their
proxies, shall be entitled to vote at such meeting whether or not they shall be
such Holders at the time of the meeting.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by the
Company or by Securityholders as provided in Section 11.03, in which case the
Company or the Securityholders calling the meeting, as the case may be, shall
in like manner appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by vote of the Holders of a
majority in principal amount of the Securities represented at the meeting and
entitled to vote.
At any meeting such Securityholder or proxy shall be entitled to one
vote for each $1,000 principal amount of Securities held or represented by him
or her, provided, however, that no vote shall be cast or counted at any meeting
in respect of any Securities challenged as not outstanding and ruled by the
chairman of the meeting to be not outstanding. The chairman of the meeting
shall have no right to vote other than by virtue of Securities held by him or
instruments in writing as aforesaid duly designating him as the proxy to vote
on behalf of other Securityholders. At any meeting of Securityholders, the
presence of persons holding or representing any number of Securities shall be
sufficient for a quorum. Any meeting of Securityholders duly called pursuant
to the provisions of Section 11.02 or Section 11.03 may be adjourned from time
to time by vote of the Holders of a majority in aggregate principal amount of
the Securities represented at the meeting and entitled to vote, and the meeting
may be held as so adjourned without further notice.
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SECTION 11.06. Voting at the Meeting and Record to be Kept.
The vote upon any resolution submitted to any meeting of
Securityholders shall be by written ballots on which shall be subscribed the
signatures of the Holders of Securities or of their representatives by proxy
and the principal amount of the Securities voted by the ballot. The permanent
chairman of the meeting shall appoint two inspectors of votes, who shall count
all votes cast at the meeting for or against any resolution and who shall make
and file with the secretary of the meeting their verified written reports in
duplicate of all votes cast at the meeting. A record in duplicate of the
proceedings of each meeting of Securityholders shall be prepared by the
secretary of the meeting and there shall be attached to such record the
original reports of the inspectors of votes on any vote by ballot taken thereat
and affidavits by one or more persons having knowledge of the facts, setting
forth a copy of the notice of the meeting and showing that such notice was
mailed as provided in Sections 11.02 or 11.03 or published as provided in
Section 11.03. The record shall be signed and verified by the affidavits of
the permanent chairman and the secretary of the meeting and one of the
duplicates shall be delivered to the Company and the other to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
SECTION 11.07. Exercise of Rights of Trustee or Securityholders May Not Be
Hindered or Delayed by Call of Meeting.
Nothing contained in this Article Eleven shall be deemed or construed
to authorize or permit by reason of any call of a meeting of Securityholders or
any rights expressly or impliedly conferred hereunder to make such call, any
hindrance or delay in the exercise of any right or rights conferred upon or
reserved to the Trustee or to the Securityholders under any of the provisions
of this Indenture or of the Securities.
ARTICLE TWELVE
SECURITY INTEREST
SECTION 12.01. Pledge and Security Interest.
Prior to the issuance of the Securities, the Company, NV Holdings and
the Trustee shall execute and deliver the Pledge Agreement, pursuant to which
the Company and NV Holdings shall grant the Security Interest to the Trustee,
for the benefit of the Holders. Each Holder, by accepting a Security, agrees
to all of the terms and provisions of the Pledge Agreement.
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The Security Interest as now or hereafter in effect shall be held for
the equal and ratable benefit and security of the Holders, without preference,
priority or distinction of any thereof over any other by reason of difference
in time of issuance, sale or otherwise, and for the enforcement of the payment
of principal of and interest on the Securities, in accordance with their terms.
The Collateral shall consist of the Property described in and subject
to the Lien of the Pledge Agreement. Prior to the issuance of the Securities,
the Company will execute and deliver, file and record, all instruments and
documents necessary to subject the Collateral to the Security Interest.
Upon the granting of the Security Interest in the Collateral to the
Trustee and thereafter as may be required, the Company shall provide and cause
NV Holdings to provide to the Trustee such Opinions of Counsel, compliance
certificates and other reports as shall be required by Section 314 of the TIA.
The Company shall not, and shall not permit any of its Subsidiaries
to, dispose of any of the Collateral except in accordance with this Indenture
and the Pledge Agreement.
So long as any Securities remain outstanding, the Company shall apply,
and cause NV Holdings to apply, the Net Available Proceeds of any sale of the
Collateral in accordance with Section 3.09 of this Indenture.
SECTION 12.02. Release of Collateral.
The Security Interest in any Collateral shall automatically and
without any action by the Trustee or the Holders be released upon any sale of
such Collateral by the Company or NV Holdings pursuant to the terms of this
Indenture. Notwithstanding the foregoing, the Trustee shall from time to time
at the request of the Company or NV Holdings execute and deliver any
instruments necessary or appropriate and take all such other action as shall be
necessary to evidence and effect such release.
SECTION 12.03. Reliance on Opinion of Counsel.
The Trustee shall, before taking any action under this Article Twelve
or the Pledge Agreement, be entitled to receive an Opinion of Counsel, stating
(a) the legal effect of such action, (b) the steps necessary to consummate the
same and perfect the Trustee's security interest with respect to the
Collateral, (c) that such action will not be in contravention of the provisions
of this Indenture and (d) that such opinion shall be full protection to the
Trustee for any action taken or not taken in reliance thereon.
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SECTION 12.04. Purchaser May Rely.
A purchaser in good faith of the Collateral or any part thereof or
interest therein which is purported to be transferred or granted by the Trustee
as provided in this Article Twelve or the Pledge Agreement may rely on the
authority of the Trustee to execute a transfer, grant or release, and shall not
be bound to ascertain or inquire as to the satisfaction of any conditions
precedent to the exercise of such authority, or to see the application of the
purchase price therefor.
SECTION 12.05. Payment of Expenses.
On demand of the Trustee, the Company forthwith shall pay, or
satisfactorily provide for, all reasonable expenditures incurred by the Trustee
under this Article Twelve and the Pledge Agreement, and all such sums shall be
a Lien upon the Collateral and shall be secured thereby.
SECTION 12.06. Suits to Protect the Collateral.
To the extent permitted under the Pledge Agreement, the Trustee shall
have power to institute and to maintain such suits and proceedings as it may
deem expedient to prevent any impairment of the Collateral by any acts which
may be unlawful or in violation of the Pledge Agreement or this Indenture,
including the power to institute and maintain suits or proceedings to restrain
the enforcement of or compliance with any legislative or other governmental
enactment, rule or order that may reasonably be believed to be unconstitutional
or otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security hereunder or be prejudicial to the
interests of the Holders or of the Trustee.
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SECTION 12.07. Trustee's Duties.
The powers conferred upon the Trustee by this Article Twelve and the
Pledge Agreement are solely to protect its interest and the interest of the
Holders in the Collateral and shall not impose any duty upon the Trustee to
exercise any such powers except as expressly provided in this Indenture and the
Pledge Agreement. The Trustee shall be under no duty whatsoever to the Company
or NV Holdings to make or give any presentment, demand for performance, notice
of nonperformance, protest, notice of protest, notice of dishonor, or other
notice or demand in connection with any Collateral, or to take any steps
necessary to preserve any rights against prior parties except as expressly
provided in this Indenture. The Trustee shall not be liable to the Company or
NV Holdings for failure to collect or realize upon any or all of the
Collateral, or for any delay in so doing, nor shall the Trustee be under any
duty to the Company or NV Holdings to take any action whatsoever with regard
thereto. The Trustee shall have no duty to the Company or NV Holdings to
comply with any recording, filing, or other legal requirements necessary to
establish or maintain the validity, priority or enforceability of, or the
Trustee's rights in or to, any of the Collateral, except with regard to the
safekeeping of any Collateral perfected by the Trustee's possession thereof,
and, with regard to such safekeeping, the Trustee shall be liable only for any
damages that result from its willful misconduct or gross negligence.
SECTION 12.08. Sale of Collateral.
So long as no Default or Event of Default shall have occurred and be
continuing, the Company or NV Holdings may sell, transfer or otherwise dispose
of any of the Collateral (other than, except in connection with a Disposition
of Assets effected in compliance with Section 6.01, the Equity Interests in NV
Holdings and, except in accordance with Section 4 of the Pledge Agreement, any
Cash Collateral (as defined in the Pledge Agreement)) at any time, provided
that no such Collateral may be sold, transferred or otherwise disposed of,
directly or indirectly to LeBow or any Brooke Expanded Affiliate (other than
the Company or, in the case of any Equity Interests in New Valley, NV Holdings)
and provided further that
(a) in the case of the Equity Interests of Liggett, no such Equity
Interests shall be sold, transferred or otherwise disposed of unless (i) all of
such Equity Interests so held by the Company are sold as part of the same
transaction or series of substantially contemporaneous related transactions,
(ii) any of the Designated Investment Banks has delivered an opinion to the
Company that such transaction is fair to the Company (assuming for such
purpose that the Company consists only of BGLS and its Subsidiaries determined
as of the date of the rendering of such opinion), (iii) such Equity Interests
are sold only for cash or cash equivalents and/or securities (such securities,
"Security Proceeds") and customary contract rights that are incidental to such
securities or to the effectuation of the transaction, and (iv) the proceeds of
such sale, transfer or disposition are deposited in accordance with Section
4.22; provided that no such Security Proceeds may be sold or otherwise
transferred by
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the Company (a) to any Affiliate or (b) for any consideration except cash or
cash equivalents which shall be deposited and applied in accordance with clause
(x) above; and
(b) in the case of the Equity Interests of Brooke Overseas, no such
Equity Interests shall be sold, transferred or disposed of unless (i) a
nationally or internationally recognized investment bank has delivered an
opinion to the Company that such sale, transfer or disposition is fair to the
Company (assuming for such purpose that the Company consists only of BGLS,
Subsidiaries the Equity Interests of which are included in the Collateral and
subsidiaries of such Subsidiaries determined as of the date of the rendering of
such opinion) and (ii) the proceeds of such sale, transfer or disposition shall
be applied by the Company in accordance with Section 3.09 and, until such
application, deposited and held in accordance with Section 4.22.
SECTION 12.09. Dealings with Collateral.
The Company shall, and shall cause NV Holdings to, only take action in
respect of the Collateral in good faith and with due regard to the preservation
of the value of the Collateral (including, without limitation, the sale,
purchase and voting of the Collateral).
ARTICLE THIRTEEN
MISCELLANEOUS
SECTION 13.01. TIA Controls.
If any provision of this Indenture limits, qualifies, or conflicts
with the TIA, the TIA shall control.
SECTION 13.02. Notices.
Any notices or other communications required or permitted hereunder
shall be in writing, and shall be sufficiently given if made by hand delivery,
by facsimile or by registered or certified mail, postage prepaid, return
receipt requested, addressed as follows:
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if to the Company:
BGLS Inc.
c/o Brooke Group Ltd.
100 S.E. Second Street
32nd Floor
Miami, Florida 33131
Attention: Bennett S. LeBow
Facsimile: (305) 579-8001
if to the Trustee:
Shawmut Bank, N.A.
Corporate Trust Department
One Federal Street, 31st Floor
Boston, Massachusetts 02211
Facsimile: (617) 292-4289
The Company or the Trustee, by notice to the other, may designate
additional or different addresses as shall be furnished in writing by either
party. Any notice or communication to the Company or the Trustee shall be
deemed to have been given or made as of the date so delivered if personally
delivered; upon confirmation of sending of facsimile, if sent by facsimile; and
upon receipt if sent by registered or certified mail (except that a notice of
change of address shall not be deemed to have been given until actually
received by the addressee).
Any notice or communication mailed to a Securityholder shall be mailed
to it by first class mail or other equivalent means at its address as it
appears on the Securities Register and shall be sufficiently given to it if so
mailed within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to any other
Securityholder. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 13.03. Communications by Holders with Other Holders.
Securityholders may communicate pursuant to TIA Section 312(b) with
other Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the Registrar and any other person shall
have the protection of TIA Section 312(c).
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SECTION 13.04. Certificate and Opinion as to Conditions Precedent.
Upon any request or application by the Company to the Trustee to take
any action under this Indenture, the Company shall for any actions taken
pursuant to Article Twelve furnish to the Trustee and for any other actions
taken under this Indenture shall furnish at the request of the Trustee:
(1) an Officers' Certificate stating that, in the opinion of
the signers, all conditions precedent, if any, provided for in this
Indenture relating to the proposed action have been complied with; and
(2) an Opinion of Counsel stating that, in the opinion of
such counsel, all such conditions precedent have been complied with.
SECTION 13.05. Statements Required in Certificate or Opinion.
Each Officers' Certificate of the Company and each Opinion of Counsel
with respect to compliance with a condition or covenant provided for in this
Indenture shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he has
made such examination or investigation as is necessary, to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of each
such person, such condition or covenant has been complied with;
provided, however, that with respect to matters of fact an Opinion of
Counsel may rely on Officers' Certificates of the Company or
certificates of public officials.
SECTION 13.06. Rules by Trustee, Paying Agent, Registrar.
The Trustee may make reasonable rules for action by or at a meeting of
Securityholders. The Paying Agent or Registrar may make reasonable rules for
its functions.
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SECTION 13.07. Legal Holidays.
A "Legal Holiday" used with respect to a particular place of payment
is a Saturday, a Sunday or a day on which banking institutions at such place
are not required to be open. If a payment date is a Legal Holiday at such a
place, payment may be made at such place on the next succeeding day that is not
a Legal Holiday, and no interest shall accrue for the intervening period.
SECTION 13.08. Governing Law.
This Indenture and the Securities shall be governed by and constituted
in accordance with the laws of the State of New York without regard to
principles of conflicts of law.
SECTION 13.09. No Adverse Interpretation of Other Agreements.
This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company, or any of its Subsidiaries. Any such indenture,
loan or debt agreement may not be used to interpret this Indenture.
SECTION 13.10. No Recourse against Others.
Except with respect to the obligations and covenants of Bennett S.
LeBow and BGL contained in Sections 5.01 through 5.05 (but only to the extent
of any benefit accruing directly to Bennett S. LeBow or BGL, as the case may
be, as a result of the transaction causing the breach of any such Sections), no
recourse for the payment of the principal of, or interest on, the Securities,
or for any claim based thereon or otherwise in respect thereof, and no recourse
under, upon or in respect of any obligation, covenant, agreement,
representation or warranty of the Company or NV Holdings in this Indenture, the
Pledge Agreement or in any other document relating to the transactions
contemplated by this Indenture, whether existing as of the date thereof or
thereafter existing, shall be had against any incorporator, officer, director,
employee, stockholder or controlling person of the Company or NV Holdings
(except, in the case of NV Holdings, the Company), it being understood that the
Holders shall have recourse for any such liability only to the assets of the
Company or NV Holdings, as the case may be, and none of such persons or
entities (other than the Company or NV Holdings, as the case may be) shall be
personally liable therefor. Each Holder of a Security by accepting a Security
waives and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Securities.
The Trustee has no obligation or liability to the Holders to make
payments of the principal or interest with respect to the Securities, except
for amounts on deposit for such purposes with the Trustee. The Trustee's sole
obligations are to administer for the benefit of the Holders the funds and
accounts established under this Indenture, and to perform such other
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duties as are specifically set forth in this Indenture and the Pledge
Agreement. All recitals, statements and representations contained in this
Indenture or the Pledge Agreement are to be taken and construed as made on the
part of the Company or NV Holdings, as the case may be, and not by the Trustee,
and the Trustee does not assume any responsibility or obligation for the
correctness of such statement, recital or representation.
SECTION 13.11. Successors.
All agreements of the Company in this Indenture, the Pledge Agreement
and the Securities shall bind its successors. All agreements of the Trustee in
this Indenture shall bind its successor.
SECTION 13.12. Duplicate Originals.
All parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 13.13. Severability.
In case any provision in this Indenture, the Pledge Agreement or in
the Securities shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby, and a Holder shall have no claim therefor against
any party hereto.
SECTION 13.14. Actions by Holders.
Except as expressly stated to the contrary, any request, demand,
authorization, direction, notice, consent, waiver or other action provided by
this Indenture to be given or taken by Holders of a minimum percentage of the
aggregate unpaid principal amount of the Securities shall be determined by
reference to the Securities as a whole and not to any series thereof.
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SIGNATURES
IN WITNESS WHEREOF, the parties hereto have caused this Indenture to
be duly executed, and their respective corporate seals to be hereunto affixed
and attested, all as of the date first written above.
BGLS INC.
By:
------------------------------
[Seal] Name: Bennett S. LeBow
Title: Chairman
Attest:
-------------------------
SHAWMUT BANK, N.A.
By:
------------------------------
[Seal] Name:
Title:
Attest:
-------------------------
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ___ day of ________, 1995, before me personally came
Bennett S. LeBow, to me known, who, being by me duly sworn, did depose and say
that he is Chairman of BGLS Inc., one of the corporations described in and
which executed the above instrument; that he knows the corporate seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was affixed by the authority of the Board of Directors of said
corporation; and that he signed his name thereto by like authority.
________________________________________
Notary Public
[Notary Seal]
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STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK )
On this ___ day of ________, 1995, before me personally came
[__________], to me known, who, being by me duly sworn, did depose and say that
he is Vice President of Shawmut Bank, N.A., the national banking
association described in and which executed the above instrument; that he knows
the seal of said national banking association; that the seal affixed to said
instrument is such seal; that it was affixed by the authority of the Board of
Directors of said national banking association; and that he signed his name
thereto by like authority.
________________________________________
Notary Public
[Notary Seal]
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Acknowledgment and Undertaking of Bennett S. LeBow
Bennett S. LeBow hereby acknowledges that he has read and
understood the foregoing (the "Indenture"; capitalized terms used herein are
used with the meanings ascribed to them in the Indenture) and hereby agrees,
for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, that he shall comply with Sections 5.01(a) and 5.02(a) and
5.05(a) of the Indenture; provided that he shall not be liable for any breach
of such Sections except to the extent of any benefit accruing directly to him
as a result of such breach.
This Acknowledgment and Undertaking shall be governed by, and
construed in accordance with, the law of the State of New York.
IN WITNESS WHEREOF, I have executed this Acknowledgment and
Undertaking, intending to be legally bound, as of ________, 1995.
________________________
Bennett S. LeBow
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Acknowledgment and Undertaking of Brooke Group Ltd.
Brooke Group Ltd. hereby acknowledges that it has read and
understood the foregoing (the "Indenture"; capitalized terms used herein are
used with the meanings ascribed to them in the Indenture) and hereby agrees,
for good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, that it shall comply with Sections 5.01(b), 5.02(b),
5.03(b), 5.04 and 5.05(b) of the Indenture; provided that it shall not be
liable for any breach of such Sections except to the extent of any benefit
accruing directly to it as a result of such breach.
Brooke Group Ltd. hereby represents and warrants that (a) the
execution, delivery and performance of this Acknowledgment and Undertaking has
been duly authorized by all necessary action on the part of the undersigned,
(b) the undersigned has duly executed and delivered this Acknowledgment and
Undertaking and (c) this Acknowledgment and Undertaking is its legal, valid and
binding obligation, enforceable against the undersigned in accordance with its
terms. This Acknowledgment and Undertaking shall be governed by, and construed
in accordance with, the law of the State of New York.
IN WITNESS WHEREOF, Brooke Group Ltd. has executed this
Acknowledgment and Undertaking, intending to be legally bound, as of _______,
1995.
BROOKE GROUP LTD.
By: ___________________________
Name:
Title:
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<PAGE> 164
EXHIBIT A-1
to Indenture
FORM OF SERIES A NOTE
(Face of Note)
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR UNDER ANY STATE SECURITIES OR BLUE SKY LAWS AND MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR ASSIGNED EXCEPT PURSUANT TO BOTH
(1) (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT, (B) RULE 144A UNDER
SUCH ACT, (C) RULE 144 UNDER SUCH ACT OR (D) ANY OTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND (2) (X) COMPLIANCE WITH ANY
APPLICABLE REGISTRATION OR QUALIFICATION REQUIREMENTS OF ANY STATE SECURITIES
OR BLUE SKY LAWS OR (Y) AN EXEMPTION FROM ANY SUCH APPLICABLE REGISTRATION OR
QUALIFICATION REQUIREMENTS, PROVIDED THAT IN THE CASE OF (1)(C) OR (D) OR
(2)(Y) THE HOLDER OF THIS NOTE SHALL HAVE FURNISHED TO BGLS INC. AN OPINION OF
COUNSEL, REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO BGLS INC., THAT SUCH
EXEMPTION IS AVAILABLE WITH RESPECT TO SUCH TRANSACTION.
BGLS INC.
15.75% Series A Senior Secured Note due 2000
No. $
BGLS INC., a Delaware corporation (the "Company"), for value received,
promises to pay to or registered assigns, the principal sum of Dollars on
December 31, 2000.
Interest Payment Dates: June 30 and December 31 in each year and
Maturity.
Record Dates: June 15 or December 15 for each Interest Payment Date,
as the case may be, and December 15, 2000 for Maturity.
Reference is made to the further provisions of this Note set forth
herein, which will for all purposes have the same effect as if set forth at
this place.
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<PAGE> 165
Capitalized terms used herein and not defined shall have the meaning
ascribed thereto in the Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually, or by facsimile, by its duly authorized officer, and has caused a
facsimile of the corporate seal of the Company to be affixed to, or imprinted
on, this Note.
Dated:
BGLS INC.
By:
----------------------------------
President
Attest:
-------------------------------------
Secretary
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 15.75% Series A Senior Secured Notes due 2000
referred to in the within-mentioned Indenture.
SHAWMUT BANK, N.A.,
as Trustee
By
----------------------------------
Authorized Signature
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<PAGE> 166
(Reverse Side)
BGLS INC.
15.75% Series A Senior Secured Note due 2000
1. Description of Notes.
This Note is one of a duly authorized issue of 15.75% Series A Senior
Secured Notes due 2000 (the "Series A Notes") of BGLS INC., a Delaware
corporation (the "Company"). The Series A Notes together with the Series B
Notes issued pursuant to the Indenture (as hereinafter defined) are
collectively referred to herein as the "Securities".
2. Interest.
The Company promises to pay interest on the principal amount and, to
the extent lawful, on any interest payment due but unpaid on such principal
amount of the Series A Notes at the rate per annum shown above from the date
these Series A Notes are issued until the date the Series A Notes are paid in
full.
Interest on the Series A Notes will accrue from the most recent date
to which interest has been paid or, if no interest has been paid, from
________, 1995. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
3. Method of Payment.
The Company will pay interest on the Series A Notes (except defaulted
interest) to the persons who are registered Holders of Series A Notes at the
close of business on the fifteenth day of the month in which the Interest
Payment Date occurs. Holders must surrender Series A Notes to a Paying Agent to
collect principal payments. The Company will pay principal and interest in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts ("U.S. Legal Tender").
However, the Company may pay principal or interest by check payable in such
U.S. Legal Tender. The Company may deliver any such interest payment to the
Paying Agent or the Company may mail any such interest payment to a Holder at
the Holder's registered address.
3
<PAGE> 167
4. Paying Agent and Registrar.
Initially, Shawmut Bank, N.A. (the "Trustee") will act as Paying Agent
and Registrar. The Company may change any Paying Agent, Registrar or
co-Registrar without notice. Except as provided in the Indenture, the Company
or any of its Subsidiaries may act as Paying Agent, Registrar or co-Registrar.
5. Indenture.
The Company issued the Series A Notes under an Indenture, dated as of
________, 1995 (the "Indenture"), between the Company and the Trustee, pursuant
to which the Company may also issue 15.75% Series B Senior Secured Notes due
2000 ("Series B Notes"). Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S. Code Section Section 77aaa-77bbbb)
(the "TIA"), as in effect on the date of the Indenture. The Securities are
subject to all such terms and Holders of Securities are referred to the
Indenture and the TIA for a statement of such terms. The Securities are
general secured obligations of the Company limited to $___,000,000 aggregate
principal amount.
6. Optional Redemption.
The Securities may be redeemed at any time, in whole or from time to
time in part, at Redemption Prices equal to the percentages of principal amount
thereof set forth below if redeemed during the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1995 101.00
1996 101.00
1997 101.00
1998 101.00
1999 101.00
and thereafter 100.00
</TABLE>
in each case together with accrued interest to the Redemption Date.
4
<PAGE> 168
7. Notice of Redemption.
Notice of redemption will be mailed at least 30 days, but not more
than 60 days, before the Redemption Date to each Holder of Securities subject
to redemption at his registered address. If redemption is pursuant to
Paragraph 6 of this Series A Note, then Securities in denominations larger than
$1,000 may be redeemed in part. Interest accrues on Securities, or portions of
them, called for redemption, to the Redemption Date, and interest will cease to
accrue thereafter.
If U.S. Legal Tender sufficient for the redemption of Securities is
made available for redemption on any Redemption Date, Securities called for
redemption will bear interest to the Redemption Date, and interest will cease
to accrue thereafter, and the only right of the Holders of such Securities will
be to receive payment of the Redemption Price, including all interest accrued
to such Redemption Date.
8. Mandatory Offer to Purchase Upon Triggering Asset Sale.
Within (i) 30 days following the consummation of a Triggering Asset
Sale, other than a Triggering Asset Sale referred to in clause (ii) or (iii)
below, (ii) 90 days following the consummation of a Triggering Asset Sale if
10% or more of the consideration (not including any assumption of Indebtedness)
actually received by the Company, directly or indirectly (including through any
Subsidiary), in respect of such Triggering Asset Sale consists of non-cash
consideration, or (iii) 180 days following the consummation of a Triggering
Asset Sale if such sale involves a sale of the Equity interests of all or
substantially all of the assets of Liggett and 10% or more of the consideration
(not including any assumption of Indebtedness) actually received by the
Company, directly or indirectly (including through any Subsidiary), in respect
of such Triggering Asset Sale consists of non-cash consideration (the "Offer
Date"), the Company shall make an offer to all Holders (an "Offer") to apply
the applicable Offer Purchase Amount to the acquisition of Securities at a
purchase price (the "Offer Purchase Price") equal to the Redemption Price
payable if the Company were redeeming such Securities pursuant to Paragraph 6
of this Series A Note plus accrued interest to the date of such acquisition
(the "Purchase Date").
5
<PAGE> 169
9. Holders' Right to Cause Repurchase Upon Change of Control.
In the event that Bennett S. LeBow ceases to control the Company
(including, for the avoidance of doubt, any successor thereto under Article Six
of the Indenture) (other than by his death or Incapacity) (a "Change of
Control"), each Holder shall have the option to cause the Company to repurchase
the Securities held by such Holder in whole, but not in part, at 100% of the
principal amount thereof, plus interest accrued to the Repurchase Date. Within
five Business Days after any Change of Control, the Company shall notify the
Trustee in writing at its corporate trust office (i) of such Change of Control
and (ii) that each Holder has the option to cause the Company to repurchase its
Securities pursuant to Section 3.08 of the Indenture. Within ten days after it
receives such notice from the Company, the Trustee shall give notice of such
option to the Holders at their addresses, as shown in the Securities Register,
and shall publish at least once in each of two successive weeks commencing
within ten days following notice to the Trustee, in The Wall Street Journal
(National Edition), or the national edition of a reasonably equivalent
publication, the Notice of Option to Cause Repurchase Upon Change of Control.
10. Denominations; Transfer; Exchange.
The Securities are in registered form without coupons in denominations
of $1,000 and integral multiples of $1,000. A Holder may register the transfer
or exchange of Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted
by the Indenture. The Registrar need not register the transfer or exchange of
any Securities selected for redemption.
11. Persons Deemed Owners.
The registered Holder of a Security may be treated as the owner of it
for all purposes.
6
<PAGE> 170
12. Unclaimed U.S. Legal Tender.
If U.S. Legal Tender for the payment of principal or interest remains
unclaimed for two years, the Trustee and the Paying Agents will pay such U.S.
Legal Tender back to the Company at their request. After that, all liability of
the Trustee and such Paying Agents with respect to such money shall cease;
provided however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once in The Wall Street Journal (National Edition), or the national
edition of a reasonably equivalent publication or mail to each such Holder
notice that such money remains unclaimed and that after a date specified
therein, which shall not be less than 30 days from the date of such publication
or mailing, any unclaimed balance of such money then remaining will be repaid
to the Company.
13. Discharge Prior to Redemption or Maturity.
If, at any time, the Company deposits with the Trustee U.S. Legal
Tender or U.S. Government Obligations sufficient to pay the principal of, and
interest on, the Securities to redemption or maturity, and complies with the
other provisions of the Indenture relating thereto, the Company will be deemed
to have paid discharged the entire Indebtedness on the Securities and the
provisions of the Indenture and the Pledge Agreement.
14. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the
Company to, among other things, make distributions on, or purchases or
redemptions of its Capital Stock or enter into transactions with Affiliates of
the Company. The Indenture also limits the ability of the Company to merge or
consolidate with, or transfer all or substantially all of its properties and
assets to, any other person. The Indenture also limits the ability of the
Company to incur additional indebtedness. Such limitations are subject to a
number of important qualifications and exceptions.
15. Successors.
When a successor assumes all the obligations of the Company under the
Securities and the Indenture, the Company will be released from those
obligations except in the case of succession by lease.
7
<PAGE> 171
16. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture, the Pledge Agreement or
the Securities may be amended or supplemented with the written consent of the
Holders of at least 66 2/3% in aggregate principal amount of the Securities
then outstanding, and any existing Default or Event of Default, or compliance
with any provisions, may be waived with the consent of the Holders of at least
66 2/3% in aggregate principal amount of the Securities then outstanding. No
such amendment, supplement or waiver may have a disproportionate adverse effect
on one series of Securities unless the Holder or Holders of at least 66 2/3 %
in aggregate principal amount of the outstanding Securities of such series
shall consent to such action. Without notice to, or consent of, any Holder,
the parties thereto may amend or supplement the Indenture, the Pledge
Agreement, or the Securities to, among other things, cure any ambiguity, defect
or inconsistency (provided such amendment or supplement does not adversely
affect the rights of any Holder), provide for uncertificated Securities in
addition to, or in place of, certificated Securities, or make any change that
does not adversely affect the rights of any Holder of a Security.
17. Two Series Pari Passu, Etc.
The Securities are secured senior indebtedness of the Company. The
Series A Notes and the Series B Notes will rank pari passu with each other in
right of payment and in respect of the Collateral and in all other respects and
Holders of the Securities of both series will vote and exercise remedies
together as if one class.
18. Pledge and Security Interest.
The Company has pledged to the Trustee all of the now-owned or
hereafter acquired properties, securities or other assets of the Company,
including equity securities in New Valley, Liggett, Brooke Overseas and any
other Subsidiary directly owned by the Company from time to time and any
dividends or other distributions on any capital stock that forms part of the
Collateral and all proceeds therefrom but excluding cash that is applied within
180 days of receipt thereof (except to the extent such cash is required to be
deposited and held in the Cash Collateral Account pursuant to the Pledge
Agreement).
NV Holdings has pledged to the Trustee all of the now-owned or
hereafter acquired properties, securities or other assets of the Company,
including equity securities in New Valley, and any dividends or other
distributions on any capital stock that forms part of the Collateral and all
proceeds therefrom but excluding cash that is applied within 180 days of
receipt thereof (except to the extent such cash is required to be deposited and
held in the Cash Collateral Account pursuant to the Pledge Agreement).
8
<PAGE> 172
The Security Interest in the Collateral shall automatically and
without any action by the Trustee or the Holders be automatically released upon
any sale of the Collateral by the Company. Notwithstanding the foregoing, the
Trustee shall from time to time at the request of the Company execute and
deliver any instruments necessary or appropriate and take all such other action
as shall be necessary to evidence and effect such release.
19. Defaults and Remedies.
If an Event of Default (other than an Event of Default specified in
Section 7.01(6) or 7.01(7) of the Indenture as a result of a case or proceeding
in which the Company is the subject debtor) occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Securities then outstanding may declare all of the Securities to be and become
due and payable. If an Event of Default specified in Section 7.01(6) or
7.01(7) of the Indenture occurs as a result of a case or proceeding in which
the Company is the subject debtor, all the Securities then outstanding shall
ipso facto become immediately due and payable in the manner and with the effect
provided in the Indenture. Holders of Securities may not enforce the Indenture
or the Securities except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the
Securities.
20. Trustee Dealings with the Company.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or any
of its Subsidiaries or other Affiliates with the same rights it would have if
it were not Trustee.
21. No Recourse against Others.
Except with respect to the obligations and covenants of Bennett S.
LeBow and BGL contained in Sections 5.01 through 5.05 of the Indenture (but
only to the extent of any benefit accruing directly to Bennett S. LeBow or BGL,
as the case may be, as a result of the transaction causing the breach of any
such Sections), no recourse for the payment of the principal of, or interest
on, the Securities, or for any claim based thereon or otherwise in respect
thereof, and no recourse under, upon or in respect of any obligation, covenant,
agreement, representation or warranty of the Company in the Indenture or in any
other document, relating to the transactions contemplated by the Indenture,
whether existing as of the date thereof or thereafter existing, shall be had
against any incorporator, officer, director, employee, stockholder or
controlling person of the Company, it being understood that the Holders shall
have recourse for any such liability only to the assets of the Company, and
none of such persons or entities (other than the Company) shall be personally
liable therefor. Each Holder of a Security by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Security.
9
<PAGE> 173
The Trustee has no obligation or liability to the Holders to make
payments of the principal of or interest on the Securities, except for amounts
on deposit for such purposes with the Trustee. The Trustee's sole obligations
are to administer for the benefit of the Holders the funds and accounts
established under the Indenture, and to perform such other duties as are
specifically set forth in the Indenture. All recitals, statements and
representations contained in this Series A Note are to be taken and construed
as made on the part of the Company, and not by the Trustee, and the Trustee
does not assume any responsibility or obligation for the correctness of such
statement, recital or representation.
22. Authentication.
This Series A Note shall not be valid until the Trustee or
authenticating agent manually, or by facsimile, signs the certificate of
authentication set forth herein.
23. Abbreviation.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TENANT
(tenants by the entireties), JT TEN (joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
24. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities immediately prior to the qualification of the
Indenture under the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Security, upon written
request and without charge, a copy of the Indenture and the Pledge Agreement.
Requests may be made to: BGLS Inc., c/o Brooke Group Ltd., 100 S.E. Second
Street, 32nd Floor, Miami, Florida 33131, Attention: Secretary.
10
<PAGE> 174
FORM OF ASSIGNMENT
I or we assign and transfer this Series A Note to
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert social security or other identifying number of assignee
________________________________
and irrevocably appoint as agent to transfer
this Series A Note on the Securities Register of the Company. The agent may
substitute another to act for him.
