<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): FEBRUARY 2, 1998
<TABLE>
<CAPTION>
<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 (Registrant's telephone number, including
area code) area 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>
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ITEM 5. OTHER EVENTS.
On February 2, 1998, Brooke Group Ltd. ("BGL") issued a press
release, a copy of which is attached hereto as Exhibit 99.1 and incorporated
herein by reference. The press release related, among other things, to BGL's
wholly-owned subsidiary, Liggett Group Inc. ("Liggett"), entering into various
amendments to the Indenture governing Liggett's Senior Secured Notes, copies of
which amendments and related agreements are attached hereto as Exhibits 99.2
through 99.6 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
99.1 Press Release of Brooke Group Ltd. dated February 2, 1998.
99.2 Second Supplemental Indenture and Amendment to Series B and Series C
Senior Secured Notes, dated as of January 30, 1998, between Liggett
Group Inc. ("Liggett"), Eve Holdings Inc. ("Eve") and Bankers Trust
Company, as Trustee.
99.3 Amendment No. 2 to Security Agreement, dated as of January 30, 1998,
among Liggett, Eve and Bankers Trust Company, as Collateral Agent.
99.4 Commitment, Contribution and Subordination Agreement, dated as of
January 30, 1998, by Liggett, BGL, BGLS Inc., Brooke (Overseas) Ltd.
("BOL") and Bankers Trust Company, as Trustee.
99.5 Registration Rights Agreement, dated as of January 30, 1998, among BGL
and the holders of record of the shares of BGL's common stock referred
to therein.
99.6 Pledge Agreement, dated as of January 30, 1998, among BOL and Bankers
Trust Company, as Collateral Agent.
Page 2 of 3
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
BROOKE GROUP LTD.
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: February 3, 1998
Page 3 of 3
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EXHIBIT 99.1
SARD VERBINNEN & CO NEWS
FOR IMMEDIATE RELEASE
Contact: George Sard/Anna Cordasco/Paul Caminiti
Sard Verbinnen & Co.
212/687-8080
LIGGETT GROUP TO EXTEND PAYMENT ON NOTES UNTIL 1999;
BROOKE GROUP CONTINUES TO NEGOTIATE BGLS NOTES
- -------------------------------------------------------------------------------
MIAMI, FL, February 2, 1998 -- Brooke Group Ltd. (NYSE: BGL) announced
today that its wholly-owned subsidiary Liggett Group Inc. has obtained the
consents of the required majority of the holders of Liggett's 11.50% Series B
and 19.75% Series C Senior Secured Notes due 1999 to various amendments to the
Indenture governing Liggett's Senior Secured Notes. The amendments provide,
among other things, for the extension of the date of the February 1, 1998
mandatory redemption of $37,500,000 principal amount of Liggett's Senior Secured
Notes to the date of final maturity, February 1, 1999. In connection with the
amendments, Brooke will issue 482,970 shares of Brooke's common stock to the
holders of record on January 15, 1998 of Liggett's Senior Secured Notes. The
consent solicitation, originally scheduled to expire at noon EST on January 30,
1998, was extended by Liggett to 5:00 p.m. EST on that date.
Brooke also announced that its wholly-owned subsidiary, BGLS Inc.,
continues in negotiations with the principal holders of the BGLS 15.75% Senior
Secured Notes due 2001 with respect to certain modifications to the terms of
such debt. Pending completion of these negotiations, BGLS has postponed making
the interest payment due on January 31, 1998 on BGLS' Senior Secured Notes. The
Indenture governing BGLS' Senior Secured Notes provides for a 30-day grace
period before failure to pay interest will be an event of default.
Brooke Group is a holding company which owns Liggett Group Inc. and
controlling interests in Liggett-Ducat Ltd. and New Valley Corporation.
