<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
JOINT CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): MARCH 2, 1998
<TABLE>
<S> <C>
BROOKE GROUP LTD. BGLS INC.
(Exact name of registrant as specified in its (Exact name of registrant as specified in its
charter) charter)
1-5759 33-93576
(Commission File Number) (Commission File Number)
51-0255124 13-3593483
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
DELAWARE DELAWARE
(State or other jurisdiction of incorporation (State or other jurisdiction of incorporation
or organization) or organization)
100 S.E. SECOND STREET 100 S.E. SECOND STREET
MIAMI, FLORIDA 33131 MIAMI, FLORIDA 33131
(Address of principal executive offices including (Address of principal executive offices including
Zip Code) Zip Code)
305/579-8000 305/579-8000
(Registrant's telephone number, including area (Registrant's telephone number, including area
code) code)
(NOT APPLICABLE) (NOT APPLICABLE)
(Former name or former address, (Former name or former address,
if changed since last report) if changed since last report)
</TABLE>
<PAGE> 2
ITEM 5. OTHER EVENTS.
On March 2, 1998, Brooke Group Ltd. (the "Company") and New
Valley Corporation issued a press release, a copy of which is attached hereto as
Exhibit 99.1 and incorporated herein by reference.
On March 3, 1998, the Company issued a press release which
related, among other things, to the execution by BGLS Inc. of a Standstill
Agreement with AIF II, L.P. and an affiliated investment manager on behalf of a
managed account, who are holders of BGLS' 15.75% Senior Secured Notes due 2001,
and the issuance of warrants to purchase common stock of the Company to such
holders. Copies of the press release dated March 3, 1998, the Standstill
Agreement, the warrants and certain related agreements are attached hereto as
Exhibits 10.1 through 10.10 and Exhibit 99.2 and incorporated herein by
reference.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND
EXHIBITS.
(c) Exhibits.
The following Exhibits are provided in accordance with the
provisions of Item 601 of Regulation S-K and are filed herewith unless otherwise
noted.
EXHIBIT INDEX
<TABLE>
<S> <C>
10.1 Standstill Agreement, dated as of March 3, 1998, among BGLS and AIF II,
L.P. ("AIF") and Artemis America Partnership ("AAP" and collectively,
with AIF, the "Apollo Holders").
10.2 Warrant to purchase common stock of the Company, dated March 2, 1998,
issued to AIF.
10.3 Warrant to purchase common stock of the Company, dated March 2, 1998,
issued to AAP.
10.4 Warrant to purchase common stock of the Company, dated March 2, 1998,
issued to AIF.
10.5 Warrant to purchase common stock of the Company, dated March 2, 1998,
issued to AAP.
10.6 Registration Rights Agreement, dated as of March 2, 1998, among the
Company and the Apollo Holders.
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
10.7 Registration Rights Agreement, dated as of March 2, 1998, among the
Company and the Apollo Holders.
10.8 Limited Recourse Guarantee Agreement, dated as of March 2, 1998, made
by Brooke (Overseas) Ltd. ("BOL") for the benefit of the Apollo
Holders.
10.9 Pledge Agreement, dated as of March 2, 1998, between BOL and AIF.
10.10 Pledge Agreement, dated as of March 2, 1998, between BOL and AAP.
99.1 Press Release of the Company and New Valley Corporation dated March 2,
1998.
99.2 Press Release of the Company dated March 3, 1998.
</TABLE>
Page 3 of 4
<PAGE> 4
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.
By: /s/ Joselynn D. Van Siclen
------------------------------------------
Joselynn D. Van Siclen
Vice President and Chief Financial Officer
BGLS INC.
By: /s/ Joselynn D. Van Siclen
------------------------------------------
Joselynn D. Van Siclen
Vice President and Chief Financial Officer
Date: March 4, 1998
Page 4 of 4
<PAGE> 1
EXHIBIT 10.1
STANDSTILL AGREEMENT
THIS STANDSTILL AGREEMENT (this "Agreement"), dated as of
March 5, 1998 among BGLS INC., a Delaware corporation (the "Company"), AIF II,
L.P., a Delaware limited partnership ("AIF II") and ARTEMIS AMERICA PARTNERSHIP,
a Delaware partnership (as successor to Artemis America LLC, a Delaware limited
liability company) (together with AIF II, the "Participating Holders").
Capitalized terms not otherwise defined herein shall have the meanings specified
in the Indenture (as defined below).
WHEREAS, pursuant to that certain Indenture dated as of
January 1, 1996 (the "Indenture") between the Company and State Street Bank and
Trust Company, as successor to Fleet National Bank of Massachusetts (the
"Trustee"), the Company issued the Series A Securities and the Series B
Securities, of which only the Series B Securities remain outstanding;
WHEREAS, the Participating Holders (directly or through one or
more nominees or custodians, as more fully described on Schedule 1 hereto) and
certain other Holders (the "Other Holders") (the Participating Holders and the
Other Holders being collectively referred to herein as the "Holders") own all of
the outstanding Series B Securities;
WHEREAS, pursuant to the Standstill Agreement and Consent
dated as of August 28, 1997, as amended, among, inter alia, the Company and the
Participating Holders (the "Original Standstill Agreement"), the Participating
Holders agreed to refrain from exercising remedies as a result of the failure of
the Company to pay to the Participating Holders the interest due to the
Participating Holders on July 31, 1997 (the "July Interest Amount") and January
31, 1998 (the "January Interest Amount");
WHEREAS, all interest due to the Other Holders, in connection
with the July 31, 1997 Interest Payment Date has been paid to such Holders;
WHEREAS, the Company has requested, and each of the
Participating Holders has agreed, subject to the terms and conditions set forth
in this Agreement, for the period commencing on the date hereof and ending on
the earlier of the Maturity Date or the occurrence of a Termination Event (as
defined in Section 7) (the "Waiver Period"), (i) to waive any Default or Event
of Default existing solely as a result of the failure of the Company to pay to
such Participating Holder its pro rata share of the July Interest Amount, the
January Interest Amount and all amounts due to such Participating Holders on the
remaining Interest Payment Dates through and including July 31, 2000 (the
"Remaining Interest Payments" and, together with the July Interest Amount and
the January Interest Amount, the "Unpaid Interest Amounts"), with such interest
payments to be made to the Participating Holders on the Maturity Date, and (ii)
that it shall refrain from exercising its rights and remedies against the
Company in connection with the Company's failure to pay such Participating
Holder its pro rata share of the Unpaid Interest Amounts;
Standstill Agreement
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreement of the parties hereinafter set forth, the parties
hereto hereby agree as follows:
1. WAIVER OF DEFAULT. Each of the Participating Holders
hereby waives, until the expiration of the Waiver Period, any Default or Event
of Default existing solely as a result of the Company's failure to pay to such
Participating Holder such Participating Holder's pro rata share of the Unpaid
Interest Amounts. The Company acknowledges that (i) interest at a rate of 16.75%
per annum has accrued pursuant to Section 2.12 of the Indenture on the July
Interest Amount from July 31, 1998 through the date of this Amendment and (ii)
interest shall accrue at the rate of 15.75% per annum, compounded on a
semi-annual basis, on (a) the July Interest Amount plus the amount accrued
pursuant to clause (i) above, (b) the January Interest Amount and (c) each
Remaining Interest Payment from the date each such payment is due pursuant to
Section 2.13 of the Indenture until all such amounts are paid in full in cash.
2. STANDSTILL. Each of the Participating Holders hereby
agrees that during the Waiver Period it will not exercise and shall not direct
the Trustee to exercise any remedy under the Indenture or the Series B
Securities, at law or in equity, which it or the Trustee now has or hereafter
may have in respect of any Default or Event of Default resulting solely from the
failure of the Company to pay to such Participating Holder its pro rata share of
the Unpaid Interest Amounts.
4. REMOVAL OF SECURITIES FROM DTC. Each of the
Participating Holders agrees that, it shall remove its securities from the
Depository Trust Company registry prior to July 1, 1998.
5. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS
AGREEMENT. This Agreement shall become effective upon the execution and delivery
by the Company and each of the Participating Holders of the following documents
and the payment of all reasonable fees and expenses of Sidley & Austin, counsel
to the Participating Holders:
(a) This Agreement;
(b) The five-year Warrants executed by Brooke Group
Limited ("BGL") in favor of the Participating Holders for the purchase of an
aggregate 2,000,000 shares of the common stock of BGL at an exercise price of
$5.00 per share;
(c) The Registration Rights Agreements of even date
herewith between BGL and the Participating Holders relating to the shares of BGL
referred to in clause 5(b);
(d) The Warrants executed by BGL in favor of the
Participating Holders for the purchase of 2,150,000 shares of the common stock
of BGL at an exercise price of $.10 per share;
Standstill Agreement
2
<PAGE> 3
(e) The Registration Rights Agreements of even date
herewith between BGL and the Participating Holders relating to the shares of BGL
referred to in clause 5(d);
(f) The Limited Recourse Guarantee of even date herewith
between Brooke (Overseas) Ltd. (the "Guarantor") and the Participating Holders;
and
(g) The Pledge Agreements of even date herewith between
the Guarantor and each of the Participating Holders, securing the Limited
Recourse Guarantee.
(h) The opinion of Milbank, Tweed, Hadley & McCloy in
form and substance reasonably satisfactory to the Participating Holders.
6. TERMINATION. This Standstill Agreement and Consent
shall terminate upon the earlier of (i) the payment in full to each
Participating Holder of its pro rata share of the Unpaid Interest Amounts, plus
all amounts owing thereon pursuant to Section 2.12 of the Indenture and Section
1 hereof , (ii) the occurrence of an Event of Default (other than in connection
with the Unpaid Interest Amounts) and (iii) any redemption or other payment of
Securities pursuant to Section 3.08 or 3.09 of the Indenture; provided, that
this Standstill Agreement shall only terminate with respect to those
AgreementSecurities actually redeemed or repurchased from the Participating
Holders pursuant to such sections (a "Termination Event").
7. ABSENCE OF WAIVER. The parties hereto agree that,
except to the extent expressly set forth herein, nothing contained herein shall
be deemed to:
(a) be a consent to, or waiver of, any Default
or Event of Default;
(b) prejudice any right or remedy which any of
the Participating Holders may now have or may in the future have under
the Indenture, the Series B Securities or otherwise, including, without
limitation, any right or remedy resulting from any Default or Event of
Default; or
(c) constitute a waiver of the rights of any of
the Participating Holders under Section 2.12 of the Indenture, except
as provided in Section 2 hereof.
8. REPRESENTATIONS. Each party hereto hereby represents
and warrants to the other parties that:
(a) such party is a corporation or partnership,
as applicable, duly organized, validly existing, and in good standing
under the laws of the state of its incorporation or formation, as
applicable;
(b) the execution, delivery and performance of
this Standstill Agreement and Consent and each of the documents
contemplated hereby by such party is
Standstill Agreement
3
<PAGE> 4
within its corporate or partnership powers, as applicable, has been
duly authorized by all necessary corporate or partnership action, as
applicable, has received all necessary consents and approvals (if any
shall be required), and does not and will not contravene or conflict
with any provisions of law or of the charter or by-laws, or partnership
agreement, as applicable, of such party or of any material agreement
binding upon such party or its property; and
(c) upon its effectiveness under Section 6
hereof, this Standstill Agreement and Consent will be a legal, valid
and binding obligation of such party, enforceable against it in
accordance with its terms.
In addition, the Company represents and warrants that to the best of its
knowledge, except as set forth herein no Default or Event of Default under the
Indenture has occurred and is continuing.
9. CONTINUING EFFECT, ETC. Except as expressly provided
herein, the Company hereby agrees that the Indenture and the Series B Securities
shall continue unchanged and in full force and effect, and all rights, powers
and remedies of the Participating Holders thereunder and under applicable law
are hereby expressly reserved. In addition, the Company hereby agrees that its
obligations under this Standstill Agreement constitute "Secured Obligations" as
defined in each of the BGLS Pledge Agreement, the NV Holdings Pledge Agreement
and the Pledge Agreements referenced in Section 5(g) above.
10. EXPENSES AND INDEMNIFICATIONS.
(a) The Company hereby agrees to reimburse each of the
Participating Holders for their reasonable attorneys fees and expenses incurred
in connection with this Standstill Agreement, the Original Standstill Agreement,
the letter dated August 28, 1997 between the Company and the Participating
Holders, and for legal expenses incurred in connection with a due diligence
review of certain litigation matters involving the Company and its subsidiaries
and a structuring analysis of various alternatives for the proposed
restructuring..
(b) The Company agrees that an actual or threatened or
potential claim, action, suit or proceeding against or affecting an Indemnitee
(as defined in the Exchange Agreement dated as of November 21, 1995 among inter
alia the Company and the Participating Holders) that at any time results from,
relates to or arises out of the execution, delivery or performance by the
Participating Holders of this Agreement is deemed to be an Indemnification Event
(as defined in the Exchange Agreement).
11. MISCELLANEOUS.
(a) Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
Standstill Agreement
4
<PAGE> 5
(b) This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts and each such
counterpart shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same agreement.
(c) This Agreement shall be a contract made under and
governed by the laws of the State of New York.
(d) All obligations of the Company and rights of the
Participating Holders expressed herein shall be in addition to and not in
limitation of those provided by applicable law.
(e) This Agreement shall be binding upon the Company, the
Participating Holders and their respective successors and assigns, and shall
inure to the benefit of the Company, the Participating Holders and their
respective successors and assigns.
(f) All amendments or modifications of this Agreement and
all consents, waivers and notices delivered hereunder or in connection herewith
shall be in writing.
12. WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE
PARTICIPATING HOLDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE PARTIES HERETO FURTHER
AGREE THAT THIS AGREEMENT MAY BE FILED AS EVIDENCE OF THE WAIVER REFERRED TO
ABOVE IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Standstill Agreement
5
<PAGE> 6
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 /s/ Richard J. Lampen
--------------------------------
Name: Richard J. Lampen
Title: Executive Vice President
AIF II, L.P.
By APOLLO ADVISORS, L.P.
Managing General Partner
By APOLLO CAPITAL MANAGEMENT, INC.
General Partner
By /s/ John J. Hannan
-----------------------------
Name: John J. Hannan
Title:
ARTEMIS AMERICA PARTNERSHIP
By LION ADVISORS, L.P.
Attorney-in-Fact
By LION CAPITAL MANAGEMENT, INC.
General Partner
By /s/ John J. Hannan
-----------------------------
Name: John J. Hannan
Title:
Standstill Agreement
6
<PAGE> 7
ACKNOWLEDGED, AGREED & CONSENTED TO
WITH RESPECT TO SECTION 11(b):
BROOKE GROUP LTD.
By /s/ Richard J. Lampen
----------------------------------
Name: Richard J. Lampen
Title: Executive Vice President
Standstill Agreement
7
<PAGE> 8
SCHEDULE I
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT ($)
HOLDER DTC PARTICIPANT (NO.) OF SERIES B NOTES
- ------ --------------------- -----------------
<S> <C> <C>
Artemis America The Bank of New York (901) $42,513,000
Partnership
AIF II, L.P. Chase Manhattan Bank, Trust (931) $54,726,000
</TABLE>
Standstill Agreement
<PAGE> 1
EXHIBIT 10.2
BROOKE GROUP LTD.
WARRANT
SECTION 1. WARRANT. AIF II, L.P. (the "Holder") may exercise this
Warrant to receive 1,120,000 shares of common stock, $0.10 par value ("Common
Stock"), of Brooke Group Ltd., a Delaware corporation (the "Company"), at any
time up and until five (5) years from the date listed at the end of this
Warrant. The initial exercise price is $5.00 per share. The price and the
number of shares purchasable hereunder are subject to adjustment. The Company
shall register this Warrant in a warrant register to be maintained by the
Company.
SECTION 2. PROCEDURE. To exercise this Warrant, the Holder must (1)
complete and sign the exercise notice on the back of the Warrant, (2) surrender
the Warrant to the Company or its designated agent, (3) furnish appropriate
endorsements and transfer documents if required by the Company, and (4) pay the
exercise price and any transfer or similar tax if required. The date on which
the Holder satisfies all those requirements is the exercise date. As soon as
practical, the Company shall deliver a certificate for the number of full
shares of Common Stock issuable upon the exercise and a check for any
fractional share. The person in whose name the certificate is registered shall
be treated as a stockholder of record on and after the exercise date. If the
Holder exercises more than one Warrant, at the same time, the number of full
shares issuable upon the exercise shall be based on the total number of shares
covered by the Warrants exercised. Upon a surrender of a Warrant that is
exercised in part, the Company shall issue for the Holder a new Warrant
covering the exercised portion of the Warrant surrendered.
SECTION 3. FRACTIONAL SHARES. The Company will not issue a
fractional share of Common Stock upon exercise of a Warrant. Instead the
Company will deliver its check for the current market value of the fractional
share. The current market value of a fraction of a share is determined as
follows: Multiply the current market price of a full share by the fraction.
Round the result to the nearest cent. The current market price of a share of
Common Stock is the last reported sale price of the Common Stock on the
principal national securities exchange where it is traded (the "quoted price")
on the last trading day prior to the exercise date. In the absence of such a
quotation, the Company shall determine the current market price on the basis of
such quotations as it considers appropriate.
SECTION 4. TAXES ON EXERCISE. If the Holder exercises the warrant,
the Company shall pay any documentary, stamp or similar issue or transfer tax
due on the issue of shares of Common Stock upon the exercise. However, the
Holder shall pay any such tax which is due because the shares are issued in
a name other than the Holder's name.
SECTION 5. COMPANY TO PROVIDE STOCK. The Company shall reserve out
of its authorized but unissued Common Stock or its Common Stock held in
treasury enough shares of Common Stock to permit exercise of the Warrant. All
shares of Common Stock which may be
<PAGE> 2
issued upon exercise of the Warrant shall be full paid and non-assessable.
Pursuant and subject to the terms and conditions of that certain Registration
Rights Agreement, dated March 2, 1998, by and among the Company and the warrant
holders listed therein (the "Registration Rights Agreement"), the Company will
use its best efforts to comply with all securities laws regulating the offer and
delivery of shares of Common Stock upon exercise of the Warrant and will use its
best efforts to list such shares on each national securities exchange on which
the Common Stock is listed.
SECTION 6. ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If the Company:
(1) pays a dividend or makes a distribution on its Common Stock
in shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into a
smaller number of shares;
(4) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any shares
of its capital stock,
then the number of shares issuable on exercise and the exercise price in effect
immediately prior to such action shall be adjusted so that the Holder of a
Warrant thereafter exercised may receive the number of shares of capital stock
of the Company which he would have owned immediately following such action if he
had exercised the Warrant immediately prior to such action. The adjustment shall
become effective immediately after the record date in the case of a dividend or
distribution and immediately after the effective date in the case of a
subdivision, combination or reclassification.
If after an adjustment the Holder upon exercise of a Warrant
may receive shares of two or more classes of capital stock of the Company, the
Company shall determine the allocation of the adjusted exercise price between
the classes of capital stock. After such allocation, the number of shares
issuable on exercise and the exercise price of each class of capital stock shall
thereafter be subject to adjustment on terms comparable to those applicable to
Common Stock in this Section.
SECTION 7. ADJUSTMENT FOR RIGHTS ISSUE. If the Company
distributes any rights, warrants, convertible securities or other common stock
equivalents (to the extent that any of the foregoing are exercisable,
convertible of otherwise exchangeable for common stock for less than the current
market price) to all holders of its Common Stock entitling them for a period
expiring within 60 days after the record date mentioned below to purchase shares
of Common Stock at a
<PAGE> 3
price per share less than the current market price per share on the record date,
the exercise price shall be adjusted in accordance with the formula:
NxP
---
C'=C x O + M
-----
O + N
where:
C' = the adjusted exercise price.
C = the current exercise price.
O = the number of shares of Common Stock outstanding on the record
date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
M = the current market price per share of Common Stock on the
record date.
The adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive the rights or warrants.
SECTION 8. ADJUSTMENT FOR OTHER DISTRIBUTIONS. If the Company
distributes to all holders of its Common Stock any of its assets or debt
securities or any rights, warrants, convertible securities or other common stock
equivalents to purchase securities of the Company, the exercise price shall be
adjusted in accordance with the formula:
C'= C x M - F
-----
M
where:
C' = the adjusted exercise price.
C = the current exercise price.
M = the current market price per share of Common Stock on the
record date.
F = the fair market value on the record date of the assets,
securities, rights or warrants applicable to one share of
Common Stock. The Company shall determine the fair market
value.
The adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive the distribution. This Section
does not apply to normal cash dividends or cash distributions. Also, this
Section does not apply to rights or warrants referred to in Section 7.