Dated:____________________
Signed:__________
________________________________________________________________________________
(Sign exactly as name appears above)
11
<PAGE> 175
OPTION TO CAUSE REPURCHASE UPON CHANGE OF CONTROL
If you want to elect to have this Series A Note repurchased by the
Company pursuant to Section 3.08 of the Indenture and Paragraph 9 of the Series
A Note, check box: [ ]
Date: ___________________________ Signature:____________________________
(Sign exactly as your
name appears above)
Signature Guarantee:____________________________________________________________
OPTION OF HOLDER TO ELECT PURCHASE PURSUANT
TO SECTION 3.09 OF THE INDENTURE
UPON TRIGGERING ASSET SALE
If you want to elect to have this Series A Note purchased by the Company
pursuant to Section 3.09 of the Indenture and Paragraph 8 of the Series A Note,
check box: [ ]
Date: ___________________________ Signature:____________________________
(Sign exactly as your
name appears above)
Signature Guarantee:____________________________________________________________
12
<PAGE> 176
EXHIBIT A-2
to Indenture
FORM OF SERIES B NOTE
(Face of Note)
BGLS INC.
15.75% Series B Senior Secured Note due 2000
No. $
BGLS INC., a Delaware corporation (the "Company"), for value received,
promises to pay to or registered assigns, the principal
sum of Dollars on December 31, 2000.
Interest Payment Dates: June 30 and December 31 in each year and Maturity.
Record Dates: June 15 or December 15 for each Interest Payment Date,
as the case may be, and December 15, 2000 for Maturity.
Reference is made to the further provisions of this Note set forth
herein, which will for all purposes have the same effect as if set forth at
this place.
Capitalized terms used herein and not defined shall have the meaning
ascribed thereto in the Indenture.
IN WITNESS WHEREOF, the Company has caused this Note to be signed
manually, or by facsimile, by its duly authorized officer, and has caused a
facsimile of the corporate seal of the Company to be affixed to, or imprinted
on, this Note.
Dated:
BGLS INC.
By:___________________________________________
President
Attest:
______________________________________________
1
<PAGE> 177
Secretary
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the 15.75% Series B Senior Secured Notes due 2000
referred to in the within-mentioned Indenture.
SHAWMUT BANK, N.A.,
as Trustee
By
-------------------------------------------
Authorized Signature
2
<PAGE> 178
(Reverse Side)
BGLS INC.
15.75% Series B Senior Secured Note due 2000
1. Description of Notes.
This Note is one of a duly authorized issue of 15.75% Series B Senior
Secured Notes due 2000 (the "Series B Notes") of BGLS INC., a Delaware
corporation (the "Company"). The Series B Notes together with the Series A
Notes issued pursuant to the Indenture (as hereinafter defined) are
collectively referred to herein as the "Securities".
2. Interest.
The Company promises to pay interest on the principal amount and, to
the extent lawful, on any interest payment due but unpaid on such principal
amount of the Series B Notes at the rate per annum shown above from the date
these Series B Notes are issued until the date the Series B Notes are paid in
full.
Interest on the Series B Notes will accrue from the most recent date
to which interest has been paid or, if no interest has been paid, from
________, 1995. Interest will be computed on the basis of a 360-day year of
twelve 30-day months.
3. Method of Payment.
The Company will pay interest on the Series B Notes (except defaulted
interest) to the persons who are registered Holders of Series B Notes at the
close of business on the fifteenth day of the month in which the Interest
Payment Date occurs. Holders must surrender Series B Notes to a Paying Agent to
collect principal payments. The Company will pay principal and interest in such
coin or currency of the United States of America as at the time of payment is
legal tender for payment of public and private debts ("U.S. Legal Tender").
However, the Company may pay principal or interest by check payable in such
U.S. Legal Tender. The Company may deliver any such interest payment to the
Paying Agent or the Company may mail any such interest payment to a Holder at
the Holder's registered address.
3
<PAGE> 179
4. Paying Agent and Registrar.
Initially, Shawmut Bank, N.A. (the "Trustee") will act as Paying Agent
and Registrar. The Company may change any Paying Agent, Registrar or
co-Registrar without notice. Except as provided in the Indenture, the Company
or any of its Subsidiaries may act as Paying Agent, Registrar or co-Registrar.
5. Indenture.
The Company issued the Series B Notes under an Indenture, dated as of
________, 1995 (the "Indenture"), between the Company and the Trustee, pursuant
to which the Company may also issue 15.75% Series B Senior Secured Notes due
2000 ("Series B Notes"). Capitalized terms herein are used as defined in the
Indenture unless otherwise defined herein. The terms of the Securities include
those stated in the Indenture and those made part of the Indenture by reference
to the Trust Indenture Act of 1939 (15 U.S. Code Section Section 77aaa-77bbbb)
(the "TIA"), as in effect on the date of the Indenture. The Securities are
subject to all such terms and Holders of Securities are referred to the
Indenture and the TIA for a statement of such terms. The Securities are
general secured obligations of the Company limited to $___,000,000 aggregate
principal amount.
6. Optional Redemption.
The Securities may be redeemed at any time, in whole or from time to
time in part, at Redemption Prices equal to the percentages of principal amount
thereof set forth below if redeemed during the years indicated below:
<TABLE>
<CAPTION>
Year Percentage
---- ----------
<S> <C>
1995 101.00
1996 101.00
1997 101.00
1998 101.00
1999 101.00
and thereafter 100.00
</TABLE>
in each case together with accrued interest to the Redemption Date.
4
<PAGE> 180
7. Notice of Redemption.
Notice of redemption will be mailed at least 30 days, but not more
than 60 days, before the Redemption Date to each Holder of Securities subject
to redemption at his registered address. If redemption is pursuant to
Paragraph 6 of this Series B Note, then Securities in denominations larger than
$1,000 may be redeemed in part. Interest accrues on Securities, or portions of
them, called for redemption, to the Redemption Date, and interest will cease to
accrue thereafter.
If U.S. Legal Tender sufficient for the redemption of Securities is
made available for redemption on any Redemption Date, Securities called for
redemption will bear interest to the Redemption Date, and interest will cease
to accrue thereafter, and the only right of the Holders of such Securities will
be to receive payment of the Redemption Price, including all interest accrued
to such Redemption Date.
8. Mandatory Offer to Purchase Upon Triggering Asset Sale.
Within (i) 30 days following the consummation of a Triggering Asset
Sale, other than a Triggering Asset Sale referred to in clause (ii) or (iii)
below, (ii) 90 days following the consummation of a Triggering Asset Sale if
10% or more of the consideration (not including any assumption of Indebtedness)
actually received by the Company, directly or indirectly (including through any
Subsidiary), in respect of such Triggering Asset Sale consists of non-cash
consideration, or (iii) 180 days following the consummation of a Triggering
Asset Sale if such sale involves a sale of the Equity interests of all or
substantially all of the assets of Liggett and 10% or more of the consideration
(not including any assumption of Indebtedness) actually received by the
Company, directly or indirectly (including through any Subsidiary), in respect
of such Triggering Asset Sale consists of non-cash consideration (the "Offer
Date"), the Company shall make an offer to all Holders (an "Offer") to apply
the applicable Offer Purchase Amount to the acquisition of Securities at a
purchase price (the "Offer Purchase Price") equal to the Redemption Price
payable if the Company were redeeming such Securities pursuant to Paragraph 6
of this Series B Note plus accrued interest to the date of such acquisition
(the "Purchase Date").
5
<PAGE> 181
9. Holders' Right to Cause Repurchase Upon Change of Control.
In the event that Bennett S. LeBow ceases to control the Company
(including, for the avoidance of doubt, any successor thereto under Article Six
of the Indenture) (other than by his death or Incapacity) (a "Change of
Control"), each Holder shall have the option to cause the Company to repurchase
the Securities held by such Holder in whole, but not in part, at 100% of the
principal amount thereof, plus interest accrued to the Repurchase Date. Within
five Business Days after any Change of Control, the Company shall notify the
Trustee in writing at its corporate trust office (i) of such Change of Control
and (ii) that each Holder has the option to cause the Company to repurchase its
Securities pursuant to Section 3.08 of the Indenture. Within ten days after it
receives such notice from the Company, the Trustee shall give notice of such
option to the Holders at their addresses, as shown in the Securities Register,
and shall publish at least once in each of two successive weeks commencing
within ten days following notice to the Trustee, in The Wall Street Journal
(National Edition), or the national edition of a reasonably equivalent
publication, the Notice of Option to Cause Repurchase Upon Change of Control.
10. Denominations; Transfer; Exchange.
The Securities are in registered form without coupons in denominations
of $1,000 and integral multiples of $1,000. A Holder may register the transfer
or exchange of Securities in accordance with the Indenture. The Registrar may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and to pay any taxes and fees required by law or permitted
by the Indenture. The Registrar need not register the transfer or exchange of
any Securities selected for redemption.
11. Persons Deemed Owners.
The registered Holder of a Security may be treated as the owner of it
for all purposes.
6
<PAGE> 182
12. Unclaimed U.S. Legal Tender.
If U.S. Legal Tender for the payment of principal or interest remains
unclaimed for two years, the Trustee and the Paying Agents will pay such U.S.
Legal Tender back to the Company at their request. After that, all liability of
the Trustee and such Paying Agents with respect to such money shall cease;
provided however, that the Trustee or such Paying Agent, before being required
to make any such repayment, may at the expense of the Company cause to be
published once in The Wall Street Journal (National Edition), or the national
edition of a reasonably equivalent publication or mail to each such Holder
notice that such money remains unclaimed and that after a date specified
therein, which shall not be less than 30 days from the date of such publication
or mailing, any unclaimed balance of such money then remaining will be repaid
to the Company.
13. Discharge Prior to Redemption or Maturity.
If, at any time, the Company deposits with the Trustee U.S. Legal
Tender or U.S. Government Obligations sufficient to pay the principal of, and
interest on, the Securities to redemption or maturity, and complies with the
other provisions of the Indenture relating thereto, the Company will be deemed
to have paid discharged the entire Indebtedness on the Securities and the
provisions of the Indenture and the Pledge Agreement.
14. Restrictive Covenants.
The Indenture imposes certain limitations on the ability of the
Company to, among other things, make distributions on, or purchases or
redemptions of its Capital Stock or enter into transactions with Affiliates of
the Company. The Indenture also limits the ability of the Company to merge or
consolidate with, or transfer all or substantially all of its properties and
assets to, any other person. The Indenture also limits the ability of the
Company to incur additional indebtedness. Such limitations are subject to a
number of important qualifications and exceptions.
15. Successors.
When a successor assumes all the obligations of the Company under the
Securities and the Indenture, the Company will be released from those
obligations except in the case of succession by lease.
7
<PAGE> 183
16. Amendment; Supplement; Waiver.
Subject to certain exceptions, the Indenture, the Pledge Agreement or
the Securities may be amended or supplemented with the written consent of the
Holders of at least 66 2/3% in aggregate principal amount of the Securities
then outstanding, and any existing Default or Event of Default, or compliance
with any provisions, may be waived with the consent of the Holders of at least
66 2/3% in aggregate principal amount of the Securities then outstanding. No
such amendment, supplement or waiver may have a disproportionate adverse effect
on one series of Securities unless the Holder or Holders of at least 66 2/3%
in aggregate principal amount of the outstanding Securities of such series
shall consent to such action. Without notice to, or consent of, any Holder,
the parties thereto may amend or supplement the Indenture, the Pledge
Agreement, or the Securities to, among other things, cure any ambiguity, defect
or inconsistency (provided such amendment or supplement does not adversely
affect the rights of any Holder), provide for uncertificated Securities in
addition to, or in place of, certificated Securities, or make any change that
does not adversely affect the rights of any Holder of a Security.
17. Two Series Pari Passu, Etc.
The Securities are secured senior indebtedness of the Company. The
Series A Notes and the Series B Notes will rank pari passu with each other in
right of payment and in respect of the Collateral and in all other respects and
Holders of the Securities of both series will vote and exercise remedies
together as if one class.
18. Pledge and Security Interest.
The Company has pledged to the Trustee all of the now-owned or
hereafter acquired properties, securities or other assets of the Company,
including equity securities in New Valley, Liggett, Brooke Overseas and any
other Subsidiary directly owned by the Company from time to time and any
dividends or other distributions on any capital stock that forms part of the
Collateral and all proceeds therefrom but excluding cash that is applied within
180 days of receipt thereof (except to the extent such cash is required to be
deposited and held in the Cash Collateral Account pursuant to the Pledge
Agreement).
NV Holdings has pledged to the Trustee all of the now-owned or
hereafter acquired properties, securities or other assets of the Company,
including equity securities in New Valley, and any dividends or other
distributions on any capital stock that forms part of the Collateral and all
proceeds therefrom but excluding cash that is applied within 180 days of
receipt thereof (except to the extent such cash is required to be deposited and
held in the Cash Collateral Account pursuant to the Pledge Agreement).
8
<PAGE> 184
The Security Interest in the Collateral shall automatically and
without any action by the Trustee or the Holders be automatically released upon
any sale of the Collateral by the Company. Notwithstanding the foregoing, the
Trustee shall from time to time at the request of the Company execute and
deliver any instruments necessary or appropriate and take all such other action
as shall be necessary to evidence and effect such release.
19. Defaults and Remedies.
If an Event of Default (other than an Event of Default specified in
Section 7.01(6) or 7.01(7) of the Indenture as a result of a case or proceeding
in which the Company is the subject debtor) occurs and is continuing, the
Trustee or the Holders of at least 25% in aggregate principal amount of the
Securities then outstanding may declare all of the Securities to be and become
due and payable. If an Event of Default specified in Section 7.01(6) or
7.01(7) of the Indenture occurs as a result of a case or proceeding in which
the Company is the subject debtor, all the Securities then outstanding shall
ipso facto become immediately due and payable in the manner and with the effect
provided in the Indenture. Holders of Securities may not enforce the Indenture
or the Securities except as provided in the Indenture. The Trustee may require
indemnity satisfactory to it before it enforces the Indenture or the
Securities.
20. Trustee Dealings with the Company.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Securities and may otherwise deal with the Company or any
of its Subsidiaries or other Affiliates with the same rights it would have if
it were not Trustee.
21. No Recourse against Others.
Except with respect to the obligations and covenants of Bennett S.
LeBow and BGL contained in Sections 5.01 through 5.05 of the Indenture (but
only to the extent of any benefit accruing directly to Bennett S. LeBow or BGL,
as the case may be, as a result of the transaction causing the breach of any
such Sections), no recourse for the payment of the principal of, or interest
on, the Securities, or for any claim based thereon or otherwise in respect
thereof, and no recourse under, upon or in respect of any obligation, covenant,
agreement, representation or warranty of the Company in the Indenture or in any
other document, relating to the transactions contemplated by the Indenture,
whether existing as of the date thereof or thereafter existing, shall be had
against any incorporator, officer, director, employee, stockholder or
controlling person of the Company, it being understood that the Holders shall
have recourse for any such liability only to the assets of the Company, and
none of such persons or entities (other than the Company) shall be personally
liable therefor. Each Holder of a Security by accepting a Security waives and
releases all such liability. The waiver and release are part of the
consideration for the issuance of the Securities.
9
<PAGE> 185
The Trustee has no obligation or liability to the Holders to make
payments of the principal of or interest on the Securities, except for amounts
on deposit for such purposes with the Trustee. The Trustee's sole obligations
are to administer for the benefit of the Holders the funds and accounts
established under the Indenture, and to perform such other duties as are
specifically set forth in the Indenture. All recitals, statements and
representations contained in this Series B Note are to be taken and construed
as made on the part of the Company, and not by the Trustee, and the Trustee
does not assume any responsibility or obligation for the correctness of such
statement, recital or representation.
22. Authentication.
This Series B Note shall not be valid until the Trustee or
authenticating agent manually, or by facsimile, signs the certificate of
authentication set forth herein.
23. Abbreviation.
Customary abbreviations may be used in the name of a Holder of a
Security or an assignee, such as: TEN COM (= tenants in common), TENANT
(tenants by the entireties), JT TEN (joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
24. CUSIP Numbers.
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures, the Company will cause CUSIP numbers to be
printed on the Securities immediately prior to the qualification of the
Indenture under the TIA as a convenience to the Holders of the Securities. No
representation is made as to the accuracy of such numbers as printed on the
Securities and reliance may be placed only on the other identification numbers
printed hereon.
The Company will furnish to any Holder of a Security, upon written
request and without charge, a copy of the Indenture and the Pledge Agreement.
Requests may be made to: BGLS Inc., c/o Brooke Group Ltd., 100 S.E. Second
Street, 32nd Floor, Miami, Florida 33131, Attention: Secretary.
10
<PAGE> 186
FORM OF ASSIGNMENT
I or we assign and transfer this Series B Note to
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Print or type name, address and zip code of assignee)
Please insert social security or other identifying number of assignee
__________________________
and irrevocably appoint as agent to transfer this Series B
Note on the Securities Register of the Company. The agent may substitute
another to act for him.
Dated:____________________
Signed:__________
________________________________________________________________________________
(Sign exactly as name appears above)
11
<PAGE> 187
OPTION TO CAUSE REPURCHASE UPON CHANGE OF CONTROL
If you want to elect to have this Series B Note repurchased by the
Company pursuant to Section 3.08 of the Indenture and Paragraph 9 of the Series
B Note, check box: [ ]
Date: ___________________________ Signature:______________________________
(Sign exactly as your
name appears above)
Signature Guarantee:____________________________________________________________
OPTION OF HOLDER TO ELECT PURCHASE PURSUANT
TO SECTION 3.09 OF THE INDENTURE
UPON TRIGGERING ASSET SALE
If you want to elect to have this Series B Note purchased by the Company
pursuant to Section 3.09 of the Indenture and Paragraph 8 of the Series B Note,
check box: [ ]
Date: ___________________________ Signature:______________________________
(Sign exactly as your
name appears above)
Signature Guarantee:____________________________________________________________
12
<PAGE> 188
SCHEDULE 1
Existing Indebtedness
[TO BE REVISED DEPENDING SOLELY UPON
OUTSTANDING PRINCIPAL AMOUNTS OF RESET NOTES
OR SUBORDINATED DEBENTURES SUBSEQUENT TO TENDER]
[BGLS INC.
INDEBTEDNESS
<TABLE>
<CAPTION>
Long-term Debt
<S> <C>
13.750% Series 2 Senior Secured Notes due 1997 91,179,000
16.125% Senior Subordinated Reset Notes 5,670,000
14.500% Subordinated Debentures due 1998 140,000,000 (1)
Liability with respect to MAI's banks' foreclosure
on its European subsidiaries 7,500,000 (2)
Other 1,415,564
------------
245,764,564
===========
</TABLE>
1
<PAGE> 189
(1) Amount includes $13,705,000 of the Subordinated Debt currently held by
Brooke which would be retired under the new indenture.
(2) Amount accrued in respect of disputed potential liability.]
2
<PAGE> 190
EXHIBIT D
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT dated as of December __, 1995
between BGLS INC., a corporation duly organized and validly existing under the
laws of the State of Delaware (the "Company") and SHAWMUT BANK, N.A., a
national banking association, as trustee (the "Trustee") under the Indenture
dated as of ___________, 1995 (as amended, supplemented or modified from time
to time, the "Indenture"), pursuant to which the Company has issued its 15.75%
Senior Series B Secured Notes due 2000 and its 15.75% Senior Series A Secured
Notes due 2000 (each of which series is equal to and ratable with the other
series)..
Section 1. Definitions. Terms defined in the Indenture are
used herein as defined therein. In addition, as used herein:
"Accounts" has the meaning ascribed thereto in Section 3(d)
hereof.
"BGLS Registration Rights Agreement" means the A/B Exchange
and Registration Rights Agreement dated as of December __, 1995 among
the Company, BGL, AIF II, L.P., a Delaware limited partnership,
Artemis America Partnership, a Delaware general partnership, Tortoise
Corp., a New York corporation, and Mainstay High Yield Corporate Bond
Fund, a Series of The MainStay Funds, a Massachusetts business trust,
as amended, modified and supplemented from time to time.
"Brooke Overseas Convertible Securities" means any securities
that are convertible into or exchangeable for Equity Interests of
Brooke Overseas.
"Brooke Overseas Stock Purchase Rights" means any options,
warrants or other rights to subscribe for or purchase or acquire any
Equity Interests of Brooke Overseas or any Brooke Overseas Convertible
Securities.
<PAGE> 191
- 2 -
"Cash Collateral Account" has the meaning ascribed thereto in
Section 4.01 hereof.
"Collateral" has the meaning ascribed thereto in Section 3
hereof.
"COM Products" means COM Products Inc., a Delaware corporation.
"COM Products Convertible Securities" means any securities
that are convertible into or exchangeable for Equity Interests of COM
Products.
"COM Products Stock Purchase Rights" means any options,
warrants or other rights to subscribe for or purchase or acquire any
Equity Interests of COM Products or any COM Products Convertible
Securities.
"Copyright Collateral" means all Copyrights, whether now owned
or hereafter acquired by the Company.
"Copyrights" means all copyrights, copyright registrations and
applications for copyright registrations, including, without
limitation, all renewals, extensions, income, royalties, damages and
payments now or hereafter due and/or payable under and with respect
thereto, including, without limitation, damages and payments for past
or future infringements thereof, the right to sue for past, present
and future infringements thereof, and all rights corresponding thereto
throughout the world.
"Documents" has the meaning ascribed thereto in Section 3(j)
hereof.
"Environmental Laws" means any and all present and future
Federal, state, local and foreign laws, rules or regulations, and any
orders or decrees, in each case as now or hereafter in effect,
relating to the regulation or protection of human health, safety or
the environment or to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or toxic or hazardous
Company Pledge and Security Agreement
<PAGE> 192
- 3 -
substances or wastes into the indoor or outdoor environment,
including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes.
"Equipment" has the meaning ascribed thereto in Section 3(h)
hereof.
"Holdings Convertible Securities" means any securities that
are convertible into or exchangeable for Equity Interests of NV
Holdings.
"Holdings Stock Purchase Rights" means any options, warrants
or other rights to subscribe for or purchase or acquire any Equity
Interests of NV Holdings or any Holdings Convertible Securities.
"Initial Pledged Brooke Overseas Shares" means all Equity
Interests of Brooke Overseas represented by the certificates
identified in Annex 1 hereto.
"Initial Pledged COM Products Shares" means all Equity
Interests of COM Products represented by the certificates identified
in Annex 1 hereto.
"Initial Pledged Holdings Shares" means all Equity Interests
of NV Holdings represented by the certificates identified in Annex 1
hereto.
"Initial Pledged Liggett Shares" means all Equity Interests of
Liggett represented by the certificates identified in Annex 1 hereto.
"Initial Pledged New Valley Common Shares" means the New
Valley Common Shares represented by the certificates identified in
Annex 1 hereto.
Company Pledge and Security Agreement
<PAGE> 193
- 4 -
"Initial Pledged New Valley Preferred Shares" means the New
Valley Class B Preferred Shares represented by the certificates
identified in Annex 1 hereto.
"Instruments" has the meaning ascribed thereto in Section 3(e)
hereof.
"Intellectual Property" means, collectively, all Copyright
Collateral, all Patent Collateral and all Trademark Collateral.
"Inventory" has the meaning ascribed thereto in Section 3(f)
hereof.
"Issuers" means, collectively, the respective corporations
identified in Annex 1 hereto under the caption "Issuer".
"Liggett Convertible Securities" means any securities that are
convertible into or exchangeable for Equity Interests capital stock of
Liggett.
"Liggett Stock Purchase Rights" means any options, warrants or
other rights to subscribe for or purchase or acquire any Equity
Interests of Liggett or any Liggett Convertible Securities.
"Motor Vehicles" means motor vehicles, tractors, trailers and
other like property, whether or not the title thereto is governed by a
certificate of title or ownership.
"New Valley Class A Preferred Shares" means the $15 Class A
Increasing Rate Cumulative Senior Preferred Shares, par value $0.01
per share, of New Valley and any options, warrants or
Company Pledge and Security Agreement
<PAGE> 194
- 5 -
other rights to acquire such shares and any Equity Interests which may
be issued in exchange or replacement thereof.
"New Valley Class B Preferred Shares" means the $3 Class B
Cumulative Convertible Preferred Shares, par value $0.10 per share, of
New Valley and any options, warrants or other rights to acquire such
shares and any Equity Interests which may be issued in exchange or
replacement thereof.
"New Valley Convertible Securities" means any securities that
are convertible into or exchangeable for Equity Interests of New
Valley.
"New Valley Registration Rights Agreement" means the
Registration Rights Agreement dated as of December __, 1995 among the
Company, BGL, New Valley and the Trustee, as amended, modified or
supplemented from time to time.
"New Valley Stock Purchase Rights" means any options, warrants
or other rights to subscribe for or purchase or acquire any Equity
Interests of New Valley or any New Valley Convertible Securities.
"NV Holdings Pledge Agreement" means the Pledge and Security
Agreement dated as of December __, 1995 between NV Holdings and the
Trustee.
"Patent Collateral" means all Patents, whether now owned or
hereafter acquired by the Company.
"Patents" means all patents and patent applications,
including, without limitation, the inventions and improvements
described and claimed therein together with the reissues, divisions,
continuations, renewals, extensions and continuations-in-part thereof,
all income, royalties, damages and payments now or hereafter due
and/or payable under and with respect thereto, including, without
limitation, damages and payments for past or future infringements
thereof, the right to sue for past, present and future infringements
thereof, and all rights corresponding thereto throughout the world.
"Permitted Investments" means (i) cash, (ii) Investments in
direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America,
provided that such obligations mature within one year from the date
the Investment is made
Company Pledge and Security Agreement
<PAGE> 195
- 6 -
or acquired, and (iii) Investments maturing within one year from the
date the Investment is made or acquired in time deposits with or
certificates of deposit issued by a bank or trust company organized
under the laws of the United States of America or any State thereof
having a capital and surplus and undivided profits aggregating at
least $250,000,000.
"Pledge Documents" means the Indenture, the Securities, this
Agreement, the NV Holdings Pledge Agreement, and all other
instruments, documents and agreements delivered in connection
therewith (including any other pledge agreement, mortgage, security
agreement or similar agreement), as the same may be amended, modified
or supplemented from time to time.
"Pledged Stock" has the meaning ascribed thereto in Section
3(a) hereof.
"Registration Rights Agreements" means, collectively, the BGLS
Registration Rights Agreement and the New Valley Registration Rights
Agreement.
"Secured Obligations" means, collectively, all obligations and
liabilities of any kind or nature, present or future, absolute or
contingent, of (i) the Company arising under the Securities, the
Indenture, the Registration Rights Agreements or this Agreement, (ii)
NV Holdings arising under the NV Holdings Pledge Agreement or any
other undertaking or agreement delivered by NV Holdings in connection
with the Securities, the Indenture or this Agreement, (iii) Liggett
arising under any undertaking or agreement delivered by Liggett in
connection with the Securities, the Indenture or this Agreement, (iv)
Brooke Overseas arising under any undertaking or agreement delivered
by Brooke Overseas in connection with the Securities, the Indenture or
this Agreement, (v) New Valley arising under any undertaking or
agreement delivered by New Valley in connection with the Securities,
the Indenture, the New Valley Registration Rights Agreement or this
Agreement, (vi) Bennett S. LeBow arising under his undertaking
attached
Company Pledge and Security Agreement
<PAGE> 196
- 7 -
to the Indenture and (vii) Brooke arising under its undertaking
attached to the Indenture.
"Stock Collateral" means, collectively, the Collateral
described in clauses (a) through (c) of Section 3 hereof and the
proceeds of and to any such property and, to the extent related to any
such property or such proceeds, all books, correspondence, credit
files, records, invoices and other papers.
"Trademark Collateral" means all Trademarks, whether now owned
or hereafter acquired by the Company. Notwithstanding the foregoing,
the Trademark Collateral does not and shall not include any Trademark
that would be rendered invalid, abandoned, void or unenforceable by
reason of its being included as part of the Trademark Collateral.
"Trademarks" means all trade names, trademarks and service
marks, logos, trademark and service mark registrations, and
applications for trademark and service mark registrations, including,
without limitation, all renewals of trademark and service mark
registrations, all rights corresponding thereto throughout the world,
the right to recover for all past, present and future infringements
thereof, all other rights of any kind whatsoever accruing thereunder
or pertaining thereto, together, in each case, with the product lines
and goodwill of the business connected with the use of, and symbolized
by, each such trade name, trademark and service mark.
"Uniform Commercial Code" means the Uniform Commercial Code as
in effect from time to time in the State of New York.
Company Pledge and Security Agreement
<PAGE> 197
- 8 -
Section 2. Representations and Warranties. The Company
represents and warrants and covenants to the Trustee for the benefit of the
Holders that:
(a) except for the Security Interest, the Company is the sole
legal and equitable owner of the Collateral, holds the same free and
clear of all liens, charges, encumbrances and security interests of
any kind and nature and will make no other assignment, pledge,
mortgage, hypothecation, transfer or other disposition of the
Collateral, other than the sale or application of the Collateral in
compliance with the provisions of Sections 3.09 and 12.08 of the
Indenture;
(b) the Company has good right and legal title to the
Collateral and will defend its title thereto against the claims of all
Persons whomsoever and will maintain and preserve the Security
Interest as long as this Agreement shall remain in full force and
effect;
(c) except for the filing of UCC-1 financing statements, no
consent or approval of, or other action by, and no notice to or filing
with, any governmental body or regulatory authority or securities
exchange, was or is necessary as a condition (i) to the validity of
the pledge provided for herein or for the execution, delivery or
performance of this Agreement by the Company or (ii) other than (A)
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and
regulations thereunder, or (B) the Securities Act, and regulations
thereunder and any applicable blue sky laws, for the exercise by the
Trustee of the voting or other rights provided for in this Agreement
or the remedies in respect of the Collateral pursuant to this
Agreement;
(d) as of ___________: (i) the Initial Pledged Holdings
Shares are the only issued and outstanding shares of capital stock of
NV Holdings and (ii) there are no issued and outstanding Holdings
Convertible Securities or Holdings Stock Purchase Rights, and NV
Holdings is not subject to any obligation, contingent or otherwise, to
issue in the future any additional shares of its capital stock or any
such
Company Pledge and Security Agreement
<PAGE> 198
- 9 -
Holdings Convertible Securities or Holdings Stock Purchase Rights;
(e) the Initial Pledged Holdings Shares are duly authorized,
validly issued, fully paid and nonassessable;
(f) as of ____________: (i) the Initial Pledged Liggett
Shares are the only issued and outstanding shares of capital stock of
Liggett and (ii) there are no issued and outstanding Liggett
Convertible Securities or Liggett Stock Purchase Rights, and Liggett
is not subject to any obligation, contingent or otherwise, to issue in
the future any additional shares of its capital stock or any such
Liggett Convertible Securities or Liggett Stock Purchase Rights;
(g) the Initial Pledged Liggett Shares are duly authorized,
validly issued, fully paid and nonassessable;
(h) as of ____________: (i) the Initial Pledged Brooke
Overseas Shares are the only issued and outstanding shares of capital
stock of Brooke Overseas and (ii) there are no issued and outstanding
Brooke Overseas Convertible Securities or Brooke Overseas Stock
Purchase Rights, and Brooke Overseas is not subject to any obligation,
contingent or otherwise, to issue in the future any additional shares
of its capital stock or any such Brooke Overseas Convertible
Securities or Brooke Overseas Stock Purchase Rights;
(i) the Initial Pledged Brooke Overseas Shares are duly
authorized, validly issued, fully paid and nonassessable;
(j) as of ____________: (i) the Initial Pledged COMProducts
Shares are the only issued and outstanding shares of capital stock of
COM Products and (ii) there are no issued and outstanding COM Products
Convertible Securities or COM Products Stock Purchase Rights, and COM
Products is not subject to any obligation, contingent or otherwise, to
issue in the future any additional shares of
Company Pledge and Security Agreement
<PAGE> 199
- 10 -
its capital stock or any such COM Products Convertible Securities or
COM Products Stock Purchase Rights;
(k) the Initial Pledged COM Products Shares are duly
authorized, validly issued, fully paid and nonassessable;
(l) as of ____________: (i) there are 191,445,117 New Valley
Common Shares issued and outstanding and (ii) there are 2,790,776 New
Valley Class B Preferred Shares issued and outstanding;
(m) the Initial Pledged New Valley Common Shares and the
Initial Pledged New Valley Class B Preferred Shares are duly
authorized, validly issued, fully paid and nonassessable;
(n) the Company has full corporate power and authority to
execute, deliver and perform this Agreement;
(o) except for the Pledge Documents, the Company is not now
and will not become a party to any voting trust or other agreement or
undertaking with respect to the exercise of the voting or consent
rights associated with any of the Stock Collateral (other than an
agreement or undertaking in respect of a sale of the Stock Collateral,
which sale is or will be in compliance with the provisions of Section
12.08 of the Indenture), and there are no other restrictions on the
exercise of such rights;
(p) except for the Pledge Documents, the Company is not now
and will not become a party to any agreement or undertaking pursuant
to which any Issuer or any other Person could have the right to
purchase any of the Stock Collateral (other than an agreement or
undertaking in respect of a sale of the Stock Collateral, which sale
is or will be in compliance with the provisions of Section 12.08 of
the Indenture), and at the time of delivery of any Stock Collateral to
the Trustee there will not be (and the Company will not thereafter
permit to exist) any other restrictions on the transfer of the Stock
Collateral;
Company Pledge and Security Agreement
<PAGE> 200
- 11 -
(q) except for the Pledge Documents, the Company has the
right to vote, pledge and grant a security interest in, or otherwise
transfer, the Collateral free of any liens (except as set forth in (a)
above);
(r) the grant and perfection of the Security Interest in
the Stock Collateral for the benefit of the Trustee and the Holders,
in accordance with the terms hereof, will not violate the registration
requirements of the Securities Act, any provisions of any other
applicable federal, state or foreign securities laws, or any
applicable general corporation law or other applicable law;
(s) each Issuer is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation and has full power and authority to own or lease its
properties and assets and to carry on its business;
(t) the stock powers delivered to the Trustee with
respect to the Pledged Stock have been, and at the time of the
delivery of any other stock powers to the Trustee in connection with
the pledge of any additional Stock Collateral such stock powers will
be, duly executed;
(u) the pledge of the Initial Pledged Shares pursuant to
this Agreement, together with the transfer of such Initial Pledged
Shares to the Trustee, creates a valid and perfected first priority
security interest in the Collateral, in favor of the Trustee for the
benefit of the Trustee and the Holders, securing the due and punctual
payment and performance in full of the Secured Obligations in
accordance with the respective terms thereof; and
(v) the Company will not permit NV Holdings to sell, assign,
transfer or otherwise dispose of, or pledge, hypothecate or otherwise
encumber, any of its Equity Interests in New Valley which are pledged
pursuant to the NV Holdings Pledge Agreement, unless any such sale,
assignment, transfer or disposition is in compliance with the
provisions of Section 12.08 of the Indenture.