# # # #
<PAGE> 1
EXHIBIT 99.2
SECOND SUPPLEMENTAL INDENTURE
AND
AMENDMENT TO SERIES B AND SERIES C SENIOR SECURED NOTES
THIS SECOND SUPPLEMENTAL INDENTURE AND AMENDMENT TO SERIES B
AND SERIES C SENIOR SECURED NOTES (the "SECOND SUPPLEMENTAL INDENTURE AND
AMENDMENT TO NOTES"), dated as of January 30, 1998, is between LIGGETT GROUP
INC., a Delaware corporation, EVE HOLDINGS INC., a Delaware corporation, and
BANKERS TRUST COMPANY, a New York banking corporation organized under the laws
of the State of New York, as Trustee under the Indenture, dated as of February
14, 1992, between the foregoing parties (as at any time amended or supplemented
or otherwise modified, the "INDENTURE"). Capitalized terms used but not defined
herein shall have the meanings assigned to such terms in the Indenture.
RECITALS OF THE COMPANY
WHEREAS, the Company has heretofore executed and delivered the
Indenture providing for the issuance of the Series A Senior Secured Notes and
the Series B Senior Secured Notes; and
WHEREAS, pursuant to Section 2 of the Registration Rights
Agreement, all of the Series A Senior Secured Notes have heretofore been
exchanged for Series B Senior Secured Notes; and
WHEREAS, the Indenture was amended by the First Supplemental
Indenture (the "FIRST SUPPLEMENTAL INDENTURE") dated as of January 26, 1994,
pursuant to which the Company issued the Variable Rate Series C Senior Secured
Notes, which Series C Senior Secured Notes have the same terms (other than the
rate of interest) and stated maturity as the Series B Senior Secured Notes; and
WHEREAS, as of the date hereof there are issued and
outstanding under the Indenture $112,612,000 principal amount of the Series B
Senior Secured Notes and $32,279,081 principal amount of the Series C Senior
Secured Notes; and
WHEREAS, the Company desires to amend the Senior Secured
Notes, the Indenture and the Security Agreement to, among other things, extend
the date of the February 1, 1998 mandatory redemption of $37,500,000 aggregate
principal amount of Senior Secured
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Notes, required pursuant to paragraph 2(b)(ii) of the Senior Secured Notes (the
"1998 MANDATORY REDEMPTION") to February 1, 1999; and
WHEREAS, in consideration of the extension of the 1998
Mandatory Redemption, Brooke Group Ltd. ("BGL"), a Delaware corporation, and
BGLS Inc. ("BGLS"), a Delaware corporation, have agreed pursuant to the
Commitment, Contribution and Subordination Agreement, dated as of January 30,
1998, executed by BGL, BGLS and Brooke (Overseas) Ltd. ("BOL") in favor of the
Trustee and the Noteholders (the "COMMITMENT AGREEMENT") that, in the event the
Company shall fail to pay the interest installments in full when due on the
Senior Secured Notes on February 1, 1998 and August 1, 1998 (the "1998 INTEREST
PAYMENTS"), BGL and BGLS shall, at their option, either (i) arrange for loans to
be made to the Company and, if required by the lender thereof, guaranty the
repayment of such loans or (ii) make loans to the Company, which loans shall
constitute Subordinated Indebtedness, in either case, so as to permit the
Company to make such 1998 Interest Payments in full (the "BGL/BGLS COMMITMENT");
and
WHEREAS, BGL and BGLS have agreed pursuant to the Commitment
Agreement, that any right of repayment, reimbursement, contribution or
subrogation of BGL or BGLS in connection with the BGL/BGLS Commitment, along
with any right of repayment, reimbursement, contribution or subrogation of BGL
or BGLS in connection with the guarantee of loans made in connection with the
Company's payment of the August 1, 1997 interest installment, shall be
subordinated in all respects to the prior repayment in full of all amounts
outstanding in respect of the Senior Secured Notes (the "BGL/BGLS
SUBORDINATION"); and
WHEREAS, in connection with the formation of a joint venture
or other entity (the "NEW RUSSIAN ENTITY") to finance the construction of a new
tobacco factory in Russia by Liggett-Ducat Limited, a Russian joint stock
company ("LIGGETT-DUCAT"), and in consideration of the BGL/BGLS Commitment, the