SECTION 9. CURRENT MARKET PRICE, ETC. In Sections 7 and 8 the
current market price per share of Common Stock on any date is the average of the
quoted prices of the Common Stock for 30 consecutive trading days commencing 45
trading days before the date in question. In the absence of one or more such
quotations, the Company shall determine the current market
<PAGE> 4
price on the basis of such quotations as it considers appropriate. If the
exercise price is adjusted pursuant to Sections 7 or 8, the number of shares
issuable on exercise of this warrant thereafter shall be adjusted by multiplying
such number by a fraction the numerator of which is the previous exercise price
and the denominator of which is the adjusted exercise price.
SECTION 10. WHEN ADJUSTMENT MAY BE DEFERRED. No adjustment in
the exercise price need be made unless the adjustment would require an increase
or decrease of at least 1% in the exercise price. Any adjustments that are not
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section shall be made to the nearest
cent or to the nearest 1/100th of a share, as the case may be.
SECTION 11. WHEN NO ADJUSTMENT REQUIRED. No adjustment need be
made for a transaction referred to in Sections 6, 7 or 8 if the Holder is to
participate in the transaction on the basis and with notice that the Board of
Directors determines to be fair and appropriate in light of the basis and notice
on which holders of Common Stock participate in the transaction. No adjustment
need be made for rights to purchase Common Stock pursuant to a Company plan for
reinvestment of dividends or interest. No adjustment need be made for a change
in the par value or no par value of the Common Stock. To the extent the Warrant
becomes exercisable for cash, no adjustment need be made thereafter as to the
cash. Interest will not accrue on the cash.
SECTION 12. NOTICE OF ADJUSTMENT. Whenever the exercise price
is adjusted, the Company shall promptly mail to the Holder a notice of the
adjustment. The Company shall obtain a certificate from the Company's
independent public accountants briefly stating the facts requiring the
adjustment and the manner of computing it. The certificate shall be conclusive
evidence that the adjustment is correct.
SECTION 13. NOTICE OF CERTAIN TRANSACTIONS. If:
(1) the Company takes any action that would require an
adjustment in the exercise price to Sections 6, 7 or 8 and if the
Company does not let the Holder participate pursuant to Section 11;
(2) the Company takes any action that would require an
instrument of assumption pursuant to Section 14; or
(3) there is a liquidation or dissolution of the Company,
the Company shall mail to the Holder a notice stating the proposed record date
for a dividend or distribution or the proposed effective date of a subdivision,
combination, reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution. The Company shall mail the notice at least 15 days
before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
SECTION 14. REORGANIZATION OF COMPANY. If the Company is a
party to a recapitalization or a merger or consolidation which reclassifies or
changes its outstanding
<PAGE> 5
Common Stock, the person obligated to deliver securities, cash or other assets
upon exercise of the Warrant shall assume the Company's obligations under this
Warrant. The instrument of assumption shall provide that the Holder may exercise
it into the kind and amount of securities, cash or other assets which he would
have owned immediately after the recapitalization, consolidation or merger if he
had exercised the Warrant immediately before the effective date of the
transaction. The instrument of assumption shall provide for adjustments which
shall be as nearly equivalent as may be practical to the adjustments provided
for in this Warrant. The successor Company shall mail to the Holder a notice
briefly describing the instrument of assumption.
SECTION 15. COMPANY DETERMINATION FINAL. Any determination
that the Company or the Board of Directors must make pursuant to Sections 3, 6,
9 or 11 is conclusive, if made in good faith, absent manifest error.
SECTION 16. TRANSFER AND EXCHANGE. The Holder may transfer
this Warrant to any of its partners or any affiliated investment account entity.
Except as permitted by the immediately preceding sentence, the Warrant is not
transferable (a) prior to May 31, 1998 (unless the Company is diligently
pursuing the effectiveness of the registration of a registration statement, in
which case prior to July 15, 1998) or (b) so long as an effective Registration
Statement (as defined in the Registration Rights Agreement) for the shares of
Common Stock is on file with the Securities and Exchange Commission. Subject to
the preceding sentence, the Warrant may be presented for transfer or exchange at
the principal office of the Company. When the Warrant is presented to the
Company with a request to register transfer or to exchange it for the Warrant
covering an equal number of shares of Common Stock, the Company shall register
the transfer or make the exchange. The Company may charge a reasonable fee for
any registration of transfer or exchange. Notwithstanding the foregoing, neither
this Warrant nor the underlying Common Stock has been registered, and transfer
thereof is subject to applicable securities law restrictions. A legend in
substantially the following form shall be placed on each such security:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR
QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS
PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY
REQUIRED REGISTRATION OR QUALIFICATION UNDER ANY STATE SECURITIES LAWS, OR THE
PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER
FEDERAL OR STATE SECURITIES LAWS."
SECTION 17. REPLACEMENT SECURITIES. If the Holder of a Warrant
claims that his Warrant has been lost, destroyed or wrongfully taken, the
Company shall issue a replacement. If required by the Company, an indemnity bond
must be sufficient in its judgment to protect the Company from any loss which
any Holder of a Warrant may suffer if a Warrant is replaced. The Company may
charge for its expenses in replacing a Warrant.
SECTION 18. NOTICES. Any notice or communication to the
Company is duly given if in writing and delivered in person or mailed by
first-class mail to its principal executive offices
<PAGE> 6
at 100 S.E. Second Street, 32nd Floor, Miami, Florida, 33131, Attn: Chairman of
the Board. The Company by notice may designate additional or different addresses
for subsequent notices or communications. Any notice or communication to the
Holder shall be mailed by first-class mail to his address shown on the register
kept by the Company. Failure to mail a notice or communication to the Holder or
any defect in it shall not affect its sufficiency with respect to any other
holder of warrants relating to the Company's Common Stock. If a notice or
communication is mailed in the manner provided above within the time prescribed,
it is duly given, whether or not the addressee receives it.
SECTION 19. LIABILITY. No Holder as such shall have any
liability as a stockholder of the Company.
SECTION 20. GOVERNING LAW. This Warrant shall be governed by
the internal law of New York.
BROOKE GROUP LTD.
By: /s/ Richard J. Lampen
------------------------------
Name: Richard J. Lampen
Title:Executive Vice President
Date: March 2, 1998
<PAGE> 7
[Form of Election to Purchase]
(To be Executed upon Exercise of the Warrant)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for and purchases _____________ shares of Common Stock and tenders
payment for such shares to the order of Brooke Group Ltd. in the amount of
$_____________ in accordance with the terms of this Warrant. The undersigned
requests that certificate(s) for such shares be issued and registered in the
name of _________________________________________________, whose address is
________________________________________________________________ and that such
shares be delivered to ____________________________________________ whose
address is _______________________________________________________________. If
said number of shares is less than all of the shares of Common Stock purchasable
under this Warrant, the undersigned requests that a new Warrant representing the
remaining balance of such shares be registered in the name of
__________________________________________, whose address is
_______________________________________________________________, and that such
Warrant be delivered to ___________________________________________, whose
address is ___________________________________________________________________
Date: By:
Name:
Its:
<PAGE> 1
EXHIBIT 10.3
BROOKE GROUP LTD.
WARRANT
SECTION 1. WARRANT. Artemis America Partnership (the "Holder")
may exercise this Warrant to receive 880,000 shares of common stock, $0.10 par
value ("Common Stock"), of Brooke Group Ltd., a Delaware corporation (the
"Company"), at any time up and until five (5) years from the date listed at the
end of this Warrant. The initial exercise price is $5.00 per share. The price
and the number of shares purchasable hereunder are subject to adjustment. The
Company shall register this Warrant in a warrant register to be maintained by
the Company.
SECTION 2. PROCEDURE. To exercise this Warrant, the Holder
must (1) complete and sign the exercise notice on the back of the Warrant, (2)
surrender the Warrant to the Company or its designated agent, (3) furnish
appropriate endorsements and transfer documents if required by the Company, and
(4) pay the exercise price and any transfer or similar tax if required. The date
on which the Holder satisfies all those requirements is the exercise date. As
soon as practical, the Company shall deliver a certificate for the number of
full shares of Common Stock issuable upon the exercise and a check for any
fractional share. The person in whose name the certificate is registered shall
be treated as a stockholder of record on and after the exercise date. If the
Holder exercises more than one Warrant, at the same time, the number of full
shares issuable upon the exercise shall be based on the total number of shares
covered by the Warrants exercised. Upon a surrender of a Warrant that is
exercised in part, the Company shall issue for the Holder a new Warrant covering
the exercised portion of the Warrant surrendered.
SECTION 3. FRACTIONAL SHARES. The Company will not issue a
fractional share of Common Stock upon exercise of a Warrant. Instead the Company
will deliver its check for the current market value of the fractional share. The
current market value of a fraction of a share is determined as follows: Multiply
the current market price of a full share by the fraction. Round the result to
the nearest cent. The current market price of a share of Common Stock is the
last reported sale price of the Common Stock on the principal national
securities exchange where it is traded (the "quoted price") on the last trading
day prior to the exercise date. In the absence of such a quotation, the Company
shall determine the current market price on the basis of such quotations as it
considers appropriate.
SECTION 4. TAXES ON EXERCISE. If the Holder exercises the
Warrant, the Company shall pay any documentary, stamp or similar issue or
transfer tax due on the issue of shares of Common Stock upon the exercise.
However, the Holder shall pay any such tax which is due because the shares are
issued in a name other than the Holder's name.
SECTION 5. COMPANY TO PROVIDE STOCK. The Company shall reserve
out of its authorized but unissued Common Stock or its Common Stock held in
treasury enough shares of Common Stock to permit exercise of the Warrant. All
shares of Common Stock which may be
<PAGE> 2
issued upon exercise of the Warrant shall be fully paid and non-assessable.
Pursuant and subject to the terms and conditions of that certain Registration
Rights Agreement, dated March 2, 1998, by and among the Company and the warrant
holders listed therein (the "Registration Rights Agreement"), the Company will
use its best efforts to comply with all securities laws regulating the offer and
delivery of shares of Common Stock upon exercise of the Warrant and will use its
best efforts to list such shares on each national securities exchange on which
the Common Stock is listed.
SECTION 6. ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If the
Company:
(1) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock
into a greater number of shares;
(3) combines its outstanding shares of Common Stock into
a smaller number of shares;
(4) makes a distribution on its Common Stock in shares of
its capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any
shares of its capital stock,
then the number of shares issuable on exercise and the exercise price in effect
immediately prior to such action shall be adjusted so that the Holder of a
Warrant thereafter exercised may receive the number of shares of capital stock
of the Company which he would have owned immediately following such action if he
had exercised the Warrant immediately prior to such action. The adjustment shall
become effective immediately after the record date in the case of a dividend or
distribution and immediately after the effective date in the case of a
subdivision, combination or reclassification.
If after an adjustment the Holder upon exercise of a Warrant
may receive shares of two or more classes of capital stock of the Company, the
Company shall determine the allocation of the adjusted exercise price between
the classes of capital stock. After such allocation, the number of shares
issuable on exercise and the exercise price of each class of capital stock shall
thereafter be subject to adjustment on terms comparable to those applicable to
Common Stock in this Section.
-2-
<PAGE> 3
SECTION 7. ADJUSTMENT FOR RIGHTS ISSUE. If the Company
distributes any rights, warrants, convertible securities or other common stock
equivalents (to the extent that any of the foregoing are exercisable,
convertible or otherwise exchangeable for common stock less than the current
market price) to all holders of its Common Stock entitling them for a period
expiring within 60 days after the record date mentioned below to purchase shares
of Common Stock at a price per share less than the current market price per
share on the record date, the exercise price shall be adjusted in accordance
with the formula:
NxP
---
C'=C x O + M
-----
O + N
where:
C' = the adjusted exercise price.
C = the current exercise price.
O = the number of shares of Common Stock outstanding on the record
date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
M = the current market price per share of Common Stock on the
record date.
The adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive the rights or warrants.
SECTION 8. ADJUSTMENT FOR OTHER DISTRIBUTIONS. If the Company
distributes to all holders of its Common Stock any of its assets or debt
securities or any rights, warrants, convertible securities or other common stock
equivalents to purchase securities of the Company, the exercise price shall be
adjusted in accordance with the formula:
C'= C x M - F
-----
M
where:
C' = the adjusted exercise price.
C = the current exercise price.
M = the current market price per share of Common Stock on the
record date.
F = the fair market value on the record date of the assets,
securities, rights or warrants applicable to one share of
Common Stock. The Company shall determine the fair
market value.
-3-
<PAGE> 4
The adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive the distribution. This Section
does not apply to normal cash dividends or cash distributions. Also, this
Section does not apply to rights or warrants referred to in Section 7.
SECTION 9. CURRENT MARKET PRICE, ETC. In Sections 7 and 8 the
current market price per share of Common Stock on any date is the average of the
quoted prices of the Common Stock for 30 consecutive trading days commencing 45
trading days before the date in question. In the absence of one or more such
quotations, the Company shall determine the current market price on the basis of
such quotations as it considers appropriate. If the exercise price is adjusted
pursuant to Sections 7 or 8, the number of shares issuable on exercise of this
warrant thereafter shall be adjusted by multiplying such number by a fraction
the numerator of which is the previous exercise price and the denominator of
which is the adjusted exercise price.
SECTION 10. WHEN ADJUSTMENT MAY BE DEFERRED. No adjustment in
the exercise price need be made unless the adjustment would require an increase
or decrease of at least 1% in the exercise price. Any adjustments that are not
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section shall be made to the nearest
cent or to the nearest 1/100th of a share, as the case may be.
SECTION 11. WHEN NO ADJUSTMENT REQUIRED. No adjustment need be
made for a transaction referred to in Sections 6, 7 or 8 if the Holder is to
participate in the transaction on the basis and with notice that the Board of
Directors determines to be fair and appropriate in light of the basis and notice
on which holders of Common Stock participate in the transaction. No adjustment
need be made for rights to purchase Common Stock pursuant to a Company plan for
reinvestment of dividends or interest. No adjustment need be made for a change
in the par value or no par value of the Common Stock. To the extent the Warrant
becomes exercisable for cash, no adjustment need be made thereafter as to the
cash. Interest will not accrue on the cash.
SECTION 12. NOTICE OF ADJUSTMENT. Whenever the exercise price
is adjusted, the Company shall promptly mail to the Holder a notice of the
adjustment. The Company shall obtain a certificate from the Company's
independent public accountants briefly stating the facts requiring the
adjustment and the manner of computing it. The certificate shall be conclusive
evidence that the adjustment is correct.
SECTION 13. NOTICE OF CERTAIN TRANSACTIONS. If:
(1) the Company takes any action that would require an
adjustment in the exercise price to Sections 6, 7 or 8 and if the
Company does not let the Holder participate pursuant to Section 11;
-4-
<PAGE> 5
(2) the Company takes any action that would require an
instrument of assumption pursuant to Section 14; or
(3) there is a liquidation or dissolution of the Company,
the Company shall mail to the Holder a notice stating the proposed record date
for a dividend or distribution or the proposed effective date of a subdivision,
combination, reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution. The Company shall mail the notice at least 15 days
before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
SECTION 14. REORGANIZATION OF COMPANY. If the Company is a
party to a recapitalization or a merger or consolidation which reclassifies or
changes its outstanding Common Stock, the person obligated to deliver
securities, cash or other assets upon exercise of the Warrant shall assume the
Company's obligations under this Warrant. The instrument of assumption shall
provide that the Holder may exercise it into the kind and amount of securities,
cash or other assets which he would have owned immediately after the
recapitalization, consolidation or merger if he had exercised the Warrant
immediately before the effective date of the transaction. The instrument of
assumption shall provide for adjustments which shall be as nearly equivalent as
may be practical to the adjustments provided for in this Warrant. The successor
Company shall mail to the Holder a notice briefly describing the instrument of
assumption.
SECTION 15. COMPANY DETERMINATION FINAL. Any determination
that the Company or the Board of Directors must make pursuant to Sections 3, 6,
9 or 11 is conclusive, if made in good faith, absent manifest error.
SECTION 16. TRANSFER AND EXCHANGE. The Holder may transfer
this Warrant to any of its partners or any affiliated investment account entity.
Except as permitted by the immediately preceding sentence, the Warrant is not
transferable (a) prior to May 31, 1998 (unless the Company is diligently
pursuing the effectiveness of the registration of a registration statement, in
which case prior to July 15, 1998) or (b) so long as an effective Registration
Statement (as defined in the Registration Rights Agreement) for the shares of
Common Stock is on file with the Securities and Exchange Commission. Subject to
the preceding sentence, the Warrant may be presented for transfer or exchange at
the principal office of the Company. When the Warrant is presented to the
Company with a request to register transfer or to exchange it for the Warrant
covering an equal number of shares of Common Stock, the Company shall register
the transfer or make the exchange. The Company may charge a reasonable fee for
any registration of transfer or exchange. Notwithstanding the foregoing, neither
this Warrant nor the underlying Common Stock has been registered, and transfer
thereof is subject to applicable securities law restrictions. A legend in
substantially the following form shall be placed on each such security:
-5-
<PAGE> 6
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR
QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS
PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY
REQUIRED REGISTRATION OR QUALIFICATION UNDER ANY STATE SECURITIES LAWS, OR THE
PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER
FEDERAL OR STATE SECURITIES LAWS."
SECTION 17. REPLACEMENT SECURITIES. If the Holder of a Warrant
claims that his Warrant has been lost, destroyed or wrongfully taken, the
Company shall issue a replacement. If required by the Company, an indemnity bond
must be sufficient in its judgment to protect the Company from any loss which
any Holder of a Warrant may suffer if a Warrant is replaced. The Company may
charge for its expenses in replacing a Warrant.
SECTION 18. NOTICES. Any notice or communication to the
Company is duly given if in writing and delivered in person or mailed by
first-class mail to its principal executive offices at 100 S.E. Second Street,
32nd Floor, Miami, Florida, 33131, Attn: Chairman of the Board. The Company by
notice may designate additional or different addresses for subsequent notices or
communications. Any notice or communication to the Holder shall be mailed by
first-class mail to his address shown on the register kept by the Company.
Failure to mail a notice or communication to the Holder or any defect in it
shall not affect its sufficiency with respect to any other holder of warrants
relating to the Company's Common Stock. If a notice or communication is mailed
in the manner provided above within the time prescribed, it is duly given,
whether or not the addressee receives it.
SECTION 19. LIABILITY. No Holder as such shall have any
liability as a stockholder of the Company.
SECTION 20. GOVERNING LAW. This Warrant shall be governed by
the internal law of New York.
BROOKE GROUP LTD.
By: /s/ Richard J. Lampen
------------------------------
Name: Richard J. Lampen
Title: Executive Vice President
Date: March 2, 1998
-6-
<PAGE> 7
[Form of Election to Purchase]
(To be Executed upon Exercise of the Warrant)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for and purchases _____________ shares of Common Stock and tenders
payment for such shares to the order of Brooke Group Ltd. in the amount of
$_____________ in accordance with the terms of this Warrant. The undersigned
requests that certificate(s) for such shares be issued and registered in the
name of _________________________________________________, whose address is
________________________________________________________________ and that such
shares be delivered to ____________________________________________ whose
address is _______________________________________________________________. If
said number of shares is less than all of the shares of Common Stock purchasable
under this Warrant, the undersigned requests that a new Warrant representing the
remaining balance of such shares be registered in the name of
__________________________________________, whose address is
_______________________________________________________________, and that such
Warrant be delivered to ___________________________________________, whose
address is __________________________________________________________________
Date: By:
---------------------- --------------------------------------------
Name:
----------------------------------------
Its:
----------------------------------------
-7-
<PAGE> 1
EXHIBIT 10.4
BROOKE GROUP LTD.
WARRANT
SECTION 1. WARRANT. AIF II, L.P. (the "Holder") may exercise
this Warrant to receive 1,204,000 shares of common stock, $0.10 par value
("Common Stock"), of Brooke Group Ltd., a Delaware corporation (the "Company"),
at any time after October 31, 1999 and up and until October 31, 2004. The
initial exercise price of this Warrant is $0.10 per share. The price and the
number of shares purchasable under this Warrant are subject to adjustment. The
Company shall register this Warrant in a warrant register to be maintained by
the Company.
SECTION 2. SUBSTITUTION OF LIGGETT WARRANT. The Company may,
upon giving the Holder 60 days prior written notice, substitute (the "Warrant
Substitution") a new warrant (the "Liggett Warrant") for this Warrant. The
Warrant Substitution must occur prior to October 31, 1999. The Liggett Warrant
will entitle the Holder to acquire a number of shares of common stock, $0.10 par
value (the "Liggett Common Shares"), of Liggett Group, Inc., a Delaware
corporation ("Liggett"), equal to 9.90% of the total number of Liggett Common
Shares issued and outstanding following the exercise in full of the Liggett
Warrant. The initial exercise price of the Liggett Warrant shall be $0.10 per
Liggett Common Share. The Liggett Warrant will be exercisable at any time, in
whole or in part, on or prior to October 31, 2004, and shall have terms and
conditions identical to this Warrant, except as set forth herein. In the event
of a substitution pursuant to this Section 2, Liggett shall register the Liggett
Warrant in a warrant register to be maintained by Liggett. Upon the Warrant
Substitution, this Warrant shall automatically be cancelled and the Holder shall
immediately return this Warrant to the Company.