Company Pledge and Security Agreement
<PAGE> 201
- 12 -
Section 3. Collateral. As collateral security for the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) and performance of the Secured Obligations, the Company hereby
pledges and grants to the Trustee for the benefit of the Holders a security
interest in all of the Company's right, title and interest in the following
property, whether now owned by the Company or hereafter acquired and whether
now existing or hereafter coming into existence (all being collectively
referred to herein as "Collateral"):
(a) the shares of stock of the Issuers represented by the
certificates identified in Annex 1 hereto and all other shares of
capital stock of whatever class of the Issuers, now or hereafter owned
by the Company, in each case together with the certificates evidencing
the same (collectively, the "Pledged Stock");
(b) subject to the proviso at the end of this Section 3, all
shares, securities, moneys or property representing a dividend on any
of the Pledged Stock, or representing a distribution or return of
capital upon or in respect of the Pledged Stock, or resulting from a
split-up, revision, reclassification or other like change of the
Pledged Stock or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of, or
otherwise in respect of, the Pledged Stock;
(c) without affecting the obligations of the Company under
any provision prohibiting such action hereunder or under the
Indenture, in the event of any consolidation or merger in which an
Issuer is not the surviving corporation, all shares of each class of
the capital stock of the successor corporation (unless such successor
corporation is the Company itself) formed by or resulting from such
consolidation or merger (the Pledged Stock, together with all other
certificates, shares, securities, properties or moneys as may from
time to time be pledged hereunder
Company Pledge and Security Agreement
<PAGE> 202
- 13 -
pursuant to clause (a) or (b) above and this clause (c) being herein
collectively called the "Stock Collateral");
(d) all accounts and general intangibles (each as defined in
the Uniform Commercial Code) of the Company constituting any right to
the payment of money, including (but not limited to) all moneys due
and to become due to the Company in respect of any loans or advances
or for Inventory or Equipment or other goods sold or leased or for
services rendered, all moneys due and to become due to the Company
under any guarantee (including a letter of credit) of the purchase
price of Inventory or Equipment sold by the Company and all tax
refunds (such accounts, general intangibles and moneys due and to
become due being herein called collectively "Accounts");
(e) all instruments, chattel paper or letters of credit (each
as defined in the Uniform Commercial Code) of the Company evidencing,
representing, arising from or existing in respect of, relating to,
securing or otherwise supporting the payment of, any of the Accounts,
including (but not limited to) promissory notes, drafts, bills of
exchange and trade acceptances (herein collectively called
"Instruments");
(f) all inventory (as defined in the Uniform Commercial Code)
of the Company, all goods obtained by the Company in exchange for such
inventory, and any products made or processed from such inventory
including all substances, if any, commingled therewith or added
thereto (herein collectively called "Inventory");
(g) all Intellectual Property and all other accounts or
general intangibles not constituting Intellectual Property or
Accounts;
(h) all equipment (as defined in the Uniform Commercial Code)
of the Company, including all Motor Vehicles (herein collectively
called "Equipment");
Company Pledge and Security Agreement
<PAGE> 203
- 14 -
(i) each contract and other agreement of the Company relating
to the sale or other disposition of Inventory or Equipment;
(j) all documents of title (as defined in the Uniform
Commercial Code) or other receipts of the Company covering, evidencing
or representing Inventory or Equipment (herein collectively called
"Documents");
(k) all rights, claims and benefits of the Company against
any Person arising out of, relating to or in connection with Inventory
or Equipment purchased by the Company, including, without limitation,
any such rights, claims or benefits against any Person storing or
transporting such Inventory or Equipment;
(l) the balance from time to time in the Cash Collateral
Account; and
(m) all other tangible and intangible personal property and
fixtures of the Company, including, without limitation, all proceeds,
products, offspring, accessions, rents, profits, income, benefits,
substitutions and replacements of and to any of the property of the
Company described in the preceding clauses of this Section 3
(including, without limitation, any proceeds of insurance thereon and
all causes of action, claims and warranties now or hereafter held by
the Company in respect of any of the items listed above) and, to the
extent related to any property described in said clauses or such
proceeds, products and accessions, all books, correspondence, credit
files, records, invoices and other papers, including without
limitation all tapes, cards, computer runs and other papers and
documents in the possession or under the control of the Company or any
computer bureau or service company from time to time acting for the
Company;
provided that "Collateral" shall not include Excluded Cash.
Company Pledge and Security Agreement
<PAGE> 204
- 15 -
Section 4. Cash Collateral Account.
4.01 Cash Collateral Account. There is hereby established
with the Trustee a cash collateral account (the "Cash Collateral Account") in
the name and under the control of the Trustee into which there shall be
deposited from time to time the cash required to be deposited therein pursuant
to Sections 4.22 and 12.08 of the Indenture and proceeds of any of the
Collateral required to be delivered to the Trustee pursuant hereto. The
balance from time to time in the Cash Collateral Account shall constitute part
of the Collateral hereunder and shall not constitute payment of the Secured
Obligations until applied as hereinafter provided. Except as expressly
provided in the next sentence, the Trustee shall remit the collected balance
outstanding to the credit of the Cash Collateral Account to or upon the order
of the Company as the Company shall from time to time instruct in accordance
with the Indenture. However, at any time following the occurrence and during
the continuance of an Event of Default, the Trustee may in its discretion apply
or cause to be applied (subject to collection) the balance from time to time
outstanding to the credit of the Cash Collateral Account to the payment of the
Secured Obligations in the manner specified in Section 5.09 hereof. The
balance from time to time in the Cash Collateral Account shall be subject to
withdrawal only as provided herein.
4.02 Investment of Balance in Cash Collateral Account.
Amounts on deposit in the Cash Collateral Account shall be invested from time
to time in such Permitted Investments as the Company (or, after the occurrence
and during the continuance of a Default, the Trustee) shall determine, which
Permitted Investments shall be held in the name and be under the control of the
Trustee, provided that at any time after the occurrence and during the
continuance of an Event of Default, the Trustee may in its discretion at any
time and from time to time elect to liquidate any such Permitted Investments
and to apply or cause to be applied the proceeds thereof to the payment of the
Secured Obligations in the manner specified in Section 5.09 hereof.
Company Pledge and Security Agreement
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Section 5. Further Assurances; Remedies. In furtherance of
the grant of the pledge and security interest pursuant to Section 3 hereof, the
Company hereby agrees with the Trustee as follows:
5.01 Delivery and Other Perfection. The Company shall:
(a) if any of the shares, securities, moneys or property
required to be pledged by the Company under clauses (a), (b) and (c)
of Section 3 hereof are received by the Company, hold such Property in
trust and forthwith either (x) transfer and deliver to the Trustee
such shares or securities so received by the Company (together with
the certificates for any such shares and securities duly endorsed in
blank or accompanied by undated stock powers duly executed in blank),
all of which thereafter shall be held by the Trustee, pursuant to the
terms of this Agreement, as part of the Collateral or (y) take such
other action as may be necessary or appropriate or as the Trustee may
reasonably request to duly record the Lien created hereunder in such
shares, securities, moneys or property in said clauses (a), (b) and
(c);
(b) deliver and pledge to the Trustee any and all Instruments
pledged hereunder, endorsed and/or accompanied by such instruments of
assignment and transfer in such form and substance as may be required
to perfect the pledge thereof hereunder or as the Trustee may
reasonably request; provided, that so long as no Default shall have
occurred and be continuing, the Company may retain for collection in
the ordinary course any Instruments received by the Company in the
ordinary course of business and the Trustee shall, promptly upon
request of the Company, make appropriate arrangements for making any
Instrument pledged by the Company hereunder available to the Company
for purposes of presentation, collection or renewal (any such
arrangement to be effected, to the extent deemed appropriate by the
Trustee, against trust receipt or like document);
Company Pledge and Security Agreement
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(c) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers
that may be necessary or desirable or that the Trustee may reasonably
request to create, preserve, perfect or validate the security interest
granted pursuant hereto or to enable the Trustee to exercise and
enforce its rights hereunder with respect to such pledge and security
interest, including, without limitation, causing any or all of the
Stock Collateral to be transferred of record into the name of the
Trustee or its nominee (and the Trustee agrees that if any Stock
Collateral is transferred into its name or the name of its nominee,
the Trustee will thereafter promptly give to the Company copies of any
notices and communications received by it with respect to the Stock
Collateral), provided that notices to account debtors in respect of any
Accounts or Instruments shall be subject to the provisions of clause
(g) below;
(d) upon the acquisition after the date hereof by the Company
of any Equipment covered by a certificate of title or ownership, cause
the Trustee to be listed as the lienholder on such certificate of
title and within 120 days of the acquisition thereof deliver evidence
of the same to the Trustee;
(e) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as may be necessary to reflect the security interests granted
by this Agreement;
(f) permit representatives of the Trustee, upon reasonable
notice, at any time during normal business hours to inspect and make
abstracts from its books and records pertaining to the Collateral, and
permit representatives of the Trustee to be present at the Company's
place of business to receive copies of all communications and
remittances relating to the Collateral, and forward copies of any
notices or communications received by the Company with respect to the
Collateral, all to the extent and in such manner as the Trustee may
reasonably request; and
Company Pledge and Security Agreement
<PAGE> 207
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(g) upon the occurrence and during the continuance of any
Default, upon request of the Trustee, promptly notify (and the Company
hereby authorizes the Trustee so to notify) each account debtor in
respect of any Accounts or Instruments that such Collateral has been
assigned to the Trustee hereunder, and that any payments due or to
become due in respect of such Collateral are to be made directly to
the Trustee.
5.02 Other Financing Statements and Liens. Without the prior
written consent of the Trustee, the Company shall not file or suffer to be on
file, or authorize or permit to be filed or to be on file, in any jurisdiction,
any financing statement or like instrument with respect to the Collateral in
which the Trustee is not named as the sole secured party.
5.03 Preservation of Rights. The Trustee shall not be
required to take steps necessary to preserve any rights against prior parties
to any of the Collateral.
5.04 Special Provisions Relating to Stock Collateral.
(a) So long as no Event of Default shall have occurred and be
continuing, the Company shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Stock Collateral for all
purposes not inconsistent with the terms of this Agreement, the Indenture, the
Securities or any other instrument or agreement referred to herein or therein,
provided that the Company agrees that it will not vote the Stock Collateral in
any manner that is inconsistent with the terms of this Agreement, the
Indenture, the Securities or any such other instrument or agreement; and the
Trustee shall execute and deliver to the Company or cause to be executed and
delivered to the Company all such proxies, powers of attorney, dividend and
other orders, and all such instruments, without recourse, as the Company may
reasonably request for the purpose of enabling the Company to exercise the
rights and powers that it is entitled to exercise pursuant to this Section
5.04(a).
(b) If any Event of Default shall have occurred, then so long
as any Event of Default shall continue, and whether or
Company Pledge and Security Agreement
<PAGE> 208
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not the Trustee exercises any available right to declare any Secured Obligation
due and payable or seeks or pursues any other relief or remedy available to it
under applicable law or under this Agreement, the Indenture, the Securities or
any other agreement relating to such Secured Obligation, all dividends and
other distributions on the Stock Collateral shall be paid directly to the
Trustee and retained by it in the Cash Collateral Account as part of the Stock
Collateral, subject to the terms of this Agreement, and, if the Trustee shall
so request in writing, the Company agrees to execute and deliver to the Trustee
appropriate additional dividend, distribution and other orders and documents to
that end, provided that if all Events of Default are cured, any such dividend
or distribution theretofore paid to the Trustee shall, upon request of the
Company (except to the extent theretofore applied to the Secured Obligations),
be returned by the Trustee to the Company.
5.05 Events of Default, Etc. During the period during which
an Event of Default shall have occurred and be continuing:
(a) the Company shall, at the request of the Trustee,
assemble the Collateral owned by it at such place or places,
reasonably convenient to both the Trustee and the Company, designated
in its request;
(b) the Trustee may make any reasonable compromise or
settlement deemed desirable with respect to any of the Collateral and
may extend the time of payment, arrange for payment in installments,
or otherwise modify the terms of, any of the Collateral;
(c) the Trustee shall have all of the rights and remedies
with respect to the Collateral of a secured party under the Uniform
Commercial Code (whether or not said Code is in effect in the
jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled
under the laws in effect in any jurisdiction where any rights and
remedies hereunder may be asserted, including, without limitation, the
right, to the maximum extent permitted by law, to exercise all voting,
consensual and other powers of
Company Pledge and Security Agreement
<PAGE> 209
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ownership pertaining to the Collateral as if the Trustee were the sole
and absolute owner thereof (and the Company agrees to take all such
action as may be appropriate to give effect to such right);
(d) the Trustee in its discretion may, in its name or in the
name of the Company or otherwise, demand, sue for, collect or receive
any money or property at any time payable or receivable on account of
or in exchange for any of the Collateral, but shall be under no
obligation to do so; and
(e) the Trustee may, upon ten business days' prior written
notice to the Company of the time and place, with respect to the
Collateral or any part thereof that shall then be or shall thereafter
come into the possession, custody or control of the Trustee or any of
its agents, sell, lease, assign or otherwise dispose of all or any
part of such Collateral, at such place or places as the Trustee deems
best, and for cash or for credit or for future delivery (without
thereby assuming any credit risk), at public or private sale, without
demand of performance or notice of intention to effect any such
disposition or of the time or place thereof (except such notice as is
required above or by applicable statute and cannot be waived), and the
Trustee or anyone else may be the purchaser, lessee, assignee or
recipient of any or all of the Collateral so disposed of at any public
sale (or, to the extent permitted by law, at any private sale) and
thereafter hold the same absolutely, free from any claim or right of
whatsoever kind, including any right or equity of redemption
(statutory or otherwise), of the Company, any such demand, notice and
right or equity being hereby expressly waived and released. The
Trustee may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the sale may be so
adjourned.
The proceeds of each collection, sale or other disposition under this Section
5.05 shall be applied in accordance with Section 5.09 hereof.
Company Pledge and Security Agreement
<PAGE> 210
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The Company recognizes that, by reason of certain prohibitions
contained in the Securities Act, and applicable state securities laws, the
Trustee may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who are "accredited investors" (as
defined in the Securities Act) and who will agree, among other things, to
acquire the Collateral for their own account, for investment and not with a
view to the distribution or resale thereof. The Company acknowledges that any
such private sales may be at prices and on terms less favorable to the Trustee
than those obtainable through a public sale without such restrictions, and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner and that the
Trustee shall have no obligation to engage in public sales and no obligation to
delay the sale of any Collateral for the period of time necessary to permit the
respective Issuer or issuer thereof to register it for public sale.
5.06 Deficiency. If the proceeds of sale, collection or
other realization of or upon the Collateral pursuant to Section 5.05 hereof are
insufficient to cover the costs and expenses of such realization and the
payment in full of the Secured Obligations, the Company shall remain liable for
any deficiency.
5.07 Removals, Etc. Without at least 30 days' prior written
notice to the Trustee, the Company shall not (i) maintain any of its books and
records with respect to the Collateral at any office or maintain its principal
place of business at any place, or permit any Inventory or Equipment to be
located anywhere, other than at the address indicated beneath the signature of
the Company to the Indenture or at one of the locations identified in Annex 2
hereto or in transit from one of such locations to another or (ii) change its
name, or the name under which it does business, from the name shown on the
signature pages hereto.
5.08 Private Sale. The Trustee shall incur no liability as a
result of the sale of the Collateral, or any part
Company Pledge and Security Agreement
<PAGE> 211
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thereof, at any private sale pursuant to Section 5.05 hereof conducted in a
commercially reasonable manner, including any such sale limited to "accredited
investors", as such term is defined in Rule 501(a) of the Securities Act. The
Company hereby waives any claims against the Trustee arising by reason of the
fact that the price at which the Collateral may have been sold at such a
private sale was less than the price that might have been obtained at a public
sale or was less than the aggregate amount of the Secured Obligations, even if
the Trustee accepts the first offer received and does not offer the Collateral
to more than one offeree.
5.09 Application of Proceeds. Except as otherwise herein
expressly provided, the proceeds of any collection, sale or other realization
of all or any part of the Collateral pursuant hereto, and any other cash at the
time held by the Trustee under Section 4 hereof or this Section 5, shall be
applied by the Trustee:
First, to the payment of the costs and expenses of such
collection, sale or other realization, including reasonable
out-of-pocket costs and expenses of the Trustee and the fees and
expenses of its agents and counsel, and all expenses incurred and
advances made by the Trustee in connection therewith;
Next, to the payment in full of the Secured Obligations; and
Finally, to the payment to the Company, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining.
As used in this Section 5, "proceeds" of Collateral shall mean
cash, securities and other property realized in respect of, and distributions
in kind of, Collateral, including any thereof received under any
reorganization, liquidation or adjustment of debt of the Company or any issuer
of or obligor on any of the Collateral.
Company Pledge and Security Agreement
<PAGE> 212
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5.10 Attorney-in-Fact. Without limiting any rights or powers
granted by this Agreement to the Trustee while no Event of Default has occurred
and is continuing, upon the occurrence and during the continuance of any Event
of Default the Trustee is hereby appointed the attorney-in-fact of the Company
for the purpose of carrying out the provisions of this Section 5 and taking any
action and executing any instruments that the Trustee may deem necessary or
advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest. Without limiting
the generality of the foregoing, so long as the Trustee shall be entitled under
this Section 5 to make collections in respect of the Collateral, the Trustee
shall have the right and power to receive, endorse and collect all checks made
payable to the order of the Company representing any dividend, payment or other
distribution in respect of the Collateral or any part thereof and to give full
discharge for the same.
5.11 Perfection. Prior to or concurrently with the execution
and delivery of this Agreement, the Company shall (i) file such financing
statements and other documents in such offices as may be necessary or
appropriate or as the Trustee may reasonably request to perfect the security
interests granted by Section 3 of this Agreement, (ii) cause the Trustee to be
listed as the lienholder on all certificates of title or ownership relating to
Motor Vehicles owned by the Company and (iii) deliver to the Trustee all
certificates identified in Annex 1 hereto, accompanied by undated stock powers
duly executed in blank.
5.12 Termination. When all Secured Obligations shall have
been paid in full, this Agreement shall terminate, and the Trustee shall
forthwith cause to be assigned, transferred and delivered, against receipt but
without any recourse, warranty or representation whatsoever, any remaining
Collateral and money received in respect thereof, to or on the order of the
Company. The Trustee shall also execute and deliver to the Company upon such
termination such Uniform Commercial Code termination statements, certificates
for terminating the Liens on the Motor Vehicles and such other documentation as
shall be reasonably requested by the Company to effect the termination and
release of the Liens on the Collateral.
Company Pledge and Security Agreement
<PAGE> 213
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5.13 Further Assurances. The Company agrees that, from time
to time it will execute and deliver such further documents and do such other
acts and things as may be necessary or appropriate or as the Trustee may
reasonably request in order fully to effect the purposes of this Agreement.
5.14 Release of Motor Vehicles. So long as no Default shall
have occurred and be continuing, upon the request of the Company, the Trustee
shall execute and deliver to the Company such instruments as the Company shall
reasonably request to remove the notation of the Trustee as lienholder on any
certificate of title for any Motor Vehicle; provided that any such instruments
shall be delivered, and the release effective only upon receipt by the Trustee
of a certificate from the Company stating that the Motor Vehicle the lien on
which is to be released is to be sold or has suffered a casualty loss (with
title thereto passing to the casualty insurance company therefor in settlement
of the claim for such loss).
Section 6. Miscellaneous.
6.01 No Waiver. No failure on the part of the Trustee to
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by the Trustee of any right, power or
remedy hereunder preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies herein are cumulative and
are not exclusive of any remedies provided by law.
6.02 Notices. All notices, requests, consents and demands
hereunder shall be in writing and telecopied or delivered to the intended
recipient at its "Address for Notices" specified pursuant to Section 13.02 of
the Indenture and shall be deemed to have been given at the times specified in
said Section 13.02.
6.03 Amendments, Etc. The terms of this Agreement may be
waived, altered or amended only by an instrument in writing duly executed by
the Company and the Trustee in accordance with
Company Pledge and Security Agreement
<PAGE> 214
- 25 -
Article 10 of the Indenture. Any such amendment or waiver shall be binding
upon the Trustee, each holder of any of the Secured Obligations and the
Company.
6.04 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of the
Company, the Trustee and each holder of any of the Secured Obligations
(provided, however, that the Company shall not assign or transfer its rights
hereunder without the prior written consent of the Trustee).
6.05 Captions. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
6.06 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument and either of the parties hereto may execute this Agreement
by signing any such counterpart.
6.07 Governing Law. This Agreement shall be governed by,
and construed in accordance with, the law of the State of New York.
6.08 Agents and Attorneys-in-Fact. The Trustee may employ
agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.
6.09 Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of the Trustee in
order to carry out the intentions of the parties hereto as nearly as may be
possible and (ii) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
Company Pledge and Security Agreement
<PAGE> 215
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6.10 Indemnity. The Company and Brooke Group Ltd. hereby
jointly agree to indemnify NV Holdings for, and hold it harmless against, any
claim, demand, expense (including but not limited to attorneys' fees), loss or
liability incurred by it arising solely out of or in connection with its being
an affiliate of the Company or Brooke Group Ltd.
Each of the Company and Brooke Group Ltd. hereby acknowledges
that the indemnity contained in this Section 6.10 is for the benefit of NV
Holdings and that NV Holdings is relying on said indemnity as a basis for
entering into the NV Holdings Pledge Agreement.
6.11 Indemnification of Trustee and Holders. The Company and
Brooke Group Ltd. hereby jointly agree to indemnify the Trustee and the Holders
from, and hold the Trustee and the Holders harmless against, any losses,
liabilities, claims, damages or expenses arising under any Environmental Law as
a result of the past, present or future operations of the Company or any of its
Subsidiaries following the exercise by the Trustee of any of its rights and
remedies under this Agreement.
6.12 Additional Subsidiaries. The Company shall cause each
new Subsidiary of the Company to execute and deliver an acknowledgment and
undertaking substantially in the form of the acknowledgments and undertakings
attached hereto and to do such other acts and things as the Trustee may
reasonably request in order fully to effect the purposes of this Agreement.
Company Pledge and Security Agreement
<PAGE> 216
- 27 -
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
and Security Agreement to be duly executed and delivered as of the day and year
first above written.
BGLS INC.
By _________________________
Title:
SHAWMUT BANK, N.A., as Trustee
By _________________________
Title:
Company Pledge and Security Agreement
<PAGE> 217
ACKNOWLEDGMENT AND UNDERTAKING
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, New Valley Holdings, Inc., a
Delaware corporation ("Holdings") hereby acknowledges receipt of a copy of the
foregoing Pledge and Security Agreement dated as of December __, 1995 and
agrees as follows (with capitalized terms used and not otherwise defined below
that are defined in such Pledge and Security Agreement having the meanings
ascribed to such terms therein):
1. Holdings will promptly note on its books the security
interests granted under such Pledge and Security Agreement in the applicable
Pledged Stock.
2. Holdings hereby waives any rights or requirement at any
time hereafter to receive a copy of such Pledge and Security Agreement in
connection with the registration of any Stock Collateral in the name of the
Trustee or its nominee or the exercise of voting rights by the Trustee.
3. Holdings agrees (a) to take all actions contemplated to be
taken by it under the Pledge and Security Agreement, (b) to comply with all
provisions thereof and (c) not to participate in any transaction that is
inconsistent with its obligations hereunder or thereunder.
The undersigned hereby represents and warrants that (a) the
execution, delivery and performance of this Acknowledgment and Undertaking has
been duly authorized by all necessary action on the part of the undersigned,
(b) the undersigned has duly executed and delivered this Acknowledgment and
Undertaking and (c) this Acknowledgment and Undertaking is its legal, valid and
binding obligation, enforceable against the undersigned in accordance with its
terms. This Acknowledgment and Undertaking shall be governed by, and construed
in accordance with, the law of the State of New York.
This Acknowledgment and Undertaking may not be terminated,
revoked, amended or otherwise modified without the prior written consent of the
Trustee, which is an express third-party beneficiary hereof.
Dated: ____________, 1995
<PAGE> 218
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NEW VALLEY HOLDINGS, INC.
By_______________________
Name:
Title:
Company Pledge and Security Agreement
<PAGE> 219
ACKNOWLEDGMENT AND UNDERTAKING
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, Liggett Group Inc., a Delaware
corporation ("Liggett") hereby acknowledges receipt of a copy of the foregoing
Pledge and Security Agreement dated as of December __, 1995 and agrees as
follows (with capitalized terms used and not otherwise defined below that are
defined in such Pledge and Security Agreement having the meanings ascribed to
such terms therein):
1. Liggett will promptly note on its books the security
interests granted under such Pledge and Security Agreement in the Liggett Stock
Purchase Rights.
2. Liggett hereby waives any rights or requirement at any
time hereafter to receive a copy of such Pledge and Security Agreement in
connection with the registration of any Liggett Stock Purchase Rights in the
name of the Trustee or its nominee or the exercise of voting rights by the
Trustee.
3. Liggett agrees (a) to take all actions contemplated to be
taken by it under the Pledge and Security Agreement, (b) to comply with all
provisions thereof and (c) not to participate in any transaction that is
inconsistent with its obligations hereunder or thereunder.
The undersigned hereby represents and warrants that (a) the
execution, delivery and performance of this Acknowledgment and Undertaking has
been duly authorized by all necessary action on the part of the undersigned,
(b) the undersigned has duly executed and delivered this Acknowledgment and
Undertaking and (c) this Acknowledgment and Undertaking is its legal, valid and
binding obligation, enforceable against the undersigned in accordance with its
terms. This Acknowledgment and Undertaking shall be governed by, and construed
in accordance with, the law of the State of New York.
This Acknowledgment and Undertaking may not be terminated,
revoked, amended or otherwise modified without the prior written consent of the
Trustee, which is an express third-party beneficiary hereof.
Dated: ____________, 1995
<PAGE> 220
- 2 -
LIGGETT GROUP INC.
By_______________________
Name:
Title:
Company Pledge and Security Agreement
<PAGE> 221
ACKNOWLEDGMENT AND UNDERTAKING
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, Brooke (Overseas) Ltd., a
Delaware corporation ("Brooke Overseas") hereby acknowledges receipt of a copy
of the foregoing Pledge and Security Agreement dated as of December __, 1995
and agrees as follows (with capitalized terms used and not otherwise defined
below that are defined in such Pledge and Security Agreement having the
meanings ascribed to such terms therein):
1. Brooke Overseas will promptly note on its books the
security interests granted under such Pledge and Security Agreement in the
Brooke Overseas Stock Purchase Rights.
2. Brooke Overseas hereby waives any rights or requirement at
any time hereafter to receive a copy of such Brooke Overseas Stock Purchase
Rights in connection with the registration of any Brooke Overseas Stock
Purchase Rights in the name of the Trustee or its nominee or the exercise of
voting rights by the Trustee.
3. Brooke Overseas agrees (a) to take all actions contemplated
to be taken by it under the Pledge and Security Agreement, (b) to comply with
all provisions thereof and (c) not to participate in any transaction that is
inconsistent with its obligations hereunder or thereunder.
The undersigned hereby represents and warrants that (a) the
execution, delivery and performance of this Acknowledgment and Undertaking has
been duly authorized by all necessary action on the part of the undersigned,
(b) the undersigned has duly executed and delivered this Acknowledgment and
Undertaking and (c) this Acknowledgment and Undertaking is its legal, valid and
binding obligation, enforceable against the undersigned in accordance with its
terms. This Acknowledgment and Undertaking shall be governed by, and construed
in accordance with, the law of the State of New York.
This Acknowledgment and Undertaking may not be terminated,
revoked, amended or otherwise modified without the prior written consent of the
Trustee, which is an express third-party beneficiary hereof.
<PAGE> 222
- 2 -
Dated: ____________, 1995
BROOKE (OVERSEAS) LTD.
By_______________________
Name:
Title:
Company Pledge and Security Agreement
<PAGE> 223
ACKNOWLEDGMENT AND UNDERTAKING
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, New Valley Corporation, a New
York corporation ("New Valley") hereby acknowledges receipt of a copy of the
foregoing Pledge and Security Agreement dated as of December __, 1995 and
agrees as follows (with capitalized terms used and not otherwise defined below
that are defined in such Pledge and Security Agreement having the meanings
ascribed to such terms therein):
1. New Valley will promptly note on its books the security
interests granted under such Pledge and Security Agreement in the New Valley
Stock Purchase Rights.
2. New Valley hereby waives any rights or requirement at any
time hereafter to receive a copy of such Pledge and Security Agreement in
connection with the registration of any New Valley Stock Purchase Rights in the
name of the Trustee or its nominee or the exercise of voting rights by the
Trustee.
3. New Valley agrees (a) to take all actions contemplated to
be taken by it under the Pledge and Security Agreement, (b) to comply with all
provisions thereof and (c) not to participate in any transaction that is
inconsistent with its obligations hereunder or thereunder.
The undersigned hereby represents and warrants that (a) the
execution, delivery and performance of this Acknowledgment and Undertaking has
been duly authorized by all necessary action on the part of the undersigned,
(b) the undersigned has duly executed and delivered this Acknowledgment and
Undertaking and (c) this Acknowledgment and Undertaking is its legal, valid and
binding obligation, enforceable against the undersigned in accordance with its
terms. This Acknowledgment and Undertaking shall be governed by, and construed
in accordance with, the law of the State of New York.
This Acknowledgment and Undertaking may not be terminated,
revoked, amended or otherwise modified without the prior written consent of the
Trustee, which is an express third-party beneficiary hereof.
Dated: ____________, 1995
<PAGE> 224
- 2 -
NEW VALLEY CORPORATION
By_______________________
Name:
Title:
Company Pledge and Security Agreement
<PAGE> 225
ACKNOWLEDGMENT AND UNDERTAKING
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, COM Products Inc., a Delaware
corporation ("COM Products") hereby acknowledges receipt of a copy of the
foregoing Pledge and Security Agreement dated as of December __, 1995 and
agrees as follows (with capitalized terms used and not otherwise defined below
that are defined in such Pledge and Security Agreement having the meanings
ascribed to such terms therein):
1. COM Products will promptly note on its books the security
interests granted under such Pledge and Security Agreement in the COM Products
Stock Purchase Rights.
2. COM Products hereby waives any rights or requirement at
any time hereafter to receive a copy of such Pledge and Security Agreement in
connection with the registration of any COM Products Stock Purchase Rights in
the name of the Trustee or its nominee or the exercise of voting rights by the
Trustee.
3. COM Products agrees (a) to take all actions contemplated
to be taken by it under the Pledge and Security Agreement, (b) to comply with
all provisions thereof and (c) not to participate in any transaction that is
inconsistent with its obligations hereunder or thereunder.
The undersigned hereby represents and warrants that (a) the
execution, delivery and performance of this Acknowledgment and Undertaking has
been duly authorized by all necessary action on the part of the undersigned,
(b) the undersigned has duly executed and delivered this Acknowledgment and
Undertaking and (c) this Acknowledgment and Undertaking is its legal, valid and
binding obligation, enforceable against the undersigned in accordance with its
terms. This Acknowledgment and Undertaking shall be governed by, and construed
in accordance with, the law of the State of New York.
This Acknowledgment and Undertaking may not be terminated,
revoked, amended or otherwise modified without the prior written consent of the
Trustee, which is an express third-party beneficiary hereof.
<PAGE> 226
- 2 -
Dated: ____________, 1995
COM PRODUCTS INC.
By_______________________
Name:
Title:
Company Pledge and Security Agreement
<PAGE> 227
ANNEX 1
PLEDGED STOCK
[See Section 3]
<TABLE>
<CAPTION>
Certificate Registered
Issuer Nos. Owner Number of Shares
- ------ ----------- ---------- ----------------
<S> <C> <C> <C>
New Valley NY 34671 BGLS Inc. 394,975 shares of
Corporation common stock, par
value $.01 per share
New Valley NB 26885 BGLS Inc. 50,885 shares of
Corporation $3.00 Class B
Cumulative Con-
vertible Preferred
Shares, par value
$.10 per share
New Valley NB 26924 BGLS Inc. 200,000 shares of
Corporation $3.00 Class B
Cumulative Con-
vertible Preferred
Shares, par value
$.10 per share
Liggett 1 BGLS Inc. 1,000 shares of
Group, Inc. common stock, par
value $.10 per share
New Valley 1 BGLS Inc. 100 shares of common
Holdings, Inc. stock, par value
$.01 per share
Brooke (Over- 2 BGLS Inc. 10 shares of common
seas) Ltd. stock, par value
$.01 per share
COM Products 2 BGLS Inc. 100 shares of common
Inc. stock, par value
$.01 per share
</TABLE>
Annex 1 to BGLS Pledge and Security Agreement
<PAGE> 228
ANNEX 2
LIST OF LOCATIONS
[See Section 5.07]
100 S.E. Second Street
Miami, Florida 33131
Annex 2 to BGLS Pledge and Security Agreement
<PAGE> 229
EXHIBIT E
PLEDGE AND SECURITY AGREEMENT
PLEDGE AND SECURITY AGREEMENT dated as of December __, 1995
between NEW VALLEY HOLDINGS, INC., a corporation duly organized and validly
existing under the laws of the State of Delaware ("NV Holdings") and Shawmut
Bank, N.A., a national banking association, as trustee (the "Trustee") under
the Indenture dated as of December __, 1995 (as amended, supplemented or
modified from time to time, the "Indenture") between BGLS Inc., a Delaware
corporation (the "Company") and the Trustee, pursuant to which the Company has
issued its 15.75% Senior Series A Secured Notes due 2000 and its 15.75% Senior
Series B Secured Notes due 2000 (each of which series is equal to and ratable
with the other series).
Section 1. Definitions. Terms defined in the Indenture are
used herein as defined therein. In addition, as used herein:
"BGLS Registration Rights Agreement" means the A/B Exchange
and Registration Rights Agreement dated as of December __, 1995 among
the Company, BGL, AIF II, L.P., a Delaware limited partnership,
Artemis America Partnership, a Delaware general partnership, Tortoise
Corp., a New York corporation, and Mainstay High Yield Corporate Bond
Fund, a series of The MainStay Funds, a Massachusetts business trust,
as amended, modified or supplemented from time to time.
"Cash Collateral Account" has the meaning ascribed thereto in
Section 4.01 hereof.
"Collateral" has the meaning ascribed thereto in Section 3
hereof.
"Company Pledge Agreement" means the Pledge and Security
Agreement dated as of December __, 1995 between BGLS and the Trustee,
as amended, modified or supplemented from time to time.
NV Holdings Pledge and Security Agreement
<PAGE> 230
2
"Environmental Laws" means any and all present and future
Federal, state, local and foreign laws, rules or regulations, and any
orders or decrees, in each case as now or hereafter in effect,
relating to the regulation or protection of human health, safety or
the environment or to emissions, discharges, releases or threatened
releases of pollutants, contaminants, chemicals or toxic or hazardous
substances or wastes into the indoor or outdoor environment,
including, without limitation, ambient air, soil, surface water,
ground water, wetlands, land or subsurface strata, or otherwise
relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of pollutants, contaminants,
chemicals or toxic or hazardous substances or wastes.
"Initial Pledged New Valley Common Shares" means the New
Valley Common Shares represented by the certificates identified in
Annex 1 hereto.
"Initial Pledged Shares" means the New Valley Common Shares
and the New Valley Class A Preferred Shares represented by the
certificates identified in Annex 1 hereto.