BGL/BGLS Subordination, the BOL Pledge Agreement (as defined below) and the
Liggett-Ducat Recapitalization (as defined below), the Company has agreed,
pursuant to the Commitment Agreement, to transfer on the Effective Date (as
defined below) its approximately 19.97% ownership interest in, and options to
acquire additional shares of, Capital Stock of Liggett-Ducat (the "LIGGETT-DUCAT
SALE") to BOL and each of BOL, BGL and BGLS has agreed, pursuant to the
Commitment Agreement, to cancel or convert to equity all Indebtedness of
Liggett-Ducat owed to it (the "LIGGETT-DUCAT RECAPITALIZATION"); and
WHEREAS, BOL has agreed that, in consideration of the
Collateral Agent's release at the written direction of the Requisite Holders (in
the form of written consent to this Second Supplemental Indenture and Amendment
to Notes), of its existing lien on the Company's interests in Liggett-Ducat, BOL
will pledge to the Collateral Agent pursuant to the Pledge Agreement, dated
January 30, 1998, executed by BOL in favor of the Collateral Agent (the "BOL
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PLEDGE AGREEMENT"), sixteen percent (16%) of the fully diluted shares of the
Capital Stock of Liggett-Ducat (the "LIGGETT-DUCAT SHARES"), after taking into
account the Liggett-Ducat Recapitalization, to secure the Company's obligations
under the Indenture; and
WHEREAS, BOL agrees that, upon the occurrence of an Event of
Default under the Indenture, the Collateral Agent at the request of the
Requisite Holders shall be entitled to direct the Pledgor to cause Liggett-Ducat
or the New Russian Entity, as applicable, to register the Pledged Stock (as
defined in the BOL Pledge Agreement) on the terms set forth in Appendix A to the
BOL Pledge Agreement;
WHEREAS, Section 9.02 of the Indenture provides, among other
things, that the Company, the Guarantors and the Trustee may modify and amend
the Indenture with the consent of the Requisite Holders, which consent has been
obtained; and
WHEREAS, the Company desires to execute this Second
Supplemental Indenture and Amendment to Notes and hereby requests the Trustee
and the Guarantors to join in this Second Supplemental Indenture and Amendment
to Notes for the purpose of amending the Indenture as hereinafter provided; and
WHEREAS, all conditions and requirements under the Indenture
and the TIA necessary to make this Second Supplemental Indenture and Amendment
to Notes a legal, valid and binding instrument have been done, performed and
fulfilled, and the execution and delivery of this Second Supplemental Indenture
and Amendment to Notes has been in all respects duly authorized by the parties
hereto;
NOW THEREFORE, THIS INDENTURE WITNESSETH:
That the Company, in consideration of the consent of the
Requisite Holders referenced above and the premises set forth herein and for
other valuable consideration, the receipt of which is hereby acknowledged,
hereby covenants, declares and agrees with the Trustee and its successors in the
trust under the Indenture as follows:
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ARTICLE ONE
AMENDMENTS TO THE INDENTURE
SECTION 1.01. Section 1.01 of the Indenture shall be amended
by adding the following new definitions (to the extent not already included in
Section 1.01 thereof) and inserting the same in the appropriate alphabetical
locations and amending in their entirety the following definitions (to the
extent already included in Section 1.01 thereof), as follows:
"Asset Sale" means any conveyance, transfer, lease or other
disposition (including, without limitation, by way of merger, consolidation or
sale and leaseback transaction), directly or indirectly, of any properties and
assets of the Company or any Subsidiary other than in the ordinary course of
business. For the purposes of this Indenture, the term "Asset Sale" shall not
include (i) any conveyance, transfer, lease or other disposition (as aforesaid)
of properties or assets of the Company or any Subsidiary that is governed by the
provisions of Article 5, (ii) any conveyance, transfer, lease or other
disposition (as aforesaid) of any Excluded Assets or (iii) the Liggett-Ducat
Sale.