The Holder will be obligated to accept the Liggett Warrant in
the Warrant Substitution only if the following conditions shall have been
satisfied:
a. Liggett shall have complied with the terms of all
covenants set forth in the Indenture, dated as of February 14, 1992, by
and among Liggett, Eve Holdings, Inc. and Bankers Trust Company, as
trustee, as amended (the "Liggett Indenture") that govern or prohibit
changes to Liggett's capital structure or transactions with
"Affiliates," whether or not the Liggett Indenture remains in effect at
the time of the Warrant Substitution;
b. The Warrant Substitution shall not be precluded by
the Liggett Indenture or the Indenture, dated as of January 1, 1996, by
and between BGLS Inc. and State Street Bank and Trust Company (as
successor to Fleet National Bank of Massachusetts), as trustee;
c. No Termination Event shall have occurred under the
Standstill Agreement, dated as of February 27, 1997, by and among BGLS
Inc., the Holder, and Artemis America Partnership;
<PAGE> 2
e. The Company, Liggett and the Holder shall have
entered into mutually satisfactory agreements providing certain
protections to the Holder as a minority shareholder of Liggett,
including preemptive rights, limitations on transactions with
affiliates, covenants similar to those set forth in the Liggett
Indenture and other reasonable rights; and
f. The Company, Liggett and the Holder shall have
entered into a mutually satisfactory agreement that establishes methods
for the Holder to realize the fair market value of the Liggett Warrant
as soon as practicable following the Warrant Substitution and
establishes methods for the Company to cause the Holder to participate
in sales of the Liggett Common Shares.
The Company and the Holder agree to commence discussions regarding the matters
described in subparagraphs d and e above as soon as possible with a view to
entering into definitive agreements on or prior to May 1, 1998.
SECTION 3. PROCEDURE. To exercise this Warrant, the Holder
must (1) complete and sign the exercise notice on the back of the Warrant, (2)
surrender the Warrant to the Company or its designated agent, (3) furnish
appropriate endorsements and transfer documents if required by the Company, and
(4) pay the exercise price and any transfer or similar tax if required. The date
on which the Holder satisfies all those requirements is the exercise date. As
soon as practical, the Company shall deliver a certificate for the number of
full shares of Common Stock issuable upon the exercise and a check for any
fractional share. The person in whose name the certificate is registered shall
be treated as a stockholder of record on and after the exercise date. If the
Holder exercises more than one Warrant, at the same time, the number of full
shares issuable upon the exercise shall be based on the total number of shares
covered by the Warrant exercised. Upon a surrender of a Warrant that is
exercised in part, the Company shall issue for the Holder a new Warrant covering
the exercised portion of the Warrant surrendered.
SECTION 4. FRACTIONAL SHARES. The Company will not issue a
fractional share of Common Stock upon exercise of a Warrant. Instead the Company
will deliver its check for the current market value of the fractional share. The
current market value of a fraction of a share is determined as follows: Multiply
the current market price of a full share by the fraction. Round the result to
the nearest cent. The current market price of a share of Common Stock is the
last reported sale price of the Common Stock on the principal national
securities exchange where it is traded (the "quoted price") on the last trading
day prior to the exercise date. In the absence of such a quotation, the Company
shall determine the current market price on the basis of such quotations as it
considers appropriate.
SECTION 5. TAXES ON EXERCISE. If the Holder exercises the
Warrant, the Company shall pay any documentary, stamp or similar issue or
transfer tax due on the issue of shares of
-2-
<PAGE> 3
Common Stock upon the exercise. However, the Holder shall pay any such tax which
is due because the shares are issued in a name other than the Holder's name.
SECTION 6. COMPANY TO PROVIDE STOCK. The Company shall reserve
out of its authorized but unissued Common Stock or its Common Stock held in
treasury enough shares of Common Stock to permit exercise of the Warrant. All
shares of Common Stock which may be issued upon exercise of the Warrant shall be
fully paid and non-assessable. Pursuant and subject to the terms and conditions
of that certain Registration Rights Agreement, dated March 2, 1998, by and among
the Company and the warrant holders listed therein (the "Registration Rights
Agreement"), the Company will use its best efforts to comply with all securities
laws regulating the offer and delivery of shares of Common Stock upon exercise
of the Warrant and will use it best efforts to list such shares on each national
securities exchange on which the Common Stock is listed.
SECTION 7. ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If the
Company:
(1) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into a
smaller number of shares;
(4) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any shares
of its capital stock,
then the number of shares issuable on exercise and the exercise price in effect
immediately prior to such action shall be adjusted so that the Holder of a
Warrant thereafter exercised may receive the number of shares of capital stock
of the Company which he would have owned immediately following such action if he
had exercised the Warrant immediately prior to such action. The adjustment shall
become effective immediately after the record date in the case of a dividend or
distribution and immediately after the effective date in the case of a
subdivision, combination or reclassification.
If after an adjustment the Holder upon exercise of a Warrant
may receive shares of two or more classes of capital stock of the Company, the
Company shall determine the allocation of the adjusted exercise price between
the classes of capital stock. After such allocation, the number of shares
issuable on exercise and the exercise price of each class of capital stock shall
thereafter be subject to adjustment on terms comparable to those applicable to
Common Stock in this Section.
-3-
<PAGE> 4
SECTION 8. ADJUSTMENT FOR RIGHTS ISSUE. If the Company
distributes any rights, warrants, convertible securities or other common stock
equivalents (to the extent that any of the foregoing are exercisable,
convertible or otherwise exchangeable for common stock for less than the current
market price) to all holders of its Common Stock entitling them for a period
expiring within 60 days after the record date mentioned below to purchase shares
of Common Stock at a price per share less than the current market price per
share on the record date, the exercise price shall be adjusted in accordance
with the formula:
NxP
---
C'=C x O + M
-----
O + N
where:
C' = the adjusted exercise price.
C = the current exercise price.
O = the number of shares of Common Stock outstanding on the record
date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
M = the current market price per share of Common Stock on the
record date.
The adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive the rights or warrants.
SECTION 9. ADJUSTMENT FOR OTHER DISTRIBUTIONS. If the Company
distributes to all holders of its Common Stock any of its assets or debt
securities or any rights, warrants, convertible securities or other common stock
equivalents to purchase securities of the Company, the exercise price shall be
adjusted in accordance with the formula:
C'= C x M -F
----
M
where:
C' = the adjusted exercise price.
C = the current exercise price.
M = the current market price per share of Common Stock on the
record date.
F = the fair market value on the record date of the assets,
securities, rights or warrants applicable to one share of
Common Stock. The Company shall determine the fair
market value.
The adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive the distribution. This Section
does not apply to normal cash
-4-
<PAGE> 5
dividends or cash distributions. Also, this Section does not apply to rights or
warrants referred to in Section 8.
SECTION 10. CURRENT MARKET PRICE, ETC. In Sections 8 and 9 the
current market price per share of Common Stock on any date is the average of the
quoted prices of the Common Stock for 30 consecutive trading days commencing 45
trading days before the date in question. In the absence of one or more such
quotations, the Company shall determine the current market price on the basis of
such quotations as it considers appropriate. If the exercise price is adjusted
pursuant to Sections 8 or 9, the number of shares issuable on exercise of this
warrant thereafter shall be adjusted by multiplying such number by a fraction
the numerator of which is the previous exercise price and the denominator of
which is the adjusted exercise price.
SECTION 11. WHEN ADJUSTMENT MAY BE DEFERRED. No adjustment in
the exercise price need be made unless the adjustment would require an increase
or decrease of at least 1% in the exercise price. Any adjustments that are not
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section shall be made to the nearest
cent or to the nearest 1/100th of a share, as the case may be.
SECTION 12. WHEN NO ADJUSTMENT REQUIRED. No adjustment need be
made for a transaction referred to in Sections 7, 8 or 9 if the Holder is to
participate in the transaction on the basis and with notice that the Board of
Directors determines to be fair and appropriate in light of the basis and notice
on which holders of Common Stock participate in the transaction. No adjustment
need be made for rights to purchase Common Stock pursuant to a Company plan for
reinvestment of dividends or interest. No adjustment need be made for a change
in the par value or no par value of the Common Stock. To the extent the Warrant
becomes exercisable for cash, no adjustment need be made thereafter as to the
cash. Interest will not accrue on the cash.
SECTION 13. NOTICE OF ADJUSTMENT. Whenever the exercise price
is adjusted, the Company shall promptly mail to the Holder a notice of the
adjustment. The Company shall obtain a certificate from the Company's
independent public accountants briefly stating the facts requiring the
adjustment and the manner of computing it. The certificate shall be conclusive
evidence that the adjustment is correct.
SECTION 14. NOTICE OF CERTAIN TRANSACTIONS. If:
(1) the Company takes any action that would require an
adjustment in the exercise price to Sections 7, 8 or 9 and if the
Company does not let the Holder participate pursuant to Section 12;
(2) the Company takes any action that would require an
instrument of assumption pursuant to Section 15; or
(3) there is a liquidation or dissolution of the Company,
-5-
<PAGE> 6
the Company shall mail to the Holder a notice stating the proposed record date
for a dividend or distribution or the proposed effective date of a subdivision,
combination, reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution. The Company shall mail the notice at least 15 days
before such date. Failure to mail the notice or any defect in it shall not
affect the validity of the transaction.
SECTION 15. REORGANIZATION OF COMPANY. If the Company is a
party to a recapitalization or a merger or consolidation which reclassifies or
changes its outstanding Common Stock, the person obligated to deliver
securities, cash or other assets upon exercise of the Warrant shall assume the
Company's obligations under this Warrant. The instrument of assumption shall
provide that the Holder may exercise it into the kind and amount of securities,
cash or other assets which he would have owned immediately after the
recapitalization, consolidation or merger if he had exercised the Warrant
immediately before the effective date of the transaction. The instrument of
assumption shall provide for adjustments which shall be as nearly equivalent as
may be practical to the adjustments provided for in this Warrant. The successor
Company shall mail to the Holder a notice briefly describing the instrument of
assumption.
SECTION 16. COMPANY DETERMINATION FINAL. Any determination
that the Company or the Board of Directors must make pursuant to Sections 4, 7,
10 or 12 is conclusive, if made in good faith, absent manifest error.
SECTION 17. TRANSFER AND EXCHANGE. The Holder may transfer
this Warrant to any of its partners or any affiliated investment account entity.
Except as permitted by the immediately preceding sentence, the Warrant is not
transferable (a) prior to October 31, 1999 or (b) so long as an effective
Registration Statement (as defined in the Registration Rights Agreement) for the
shares of Common Stock is on file with the Securities and Exchange Commission.
Subject to the preceding sentence, the Warrant may be presented for transfer or
exchange at the principal office of the Company. When the Warrant is presented
to the Company with a request to register transfer or to exchange it for
Warrants covering an equal number of shares of Common Stock, the Company shall
register the transfer or make the exchange. The Company may charge a reasonable
fee for any registration of transfer or exchange. Notwithstanding the foregoing,
neither this Warrant nor the underlying Common Stock has been registered, and
transfer thereof is subject to applicable securities law restrictions. A legend
in substantially the following form shall be placed on each such security:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR
QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS
PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY
REQUIRED REGISTRATION OR QUALIFICATION UNDER ANY STATE SECURITIES LAWS, OR THE
PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER
FEDERAL OR STATE SECURITIES LAWS."
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<PAGE> 7
SECTION 18. REPLACEMENT SECURITIES. If the Holder of a Warrant
claims that the Holder's Warrant has been lost, destroyed or wrongfully taken,
the Company shall issue a replacement. If required by the Company, an indemnity
bond must be sufficient in its judgment to protect the Company from any loss
which any Holder of a Warrant may suffer if a Warrant is replaced. The Company
may charge for its expenses in replacing a Warrant.
SECTION 19. NOTICES. Any notice or communication to the
Company is duly given if in writing and delivered in person or mailed by
first-class mail to its principal executive offices at 100 S.E. Second Street,
32nd Floor, Miami, Florida, 33131, Attn: Chairman of the Board. The Company by
notice may designate additional or different addresses for subsequent notices or
communications. Any notice or communication to the Holder shall be mailed by
first-class mail to the Holder's address shown on the register kept by the
Company. Failure to mail a notice or communication to the Holder or any defect
in it shall not affect its sufficiency with respect to any other holders of
warrants relating to the Company's Common Stock. If a notice or communication is
mailed in the manner provided above within the time prescribed, it is duly
given, whether or not the addressee receives it.
SECTION 20. LIABILITY. No Holder as such shall have any
liability as a stockholder of the Company.
SECTION 22. GOVERNING LAW. This Warrant shall be governed by
the internal law of New York.
BROOKE GROUP LTD.
By: /s/ Richard J. Lampen
-------------------------------
Name: Richard J. Lampen
Title: Executive Vice President
Date: March 2, 1998
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<PAGE> 8
[Form of Election to Purchase]
(To be Executed upon Exercise of the Warrant)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for and purchases _____________ shares of Common Stock and tenders
payment for such shares to the order of Brooke Group Ltd. in the amount of
$_____________ in accordance with the terms of this Warrant. The undersigned
requests that certificate(s) for such shares be issued and registered in the
name of _______________________________________________, whose address is
______________________________________________________________ and that such
shares be delivered to ____________________________________________ whose
address is _______________________________________________________________. If
said number of shares is less than all of the shares of Common Stock purchasable
under this Warrant, the undersigned requests that a new Warrant representing the
remaining balance of such shares be registered in the name of
________________________________________, whose address is
_______________________________________________________________, and that such
Warrant be delivered to ___________________________________________, whose
address is __________________________________________________________________.
Date: By:
------------------------------------------
Name:
--------------------------------------
Its:
--------------------------------------
-8-
<PAGE> 1
EXHIBIT 10.5
BROOKE GROUP LTD.
WARRANT
SECTION 1. WARRANT. Artemis America Partnership (the "Holder")
may exercise this Warrant to receive 946,000 shares of common stock, $0.10 par
value ("Common Stock"), of Brooke Group Ltd., a Delaware corporation (the
"Company"), at any time after October 31, 1999 and up and until October 31,
2004. The initial exercise price of this Warrant is $0.10 per share. The price
and the number of shares purchasable under this Warrant are subject to
adjustment. The Company shall register this Warrant in a warrant register to be
maintained by the Company.
SECTION 2. SUBSTITUTION OF LIGGETT WARRANT. The Company may,
upon giving the Holder 60 days prior written notice, substitute (the "Warrant
Substitution") a new warrant (the "Liggett Warrant") for this Warrant. The
Warrant Substitution must occur prior to October 31, 1999. The Liggett Warrant
will entitle the Holder to acquire a number of shares of common stock, $0.10 par
value (the "Liggett Common Shares"), of Liggett Group, Inc., a Delaware
corporation ("Liggett"), equal to 9.90% of the total number of Liggett Common
Shares issued and outstanding following the exercise in full of the Liggett
Warrant. The initial exercise price of the Liggett Warrant shall be $0.10 per
Liggett Common Share. The Liggett Warrant will be exercisable at any time, in
whole or in part, on or prior to October 31, 2004, and shall have terms and
conditions identical to this Warrant, except as set forth herein. In the event
of a substitution pursuant to this Section 2, Liggett shall register the Liggett
Warrant in a warrant register to be maintained by Liggett. Upon the Warrant
Substitution, this Warrant shall automatically be cancelled and the Holder shall
immediately return this Warrant to the Company.
The Holder will be obligated to accept the Liggett Warrant in
the Warrant Substitution only if the following conditions shall have been
satisfied:
a. Liggett shall have complied with the terms of all
covenants set forth in the Indenture, dated as of February 14, 1992, by
and among Liggett, Eve Holdings, Inc. and Bankers Trust Company, as
trustee, as amended (the "Liggett Indenture") that govern or prohibit
changes to Liggett's capital structure or transactions with
"Affiliates," whether or not the Liggett Indenture remains in effect at
the time of the Warrant Substitution;
b. The Warrant Substitution shall not be precluded by
the Liggett Indenture or the Indenture, dated as of January 1, 1996, by
and between BGLS Inc. and State Street Bank and Trust Company (as
successor to Fleet National Bank of Massachusetts), as trustee;
c. No Termination Event shall have occurred under the
Standstill Agreement, dated as of February 27, 1997, by and among BGLS
Inc., AIF II, L.P., and the Holder;
<PAGE> 2
d. The Company, Liggett and the Holder shall have
entered into mutually satisfactory agreements providing certain
protections to the Holder as a minority shareholder of Liggett,
including preemptive rights, limitations on transactions with
affiliates, covenants similar to those set forth in the Liggett
Indenture and other reasonable rights; and
e. The Company, Liggett and the Holder shall have
entered into a mutually satisfactory agreement that establishes methods
for the Holder to realize the fair market value of the Liggett Warrant
as soon as practicable following the Warrant Substitution and
establishes methods for the Company to cause the Holder to participate
in sales of the Liggett Common Shares.
The Company and the Holder agree to commence discussions regarding the matters
described in subparagraphs d and e above as soon as possible with a view to
entering into definitive agreements on or prior to May 1, 1998.
SECTION 3. PROCEDURE. To exercise this Warrant, the Holder
must (1) complete and sign the exercise notice on the back of the Warrant, (2)
surrender the Warrant to the Company or its designated agent, (3) furnish
appropriate endorsements and transfer documents if required by the Company, and
(4) pay the exercise price and any transfer or similar tax if required. The date
on which the Holder satisfies all those requirements is the exercise date. As
soon as practical, the Company shall deliver a certificate for the number of
full shares of Common Stock issuable upon the exercise and a check for any
fractional share. The person in whose name the certificate is registered shall
be treated as a stockholder of record on and after the exercise date. If the
Holder exercises more than one Warrant, at the same time, the number of full
shares issuable upon the exercise shall be based on the total number of shares
covered by the Warrant exercised. Upon a surrender of a Warrant that is
exercised in part, the Company shall issue for the Holder a new Warrant covering
the exercised portion of the Warrant surrendered.
SECTION 4. FRACTIONAL SHARES. The Company will not issue a
fractional share of Common Stock upon exercise of a Warrant. Instead the Company
will deliver its check for the current market value of the fractional share. The
current market value of a fraction of a share is determined as follows: Multiply
the current market price of a full share by the fraction. Round the result to
the nearest cent. The current market price of a share of Common Stock is the
last reported sale price of the Common Stock on the principal national
securities exchange where it is traded (the "quoted price") on the last trading
day prior to the exercise date. In the absence of such a quotation, the Company
shall determine the current market price on the basis of such quotations as it
considers appropriate.
SECTION 5. TAXES ON EXERCISE. If the Holder exercises the
Warrant, the Company shall pay any documentary, stamp or similar issue or
transfer tax due on the issue of shares of Common Stock upon the exercise.
However, the Holder shall pay any such tax which is due because the shares are
issued in a name other than the Holder's name.
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<PAGE> 3
SECTION 6. COMPANY TO PROVIDE STOCK. The Company shall reserve
out of its authorized but unissued Common Stock or its Common Stock held in
treasury enough shares of Common Stock to permit exercise of the Warrant. All
shares of Common Stock which may be issued upon exercise of the Warrant shall be
fully paid and non-assessable. Pursuant and subject to the terms and conditions
of that certain Registration Rights Agreement, dated March 2, 1998, by and among
the Company and the warrant holders listed therein (the "Registration Rights
Agreement"), the Company will use its best efforts to comply with all securities
laws regulating the offer and delivery of shares of Common Stock upon exercise
of the Warrant and will use it best efforts to list such shares on each national
securities exchange on which the Common Stock is listed.
SECTION 7. ADJUSTMENT FOR CHANGE IN CAPITAL STOCK. If the
Company:
(1) pays a dividend or makes a distribution on its Common
Stock in shares of its Common Stock;
(2) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(3) combines its outstanding shares of Common Stock into a
smaller number of shares;
(4) makes a distribution on its Common Stock in shares of its
capital stock other than Common Stock; or
(5) issues by reclassification of its Common Stock any shares
of its capital stock,
then the number of shares issuable on exercise and the exercise price in effect
immediately prior to such action shall be adjusted so that the Holder of a
Warrant thereafter exercised may receive the number of shares of capital stock
of the Company which he would have owned immediately following such action if he
had exercised the Warrant immediately prior to such action. The adjustment shall
become effective immediately after the record date in the case of a dividend or
distribution and immediately after the effective date in the case of a
subdivision, combination or reclassification.
If after an adjustment the Holder upon exercise of a Warrant
may receive shares of two or more classes of capital stock of the Company, the
Company shall determine the allocation of the adjusted exercise price between
the classes of capital stock. After such allocation, the number of shares
issuable on exercise and the exercise price of each class of capital stock shall
thereafter be subject to adjustment on terms comparable to those applicable to
Common Stock in this Section.