"New Valley Class A Preferred Shares" means the $15 Class A
Increasing Rate Cumulative Senior Preferred Shares, par value $0.01
per share, of New Valley and any Equity Interests which may be issued
in exchange or replacement thereof.
"New Valley Class B Preferred Shares" means the $3 Class B
Cumulative Convertible Preferred Shares, par value $0.10 per share, of
New Valley and any Equity Interests which may be issued in exchange or
replacement thereof.
"New Valley Convertible Securities" means any securities that
are convertible into or exchangeable for Equity Interests of New
Valley.
NV Holdings Pledge and Security Agreement
<PAGE> 231
3
"New Valley Registration Rights Agreement" means the
Registration Rights Agreement dated as of December __, 1995 among the
Company, BGL, New Valley and the Trustee, as amended, modified or
supplemented.
"New Valley Stock Purchase Rights" means any options, warrants
or other rights to subscribe for or purchase or acquire any Equity
Interests of New Valley or any New Valley Convertible Securities.
"Permitted Investments" means (i) cash, (ii) Investments in
direct obligations of the United States of America or any agency
thereof or obligations guaranteed by the United States of America,
provided that such obligations mature within one year from the date
the Investment is made or acquired, and (iii) Investments maturing
within one year from the date the Investment is made or acquired in
time deposits with or certificates of deposit issued by a bank or
trust company organized under the laws of the United States of America
or any State thereof having a capital and surplus and undivided
profits aggregating at least $250,000,000.
"Pledge Documents" means the Indenture, the Securities, this
Agreement, the Company Pledge Agreement and all other instruments,
documents and agreements delivered in connection therewith (including
any other pledge agreement, mortgage, security agreement or similar
agreement), as the same may be amended, modified or supplemented from
time to time.
"Pledged Stock" has the meaning ascribed thereto in Section
3(a) hereof.
"Registration Rights Agreements" means, collectively, the BGLS
Registration Rights Agreement and the New Valley Registration Rights
Agreement, as amended, modified or supplemented from time to time.
"Secured Obligations" means, collectively, all obligations and
liabilities of any kind or nature, present or future, absolute or
contingent, of (i) the Company
NV Holdings Pledge and Security Agreement
<PAGE> 232
4
arising under the Securities, the Indenture, the Registration Rights
Agreements, the Company Pledge Agreement or this Agreement, (ii) NV
Holdings arising under this Agreement or any undertaking or agreement
delivered by NV Holdings in connection with the Securities, the
Indenture or this Agreement, (iii) New Valley arising under any
undertaking or agreement delivered by New Valley in connection with
the Securities, the Indenture, the New Valley Registration Rights
Agreement or this Agreement and (iv) Bennett S. LeBow arising under
his undertaking attached to the Indenture and (v) Brooke arising under
its undertaking attached to the Indenture.
"Stock Collateral" means, collectively, the Collateral
described in clauses (a) through (c) of Section 3 hereof and the
proceeds of and to any such property and, to the extent related to any
such property or such proceeds, all books, correspondence, credit
files, records, invoices and other papers.
"Uniform Commercial Code" means the Uniform Commercial Code as
in effect from time to time in the State of New York.
Section 2. Representations and Warranties. NV Holdings
represents and warrants and covenants to the Trustee for the benefit of the
Holders that:
(a) except for the Security Interest, NV Holdings is the sole
legal and equitable owner of the Collateral, holds the same free and
clear of all liens, charges, encumbrances and security interests of
any kind and nature and will make no other assignment, pledge,
mortgage, hypothecation, transfer or other disposition of the
Collateral, other than the sale or application of the Collateral in
compliance with the provisions of Sections 3.09 and 12.08 of the
Indenture;
(b) NV Holdings has good right and legal title to the
Collateral and will defend its title thereto against the claims of all
Persons whomsoever and will maintain and
NV Holdings Pledge and Security Agreement
<PAGE> 233
5
preserve the Security Interest as long as this Agreement shall remain
in full force and effect;
(c) except for the filing of UCC-1 financing statements, no
consent or approval of, or other action by, and no notice to or filing
with, any governmental body or regulatory authority or securities
exchange, was or is necessary as a condition (i) to the validity of
the pledge provided for herein or for the execution, delivery or
performance of this Agreement by NV Holdings or (ii) other than (A)
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 and
regulations thereunder, or (B) the Securities Act, and regulations
thereunder and any applicable blue sky laws, for the exercise by the
Trustee of the voting or other rights provided for in this Agreement
or the remedies in respect of the Pledged Collateral pursuant to this
Agreement;
(d) as of ____________: (i) there are 191,601,437 New Valley
Common Shares issued and outstanding and (ii) there are 1,107,566 New
Valley Class A Preferred Shares issued and outstanding;
(e) the Initial Pledged Shares are duly authorized, validly
issued, fully paid and nonassessable;
(f) NV Holdings has full corporate power and authority to
execute, deliver and perform this Agreement;
(g) except for the Pledge Documents, NV Holdings is not now
and will not become a party to any voting trust or other agreement or
undertaking with respect to the exercise of the voting or consent
rights associated with any of the Stock Collateral (other than an
agreement or undertaking in respect of a sale of the Stock Collateral,
which sale is or will be in compliance with the provisions of Section
12.08 of the Indenture), and there are no other restrictions on the
exercise of such rights;
(h) except for the Pledge Documents, NV Holdings is not now
and will not become a party to any agreement or
NV Holdings Pledge and Security Agreement
<PAGE> 234
6
undertaking pursuant to which New Valley or any other Person could
have the right to purchase any of the Stock Collateral (other than an
agreement or undertaking in respect of a sale of the Stock Collateral,
which sale is or will be in compliance with the provisions of Section
12.08 of the Indenture), and at the time of delivery of any Stock
Collateral to the Trustee there will not be (and NV Holdings will not
thereafter permit to exist) any other restrictions on the transfer of
the Stock Collateral;
(i) except for the Pledge Documents, NV Holdings has the
right to vote, pledge and grant a security interest in, or otherwise
transfer, the Collateral free of any liens (except as set forth in (a)
above);
(j) the grant and perfection of the Security Interest in
the Stock Collateral for the benefit of the Trustee and the Holders,
in accordance with the terms hereof, will not violate the registration
requirements of the Securities Act, any provisions of any other
applicable federal, state or foreign securities laws, or any
applicable general corporation law or other applicable law;
(k) New Valley is a corporation duly organized, validly
existing and in good standing under the laws of the state of its
incorporation and has full power and authority to own or lease its
properties and assets and to carry on its business;
(l) the stock powers delivered to the Trustee with
respect to the Stock Collateral have been, and at the time of the
delivery of any other stock powers to the Trustee in connection with
the pledge of any additional Pledged Securities such stock powers will
be, duly executed;
(m) the pledge of the Initial Pledged Shares pursuant to
this Agreement, together with the transfer of such Initial Pledged
Shares to the Trustee, creates a valid and perfected first priority
security interest in the Initial Pledged Shares, in favor of the
Trustee for the benefit of the Trustee and the Holders, securing the
due and punctual
NV Holdings Pledge and Security Agreement
<PAGE> 235
7
payment and performance in full of the Secured Obligations in
accordance with the respective terms thereof; and
(n) NV Holdings will not sell, assign, transfer or otherwise
dispose of or pledge, hypothecate or otherwise encumber any of its
Equity Interests in New Valley which are pledged hereunder, unless any
such sale, assignment, transfer or disposition is in compliance with
the provisions of Section 12.08 of the Indenture.
Section 3. Collateral. As collateral security for the prompt
payment in full when due (whether at stated maturity, by acceleration or
otherwise) and performance of the Secured Obligations, NV Holdings hereby
pledges and grants to the Trustee for the benefit of the Holders a security
interest in all of NV Holdings's right, title and interest in the following
property, whether now owned by NV Holdings or hereafter acquired and whether
now existing or hereafter coming into existence (all being collectively
referred to herein as "Collateral"):
(a) the shares of stock of New Valley represented by the
certificates identified in Annex 1 hereto and all other shares of
capital stock of whatever class of New Valley now or hereafter owned
by NV Holdings, in each case together with the certificates evidencing
the same (collectively, the "Pledged Stock");
(b) subject to the proviso at the end of this Section 3, all
shares, securities, moneys or property representing a dividend on any
of the Pledged Stock, or representing a distribution or return of
capital upon or in respect of the Pledged Stock, or resulting from a
split-up, revision, reclassification or other like change of the
Pledged Stock or otherwise received in exchange therefor, and any
subscription warrants, rights or options issued to the holders of, or
otherwise in respect of, the Pledged Stock;
(c) without affecting the obligations of NV Holdings under
any provision prohibiting such action hereunder or under the
Indenture, in the event of any consolidation or
NV Holdings Pledge and Security Agreement
<PAGE> 236
8
merger in which an Issuer is not the surviving corporation, all shares
of each class of the capital stock of the successor corporation
(unless such successor corporation is NV Holdings itself) formed by or
resulting from such consolidation or merger (the Pledged Stock,
together with all other certificates, shares, securities, properties
or moneys as may from time to time be pledged hereunder pursuant to
clause (a) or (b) above and this clause (c) being herein collectively
called the "Stock Collateral");
(d) the balance from time to time in the Cash Collateral
Account; and
(e) all other tangible and intangible personal property and
fixtures of NV Holdings, including, without limitation, all proceeds,
products, offspring, accessions, rents, profits, income, benefits,
substitutions and replacements of and to any of the property of NV
Holdings described in this and the preceding clauses of this Section 3
(including, without limitation, any proceeds of insurance thereon and
all causes of action, claims and warranties now or hereafter held by
NV Holdings in respect of any of the items listed above) and, to the
extent related to any property described in said clauses or such
proceeds, products and accessions, all books, correspondence, credit
files, records, invoices and other papers, including without
limitation all tapes, cards, computer runs and other papers and
documents in the possession or under the control of NV Holdings or any
computer bureau or service company from time to time acting for NV
Holdings;
provided that "Collateral" shall not include Excluded Cash.
NV Holdings Pledge and Security Agreement
<PAGE> 237
9
Section 4. Cash Collateral Account.
4.01 Cash Collateral Account. There is hereby established
with the Trustee a cash collateral account (the "Cash Collateral Account") in
the name and under the control of the Trustee into which there shall be
deposited from time to time the cash required to be deposited therein pursuant
to Sections 4.22 and 12.08 of the Indenture and proceeds of any of the
Collateral required to be delivered to the Trustee pursuant hereto. The
balance from time to time in the Cash Collateral Account shall constitute part
of the Collateral hereunder and shall not constitute payment of the Secured
Obligations until applied as hereinafter provided. Except as expressly
provided in the next sentence, the Trustee shall remit the collected balance
outstanding to the credit of the Cash Collateral Account to or upon the order
of NV Holdings as NV Holdings shall from time to time instruct in accordance
with the Indenture. However, at any time following the occurrence and during
the continuance of an Event of Default, the Trustee may in its discretion apply
or cause to be applied (subject to collection) the balance from time to time
outstanding to the credit of the Cash Collateral Account to the payment of the
Secured Obligations in the manner specified in Section 5.09 hereof. The
balance from time to time in the Cash Collateral Account shall be subject to
withdrawal only as provided herein.
4.02 Investment of Balance in Cash Collateral Account.
Amounts on deposit in the Cash Collateral Account shall be invested from time
to time in such Permitted Investments as NV Holdings (or, after the occurrence
and during the continuance of a Default, the Trustee) shall determine, which
Permitted Investments shall be held in the name and be under the control of the
Trustee, provided that at any time after the occurrence and during the
continuance of an Event of Default, the Trustee may in its discretion at any
time and from time to time elect to liquidate any such Permitted Investments
and to apply or cause to be applied the proceeds thereof to the payment of the
Secured Obligations in the manner specified in Section 5.09 hereof.
NV Holdings Pledge and Security Agreement
<PAGE> 238
10
Section 5. Further Assurances; Remedies. In furtherance of
the grant of the pledge and security interest pursuant to Section 3 hereof, NV
Holdings hereby agrees with the Trustee as follows:
5.01 Delivery and Other Perfection. NV Holdings shall:
(a) if any of the shares, securities, moneys or property
required to be pledged by NV Holdings under clauses (a), (b) and (c)
of Section 3 hereof are received by NV Holdings, hold such Property in
trust and forthwith either (x) transfer and deliver to the Trustee
such shares or securities so received by NV Holdings (together with
the certificates for any such shares and securities duly endorsed in
blank or accompanied by undated stock powers duly executed in blank),
all of which thereafter shall be held by the Trustee, pursuant to the
terms of this Agreement, as part of the Collateral or (y) take such
other action as may be necessary or appropriate or as the Trustee may
reasonably request to duly record the Lien created hereunder in such
shares, securities, moneys or property in said clauses (a), (b) and
(c);
(b) deliver and pledge to the Trustee any and all instruments
pledged hereunder, endorsed and/or accompanied by such instruments of
assignment and transfer in such form and substance as may be required
to perfect the pledge thereof hereunder or as the Trustee may
reasonably request; provided, that so long as no Default shall have
occurred and be continuing, NV Holdings may retain for collection in
the ordinary course any instruments received by NV Holdings in the
ordinary course of business and the Trustee shall, promptly upon
request of NV Holdings, make appropriate arrangements for making any
instrument pledged by NV Holdings hereunder available to NV Holdings
for purposes of presentation, collection or renewal (any such
arrangement to be effected, to the extent deemed appropriate by the
Trustee, against trust receipt or like document);
NV Holdings Pledge and Security Agreement
<PAGE> 239
11
(c) give, execute, deliver, file and/or record any financing
statement, notice, instrument, document, agreement or other papers
that may be necessary or desirable or that the Trustee may reasonably
request to create, preserve, perfect or validate the security interest
granted pursuant hereto or to enable the Trustee to exercise and
enforce its rights hereunder with respect to such pledge and security
interest, including, without limitation, causing any or all of the
Stock Collateral to be transferred of record into the name of the
Trustee or its nominee (and the Trustee agrees that if any Stock
Collateral is transferred into its name or the name of its nominee,
the Trustee will thereafter promptly give to NV Holdings copies of any
notices and communications received by it with respect to the Stock
Collateral);
(d) keep full and accurate books and records relating to the
Collateral, and stamp or otherwise mark such books and records in such
manner as may be necessary to reflect the security interests granted
by this Agreement;
(e) permit representatives of the Trustee, upon reasonable
notice, at any time during normal business hours to inspect and make
abstracts from its books and records pertaining to the Collateral, and
permit representatives of the Trustee to be present at NV Holdings's
place of business to receive copies of all communications and
remittances relating to the Collateral, and forward copies of any
notices or communications received by NV Holdings with respect to the
Collateral, all to the extent and in such manner as the Trustee may
reasonably request; and
(f) upon the occurrence and during the continuance of any
Default, upon request of the Trustee, promptly notify (and NV Holdings
hereby authorizes the Trustee so to notify) each account debtor in
respect of any accounts or instruments (each, as defined in the
Uniform Commercial Code) that such Collateral has been assigned to the
Trustee hereunder, and that any payments due or to become due in
respect of such Collateral are to be made directly to the Trustee.
NV Holdings Pledge and Security Agreement
<PAGE> 240
12
5.02 Other Financing Statements and Liens. Without the prior
written consent of the Trustee, NV Holdings shall not file or suffer to be on
file, or authorize or permit to be filed or to be on file, in any jurisdiction,
any financing statement or like instrument with respect to the Collateral in
which the Trustee is not named as the sole secured party.
5.03 Preservation of Rights. The Trustee shall not be
required to take steps necessary to preserve any rights against prior parties
to any of the Collateral.
5.04 Special Provisions Relating to Stock Collateral.
(a) So long as no Event of Default shall have occurred and be
continuing, NV Holdings shall have the right to exercise all voting, consensual
and other powers of ownership pertaining to the Stock Collateral for all
purposes not inconsistent with the terms of this Agreement, the Indenture, the
Securities or any other instrument or agreement referred to herein or therein,
provided that NV Holdings agrees that it will not vote the Stock Collateral in
any manner that is inconsistent with the terms of this Agreement, the
Indenture, the Securities or any such other instrument or agreement; and the
Trustee shall execute and deliver to NV Holdings or cause to be executed and
delivered to NV Holdings all such proxies, powers of attorney, dividend and
other orders, and all such instruments, without recourse, as NV Holdings may
reasonably request for the purpose of enabling NV Holdings to exercise the
rights and powers that it is entitled to exercise pursuant to this Section
5.04(a).
(b) If any Event of Default shall have occurred, then so long
as any Event of Default shall continue, and whether or not the Trustee
exercises any available right to declare any Secured Obligation due and payable
or seeks or pursues any other relief or remedy available to it under applicable
law or under this Agreement, the Indenture, the Securities or any other
agreement relating to such Secured Obligation, all dividends and other
distributions on the Stock Collateral shall be paid directly to the Trustee and
retained by it in the Cash Collateral Account as part of the Stock Collateral,
subject to the terms of
NV Holdings Pledge and Security Agreement
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13
this Agreement, and, if the Trustee shall so request in writing, NV Holdings
agrees to execute and deliver to the Trustee appropriate additional dividend,
distribution and other orders and documents to that end, provided that if all
Events of Default are cured, any such dividend or distribution theretofore paid
to the Trustee shall, upon request of NV Holdings (except to the extent
theretofore applied to the Secured Obligations), be returned by the Trustee to
NV Holdings.
5.05 Events of Default, Etc. During the period during which
an Event of Default shall have occurred and be continuing:
(a) NV Holdings shall, at the request of the Trustee,
assemble the Collateral owned by it at such place or places,
reasonably convenient to both the Trustee and NV Holdings, designated
in its request;
(b) the Trustee may make any reasonable compromise or
settlement deemed desirable with respect to any of the Collateral and
may extend the time of payment, arrange for payment in installments,
or otherwise modify the terms of, any of the Collateral;
(c) the Trustee shall have all of the rights and remedies
with respect to the Collateral of a secured party under the Uniform
Commercial Code (whether or not said Code is in effect in the
jurisdiction where the rights and remedies are asserted) and such
additional rights and remedies to which a secured party is entitled
under the laws in effect in any jurisdiction where any rights and
remedies hereunder may be asserted, including, without limitation, the
right, to the maximum extent permitted by law, to exercise all voting,
consensual and other powers of ownership pertaining to the Collateral
as if the Trustee were the sole and absolute owner thereof (and NV
Holdings agrees to take all such action as may be appropriate to give
effect to such right);
(d) the Trustee in its discretion may, in its name or in the
name of NV Holdings or otherwise, demand, sue for, collect or receive
any money or property at any time payable
NV Holdings Pledge and Security Agreement
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14
or receivable on account of or in exchange for any of the Collateral,
but shall be under no obligation to do so; and
(e) the Trustee may, upon ten business days' prior written
notice to NV Holdings of the time and place, with respect to the
Collateral or any part thereof that shall then be or shall thereafter
come into the possession, custody or control of the Trustee or any of
its agents, sell, lease, assign or otherwise dispose of all or any
part of such Collateral, at such place or places as the Trustee deems
best, and for cash or for credit or for future delivery (without
thereby assuming any credit risk), at public or private sale, without
demand of performance or notice of intention to effect any such
disposition or of the time or place thereof (except such notice as is
required above or by applicable statute and cannot be waived), and the
Trustee or anyone else may be the purchaser, lessee, assignee or
recipient of any or all of the Collateral so disposed of at any public
sale (or, to the extent permitted by law, at any private sale) and
thereafter hold the same absolutely, free from any claim or right of
whatsoever kind, including any right or equity of redemption
(statutory or otherwise), of NV Holdings, any such demand, notice and
right or equity being hereby expressly waived and released. The
Trustee may, without notice or publication, adjourn any public or
private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and such sale
may be made at any time or place to which the sale may be so
adjourned.
The proceeds of each collection, sale or other disposition under this Section
5.05 shall be applied in accordance with Section 5.09 hereof.
NV Holdings recognizes that, by reason of certain prohibitions
contained in the Securities Act, and applicable state securities laws, the
Trustee may be compelled, with respect to any sale of all or any part of the
Collateral, to limit purchasers to those who are "accredited investors" (as
defined in the Securities Act) and who will agree, among other things, to
acquire the Collateral for their own account, for investment and
NV Holdings Pledge and Security Agreement
<PAGE> 243
15
not with a view to the distribution or resale thereof. NV Holdings
acknowledges that any such private sales may be at prices and on terms less
favorable to the Trustee than those obtainable through a public sale without
such restrictions, and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially
reasonable manner and that the Trustee shall have no obligation to engage in
public sales and no obligation to delay the sale of any Collateral for the
period of time necessary to permit the respective Issuer or issuer thereof to
register it for public sale.
5.06 Deficiency. If the proceeds of sale, collection or
other realization of or upon the Collateral pursuant to Section 5.05 hereof are
insufficient to cover the costs and expenses of such realization and the
payment in full of the Secured Obligations, NV Holdings shall remain liable for
any deficiency.
5.07 Removals, Etc. Without at least 30 days' prior written
notice to the Trustee, NV Holdings shall not (i) maintain any of its books and
records with respect to the Collateral at any office or maintain its principal
place of business at any place, or permit any inventory or equipment (each, as
defined in the Uniform Commercial Code) to be located anywhere, other than at
one of the locations identified in Annex 2 hereto or in transit from one of
such locations to another or (ii) change its name, or the name under which it
does business, from the name shown on the signature pages hereto.
5.08 Private Sale. The Trustee shall incur no liability as a
result of the sale of the Collateral, or any part thereof, at any private sale
pursuant to Section 5.05 hereof conducted in a commercially reasonable manner,
including any such sale limited to "accredited investors", as such term is
defined in Rule 501(a) of the Securities Act. NV Holdings hereby waives any
claims against the Trustee arising by reason of the fact that the price at
which the Collateral may have been sold at such a private sale was less than
the price that might have been obtained at a public sale or was less than the
aggregate amount of the Secured Obligations, even if the Trustee accepts the
first
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16
offer received and does not offer the Collateral to more than one offeree.
5.09 Application of Proceeds. Except as otherwise herein
expressly provided, the proceeds of any collection, sale or other realization
of all or any part of the Collateral pursuant hereto, and any other cash at the
time held by the Trustee under Section 4 hereof or this Section 5, shall be
applied by the Trustee:
First, to the payment of the costs and expenses of such
collection, sale or other realization, including reasonable
out-of-pocket costs and expenses of the Trustee and the fees and
expenses of its agents and counsel, and all expenses incurred and
advances made by the Trustee in connection therewith;
Next, to the payment in full of the Secured Obligations; and
Finally, to the payment to NV Holdings, or its successors or
assigns, or as a court of competent jurisdiction may direct, of any
surplus then remaining.
As used in this Section 5, "proceeds" of Collateral shall mean
cash, securities and other property realized in respect of, and distributions
in kind of, Collateral, including any thereof received under any
reorganization, liquidation or adjustment of debt of NV Holdings or any issuer
of or obligor on any of the Collateral.
5.10 Attorney-in-Fact. Without limiting any rights or powers
granted by this Agreement to the Trustee while no Event of Default has occurred
and is continuing, upon the occurrence and during the continuance of any Event
of Default the Trustee is hereby appointed the attorney-in-fact of NV Holdings
for the purpose of carrying out the provisions of this Section 5 and taking any
action and executing any instruments that the Trustee may deem necessary or
advisable to accomplish the purposes hereof, which appointment as
attorney-in-fact is irrevocable and coupled with an interest. Without limiting
the generality of the
NV Holdings Pledge and Security Agreement
<PAGE> 245
17
foregoing, so long as the Trustee shall be entitled under this Section 5 to
make collections in respect of the Collateral, the Trustee shall have the right
and power to receive, endorse and collect all checks made payable to the order
of NV Holdings representing any dividend, payment or other distribution in
respect of the Collateral or any part thereof and to give full discharge for
the same.
5.11 Perfection. Prior to or concurrently with the execution
and delivery of this Agreement, NV Holdings shall (i) file such financing
statements and other documents in such offices as may be necessary or
appropriate or as the Trustee may reasonably request to perfect the security
interests granted by Section 3 of this Agreement, (ii) cause the Trustee to be
listed as the lienholder on all certificates of title or ownership relating to
motor vehicles owned by NV Holdings and (iii) deliver to the Trustee all
certificates identified in Annex 1 hereto, accompanied by undated stock powers
duly executed in blank.
5.12 Termination. When all Secured Obligations shall have
been paid in full, this Agreement shall terminate, and the Trustee shall
forthwith cause to be assigned, transferred and delivered, against receipt but
without any recourse, warranty or representation whatsoever, any remaining
Collateral and money received in respect thereof, to or on the order of NV
Holdings. The Trustee shall also execute and deliver to NV Holdings upon such
termination such Uniform Commercial Code termination statements, certificates
for terminating the Liens on the motor vehicles and such other documentation as
shall be reasonably requested by NV Holdings to effect the termination and
release of the Liens on the Collateral.
5.13 Further Assurances. NV Holdings agrees that, from time
to time it will execute and deliver such further documents and do such other
acts and things as may be necessary or appropriate or as the Trustee may
reasonably request in order fully to effect the purposes of this Agreement.
5.14 Release of Motor Vehicles. So long as no Default shall
have occurred and be continuing, upon the request of NV Holdings, the Trustee
shall execute and deliver to NV Holdings
NV Holdings Pledge and Security Agreement
<PAGE> 246
18
such instruments as NV Holdings shall reasonably request to remove the notation
of the Trustee as lienholder on any certificate of title for any Motor Vehicle;
provided that any such instruments shall be delivered, and the release
effective only upon receipt by the Trustee of a certificate from the NV
Holdings stating that the Motor Vehicle the lien on which is to be released is
to be sold or has suffered a casualty loss (with title thereto passing to the
casualty insurance company therefor in settlement of the claim for such loss).
Section 6. Miscellaneous.
6.01 No Waiver. No failure on the part of the Trustee to
exercise, and no course of dealing with respect to, and no delay in exercising,
any right, power or remedy hereunder shall operate as a waiver thereof; nor
shall any single or partial exercise by the Trustee of any right, power or
remedy hereunder preclude any other or further exercise thereof or the exercise
of any other right, power or remedy. The remedies herein are cumulative and
are not exclusive of any remedies provided by law.
6.02 Notices. All notices, requests, consents and demands
hereunder shall be in writing and telecopied or delivered to the intended
recipient at its "Address for Notices" specified pursuant to Section 13.02 of
the Indenture (or, in the case of NV Holdings, at the address specified therein
for the Company) and shall be deemed to have been given at the times specified
in said Section 13.02.
6.03 Amendments, Etc. The terms of this Agreement may be
waived, altered or amended only by an instrument in writing duly executed by NV
Holdings and the Trustee in accordance with Article 10 of the Indenture. Any
such amendment or waiver shall be binding upon the Trustee, each holder of any
of the Secured Obligations and NV Holdings.
6.04 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the respective successors and assigns of NV
Holdings, the Trustee and each holder of any of the Secured Obligations
(provided, however, that
NV Holdings Pledge and Security Agreement
<PAGE> 247
19
NV Holdings shall not assign or transfer its rights hereunder without the prior
written consent of the Trustee).
6.05 Captions. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
6.06 Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument and either of the parties hereto may execute this Agreement
by signing any such counterpart.
6.07 Governing Law. This Agreement shall be governed by,
and construed in accordance with, the law of the State of New York.
6.08 Agents and Attorneys-in-Fact. The Trustee may employ
agents and attorneys-in-fact in connection herewith and shall not be
responsible for the negligence or misconduct of any such agents or
attorneys-in-fact selected by it in good faith.
6.09 Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (i) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of the Trustee in
order to carry out the intentions of the parties hereto as nearly as may be
possible and (ii) the invalidity or unenforceability of any provision hereof in
any jurisdiction shall not affect the validity or enforceability of such
provision in any other jurisdiction.
6.10 Indemnification of Trustee and Holders. New Valley
Holdings hereby agrees to indemnify the Trustee and the Holders from, and hold
the Trustee and the Holders harmless against, any losses, liabilities, claims,
damages or expenses arising under any Environmental Law as a result of the
past, present or future operations of New Valley Holdings or New Valley
following the exercise by the Trustee of any of its rights and remedies under
this Agreement.
NV Holdings Pledge and Security Agreement
<PAGE> 248
20
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
and Security Agreement to be duly executed and delivered as of the day and year
first above written.
NEW VALLEY HOLDINGS, INC.
By
------------------------------
Title:
SHAWMUT BANK, N.A., as Trustee
By
------------------------------
Title:
NV Holdings Pledge and Security Agreement
<PAGE> 249
ACKNOWLEDGMENT AND UNDERTAKING
FOR GOOD AND VALUABLE CONSIDERATION, the receipt and
sufficiency of which are hereby acknowledged, New Valley Corporation, a New
York corporation ("New Valley") hereby acknowledges receipt of a copy of the
foregoing Pledge and Security Agreement dated as of ____________, 1995 and
agrees as follows (with capitalized terms used and not otherwise defined below
that are defined in such Pledge and Security Agreement having the meanings
ascribed to such terms therein):
1. New Valley will promptly note on its books the security
interests granted under such Pledge and Security Agreement in the Pledged
Stock.
2. New Valley hereby waives any rights or requirement at any
time hereafter to receive a copy of such Pledge and Security Agreement in
connection with the registration of any Pledged Stock in the name of the
Trustee or its nominee or the exercise of voting rights by the Trustee.
3. New Valley agrees (a) to take all actions contemplated to
be taken by it under the Pledge and Security Agreement, (b) to comply with all
provisions thereof and (c) not to participate in any transaction that is
inconsistent with its obligations hereunder or thereunder.
The undersigned hereby represents and warrants that (a) the
execution, delivery and performance of this Acknowledgment and Undertaking has
been duly authorized by all necessary action on the part of the undersigned,
(b) the undersigned has duly executed and delivered this Acknowledgment and
Undertaking and (c) this Acknowledgment and Undertaking is its legal, valid and
binding obligation, enforceable against the undersigned in accordance with its
terms. This Acknowledgment and Undertaking shall be governed by, and construed
in accordance with, the law of the State of New York.
This Acknowledgment and Undertaking may not be terminated,
revoked, amended or otherwise modified without the prior written consent of the
Trustee, which is an express third-party beneficiary hereof.
Dated: ____________, 1995
<PAGE> 250
2
NEW VALLEY CORPORATION
By
------------------------------
Name:
Title:
NV Holdings Pledge and Security Agreement
<PAGE> 251
- 2 -
ANNEX 1
PLEDGED STOCK
[See Section 3]
<TABLE>
<CAPTION>
Certificate Registered
Issuer Nos. Owner Number of Shares
- ------ ----------- ---------- ----------------
<S> <C> <C> <C>
New Valley NY 33562 New Valley 7,200,000 shares of
Corporation Holdings, Inc. common stock, par
value $.01 per share
New Valley NY 33563 New Valley 1,800,000 shares of
Corporation Holdings, Inc. common stock, par
value $.01 per share
New Valley NY 33564 New Valley 3,175,970 shares of
Corporation Holdings, Inc. common stock, par
value $.01 per share
New Valley NY 33565 New Valley 67,223,284 shares of
Corporation Holdings, Inc. common stock, par
value $.01 per share
New Valley NA 17528 New Valley 618,326 shares of
Corporation Holdings, Inc. $15.00 Class A
Increasing Rate
Cumulative Senior
Preferred Shares, par
value $.01 per share
</TABLE>
Annex 1 to NV Holdings Pledge and Security Agreement
<PAGE> 252
ANNEX 2
LIST OF LOCATIONS
[See Section 5.07]
100 S.E. Second Street
Miami, Florida 33131
Annex 2 to NV Holdings Pledge and Security Agreement
<PAGE> 253
EXHIBIT F
A/B EXCHANGE
AND
REGISTRATION RIGHTS AGREEMENT
dated as of November 21, 1995
among
BGLS INC.,
BROOKE GROUP LTD.,
AIF II, L.P.,
ARTEMIS AMERICA PARTNERSHIP,
TORTOISE CORP.,
and
MAINSTAY HIGH YIELD CORPORATE BOND FUND
<PAGE> 254
A/B EXCHANGE AND REGISTRATION RIGHTS AGREEMENT (this
"Agreement") dated as of November 21, 1995 among BGLS INC., a Delaware
corporation ("BGLS"), BROOKE GROUP LTD., a Delaware corporation ("Brooke" and,
together with BGLS, the "Brooke Parties"), AIF II, L.P., a Delaware limited
partnership ("AIF"), ARTEMIS AMERICA PARTNERSHIP, a Delaware general partnership
and successor to Artemis America LLC, a Delaware limited liability company
("Artemis" and, together with AIF, the "Apollo Holders"), TORTOISE CORP., a New
York corporation ("Tortoise"), and MAINSTAY HIGH YIELD CORPORATE BOND FUND, a
series of The MainStay Funds, a Massachusetts business trust ("Mainstay" and,
together with the Apollo Holders and Tortoise, the "Participating Holders").
RECITALS
This Agreement is entered into in connection with the offer
by BGLS (the "Exchange Offer and Consent Solicitation") to exchange (a) its
15.75% Senior Secured Notes Due 2000, Series A issued pursuant to the Indenture
(defined herein) (the "Series A Notes") for all its outstanding 13.75% Series 2
Senior Secured Notes Due 1997 (the "Series 2 Notes") and (b) its 15.75% Senior
Secured Notes Due 2000, Series B issued pursuant to the Indenture (defined
herein) (the "Series B Notes") for all its outstanding (i) 13.500% Senior
Subordinated Reset Notes Due 1997 (the interest rate on which has been reset to
16 1/8%) and (ii) 14.500% Subordinated Debentures Due 1998 (the Series A Notes
and the Series B Notes being collectively referred to herein as, the "Senior
Secured Notes"). In order to induce the Participating Holders to surrender any
Series 2 Notes owned by them for exchange, BGLS has agreed to provide the
registration rights set forth in this Agreement with respect to Series A Notes,
for the equal benefit of all the exchanging holders of Series A Notes and their
respective direct and indirect transferees. The execution and delivery of this
Agreement is a condition to the obligation of BGLS to make the Exchange Offer
and Consent Solicitation and to the Participating Holders' obligation to tender
any Series A Notes held by them for exchange pursuant to the Exchange Agreement
(defined below).
NOW, THEREFORE, in consideration of the representations,
warranties and agreements set forth in the Exchange Agreement and herein, and
intending to be legally bound, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS AND USAGE
<PAGE> 255
Section 1.1 Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"Affiliate" means an "affiliate" as defined in Rule 405 under
the Securities Act.
"BGLS" has the meaning set forth in the Preamble.
"Black Out Day" shall mean any day beginning with the day when
BGLS has given the notice referred to in Section 2.3.2 until the day before the
day when BGLS has given the advice referred to therein.
"Brooke" has the meaning set forth in the Preamble.
"Brooke Parties" has the meaning set forth in the Preamble.