"BGL" means Brooke Group Ltd., a Delaware corporation.
"BGLS" means BGLS Inc., a Delaware corporation.
"BOL" means Brooke (Overseas) Ltd., a Delaware corporation.
"BOL Pledge Agreement" means the Pledge Agreement, dated
January 30, 1998, executed by BOL in favor of the Collateral Agent, as the same
may be amended, supplemented or modified from time to time in accordance with
its terms.
"Collateral" means, collectively, (i) the "Collateral" as such
term is defined in the Security Agreement, (ii) the "Collateral" as such term is
defined in the BOL Pledge Agreement and (iii) the Real Property and proceeds
thereof that are from time to time subject to the Lien of the Mortgages.
"Commitment Agreement" means the Commitment, Contribution and
Subordination Agreement, dated as of January 30, 1998, executed by BGL, BGLS and
BOL in favor of the Trustee and the Noteholders.
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"Excluded Subsidiary" means any Subsidiary which would (solely
as the result of the ownership by a Person other than the Company or a
Subsidiary of Voting Stock or other equity interest of such Subsidiary) be an
Affiliate of the Company if the Company's direct or indirect ownership of Voting
Stock or other equity interests in such Subsidiary were disregarded.
"Liggett-Ducat Sale" means the sale by the Company to BOL of
its approximately 19.97% ownership interest in, and options to acquire
additional shares of, Capital Stock of Liggett-Ducat in consideration of the
execution and delivery of the Commitment Agreement and the BOL Pledge Agreement.
"Permitted Indebtedness" means, without duplication: (a)
Indebtedness of the Company and its Subsidiaries outstanding on the Initial
Issuance Date; (b) Indebtedness evidenced by the Senior Secured Notes and the
Guarantees; (c) Indebtedness (including guarantees thereof by Subsidiaries)
under the Working Capital Facility; (d) obligations under or pursuant to Raw
Material Purchase Arrangements (including, without limitation, letters of credit
required thereby); (e) intercompany debt obligations between or among the
Company and the Subsidiaries; (f) unsecured Indebtedness of the Company, the
proceeds of which are used by the Company to make the 1998 Interest Payments and
which Indebtedness, if provided by BGL, BGLS, BOL or any of their Affiliates,
other than the Company, is Subordinated Indebtedness; and (g) any renewals,
extensions, substitutions, refundings, refinancings or replacements of any
Indebtedness described in clauses (a) through (c) and (f) above so long as the
aggregate principal amount does not exceed the principal amount of the
Indebtedness so renewed, extended, substituted, refunded, refinanced or
replaced.
"Restricted Investment" means any investment in any Person,
whether by share purchase, capital contribution, loan, advance or otherwise,
including any credit extension constituting Indebtedness of such Person or
guarantee of Indebtedness of such Person, other than: (a) any such investments
in Guarantors by the Company or any other Guarantor or by a Guarantor or any
Subsidiary in the Company; (b) loans and advances to employees of the Company or
any Subsidiary in the ordinary course of business for a proper corporate
purpose; (c) any such investments with respect to hedging the Company's or any
Subsidiary's exposure to foreign currency fluctuations; (d) any such investments
in interest rate swaps, caps or collar agreements or similar arrangements
between the Company or any Subsidiary and a financial institution providing for
the transfer or mitigation of interest risks either generally or under specific
contingencies; and (e) Permitted Investments.
"Second Supplemental Indenture and Amendment to Notes" means
the Second Supplemental Indenture and Amendment to Series B and Series C Senior
Secured Notes, dated as of January 30, 1998 by and among the Company, the
Guarantors and the Trustee.
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"Security Documents" means, collectively, the Security
Agreement, the Mortgages and the BOL Pledge Agreement.