SECTION 8. ADJUSTMENT FOR RIGHTS ISSUE. If the Company
distributes any rights, warrants, convertible securities or other common stock
equivalents (to the extent that any of the
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<PAGE> 4
foregoing are exercisable, convertible or otherwise exchangeable for common
stock for less than the current market price) to all holders of its Common Stock
entitling them for a period expiring within 60 days after the record date
mentioned below to purchase shares of Common Stock at a price per share less
than the current market price per share on the record date, the exercise price
shall be adjusted in accordance with the formula:
NxP
---
C'=C x O + M
-----
O + N
where:
C' = the adjusted exercise price.
C = the current exercise price.
O = the number of shares of Common Stock outstanding on the record
date.
N = the number of additional shares of Common Stock offered.
P = the offering price per share of the additional shares.
M = the current market price per share of Common Stock on the
record date.
The adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive the rights or warrants.
SECTION 9. ADJUSTMENT FOR OTHER DISTRIBUTIONS. If the Company
distributes to all holders of its Common Stock any of its assets or debt
securities or any rights, warrants, convertible securities or other common stock
equivalents to purchase securities of the Company, the exercise price shall be
adjusted in accordance with the formula:
C'= C x M -F
----
M
where:
C' = the adjusted exercise price.
C = the current exercise price.
M = the current market price per share of Common Stock on the
record date.
F = the fair market value on the record date of the assets,
securities, rights or warrants applicable to one share of
Common Stock. The Company shall determine the fair
market value.
The adjustment shall become effective immediately after the record date for the
determination of stockholders entitled to receive the distribution. This Section
does not apply to normal cash dividends or cash distributions. Also, this
Section does not apply to rights or warrants referred to in Section 8.
-4-
<PAGE> 5
SECTION 10. CURRENT MARKET PRICE, ETC. In Sections 8 and 9 the
current market price per share of Common Stock on any date is the average of the
quoted prices of the Common Stock for 30 consecutive trading days commencing 45
trading days before the date in question. In the absence of one or more such
quotations, the Company shall determine the current market price on the basis of
such quotations as it considers appropriate. If the exercise price is adjusted
pursuant to Sections 8 or 9, the number of shares issuable on exercise of this
warrant thereafter shall be adjusted by multiplying such number by a fraction
the numerator of which is the previous exercise price and the denominator of
which is the adjusted exercise price.
SECTION 11. WHEN ADJUSTMENT MAY BE DEFERRED. No adjustment in
the exercise price need be made unless the adjustment would require an increase
or decrease of at least 1% in the exercise price. Any adjustments that are not
made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section shall be made to the nearest
cent or to the nearest 1/100th of a share, as the case may be.
SECTION 12. WHEN NO ADJUSTMENT REQUIRED. No adjustment need be
made for a transaction referred to in Sections 7, 8 or 9 if the Holder is to
participate in the transaction on the basis and with notice that the Board of
Directors determines to be fair and appropriate in light of the basis and notice
on which holders of Common Stock participate in the transaction. No adjustment
need be made for rights to purchase Common Stock pursuant to a Company plan for
reinvestment of dividends or interest. No adjustment need be made for a change
in the par value or no par value of the Common Stock. To the extent the Warrant
becomes exercisable for cash, no adjustment need be made thereafter as to the
cash. Interest will not accrue on the cash.
SECTION 13. NOTICE OF ADJUSTMENT. Whenever the exercise price
is adjusted, the Company shall promptly mail to the Holder a notice of the
adjustment. The Company shall obtain a certificate from the Company's
independent public accountants briefly stating the facts requiring the
adjustment and the manner of computing it. The certificate shall be conclusive
evidence that the adjustment is correct.
SECTION 14. NOTICE OF CERTAIN TRANSACTIONS. If:
(1) the Company takes any action that would require an
adjustment in the exercise price to Sections 7, 8 or 9 and if the
Company does not let the Holder participate pursuant to Section 12;
(2) the Company takes any action that would require an
instrument of assumption pursuant to Section 15; or
(3) there is a liquidation or dissolution of the Company,
the Company shall mail to the Holder a notice stating the proposed record date
for a dividend or distribution or the proposed effective date of a subdivision,
combination, reclassification, consolidation, merger, transfer, lease,
liquidation or dissolution. The Company shall mail the
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<PAGE> 6
notice at least 15 days before such date. Failure to mail the notice or any
defect in it shall not affect the validity of the transaction.
SECTION 15. REORGANIZATION OF COMPANY. If the Company is a
party to a recapitalization or a merger or consolidation which reclassifies or
changes its outstanding Common Stock, the person obligated to deliver
securities, cash or other assets upon exercise of the Warrant shall assume the
Company's obligations under this Warrant. The instrument of assumption shall
provide that the Holder may exercise it into the kind and amount of securities,
cash or other assets which he would have owned immediately after the
recapitalization, consolidation or merger if he had exercised the Warrant
immediately before the effective date of the transaction. The instrument of
assumption shall provide for adjustments which shall be as nearly equivalent as
may be practical to the adjustments provided for in this Warrant. The successor
Company shall mail to the Holder a notice briefly describing the instrument of
assumption.
SECTION 16. COMPANY DETERMINATION FINAL. Any determination
that the Company or the Board of Directors must make pursuant to Sections 4, 7,
10 or 12 is conclusive, if made in good faith, absent manifest error.
SECTION 17. TRANSFER AND EXCHANGE. The Holder may transfer
this Warrant to any of its partners or any affiliated investment account entity.
Except as permitted by the immediately preceding sentence, the Warrant is not
transferable (a) prior to October 31, 1999 or (b) so long as an effective
Registration Statement (as defined in the Registration Rights Agreement) for the
shares of Common Stock is on file with the Securities and Exchange Commission.
Subject to the preceding sentence, the Warrant may be presented for transfer or
exchange at the principal office of the Company. When the Warrant is presented
to the Company with a request to register transfer or to exchange it for
Warrants covering an equal number of shares of Common Stock, the Company shall
register the transfer or make the exchange. The Company may charge a reasonable
fee for any registration of transfer or exchange. Notwithstanding the foregoing,
neither this Warrant nor the underlying Common Stock has been registered, and
transfer thereof is subject to applicable securities law restrictions. A legend
in substantially the following form shall be placed on each such security:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR REGISTERED OR
QUALIFIED UNDER ANY STATE SECURITIES LAWS. THE SECURITIES HAVE BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD, TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS
PURSUANT TO REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND ANY
REQUIRED REGISTRATION OR QUALIFICATION UNDER ANY STATE SECURITIES LAWS, OR THE
PROPOSED TRANSACTION DOES NOT REQUIRE REGISTRATION OR QUALIFICATION UNDER
FEDERAL OR STATE SECURITIES LAWS."
-6-
<PAGE> 7
SECTION 18. REPLACEMENT SECURITIES. If the Holder of a Warrant
claims that the Holder's Warrant has been lost, destroyed or wrongfully taken,
the Company shall issue a replacement. If required by the Company, an indemnity
bond must be sufficient in its judgment to protect the Company from any loss
which any Holder of a Warrant may suffer if a Warrant is replaced. The Company
may charge for its expenses in replacing a Warrant.
SECTION 19. NOTICES. Any notice or communication to the
Company is duly given if in writing and delivered in person or mailed by
first-class mail to its principal executive offices at 100 S.E. Second Street,
32nd Floor, Miami, Florida, 33131, Attn: Chairman of the Board. The Company by
notice may designate additional or different addresses for subsequent notices or
communications. Any notice or communication to the Holder shall be mailed by
first-class mail to the Holder's address shown on the register kept by the
Company. Failure to mail a notice or communication to the Holder or any defect
in it shall not affect its sufficiency with respect to any other holders of
warrants relating to the Company's Common Stock. If a notice or communication is
mailed in the manner provided above within the time prescribed, it is duly
given, whether or not the addressee receives it.
SECTION 20. LIABILITY. No Holder as such shall have any
liability as a stockholder of the Company.
SECTION 22. GOVERNING LAW. This Warrant shall be governed by
the internal law of New York.
BROOKE GROUP LTD.
By: /s/ Richard J. Lampen
--------------------------------
Name: Richard J. Lampen
Title: Executive Vice President
Date: March 2, 1998
-7-
<PAGE> 8
[Form of Election to Purchase]
(To be Executed upon Exercise of the Warrant)
The undersigned registered owner of this Warrant irrevocably exercises
this Warrant for and purchases _____________ shares of Common Stock and tenders
payment for such shares to the order of Brooke Group Ltd. in the amount of
$_____________ in accordance with the terms of this Warrant. The undersigned
requests that certificate(s) for such shares be issued and registered in the
name of _______________________________________________, whose address is
______________________________________________________________ and that such
shares be delivered to ____________________________________________ whose
address is _______________________________________________________________. If
said number of shares is less than all of the shares of Common Stock purchasable
under this Warrant, the undersigned requests that a new Warrant representing the
remaining balance of such shares be registered in the name of
________________________________________, whose address is
_______________________________________________________________, and that such
Warrant be delivered to ___________________________________________, whose
address is ____________________________________________________________________.
Date: By:
-------------------------- ------------------------------------
Name:
--------------------------------
Its:
--------------------------------
-8-
<PAGE> 1
EXHIBIT 10.6
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
March 2, 1998 among Brooke Group Ltd., a Delaware corporation ("Brooke"), and
the entities listed on Exhibit A attached hereto (individually, together with
transferees, assignees or other successors, and including any Warrant Holder
following exercise of its warrant, in its capacity as a holder of Registrable
Securities, a "Warrant Holder" and collectively the "Warrant Holders").
RECITALS
A. Brooke has granted Warrant Holders warrants to the
Registrable Securities in the amounts specified on
Exhibit A;
B. Brooke and the Warrant Holders desire that Brooke use
its reasonable best efforts to file, on or before May 1, 1998, with the SEC a
Registration Statement to register the resale by the Warrant Holders of the
Registrable Securities.
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:
"Brooke" has the meaning set forth in the Preamble.
"Effectiveness Period" has the meaning set forth in Section
2.2.1.
"Exchange Act" means the Securities Exchange Act of 1934.
"Initial Shelf Registration" has the meaning set forth
in Section 2.2.1.
"Losses" has the meaning set forth in Section 4.1.
"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.
<PAGE> 2
"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 shares of
common stock of Brooke, $0.10 par value per share, which are subject to that
certain Warrant, dated March 2, 1998, granted by Brooke to the Warrant Holder,
including such shares of common stock at any time following exercise of such
Warrant, in whole or in part. However, such common stock will cease to be a
Registrable Security when it (i) is sold in an open market transaction or in an
underwritten public offering, (ii) is sold to any person other than an
"affiliate" of Brooke (as defined under the Regulations) pursuant to a
Registration Statement, (iii) unless the Warrant Holder is an affiliate, such
common stock 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 (provided, however, that if such Warrant Holder is an "affiliate", all
securities owned by it shall remain "Registrable Securities") or (iv) ceases to
be outstanding.
"Registration Statement" means any registration statement of
Brooke 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.
-2-
<PAGE> 3
"Securities Act" means the Securities Act of 1933.
"Shelf Registration" has the meaning set forth in Section
2.2.2.
"Subsequent Shelf Registration" has the meaning set forth in
Section 2.2.2.
"Underwritten registration" or "underwritten offering" means a
registration in which securities of Brooke are sold to one or more underwriters
or group or a syndicate of underwriters for offering to the public.
"Warrant Holder" has the meaning set forth in the Preamble.
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" 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.
-3-
<PAGE> 4
ARTICLE 2
REGISTRATION OF REGISTRABLE SECURITIES UNDER SECURITIES ACT
Section 2.1 Required Registration of Registrable Securities.
Brooke 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. On or
before May 1, 1998, Brooke shall prepare and file with the SEC a Registration
Statement for an offering to be made by the Warrant Holders on a continuous
basis under Rule 415 covering all the Registrable Securities (the "Initial Shelf
Registration"). The Initial Shelf Registration shall be on an appropriate form
permitting registration of all Registrable Securities for resale by the Warrant
Holders in the manner or manners reasonably designated by them (including one or
more underwritten offerings). Brooke shall use its reasonable best efforts to
cause the Initial Shelf Registration to be declared effective under the
Securities Act within sixty (60) days following the date of filing of the
Registration Statement with the SEC 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 Warrant
Holder, (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 Brooke reasonably acceptable to the Warrant Holders, which opinion
shall be reasonably satisfactory in form, scope and substance to the Warrant
Holders, registration of the Registrable Securities is no longer required under
the Securities Act for the Warrant 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 Warrant Holders of Registrable Securities may include
any of its Registrable Securities in any Shelf Registration pursuant to this
Agreement unless and until such Warrant Holder furnishes to Brooke in writing
such information as Brooke may reasonably request pursuant to Section 6.2(b).
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, Brooke shall use its
reasonable best efforts to (i) obtain the prompt withdrawal of any order
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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," subject to the
last sentence of this Section 2.2.2) for an offering to be made by the Warrant
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, Brooke 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 Warrant Holder
of Registrable Securities acquired from another Warrant Holder, the obligations
of 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. Subject to Section
2.3.1(q), Brooke 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 Warrant Holders or by any underwriter of the
Registrable Securities.
Section 2.3 Registration Procedures.
Section 2.3.1 Shelf Registration. In connection with a Shelf
Registration, Brooke 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 Warrant Holders, and
pursuant thereto Brooke shall:
(a) Filing of Registration Statement. Before filing any
Registration Statement or Prospectus or any amendments or supplements
thereto, furnish to and afford the Warrant Holders of the Registrable
Securities covered by such Registration Statement, and the managing
underwriters, if
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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 Secu rities covered by such Registration
Statement as amended or by such Prospectus as supplemented.
(c) Notice. Notify the Warrant Holders 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 Warrant Holder 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 incor
porated 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 Brooke or their rep
resentatives 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 Brooke 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 Brooke 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
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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 Brooke'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 Warrant Holders 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 Prospectus. Deliver to the Warrant Holders
owning Registrable Securities, 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 Brooke
hereby consents to the use of each such Prospectus and Preliminary
Prospectus and each amendment or supplement thereto by each of the
selling Warrant Holders and the underwriters or agents, if any, and
dealers, if any, in
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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 Warrant Holders 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
Warrant 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, however,
that Brooke 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 selling Warrant Holders
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 Warrant Holders
may reasonably request.
(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 Warrant
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 Warrant Holder's business, in
which case Brooke will cooperate in all
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reasonable respects with the filing of such Registration Statements and
the granting of such approvals.
(k) Amendments and Supplements. Subject to Sections 2.3.1(a)
and 2.3.1(q), 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
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 Brooke 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 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 Brooke 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 Brooke and updates
thereof (which counsel and opinions shall be reasonably satisfactory to
the managing underwriters and the selling Warrant 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
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reasonably satisfactory to the managing underwriters and the selling
Warrant Holders) from the independent certified public accountants of
Brooke (and, if necessary, any other independent certified public
accountants of any subsidiary of Brooke or of any business acquired by
Brooke 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.
(n) Financial Records, Etc.. Make available for inspection by
any Warrant Holder, any underwriter participating in any such
disposition of Registrable Securities, if any, and any attorney,
accountant or other agent retained by any such selling Warrant 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 Brooke
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
Brooke and its subsidiaries to supply all information reasonably
requested by any such Inspectors in connection with such Registration
Statement. Records which Brooke 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
Warrant 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 Brooke
or its affiliates unless and until such information is made generally
available to the public.
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Warrant 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 Warrant Holder further agrees
that it will, upon learning that disclosure of such Records is sought
in a court of competent jurisdiction, give notice to Brooke and allow
Brooke 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 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 Brooke 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) Postponement or Suspension of Shelf Registration.
Notwithstanding anything contained in this Section 2, Brooke may
postpone, for a period of not in excess of 30 days in the aggregate in
any twelve month period, taking any action with respect to or suspend
the Shelf Registration if, in the good faith opinion of Brooke's board
of directors, effecting or continuing the Shelf Registration would
adversely affect a material financing, acquisition, disposition of
assets or stock, merger or other comparable transaction or would
require Brooke to make public disclosure of information the public
disclosure of which would have a material adverse effect upon Brooke.
(r) Delivery of Opinion. Upon the filing of any Registration
Statement, deliver to the Warrant Holders an opinion or opinions of
outside counsel to Brooke (which counsel shall be reasonably
satisfactory to the Warrant Holders), to the effect that nothing has
come to the
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attention of such counsel that causes such counsel to believe that such
Registration Statement 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. Use its reasonable best efforts to
take all other steps necessary or advisable, requested by the Warrant
Holders, to effect the registration and distribution of the Registrable
Securities covered by the Registration Statement contemplated hereby.
Section 2.3.2 Warrant Holder Covenants. In
addition to the covenants provided in Section 6.2, each Warrant Holder agrees by
acquisition of the Registrable Securities that, upon receipt of any notice from
Brooke of the happening of any event of the kind described in clause (ii), (iv),
(v) or (vi) of Section 2.3.1(c), such Warrant Holder shall forthwith discontinue
disposition of such Registrable Securities covered by such Registration
Statement or Prospectus until such Warrant 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 Brooke that the use of the applicable Prospectus may be
resumed, and has received copies of any amendments or supplements thereto.
ARTICLE 3
REGISTRATION EXPENSES
All fees and expenses incident to the performance of or compliance with
this Agreement by Brooke shall be borne by Brooke, 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 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
Brooke, (iv) fees and disbursements of all independent certified public
accountants for Brooke (including the expenses of any "cold comfort" letters
required by or incident to such performance), (v) Securities Act liability
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insurance, if Brooke so desires such insurance, (vi) internal expenses of Brooke
(including all salaries and expenses of officers and employees of Brooke
performing legal or accounting duties), (vii) the fees and expenses incurred in
connection with the listing of the securities to be registered and any national
securities exchange or quoted on the NASDAQ Stock Market or the NASDAQ National
Market pursuant to section 2.3.1(1), and (viii) the fees and expenses of any
Person, including special experts, retained by Brooke in its sole discretion.
Each selling Warrant Holder shall pay 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
Warrant Holder's account. Brooke shall pay all fees and disbursements of legal
counsel for such selling Warrant Holder, up to a maximum of $50,000.
ARTICLE 4
INDEMNIFICATION
Section 4.1 Indemnification by Brooke. Brooke shall, without
limitation as to time, indemnify and hold harmless, to the fullest extent
permitted by law, each Warrant Holder and its affiliates and any investment
funds managed thereby and their respective partners, officers, directors, agents
and employees, each Person who controls each such Warrant 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 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
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in reliance upon and in conformity with information furnished in writing to
Brooke 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 Warrant 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 Brooke pursuant to Section 2.3.1(g), or
(iii) to the extent such Losses result from the sale of Registrable Securities
by such Warrant Holder or 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 Brooke
pursuant to Section 2.3.1(k) and provided to such Warrant Holder or such
underwriter pursuant to Section 2.3.1(g), after Brooke shall have notified such
Warrant 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 4.2 Indemnification by Warrant Holder. In connection
with any Registration Statement in which a Warrant Holder is participating, such
Warrant Holder shall, without limitation as to time, indemnify and hold
harmless, to the fullest extent permitted by law, Brooke and its directors,
officers, agents and employees, each Person who controls Brooke (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 thereon, 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 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 Brooke by such Warrant Holder expressly for use therein by notice
referring to this Section 4.2. In no event shall the liability of any selling
Warrant Holder hereunder be, or be claimed by Brooke to be greater in amount
than the dollar amount of the proceeds actually
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received by such Warrant Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
Section 4.3 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
indemnified party determines that one 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
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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 4.4 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 hand, in connection with the actions, statements or
omissions that resulted in such Losses as well an 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 Warrant 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
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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 4.5 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 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 Warrant Holders holding at least 66 2/3% in interest of the applicable
Registrable Securities with the consent of Brooke (not to be unreasonably
withheld or delayed).
ARTICLE 6
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 6.1 Representations and Warranties. Brooke
represents and warrants to, and agrees with, the Warrant Holders
that:
(a) Subject to the terms of Section 2.3.1(q), during the
Effectiveness Period, the Registration Statement (and any
post-effective amendment thereto) and the Prospectus (as amended or as
supplemented if Brooke 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
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<PAGE> 18
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 Brooke pursuant to Section 6.2(b) by a
Warrant Holder or on behalf of a Warrant 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) Brooke has all requisite power and authority to execute,
deliver and perform this Agreement. All necessary corporate proceedings
of Brooke have been duly taken by it to authorize the execution,
delivery, and performance of this Agreement by Brooke. This Agreement
has been duly authorized, executed, and delivered by Brooke, is the
legal, valid and binding obligation of Brooke, and is enforceable as to
Brooke 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
Brooke for the execution, delivery or performance of this Agreement by
Brooke (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 Brooke 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 bylaws of Brooke, or
violate, result in a breach of, or conflict with any law, rule,
regulation order, judgment or decree binding on Brooke or to which any
of its operations, business, properties or assets are subject.