"Business Day" means any day other than a Saturday, a Sunday
or any other day on which banking institutions are not authorized or required
to close in New York City or Miami, Florida.
"Effectiveness Date" means the date five months after the
Filing Date.
"Effectiveness Period" has the meaning set forth in Section
2.2.1.
"Exchange Act" means the Securities Exchange Act of 1934.
"Exchange Agreement" means the Exchange Agreement dated as of
November 21, 1995 among the Brooke Parties, Starfire Holding Corporation, a
Delaware corporation, and the Participating Holders.
"Exchange Offer" has the meaning set forth in Section 2.1.
"Exchange Offer and Consent Solicitation" has the meaning set
forth in the recitals.
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<PAGE> 256
"Exchange Offer Registration Statement" has the meaning set
forth in Section 2.1.
"Exchange Securities" has the meaning set forth in Section
2.1.
"Filing Date" means the date 10 Business Days after the
commencement of the Exchange Offer and Consent Solicitation.
"Holder" means any holder of a Registrable Security.
"Indenture" means the Indenture to be dated as of December __,
1995, between BGLS and the Trustee pursuant to which BGLS will issue the Senior
Secured Notes.
"Initial Shelf Registration" has the meaning set forth in
Section 2.2.1.
"Liquidated Damages" has the meaning set forth in Section 3.1.
"Losses" has the meaning set forth in Section 5.1.
"Mainstay" has the meaning set forth in the Preamble.
"Minimum Amount" means $5,000,000 or, if less than $5,000,000
in aggregate principal amount of the Registrable Securities remain outstanding,
the greater of $2,000,000 and the remaining amount of Registrable Securities
remaining to be disposed of pursuant to a Shelf Registration.
"Participating Broker-Dealer" has the meaning set forth in
Section 2.1.
"Participating Holders" has the meaning set forth in the
Preamble.
"Person" or "person" means an individual, trustee,
corporation, limited liability company, partnership, joint stock company,
trust, unincorporated association, union, business association, firm or other
entity.
"Preliminary Prospectus" means any preliminary prospectus that
may be included in any Registration Statement.
3
<PAGE> 257
"Prospectus" means the prospectus included in or related to any
Registration Statement (including a prospectus that includes any information
previously omitted from a prospectus filed as part of an effective Registration
Statement in reliance upon Rule 430A promulgated under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"Registrable Securities" means each Series A Note held by a
Participating Holder, and its direct and indirect transferees, at all times
subsequent hereto, until (i) such Series A Note is sold in an open market
transaction or in an underwritten public offering, (ii) such Series A Note is
sold pursuant to a Registration Statement, (iii) such Series A Note is eligible
for resale without restriction pursuant to Rule 144(k) of the Regulations or any
similar rule or regulation hereafter adopted by the SEC or (iv) such Series A
Note ceases to be outstanding.
"Registration Statement" means any registration statement of
BGLS under the Securities Act that covers any of the Registrable Securities,
including the Prospectus, amendments and supplements to such registration
statement, including posteffective amendments, all exhibits, and all material
incorporated by reference or deemed to be incorporated by reference in such
registration statement and all material deemed part of such registration
statement by Rule 430A of the Regulations.
"Regulations" means the General Rules and Regulations of the
SEC under the Securities Act.
"Rule 415" means Rule 415 of the Regulations or any similar
rule or regulation hereafter adopted by the SEC.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933.
4
<PAGE> 258
"Senior Secured Notes" has the meaning set forth in the
Recitals.
"Shelf Notice" has the meaning set forth in Section 2.1.
"Shelf Registration" has the meaning set forth in Section
2.2.2.
"Staff" has the meaning set forth in Section 2.1.
"Subsequent Shelf Registration" has the meaning set forth in
Section 2.2.2.
"Trustee" means Shawmut Bank, N.A., or any successor trustee
under the Indenture.
"underwritten registration" or "underwritten offering" means a
registration in which securities of BGLS are sold to one or more underwriters
or group or a syndicate of underwriters for reoffering to the public.
Section 1.2 Usage. (a) References to Articles, Sections and
Exhibits are to articles and sections hereof and exhibits hereto, references to
a Person are also references to its successors and assigns, references to a
document are to it as amended, waived and otherwise modified from time to time,
and references to a statute or another governmental rule are to it as amended
and otherwise modified from time to time. The definitions set forth in Section
1.1 are equally applicable both to the singular and plural forms and the
feminine, masculine and neuter forms of the terms defined. "Including" and
correlative terms shall be deemed to be followed by "without limitation", if
not followed by such words or words of like import. The headings of Articles
and Sections and the table of contents relating hereto have been included
solely for convenience of references and shall not have any effect on the
construction hereof.
(b) This Agreement contemplates the filing of
registration statements under the Securities Act involving various offers and
sales of securities. In connection with such registration statements, there
may be identified therein one or more underwriters through which securities are
to be offered pursuant to either a "firm-commitment" or "best-efforts"
5
<PAGE> 259
arrangement, and, in the case where there is more than one underwriter, one or
more of the underwriters may be designated as the "manager" or "representative"
or the "co-managers" or "representatives" of the several underwriters.
Accordingly, all references herein to an "underwriter" or the "underwriters" are
intended to refer to a "principal underwriter" (as defined in Rule 405 of the
Regulations) and to provide for those transactions in which securities may be
offered by or through one or more underwriters, and not to imply that any of the
transactions contemplated hereby is conditioned in any manner whatsoever on the
participation therein by one or more underwriters on behalf of any party.
ARTICLE 2
REGISTRATION OF SECURED NOTES UNDER SECURITIES ACT;
EXCHANGE OFFER
Section 2.1 Exchange Offer; Shelf Notice.
(a) BGLS shall use its reasonable best efforts to file
with the SEC no later than the Filing Date a registration statement (the
"Exchange Offer Registration Statement") on an appropriate form under the
Securities Act with respect to a proposed offer by BGLS (the "Exchange Offer")
to the Holders of Series A Notes to issue and deliver to such Holders, in
exchange for their Series A Notes, a corresponding principal amount of Series B
Notes (the "Exchange Securities"). BGLS agrees to use its reasonable best
efforts to (x) cause the Exchange Offer Registration Statement to become
effective under the Securities Act on or before the Effectiveness Date; (y)
keep the Exchange Offer open for acceptance for at least 20 Business Days (or
longer if required by applicable law) after the date that notice of the
Exchange Offer is mailed to Holders and to conduct the Exchange Offer in
accordance with such procedures as may be required by applicable provisions of
the Exchange Act; and (z) consummate the Exchange Offer on or prior to the
Effectiveness Date. The Participating Holders acknowledge and agree that the
Exchange Offer is based upon existing interpretations of the staff of the SEC's
Division of Corporation Finance (the "Staff"), which interpretations are
subject to change without notice. Each Holder who participates in the Exchange
Offer will be required to represent to BGLS that any Exchange Securities
received by it will be acquired in the ordinary course of its business, that at
the time of the
6
<PAGE> 260
consummation of the Exchange Offer such Holder will have no arrangement or
understanding with any Person to participate in the distribution (within the
meaning of the Securities Act) of the Exchange Securities, and that such Holder
is not an Affiliate of BGLS (within the meaning of the Securities Act).
(b) BGLS shall include within each prospectus distributed
to any Holders of Series A Notes contained in the Exchange Offer Registration
Statement a section entitled "Plan of Distribution," which shall contain a
summary statement of the positions taken or policies made by the Staff with
respect to the potential "underwriter" status of any broker-dealer that holds
Series A Notes acquired for its own account as a result of market-making or
other trading activities and will be the beneficial owner (as defined in Rule
13d-3 under the Exchange Act or any similar rule or regulation hereafter adopted
by the SEC) of Exchange Securities received by such broker-dealer in the
Exchange Offer (a "Participating Broker-Dealer"), and a statement that any such
broker-dealer who receives Exchange Securities for Series A Notes pursuant to
the Exchange Offer may be deemed to be an "underwriter" within the meaning of
the Securities Act and must deliver a prospectus meeting the requirements of the
Securities Act in connection with any resale of such Exchange Securities, which
prospectus delivery requirement may be satisfied by the delivery of the final
prospectus contained in the Exchange Offer Registration Statement. Such "Plan
of Distribution" section shall also state that the delivery by a Participating
Broker-Dealer of the final prospectus relating to the Exchange Offer in
connection with resales of Exchange Securities shall not be deemed to be an
admission by such Participating Broker-Dealer that it is an "underwriter" within
the meaning of the Securities Act, and shall contain all other information with
respect to resales of the Exchange Securities by Participating Broker-Dealers
that the SEC may require in connection therewith. Such "Plan of Distribution"
section shall also state that BGLS agrees to allow the use of each prospectus
distributed to any Holders of Registrable Securities by Participating
Broker-Dealers subject to the prospectus delivery requirements of the Securities
Act.
In connection with the Exchange Offer, BGLS shall:
(i) mail or otherwise deliver to each Holder a copy of the
prospectus forming part of the Exchange Offer
7
<PAGE> 261
Registration Statement, together with an appropriate letter of
transmittal and related documents;
(ii) permit Holders to withdraw tendered Series A Notes at
any time prior to the close of business, New York time, on the last
Business Day on which the Exchange Offer shall remain open, by sending
to the institution specified in the notice, a telegram, telex,
facsimile transmission or letter setting forth the name of the Holder,
the principal amount of Series A Notes delivered for exchange, and a
statement that such Holder is withdrawing his election to have such
Series A Notes or a portion thereof exchanged;
(iii) notify each Holder that any Series A Notes not tendered
will remain outstanding and continue to accrue interest, but will not
retain any rights under this Agreement except as otherwise expressly
provided herein; and
(iv) otherwise comply in all material respects with all
applicable laws relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer,
BGLS shall:
(A) accept for exchange all Series A Notes or portions
thereof validly tendered and not validly withdrawn pursuant to the
Exchange Offer;
(B) deliver to the Trustee for cancellation all Series A
Notes or portions thereof so accepted for exchange; and
(C) issue, and cause the Trustee to authenticate and deliver
promptly to each Holder of Series A Notes, Exchange Securities equal
in principal amount to the Series A Notes of such Holder so accepted
for exchange.
The Exchange Securities shall be issued under the Indenture,
with such changes to the Indenture as are necessary to comply with any
requirements of the SEC to maintain the qualification thereof under the Trust
Indenture Act.
(c) If (1) prior to the consummation of the Exchange
Offer, BGLS or any Participating Holder reasonably determines in
8
<PAGE> 262
good faith that (i) the Exchange Securities would not, upon receipt, be
tradeable by the Holders of the Series A Notes which are not Affiliates of BGLS
or broker-dealers and who can make the representation referred to in the last
sentence of Section 2.1(a) without restriction under the Securities Act and
without restrictions under applicable state securities or Blue Sky laws, (ii)
it would be impossible or inadvisable for such Participating Holder to make the
representation referred to in the last sentence of Section 2.1(a) or (iii) the
SEC is unlikely to permit the consummation of the Exchange Offer prior to the
Effectiveness Date or (2) the Exchange Offer is commenced and not consummated
on or prior to the Effectiveness Date for any reason, then BGLS shall promptly
deliver to the Participating Holders and the Trustee written notice thereof
(the "Shelf Notice") and shall file an Initial Shelf Registration pursuant to
Section 2.2.1. Following the delivery of a Shelf Notice to the Participating
Holders, BGLS shall not have any further obligation to conduct the Exchange
Offer under this Section 2.1 with respect to the Participating Holders to which
such Shelf Notice relates.
Section 2.2 Shelf Registration.
If a Shelf Notice is delivered as contemplated by Section
2.1(c), then:
Section 2.2.1 Initial Shelf Registration. BGLS shall
prepare and file with the SEC a Registration Statement for an offering to be
made by the Participating Holders on a continuous basis under Rule 415 covering
all the Registrable Securities (the "Initial Shelf Registration") as soon as
practicable following delivery of the Shelf Notice. The Initial Shelf
Registration shall be on an appropriate form permitting registration of all
Registrable Securities for resale by Participating Holders in the manner or
manners reasonably designated by them (including one or more underwritten
offerings). BGLS shall use its reasonable best efforts to cause the Initial
Shelf Registration to be declared effective under the Securities Act by the
Effectiveness Date and to keep the Initial Shelf Registration continuously
effective and the Prospectus current under the Securities Act during the period
(the "Effectiveness Period") ending on the earlier of (i) the earliest date on
which (x) all Registrable Securities covered by the Initial Shelf Registration
have been sold in the manner set forth and as contemplated in the Initial Shelf
Registration, (y) a
9
<PAGE> 263
Subsequent Shelf Registration covering all the Registrable Securities has been
declared effective under the Securities Act or (z) in the opinion of Milbank,
Tweed, Hadley & McCloy or other counsel to BGLS reasonably acceptable to the
Participating Holders, which opinion shall be reasonably satisfactory in form,
scope and substance to the Participating Holders, registration of the
Registrable Securities is no longer required under the Securities Act for the
Participating Holders to sell all remaining Registrable Securities in the open
market without limitations as to volume or manner of sale and without being
required to file any forms or reports with the SEC under the Securities Act or
the Regulations other than a notice of sale under Rule 144 under the
Regulations. No Participating Holder may include any of its Registrable
Securities in any Shelf Registration pursuant to this Agreement unless and
until such Participating Holder furnishes to the Company in writing such
information as the Company may reasonably request pursuant to Section 7.2(b).
Section 2.2.2 Subsequent Shelf Registration. If the
Initial Shelf Registration or any Subsequent Shelf Registration ceases to be
effective for any reason at any time during the Effectiveness Period, BGLS
shall, subject to Section 2.3.1(k), use its reasonable best efforts to (i)
obtain the prompt withdrawal of any order suspending the effectiveness thereof
and (ii) in any event, within 45 days of such cessation of effectiveness, amend
the Shelf Registration in a manner reasonably expected to obtain the withdrawal
of the order suspending the effectiveness thereof or file an additional
Registration Statement covering all of the Registrable Securities (a
"Subsequent Shelf Registration") for an offering to be made by the
Participating Holders on a delayed or continuous basis under Rule 415 in a
manner reasonably expected to be acceptable to the SEC. If a Subsequent Shelf
Registration is filed, BGLS shall use its reasonable best efforts to cause the
Subsequent Shelf Registration to be declared effective as soon as practicable
after such filing and to keep such Registration Statement continuously
effective and the Prospectus current to the end of the Effectiveness Period.
As used herein, the term "Shelf Registration" means the Initial Shelf
Registration and any Subsequent Shelf Registration.
Section 2.2.3 Supplements and Amendments. Subject
to the last sentence of Section 2.3.1(k), BGLS shall
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<PAGE> 264
promptly supplement and amend the Registration Statement and the Prospectus (i)
if required by the rules, regulations or instructions applicable to the
registration form used for the Registration Statement or the Prospectus, (ii)
if required by the Securities Act or the Regulations, (iii) if required to
prevent the Registration Statement or Prospectus from containing any material
misstatement or omitting to state a material fact required to be stated therein
or necessary to make the statements therein not misleading or if reasonably
requested by one or more Participating Holders holding in the aggregate at
least the Minimum Amount of Registrable Securities or by any underwriter of the
Registrable Securities.
Section 2.3 Registration Procedures.
Section 2.3.1 Shelf Registration. In connection
with any registration of Exchange Securities pursuant to Section 2.1 or
Registrable Securities pursuant to Section 2.2.1 or Section 2.2.2, BGLS shall
use its reasonable best efforts to effect such registrations to permit the sale
of such Registrable Securities or Exchange Securities in accordance with the
intended method or methods of disposition thereof, which in the case of any
Shelf Registration shall be the method or methods of disposition reasonably
intended by one or more Participating Holders of the Registrable Securities
covered by such Registration Statement (the "Selling Participating Holders")
holding in the aggregate at least the Minimum Amount of Registrable Securities,
and pursuant thereto BGLS shall:
(a) Filing of Registration Statement. Before
filing any Shelf Registration or Prospectus or any amendments or supplements
thereto, furnish to and afford each Selling Participating Holder, and the
managing underwriters, if any, a reasonable opportunity to review and, in the
case of such Selling Participating Holders, if they desire, comment on all such
documents (including any documents to be incorporated by reference therein and
all exhibits thereto) proposed to be filed.
(b) Compliance with Law. Subject to Section
2.3.1(k), comply with the provisions of the Securities Act, the Exchange Act
and the rules and regulations of the SEC promulgated thereunder applicable to
it with respect to the disposition of all Registrable Securities or Exchange
Securities covered by such Registration Statement or Exchange Offer
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Registration Statement as amended or by such Prospectus as supplemented.
(c) Notice. If a Shelf Registration is filed,
notify the Selling Participating Holders and the managing underwriters, if any,
promptly, and confirm such notice in writing (i) when a Registration Statement
or an amendment thereto or a Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to a Shelf
Registration or any post-effective amendment, when the same has become effective
(including in such notice a written statement that any such Selling
Participating Holder may, upon request, obtain, without charge, one conformed
copy of such Shelf Registration or post-effective amendment including financial
statements and schedules, documents incorporated or deemed to be incorporated by
reference and exhibits), (ii) of the issuance by the SEC of any stop order
suspending the effectiveness of a Shelf Registration or of any order preventing
or suspending the use of any Preliminary Prospectus, the initiation of any
proceedings for that purpose or any other communication between the SEC and BGLS
or Brooke or their representatives relating to a Shelf Registration, (iii) if at
any time when a prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Securities under a Shelf Registration,
the representations and warranties of BGLS contained in any agreement (including
any underwriting agreement) contemplated by Section 2.3.1(m) cease to be true
and correct, (iv) of the receipt by BGLS of any notification with respect to the
suspension of the qualification or exemption from qualification of a
Registration Statement or any of the Registrable Securities for offer or sale in
any jurisdiction, or the initiation or threatening of any proceeding for such
purpose, (v) of the happening of any event or any information becoming known
that requires the making of any changes in such Registration Statement,
Prospectus or documents so that, in the case of the Registration Statement, it
will not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading, and that, in the case of the Prospectus, it will not
contain any untrue statement of a material fact or omit to state any material
fact necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading, and (vi) of BGLS's determination
that a post-
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effective amendment to a Registration Statement would be necessary or advisable
under applicable law.
(d) Prevent Suspension of Effectiveness. Use its
reasonable best efforts to prevent the issuance of any order suspending the
effectiveness of a Registration Statement or of any order preventing or
suspending the use of a Prospectus or suspending the qualification (or exemption
from qualification) of any of the Registrable Securities or the Exchange
Securities for offers or sales in any jurisdiction, and, if any such order is
issued, use its reasonable best efforts to obtain the withdrawal of any such
order at the earliest possible moment.
(e) Underwritten Offering. If a Shelf
Registration is filed and the Registrable Securities are to be sold in an
underwritten offering, (i) promptly as is reasonably practicable incorporate in
a prospectus supplement or post-effective amendment to the Registration
Statement such information as is required by the Securities Act, Regulation S-K
of the Regulations and the Regulations and instructions applicable to the
registration form used for such Registration Statement to be disclosed
concerning, among other things, the terms of the underwritten offering, the
underwriters, and the plan of distribution and (ii) make all required filings of
such prospectus supplement or such post-effective amendment as soon as
practicable.
(f) Copies of Filings. Furnish to the Selling
Participating Holders that so request and each managing underwriter, if any,
without charge, one conformed copy of the Registration Statement and each post-
effective amendment thereto, including financial statements and schedules, all
documents incorporated or deemed to be incorporated therein by reference and all
exhibits.
(g) Delivery of Prospectuses. If a Shelf
Registration is filed, deliver to the Participating Holders, and the
underwriters, if any, without charge, as many copies of the Prospectus or
Prospectuses (including each form of Preliminary Prospectus) and each amendment
or supplement thereto and any documents incorporated or deemed to be
incorporated by reference therein as such Persons may reasonably request; and
BGLS hereby consents to the use of each such Prospectus, Preliminary Prospectus,
and each amendment or supplement thereto by each of
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the Selling Participating Holders and the underwriters or agents, if any, and
dealers, if any, in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement thereto
in the manner set forth in the relevant Registration Statement.
(h) Blue Sky Laws. Use its reasonable best
efforts to register or qualify, and to cooperate with one or more Selling
Participating Holders holding in the aggregate at least the Minimum Amount of
Registrable Securities, the underwriters, if any, and their respective counsel
in connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions within the United
States as the Selling Participating Holders or the managing underwriters, if
any, reasonably request in writing; keep each such registration or qualification
(or exemption therefrom) effective during the Effectiveness Period; and do any
and all other acts or things reasonably necessary or advisable to enable the
disposition in such jurisdictions of the Registrable Securities covered by the
applicable Registration Statement in the manner set forth in such Registration
Statement, provided that BGLS shall not be required to (A) qualify generally to
do business in any jurisdiction where it is not then so qualified, (B) subject
itself to general service of process in any such jurisdiction where it is not
then so subject or (C) subject itself to taxation in a material amount in any
such jurisdiction.
(i) Certificates. Cooperate with the Trustee and,
in the case of a Shelf Registration, the Selling Participating Holders and the
managing underwriters, if any, to facilitate the timely preparation and delivery
of certificates representing Exchange Securities or Registrable Securities, as
the case may be, to be sold, which certificates shall not bear any restrictive
legends and shall be in a form eligible for deposit with The Depository Trust
Company; and enable such Exchange Securities or Registrable Securities to be in
such denominations and registered in such names as the Holders of Exchange
Securities, the managing underwriters, if any, or Selling Participating Holders
may reasonably request.
(j) Governmental Agencies. Use its reasonable
best efforts to cause the Registrable Securities covered by the
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<PAGE> 268
Shelf Registration to be registered with or approved by such other governmental
agencies or authorities as may be necessary to enable the Selling Participating
Holders thereof or the underwriters, if any, to consummate the disposition of
such Registrable Securities in the manner set forth in such Registration
Statement, except as may be required solely as a consequence of the nature of
such Selling Participating Holder's business, in which case BGLS will cooperate
in all reasonable respects with the filing of such Registration Statements and
the granting of such approvals.
(k) Amendments and Supplements. If a Shelf
Registration is filed, upon the occurrence of any event contemplated by Section
2.3.1(c)(v) or 2.3.1(c)(vi), as promptly as practicable prepare and (subject to
Section 2.3.1(a)) file with the SEC a post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, or file any
other required document so that, as thereafter delivered to the purchasers of
Registrable Securities being sold thereunder, such Prospectus will not contain
an untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. Notwithstanding
the foregoing, BGLS may postpone, for a period not in excess of 90 days in the
aggregate in any 12-month period, filing any amendment to the Registration
Statement or supplement to the related Prospectus if, in the good faith opinion
of its Board of Directors, filing such amendment or supplement would adversely
affect a material financing, acquisition, disposition of assets or stock, merger
or other comparable transaction or would require BGLS to make public disclosure
of information the public disclosure of which would have a material adverse
effect upon BGLS.
(l) Listing on Securities Exchanges. Use its
reasonable best efforts to cause all Registrable Securities covered by such
Registration Statement to be (i) listed on each national securities exchange, if
any, on which Registrable Securities are then listed or (ii) authorized to be
quoted on the NASDAQ Stock Market or the NASDAQ National Market if similar
securities of BGLS are so authorized.
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(m) Underwriting Agreement. If a Shelf
Registration is filed, in connection with an underwritten offering of
Registrable Securities in an aggregate principal amount of not less than the
Minimum Amount, enter into and perform its obligations under an underwriting
agreement in customary form for underwritten offerings made by selling security
holders on the registration form utilized for the relevant Registration
Statement and take all such other actions as are reasonably requested by the
managing underwriters in order to expedite or facilitate the registration and
the disposition of such Registrable Securities, and in such connection, (i) make
such representations and warranties to the underwriters, with respect to the
business of BGLS and its subsidiaries, and the Registration Statement,
Prospectus and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, as are customarily made by comparable issuers
to underwriters in underwritten offerings made by selling security holders, and
confirm the same if and when requested; (ii) obtain opinions of counsel to BGLS
and updates thereof (which counsel and opinions shall be reasonably satisfactory
to the managing underwriters and the Selling Participating Holders), addressed
to the underwriters covering the matters customarily covered in opinions
requested in underwritten offerings by selling security holders; (iii) obtain
"cold comfort" letters and updates thereof (which letters and updates shall be
reasonably satisfactory to the managing underwriters and the Selling
Participating Holders) from the independent certified public accountants of BGLS
(and, if necessary, any other independent certified public accountants of any
subsidiary of BGLS or of any business acquired by BGLS for which financial
statements and financial data are, or are required to be, included in the
Registration Statement), addressed to each of the underwriters and the Selling
Participating Holders (to the extent such accountants are permitted under
applicable law and accounting literature so to address "cold comfort" letters),
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with underwritten
offerings by selling security holders; and (iv) if an underwriting agreement is
entered into, undertake such indemnification and
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contribution provisions and procedures as are customarily undertaken in such
agreements. In connection with any sales of Registrable Securities by a
Participating Holder through a broker or dealer, BGLS shall, at the request of
such Participating Holder, undertake to enter into such indemnification and
contribution provisions and procedures with such broker or dealer as are
customarily undertaken in underwriting agreements, notwithstanding that such
sales are not intended to be made pursuant to an underwritten offering. The
above shall be done in connection with each closing under such underwriting
agreement, or as and to the extent required thereunder.
(n) Financial Records, Etc. If a Shelf
Registration is filed, make available for inspection by Selling Participating
Holders, any underwriter participating in any such disposition of Registrable
Securities, if any, and any attorney, accountant or other agent retained by any
such Selling Participating Holder or underwriter (collectively, the
"Inspectors"), at the offices where normally kept, during reasonable business
hours, all financial and other records, pertinent corporate documents and
properties of BGLS and its subsidiaries (collectively, the "Records") as shall
be necessary or advisable to enable them to exercise their due diligence
responsibilities, and cause the officers, directors and employees of BGLS and
its subsidiaries to supply all information in each case reasonably requested by
any such Inspectors in connection with such Shelf Registration. Records which
BGLS determines, in good faith, to be confidential and as to which it notifies
the Inspectors are confidential shall not be disclosed by the Inspectors unless
(i) the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in such Registration Statement, (ii) the release of
such Records is ordered pursuant to a subpoena or other order from a court of
competent jurisdiction or (iii) the information in such Records has been made
generally available to the public. Except as contemplated hereby, and subject
to applicable law, each Selling Participating Holder agrees that information
obtained by it as a result of such inspections shall be deemed confidential and
shall not be used by it as the basis for any market transactions in the
securities of BGLS or its affiliates unless and until such is made generally
available to the public. Selling Participating Holders shall not be prohibited
from engaging in market transactions if such information is not material, to the
extent permitted by applicable law. Each Selling Participating Holder further
agrees that it will, upon learning that disclosure of such Records is sought in
a court of competent jurisdiction, give notice to BGLS and allow BGLS at its
expense to undertake appropriate action to prevent disclosure of the Records
deemed confidential.
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(o) Earnings Statements. Comply with all
applicable rules and regulations of the SEC relating to any Shelf Registration
and make generally available earnings statements satisfying the provisions of
Section 11(a) of the Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act) no later than 45 days after the end of any
12-month period (or 90 days after the end of any 12-month period if such period
is a fiscal year) (i) commencing at the end of any fiscal quarter in which
Registrable Securities are sold to underwriters in a firm commitment or best
efforts underwritten offering and (ii) if not sold to underwriters in such an
offering, commencing on the first day of the first fiscal quarter of BGLS after
the effective date of a Registration Statement, which statements shall cover
such 12-month periods.
(p) Disposition of Registrable Securities.
Cooperate with each Selling Participating Holder and each underwriter, if any,
participating in the disposition of Registrable Securities and their respective
counsel in connection with any filings required to be made with the National
Association of Securities Dealers, Inc. (the "NASD").
(q) Trust Indenture Act. Use its reasonable best
efforts to cause the Indenture to be qualified under the Trust Indenture Act of
1939.
(r) Delivery of Opinion. If an Exchange Offer
Registration Statement is filed, deliver to the Participating Holders and if a
Shelf Registration is filed, deliver to the Selling Participating Holders an
opinion or opinions of outside counsel to BGLS (which counsel shall be
reasonably satisfactory to the Participating Holders or the Selling
Participating Holders, as the case may be), to the effect that nothing has come
to the attention of such counsel that causes such counsel to believe that the
Exchange Offer Registration Statement or the Registration Statement, as the case
may be, contains, as of its effective date, any untrue statement of a material
fact necessary to make the statements therein, not misleading, it being
understood that any such opinion may contain customary limitations thereof.
(s) Further Assurances; Brooke Undertaking. Use
its reasonable best efforts to take all other steps necessary or
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advisable, requested by the Participating Holders, to effect the registration
and distribution of the Exchange Securities or Registrable Securities covered by
a Registration Statement or Exchange Offer Registration Statement contemplated
hereby. Brooke shall (i) use its reasonable best efforts to cooperate fully in
connection with the registration and distribution of the Senior Secured Notes
covered by a Registration Statement contemplated hereby, including furnishing
such supplemental information as may be reasonably necessary in connection with
the registration process, and (ii) take such actions specified in Sections
2.3(m) and 2.3(n) on its behalf as if it were BGLS as may be deemed necessary or
advisable by selling Participating Holders.
Section 2.3.2 Participating Holder Covenants. In
addition to the covenants provided in Section 7.2, each Participating Holder
agrees by acquisition of the Series A Notes that, following the filing of any
Shelf Registration, upon receipt of any notice from BGLS of the happening of any
event of the kind described in clause (ii), (iv), (v) or (vi) of Section
2.3.1(c), such Participating Holder shall forthwith discontinue disposition of
any Registrable Securities covered by such Shelf Registration or Prospectus
until such Participating Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 2.3.1(k), or until it is advised in
writing by BGLS that the use of the applicable Prospectus may be resumed, and
has received copies of any amendments or supplements thereto.
Section 2.4 Qualifications to Registration Obligations.
Notwithstanding anything in this Agreement to the contrary, if a Registration
Statement does not become effective after BGLS has filed it solely by reason of
the written request not to proceed made by any Participating Holder, BGLS's
obligations to such Participating Holder to file such Registration Statement and
attempt to cause it to become effective shall be deemed completely satisfied and
discharged as to such Participating Holder to the extent of such request, and
such Participating Holders' right to receive Liquidated Damages for any period
from and after the date of such request shall terminate.
ARTICLE 3
LIQUIDATED DAMAGES
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Section 3.1 Liquidated Damages. (a) BGLS and the
Participating Holders agree that the Participating Holders of Registrable
Securities will suffer damages if BGLS fails to fulfill its obligations under
Section 2.1 or Section 2.2 and that it would not be feasible to ascertain the
extent of such damages with precision. Accordingly, if neither the Exchange
Offer Registration Statement nor any Shelf Registration has been declared
effective on or prior to the Effectiveness Date, then Liquidated Damages shall
accrue on the Registrable Securities held by each Participating Holder over and
above the interest rate then applicable to such Registrable Securities on each
day during the first 30-day period immediately following the Effectiveness
Date, at a rate equal to 25 basis points (.25%) per annum. The amount of
Liquidated Damages will increase by an additional 25 basis points (.25%) per
annum during each subsequent 30-day period until the Exchange Offer
Registration Statement or the Shelf Registration is declared effective, or the
Exchange Offer Registration Statement or the applicable Shelf Registration again
becomes effective, as the case may be, provided, however, that the Liquidated
Damages rate payable on the Registrable Securities held by a Participating
Holder may not exceed 200 basis points (2.00%) per annum and, accordingly, the
sum of the interest rate and the Liquidated Damages rate payable on the
Registrable Securities held by a Participating Holder may not exceed 17.75%
(other than any interest, if any, which may be payable on overdue interest
following an "Event of Default" under the Indenture); and provided, further,
that (1) upon the consummation of the Exchange Offer, (2) upon the effectiveness
of the Initial Shelf Registration or upon the effectiveness of a Shelf
Registration, as applicable, (3) upon the effectiveness of the Shelf
Registration which had ceased to remain effective, or (4) if in the opinion of
Milbank, Tweed, Hadley & McCloy or other counsel to BGLS reasonably acceptable
to the Participating Holders, which opinion shall be reasonably satisfactory in
form, scope and substance to the Participating Holders, registration of the
Registrable Securities held by any Participating Holder is no longer required
under the Securities Act for such Participating Holder to sell all remaining
Registrable Securities held by such Participating Holder in the open market
without limitations as to volume or manner of sale and without being required to
file any forms or reports with the SEC under the Securities Act or the
Regulations other than a notice of sale under Rule 144 under the Regulations,
the Liquidated Damages with respect to the
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Registrable Securities held by such Participating Holder will cease to accrue.
Liquidated Damages payable by BGLS shall be payable semiannually on the
scheduled interest payment date applicable to such Registrable Securities to the
holder of such Registrable Securities on the regular record date applicable to
such scheduled interest payment date.
(b) Liquidated Damages shall accrue on the Registrable
Securities held by each Participating Holder over and above the interest rate
then applicable to such Registrable Securities for each Black Out Day at the
following rates during the 12-month period beginning with the date the Shelf
Registration Statement has first become effective:
<TABLE>
<CAPTION>
Per Annum Rate of
Black Out Day Liquidated Damages
------------- ------------------
<S> <C>
31 - 90 .25%
91 - 120 .50%
121 - 150 .75%
151 - 180 1.00%
181 - 210 1.25%
211 - 240 1.50%
241 - 270 1.75%
271 - 366 2.00%
</TABLE>
In addition, for each day during the 30-day period following any Black Out Day
which is not itself a Black Out Day, Liquidated Damages shall continue to
accrue at the rate at which they accrued for such Black Out Day.
(c) Notwithstanding the foregoing, BGLS shall not be
required to pay such Liquidated Damages with respect to the Registrable
Securities held by a Participating Holder if the applicable default under the
foregoing paragraphs of this Section 3.1 arises from the failure of BGLS to
cause to become effective or maintain current a Shelf Registration within the
time periods specified in this Section 3.1 primarily by reason of the failure of
such Participating Holder to provide such information as (i) BGLS may reasonably
request, with reasonable prior written notice, for use in the Registration
Statement or any Prospectus included therein pursuant to Section 7.2(b) or (ii)
the NASD or the SEC may request in connection with such Shelf Registration.