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<PAGE> 19
(c) Brooke 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 Brooke or (iii) in the case of Brooke, 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 Brooke if Brooke shall remain in existence,
of all the obligations of Brooke 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 Warrant Holders
with respect to the registration of such securities of such other
issuer.
Section 6.2 Additional Warrant Holder Covenants. Each Warrant
Holder represents and warrants (severally) to (in the case of Section 6.2(a)),
and agrees with (severally) (in the case of Section 6.2(b)), Brooke, that:
(a) Such Warrant Holder is duly organized, validly existing
and in good standing under the laws of its jurisdiction of
organization. Such Warrant Holder has all requisite power and authority
to execute, deliver and perform this Agreement. All necessary
proceedings of such Warrant Holder have been duly taken to authorize
the execution, delivery and performance of this Agreement by such
Warrant Holder. This Agreement has been duly authorized by such Warrant
Holder, executed and delivered by such Warrant Holder, is the legal,
valid and binding obligation of such Warrant Holder, and is enforceable
as to such Warrant 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 Warrant Holder for (i) the execution, delivery or performance of
this Agreement by such Warrant Holder or (ii) the sale of disposition
of the Registrable Securities by such Warrant Holder as contemplated by
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
Warrant Holder is a party, or to which any of such Warrant Holder's
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
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<PAGE> 20
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
Warrant Holder's certificate or articles of incorporation (or similar
controlling instrument) or bylaws (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 Warrant Holder or to which any such Warrant Holder's operations,
business, properties or assets are subject.
(b) Each Warrant Holder shall promptly furnish to Brooke in
writing, upon Brooke's reasonable request, any and all information as
to such Warrant 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 Brooke by or on behalf of such Warrant
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 be accurate, complete and
correct.
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 Brooke any Warrant Holder 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
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<PAGE> 21
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 Articles
2, 3, 4 and 5 (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 Brooke has obtained the written
consent of the holders of at least 66 2/3% in interest of the Registrable
Securities or Warrant Holders, as applicable. 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 the Warrant Holders that are selling
securities pursuant to a Registration Statement and that does not directly or
indirectly affect, impair, limit or compromise the rights of other Warrant
Holders may be given by the Warrant Holders selling at least 66 2/3% of the
Registrable Securities being sold by 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 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 Brooke, to 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, and (ii) if to the Warrant Holders, to the respective addresses
and telecopier numbers set forth in Exhibit A, with a copy to Apollo Advisors,
1999 Avenue of the Stars, Suite 1900, Los Angeles, California, 90067, attention:
Michael Weiner, telecopy (310) 201-4166, 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 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.
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<PAGE> 22
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 7.8, is not intended
to confer upon any Person other than the parties hereto and the Warrant Holders
and holders of Registrable Securities any rights or remedies hereunder. The
obligations of Brooke pursuant hereto shall be limited to those obligations of
Brooke expressly set forth herein.
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 Warrant Holder as follows: in
connection with the transfer of its Warrants or 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 Warrant Holder. 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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<PAGE> 23
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
"Brooke"
Brooke Group Ltd.,
a Delaware corporation
By: /s/ Richard J. Lampen
---------------------------------
Its: Executive Vice President
"Warrant Holders"
AIF II, L.P.
By: APOLLO ADVISORS, L.P.
Managing General Partner
By: APOLLO CAPITAL MANAGEMENT, INC.
General Partner
By: /s/ John J. Hannan
---------------------------------
Name: John J. Hannan
Title:
ARTEMIS AMERICA PARTNERSHIP
By: LION ADVISORS, L.P.
Attorney-in-Fact
By: LION CAPITAL MANAGEMENT, INC.
General Partner
By: /s/ John J. Hannan
---------------------------------
Name: John J. Hannan
Title:
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<PAGE> 24
EXHIBIT A
WARRANT HOLDERS
Artemis America Partnership
AIF II, L.P.
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<PAGE> 1
EXHIBIT 10.7
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT (this "Agreement") dated as of
March 2, 1998 among Brooke Group Ltd., a Delaware corporation ("Brooke"), and
the entities listed on Exhibit A attached hereto (individually, together with
transferees, assignees or other successors, and including any Warrant Holder
following exercise of its warrant, in it capacity as a holder of Registrable
Securities, a "Warrant Holder" and collectively the "Warrant Holders").
RECITALS
A. Brooke has granted Warrant Holders warrants to the
Registrable Securities in the amounts specified on Exhibit A;
B. Brooke and the Warrant Holders desire that Brooke use
its reasonable best efforts to file, by September 15, 1999, with the SEC a
Registration Statement to register the resale by the Warrant Holders of the
Registrable Securities.
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:
"Brooke" has the meaning set forth in the Preamble.
"Effectiveness Period" has the meaning set forth in
Section 2.2.1.
"Exchange Act" means the Securities Exchange Act of
1934.
"Initial Shelf Registration" has the meaning set forth
in Section 2.2.1.
"Losses" has the meaning set forth in Section 4.1.
"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.
<PAGE> 2
"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 shares of
common stock of Brooke, $0.10 par value per share, which are subject to that
certain Warrant, dated March 2, 1998, granted by Brooke to the Warrant Holder,
including such share of common stock at any time following exercise of such
Warrant, in whole or in part. However, such common stock will cease to be a
Registrable Security when it (i) is sold in an open market transaction or in an
underwritten public offering, (ii) is sold to any person other than an
"affiliate" of Brooke (as defined under the Regulations) pursuant to a
Registration Statement, (iii) unless the Warrant Holder is an affiliate, such
common stock 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 (provided, however, that if such Warrant Holder is an "affiliate", all
securities owned by it shall remain "Registrable Securities") or (iv) ceases to
be outstanding.
"Registration Statement" means any registration statement of
Brooke 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.
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<PAGE> 3
"Securities Act" means the Securities Act of 1933.
"Shelf Registration" has the meaning set forth in
Section 2.2.2.
"Subsequent Shelf Registration" has the meaning set
forth in Section 2.2.2.
"Underwritten registration" or "underwritten offering" means
a registration in which securities of Brooke are sold to one or more
underwriters or group or a syndicate of underwriters for offering to the
public.
"Warrant Holder" has the meaning set forth in the
Preamble.
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" 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.
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<PAGE> 4
ARTICLE 2
REGISTRATION OF REGISTRABLE SECURITIES UNDER SECURITIES ACT
Section 2.1 Required Registration of Registrable Securities.
Brooke 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. Prior
to September 15, 1999, Brooke shall prepare and file with the SEC a
Registration Statement for an offering to be made by the Warrant Holders on a
continuous basis under Rule 415 covering all the Registrable Securities (the
"Initial Shelf Registration"). The Initial Shelf Registration shall be on an
appropriate form permitting registration of all Registrable Securities for
resale by the Warrant Holders in the manner or manners reasonably designated by
them (including one or more underwritten offerings). Brooke shall cause the
Initial Shelf Registration to be declared effective under the Securities Act on
or before October 31, 1999 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 Warrant
Holder, (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 Brooke reasonably acceptable to the Warrant Holders, which opinion
shall be reasonably satisfactory in form, scope and substance to the Warrant
Holders, registration of the Registrable Securities is no longer required under
the Securities Act for the Warrant 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 Warrant Holders of Registrable Securities may
include any of its Registrable Securities in any Shelf Registration pursuant to
this Agreement unless and until such Warrant Holder furnishes to Brooke in
writing such information as Brooke may reasonably request pursuant to Section
6.2(b).
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, Brooke
shall use its reasonable best efforts to (i) obtain the prompt withdrawal of
any order
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<PAGE> 5
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," subject to
the last sentence of this Section 2.2.2) for an offering to be made by the
Warrant 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, Brooke 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 Warrant Holder of Registrable Securities acquired from another
Warrant Holder, the obligations of 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.
Subject to Section 2.3.1(q), Brooke 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 Warrant Holders or by any
underwriter of the Registrable Securities.
Section 2.3 Registration Procedures.
Section 2.3.1 Shelf Registration. In connection
with a Shelf Registration, Brooke 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
Warrant Holders, and pursuant thereto Brooke shall:
(a) Filing of Registration Statement. Before filing any
Registration Statement or Prospectus or any amendments or supplements
thereto, furnish to and afford the Warrant Holders of the Registrable
Securities covered by such
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<PAGE> 6
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 Secu rities covered by such
Registration Statement as amended or by such Prospectus as
supplemented.
(c) Notice. Notify the Warrant Holders 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 Warrant
Holder 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 incor porated 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 Brooke
or their rep resentatives 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 Brooke 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 Brooke
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
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<PAGE> 7
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 circumstances under which they were made, not misleading,
and (vi) of Brooke'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 Warrant Holders 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 Prospectus. Deliver to the Warrant Holders
owning Registrable Securities, 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 Brooke
hereby consents to the use of each such Prospectus and
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<PAGE> 8
Preliminary Prospectus and each amendment or supplement thereto by
each of the selling Warrant 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 the selling Warrant Holders
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 Warrant 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, however,
that Brooke 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 selling Warrant Holders
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
Warrant Holders may reasonably request.
(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 Warrant
Holders thereof or the underwriters, if any, to consummate the
disposition of
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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 Warrant Holder's business,
in which case Brooke will cooperate in all reasonable respects with
the filing of such Registration Statements and the granting of such
approvals.
(k) Amendments and Supplements. Subject to Sections 2.3.1(a)
and 2.3.1(q), 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
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 Brooke 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 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 Brooke 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 Brooke and updates thereof (which
counsel and opinions shall be reasonably satisfactory to the managing
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underwriters and the selling Warrant 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 Warrant Holders) from the independent certified public
accountants of Brooke (and, if necessary, any other independent
certified public accountants of any subsidiary of Brooke or of any
business acquired by Brooke 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.
(n) Financial Records, Etc.. Make available for inspection by
any Warrant Holder, any underwriter participating in any such
disposition of Registrable Securities, if any, and any attorney,
accountant or other agent retained by any such selling Warrant 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 Brooke
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
Brooke and its subsidiaries to supply all information reasonably
requested by any such Inspectors in connection with such Registration
Statement. Records which Brooke 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
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subject to applicable law, each selling Warrant 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 Brooke or its affiliates
unless and until such information is made generally available to the
public. Warrant 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 Warrant Holder further
agrees that it will, upon learning that disclosure of such Records is
sought in a court of competent jurisdiction, give notice to Brooke and
allow Brooke 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 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 Brooke
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) Postponement or Suspension of Shelf Registration.
Notwithstanding anything contained in this Section 2, Brooke may
postpone, for a period of not in excess of 30 days in the aggregate in
any twelve month period, taking any action with respect to or suspend
the Shelf Registration if, in the good faith opinion of Brooke's board
of directors, effecting or continuing the Shelf Registration would
adversely affect a material financing, acquisition, disposition of
assets or stock, merger or other comparable transaction or would
require Brooke to make public disclosure of information the
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public disclosure of which would have a material adverse effect upon
Brooke.
(r) Delivery of Opinion. Upon the filing of any Registration
Statement, deliver to the Warrant Holders an opinion or opinions of
outside counsel to Brooke (which counsel shall be reasonably
satisfactory to the Warrant Holders), to the effect that nothing has
come to the attention of such counsel that causes such counsel to
believe that such Registration Statement 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. Use its reasonable best efforts to
take all other steps necessary or advisable, requested by the Warrant
Holders, to effect the registration and distribution of the
Registrable Securities covered by the Registration Statement
contemplated hereby.
Section 2.3.2 Warrant Holder Covenants. In
addition to the covenants provided in Section 6.2, each Warrant Holder agrees
by acquisition of the Registrable Securities that, upon receipt of any notice
from Brooke of the happening of any event of the kind described in clause (ii),
(iv), (v) or (vi) of Section 2.3.1(c), such Warrant Holder shall forthwith
discontinue disposition of such Registrable Securities covered by such
Registration Statement or Prospectus until such Warrant 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 Brooke that the use of the
applicable Prospectus may be resumed, and has received copies of any amendments
or supplements thereto.
ARTICLE 3
REGISTRATION EXPENSES
All fees and expenses incident to the performance of or compliance
with this Agreement by Brooke shall be borne by Brooke, 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 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,
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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 Brooke, (iv) fees and disbursements of
all independent certified public accountants for Brooke (including the expenses
of any "cold comfort" letters required by or incident to such performance), (v)
Securities Act liability insurance, if Brooke so desires such insurance, (vi)
internal expenses of Brooke (including all salaries and expenses of officers
and employees of Brooke performing legal or accounting duties), (vii) the fees
and expenses incurred in connection with the listing of the securities to be
registered and any national securities exchange or quoted on the NASDAQ Stock
Market or the NASDAQ National Market pursuant to section 2.3.1(1), and (viii)
the fees and expenses of any Person, including special experts, retained by
Brooke in its sole discretion.
Each selling Warrant Holder shall pay 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 Warrant Holder's account. Brooke shall pay all fees and disbursements of
legal counsel for such selling Warrant Holder, up to a maximum of $50,000.
ARTICLE 4
INDEMNIFICATION
Section 4.1 Indemnification by Brooke. Brooke shall, without
limitation as to time, indemnify and hold harmless, to the fullest extent
permitted by law, each Warrant Holder and its affiliates and any investment
funds managed thereby and their respective partners, officers, directors,
agents and employees, each Person who controls each such Warrant 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 arising out of or
based upon, in the case of the Registration Statement or any amendments
thereto, any omission or
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<PAGE> 14
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 Brooke 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 Warrant 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
Brooke pursuant to Section 2.3.1(g), or (iii) to the extent such Losses result
from the sale of Registrable Securities by such Warrant Holder or 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 Brooke pursuant to Section 2.3.1(k) and
provided to such Warrant Holder or such underwriter pursuant to Section
2.3.1(g), after Brooke shall have notified such Warrant 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 4.2 Indemnification by Warrant Holder. In connection
with any Registration Statement in which a Warrant Holder is participating,
such Warrant Holder shall, without limitation as to time, indemnify and hold
harmless, to the fullest extent permitted by law, Brooke and its directors,
officers, agents and employees, each Person who controls Brooke (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 thereon, 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
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<PAGE> 15
necessary to make the statements therein, in the light of the circumstances
under 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 Brooke by such Warrant Holder expressly for
use therein by notice referring to this Section 4.2. In no event shall the
liability of any selling Warrant Holder hereunder be, or be claimed by Brooke
to be greater in amount than the dollar amount of the proceeds actually
received by such Warrant Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
Section 4.3 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 indemnified party
determines that one 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
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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 4.4 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 hand, in connection with the actions, statements or
omissions that resulted in such Losses as well an 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.
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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 Warrant 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 4.5 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 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 Warrant Holders holding at least 66 2/3% in interest of the applicable
Registrable Securities with the consent of Brooke (not to be unreasonably
withheld or delayed).
ARTICLE 6
REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 6.1 Representations and Warranties. Brooke
represents and warrants to, and agrees with, the Warrant Holders
that:
(a) Subject to the terms of Section 2.3.1(q), during the
Effectiveness Period, the Registration Statement (and
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any post-effective amendment thereto) and the Prospectus (as amended
or as supplemented if Brooke 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 6.1(a) with respect to statements or omissions made in
reliance upon and in conformity with written information furnished to
Brooke pursuant to Section 6.2(b) by a Warrant Holder or on behalf of
a Warrant 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) Brooke has all requisite power and authority to execute,
deliver and perform this Agreement. All necessary corporate
proceedings of Brooke have been duly taken by it to authorize the
execution, delivery, and performance of this Agreement by Brooke. This
Agreement has been duly authorized, executed, and delivered by Brooke,
is the legal, valid and binding obligation of Brooke, and is
enforceable as to Brooke 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 Brooke for the execution, delivery or performance of this
Agreement by Brooke (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,
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instrument, lease, license, arrangement or understanding to which
Brooke 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 bylaws of Brooke, or violate, result in
a breach of, or conflict with any law, rule, regulation order,
judgment or decree binding on Brooke or to which any of its
operations, business, properties or assets are subject.
(c) Brooke 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 Brooke or (iii) in the case of Brooke, 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 Brooke if Brooke shall remain in existence,
of all the obligations of Brooke 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 Warrant Holders
with respect to the registration of such securities of such other
issuer.
Section 6.2 Additional Warrant Holder Covenants. Each Warrant
Holder represents and warrants (severally) to (in the case of Section 6.2(a)),
and agrees with (severally) (in the case of Section 6.2(b)), Brooke, that:
(a) Such Warrant Holder is duly organized, validly existing
and in good standing under the laws of its jurisdiction of
organization. Such Warrant Holder has all requisite power and
authority to execute, deliver and perform this Agreement. All
necessary proceedings of such Warrant Holder have been duly taken to
authorize the execution, delivery and performance of this Agreement by
such Warrant Holder. This Agreement has been duly authorized by such
Warrant Holder, executed and delivered by such Warrant Holder, is the
legal, valid and binding obligation of such Warrant Holder, and is
enforceable as to such Warrant Holder in accordance with its terms. No
consent, authorization, approval, order, license,
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<PAGE> 20
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 Warrant Holder for (i) the
execution, delivery or performance of this Agreement by such Warrant
Holder or (ii) the sale of disposition of the Registrable Securities
by such Warrant Holder as contemplated by 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 Warrant Holder is a party,
or to which any of such Warrant Holder's 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 such Warrant Holder's certificate or articles of
incorporation (or similar controlling instrument) or bylaws (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 Warrant Holder or to which any such
Warrant Holder's operations, business, properties or assets are
subject.
(b) Each Warrant Holder shall promptly furnish to Brooke in
writing, upon Brooke's reasonable request, any and all information as
to such Warrant 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 Brooke by or on behalf of such
Warrant 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 be accurate,
complete and correct.
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
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<PAGE> 21
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 Brooke any Warrant Holder 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
Articles 2, 3, 4 and 5 (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 Brooke has obtained the
written consent of the holders of at least 66 2/3% in interest of the
Registrable Securities or Warrant Holders, as applicable. 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 the Warrant
Holders that are selling securities pursuant to a Registration Statement and
that does not directly or indirectly affect, impair, limit or compromise the
rights of other Warrant Holders may be given by the Warrant Holders selling at
least 66 2/3% of the Registrable Securities being sold by 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 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 Brooke, to 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,
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<PAGE> 22
attention: Michael L. Hirschfeld, telecopy (212) 530-5219, and (ii) if to the
Warrant Holders, to the respective addresses and telecopier numbers set forth
in Exhibit A, with a copy to Apollo Advisors, 1999 Avenue of the Stars, Suite
1900, Los Angeles, California, 90067, attention: Michael Weiner, telecopy (310)
201-4166, 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 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 7.8, is not intended
to confer upon any Person other than the parties hereto and the Warrant Holders
and holders of Registrable Securities any rights or remedies hereunder. The
obligations of Brooke pursuant hereto shall be limited to those obligations of
Brooke expressly set forth herein.
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
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<PAGE> 23
parties, except by a Warrant Holder as follows: in connection with the transfer
of its Warrants or 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 Warrant Holder. 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.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
"Brooke"
Brooke Group Ltd.,
a Delaware corporation
By: /s/ Richard J. Lampen
-----------------------------------------
Its: Executive Vice President
"Warrant Holders"
AIF II, L.P.
By: APOLLO ADVISORS, L.P.
Managing General Partner
By: APOLLO CAPITAL MANAGEMENT, INC.
General Partner
By: /s/ John J. Hannan
-------------------------------------
Name: John J. Hannan
Title:
ARTEMIS AMERICA PARTNERSHIP
By: LION ADVISORS, L.P.
Attorney-in-Fact
By: LION CAPITAL MANAGEMENT, INC.
General Partner
By: /s/ John J. Hannan
--------------------------------------
Name: John J. Hannan
Title:
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<PAGE> 24
EXHIBIT A
WARRANT HOLDERS
Artemis America Partnership
AIF II, L.P.
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<PAGE> 1
EXHIBIT 10.8
LIMITED RECOURSE GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT (this "Guarantee"), dated as of
March 2, 1998 is made by Brooke (Overseas) Ltd., a Delaware corporation (the
"Guarantor"), for the equal and ratable benefit of AIF II, L.P., a Delaware
limited partnership ("AIF II") and ARTEMIS AMERICA PARTNERSHIP, a Delaware
limited partnership (as successor to Artemis America, LLC, a Delaware limited
liability company) (collectively, with AIF II, the "Participating Holders").