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ARTICLE 4
REGISTRATION EXPENSES
All fees and expenses incidental to the performance of or
compliance with this Agreement by BGLS shall be borne by BGLS whether or not a
Shelf Registration is filed or becomes effective or an Exchange Offer is
consummated, including (i) all registration and filing fees (including (A) fees
with respect to filings required to be made with the NASD in connection with an
underwritten offering and (B) fees and expenses of compliance with state
securities or Blue Sky laws (including reasonable fees and disbursements of
counsel for BGLS, Brooke and the underwriters, or all, in connection with Blue
Sky qualifications of the Registrable Securities)), (ii) printing expenses
(including expenses of printing certificates for Registrable Securities,
printing and distributing Prospectuses, Preliminary Prospectuses and amendments
or supplements thereto, the Registration Statement and the Exchange Offer
Registration Statement and amendments thereto, the Indenture and printing or
preparing any underwriting agreement, agreement among underwriters and related
syndicate or selling group agreements, pricing agreements and Blue Sky
memoranda), (iii) fees and disbursements of counsel for BGLS and Brooke (iv)
fees and disbursements of all independent certified public accountants for BGLS
and Brooke (including the expenses of any "cold comfort" letters required by or
incident to such performance), (v) Securities Act liability insurance, if BGLS
so desires such insurance, (vi) internal expenses of BGLS (including all
salaries and expenses of officers and employees of BGLS performing legal or
accounting duties), (vii) the fees and expenses incurred in connection with the
listing of the securities to be registered on any national securities exchange,
the NASDAQ Stock Market or the NASDAQ National Market pursuant to Section
2.3.1(l), (viii) the fees and expenses of the Trustee and (ix) the fees and
expenses of any Person, including special experts, retained by BGLS or Brooke in
their sole discretion.
Each Selling Participating Holder shall pay (i) all
underwriting discounts and commissions or broker's commissions incurred in
connection with the sale or other disposition of Registrable Securities for or
on behalf of such Participating Holder's account and (ii) all fees and
disbursements of legal counsel for such Selling Participating Holder.
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ARTICLE 5
INDEMNIFICATION
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Section 5.1 Indemnification by BGLS. BGLS shall, without
limitation as to time, indemnify and hold harmless, to the fullest extent
permitted by law, each Participating Holder, Apollo Investment Fund, L.P.,
Apollo Advisors, L.P., Lion Advisors, L.P., Altus Finance, SHC, Mackay-Shields
Financial Corporation and their Affiliates and any investment funds managed
thereby and their respective partners, officers, directors and agents and
employees, each Person who controls each such Participating Holder (within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act)
and the partners, officers, directors, agents and employees of each such
controlling person (individually, an "Indemnified Person") from and against any
and all losses, claims, damages, liabilities, costs (including costs of
investigating, preparing to defend, defending and appearing as a third-party
witness and attorneys' fees and disbursements reasonably incurred) and expenses,
including any amounts paid in respect of any settlements (collectively,
"Losses"), without duplication, as incurred, arising out of or based upon any
untrue or alleged untrue statement of a material fact contained in any
Registration Statement, Prospectus or form of prospectus or in any amendment or
supplements thereto or in any Preliminary Prospectus, or in any documents
incorporated by reference in the foregoing, or arising out of or based upon, in
the case of the Registration Statement or any amendments thereto, any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, and, in the case of the
Prospectus or form of prospectus, or in any amendments or supplements thereto,
or in any Preliminary Prospectus any omission or alleged omission of a material
fact required to be stated therein or necessary to make the statements therein,
in the light of the circumstances under which they were made, not misleading,
except (i), in either case, to the extent, but only to the extent, that such
untrue or alleged untrue statement or omission or alleged omission has been made
therein in reliance upon and in conformity with information furnished in writing
to BGLS by such Indemnified Person (or the person controlling such Indemnified
Person) expressly for use therein, (ii) to the extent such Losses result from
the failure of any Participating Holder or any underwriter in an underwritten
offering to provide to any person purchasing Registrable Securities from it any
supplement to a Prospectus provided by BGLS pursuant to Section 2.3.1(g), or
(iii) to the extent such Losses result from the sale of Registrable Securities
by such
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Participating Holder or such underwriter in an underwritten offering (a) under a
Registration Statement or (b) using any Prospectus, other than a Registration
Statement or a Prospectus, as the case may be, amended or supplemented by BGLS
pursuant to Section 2.3.1(k) and provided to such Participating Holder or such
underwriter pursuant to Section 2.3.1(g), after BGLS shall have notified such
Participating Holder or such underwriter in an underwritten offering in writing
of any event contemplated by Section 2.3.1(c)(v) or 2.3.1(c)(vi) pursuant to
Section 2.3.1(c).
Section 5.2 Indemnification by Participating Holder. In
connection with any Registration Statement in which a Participating Holder is
participating, such Selling Participating Holder shall, without limitation as to
time, indemnify and hold harmless, to the fullest extent permitted by law, BGLS
and its directors, officers, agents and employees, each Person who controls BGLS
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling person, from and against any and all Losses, joint or several,
without duplication, as incurred, arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in any Registration
Statement, Prospectus, or form of prospectus, or in any amendment or supplement
thereto or in any Preliminary Prospectus or arising out of or based upon, in the
case of the Registration Statement or any amendments thereto, any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein not misleading, and, in the case of the
Prospectus or form of prospectus, or in any amendments or supplements thereto,
or in any Preliminary Prospectus, any omission or alleged omission of a material
fact necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in either case, to the extent, but
only to the extent, that such untrue or alleged untrue statement or omission or
alleged omission has been made therein in reliance upon and in conformity with
information furnished in writing to BGLS by such Selling Participating Holder
expressly for use therein by notice referring to this Section 5.2. In no event
shall the liability of any Selling Participating Holder hereunder be, or be
claimed by BGLS to be, greater in amount than the dollar amount of the proceeds
actually received by such Selling Participating Holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
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Section 5.3 Conduct of Indemnification Proceedings. If any
Person shall be entitled to indemnity or contribution hereunder (an "indemnified
party"), such indemnified party shall give prompt notice to the party or parties
from which such indemnity or contribution is sought (the "indemnifying parties")
of the commencement of any action or proceeding (including any governmental
investigation) (collectively "Proceedings" and individually a "Proceeding") with
respect to which such indemnification or contribution is sought pursuant hereto;
provided, however, that the failure so to notify the indemnifying parties shall
not relieve the indemnifying parties from any obligation or liability except to
the extent that the indemnifying parties have been actually prejudiced by such
failure. The indemnifying parties shall have the right, exercisable by giving
written notice to an indemnified party promptly after the receipt of written
notice from such indemnified party of such Proceeding, to assume, at the
indemnifying parties' expense, the defense of any such Proceeding, with counsel
reasonably satisfactory to such indemnified party and shall pay as incurred the
fees and disbursements of such counsel related to such Proceeding; provided,
however, that an indemnified party or parties (if more than one such indemnified
party is named in any Proceeding) shall have the right to employ separate
counsel in any such Proceeding and to participate in the defense thereof, but
the fees and expenses of such counsel shall be at the expense of such
indemnified party or parties unless: (i) the indemnifying party or parties agree
to pay such fees and expenses; or (ii) the indemnifying parties fail promptly to
assume the defense of such Proceeding or fail to employ counsel reasonably
satisfactory to such indemnified party or parties; or (iii) counsel for the
indemnifying party determines that such counsel may not properly represent both
the indemnifying party and such indemnified party in which case, if such
indemnified party or parties notifies the indemnifying parties in writing that
it elects to employ separate counsel at the expense of the indemnifying parties,
the indemnifying parties shall not have the right to assume the defense thereof
and the fees and expenses of counsel retained by the indemnified party or
parties shall be at the expense of the indemnifying parties, it being
understood, however, that the indemnifying parties shall not, in connection with
any one such Proceeding, arising out of the same general allegations or
circumstances, be liable for the reasonable fees and expenses of
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more than one separate firm of attorneys (together with appropriate local
counsel) at any time for such indemnified party or parties. Whether or not such
defense is assumed by the indemnifying parties, such indemnifying parties or
indemnified party or parties will not be subject to any liability for any
settlement made without its or their consent (but such consent will not be
unreasonably withheld). No indemnifying party shall be liable for any
settlement of any such action or proceeding effected without its written
consent, but if settled with its written consent each indemnifying party jointly
and severally agrees, subject to the exception and limitations set forth above,
to indemnify and hold harmless each indemnified party from and against any loss
or liability by reason of such settlement.
Section 5.4 Contribution. If the indemnification provided for
in this Article 5 is unavailable to an indemnified party or is insufficient to
hold such indemnified party harmless for any Losses in respect to which this
Article 5 would otherwise apply by its terms, then each applicable indemnifying
party, in lieu of indemnifying such indemnified party, shall have an obligation
to contribute to the amount paid or payable by such indemnified party as a
result of such Losses, in such proportion as is appropriate to reflect the
relative fault of the indemnifying party, on the one hand, and such indemnified
party, on the other hand, in connection with the actions, statements or
omissions that resulted in such Losses as well as any other relevant equitable
considerations. The relative fault of such indemnifying party, on the one hand,
and indemnified party, on the other hand, shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact, has been taken by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent any such
action, statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with any Proceeding, to
the extent such party would have been indemnified for such expenses if the
applicable indemnification provided for in Section 5.1 or 5.2 were available to
such party.
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The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 5.4 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5.4, an indemnifying
party that is a Selling Participating Holder shall not be required to contribute
any amount in excess of the amount by which the total price at which the
Registrable Securities sold by such indemnifying party and distributed to the
public were offered to the public (net of any underwriting discounts and
commissions and expenses) exceeds the amount of any damages that such
indemnifying party has otherwise been required to pay or has paid by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
Section 5.5 Remedies Cumulative. The indemnity, contribution
and expense reimbursement obligations under this Article 5 shall be in addition
to any liability that each indemnifying person may otherwise have and shall
remain operative and in full force and effect regardless of any investigation
made by or on behalf of any indemnified party. Notwithstanding anything in this
Agreement to the contrary, an indemnified party shall not be entitled to receive
duplicate indemnification or contribution for the same Losses (except to the
extent they are incurred more than once).
ARTICLE 6
UNDERWRITTEN REGISTRATION
If any of the Registrable Securities covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering will
be selected by the Selling Participating Holders holding at least 66-2/3% of the
outstanding aggregate principal amount of Registrable Securities being sold in
such underwritten offering, with the consent of BGLS and, if applicable, Brooke
(not to be unreasonably withheld or delayed).
ARTICLE 7
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REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 7.1 Representations and Warranties. BGLS and Brooke,
as applicable, represent and warrant to, and agree with the Participating
Holders that:
(a) During the Effectiveness Period, but subject to
Section 2.3.1(k), the Registration Statement (and any post-effective amendment
thereto) and the Prospectus (as amended or as supplemented if BGLS shall have
filed with the SEC any amendment or supplement to the Registration Statement or
the Prospectus) will contain all statements which are required to be stated
therein in accordance with the Securities Act and the Regulations, and will not
contain any untrue statement of a material fact or omit to state any material
fact (except such information which is omitted from the Registration Statement
pursuant to Rule 430A of the Regulations) required to be stated therein or
necessary to make the statements therein not misleading, and no event will have
occurred which is required to have been set forth in an amendment or supplement
to the Registration Statement or the Prospectus which has not then been set
forth in such an amendment or supplement; each Preliminary Prospectus, as of the
date filed with the SEC, will not include any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, in light of the
circumstances under which they were made; except that no representation or
warranty is made in this Section 7.1(a) with respect to statements or omissions
made in reliance upon and in conformity with written information furnished to
BGLS as stated in Section 7.2(b) by a Selling Participating Holder or on behalf
of a Selling Participating Holder expressly for inclusion in any Preliminary
Prospectus, the Registration Statement, or the Prospectus, or any amendment or
supplement thereto. Each of the documents filed pursuant to the Exchange Act
and incorporated or deemed to be incorporated by reference in the Registration
Statement will comply in all material respects with the requirements of the
Exchange Act and the rules and regulations thereunder.
(b) Each Brooke Party has all requisite power and
authority to execute, deliver and perform this Agreement. All necessary
corporate proceedings of each Brooke Party have been duly taken by it to
authorize the execution, delivery, and
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performance of this Agreement by such Brooke Party. This Agreement has been
duly authorized, executed, and delivered by each Brooke Party, is the legal,
valid and binding obligation of such Brooke Party, and is enforceable as to such
Brooke Party in accordance with its terms. No consent, authorization, approval,
order, license, certificate, or permit of or from, or declaration or filing
with, any federal, state, local, or other governmental authority or any court or
other tribunal is required by such Brooke Party for the execution, delivery, or
performance of this Agreement by such Brooke Party (except filings under the
Securities Act which will be made and such consents consisting only of consents
under Blue Sky or state securities laws which will be obtained). No consent of
any party to any contract, agreement, instrument, lease, license, arrangement,
or understanding to which such Brooke Party is a party, or to which any of its
properties or assets are subject, is required for the execution, delivery, or
performance of this Agreement which has not been obtained; and the execution,
delivery, and performance of this Agreement will not violate, result in a breach
of, conflict with, or (with or without the giving of notice or the passage of
time or both) entitle any party to terminate or call a default under any such
contract, agreement, instrument, lease, license, arrangement, or understanding,
or violate or result in a breach of any term of the charter or by-laws of such
Brooke Party, or violate, result in a breach of, or conflict with any law, rule,
regulation, order, judgment, or decree binding on such Brooke Party or to which
any of its operations, business, properties or assets are subject.
(c) Such Brooke Party shall not enter into any transaction
involving (i) any merger or consolidation in which it is not the surviving
Person, (ii) any sale, lease or other transfer of all or substantially all the
assets of such Brooke Party or (iii) in the case of BGLS, any exchange or
conversion of any of the Registrable Securities for or into securities of any
other issuer, unless effective provision is made for (x) the assumption by the
transferee, jointly and severally with such Brooke Party if such Brooke Party
shall remain in existence, of all of the obligations of such Brooke Party
hereunder, except that BGLS may be released from its obligation hereunder in the
event that it is released as an obligor under the Indenture pursuant to the
terms thereof and its obligations hereunder are assumed by such transferee or
Brooke, and (y) in the case of clause (iii), the entering into by such other
issuer of an
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agreement comparable hereto and reasonably satisfactory to the Participating
Holders with respect to the registration of such securities of such other
issuer.
(d) Schedule I accurately describes all outstanding rights
granted to any security holders of BGLS to register their securities or the
distribution thereof under any securities laws. BGLS shall not grant any
additional rights to register debt securities until either the Exchange Offer
Registration Statement or a Registration Statement for the resale of all
Registrable Securities is effective.
Section 7.2 Participating Holder Representations, Warranties
and Covenants. Each Participating Holder represents and warrants (severally) to
((in the case of Section 7.2(a)), and agrees with (severally) (in the case of
Section 7.2(b)), BGLS, that:
(a) Such Participating Holder is duly organized, validly
existing and in good standing under the laws of its jurisdiction of
organization. Such Participating Holder has all requisite power and authority
to execute, deliver and perform this Agreement. All necessary proceedings of
such Participating Holder have been duly taken to authorize the execution,
delivery, and performance of this Agreement by such Participating Holder. This
Agreement has been duly authorized by such Participating Holder, executed, and
delivered by such Participating Holder, is the legal, valid, and binding
obligation of such Participating Holder, and is enforceable as to such
Participating Holder in accordance with its terms. No consent, authorization,
approval, order, license, certificate, or permit of or from, or declaration or
filing with, any federal, state, local or other governmental authority or any
court or other tribunal is required by such Participating Holder for (i) the
execution, delivery or performance of this Agreement by such Participating
Holder or (ii) the sale or disposition of the Registrable Securities by such
Participating Holder as contemplated in the Registration Statements (except
filings under the Securities Act and such consents consisting only of consents
under Blue Sky or state securities laws). No consent of any party to any
contract, agreement, instrument, lease, license, arrangement, or understanding
to which such Participating Holder is a party, or to which any of such
Participating Holder's properties or assets are subject, is required for the
execution, delivery or
31
<PAGE> 285
performance of this Agreement which has not been obtained; and the execution,
delivery, and performance of this Agreement will not violate, result in a breach
of, conflict with, or (with or without the giving of notice or the passage of
time or both) entitle any party to terminate or call a default under any such
contract, agreement, instrument, lease, license, arrangement or understanding or
violate or result in a breach of, any term of such Participating Holder's
certificate or articles of incorporation (or similar controlling instrument) or
by-laws (or, if applicable, instrument corresponding thereto) or violate, result
in a breach of, or conflict with, any law, rule, regulation, order, judgment, or
decree binding on such Participating Holder or to which any of such
Participating Holder's operations, business, properties, or assets are subject.
(b) Each Participating Holder shall promptly furnish to
BGLS in writing, upon BGLS's reasonable request, any and all information as to
such Participating Holder and its plan of distribution as may be necessary to
comply with the provisions of, the Securities Act, the Regulations, the Exchange
Act, and the rules and regulations of the SEC thereunder in connection with the
preparation and filing of any Registration Statement pursuant hereto, or any
amendment or supplement thereto, or any Preliminary Prospectus or Prospectus
included therein. All information to be furnished to BGLS by or on behalf of
such Participating Holder expressly for use in connection with the preparation
of any Preliminary Prospectus, the Prospectus, the Registration Statement, or
any amendment or supplement thereto, will not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
Section 7.3 Survival of Representations and Agreements. All
representations, warranties, covenants and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants and
agreements at the effective date of each Registration Statement contemplated by
this Agreement and such representations, warranties, covenants, and agreements,
including the indemnity and contribution agreements contained in Article 5,
shall remain operative and in full force and effect regardless of any
investigation made by or on behalf of BGLS, Brooke, any Participating Holder, or
any Person that is entitled to be indemnified under Article 5, and
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shall survive termination of this Agreement and the expiration of the
Effectiveness Period.
ARTICLE 8
MISCELLANEOUS
Section 8.1 Remedies. No failure or delay on the part of a
party in exercising any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy.
Section 8.2 Amendments and Waivers. The provisions of
Sections 2.1(a) and 2.1(c), Article 4 and Article 5 (and the provisions of this
Section 8.2 as they apply thereto) may not be amended, modified, supplemented,
waived or departed from without the express written consent of each affected
party. The other provisions of this Agreement, including the provisions of this
sentence, may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, unless BGLS has
obtained the written consent of the Participating Holders of at least 66-2/3% of
the outstanding aggregate principal amount, voting together as a class, of the
then outstanding Registrable Securities. Notwithstanding the foregoing, a
waiver or consent to depart from the provisions hereof with respect to a matter
that relates exclusively to the rights of Selling Participating Holders whose
securities are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect, impair, limit or compromise the rights of other
Participating Holders of Registrable Securities may be given by Selling
Participating Holders holding at least 66-2/3% of the Registrable Securities
being sold by Participating Holders pursuant to such Registration Statement;
provided, however, that the provisions of this sentence may not be amended,
modified or supplemented except in accordance with the provisions of the
immediately preceding sentence.
Section 8.3 Notices. All notices, consents and other
communications provided for hereunder shall be in writing (including facsimile,
telegraphic or cable communication) and telecopied, telegraphed, telexed, cabled
or delivered (x) (i) if to BGLS, to it c/o Brooke Group Ltd., 100 S.E. Second
Street, 32nd Floor, Miami, Florida 33131, attention: Bennett S. LeBow,
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<PAGE> 287
telecopy (305) 579-8001, with a copy to Milbank, Tweed, Hadley & McCloy, 1 Chase
Manhattan Plaza, New York, New York 10005, attention: Michael L. Hirschfeld,
telecopy (212) 530-5219, (ii) Brooke, to 100 S.E. Second Street, 32nd Floor,
Miami, Florida 33131, attention: Bennett S. LeBow, telecopy (305) 579-8001,
with a copy to Milbank, Tweed, Hadley & McCloy, 1 Chase Manhattan Plaza, New
York, New York 10005, attention: Michael L. Hirschfeld, telecopy (212)
530-5219, (iii) if to AIF II, L.P., to it c/o Apollo Advisors, L.P., 1999 Avenue
of the Stars, Suite 1900, Los Angeles, California 90067, attention: Michael D.
Weiner, telecopy (310) 201- 4166, with a copy to Sidley & Austin, 875 Third
Avenue, New York, New York 10022, attention: Myles C. Pollin, telecopy (212)
906-2021, (iv) if to Artemis America Partnership, c/o Lion Advisors, L.P., 2
Manhattanville Road, Purchase, New York 10577, attention: Tony Tortorelli,
telecopy (914) 694-8032, with a copy to Sidley & Austin, 875 Third Avenue, New
York, New York 10022, attention: Myles C. Pollin, telecopy (212) 906-2021, (v)
if to Tortoise Corp., to 100 South Bedford Road, Mount Kisco, New York 10549,
attention: Carl Icahn, telecopy (914) 242-4099, with a copy to Gordon Altman
Butowsky Weitzen Shalov & Wein, 114 West 47th Street, New York, New York 10036,
attention: Marc Weitzen, telecopy: (212) 626-0799 and (vi) if to Mainstay High
Yield Bond Fund, to it c/o MacKay-Shields Financial Corporation, 9 West 57th
Street, New York, New York 10019, attention: Jeffrey Platt, telecopy (212)
935-1359, with a copy to Kleinberg, Kaplan, Wolff & Cohen P.C. 551 Fifth Avenue,
18th Floor, New York, New York 10176, attention: Fred Kleinberg, telecopy (212)
986-8866, or (y) at such other address as shall be designated by any such party
in a written notice to the other parties. All such notices, consents and
communications shall be effective when received.
Section 8.4 Counterparts. This Agreement may be executed in
two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
Section 8.5 Entire Agreement; No Third Party Beneficiaries.
Except for the Exchange Agreement, this Agreement (including the documents and
the instruments expressly referred to herein or therein) (i) constitutes the
entire agreement and
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supersedes all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof, and (ii) except as
expressly set forth in Article 5, is not intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder. The obligations
of Brooke pursuant hereto shall be limited to those obligations of Brooke
expressly set forth herein.
Section 8.6 Governing Law. This Agreement shall be governed
and construed in accordance with the laws of the State of New York, without
regard to principles of conflicts of law.
Section 8.7 Severability. Wherever possible, each provision
hereof shall be interpreted in such a manner as to be valid, legal and
enforceable under applicable law, but in case any one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such provision shall be ineffective to the extent,
but only to the extent, of such invalidity, illegality or unenforceability
without invalidating or rendering unenforceable the remainder of this Agreement,
unless such a construction would be unreasonable or materially impair the rights
of any party hereto.
Section 8.8 Assignment. Neither this Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except (a) by BGLS to a successor obligor
under the Indenture who assumes BGLS' obligations hereunder, if in connection
with such assignment BGLS is released as an obligor thereunder or (b) subject to
compliance by the transferee with the last sentence of Section 2.1(a), by a
Participating Holder as follows: in connection with the transfer of its
Registrable Securities in whole or in part to another Person, provided that (i)
the transferee executes an appropriate document agreeing to be bound hereby as a
Participating Holder and (ii) in the case of transfers of less than the Minimum
Amount to any transferee, such transferee shall be entitled to exercise rights
hereunder only in conjunction with the similar exercise of such rights by other
Participating Holders which in the aggregate constitute a Minimum Amount.
Subject to the preceding sentence, this Agreement will be binding upon, inure to
the benefit of and be enforceable by the parties hereto and their respective
successors and assigns.
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Section 8.9. Termination. In the event that the Exchange
Agreement terminates in accordance with its terms prior to the consummation of
the exchange referred to in the Exchange Offer and Consent Solicitation, this
Agreement shall terminate without any action by the parties hereto.
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IN WITNESS WHEREOF, the parties have entered into this
Agreement as of the date first written above.
BGLS INC.
By_____________________________
Name: Bennett S. LeBow
Title: Chairman and President
BROOKE GROUP LTD.
By_____________________________
Name: Bennett S. LeBow
Title: Chairman and President
AIF II, L.P.
By APOLLO ADVISORS, L.P.
Managing General Partner
By APOLLO CAPITAL MANAGEMENT, INC.
General Partner
By ____________________________
Name:
Title:
ARTEMIS AMERICA PARTNERSHIP
By LION ADVISORS, L.P.
Attorney-in-Fact
By LION CAPITAL MANAGEMENT, INC.
General Partner
By ____________________________
Name:
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Title:
[A/B EXCHANGE AND REGISTRATION RIGHTS AGREEMENT]
38
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TORTOISE CORP.
By_____________________________
Name:
Title:
MAINSTAY HIGH YIELD
CORPORATE BOND FUND
By MACKAY-SHIELDS FINANCIAL CORPORATION
By_____________________________
Name:
Title:
39
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[A/B EXCHANGE AND REGISTRATION RIGHTS AGREEMENT]
40
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Schedule I
Registration Rights (Section 7.1(d))
None.
41
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE 1 DEFINITIONS AND USAGE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Section 1.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE 2 REGISTRATION OF SECURED NOTES UNDER SECURITIES ACT; EXCHANGE OFFER . . . . . . . . . . . . . . . . . 5
Section 2.1 Exchange Offer; Shelf Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 2.2 Shelf Registration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.3 Registration Procedures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Section 2.4 Qualifications to Registration Obligations. . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 3 LIQUIDATED DAMAGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 3.1 Liquidated Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
ARTICLE 4 REGISTRATION EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE 5 INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.1 Indemnification by BGLS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Section 5.2 Indemnification by Participating Holder. . . . . . . . . . . . . . . . . . . . . . . . . . 19
Section 5.3 Conduct of Indemnification Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 5.4 Contribution. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Section 5.5 Remedies Cumulative. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 6 UNDERWRITTEN REGISTRATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
ARTICLE 7 REPRESENTATIONS, WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 7.1 Representations and Warranties. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 7.2 Participating Holder Representations, Warranties and Covenants. . . . . . . . . . . . . . . 24
Section 7.3 Survival of Representations and Agreements. . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 8 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 8.1 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
i
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<TABLE>
<S> <C>
Section 8.2 Amendments and Waivers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.3 Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 8.4 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.5 Entire Agreement; No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.6 Governing Law. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.7 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.8 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
Section 8.9. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Schedule I Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
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EXHIBIT G
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
December __, 1995 among NEW VALLEY CORPORATION, a New York corporation ("New
Valley"), BGLS INC., a Delaware corporation ("BGLS"), BROOKE GROUP LTD., a
Delaware corporation ("Brooke") and SHAWMUT BANK, N.A., as trustee for the
holders of the Senior Secured Notes (referred to below).
RECITALS
A. BGLS and Shawmut Bank, N.A., as trustee, have entered
into an Indenture dated as of December __, 1995, pursuant to which BGLS has
issued its 15.75% Series A Senior Secured Notes due 2000 and its 15.75% Series
B Senior Secured Notes due 2000 (together with any other indentures or
agreements relating to the issuance of indebtedness by BGLS the proceeds of
which are used to refinance or refund the indebtedness outstanding under the
then existing 15.75% Series A Senior Secured Notes due 2000 and 15.75% Series B
Senior Secured Notes due 2000, which indebtedness is also secured by the
Registrable Securities (as defined herein), the "Indenture").
B. Each of New Valley Holdings, Inc., a Delaware
corporation ("NV Holdings"), and BGLS pledged certain equity interests in New
Valley (such equity interests, together with certain other securities as
described herein, "Registrable Securities") to secure the obligations of BGLS,
NV Holdings and certain other persons under the Senior Secured Notes (as
defined herein) and the documents delivered pursuant thereto.
C. Following the occurrence of a Default Condition (as
defined herein), the Trustee and/or other Beneficiaries may acquire rights in
the Registrable Securities and may seek to sell the Registrable Securities.
Because of certain requirements under certain securities laws, it may be
necessary or advisable, in connection with the foregoing, that the Registrable
Securities be registered under such laws. New Valley is willing,
notwithstanding the possible adverse condition (financial and
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other) of BGLS and/or Brooke at the time of a Default Condition, to undertake
certain obligations to effectuate such registrations as set forth herein and
has determined that the undertaking and performance of such obligations is in
the best interests of New Valley in light of, among other things, (i) the
potential indirect benefits that may accrue to New Valley as a result of the
modification of the capitalization of BGLS that is being effectuated
concurrently with the execution and delivery hereof and (ii) the desirability
of providing for a means for the possible broad distribution of the Registrable
Securities in connection with dispositions thereof.
NOW, THEREFORE, in consideration of the foregoing and the
representations, warranties and agreements set forth herein, and intending to
be legally bound, the parties hereto hereby agree as follows:
ARTICLE 1
DEFINITIONS AND USAGE
Section 1.1 Definitions. As used in this Agreement, the
following terms shall have the following meanings:
"Beneficiaries" means collectively the Trustee and each
successor, assign and transferee thereof (including any holder of a Senior
Secured Note) which becomes a party hereto in accordance with Section 7.8 and
holds (directly or indirectly through another Person) Registrable Securities.
Without limiting the foregoing, "Beneficiary" includes any Person that acquires
Registrable Securities from another Beneficiary acting in its capacity as such
and with respect to which the Effectiveness Period continues after such
acquisition.
"BGLS" has the meaning set forth in the Preamble.
"BGLS Pledge Agreement" means the Pledge and Security
Agreement dated as of the date hereof between BGLS and the Trustee, as amended,
modified and supplemented from time to time.
"Brooke" has the meaning set forth in the Preamble.
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"Default Condition" means (i) any occurrence which constitutes
an Event of Default or would constitute an Event of Default if the Trustee had
not been prohibited by operation of law (including Section 362 of Title 11 of
the United States Code (11 U.S.C. Section Section 101 et seq.)) from sending
notice as a condition to such Event of Default and had actually sent such
notice or (ii) any circumstance in which any Beneficiary or any Person acting
on behalf of a Beneficiary acquires the Registrable Securities in connection
with the exercise of remedies, or acquires rights to or in Registrable
Securities, under a Pledge Agreement or in satisfaction of the indebtedness
outstanding under any Senior Secured Note.
"Effectiveness Period" has the meaning set forth in Section
2.2.1.
"Event of Default" means an "Event of Default" as defined in
the Indenture.
"Exchange Act" means the Securities Exchange Act of 1934.
"Indenture" has the meaning set forth in the Recitals.
"Initial Shelf Registration" has the meaning set forth in
Section 2.2.1.
"Losses" has the meaning set forth in Section 4.1.
"NV Holdings" has the meaning set forth in the Recitals.
"NV Holdings Pledge Agreement" means the Pledge and Security
Agreement dated as of the date hereof between NV Holdings and the Trustee, as
amended, modified and supplemented from time to time.
"Person" or "person" means an individual, trustee,
corporation, limited liability company, partnership, joint stock company,
trust, unincorporated association, union, business association, firm or other
entity.
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"Pledge Agreements" means (i) the BGLS Pledge Agreement, (ii)
the NV Holdings Pledge Agreement, and (iii) any other pledge agreements,
mortgages, security agreements or similar agreements which evidence liens
granted by BGLS or NV Holdings that secure indebtedness the proceeds of which
are used to refinance or refund the indebtedness outstanding under the then
existing Senior Secured Notes, as such agreements may be amended and
supplemented from time to time.
"Preliminary Prospectus" means any preliminary prospectus that
may be included in any Registration Statement.
"Prospectus" means the prospectus included in or related to
any Registration Statement (including a prospectus that includes any
information previously omitted from a prospectus filed as part of an effective
Registration Statement in reliance upon Rule 430A promulgated under the
Securities Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other amendments and
supplements to the Prospectus, including post-effective amendments, and all
material incorporated by reference or deemed to be incorporated by reference in
such Prospectus.
"Registrable Securities" means collectively the following:
(a) the shares of common stock of New Valley, $0.01 par
value per share, and any options, warrants or other rights to acquire
such shares and any equity securities which may be issued in respect
of, in exchange for or in replacement of such securities which
constitute Stock Collateral at any time;
(b) the shares of $15 Class A Increasing Rate Cumulative
Senior Preferred Shares of New Valley ($100 liquidation value), $0.01
par value per share, and any options, warrants or other rights to
acquire such shares and any equity securities which may be issued in
respect of, in exchange for or in replacement of such securities which
constitute Stock Collateral at any time;
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(c) the shares of $3 Class B Cumulative Convertible
Preferred Shares of New Valley ($25 liquidation value), $0.10 par
value per share, and any options, warrants or other rights to acquire
such shares and any equity securities which may be issued in respect
of, in exchange for or in replacement of such securities which
constitute Stock Collateral at any time; and
(d) any and all other equity interests of New Valley
which constitute Stock Collateral at any time.
However, a security will cease to be a Registrable Security when (i) such
security is sold in an open market transaction or in an underwritten public
offering, (ii) such security is sold to any person other than an "affiliate" of
New Valley (as defined under the Regulations) pursuant to a Registration
Statement, (iii) such security is eligible for resale without restriction
pursuant to Rule 144(k) of the Regulations or any similar rule or regulation
hereafter adopted by the SEC or (iv) such security ceases to be outstanding.
"Registration Statement" means any registration statement of
New Valley under the Securities Act that covers any of the Registrable
Securities, including the Prospectus, amendments and supplements to such
registration statement, including post-effective amendments, all exhibits and
all material incorporated by reference or deemed to be incorporated by
reference in such registration statement and all material deemed part of such
registration statement by Rule 430A of the Regulations.
"Regulations" means the regulations of the SEC under the
Securities Act.
"Rule 415" means Rule 415 of the Regulations or any similar
rule or regulation hereafter adopted by the SEC.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933.
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"Senior Secured Notes" means (i) the 15.75% Series A Senior
Secured Notes due 2000 and the 15.75% Series B Senior Secured Notes due 2000
issued by BGLS under the Indenture, the notes of each such series being equal
to and ratable with the notes of the other series, as such Senior Secured Notes
may be amended and supplemented from time to time, and (ii) any other
instruments of BGLS the proceeds of which are used to refinance or refund the
indebtedness outstanding under the then existing Senior Secured Notes, which
instruments are also secured by the Registrable Securities, as such instruments
may be amended, modified and supplemented from time to time.
"Shelf Registration" has the meaning set forth in Section
2.2.2.
"Specified Parties" means New Valley, BGLS and Brooke.
"Stock Collateral" has the meaning set forth in the NV
Holdings Pledge Agreement and the BGLS Pledge Agreement as applicable.
"Subsequent Shelf Registration" has the meaning set forth in
Section 2.2.2.
"Trustee" means the trustee, agent or other representative of
or for the holders of the Senior Secured Notes designated in the Indenture or
otherwise designated by such holders authorized to appoint such trustee, agent
or other representative under the Indenture.
"Underwritten registration" or "underwritten offering" means a
registration in which securities of New Valley are sold to one or more
underwriters or group or a syndicate of underwriters for reoffering to the
public.
Section 1.2 Usage. (a) References to Articles, Sections
and Exhibits are to articles and sections hereof and exhibits hereto,
references to a Person are also references to its successors and assigns,
references to a document are to it as amended, waived and otherwise modified
from time to time, and references to a statute or another governmental rule are
to it as amended and otherwise modified from time to time. The definitions set
forth
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in Section 1.1 are equally applicable both to the singular and plural forms and
the feminine, masculine and neuter forms of the terms defined. "Including" and
correlative terms shall be deemed to be followed by "without limitation", if
not followed by such words or words of like import. The headings of Articles
and Sections and the table of contents relating hereto have been included
solely for convenience of references and shall not have any effect on the
construction hereof.
(b) This Agreement contemplates the filing of
registration statements under the Securities Act involving various offers and
sales of securities. In connection with such registration statements, there
may be identified therein one or more underwriters through which securities are
to be offered pursuant to either a "firm commitment" or "best-efforts"
arrangement, and, in the case where there is more than one underwriter, one or
more of the underwriters may be designated as the "manager" or "representative"
or the "co-managers" or "representatives" of the several underwriters.
Accordingly, all references herein to an "underwriter" or the "underwriters"
are intended to refer to a "principal underwriter" (as defined in Rule 405 of
the Regulations) and to provide for those transactions in which securities may
be offered by or through one or more underwriters, and not to imply that any of
the transactions contemplated hereby is conditioned in any manner whatsoever on
the participation therein by one or more underwriters on behalf of any party.
ARTICLE 2
REGISTRATION OF REGISTRABLE SECURITIES UNDER SECURITIES ACT
Section 2.1 Required Registration of Registrable
Securities. New Valley shall use its reasonable best efforts to register the
Registrable Securities upon the terms, and subject to the limitations and
conditions, hereinafter set forth.
Section 2.2 Shelf Registration.
Section 2.2.1 Initial Shelf Registration. New Valley shall
prepare and file with the SEC a Registration Statement for an offering to be
made by the Beneficiaries on a continuous basis
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under Rule 415 covering all the Registrable Securities (the "Initial Shelf
Registration") as soon as practicable, following the receipt of a written
notice from the Trustee that a Default Condition exists. The Initial Shelf
Registration shall be on an appropriate form permitting registration of all
Registrable Securities for resale by the Beneficiaries in the manner or manners
reasonably designated by them (including one or more underwritten offerings).
New Valley shall use its reasonable best efforts to cause the Initial Shelf
Registration to be declared effective under the Securities Act as soon as
practicable following the receipt of the notice referred to in the first
sentence of this Section 2.2.1 and to keep the Initial Shelf Registration
continuously effective and the Prospectus current under the Securities Act
during the period (the "Effectiveness Period") ending on the earliest date on
which (x) all Registrable Securities have been sold other than to a
Beneficiary, (y) a Subsequent Shelf Registration covering all the Registrable
Securities has been declared effective under the Securities Act or (z) in the
opinion of Milbank, Tweed, Hadley & McCloy or other nationally recognized
counsel to New Valley reasonably acceptable to the Beneficiaries, which opinion
shall be reasonably satisfactory in form, scope and substance to the
Beneficiaries, registration of the Registrable Securities is no longer required
under the Securities Act for the Beneficiaries to sell all remaining
Registrable Securities in the open market without limitations as to volume or
manner of sale and without being required to file any forms or reports with the
SEC under the Securities Act or the Regulations other than a notice of sale
under Rule 144 under the Regulations. No Beneficiary of Registrable Securities
may include any of its Registrable Securities in any Shelf Registration
pursuant to this Agreement unless and until such Beneficiary furnishes to New
Valley in writing such information as New Valley may reasonably request
pursuant to Section 6.2.
Section 2.2.2 Subsequent Shelf Registrations. If
the Initial Shelf Registration or any Subsequent Shelf Registration ceases to
be effective for any reason at any time during the Effectiveness Period, New
Valley shall use its reasonable best efforts to (i) obtain the prompt
withdrawal of any order suspending the effectiveness thereof and (ii) in any
event, within 45 days of such cessation of effectiveness, amend the
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Shelf Registration in a manner reasonably expected to obtain the withdrawal of
the order suspending the effectiveness thereof or file an additional
Registration Statement covering all of the Registrable Securities (a
"Subsequent Shelf Registration", subject to the last sentence of this Section
2.2.2) for an offering to be made by the Beneficiaries on a delayed or
continuous basis under Rule 415 in a manner reasonably expected to be
acceptable to the SEC. If a Subsequent Shelf Registration is filed, New Valley
shall use its reasonable best efforts to cause the Subsequent Shelf
Registration to be declared effective as soon as practicable after such filing
and keep such Registration Statement continuously effective and the Prospectus
current until the end of the Effectiveness Period. As used herein, the term
"Shelf Registration" means the Initial Shelf Registration and any Subsequent
Shelf Registration. If by reason of the Securities Act or the Regulations a
Shelf Registration shall not permit the resale by a Beneficiary of Registrable
Securities acquired from another Beneficiary, the obligations of New Valley,
BGLS and Brooke shall extend to the filing of, and other registration
procedures with respect to, another registration statement (which shall be a
Subsequent Shelf Registration).
Section 2.2.3 Supplements and Amendments. New
Valley shall promptly supplement and amend the Registration Statement and the
Prospectus (i) if required by the Regulations or the instructions applicable to
the registration form used for the Shelf Registration, (ii) if required by the
Securities Act or the Regulations, (iii) if required to prevent the
Registration Statement or the Prospectus from containing any material
misstatement or omitting to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or (iv) if
reasonably requested by the Beneficiaries or by any underwriter of the
Registrable Securities.
Section 2.2.4 Suspension of Obligations;
Restructuring for "Demand" Registrations. (a) The obligations of New Valley to
register the Registrable Securities with respect to a Default Condition shall
be suspended for so long as such Default Condition shall cease to exist (other
than by reason of the implementation or completion of remedies consequent upon
such
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Default Condition) and shall recommence after the close of any such suspension
period.
(b) Upon the request of the Beneficiaries and with
the consent of New Valley (not to be unreasonably withheld or
delayed), or upon the request of New Valley and with the consent of
the Beneficiaries (not to be unreasonably withheld or delayed) a Shelf
Registration or a portion thereof (expressed as a quantity of
Registrable Securities) shall be restructured to provide for a
reasonable number of "demand" registrations with respect to such
quantity of Registrable Securities; provided, however, that the
Beneficiaries shall be entitled to withhold their consent in their
sole discretions if they are at the time actively pursuing shelf
registration procedures.
Section 2.3 Registration Procedures.
Section 2.3.1 Shelf Registration. In connection with a Shelf
Registration, New Valley shall use its reasonable best efforts to effect such
registration to permit the sale of Registrable Securities in accordance with
the method or methods of disposition reasonably intended by the Beneficiaries,
and pursuant thereto New Valley shall:
(a) Filing of Registration Statement. Before
filing any Registration Statement or Prospectus or any amendments or
supplements thereto, furnish to and afford the Beneficiaries of the
Registrable Securities covered by such Registration Statement, and the
managing underwriters, if any, a reasonable opportunity to review and,
if they desire, comment on all such documents (including any documents
to be incorporated by reference therein and all exhibits thereto)
proposed to be filed.
(b) Compliance with Law. Comply with the
provisions of the Securities Act, the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to it with
respect to the disposition of all Registrable Securities covered by
such Registration Statement as amended or by such Prospectus as
supplemented.
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(c) Notice. Notify the Beneficiaries owning the
Registrable Securities covered by the Registration Statement, and the
managing underwriters, if any, promptly, and confirm such notice in
writing (i) when a Registration Statement and an amendment thereto or
a Prospectus or any Prospectus supplement or post-effective amendment
has been filed, and, with respect to a Registration Statement or any
post-effective amendment, when the same has become effective
(including in such notice a written statement that any such
Beneficiary may, upon request, obtain, without charge, one conformed
copy of such Registration Statement or post-effective amendment
including financial statements and schedules, documents incorporated
or deemed to be incorporated by reference and exhibits), (ii) of the
issuance by the SEC of any stop order suspending the effectiveness of
a Registration Statement or of any order preventing or suspending the
use of any Preliminary Prospectus, the initiation of any proceedings
for that purpose or any other communication between the SEC and New
Valley or their representatives related to a Shelf Registration, (iii)
if at any time when a prospectus is required by the Securities Act to
be delivered in connection with sales of the Registrable Securities,
the representations and warranties of New Valley contained in any
agreement (including any underwriting agreement) contemplated by
Section 2.3.1(m) cease to be true and correct, (iv) of the receipt by
New Valley of any notification with respect to the suspension of the
qualification or exemption from qualification of a Registration
Statement or any of the Registrable Securities for offer or sale in
any jurisdiction, or the initiation or threatening of any proceeding
for such purpose, (v) of the happening of any event or any information
becoming known that requires the making of any changes in such
Registration Statement, Prospectus or documents so that, in the case
of the Registration Statement, it will not contain any untrue
statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, and, in the case of the Prospectus, it will
not contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in light
of the
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circumstances under which they were made, not misleading, and (vi) of
New Valley's determination that a post- effective amendment to a
Registration Statement would be necessary or advisable under
applicable law.
(d) Prevent Suspension of Effectiveness. Use its
reasonable best efforts to prevent the issuance of any order
suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of a Prospectus or suspending
the qualification (or exemption from qualification) of any of the
Registrable Securities for offers or sales in any jurisdiction, and,
if any such order is issued, use its reasonable best efforts to obtain
the withdrawal of any such order at the earliest possible moment.
(e) Underwritten Offering. If the Registrable
Securities are to be sold in an underwritten offering, (i) as promptly
as is reasonably practicable incorporate in a prospectus supplement or
post-effective amendment to the Registration Statement such
information as is required by the Securities Act, Regulation S-K of
the Regulations, the Regulations and instructions applicable to the
registration form used for such Registration Statement to be disclosed
concerning, among other things, the terms of the underwritten
offering, the underwriters, and the plan of distribution and (ii) make
all required filings of such prospectus supplement or such
post-effective amendment as soon as practicable.
(f) Copies of Filings. Furnish to the
Beneficiaries owning Registrable Securities that so request and each
managing underwriter, if any, without charge, one conformed copy of
the Registration Statement and each post-effective amendment thereto,
including financial statements and schedules, all documents
incorporated or deemed to be incorporated therein by reference and all
exhibits.
(g) Delivery of Prospectuses. Deliver to the
Beneficiaries owning Registrable Securities, and the underwriters, if
any, without charge, as many copies of the Prospectus or Prospectuses
(including each form of
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Preliminary Prospectus) and each amendment or supplement thereto and
any documents incorporated or deemed to be incorporated by reference
therein as such Persons may reasonably request; and New Valley hereby
consents to the use of each such Prospectus and Preliminary Prospectus
and each amendment or supplement thereto by each of the selling
Beneficiaries and the underwriters or agents, if any, and dealers, if
any, in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement
thereto in the manner set forth in the relevant Registration
Statement.
(h) Blue Sky Laws. Use its reasonable best
efforts to register or qualify, and to cooperate with the selling
Beneficiaries with respect to the Registrable Securities, the
underwriters, if any, and their respective counsel in connection with
the registration or qualification (or exemption from such registration
or qualification) of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions within the
United States as such Beneficiaries or the managing underwriters, if
any, reasonably request in writing; keep each such registration or
qualification (or exemption therefrom) effective during the
Effectiveness Period; and do any and all other acts or things
reasonably necessary or advisable to enable the disposition in such
jurisdictions of the Registrable Securities covered by the applicable
Registration Statement in the manner set forth in such Registration
Statement.
(i) Certificates. Cooperate with the selling
Beneficiaries with respect to Registrable Securities and the managing
underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be
sold, which certificates shall not bear any restrictive legends and
shall be in a form eligible for deposit with The Depository Trust
Company; and enable such Registrable Securities to be in such
denominations and registered in such names as the managing
underwriters, if any, or Beneficiaries may reasonably request.
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(j) Governmental Agencies. Use its reasonable
best efforts to cause the Registrable Securities covered by the
Registration Statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the
selling Beneficiaries thereof or the underwriters, if any, to
consummate the disposition of such Registrable Securities in the
manner set forth in such Registration Statement, except as may be
required solely as a consequence of the nature of such selling
Beneficiary's business, in which case New Valley will cooperate in all
reasonable respects with the filing of such Registration Statements
and the granting of such approvals.
(k) Amendments and Supplements. Upon the
occurrence of any event contemplated by Section 2.3.1(c)(v) or
2.3.1(c)(vi), as promptly as practicable prepare and (subject to
Section 2.3.1(a)) file with the SEC a post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or
any document incorporated or deemed to be incorporated therein by
reference, or file any other required document so that, as thereafter
delivered to the purchasers of Registrable Securities being sold
thereunder, the Registration Statement and such Prospectus will not
contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they
were made, not misleading.
(l) Listing on Securities Exchanges. Use its
reasonable best efforts to cause all Registrable Securities covered by
a Registration Statement to be (i) listed on each national securities
exchange, if any, on which Registrable Securities are then listed, or
(ii) authorized to be quoted on the NASDAQ Stock Market or the NASDAQ
National Market if, similar securities of New Valley are so
authorized.
(m) Underwriting Agreement. In connection with
an underwritten offering of Registrable Securities, enter into and
perform its obligations under an underwriting agreement in customary
form for underwritten offerings made by selling security holders on
the registration form
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utilized for the relevant Registration Statement and take such other
actions as are reasonably requested by the managing underwriters in
order to expedite or facilitate the registration and the disposition
of such Registrable Securities, and in such connection, (i) make such
representations and warranties to the underwriters with respect to the
business of New Valley and its subsidiaries, and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to
be incorporated by reference therein, in each case as are customarily
made by comparable issuers to underwriters in underwritten offerings
made by selling security holders, and confirm the same if and when
requested; (ii) obtain opinions of counsel to New Valley and updates
thereof (which counsel and opinions shall be reasonably satisfactory
to the managing underwriters and the selling Beneficiaries), addressed
to the underwriters covering the matters customarily covered in
opinions requested in underwritten offerings by selling security
holders; (iii) obtain "cold comfort" letters and updates thereof
(which letters and updates shall be reasonably satisfactory to the
managing underwriters and the selling Beneficiaries) from the
independent certified public accountants of New Valley (and, if
necessary, any other independent certified public accountants of any
subsidiary of New Valley or of any business acquired by New Valley for
which financial statements and financial data are, or are required to
be, included in the Registration Statement), addressed to each of the
underwriters and the holders of Registrable Securities included in
such underwritten offering (to the extent such accountants are
permitted under applicable law and accounting literature so to address
"cold comfort" letters), such letters to be in customary form and
covering matters of the type customarily covered in "cold comfort"
letters in connection with underwritten offerings by selling security
holders; and (iv) if an underwriting agreement is entered into,
undertake such indemnification and contribution provisions and
procedures as are customarily undertaken in such agreements. The
above shall be done in connection with each closing under such
underwriting agreement, or as and to the extent required thereunder.
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(n) Financial Records, Etc. Make available for
inspection by any Beneficiary, any underwriter participating in any
such disposition of Registrable Securities, if any, and any attorney,
accountant or other agent retained by any such selling Beneficiary or
underwriter (collectively, the "Inspectors"), at the offices where
normally kept, during reasonable business hours, all financial and
other records, pertinent corporate documents and properties of New
Valley and its subsidiaries (collectively, the "Records") as shall be
necessary or advisable to enable them to exercise their due diligence
responsibilities, and cause the officers, directors and employees of
New Valley and its subsidiaries to supply all information in each case
reasonably requested by any such Inspectors in connection with such
Registration Statement. Records which New Valley determines, in good
faith, to be confidential and as to which it notifies the Inspectors
are confidential shall not be disclosed by the Inspectors unless (i)
the disclosure of such Records is necessary to avoid or correct a
misstatement or omission in such Registration Statement, (ii) the
release of such Records is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction or (iii) the information
in such Records has been made generally available to the public.
Except as contemplated hereby, and subject to applicable law, each
selling Beneficiary agrees that information obtained by it as a result
of such inspections shall be deemed confidential and shall not be used
by it as the basis for any market transactions in the securities of
New Valley or its affiliates unless and until such is made generally
available to the public. Beneficiaries shall not be prohibited from
engaging in market transactions if such information is not material,
to the extent permitted by applicable law. Each selling Beneficiary
further agrees that it will, upon learning that disclosure of such
Records is sought in a court of competent jurisdiction, give notice to
New Valley and allow New Valley at its expense to undertake
appropriate action to prevent disclosure of the Records deemed
confidential.
(o) Earnings Statements. Comply with all
applicable rules and regulations of the SEC relating to the Shelf
Registration and make generally available earnings
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statements satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder (or any similar rule
promulgated under the Securities Act) no later than 45 days after the
end of any 12-month period (or 90 days after the end of any 12-month
period if such period is a fiscal year) (i) commencing at the end of
any fiscal quarter in which Registrable Securities are sold to
underwriters in a firm commitment or best efforts underwritten
offering and (ii) if not sold to underwriters in such an offering,
commencing on the first day of the first fiscal quarter of New Valley
after the effective date of a Registration Statement, which statements
shall cover such 12-month periods.
(p) Disposition of Registrable Securities.
Cooperate with each holder of Registrable Securities covered by any
Registration Statement and each underwriter, if any, participating in
the disposition of such Registrable Securities and their respective
counsel in connection with any filings required to be made with the
National Association of Securities Dealers, Inc. (the "NASD").
(q) Further Assurances; BGLS and Brooke
Undertaking. Use its reasonable best efforts to take all other steps
necessary or advisable to effect the registration and distribution of
the Registrable Securities covered by a Registration Statement
contemplated hereby. Each of BGLS and Brooke shall (i) use its
reasonable best efforts to cooperate fully in connection with the
registration and distribution of the Registrable Securities covered by
a Registration Statement contemplated hereby, including furnishing
such supplemental information as may be reasonably necessary in
connection with the registration process, (ii) take such actions
specified in Sections 2.3.1(m) and 2.3.1(n) on its behalf as if it
were New Valley as may be deemed necessary or advisable by selling
Beneficiaries, and (iii) to the extent that it is within its power,
cause New Valley to comply with New Valley's obligations hereunder.
Section 2.3.2 Beneficiary Covenants. In addition
to the covenant provided in Section 6.2, each Beneficiary agrees by acquisition
of the Registrable Securities that, upon receipt
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of any notice from New Valley of the happening of any event of the kind
described in clause (ii), (iv), (v) or (vi) of Section 2.3.1(c), such
Beneficiary shall forthwith discontinue disposition of such Registrable
Securities covered by such Registration Statement or Prospectus until such
Beneficiary's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 2.3.1(k), or until it is advised in writing by New
Valley that the use of the applicable Prospectus may be resumed, and has
received copies of any amendments or supplements thereto.
Section 2.4 Qualifications to Registration Obligations.
Notwithstanding anything in this Agreement to the contrary, if a Registration
Statement does not become effective after New Valley has filed it solely by
reason of the written request not to proceed made by the Beneficiaries, New
Valley's obligations to file such Registration Statement and attempt to cause
it to become effective shall be deemed completely satisfied and discharged to
the extent of such request.
Section 2.5 New Valley's Obligations Absolute.
Notwithstanding anything contained herein to the contrary, New Valley's
performance and obligations hereunder shall be absolute and without any setoff,
defense, counterclaim, deduction, abatement, suspension, deferment, diminution
or reduction, relating to, and irrespective and independent of any rights,
claims or defenses that New Valley may have against, BGLS or Brooke or any of
their respective affiliates (whether arising under this Agreement or
otherwise).
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ARTICLE 3
REGISTRATION EXPENSES
All fees and expenses incident to the performance of or
compliance with this Agreement by New Valley shall be borne by New Valley, BGLS
and Brooke, jointly and severally, whether or not a Shelf Registration is filed
or becomes effective, including (i) all registration and filing fees (including
(A) fees with respect to filings required to be made with the NASD in
connection with an underwritten offering and (B) fees and expenses of
compliance with state securities or Blue Sky laws (including reasonable fees
and disbursements of counsel for New Valley, BGLS, Brooke or the underwriters,
or both, in connection with Blue Sky qualifications of the Registrable
Securities)), (ii) printing expenses (including expenses of printing
certificates for Registrable Securities, printing and distributing
Prospectuses, Preliminary Prospectuses and amendments or supplements thereto,
the Registration Statement and amendments thereto, and printing or preparing
any underwriting agreement, agreement among underwriters and related syndicate
or selling group agreements, pricing agreements and Blue Sky memoranda), (iii)
fees and disbursements of counsel for New Valley, BGLS and Brooke, (iv) fees
and disbursements of all independent certified public accountants for New
Valley, BGLS and Brooke (including the expenses of any "cold comfort" letters
required by or incident to such performance), (v) Securities Act liability
insurance, if New Valley so desires such insurance, (vi) internal expenses of
New Valley (including all salaries and expenses of officers and employees of
New Valley performing legal or accounting duties), (vii) the fees and expenses
incurred in connection with the listing of the securities to be registered on
any national securities exchange or quoted on the NASDAQ Stock Market or the
NASDAQ National Market pursuant to Section 2.3.1(l), and (viii) the fees and
expenses of any Person, including special experts, retained by New Valley, BGLS
or Brooke in its sole discretion; provided, however, that New Valley, BGLS and
Brooke may agree in writing to allocate among themselves the liability for the
fees and expenses hereunder.
Each selling Beneficiary shall pay all underwriting discounts
and commissions or broker's commissions incurred in
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connection with the sale or other disposition of Registrable Securities for or
on behalf of such Beneficiary's account. Notwithstanding the foregoing, if
there shall have occurred two or more Specified Private Sales (as defined
below), the fees and expenses specified in clauses (i) through (iii) of the
first paragraph of this Article 3 that are incurred by New Valley, BGLS and
Brooke in connection with any subsequent Shelf Registration shall be borne as
follows: (i) 50% by New Valley, BGLS and Brooke, jointly and severally (subject
to the proviso to such first paragraph); and 50% by the selling Beneficiaries
relating to such Shelf Registration, jointly and severally; provided, however,
that New Valley, BGLS and Brooke on the one hand and such Beneficiaries on the
other hand may agree in writing to allocate among themselves their portion of
liability for such fees and expenses.
A "Specified Private Sale" means a sale by a Beneficiary of
Registrable Securities (i) in an amount equal to more than a majority in
interest of the Registrable Securities, (ii) other than by means of a Shelf
Registration and (iii) with respect to which a Shelf Registration was
previously filed, if the Specified Parties have fulfilled their
responsibilities hereunder relating to such Shelf Registration in all material
respects.
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ARTICLE 4
INDEMNIFICATION
Section 4.1 Indemnification by New Valley. New Valley
shall, without limitation as to time, indemnify and hold harmless, to the
fullest extent permitted by law, each Beneficiary and its affiliates and any
investment funds managed thereby and their respective partners, officers,
directors, agents and employees, each Person who controls each such Beneficiary
(within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act) and the partners, officers, directors, agents and employees of
each such controlling person (individually, an "Indemnified Person") from and
against any and all losses, claims, damages, liabilities, costs (including
costs of investigating, preparing to defend, defending and appearing as a
third-party witness and attorneys' fees and disbursements reasonably incurred)
and expenses, including any amounts paid in respect of any settlements
(collectively, "Losses"), without duplication, as incurred, arising out of or
based upon any untrue or alleged untrue statement of a material fact contained
in any Registration Statement, Prospectus or form of prospectus, or in any
amendment or supplements thereto or in any Preliminary Prospectus, or arising
out of or based upon, in the case of the Registration Statement or any
amendments thereto, any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and, in the case of the Prospectus or form of prospectus, or in any
amendments or supplements thereto, or in any Preliminary Prospectus, any
omission or alleged omission of a material fact required to be stated therein
or necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except, in either case, to the
extent, but only to the extent, that such untrue or alleged untrue statement or
omission or alleged omission has been made therein in reliance upon and in
conformity with information furnished in writing to New Valley by such
Indemnified Person (or the person controlling such Indemnified Person)
expressly for use therein.
Section 4.2 Indemnification by BGLS and Brooke. BGLS and
Brooke shall, jointly and severally, without limitation as to time, indemnify
and hold harmless, to the fullest extent
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permitted by law, New Valley (an "Indemnified Person") from and against any and
all Losses, as incurred, (i) arising out of or based upon any untrue or alleged
untrue statement of a material fact furnished in writing to New Valley by BGLS
or Brooke and contained in any Registration Statement, Prospectus or form of
prospectus, or in any amendment or supplements thereto or in any Preliminary
Prospectus, or arising out of or based upon, in the case of the Registration
Statement or any amendments thereto, any omission or alleged omission of a
material fact relating to Brooke or BGLS required to be stated therein or
necessary to make the statements therein not misleading, and, in the case of
the Prospectus or form of prospectus, or in any amendments or supplements
thereto, or in any Preliminary Prospectus, any omission or alleged omission of
a material fact relating to BGLS or Brooke required to be stated therein or
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in either case, to the extent, but
only to the extent, that such untrue or alleged untrue statement or omission or
alleged omission has been made therein in reliance upon and in conformity with
the information furnished in writing to New Valley by Brooke or BGLS expressly
for use therein, and (ii) constituting payments made by New Valley pursuant to
Section 4.1.
Section 4.3 Indemnification by Beneficiary. In
connection with any Registration Statement in which a Beneficiary is
participating, such Beneficiary shall, without limitation as to time, indemnify
and hold harmless, to the fullest extent permitted by law, New Valley and its
directors, officers, agents and employees, each Person who controls New Valley
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, agents or employees of such
controlling person, from and against any and all Losses, joint or several,
without duplication, as incurred, arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in any Registration
Statement, Prospectus, or form of prospectus, or in any amendment or supplement
thereto or in any Preliminary Prospectus, or arising out of or based upon, in
the case of the Registration Statement or any amendments thereto, any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein not misleading, and, in the case of
the
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Prospectus or form of prospectus, or in any amendments or supplements thereto,
or in any Preliminary Prospectus, any omission or alleged omission of a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading; in either case, to
the extent, but only to the extent, that such untrue or alleged untrue
statement or omission or alleged omission has been made therein in reliance
upon and in conformity with information furnished in writing to New Valley by
such Beneficiary expressly for use therein by notice referring to this Section
4.3. In no event shall the liability of any selling Beneficiary hereunder be,
or be claimed by New Valley to be, greater in amount than the dollar amount of
the proceeds actually received by such Beneficiary upon the sale of the
Registrable Securities giving rise to such indemnification obligation.
Section 4.4 Conduct of Indemnification Proceedings. If
any Person shall be entitled to indemnity or contribution hereunder (an
"indemnified party"), such indemnified party shall give prompt notice to the
party or parties from which such indemnity or contribution is sought (the
"indemnifying parties") of the commencement of any action or proceeding
(including any governmental investigation) (collectively "Proceedings" and
individually a "Proceeding") with respect to which such indemnification or
contribution is sought pursuant hereto; provided, however, that the failure so
to notify the indemnifying parties shall not relieve the indemnifying parties
from any obligation or liability except to the extent that the indemnifying
parties have been actually prejudiced by such failure. The indemnifying
parties shall have the right, exercisable by giving written notice to an
indemnified party promptly after the receipt of written notice from such
indemnified party of such Proceeding, to assume, at the indemnifying parties'
expense, the defense of any such Proceeding, with counsel reasonably
satisfactory to such indemnified party and shall pay as incurred the fees and
disbursements of such counsel related to such Proceeding; provided, however,
that an indemnified party or parties (if more than one such indemnified party
is named in any Proceeding) shall have the right to employ separate counsel in
any such Proceeding and to participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such
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indemnified party or parties unless: (i) the indemnifying party or parties
agree to pay such fees and expenses; or (ii) the indemnifying parties fail
promptly to assume the defense of such Proceeding or fail to employ counsel
reasonably satisfactory to such indemnified party or parties; or (iii) counsel
for the indemnifying party determines that such counsel may not properly
represent both the indemnifying party and such indemnified party in which case,
if such indemnified party or parties notifies the indemnifying parties in
writing that it elects to employ separate counsel at the expense of the
indemnifying parties, the indemnifying parties shall not have the right to
assume the defense thereof and the fees and expenses of counsel retained by the
indemnified party or parties shall be at the expense of the indemnifying
parties, it being understood, however, that the indemnifying parties shall not,
in connection with any one such Proceeding, arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (together with appropriate local
counsel) at any time for such indemnified party or parties. Whether or not
such defense is assumed by the indemnifying parties, such indemnifying parties
will not be subject to any liability for any settlement made without its or
their consent (but such consent will not be unreasonably withheld). No
indemnifying party shall be liable for any settlement of any such action or
proceeding effected without its written consent, but if settled with its
written consent each indemnifying party jointly and severally agrees, subject
to the exception and limitations set forth above, to indemnify and hold
harmless each indemnified party from and against any Losses by reason of such
settlement.
Section 4.5 Contribution. If the indemnification
provided for in this Article 4 is unavailable to an indemnified party or is
insufficient to hold such indemnified party harmless for any Losses in respect
to which this Article 4 would otherwise apply by its terms, then each
applicable indemnifying party, in lieu of indemnifying such indemnified party,
shall have an obligation to contribute to the amount paid or payable by such
indemnified party as a result of such Losses, in such proportion as is
appropriate to reflect the relative fault of the indemnifying party, on the one
hand, and such indemnified party, on the other
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hand, in connection with the actions, statements or omissions that resulted in
such Losses as well as any other relevant equitable considerations. The
relative fault of such indemnifying party, on the one hand, and indemnified
party, on the other hand, shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a
material fact, has been taken by, or relates to information supplied by, such
indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent any such
action, statement or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include any legal or other fees or
expenses reasonably incurred by such party in connection with any Proceeding,
to the extent such party would have been indemnified for such expenses if the
applicable indemnification provided for in Section 4.1, 4.2 or 4.3 were
available to such party.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 4.5 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 4.5, an indemnifying
party that is a selling Beneficiary shall not be required to contribute any
amount in excess of the amount by which the total price at which the
Registrable Securities sold by such indemnifying party and distributed to the
public were offered to the public (net of any underwriting discounts and
commissions and expenses) exceeds the amount of any damages that such
indemnifying party has otherwise been required to pay or has paid by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
Section 4.6 Remedies Cumulative. The indemnity,
contribution and expense reimbursement obligations under this Article 4 shall
be in addition to any liability that each indemnifying person may
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otherwise have and shall remain operative and in full force and effect
regardless of any investigation made by or on behalf of any indemnified party.
Notwithstanding anything in this Agreement to the contrary, an indemnified
party shall not be entitled to receive duplicate indemnification or
contribution for the same Losses (except to the extent they are incurred more
than once).
ARTICLE 5
UNDERWRITTEN REGISTRATION
If any of the Registrable Securities covered by any Shelf
Registration are to be sold in an underwritten offering, the investment banker
or investment bankers and manager or managers that will manage the offering
will be selected by the Beneficiaries holding at least 66 2/3% in interest of
the applicable Registrable Securities with the consent of New Valley (not to be
unreasonably withheld or delayed).
ARTICLE 6
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 6.1 Representations and Warranties. Each of New
Valley and, in the case of Sections 6.1(b) and (c), BGLS and Brooke represents
and warrants to, and agrees with, the Beneficiaries that:
(a) During the Effectiveness Period, the
Registration Statement (and any post-effective amendment thereto) and
the Prospectus (as amended or as supplemented if New Valley shall have
filed with the SEC any amendment or supplement to the Registration
Statement or the Prospectus) will contain all statements which are
required to be stated therein in accordance with the Securities Act
and the Regulations, and will not contain any untrue statement of a
material fact or omit to state any material fact (except such
information which is omitted from the Registration Statement pursuant
to Rule 430A of the Regulations) required to be stated therein or
necessary to make the statements therein not misleading, and no event
will have occurred
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which is required to have been set forth in an amendment or supplement
to the Registration Statement or the Prospectus which has not then
been set forth in such an amendment or supplement; each Preliminary
Prospectus, as of the date filed with the SEC, will not include any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading, in light of the circumstances under which they
were made; except that no representation or warranty is made in this
Section 6.1(a) with respect to statements or omissions made in
reliance upon and in conformity with written information furnished to
New Valley pursuant to Section 6.2 by a Beneficiary or on behalf of a
Beneficiary expressly for inclusion in any Preliminary Prospectus, the
Registration Statement, or the Prospectus, or any amendment or
supplement thereto. Each of the documents filed pursuant to the
Exchange Act and incorporated or deemed to be incorporated by
reference in the Registration Statement will comply in all material
respects with the requirements of the Exchange Act and the rules and
regulations thereunder.
(b) Such Specified Party has all requisite power
and authority to execute, deliver and perform this Agreement. All
necessary corporate proceedings of such Specified Party have been duly
taken by it to authorize the execution, delivery, and performance of
this Agreement by such Specified Party. This Agreement has been duly
authorized, executed, and delivered by such Specified Party, is the
legal, valid and binding obligation of such Specified Party, and is
enforceable as to such Specified Party in accordance with its terms.
No consent, authorization, approval, order, license, certificate, or
permit of or from, or declaration or filing with, any federal, state,
local, or other governmental authority or any court or other tribunal
is required by such Specified Party for the execution, delivery or
performance of this Agreement by such Specified Party (except filings
under the Securities Act which will be made and such consents
consisting only of consents under Blue Sky or state securities laws
which will be obtained). No consent of any party to any contract,
agreement, instrument, lease, license, arrangement or understanding to
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which such Specified Party is a party or to which any of its
properties or assets are subject, is required for the execution,
delivery or performance of this Agreement which has not been obtained;
and the execution, delivery, and performance of this Agreement will
not violate, result in a breach of, conflict with or (with or without
the giving of notice or the passage of time or both) entitle any party
to terminate or call a default under any such contract, agreement,
instrument, lease, license, arrangement or understanding or violate or
result in a breach of any term of the charter or by-laws of such
Specified Party, or violate, result in a breach of, or conflict with
any law, rule, regulation order, judgment or decree binding on such
Specified Party or to which any of its operations, business,
properties or assets are subject.
(c) Such Specified Party shall not enter into any
transaction involving (i) any merger or consolidation in which it is
not the surviving Person, (ii) any sale, lease or other transfer of
all or substantially all the assets of such Specified Party or (iii)
in the case of New Valley, any exchange or conversion of any of the
Registrable Securities for or into securities of any other issuer,
unless effective provision is made for (x) the assumption by the
survivor of the transaction or the transferee, jointly and severally
with such Specified Party if such Specified Party shall remain in
existence, of all the obligations of such Specified Party hereunder,
and (y) in the case of clause (iii), the entering into by such other
issuer of an agreement comparable hereto and reasonably satisfactory
to the Beneficiaries with respect to the registration of such
securities of such other issuer.
Section 6.2 Additional Beneficiary Covenants. Each
Beneficiary agrees with New Valley that such Beneficiary shall promptly furnish
to New Valley in writing, upon New Valley's reasonable request, any and all
information as to such Beneficiary as may be necessary to comply with the
provisions of, the Securities Act, the Regulations, the Exchange Act and the
rules and regulations of the SEC thereunder in connection with the preparation
and filing of any Registration Statement pursuant hereto, or any amendment or
supplement thereto, or any Preliminary Prospectus or Prospectus included
therein. All information to be furnished to New Valley by or on behalf of such
Beneficiary expressly for use in connection with the preparation of any
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Preliminary Prospectus, the Prospectus, the Registration Statement, or any
amendment or supplement thereto, will not include any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary to make the statements therein not misleading.
Section 6.3 Survival of Representations and Agreements.
All representations, warranties, covenants and agreements contained in this
Agreement shall be deemed to be representations, warranties, covenants and
agreements at the effective date of each Registration Statement contemplated by
this Agreement, and such representations, warranties, covenants, and
agreements, including the indemnity and contribution agreements contained in
Article 4, shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of New Valley, BGLS, Brooke, any
Beneficiary or any Person that is entitled to be indemnified under Article 4,
and shall survive termination of this Agreement and the expiration of the
Effectiveness Period.