R E C I T A L S:
WHEREAS, BGLS Inc., a Delaware corporation (the "Company"),
has entered into the Indenture (as amended, modified, supplemented and in
effect from time to time, the "Indenture") dated as of January 1, 1996 between
the Company and State Street Bank and Trust Company (as successor to Fleet
National Bank of Massachusetts), as trustee (the "Trustee");
WHEREAS, pursuant to the terms and conditions of the
Standstill Agreement dated as of March 2, 1998 between the Company and the
Participating Holders (the "Standstill Agreement"), the Participating Holders
have agreed to defer the payment of interest due to the Participating Holders
under the Indenture until the occurrence of a Termination Event (as defined in
the Standstill Agreement);
WHEREAS, it is a condition to the Participating Holders
entering into the Standstill Agreement that the Guarantor shall have (i)
pledged certain securities to the Participating Holders pursuant to Pledge
Agreements dated as of the date of this Guarantee (the "Pledge Agreements") and
(ii) guaranteed for the benefit of the Participating Holders the Company's
obligations under the Series B Senior Secured Notes (as defined below); and
WHEREAS, the Guarantor, expects to receive substantial
benefits from the performance of the Standstill Agreement;
NOW, THEREFORE, to induce the Participating Holders to enter
into the Standstill Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Guarantor has
agreed to guarantee the Guaranteed Obligations (as defined below) upon the
terms and conditions of this Guarantee. Accordingly, the parties hereto agree
as follows:
<PAGE> 2
Section 1. Definitions and Interpretation.
1.1 Definitions. Unless otherwise defined, all
capitalized terms used in this Guarantee that are defined in the Indenture
(including those terms incorporated therein by reference) shall have the
respective meanings set forth in the Indenture. In addition, the following
terms shall have the following meanings under this Guarantee:
"Guaranteed Obligations" means any and all
obligations of the Company for the payment of all amounts, liabilities
and indebtedness (whether for principal, interest (including interest
at the post-default rate, fees, charges, indemnification or otherwise)
now or in the future owed to the Participating Holders under the
Indenture, the Series B Senior Secured Notes and the Standstill
Agreement and any extensions, renewals or modifications of any of the
foregoing, and for the performance by the Company of its agreements,
covenants and undertakings, under or in respect of the Indenture, the
Series B Senior Secured Notes and the Standstill Agreement and any
renewals, extensions or modifications of any of the foregoing.
1.2 Interpretation. In this Guarantee, unless otherwise
indicated, the singular includes the plural and plural the singular; words
importing any gender include the other gender; references to statutes or
regulations are to be construed as including all statutory or regulatory
provisions consolidating, amending or replacing the statute or regulation
referred to; references to "writing" include printing, typing, lithography and
other means of reproducing words in a tangible visible form; the words
"including", "includes" and "include" shall be deemed to be followed by the
words "without limitation"; references to articles, sections (or subdivisions
of sections), exhibits, annexes or schedules are to this Guarantee; references
to agreements and other contractual instruments shall be deemed to include all
subsequent amendments, extensions and other modifications to such instruments
(without, however, limiting any prohibition on any such amendments, extensions
or modifications by the terms of this Guarantee); and references to Persons
include their respective permitted successors and assigns and, in the case of
Governmental Persons, Persons succeeding to their respective functions and
capacities.
Section 2. The Guarantee.
2.1 The Guarantee. The Guarantor hereby guarantees to
each of the Participating Holders the prompt payment in full when due (whether
at stated maturity, by acceleration or otherwise) of the Guaranteed
Obligations. The Guarantor hereby further agrees that if the Company shall fail
to pay in full when due (whether at stated maturity, by acceleration or
otherwise) any of the Guaranteed Obligations, the Guarantor will promptly pay
the same, without any demand or notice whatsoever, and that in the case of any
extension of time of payment or renewal of any of the Guaranteed Obligations,
the same will be promptly paid in full when due (whether at extended maturity,
by acceleration or otherwise) in accordance with the terms of such extension or
renewal.
LIMITED RECOURSE GUARANTEE
- 2 -
<PAGE> 3
2.2 Obligations Unconditional. The obligations of the
Guarantor under Section 2.1 are absolute and unconditional irrespective of the
value, genuineness, validity, regularity or enforceability of the Indenture,
the Series B Senior Secured Notes or any other agreement or instrument referred
to herein or therein, or any substitution, release or exchange of any other
guarantee of or security for any of the Guaranteed Obligations, and, to the
fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever that might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor, it being the intent of this
Section 2.2 that the obligations of the Guarantor hereunder shall be absolute
and unconditional under any and all circumstances. Without limiting the
generality of the foregoing, it is agreed that the occurrence of any one or
more of the following shall not alter or impair the liability of the Guarantor
hereunder which shall remain absolute and unconditional as described above:
1. at any time or from time to time, without notice
to the Guarantor, the time for any performance of or compliance with
any of the Guaranteed Obligations shall be extended, or such
performance or compliance shall be waived;
2. any of the acts mentioned in any of the
provisions of the Indenture, the Series B Senior Secured Notes, the
Standstill Agreement or any other agreement or instrument referred to
herein or therein shall be done or omitted;
3. the maturity of any of the Guaranteed Obligations
shall be accelerated, or any of the Guaranteed Obligations shall be
modified, supplemented or amended in any respect, or any right under
the Indenture, the Series B Senior Secured Notes, the Standstill
Agreement or any other agreement or instrument referred to herein or
therein shall be waived or any other guarantee of any of the
Guaranteed Obligations or any security therefor shall be released or
exchanged in whole or in part or otherwise dealt with; or
4. any lien or security interest granted to, or in
favor of, the Participating Holders as security for any of the
Guaranteed Obligations (including, without limitation, those granted
under the Pledge Agreement) shall fail to be perfected.
The Guarantor hereby expressly waives diligence, presentment, demand of
payment, protest and all notices whatsoever, and any requirement that the
Participating Holders exhaust any right, power or remedy or proceed against the
Company under the Indenture, the Series B Senior Secured Notes, the Standstill
Agreement or any other agreement or instrument referred to herein or therein,
or against any other Person under any other guarantee of, or security for, any
of the Guaranteed Obligations.
2.3 Reinstatement. The obligations of the Guarantor
under this Section 2 shall be automatically reinstated if and to the extent
that for any reason any payment by or on behalf of the Company in respect of
the Guaranteed Obligations is rescinded or must be otherwise restored by any
holder of any of the Guaranteed Obligations, whether as a result of any
proceedings in
LIMITED RECOURSE GUARANTEE
- 3 -
<PAGE> 4
bankruptcy or reorganization or otherwise, and the Guarantor agrees that it
will indemnify each of the Participating Holders on demand for all reasonable
costs and expenses (including, fees of counsel) incurred by each of the
Participating Holders in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law.
2.4 Subrogation. Until the Guaranteed Obligations have
been satisfied in full, the Guarantor hereby waives all rights of subrogation
or contribution, whether arising by contract or operation of law (including any
such right arising under the Federal Bankruptcy Code) or otherwise by reason of
any payment by it pursuant to the provisions of this Section 2.
2.5 Remedies. The Guarantor agrees that, as between the
Guarantor and each of the Participating Holders, the obligations of the Company
under the Indenture and the Series B Senior Secured Notes (including the
obligations under the Standstill Agreement) may be declared to be forthwith due
and payable as provided in Section 7.02 of the Indenture (and shall be deemed
to have become automatically due and payable in the circumstances provided in
said Section 7.02) and Section 7 of the Termination Agreement for purposes of
Section 2.1 hereof notwithstanding any stay, injunction or other prohibition
preventing such declaration (or such obligations from becoming automatically
due and payable) as against the Company and that, in the event of such
declaration (or such obligations being deemed to have become automatically due
and payable), such obligations (whether or not due and payable by the Company)
shall forthwith become due and payable by the Guarantor for purposes of said
Section 2.1.
2.6 Separate Action. The Participating Holders may bring
and prosecute a separate action or actions against the Guarantor whether or not
the Company, any other guarantor or any other Person is joined in any such
action or a separate action or actions are brought against the Company, any
other guarantor, any other Person, or any collateral for all or any part of the
Guaranteed Obligations. The obligations of the Guarantor under, and the
effectiveness of, this Guarantee are not conditioned upon the existence or
continuation of any other guarantee (including any letter of credit) of all or
any part of the Guaranteed Obligations.
2.7 Instrument for the Payment of Money; Post-Default
Interest. The Guarantor hereby acknowledges that the guarantee in this Section
2 constitutes an instrument for the payment of money, and consents and agrees
that each of the Participating Holders, at each Participating Holder's sole
option, in the event of a dispute by the Guarantor in the payment of any moneys
due hereunder, shall have the right to bring motion-action under New York CPLR
Section 3213. In addition, the Guarantor hereby agrees that in the event it
shall fail to pay in full any amount owing by it hereunder on the date upon
which the same shall become due (whether upon demand or otherwise), it shall be
obligated to pay interest at the post-default rate in respect of such amount
for each day during the period from and including the due date thereof to but
excluding the date the same shall be paid in full, such interest to be payable
upon demand of the Participating Holders.
LIMITED RECOURSE GUARANTEE
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<PAGE> 5
2.8 Continuing Guarantee. The guarantee in this Section
2 is a continuing guarantee, and shall apply to all Guaranteed Obligations
whenever arising.
Section 3. Representations and Warranties. The Guarantor
represents and warrants to each of the Participating Holders that:
3.1 Corporate Existence. The Guarantor is a corporation
duly organized and validly existing under the laws of the state of Delaware and
has all requisite corporate power, and has all material governmental licenses,
authorizations, consents and approvals necessary to own its assets and carry on
its business as now being or as proposed to be conducted.
3.2 No Breach. None of the execution and delivery of
this Guarantee, the consummation of the transactions herein contemplated or
compliance with the terms and provisions hereof will conflict with or result in
a breach of, or require any consent under, the charter or by-laws of the
Guarantor, or any applicable law or regulation, or any order, writ, injunction
or decree of any court or governmental authority or agency, or any agreement or
instrument to which the Guarantor or any of its Subsidiaries is a party or by
which any of them is bound or to which any of them is subject, or constitute a
default under any such agreement or instrument, or result in the creation or
imposition of any Lien upon any of the revenues or assets of the Guarantor or
any of its Subsidiaries pursuant to the terms of any such agreement or
instrument.
3.3 Corporate Action. The Guarantor has all necessary
corporate power and authority to execute, deliver and perform its obligations
under this Guarantee; the execution, delivery and performance by the Guarantor
of this Guarantee have been duly authorized by all necessary corporate action
on its part; and this Guarantee has been duly and validly executed and
delivered by the Guarantor and constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms.
3.4 Approvals. No authorizations, approvals or consents
of, and no filings or registrations with, any governmental or regulatory
authority or agency, or any securities exchange are necessary for the
execution, delivery or performance by the Guarantor of this Guarantee or for
the validity or enforceability hereof.
Section 4. Miscellaneous.
4.1 No Waiver. No failure on the part of any of the
Participating Holders 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 any of the
Participating Holders 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.
LIMITED RECOURSE GUARANTEE
- 5 -
<PAGE> 6
4.2 Notices. All notices, requests, consents and demands
hereunder shall be in writing and telecopied or delivered to the intended
recipient at the "Address for Notices" specified for the Company in the
Indenture or, as to either party, at such other address as shall be designated
by such party in a notice to the other party. Except as otherwise provided in
this Guarantee, all such communications shall be deemed to have been duly given
when transmitted by telecopier or personally delivered or, in the case of a
mailed notice, upon receipt, in each case given or addressed as aforesaid.
4.3 Expenses. The Guarantor agrees to reimburse each of
the Participating Holders for all reasonable costs and expenses of such
Participating Holder (including, the reasonable fees and expenses of legal
counsel) in connection with (a) any Event of Default and any enforcement or
collection proceeding resulting therefrom, including, all manner of
participation in or other involvement with (x) bankruptcy, insolvency,
receivership, foreclosure, winding up or liquidation proceedings, (y) judicial
or regulatory proceedings and (z) workout, restructuring or other negotiations
or proceedings (whether or not the workout, restructuring or transaction
contemplated thereby is consummated) and (b) the enforcement of this Section
4.3.
4.4 Amendments, Etc. The terms of this Guarantee may be
waived, altered or amended only by an instrument in writing duly executed by
the Guarantor and each of the Participating Holders. Any such amendment or
waiver shall be binding upon the Participating Holders, each holder of any of
the Guaranteed Obligations and the Guarantor.
4.5 Successors and Assigns. This Guarantee shall be
binding upon and inure to the benefit of the respective successors and assigns
of the Guarantor, the Participating Holders, and each holder of any of the
Guaranteed Obligations (provided, however, that the Guarantor shall not assign
or transfer its rights hereunder without the prior written consent of each of
the Participating Holders).
4.6 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 Guarantee.
4.7 Counterparts. This Guarantee 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 Guarantee
by signing any such counterpart.
4.8 Governing Law; Submission to Jurisdiction. This
Guarantee shall be governed by, and construed in accordance with, the law of
the State of New York. The Guarantor hereby submits to the nonexclusive
jurisdiction of the United States District Court for the Southern District of
New York and of the Supreme Court of the State of New York sitting in New York
County (including its Appellate Division), and of any other appellate court in
the State of New York, for the purposes of all legal proceedings arising out of
or relating to this Guarantee or the transactions contemplated hereby. The
Guarantor hereby irrevocably waives, to the fullest extent permitted by
applicable law, any objection that it may now or hereafter have to
LIMITED RECOURSE GUARANTEE
- 6 -
<PAGE> 7
the laying of the venue of any such proceeding brought in such a court and any
claim that any such proceeding brought in such a court has been brought in an
inconvenient forum.
4.9 Waiver of Jury Trial. EACH OF THE GUARANTOR AND
PARTICIPATING HOLDERS HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL
PROCEEDING ARISING OUT OF OR RELATING TO THIS GUARANTEE OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
4.10 Agents and Attorneys-in-Fact. The Participating
Holders 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.
4.11 Severability. If any provision hereof is invalid and
unenforceable in any jurisdiction, then, to the fullest extent permitted by
law, (a) the other provisions hereof shall remain in full force and effect in
such jurisdiction and shall be liberally construed in favor of the
Participating Holders in order to carry out the intentions of the parties
hereto as nearly as may be possible and (b) 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.
4.12 Limitation on Recourse. Notwithstanding anything to
the contrary contained in this Guarantee, recourse to the Guarantor under this
Guarantee shall be limited to the collateral granted pursuant to the Pledge
Agreements.
LIMITED RECOURSE GUARANTEE
- 7 -
<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have caused this
Guarantee to be duly executed and delivered as of the day and year first above
written.
BROOKE (OVERSEAS) LTD.
By /s/ Richard J. Lampen
---------------------------------
Name: Richard J. Lampen
Title: Executive Vice President
LIMITED RECOURSE GUARANTEE
- 8 -
<PAGE> 1
EXHIBIT 10.9
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "Agreement") dated as of
March 2, 1998, is made between Brooke (Overseas) Ltd. (the
"Pledgor") and AIF II, L.P. (the "Pledgee").
R E C I T A L S:
WHEREAS, BGLS Inc., a Delaware corporation (the "Company"),
has entered into the Indenture (as amended, modified, supplemented and in
effect from time to time, the "Indenture") dated as of January 1, 1996 between
the Company and State Street Bank and Trust Company (as successor to Fleet
National Bank of Massachusetts), as trustee (the "Trustee");
WHEREAS, pursuant to the terms and conditions of the
Standstill Agreement dated as of March 2, 1998 between the Company, the Pledgee
and Artemis American Partnership L.P. ("AAP", collectively with the Pledgee,
the "Participating Holders")(the "Standstill Agreement"), the Participating
Holders have agreed to defer the payment of interest due to the Parti cipating
Holders under the Indenture until the occurrence of a Termination Event (as
defined in the Standstill Agreement);
WHEREAS, the Issuer has elected pursuant to Section 8103 of
the Delaware Commercial Code to treat interests in the Issuer as securities
which may be perfected through possession of the security;
WHEREAS, it is a condition to the Participating Holders
entering into the Standstill Agreement that the Pledgor shall (i) pledge the
Collateral (as defined below) to the Pledgee, (ii) pledge certain securities to
AAP pursuant to a Pledge Agreement dated as of the date of this Agreement and
(iii) guarantee for the benefit of the Participating Holders the Guaranteed
Obligations (as defined in the Limited Recourse Guarantee); and
NOW, THEREFORE, to induce the Participating Holders to enter
into the Standstill Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the Pledgor has
agreed to pledge the Collateral upon the terms and conditions of this
Agreement. Accordingly, the parties hereto agree as follows:
AIF II Pledge Agreement
- 1 -
<PAGE> 2
Section 1. Definitions and Interpretation.
1.01 Certain Defined Terms. (a) Each capitalized term
used in this Agreement and not defined in this Agreement shall have the meaning
assigned to such term (whether directly or by reference to another agreement or
document) in the Indenture or the Limited Recourse Guarantee. The principles of
interpre tation set forth in Section 1.03 of the Indenture shall apply to this
Agreement. Unless otherwise defined in this Agreement or in the Indenture,
terms used in Article 9 of the Uniform Commercial Code (as defined below) are
used in this Agreement as defined in such Article 9.
(b) In addition, the following terms shall have the
meanings set forth below:
"Collateral" shall have the meaning assigned to that
term in Section 2.01.
"Equity Collateral" shall have the meaning assigned to
that term in Section 2.01(a).
"Equity Rights" shall have the meaning assigned to that
term in Section 2.01(a).
"Issuer" shall mean Western Tobacco Investments LLC, a
Delaware limited liability company.
"Limited Recourse Guarantee" shall mean the Limited Recourse
Guarantee dated as of March 2, 1998 between the Pledgor and the Participating
Holders.
"LLC Agreement" shall mean the Limited Liability Company
Agreement of Western Tobacco Investments LLC dated as of February 27, 1998
adopted and executed by the Issuer, the Pledgor and Western Realty Development
LLC.
"Pledged Equity" shall have the meaning assigned to
that term in Section 2.01(a).
"Secured Obligations" shall mean the Guaranteed Obligations
(as defined in the Limited Recourse Guarantee).
"Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect in from time to time in any applicable jurisdiction.
AIF II Pledge Agreement
- 2 -
<PAGE> 3
Section 2. Collateral.
2.01 Grant. As collateral security for the prompt payment
in full when due (whether at stated maturity, by acceleration or otherwise) and
timely performance of the Secured Obligations, the Pledgor hereby pledges and
grants to the Pledgee a security interest in all of the Pledgor's right, title
and interest in and to the following property, whether now owned or acquired in
the future by the Pledgor and whether now existing or in the future coming into
existence (collectively, the "Collateral"):
(a) a 28.20% membership interest in the Issuer together
with (i) the share certificates representing the same identified in Exhibit A
and (ii) the right, title and interest of the Pledgor with respect to such
28.20% membership interest in, to and under the LLC Agreement (collectively,
the "Pledged Equity"); and
(b) all shares, securities, moneys or property
representing a dividend on, or a distribution or return of capital in respect
of any of the Pledged Equity, resulting from a split-up, revision,
reclassification or other like change of any of the Pledged Equity or otherwise
received in exchange for any of the Pledged Equity and all subscriptions,
options, warrants or other rights of like nature (the "Equity Rights") issued
to the holders of, or otherwise in respect of, any of the Pledged Equity; and
(c) in the event of any consolidation or merger in which
the Issuer is not the surviving entity, all of the mem bership interest, or
other equity interests of the successor corporation or successor entity (unless
such successor entity is the Pledgor itself) formed by or resulting from such
consoli dation or merger (collectively, and together with the property
described in clauses (a) and (b) above, the "Equity Collateral"); and
(d) all proceeds and products in whatever form of all or
any part of the foregoing.
2.02 Perfection and Registration of Pledge. Concurrently
with the execution and delivery of this Agreement, the Pledgor shall (i)
deliver to the Pledgee all of the certifi cates identified in Exhibit A,
accompanied by undated certificate powers duly executed in blank and (ii) take
all such other actions as shall be necessary or as the Pledgee may reasonably
request to perfect and establish the priority of the Liens granted by this
Agreement.
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2.03 Preservation and Protection of Security Interests.
The Pledgor shall:
(a) upon the acquisition after the date of this
Agreement by the Pledgor of any Equity Collateral, promptly either (x) transfer
and deliver to the Pledgee all such Equity Collateral (together with, if
applicable, the certificates representing such Equity Collateral duly endorsed
in blank or accompanied by undated powers duly executed in blank or such
instruments of transfer as the Pledgee shall direct in its discretion to
effectuate the purposes of this Agreement) or (y) take such other action as the
Pledgee shall deem reasonably necessary or appropriate to perfect, and
establish the priority of, the Liens granted by this Agreement in such Equity
Collateral; and
(b) give, execute, deliver, file or record any and all
financing statements, notices, contracts, agreements or other instruments,
obtain any and all governmental approvals and take such steps as are reasonably
necessary to create, perfect, establish the priority of, or to preserve the
validity, per fection or priority of, the Liens granted by this Agreement or to
enable the Pledgee to exercise and enforce its rights, remedies, powers and
privileges under this Agreement with respect to such Liens, including causing
any or all of the Equity Collateral to be transferred of record into the name
of the Pledgee or its nominee (and the Pledgee agrees that if any Equity
Collateral is transferred into its name or the name of its nominee, the Pledgee
will thereafter promptly give to the Pledgee copies of any notices and
communications received by it with respect to the Equity Collateral pledged by
the Pledgor).