ARTICLE 7
MISCELLANEOUS
Section 7.1 Remedies. No failure or delay on the part of
a party in exercising any right, power or remedy hereunder shall operate as a
waiver thereof; nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy.
Section 7.2 Amendments and Waivers. The provisions of
Article 3 and Article 4 (and the provisions of this Section 7.2 as they apply
thereto) may not be amended, modified, supplemented, waived or departed from
without the express written consent of each affected party. The other
provisions of this Agreement, including the provisions of this sentence, may
not be amended, modified or supplemented, and waivers or consents to departures
from the provisions hereof may not be given, unless New Valley
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has obtained the written consent of (x) if the Trustee holds Registrable
Securities, the Trustee plus BGLS and Brooke and (y) if the Beneficiaries are
holders of Registrable Securities other than as Trustee, BGLS, Brooke and the
holders of at least 66 2/3% in interest of the Registrable Securities;
provided, however, that the consent of each holder of Registrable Securities
shall be required if the effect of the amendment or waiver is less favorable or
more unfavorable, as the case may be, on such holder of Registrable Securities
as it is on the consenting holders of Registrable Securities.
Section 7.3 Notices. All notices, consents and other
communications provided for hereunder shall be in writing (including facsimile,
telegraphic or cable communication) and telecopied, telegraphed, telexed,
cabled or delivered (x) (i) if to BGLS, to it c/o Brooke Group Ltd., 100 S.E.
Second Street, 32nd Floor, Miami, Florida 33131, attention: Bennett S. LeBow,
telecopy (305) 579-8001, with a copy to (A) Milbank, Tweed, Hadley & McCloy, 1
Chase Manhattan Plaza, New York, New York 10005, attention: Michael L.
Hirschfeld, telecopy (212) 530-5219 and (B) New Valley, at its address set
forth below, (ii) if to Brooke, to 100 S.E. Second Street, 32nd Floor, Miami,
Florida 33131, attention: Bennett S. LeBow, telecopy (305) 579-8001, with a
copy to (A) Milbank, Tweed, Hadley & McCloy, 1 Chase Manhattan Plaza, New York,
New York 10005, attention: Michael L. Hirschfeld, telecopy (212) 530-5219 and
(B) New Valley, at its address set forth below, (iii) if to New Valley, to 100
S.E. Second Street, Miami, Florida 33131, attention: Marc Bell, telecopy (305)
579-8016, with a copy to each of BGLS and Brooke at its address set forth
above, (iv) if to the Trustee, to Shawmut Bank, N.A., Corporate Trust
Department, One Federal Street, 31st Floor, Boston, Massachusetts 02211,
telecopy (617) 292-4289, and (v) if to any Beneficiary not specified above, to
the addresses provided by such Beneficiary for such purpose to the other
parties to this Agreement or (y) at such other address as shall be designated
by any such party in a written notice to the other parties. For so long as
each of the following Persons, any affiliate thereof or any investment fund
managed by such Person or by any affiliate thereof owns any Senior Secured
Notes or Registrable Securities, all notices, consents or other communications
to or from the Trustee shall also be delivered to, as applicable, (x) (a) AIF
II, L.P., c/o Apollo Advisors, L.P.,
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1999 Avenue of the Stars, Suite 1900, Los Angeles, California 90067,
attention: Michael D. Weiner, telecopy (310) 201-4166, with a copy to Sidley
& Austin, 875 Third Avenue, New York, New York 10022, attention: Myles C.
Pollin, telecopy (212) 906-2021, (b) Artemis America Partnership, c/o Lion
Advisors, L.P., 2 Manhattanville Road, Purchase, New York 10577, attention:
Tony Tortorelli, telecopy (914) 694-8032, with a copy to Sidley & Austin, 875
Third Avenue, New York, New York 10022, attention: Myles C. Pollin, telecopy
(212) 906-2021, (c) Tortoise Corp., c/o Icahn Associates, 114 West 47th Street,
New York, New York 10036, attention: Mark Rachesky, telecopy (212) 768-0542,
with a copy to Gordon Altman Butowsky Weitzen Shalov & Wien, 114 West 47th
Street, New York, New York 10036, attention: Marc Weitzen, telecopy (212)
626-0799, and (d) Mainstay High Yield Bond Fund, c/o MacKay-Shields Financial
Corporation, 9 West 57th Street, New York, New York 10019, attention: Jeffry
Platt, telecopy (212) 935-1359, with a copy to Kleinberg, Kaplan, Wolff & Cohen
P.C., 551 Fifth Avenue, 18th Floor, New York, New York 10176, Attention: Fred
Kleinberg, telecopy (212) 986-8866, or (y) at such other address as shall be
designated by any such person in a written notice to the other parties. All
such notices, consents and communications shall be effective when received.
Section 7.4 Counterparts. This Agreement may be executed
in two or more counterparts, all of which shall be considered one and the same
agreement and shall become effective when one or more counterparts have been
signed by each of the parties and delivered to the other parties, it being
understood that all parties need not sign the same counterpart.
Section 7.5 Entire Agreement; No Third Party
Beneficiaries; Obligations of Brooke. This Agreement (including the documents
and the instruments expressly referred to herein or therein) (i) constitutes
the entire agreement and supersedes all prior agreements and understandings,
both written and oral, among the parties with respect to the subject matter
hereof, and (ii) except as expressly set forth in Article 4 and in Section 7.3,
is not intended to confer upon any Person other than the parties hereto and the
Beneficiaries any rights or remedies hereunder. The obligations of Brooke
pursuant hereto shall be limited to those obligations of Brooke expressly set
forth herein.
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Section 7.6 Governing Law. This Agreement shall be
governed and construed in accordance with the laws of the State of New York,
without regard to principles of conflicts of law.
Section 7.7 Severability. Wherever possible, each
provision hereof shall be interpreted in such a manner as to be valid, legal
and enforceable under applicable law, but in case any one or more of the
provisions contained herein shall, for any reason, be held to be invalid,
illegal or unenforceable in any respect, such provision shall be ineffective to
the extent, but only to the extent, of such invalidity, illegality or
unenforceability without invalidating or rendering unenforceable the remainder
of this Agreement, unless such a construction would be unreasonable or
materially impair the rights of any party hereto.
Section 7.8 Assignment. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto (whether by operation of law or otherwise) without the prior
written consent of the other parties, except by a Beneficiary as follows: in
connection with the transfer of its Registrable Securities in whole or in part
to another Person, provided that the transferee executes an appropriate
document agreeing to be bound hereby as a Beneficiary. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of and be enforceable by the parties hereto and their respective successors and
assigns.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
NEW VALLEY CORPORATION
By
------------------------------------
Name:
Title:
BGLS INC.
By
------------------------------------
Name: Bennett S. LeBow
Title: President
BROOKE GROUP LTD.
By
------------------------------------
Name: Bennett S. LeBow
Title: Chairman and President
SHAWMUT BANK, N.A., as Trustee
under the Indenture
By
------------------------------------
Name:
Title:
<PAGE> 330
EXHIBIT H
[Form of Opinion of General Counsel of the Company]
___________ __, 1995
AIF II, L.P.
Artemis America Partnership
Tortoise Corp.
Mainstay High Yield Corporate
Bond Fund
Ladies and Gentlemen:
I am General Counsel of Brooke Group Ltd., a Delaware
corporation, BGLS Inc., a Delaware corporation, Brooke (Overseas) Ltd., a
Delaware corporation, New Valley Holdings, Inc., a Delaware corporation and
counsel to New Valley Corporation, a New York corporation (each a "Brooke Party"
and collectively the "Brooke Parties"), and am rendering this opinion in
connection with the execution and delivery of the agreements and instruments
listed in Schedule A hereto (the "Operative Documents") and the consummation of
the transactions contemplated therein. Capitalized terms used and not otherwise
defined herein that are defined in the Exchange Agreement listed in Schedule A
hereto have the meanings set forth therein. This opinion is being delivered
pursuant to Section 2.1(b)(iii) of said Exchange Agreement.
I have examined the Operative Documents and the Certificate of
Incorporation and by-laws of each of the Brooke Parties, agreements and other
instruments and certificates of public officials, and such other documents, as I
have deemed
<PAGE> 331
-2-
necessary in connection with the opinions hereinafter expressed. In such
examination I have assumed the genuineness of all signatures, the authenticity
of all documents submitted to me as originals, the conformity with the original
documents submitted to me as copies and the authenticity of the originals of
such latter documents. As to questions of fact material to such opinions I
have relied, without independent investigation, upon the representations and
warranties of the Brooke Parties contained in the Operative Documents and
certifications of representatives of the Brooke Parties and certificates of
public officials.
In rendering the opinions expressed below, I have assumed with
respect to all documents referred to in this opinion letter that:
(i) such documents have been duly authorized by, and have
been duly executed and delivered by, all of the parties (other than
the Brooke Parties) to such documents and constitute legal, valid,
binding and enforceable obligations of all such parties (including the
Brooke Parties); and
(ii) all of the parties (other than the Brooke Parties) to
such documents that are not natural persons are validly existing and
have the power and authority (corporate or other), and all of the
parties (other than the Brooke Parties) and the authorized signatories
of the parties (other than the Brooke Parties) to such documents that
are natural persons have the legal capacity, power and authority
(corporate or other), to execute, deliver and perform such documents.
Based upon the foregoing and having regard for legal
considerations that I deem relevant, I am of the opinion that:
1. Each Brooke Party is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, and has the corporate power to transact its business as now
transacted, to execute and deliver each Operative Document to which it is a
party and to perform its obligations thereunder.
<PAGE> 332
-3-
2. The execution, delivery and performance by each Brooke
Party of each of the Operative Documents to which it is a party has been duly
authorized by each party and will not (a) contravene or result in a breach or
constitute a default under or result in the creation of any Lien on any assets
of any such Brooke Party (except as provided therein) under (i) the Certificate
of Incorporation or bylaws of such Brooke Party, (ii) any order or judgment
known to me after due inquiry applicable to any such Brooke Party or any of
their respective assets or (iii) except for the Reset Notes and the Reset Note
Indenture, any material agreement, contract, mortgage or other instrument or
document known to me after due inquiry to which any such Brooke Party is a
party or by which any Brooke Party or any of their respective assets is bound
or (b) require any authorization, approval or consent of, or filing or
registration with any governmental or regulatory authority or agency of the
United States of America or pursuant to the General Corporation Law of the
State of Delaware other than the qualification of the Indenture under the Trust
Indenture Act of 1939, as amended, and filings and registrations required in
connection with the Registration Rights Agreement and the New Valley
Registration Rights Agreement.
3. Brooke has previously transferred to BGLS, as a
contribution to capital, 10 shares of common stock, par value $0.01 per share
(the "BOL Shares") of BOL, and BGLS is, as of the date hereof, the record and
beneficial owner of the BOL Shares, except for the security interests created
under the Company Pledge Agreement. The BOL Shares constitute all of the
issued and outstanding shares of capital stock of BOL. All of the outstanding
shares of BOL Shares have been duly authorized and validly issued and are fully
paid and nonassessable.
4. The authorized capital of NV Holdings consists of 100
shares of common stock, par value $0.01 per share ("NVH Shares"), all of which
are issued and outstanding and BGLS is, as of the date hereof, the record and
beneficial owner of the NVH Shares except for the security interests created
under the Company Pledge Agreement. All of the outstanding NVH Shares have
been duly authorized and validly issued and are fully paid and nonassessable.
<PAGE> 333
-4-
5. BGLS has transferred to NV Holdings, as a contribution to
capital, all of BGLS's right, title and interest in and to 618,326 New Valley
Class A Preferred Shares and 79,399,254 New Valley Common Shares (collectively,
the "New Valley Shares"), and NV Holdings is, as of the date hereof, the record
and beneficial owner of such New Valley Shares, subject only to the options
referred to in the proviso to Section 4.18(d) of the Indenture and except for
the security interests created under the NV Holdings Pledge Agreement.
The opinions expressed herein are limited to the General
Corporation Law of the State of Delaware and the Federal laws of the United
States of America.
The opinion is being delivered for your sole benefit in
connection with the transactions contemplated by the Exchange Agreement and for
no other purpose and this opinion may not be relied upon any other person.
Very truly yours,
<PAGE> 334
SCHEDULE A
(1) Indenture dated as of _________ __, 1995 between BGLS and Shawmut
Bank, N.A., as trustee, pursuant to which the Company is the New
Securities.
(2) Exchange Agreement, dated as of __________ __, 1995, among BGLS,
Brooke Group Ltd., AIF II, L.P., Artemis America Partnership, Tortoise
Corp., Starfire Holding Corporation and Mainstay High Yield Corporate
Bond Fund.
(3) Pledge and Security Agreement dated as of _________ __, 1995, between
BGLS and Shawmut Bank, N.A., as trustee for the benefit of the holders
of the New Securities.
(4) Pledge and Security Agreement dated as of _________ __, 1995, between
NV Holdings and Shawmut Bank, N.A., as trustee for the benefit of the
holders of the New Securities.
(5) New Valley Registration Rights Agreement dated as of __________ __,
1995, between New Valley, BGLS, Brooke and Shawmut Bank, N.A., as
trustee for the holders of the New Securities.
(6) A/B Exchange and Registration Rights Agreement dated as of November
__, 1995, among BGLS, Brooke Group Ltd., AIF II, L.P., Artemis America
Partnership, Tortoise Corp.. Mainstay High Yield Corporate Bond Fund.
(7) Sixth Supplemental Indenture dated as of _________ __, 1995, to
Indenture dated as of April 1, 1988, pursuant to which BGLS issued its
13.5000% Subordinated Reset Notes due 1997.
(8) Sixth Supplemental Indenture dated as of _________ __, 1995, to
Indenture dated as of April 1, 1988, pursuant to which BGLS issued its
14.5000% Subordinated Debentures due 1998.
(9) The Acknowledgements and Undertakings of Liggett, NV Holdings, Brooke
Overseas and New Valley attached to the Pledge Agreements referred to
above.
<PAGE> 335
EXHIBIT I
[Form of Opinion of Milbank, Tweed, Hadley & McCloy]
_____________ __, 1995
AIF II, L.P.
Artemis America Partnership
Tortoise Corp.
Mainstay High Yield Corporate
Bond Fund
Ladies and Gentlemen:
We have acted as counsel to BGLS Inc., Brooke Group Ltd.,
Liggett Group Inc., Brooke (Overseas) Ltd., New Valley Holdings, Inc. and New
Valley Corporation (each a "Company" and collectively the "Companies"), in
connection with the agreements and instruments listed in Schedule A hereto (the
"Operative Documents"). Unless otherwise defined herein, terms defined in the
Exchange Agreement listed in Schedule A hereto are used herein as defined
therein. This opinion is being delivered pursuant to Section 2.1(b)(iii) of
said Exchange Agreement.
In rendering the opinions expressed below, we have examined the
following agreements, instruments and other documents:
(a) the Operative Documents; and
(b) such corporate records of the Companies and such
other documents as we have deemed necessary as a
basis for the opinions expressed below.
<PAGE> 336
2
In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals and
the conformity with authentic original documents of all documents submitted to
us as copies. When relevant facts were not independently established, we have
relied upon statements of governmental officials and upon representations made
in or pursuant to the Operative Documents and statements of appropriate
representatives of the Companies.
In rendering the opinions expressed below, we have assumed,
with respect to all of the documents referred to in this opinion letter, that
(except, to the extent set forth in the opinions expressed below, as to the
Companies):
(i) such documents have been duly authorized by, have
been duly executed and delivered by, and constitute
legal, valid, binding and enforceable obligations of,
all of the parties to such documents;
(ii) all signatories to such documents have been duly
authorized; and
(iii) all of the parties to such documents are duly
organized and validly existing and have the power and
authority (corporate or other) to execute, deliver
and perform such documents.
Based upon and subject to the foregoing and subject also to the
comments and qualifications set forth below, and having considered such
questions of law as we have deemed necessary as a basis for the opinions
expressed below, we are of the opinion that:
1. Each Company is validly existing and in good standing under
the laws of its state of incorporation and has the corporate power to execute,
deliver and perform each of the Operative Documents to which it is a party.
2. Each of the Operative Documents to which each Company is a
party constitutes the legal, valid and binding agreement of such Company
enforceable against it in accordance with its terms, except as may be limited by
bankruptcy,
<PAGE> 337
3
insolvency, reorganization, moratorium or other similar laws relating to or
affecting the rights of creditors generally and except as the enforceability of
such Operative Documents is subject to the application of general principles of
equity (regardless of whether considered in a proceeding in equity or at law),
including without limitation (i) the possible unavailability of specific
performance, injunctive relief or any other equitable remedy and (ii) concepts
of materiality, reasonableness, good faith and fair dealing.
3. The execution, delivery and performance by each Company of
the Operative Documents to which it is a party will not (a) contravene (i) the
Certificate of Incorporation or bylaws of such Company or (ii) any applicable
New York or federal law, statute or regulation or the General Corporation Law of
the State of Delaware or (b) require any authorization, approval or consent of
or filing or registration with any governmental or regulatory authority or
agency of the United States of America or the State of New York (except
qualification under the Trust Indenture Act of 1939, as amended) or, pursuant to
the General Corporation Law of the State of Delaware, the State of Delaware,
except for the filing of financing statements and vehicle title documents, as
applicable, in respect of the liens created pursuant to the Company Pledge
Agreement and the NV Holdings Pledge Agreement.
4. Each of the Company Pledge Agreement and the NV Holdings
Pledge Agreement is effective to create in favor of the Trustee for the benefit
of the Holders a valid security interest under the Uniform Commercial Code as in
effect in the State of New York (the "Uniform Commercial Code") in all of the
right, title and interest of each of the Company and NV Holdings, respectively,
in, to and under the Collateral (as defined in each of the Company Pledge
Agreement and the NV Holdings Pledge Agreement) as collateral security for the
payment, observance and performance of the Secured Obligations (as defined in
each of the Company Pledge Agreement and the NV Holdings Pledge Agreement),
except that (a) such security interest would continue in the Collateral after
its sale, exchange or other disposition only to the extent provided in Sections
9-306 of the Uniform Commercial Code, (b) the security interest in Collateral in
which the Company or NV Holdings acquires rights after the commencement of a
case under the Federal Bankruptcy Code of 1978, as amended (the "Bankruptcy
Code") in respect of it may be limited by Section 552
<PAGE> 338
4
thereof and (c) the creation of the respective security interest in any Pledged
Stock (as defined in each of the Company Pledge Agreement and the NV Holdings
Pledge Agreement) constituting a "security" (as defined in Section 8-102 of the
Uniform Commercial Code) requires the transfer of said Pledged Stock to the
Trustee pursuant to Section 8-313(1) of the Uniform Commercial Code, which
transfer in the case of a "certificated security" (as defined in said Section
8-102) may be effected in the manner contemplated by paragraph 5(a) below.
5. The security interests referred to in paragraph 4 above in
the types of Collateral described below will be perfected as follows (with the
capitalized terms used in this paragraph 5 that are defined in the Company
Pledge Agreement or NV Holdings Pledge Agreement being used with the meanings
set forth therein):
(a) such security interest in that portion of the
Collateral consisting of Pledged Stock will be perfected, upon
the Pledgor obtaining rights therein, by the respective Trustee
or a person designated by such Trustee taking possession in the
State of New York of the certificates representing such Pledged
Stock and retaining possession thereof; and
(b) such security interest in that portion of the
Collateral consisting of "proceeds" (as defined in the Uniform
Commercial Code) may be perfected as and to the extent
provided in Section 9-306 of the Uniform Commercial Code.
6. Assuming that the respective Trustee or a person designated
by such Trustee obtains, and thereafter maintains, possession of the
certificates representing any Pledged Stock in good faith and without notice
that it is overdue or has been dishonored or of any defense against or claim to
it on the part of any Person and without notice of any adverse claim (as defined
in Section 8-302(2) of the Uniform Commercial Code) in registered form issued to
the Trustee or endorsed to the Trustee or in blank, any perfected security
interest therein will have priority over all other security interests
theretofore or thereafter created under the Uniform Commercial Code.
<PAGE> 339
5
7. By reason of the exemption contained in Section 3(a)(9) of
the Securities Act, the issuance of the New Securities to the holders of the Old
Securities in respect of the Old Securities pursuant to the Exchange is exempt
from the registration and prospectus delivery requirements of Section 5 of the
Securities Act.
The foregoing opinions are subject to the following comments
and qualifications:
A. We wish to point out that obligations of the Company
under the Indenture and the Company Pledge Agreement and the obligations of NV
Holdings under the NV Holdings Pledge Agreements may be subject to possible
limitations upon the exercise of the remedial or procedural provisions
contained therein, provided that such limitations do not, in our opinion, make
the remedies and procedures that will be afforded to the beneficiaries of such
agreements inadequate for the practical realization of the substantive benefits
purported to be provided thereby.
B. The enforceability of the indemnification provisions set
forth in the Operative Documents may be limited by laws rendering unenforceable
provisions requiring indemnification of a party for liability for its own action
or inaction to the extent the action or inaction involves gross negligence,
recklessness, willful misconduct or unlawful conduct.
C. The enforceability of provisions of the Operative Documents
to the effect that terms may not be waived or modified except in writing may be
limited under certain circumstances.
D. We express no opinion as to the existence of, or the right,
title or interest of any Company in, to or under any of the Collateral.
E. With respect to the opinions set forth in paragraphs 4
through 6 above, we express no opinion as to any security interest in (or other
lien on) any Collateral to the extent that, pursuant to Section 9-104 of the
Uniform Commercial Code, Article 9 of the Uniform Commercial Code does not apply
to such security interest or lien, and except as expressly provided in
paragraphs 4 through 6 above, we express no opinion as to the
<PAGE> 340
6
creation, perfection or priority of any security interest in, or other lien on,
the Collateral.
F. We express no opinion as to the applicability to, or effect
upon, any of the Operative Documents or the respective transactions contemplated
thereby, of Section 544(b), 547 or 548 of the Bankruptcy Code, Article 10 of the
New York Debtor and Creditor Law, or any other provisions of Federal or State
law relating to fraudulent transfers and obligations.
The opinions expressed herein are limited to the internal laws
of the State of New York, the General Corporation Law of the State of Delaware
and the Federal laws of the United States.
In the course of the Company's preparation of the Offering
Circular, we participated in conferences with certain officers or employees of
the Company and with counsel for the Company and reviewed certain corporate
records, documents and proceedings. We have not independently verified the
accuracy, completeness or fairness of the statements contained in the Offering
Circular, and we are unable to assume, and we do not assume, any responsibility
for the accuracy, completeness or fairness of the statements contained in the
Offering Circular. However, in the course of the above-described participation
and review, nothing came to our attention that causes us to believe that the
Offering Circular, considered as a whole on the date thereof and the date
hereof, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. We do not express
any opinion or belief as to the financial statements and other financial or
statistical information contained in the Offering Circular.
This letter is being delivered for your sole benefit in
connection with the transactions contemplated by the Exchange Agreement and for
no other purpose and may not be relied upon any other person.
Very truly yours,
TDB/MLW
<PAGE> 341
SCHEDULE A
(1) Indenture dated as of _________ __, 1995 between BGLS and Shawmut
Bank, N.A., as trustee, pursuant to which the Company is the New
Securities.
(2) Exchange Agreement, dated as of November 21, 1995, among BGLS, Brooke
Group Ltd., AIF II, L.P., Artemis America Partnership, Tortoise Corp.,
Starfire Holding Corporation, and Mainstay High Yield Corporate Bond
Fund.
(3) Pledge and Security Agreement dated as of _________ __, 1995, between
BGLS and Shawmut Bank, N.A., as trustee for the benefit of the holders
of the New Securities.
(4) Pledge and Security Agreement dated as of _________ __, 1995, between
NV Holdings and Shawmut Bank, N.A., as trustee for the benefit of the
holders of the New Securities.
(5) New Valley Registration Rights Agreement dated as of _____________ __,
1995, between New Valley, BGLS, Brooke and Shawmut Bank, N.A., as
trustee for the holders of the New Securities.
(6) A/B Exchange and Registration Rights Agreement dated as of November
21, 1995, among BGLS, Brooke Group Ltd., AIF II, L.P., Artemis America
Partnership, Tortoise Corp. and Mainstay High Yield Corporate Bond
Fund.
(7) Sixth Supplemental Indenture dated as of _________ __, 1995, to
Indenture dated as of April 1, 1988, pursuant to which BGLS issued its
13.5000% Subordinated Reset Notes due 1997.
(8) Sixth Supplemental Indenture dated as of _________ __, 1995, to
Indenture dated as of April 1, 1988, pursuant to which BGLS issued its
14.5000% Subordinated Debentures due 1998.
(9) The Acknowledgements and Undertakings of Liggett, NV Holdings, Brooke
Overseas and New Valley attached to the Pledge Agreements referred to
above.
<PAGE> 342
EXHIBIT J
THE EXCHANGE OFFER
<TABLE>
<S> <C>
Securities Offered
in Exchange . . . . . . . . . . $1,087.47 principal amount of 15.75% Series A Senior Secured Notes Due 2000* (the
"Series A Notes") for each $1,000 principal amount of Series 2 Notes, $1,132.28
principal amount of 15.75% Series B Senior Secured Notes Due 2000* (the "Series B
Notes") for each $1,000 principal amount of Reset Notes and $1,000 principal amount
of Series B Notes for each $1,000 principal amount of Subordinated Debentures (the
Series A Notes and the Series B Notes being jointly referred to as the "New
Securities").
Interest; Accrued
Interest . . . . . . . . . . . Interest on the New Securities will be deemed to have accrued (i) at the rate of
13.75% per annum (the "Deemed Accrual Rate") from October 1, 1995 to the date (the
"Exchange Date") the exchange of New Securities for Existing Securities is
consummated and (ii) at the rate of 15.75% per annum thereafter. Interest for the
period and at the rate described in clause (i) of the preceding sentence, plus
interest from the Exchange Date to June 30, 1996 will be payable on June 30, 1996 to
the holder of record of the New Security on June 15, 1996. Interest on all Existing
Securities accepted for exchange into New Securities will be deemed to have accrued
to but not after October 1, 1995. Interest shall accrue on the same basis as in the
</TABLE>
__________________________________
* If the Indenture is not executed prior to December 31, 1995, the New
Securities will be due in 2001, on the fifth anniversary of last day of the
month in which the Indenture is executed.
<PAGE> 343
<TABLE>
<S> <C>
Indenture. With respect to each Existing Security accepted for exchange, interest
on the outstanding principal amount thereof for the period commencing October 1,
1995 and ending on the Exchange Date ("Differential Interest") will be paid in cash
on the Exchange Date at a rate equal to the difference between the stated interest
rate applicable to such Existing Security and the Deemed Accrual Rate (the
"Differential Interest Rate"). The Differential Interest Rate applicable to the
Series 2 Notes, the Reset Notes and the Subordinated Debentures shall be 0%, 2.375%
and .750%, respectively, and as such, no Differential Interest will be paid to the
exchanging holders of the Series 2 Notes or their assignees. Differential Interest
shall be payable to the person specified in a properly submitted letter of
transmittal accompanying Existing Securities tendered for exchange.
Expiration Date;
Withdrawal . . . . . . . . . . The Exchange Offer will expire at 5:00 p.m., New York City time, on the 20th
business day following commencement, or such later date and time to which it is
extended (as such date may be extended, the "Expiration Date"). Tenders of Existing
Securities pursuant to the Exchange Offer are irrevocable, except as provided below.
Existing Securities tendered pursuant to the Exchange Offer may be withdrawn, unless
theretofore accepted for exchange as provided in the Exchange Offer, at any time (i)
through the seventh calendar day, and (ii) after 5:00 p.m., New York City time, on
the 60th calendar day, after the Exchange Offer is commenced. Any Existing
Securities not accepted for exchange for any reason will be returned without expense
to the tendering holder thereof as promptly as practicable after the expiration or
termination of the Exchange Offer.
</TABLE>
<PAGE> 344
<TABLE>
<S> <C>
Conditions to the
Exchange Offer . . . . . . . . The Company's obligation to consummate the Exchange Offer is subject to certain
conditions, including (i) that there shall have been tendered on or prior to the
Expiration Date valid and unrevoked letters of transmittal accepting the Exchange
Offer by (A) the holders of not less than 100% of the aggregate outstanding
principal amount of the Series 2 Notes, (B) the holders of not less than 87 1/2% of
the aggregate outstanding principal amount of the Subordinated Debentures and
(C) the holders of not less than a majority of the aggregate outstanding principal
amount of the Reset Notes and (ii) that there has been received on or prior to the
Expiration Date valid and unrevoked consents to the applicable Proposed Amendments
described below by holders of at least a majority in aggregate outstanding principal
amount of each of the Reset Notes and the Subordinated Debentures. The Company's
obligation to consummate the Exchange Offer is also subject to absence of each of
the following conditions:
(a) . . . . . . . . . . . . . . there shall be threatened, instituted or pending any action or proceeding before, or
any injunction, order, or decree shall have been issued by, any court or
governmental agency or other governmental regulatory or administrative agency or
commission (i) seeking to restrain or prohibit the making or consummation of the
Exchange Offer or any other transaction contemplated by the Exchange Offer, or
assessing or seeking any damages as a result thereof, or (ii) resulting in a
material delay in the ability of the Company to accept for exchange or exchange all
or some of the Existing Securities; or any statute, rule, regulation, order or
injunction shall be sought, proposed, introduced, enacted,
</TABLE>
<PAGE> 345
<TABLE>
<S> <C>
promulgated or deemed applicable to the Exchange Offer or any of the transactions
contemplated by the Exchange Offer by any domestic or foreign government or
governmental authority or any action shall have been taken, proposed or threatened
by any domestic or foreign government or governmental authority or agency or court,
that, in the sole judgment of the Company, might directly or indirectly result in
any of the consequences referred to in clause (i) or (ii) above or, in the sole
judgment of the Company, might make it inadvisable to proceed with the Exchange
Offer or Consent Solicitation; or
(b) . . . . . . . . . . . . . . there shall have occurred (i) any general suspension of or general limitation on
prices for or trading in securities on any national securities exchange or the over-
the-counter market, (ii) any limitation by any governmental agency or authority
which adversely affects the ability of the Company to complete the transactions
contemplated by the Exchange Offer, (iii) a declaration of a banking moratorium or
any suspension of payments in respect of banks in the United States or any
limitation by any governmental agency or authority which adversely affects the
extension of credit, or (iv) a commencement of a war, armed hostilities or other
similar international calamity directly or indirectly involving the United States,
or, in the case of any of the foregoing existing at the time of the commencement of
the Exchange Offer, a material escalation or worsening thereof.
. . . . . . . . . . . . . . . . The foregoing conditions are for the sole benefit of the Company and may be asserted
by the Company regardless of the circumstances giving rise to any such
</TABLE>
<PAGE> 346
<TABLE>
<S> <C>
condition or may be waived by the Company in whole or in part at any time and from
time to time in its sole discretion.
Solicitation of
Consents . . . . . . . . . . . Holders of Reset Notes and Subordinated Debentures who desire to accept the Exchange
Offer will be required to consent to the applicable Proposed Amendments. The
Company will also solicit consents from holders of Existing Securities who do not
desire to accept the Exchange Offer. Pursuant to the terms of the letter of
transmittal, the completion, execution and delivery thereof will constitute consent
to the Proposed Amendments. For the Proposed Amendments to become effective with
respect to any Existing Indenture, holders of at least a majority in aggregate
outstanding principal amount of the issue of Existing Security subject to such
Existing Indenture must consent thereto and a supplemental indenture amending the
Existing Indenture must be executed by the Company and the trustee under such
Existing Indenture. The date of the execution of such a supplemental indenture (the
applicable "Amendment Date") will be as soon as practicable after the receipt of the
requisite consents to the Proposed Amendments, but in any event prior to the
consummation of the Exchange Offer. Each executed supplemental indenture will
provide that the related Proposed Amendments will not be effective if the Exchange
Offer is not consummated. Consent to the Proposed Amendments may be revoked at any
time until the Amendment Date.
Proposed Amendments . . . . . . The Proposed Amendments will eliminate substantially all of the covenants and events
of default contained in the Subordinated Debenture Indenture and Reset Indenture.
</TABLE>
<PAGE> 1
EXHIBIT 99.1
<PAGE> 2
SARD VERBINNEN & CO
NEWS
FOR IMMEDIATE RELEASE
Contact: George Sard/Anna Cordasco/Paul Caminiti
Sard Verbinnen & Co
212/687-8080
BROOKE GROUP SUBSIDIARY, BGLS INC., TO COMMENCE
EXCHANGE OFFER FOR OUTSTANDING DEBT
MIAMI, FL, NOVEMBER 27, 1995 -- Brooke Group Ltd. (NYSE:BGL) announced
today that BGLS Inc., a subsidiary of Brooke, has agreed to commence an offer
to exchange a total of $231,869,000 principal amount of BGLS's new five-year
15.75% Senior Secured Notes for all its outstanding 13.75% Series 2 Senior
Secured Notes due 1997, 16.125% Senior Subordinated Reset Notes due 1997 and
14.500% Subordinated Debentures due 1998. The exchange ratio will be $1,087.47
principal amount of new Series A Senior Secured Notes for each $1,000 principal
amount of Series 2 Notes exchanged, $1,132.28 principal amount of new Series B
Senior Secured Notes for each $1,000 principal amount of Reset Notes exchanged
and $1,000 principal amount of new Series B Senior Secured Notes for each
$1,000 principal amount of Subordinated Debentures exchanged. The new Series A
Senior Secured Notes and the new Series B Senior Secured Notes are identical
except that the Series B Notes are not subject to restrictions on transfer.
The exchange offer, which will not require registration with the
Securities and Exchange Commission, will begin shortly and will be subject to a
number of conditions, including the tender of a least 100% of the Series 2
Notes, 87.5% of the Subordinated Debentures and a majority of the Reset Notes.
The holders of in excess of 99% of the Series 2 Notes and 88% of the
Subordinated Debentures have agreed, subject to certain conditions, to tender
their securities in the exchange offer. To assure the minimum tender condition
is satisfied, BGLS has agreed, subject to certain conditions, to redeem any
other Series 2 Notes not tendered in the exchange offer and to redeem the Reset
Notes if a majority are not tendered. In connection with the exchange offer,
the indentures under which the Reset Notes and Subordinated
-more-
Sard Verbinnen & Co., Inc. 630 Third Avenue New York, NY 10017 Tel 212 687 8080
Fax 212 687 8300
<PAGE> 3
2
Debentures were issued will be amended to remove substantially all their
covenants and events of default. The new Senior Secured Notes will be secured
by substantially all of BGLS's assets.
Brooke Group is a holding company which controls Liggett Group Inc.,
tobacco and real estate operations in the former Soviet Union and has a
substantial equity interest in New Valley Corporation.
###