2.04 Attorney-in-Fact. Subject to the rights of the
Pledgor under Section 2.05, the Pledgee is hereby appointed the
attorney-in-fact of the Pledgor for the purpose of carrying out the provisions
of this Agreement and taking any action and exe cuting any instruments as are
reasonably necessary to accomplish the purposes of this Agreement, to preserve
the validity, per fection and priority of the Liens granted by this Agreement
and, following any Termination Event, to exercise its rights, remedies, powers
and privileges under this Agreement. This appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, the Pledgee shall be entitled under this Agreement upon the
occurrence and continuation of any Termination Event (i) to ask, demand,
collect, sue for, recover, receive and give receipt and discharge for amounts
due and to become due under and in respect of all or any part of the
Collateral; (ii) to receive, endorse and collect any drafts, instruments,
documents and chattel paper in connection with clause (i) above; (iii) to file
any claims or
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take any action or proceeding as is reasonably necessary for the collection of
all or any part of the Collateral; and (iv) to execute, in connection with any
sale or disposition of the Collateral under Section 5, any endorsements,
assignments, bills of sale or other instruments of conveyance or transfer with
respect to all or any part of the Collateral.
2.05 Special Provisions Relating to Equity Collateral.
(a) So long as no Termination Event shall have occurred
and be continuing, the Pledgor shall have the right to exercise all voting,
consensual and other powers of ownership pertaining to the Equity Collateral
for all purposes not inconsistent with the terms of this Agreement; provided
that the Pledgor agrees that it will not vote the Equity Collateral in any
manner that is inconsistent with the terms of this Agreement; and the Pledgee
shall, at the Pledgor's expense, execute and deliver to the Pledgor or cause to
be executed and delivered to the Pledgor all such proxies, powers of attorney,
dividend or distribution and other orders and other instruments, without
recourse, as the Pledgor may reasonably request for the purpose of enabling the
Pledgor to exercise the rights and powers which it is entitled to exercise
pursuant to this Section 2.05(a).
(b) So long as no Termination Event shall have occurred
and be continuing, the Pledgor shall be entitled to receive and retain any
dividends or other distributions on the Equity Collateral.
(c) If any Termination Event shall have occurred and be
continuing, and whether or not the Pledgee exercises any available right to
declare any Secured Obligation due and payable or seeks or pursues any other
right, remedy, power or privilege available to it under applicable law or this
Agreement, all dividends and other distributions on the Equity Collateral shall
be paid directly to the Pledgee as part of the Equity Collateral, subject to
the terms of this Agreement, and, if the Pledgee shall so request, the Pledgor
agrees to execute and deliver to the Pledgee appropriate additional dividend,
distribution and other orders and instruments to that end; provided that if
such Termination Event is cured or rescinded, any such dividend or distribution
paid to the Pledgee prior to such cure shall, upon request of the Pledgor
(except to the extent applied to the Secured Obligations), be returned by the
Pledgee to the Pledgor.
2.06 Rights and Obligations.
(a) No reference in this Agreement to proceeds or to the
sale or other disposition of Collateral shall authorize the
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<PAGE> 6
Pledgor to sell or otherwise dispose of any Collateral except to the extent
otherwise expressly permitted by the terms of this Agreement.
(b) The Pledgee shall not be required to take steps
necessary to preserve any rights against prior parties to any part of the
Collateral.
(c) The Pledgor shall remain liable to perform its
duties and obligations under the LLC Agreement in accordance with its terms to
the same extent as if this Agreement had not been executed and delivered. The
exercise by the Pledgee of any right, remedy, power or privilege in respect of
this Agreement shall not release the Pledgor from any of its duties and obli
gations under the LLC Agreement. The Pledgee shall have no duty, obligation or
liability under the LLC Agreement by reason of this Agreement.
2.07 Termination. When all Secured Obligations shall have
been satisfied in full, this Agreement shall terminate, and the Pledgee 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 of the Collateral, to or on the order
of the Pledgor.
Section 3. Representations and Warranties. As of the date of
this Agreement, the Pledgor represents and warrants to the Pledgee as follows:
3.01 Title. The Pledgor is the sole beneficial owner of
the Collateral in which it purports to grant a Lien pursuant to this Agreement,
and such Collateral is free and clear of all Liens (and, with respect to the
Equity Collateral, of any Equity Right in favor of any other Person). The Liens
granted by this Agreement in favor of the Pledgee have attached and constitute
a perfected security interest in all of such Collateral prior to all other
Liens.
3.02 Pledged Equity.
(a) The Pledged Equity evidenced by the certificates
identified in Exhibit A is duly authorized, validly existing, fully paid and
nonassessable, and none of such Pledged Equity is subject to any contractual
restriction, or any restriction under the organizational documents of the
Issuer of such Pledged Equity, upon the transfer of such Pledged Equity (except
for any such restriction contained in this Agreement).
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<PAGE> 7
(b) The Equity Collateral constitutes 28.20% of the
total number of membership interests or shares of each class of capital stock,
as applicable, of the Issuer currently outstan ding. The attached Exhibit A
correctly identifies, as of the date of this Agreement, the membership
interests comprising such Pledged Equity and the respective percentage interest
in the Issuer as a whole. All such membership interests or shares are duly
authorized, validly issued, fully paid and nonassessable and will be free of
any contractual restriction or any restriction under the charter or bylaws of
the Issuer of the Equity Colla teral, upon the transfer of the Equity
Collateral (except for any such restriction contained in this Agreement).
Section 4. Covenants.
4.01 Books and Records. The Pledgor shall:
(a) keep full and accurate books and records relating to
the Collateral and stamp or otherwise mark such books and records in such
manner as the Pledgee may reasonably require in order to reflect the Liens
granted by this Agreement; and
(b) permit representatives of the Pledgee, upon
reasonable notice, at any time during normal business hours to inspect and make
abstracts from its books and records pertaining to the Collateral, permit
representatives of the Pledgee to be present at the Pledgor'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
Pledgor with respect to the Collateral, all in such manner as the Pledgee may
reasonably request.
4.02 Removals, Etc. Without at least 30 days' prior
written notice to the Pledgee, the Pledgor 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, other than at the address initially
indicated for notices to it under Section 6(c) or (ii) change its corporate
name, or the name under which it does business, from the name shown on the
signature pages to this Agreement.
4.03 Sales and Other Liens. Except as otherwise permitted
under the Indenture, the Pledgor shall not sell, transfer or otherwise dispose
of all or any part of the Collateral, create, incur, assume or suffer to exist
any Lien upon all or any part of the Collateral or file or suffer to be on file
or authorize to be filed, in any jurisdiction, any financing statement or like
instrument with respect to all or any part of the Collateral in which the
Pledgee is not named as the sole secured party.
AIF II Pledge Agreement
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<PAGE> 8
4.04 Further Assurances. The Pledgor agrees that, from
time to time upon the written request of the Pledgee, the Pledgor will execute
and deliver such further documents and do such other acts and things as the
Pledgee may reasonably request in order fully to effect the purposes of this
Agreement.
4.05 Dilution. The Pledgor shall cause the Equity
Collateral to constitute at all times 28.2% of the total equity interests in
the Issuer. The Pledgor shall cause all such interests to be duly authorized,
validly issued, fully paid and nonassessable and to be free of any contractual
restriction or any restriction under the Limited Liability Company Agreement,
upon the transfer of such Equity Collateral.
4.06 Financial Reports. Within 45 days after the close of
the first three quarterly accounting periods in each fiscal year of the
Pledgor, the Pledgor shall deliver to the Pledgee, the unaudited financial
statements of the Pledgor and the Issurer. Within 120 days after the close of
each fiscal year, the Pledgor shall deliver to the Pledgee, the financial
statements of the Pledgor and the Issuer, certified by an independent certified
public accountant of recognized national standing. The Pledgor represents and
warrants that all such financial statements shall be true and correct in all
material respects.
Section 5. Remedies.
5.01 Events of Default, Etc. If a Termination Event
shall have occurred and be continuing:
(a) the Pledgee in its discretion may, in its name or in
the name of the Pledgor 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 all or any part of the Collateral, but shall be under no
obligation to do so;
(b) the Pledgee in its discretion may, upon ten business
days' prior written notice to the Pledgor of the time and place and subject to
the terms of the LLC Agreement, with respect to all or any part of the
Collateral which shall then be or shall thereafter come into the possession,
custody or control of the Pledgee or its agents, sell, lease or otherwise
dispose of all or any part of such Collateral, at such place or places as the
Pledgee deems best, for cash, for credit or for future delivery (without
thereby assuming any credit risk) and at public or private sale, without demand
of performance or notice of intention to effect any such disposition or of time
or place of any such sale (except such notice as is required above or by
applicable statute and cannot be waived), and the Pledgee or any
AIF II Pledge Agreement
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<PAGE> 9
other Person may be the purchaser, lessee 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 Pledgor, any such demand, notice
and right or equity being hereby expressly waived and released. The Pledgee
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; and
(c) the Pledgee shall have, and in its discretion may
exercise, all of the rights, remedies, powers and privileges with respect to
the Collateral of a secured party under the Uni form Commercial Code (whether
or not the Uniform Commercial Code is in effect in the jurisdiction where such
rights, remedies, powers and privileges are asserted) and such additional
rights, remedies, powers and privileges to which a secured party is entitled
under the laws in effect in any jurisdiction where any rights, remedies, powers
and privileges in respect of this Agreement or the Collateral may be asserted,
including the right, to the maximum extent permitted by law (subject to the
terms of the LLC Agreement), to exercise all voting, consensual and other
powers of ownership pertaining to the Collateral as if the Pledgee was the sole
and absolute owner of the Collateral (and the Pledgor agrees to take all such
action as may be appropriate to give effect to such right).
The proceeds of, and other realization upon, the Collateral by virtue of the
exercise of remedies under this Section 5.01 shall be applied in accordance
with Section 5.04.
5.02 Limited Recourse. Notwithstanding anything to the
contrary in this Agreement, the Limited Recourse Guarantee, the Standstill
Agreement, the Indenture or otherwise, the secur ity interest granted herein
secures a limited recourse obligation and recourse for the Secured Obligations
is expressly limited solely to the Pledgee's interest in the Collateral.
5.03 Private Sale.
(a) The Pledgee shall incur no liability as a result of
the sale, lease or other disposition of all or any part of the Collateral at
any private sale pursuant to Section 5.01 conducted in a commercially
reasonable manner. The Pledgor hereby waives any claims against the Pledgee
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 which might have been
AIF II Pledge Agreement
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<PAGE> 10
obtained at a public sale or was less than the aggregate amount of the Secured
Obligations, even if the Pledgee accepts the first offer received and does not
offer the Collateral to more than one offeree.
(b) The Pledgor recognizes that, by reason of certain
prohibitions contained in the Securities Act of 1933 and applicable state
securities laws, the Pledgee may be compelled, with respect to any sale of all
or any part of the Collateral, to limit purchasers to those who will agree,
among other things, to acquire the Collateral for their own account, for
investment and not with a view to distribution or resale. The Pledgor acknow
ledges that any such private sales may be at prices and on terms less favorable
to the Pledgee 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 Pledgee 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 Issuer of the Collateral to register it for public
sale.
1.054 Application of Proceeds. Except as otherwise
expressly provided in this Agreement, the proceeds of, or other realization
upon, all or any part of the Collateral by virtue of the exercise of remedies
under Section 5.01, and any other cash at the time held by the Pledgee under
this Section 5, shall be applied by the Pledgee:
First, to the payment of the reasonable costs and expenses of
such exercise of remedies, including reasonable out-of-pocket costs and
expenses of the Pledgee and the reasonable fees and expenses of its counsel;
Next, to the payment in full of the remaining Secured
Obligations then due and owing; and
Finally, to the Pledgor, or its respective 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 property received under any
bankruptcy, reorganization or other similar proceeding as to the Pledgor or any
issuer of, or account debtor or other obligor on, any of the Collateral.
AIF II Pledge Agreement
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<PAGE> 11
Section 6. Miscellaneous.
(a) No Waiver. No failure on the part of the Pledgee to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, remedy, power or privilege under this Agreement shall operate as a
waiver of such right, remedy, power or privilege, nor shall any single or
partial exercise of any right, remedy, power or privilege under this Agreement
preclude any other or further exercise of any such right, remedy, power or
privilege or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges provided in this Agreement are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
(b) Amendments, Etc. Any provision of this Agreement may
be modified, supplemented or waived only by an instrument in writing duly
executed by the Pledgor and the Pledgee. Any such modification, supplement or
waiver shall be for such period and subject to such conditions as shall be
specified in the instrument effecting the same and shall be binding upon the
Pledgee and the Pledgor, and any such waiver shall be effective only in the
specific instance and for the purposes for which given.
(c) Addresses for Notices. All notices and other
communications required or permitted to be given or made under this Agreement
shall be given or made by mail, overnight courier or facsimile (or, unless such
notice is specifically required to be given in writing, by telephone, confirmed
in writing by fac simile by the close of business on the day notice is given)
and faxed, mailed certified or registered (return receipt requested) or sent by
overnight courier, or personally delivered (or tele phoned, as the case may be)
at the address specified below or at such other address as shall be designated
in a notice in writing.
If to the Pledgee:
AIF, L.P.
c/o Apollo Advisors, L.P.
1999 Avenue of the Stars
Suite 1900
Los Angeles, California 90067
Facsimile No.: (310) 201-4166
Attention: Michael D. Weiner
AIF II Pledge Agreement
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<PAGE> 12
With a copy to:
Sidley & Austin
875 Third Avenue
New York, New York 10022
Facsimile No.: (212) 906-2021
Attention: Daniel G. Kelly, Jr.
If to the Pledgor:
Brooke (Overseas) Ltd.
100 S.E. Second Street, 32nd Floor
Miami, Florida 33131
Telephone No.: (305) 579-8000
Facsimile No.: (305) 579-8009
Attention: Richard J. Lampen, Esq.
With a copy to:
Milbank, Tweed, Hadley & McCloy
601 S. Figueroa Street
30th Floor
Los Angeles, California 90017
Telephone No.: (213) 892-4408
Facsimile No.: (213) 629-5063
Attention: Eric R. Reimer
(d) Captions. The captions and section headings
appearing in this Agreement are included solely for convenience of reference
and are not intended to affect the interpretation of any provision of this
Agreement.
(e) Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such pro hibition or
unenforceability without invalidating the remaining provisions of this
Agreement, and any such prohibition or unen forceability in any jurisdiction
shall not invalidate or render unenforceable such provision in any other
jurisdiction.
(f) Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties to this Agreement may execute this
Agreement by signing any such counterpart.
Section 7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE
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STATE OF NEW YORK APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THAT
STATE.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties to this Agreement have caused
this Agreement to be duly executed as of the day and year first above written.
BROOKE (OVERSEAS) LTD.
By: /s/ Richard J. Lampen
-----------------------------------
Name: Richard J. Lampen
Title: Executive Vice President
AIF II, L.P.
By: /s/ John J. Hannan
-----------------------------------
Name: John J. Hannan
Title:
AIF II Pledge Agreement
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<PAGE> 15
EXHIBIT A
PLEDGED CERTIFICATES
<TABLE>
<CAPTION>
Member Membership Interest Certificates
------ ------------------- ------------
<S> <C> <C>
Brooke (Overseas) Ltd. 28.20% 001
</TABLE>
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<PAGE> 1
EXHIBIT 10.10
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "Agreement") dated as of March 2,
1998, is made between Brooke (Overseas) Ltd. (the "Pledgor") and Artemis
America Partnership, a Delaware partnership (the "Pledgee").
R E C I T A L S:
WHEREAS, BGLS Inc., a Delaware corporation (the "Company"),
has entered into the Indenture (as amended, modified, supplemented and in
effect from time to time, the "Indenture") dated as of January 1, 1996 between
the Company and State Street Bank and Trust Company (as successor to Fleet
National Bank of Massachusetts), as trustee (the "Trustee");
WHEREAS, pursuant to the terms and conditions of the
Standstill Agreement dated as of March 2, 1998 between the Company, the Pledgee
and AIF II, L.P. a Delaware limited partnership ("AIF", collectively with the
Pledgee, the "Participating Holders")(the "Standstill Agreement"), the
Participating Holders have agreed to defer the payment of interest due to the
Participating Holders under the Indenture until the occurrence of a Termination
Event (as defined in the Standstill Agreement);
WHEREAS, the Issuer has elected pursuant to Section 8103 of
the Delaware Commercial Code to treat interests in the Issuer as securities
which may be perfected through possession of the security;
WHEREAS, it is a condition to the Participating Holders
entering into the Standstill Agreement that the Pledgor shall (i) pledge the
Collateral (as defined below) to the Pledgee, (ii) pledge certain securities to
AAP pursuant to a Pledge Agreement dated as of the date of this Agreement and
(iii) guarantee for the benefit of the Participating Holders the Guaranteed
Obligations (as defined in the Limited Recourse Guarantee); and
NOW, THEREFORE, to induce the Participating Holders to enter
into the Standstill Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which are
Artemis Pledge Agreement
<PAGE> 2
hereby acknowledged, the Pledgor has agreed to pledge the Collateral upon the
terms and conditions of this Agreement. Accordingly, the parties hereto agree
as follows:
Section 1. Definitions and Interpretation.
1.01 Certain Defined Terms. (a) Each capitalized term
used in this Agreement and not defined in this Agreement shall have the meaning
assigned to such term (whether directly or by reference to another agreement or
document) in the Indenture or the Limited Recourse Guarantee. The principles of
interpretation set forth in Section 1.03 of the Indenture shall apply to this
Agreement. Unless otherwise defined in this Agreement or in the Indenture,
terms used in Article 9 of the Uniform Commercial Code (as defined below) are
used in this Agreement as defined in such Article 9.
(b) In addition, the following terms shall have the
meanings set forth below:
"Collateral" shall have the meaning assigned to that
term in Section 2.01.
"Equity Collateral" shall have the meaning assigned to that
term in Section 2.01(a).
"Equity Rights" shall have the meaning assigned to that
term in Section 2.01(a).
"Issuer" shall mean Western Tobacco Investments LLC, a
Delaware limited liability company.
"Limited Recourse Guarantee" shall mean the Limited Recourse
Guarantee dated as of March 2, 1998 between the Pledgor and the Participating
Holders.
"LLC Agreement" shall mean the Limited Liability Company
Agreement of Western Tobacco Investments LLC dated as of February 27, 1998
adopted and executed by the Issuer, the Pledgor and Western Realty Development
LLC.
"Pledged Equity" shall have the meaning assigned to
that term in Section 2.01(a).
"Secured Obligations" shall mean the Guaranteed Obligations
(as defined in the Limited Recourse Guarantee).
Artemis Pledge Agreement
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<PAGE> 3
"Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect in from time to time in any applicable jurisdiction.
Section 2. Collateral.
2.01 Grant. As collateral security for the prompt payment
in full when due (whether at stated maturity, by acceleration or otherwise) and
timely performance of the Secured Obligations, the Pledgor hereby pledges and
grants to the Pledgee a security interest in all of the Pledgor's right, title
and interest in and to the following property, whether now owned or acquired in
the future by the Pledgor and whether now existing or in the future coming into
existence (collectively, the "Collateral"):
(a) a 21.90% membership interest in the Issuer together
with (i) the share certificates representing the same identified in Exhibit A
and (ii) the right, title and interest of the Pledgor with respect to such
21.90% membership interest in, to and under the LLC Agreement (collectively,
the "Pledged Equity"); and
(b) all shares, securities, moneys or property
representing a dividend on, or a distribution or return of capital in respect
of any of the Pledged Equity, resulting from a split-up, revision,
reclassification or other like change of any of the Pledged Equity or otherwise
received in exchange for any of the Pledged Equity and all subscriptions,
options, warrants or other rights of like nature (the "Equity Rights") issued
to the holders of, or otherwise in respect of, any of the Pledged Equity; and
(c) in the event of any consolidation or merger in which
the Issuer is not the surviving entity, all of the membership interest, or
other equity interests of the successor corporation or successor entity (unless
such successor entity is the Pledgor itself) formed by or resulting from such
consolidation or merger (collectively, and together with the property described
in clauses (a) and (b) above, the "Equity Collateral"); and
(d) all proceeds and products in whatever form of all or
any part of the foregoing.
2.02 Perfection and Registration of Pledge. Concurrently
with the execution and delivery of this Agreement, the Pledgor shall (i)
deliver to the Pledgee all of the certificates identified in Exhibit A,
accompanied by undated certificate powers duly executed in blank and (ii) take
all such
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<PAGE> 4
other actions as shall be necessary or as the Pledgee may reasonably request to
perfect and establish the priority of the Liens granted by this Agreement.
2.03 Preservation and Protection of Security Interests.
The Pledgor shall:
(a) upon the acquisition after the date of this
Agreement by the Pledgor of any Equity Collateral, promptly either (x) transfer
and deliver to the Pledgee all such Equity Collateral (together with, if
applicable, the certificates representing such Equity Collateral duly endorsed
in blank or accompanied by undated powers duly executed in blank or such
instruments of transfer as the Pledgee shall direct in its discretion to
effectuate the purposes of this Agreement) or (y) take such other action as the
Pledgee shall deem reasonably necessary or appropriate to perfect, and
establish the priority of, the Liens granted by this Agreement in such Equity
Collateral; and
(b) give, execute, deliver, file or record any and all
financing statements, notices, contracts, agreements or other instruments,
obtain any and all governmental approvals and take such steps as are reasonably
necessary to create, perfect, establish the priority of, or to preserve the
validity, perfection or priority of, the Liens granted by this Agreement or to
enable the Pledgee to exercise and enforce its rights, remedies, powers and
privileges under this Agreement with respect to such Liens, including causing
any or all of the Equity Collateral to be transferred of record into the name
of the Pledgee or its nominee (and the Pledgee agrees that if any Equity
Collateral is transferred into its name or the name of its nominee, the Pledgee
will thereafter promptly give to the Pledgee copies of any notices and
communications received by it with respect to the Equity Collateral pledged by
the Pledgor).
2.04 Attorney-in-Fact. Subject to the rights of the
Pledgor under Section 2.05, the Pledgee is hereby appointed the
attorney-in-fact of the Pledgor for the purpose of carrying out the provisions
of this Agreement and taking any action and executing any instruments as are
reasonably necessary to accomplish the purposes of this Agreement, to preserve
the validity, perfection and priority of the Liens granted by this Agreement
and, following any Termination Event, to exercise its rights, remedies, powers
and privileges under this Agreement. This appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, the Pledgee shall be entitled under this Agreement upon the
occurrence and continuation of any Termination Event (i) to ask, demand,
collect, sue for, recover, receive and give
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<PAGE> 5
receipt and discharge for amounts due and to become due under and in respect of
all or any part of the Collateral; (ii) to receive, endorse and collect any
drafts, instruments, documents and chattel paper in connection with clause (i)
above; (iii) to file any claims or take any action or proceeding as is
reasonably necessary for the collection of all or any part of the Collateral;
and (iv) to execute, in connection with any sale or disposition of the
Collateral under Section 5, any endorsements, assignments, bills of sale or
other instruments of conveyance or transfer with respect to all or any part of
the Collateral.
2.05 Special Provisions Relating to Equity Collateral.
(a) So long as no Termination Event shall have occurred
and be continuing, the Pledgor shall have the right to exercise all voting,
consensual and other powers of ownership pertaining to the Equity Collateral
for all purposes not inconsistent with the terms of this Agreement; provided
that the Pledgor agrees that it will not vote the Equity Collateral in any
manner that is inconsistent with the terms of this Agreement; and the Pledgee
shall, at the Pledgor's expense, execute and deliver to the Pledgor or cause to
be executed and delivered to the Pledgor all such proxies, powers of attorney,
dividend or distribution and other orders and other instruments, without
recourse, as the Pledgor may reasonably request for the purpose of enabling the
Pledgor to exercise the rights and powers which it is entitled to exercise
pursuant to this Section 2.05(a).
(b) So long as no Termination Event shall have occurred
and be continuing, the Pledgor shall be entitled to receive and retain any
dividends or other distributions on the Equity Collateral.
(c) If any Termination Event shall have occurred and be
continuing, and whether or not the Pledgee exercises any available right to
declare any Secured Obligation due and payable or seeks or pursues any other
right, remedy, power or privilege available to it under applicable law or this
Agreement, all dividends and other distributions on the Equity Collateral shall
be paid directly to the Pledgee as part of the Equity Collateral, subject to
the terms of this Agreement, and, if the Pledgee shall so request, the Pledgor
agrees to execute and deliver to the Pledgee appropriate additional dividend,
distribution and other orders and instruments to that end; provided that if
such Termination Event is cured or rescinded, any such dividend or distribution
paid to the Pledgee prior to such cure shall, upon request of the Pledgor
(except to the extent applied to the Secured Obligations), be returned by the
Pledgee to the Pledgor.
Artemis Pledge Agreement
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<PAGE> 6
2.06 Rights and Obligations.
(a) No reference in this Agreement to proceeds or to the
sale or other disposition of Collateral shall authorize the Pledgor to sell or
otherwise dispose of any Collateral except to the extent otherwise expressly
permitted by the terms of this Agreement.
(b) The Pledgee shall not be required to take steps
necessary to preserve any rights against prior parties to any part of the
Collateral.
(c) The Pledgor shall remain liable to perform its
duties and obligations under the LLC Agreement in accordance with its terms to
the same extent as if this Agreement had not been executed and delivered. The
exercise by the Pledgee of any right, remedy, power or privilege in respect of
this Agreement shall not release the Pledgor from any of its duties and
obligations under the LLC Agreement. The Pledgee shall have no duty, obligation
or liability under the LLC Agreement by reason of this Agreement.
2.07 Termination. When all Secured Obligations shall have
been satisfied in full, this Agreement shall terminate, and the Pledgee 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 of the Collateral, to or on the order
of the Pledgor.
Section 3. Representations and Warranties. As of the date
of this Agreement, the Pledgor represents and warrants to the Pledgee as
follows:
3.01 Title. The Pledgor is the sole beneficial owner of
the Collateral in which it purports to grant a Lien pursuant to this Agreement,
and such Collateral is free and clear of all Liens (and, with respect to the
Equity Collateral, of any Equity Right in favor of any other Person). The Liens
granted by this Agreement in favor of the Pledgee have attached and constitute
a perfected security interest in all of such Collateral prior to all other
Liens.
3.02 Pledged Equity.
(a) The Pledged Equity evidenced by the certificates
identified in Exhibit A is duly authorized, validly existing, fully paid and
nonassessable, and none of such Pledged Equity is subject to any contractual
restriction, or any restriction under
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<PAGE> 7
the organizational documents of the Issuer of such Pledged Equity, upon the
transfer of such Pledged Equity (except for any such restriction contained in
this Agreement).
(b) The Equity Collateral constitutes 21.90% of the
total number of membership interests or shares of each class of capital stock,
as applicable, of the Issuer currently outstanding. The attached Exhibit A
correctly identifies, as of the date of this Agreement, the membership
interests comprising such Pledged Equity and the respective percentage interest
in the Issuer as a whole. All such membership interests or shares are duly
authorized, validly issued, fully paid and nonassessable and will be free of
any contractual restriction or any restriction under the charter or bylaws of
the Issuer of the Equity Collateral, upon the transfer of the Equity Collateral
(except for any such restriction contained in this Agreement).
Section 4. Covenants.
4.01 Books and Records. The Pledgor shall:
(a) keep full and accurate books and records relating to
the Collateral and stamp or otherwise mark such books and records in such
manner as the Pledgee may reasonably require in order to reflect the Liens
granted by this Agreement; and
(b) permit representatives of the Pledgee, upon
reasonable notice, at any time during normal business hours to inspect and make
abstracts from its books and records pertaining to the Collateral, permit
representatives of the Pledgee to be present at the Pledgor'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
Pledgor with respect to the Collateral, all in such manner as the Pledgee may
reasonably request.
4.02 Removals, Etc. Without at least 30 days' prior
written notice to the Pledgee, the Pledgor 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, other than at the address initially
indicated for notices to it under Section 6(c) or (ii) change its corporate
name, or the name under which it does business, from the name shown on the
signature pages to this Agreement.
4.03 Sales and Other Liens. Except as otherwise permitted
under the Indenture, the Pledgor shall not sell, transfer or otherwise dispose
of all or any part of the Collateral, create, incur, assume or suffer to exist
any Lien upon all or any part of the Collateral or file or suffer to be on
Artemis Pledge Agreement
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<PAGE> 8
file or authorize to be filed, in any jurisdiction, any financing statement or
like instrument with respect to all or any part of the Collateral in which the
Pledgee is not named as the sole secured party.
4.04 Further Assurances. The Pledgor agrees that, from
time to time upon the written request of the Pledgee, the Pledgor will execute
and deliver such further documents and do such other acts and things as the
Pledgee may reasonably request in order fully to effect the purposes of this
Agreement.
4.05 Dilution. The Pledgor shall cause the Equity
Collateral to constitute at all times 21.90% of the total equity interests in
the Issuer. The Pledgor shall cause all such interests to be duly authorized,
validly issued, fully paid and nonassessable and to be free of any contractual
restriction or any restriction under the Limited Liability Company Agreement,
upon the transfer of such Equity Collateral.
4.06 Financial Reports. Within 45 days after the close of
the first three quarterly accounting periods in each fiscal year of the
Pledgor, the Pledgor shall deliver to the Pledgee, the unaudited financial
statements of the Pledgor and the Issuer. Within 120 days after the close of
each fiscal year, the Pledgor shall deliver to the Pledgee, the financial
statements of the Pledgor and the Issuer, certified by an independent certified
public accountant of recognized national standing. The Pledgor represents and
warrants that all such financial statements shall be true and correct in all
material respects.
Section 5. Remedies.
5.01 Events of Default, Etc. If a Termination Event
shall have occurred and be continuing:
(a) the Pledgee in its discretion may, in its name or in
the name of the Pledgor 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 all or any part of the Collateral, but shall be under no
obligation to do so;
(b) the Pledgee in its discretion may, upon ten business
days' prior written notice to the Pledgor of the time and place and subject to
the terms of the LLC Agreement, with respect to all or any part of the
Collateral which shall then be or shall thereafter come into the possession,
custody or control of the Pledgee or its agents, sell, lease or otherwise
dispose of all or any part of such Collateral, at such place or places as the
Pledgee deems best, for cash, for credit or for future
Artemis Pledge Agreement
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<PAGE> 9
delivery (without thereby assuming any credit risk) and at public or private
sale, without demand of performance or notice of intention to effect any such
disposition or of time or place of any such sale (except such notice as is
required above or by applicable statute and cannot be waived), and the Pledgee
or any other Person may be the purchaser, lessee 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 Pledgor, any such demand, notice
and right or equity being hereby expressly waived and released. The Pledgee
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; and
(c) the Pledgee shall have, and in its discretion may
exercise, all of the rights, remedies, powers and privileges with respect to
the Collateral of a secured party under the Uniform Commercial Code (whether or
not the Uniform Commercial Code is in effect in the jurisdiction where such
rights, remedies, powers and privileges are asserted) and such additional
rights, remedies, powers and privileges to which a secured party is entitled
under the laws in effect in any jurisdiction where any rights, remedies, powers
and privileges in respect of this Agreement or the Collateral may be asserted,
including the right, to the maximum extent permitted by law (subject to the
terms of the LLC Agreement), to exercise all voting, consensual and other
powers of ownership pertaining to the Collateral as if the Pledgee was the sole
and absolute owner of the Collateral (and the Pledgor agrees to take all such
action as may be appropriate to give effect to such right).
The proceeds of, and other realization upon, the Collateral by virtue of the
exercise of remedies under this Section 5.01 shall be applied in accordance
with Section 5.04.
5.02 Limited Recourse. Notwithstanding anything to the
contrary in this Agreement, the Limited Recourse Guarantee, the Standstill
Agreement, the Indenture or otherwise, the security interest granted herein
secures a limited recourse obligation and recourse for the Secured Obligations
is expressly limited solely to the Pledgee's interest in the Collateral.
5.03 Private Sale.
(a) The Pledgee shall incur no liability as a result of
the sale, lease or other disposition of all or any part of the
Artemis Pledge Agreement
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<PAGE> 10
Collateral at any private sale pursuant to Section 5.01 conducted in a
commercially reasonable manner. The Pledgor hereby waives any claims against
the Pledgee 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
which might have been obtained at a public sale or was less than the aggregate
amount of the Secured Obligations, even if the Pledgee accepts the first offer
received and does not offer the Collateral to more than one offeree.
(b) The Pledgor recognizes that, by reason of certain
prohibitions contained in the Securities Act of 1933 and applicable state
securities laws, the Pledgee may be compelled, with respect to any sale of all
or any part of the Collateral, to limit purchasers to those who will agree,
among other things, to acquire the Collateral for their own account, for
investment and not with a view to distribution or resale. The Pledgor
acknowledges that any such private sales may be at prices and on terms less
favorable to the Pledgee 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 Pledgee 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 Issuer of the Collateral to register it
for public sale.
5.04 Application of Proceeds. Except as otherwise
expressly provided in this Agreement, the proceeds of, or other realization
upon, all or any part of the Collateral by virtue of the exercise of remedies
under Section 5.01, and any other cash at the time held by the Pledgee under
this Section 5, shall be applied by the Pledgee:
First, to the payment of the reasonable costs and expenses of
such exercise of remedies, including reasonable out-of-pocket costs and
expenses of the Pledgee and the reasonable fees and expenses of its counsel;
Next, to the payment in full of the remaining Secured
Obligations then due and owing; and
Finally, to the Pledgor, or its respective 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 property received under any
bankruptcy, reorganization or
Artemis Pledge Agreement
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<PAGE> 11
other similar proceeding as to the Pledgor or any issuer of, or account debtor
or other obligor on, any of the Collateral.
Section 6. Miscellaneous.
(a) No Waiver. No failure on the part of the Pledgee to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, remedy, power or privilege under this Agreement shall operate as a
waiver of such right, remedy, power or privilege, nor shall any single or
partial exercise of any right, remedy, power or privilege under this Agreement
preclude any other or further exercise of any such right, remedy, power or
privilege or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges provided in this Agreement are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
(b) Amendments, Etc. Any provision of this Agreement may
be modified, supplemented or waived only by an instrument in writing duly
executed by the Pledgor and the Pledgee. Any such modification, supplement or
waiver shall be for such period and subject to such conditions as shall be
specified in the instrument effecting the same and shall be binding upon the
Pledgee and the Pledgor, and any such waiver shall be effective only in the
specific instance and for the purposes for which given.
(c) Addresses for Notices. All notices and other
communications required or permitted to be given or made under this Agreement
shall be given or made by mail, overnight courier or facsimile (or, unless such
notice is specifically required to be given in writing, by telephone, confirmed
in writing by facsimile by the close of business on the day notice is given)
and faxed, mailed certified or registered (return receipt requested) or sent by
overnight courier, or personally delivered (or telephoned, as the case may be)
at the address specified below or at such other address as shall be designated
in a notice in writing.
Artemis Pledge Agreement
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<PAGE> 12
If to the Pledgee:
Artemis America Partnership
c/o Lion Advisors, L.P.
2 Manhattanville Road
Purchase, New York 10577
Facsimile: (914) 694-8032
Attention: Tony Tortorelli
With a copy to:
Sidley & Austin
875 Third Avenue
New York, New York 10022
Facsimile No.: (212) 906-2021
Attention: Daniel G. Kelly, Jr.
If to the Pledgor:
Brooke (Overseas) Ltd.
100 S.E. Second Street, 32nd Floor
Miami, Florida 33131
Telephone No.: (305) 579-8000
Facsimile No.: (305) 579-8009
Attention: Richard J. Lampen, Esq.
With a copy to:
Milbank, Tweed, Hadley & McCloy
601 S. Figueroa Street
30th Floor
Los Angeles, California 90017
Telephone No.: (213) 892-4408
Facsimile No.: (213) 629-5063
Attention: Eric R. Reimer
(d) Captions. The captions and section headings
appearing in this Agreement are included solely for convenience of reference
and are not intended to affect the interpretation of any provision of this
Agreement.
(e) Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement, and any such prohibition
Artemis Pledge Agreement
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<PAGE> 13
or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(f) Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties to this Agreement may execute this
Agreement by signing any such counterpart.
Section 7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THAT STATE.
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the parties to this Agreement have caused
this Agreement to be duly executed as of the day and year first above written.
BROOKE (OVERSEAS) LTD.
By: /s/ Richard J. Lampen
---------------------------------
Name: Richard J. Lampen
Title: Executive Vice President
ARTEMIS AMERICA PARTNERSHIP, L.P.
By: /s/ John J. Hannan
---------------------------------
Name: John J. Hannan
Title:
Artemis Pledge Agreement
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<PAGE> 15
EXHIBIT A
PLEDGED CERTIFICATES
<TABLE>
<CAPTION>
Member Membership Interest Certificates
------ ------------------- ------------
<S> <C> <C>
Brooke (Overseas) Ltd. 21.90% 002
</TABLE>
<PAGE> 1
EXHIBIT 99.1
PRESS RELEASE
BROOKE GROUP AND NEW VALLEY TO INVEST IN REAL ESTATE IN RUSSIA
WITH APOLLO FUND
MIAMI, FL, March 2, 1998 -- Brooke Group Ltd. (NYSE: BGL) and New
Valley Corporation (OTC: NVYL) announced today that New Valley has entered into
a joint venture with Apollo Real Estate Investment Fund III, L.P. to form
Western Realty Development LLC to develop real estate in Moscow, Russia.
Pursuant to the agreement, the contributions of New Valley to Western Realty
will include the assets of its BrookeMil Ltd. subsidiary, a real estate
development company in Russia that owns a major office project in Moscow.
Apollo will contribute up to $58 million to Western Realty.
BrookeMil is currently developing a three-phase complex on 2.2 acres
of land in downtown Moscow. The first phase of the project, Ducat Place I, a
46,500 sq. ft. Class-A office building, was successfully built and leased in
1993 and sold to a tenant in April, 1997. In 1997, BrookeMil completed
construction of Ducat Place II, a premier 150,000 sq. ft. office building.
Ducat Place II has been leased to a number of leading international companies,
including Motorola, Conoco, Lukoil-Arco and Morgan Stanley. The third phase,
Ducat Place III, is planned as a 350,000 sq. ft. mixed-use complex, with
construction set to begin in 1999.
"The formation of Western Realty with Apollo will allow us to
significantly expand our real estate business in Russia, where we are already
very well positioned," said Bennett S. LeBow, Chairman and CEO of Brooke Group
and New Valley. LeBow added, "Ducat Place is the leading western-style
commercial complex in Moscow, with a host of blue-chip tenants, and we believe
that Ducat Place III has even greater potential."
"We are pleased to be working with New Valley - which has developed
some of Moscow's finest existing properties - and we are confident that we will
find many exciting future opportunities together," said Lee Neibart, a
principal of Apollo.
Western Realty will seek to make additional real estate and other
investments in Russia. New Valley and Apollo have agreed to invest, through
Western Realty or another entity, up to $25 million in the aggregate for the
potential development of a real estate project in Moscow. In addition, Western
Realty has agreed to invest $20 million for a 30% interest in a company
organized by Brooke (Overseas) Ltd., a wholly-owned subsidiary of Brooke Group,
which will, among other things, acquire an interest in
<PAGE> 2
an industrial site and manufacturing facility being constructed on the
outskirts of Moscow by a subsidiary of Brooke (Overseas) Ltd.
Brooke Group is a holding company which owns Liggett Group Inc. and
Liggett-Ducat Ltd. and holds 42% of the voting power in New Valley. New Valley
is principally engaged in investment banking and brokerage through Ladenburg,
Thalmann & Co. Inc., in real estate development in Russia through BrookeMil,
and in ownership and management of commercial real estate through its New
Valley Realty division.
# # #
<PAGE> 1
EXHIBIT 99.2
PRESS RELEASE
BROOKE GROUP REACHES AGREEMENT WITH APOLLO HOLDERS
OF BGLS NOTES
Miami, FL, March 3, 1998 -- Brooke Group Ltd. (NYSE: BGL) announced
today that its wholly-owned subsidiary, BGLS Inc., has entered into an
agreement with AIF II, L.P. and an affiliated investment manager on behalf of a
managed account (the "Apollo Holders"), who hold approximately 41.8% of the
$232,864,000 principal amount of BGLS' 15.75% Senior Secured Notes due 2001.
BGLS has made the interest payment due on January 31, 1998 to all holders of
the BGLS Notes other than the Apollo Holders.
Pursuant to the terms of the agreement, the Apollo Holders have agreed
to defer the payment of interest on the BGLS Notes held by them, commencing
with the interest payment that was due July 31, 1997, which they had previously
agreed to defer, through the interest payment due on July 31, 2000. The
deferred interest payments will be payable at final maturity of the BGLS Notes
on January 31, 2001 or upon an Event of Default under the Indenture for the
BGLS Notes. In connection with the agreement, Brooke Group issued to the Apollo
Holders a five-year warrant to purchase 2,000,000 shares of Brooke Group common
stock at a price of $5.00 per share. The Apollo Holders were also issued a
second warrant expiring October 31, 2004 to purchase an additional 2,150,000
shares of Brooke Group common stock at a price of $0.10 per share. The second
warrant will become exercisable on October 31, 1999, and Brooke Group will have
the right under certain conditions prior to that date to substitute for that
warrant a new warrant for 9.9% of the common stock of Liggett Group Inc.
Brooke Group is a holding company which owns Liggett Group Inc. and
has controlling interests in Liggett-Ducat and New Valley Corporation.