"Subordinated Indebtedness" means unsecured Indebtedness (i)
subordinated by its terms in right of payment to all series of Senior Secured
Notes, (ii) having no principal payment with a stated maturity earlier than
three months subsequent to the stated maturity of the Senior Secured Notes and
(iii) no payment in respect of interest on or principal of which shall be made
so long as any Event of Default shall have occurred and be continuing;
SECTION 1.02. Section 4.03 of the Indenture is hereby amended
in its entirety to read as follows:
SECTION 4.03. LIMITATIONS ON RESTRICTED PAYMENTS. The Company
shall not, and shall not permit any Subsidiary to, directly or
indirectly, (i) declare or pay any dividend on, or make any
distribution on account of, any shares of Capital Stock of the
Company (other than dividends and distributions payable in
shares of Capital Stock of the Company or in rights, warrants
or options to purchase Capital Stock of the Company), (ii)
purchase, redeem or otherwise acquire or retire for
consideration any shares of Capital Stock of the Company or
any option, warrant or other right to acquire any such Capital
Stock, (iii) make any payment of principal of, or redeem,
repurchase, defease or otherwise acquire or retire for
consideration any Subordinated Indebtedness of the Company,
(iv) make any Restricted Investments or (v) make any payment
to BGLS, BGL or BOL in respect of any Indebtedness of the
Company guaranteed by BGLS, BGL or BOL (such payments and any
other actions described in clauses (i), (ii), (iii), (iv) and
(v) collectively, "Restricted Payments").
SECTION 1.03. Section 4.05 of the Indenture is hereby amended
in its entirety to read as follows:
SECTION 4.05. LIMITATION ON INDEBTEDNESS. The Company shall
not, and shall not permit any of its Subsidiaries to, create,
incur, assume or directly or indirectly guarantee or in any
other manner become directly or indirectly liable for the
payment of any
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Indebtedness (including Acquired Indebtedness), other than
Permitted Indebtedness or Subordinated Indebtedness.
SECTION 1.04. Section 4.06 of the Indenture is hereby amended
in its entirety to read as follows:
SECTION 4.06. DISPOSITION OF PROCEEDS OF ASSET SALES. The
Company shall not, and shall not permit any Subsidiary to,
directly or indirectly, make any Asset Sale unless (i) the
Company or such Subsidiary, as the case may be, receives
consideration at the time of such Asset Sale at least equal to
the Fair Market Value (as determined by the Board of Directors
whose good faith determination shall be conclusive and
evidenced by a board resolution) of the assets subject to such
Asset Sale and (ii) at least 90% of the consideration for any
such Asset Sale consists of cash. The Net Cash Proceeds of and
any instruments received in consideration of any Asset Sale
shall be deposited with the Collateral Agent in accordance
with Section 6.5 of the Security Agreement as additional
Collateral to secure the Senior Secured Notes; provided that
up to $2,000,000, cumulatively and in the aggregate, of such
Net Cash Proceeds may be used by the Company in connection
with the Capital Expenditures described on SCHEDULE I to the
Second Supplemental Indenture and Amendment to Notes. All
proceeds from Asset Sales shall remain subject to the
applicable provisions of the applicable Security Documents and
all sales and other dispositions of Collateral by or on behalf
of or at the direction of the Collateral Agent, which sales or
dispositions constitute an Asset Sale, shall be solely
governed by the provisions of the Security Documents.
SECTION 1.05. Section 4.09 of the Indenture is hereby amended
in its entirety to read as follows:
SECTION 4.09. LIMITATION ON TRANSACTIONS WITH AFFILIATES. The
Company shall not, and shall not permit, cause or suffer any
Subsidiary to, make any loans, advances or investments to or
in any Affiliate of the Company (other than a Subsidiary) or
enter into or materially amend (it being understood that the
mere renewal or extension of an agreement is not a material
amendment)
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any agreement relating to the sale, purchase, lease, transfer,
or other disposition of any assets, property or services from
or to any Affiliate of the Company (other than a Subsidiary
which is not an Excluded Subsidiary); provided that the
foregoing restrictions shall not apply to any of the following
transactions:
(i) The Liggett-Ducat Sale;
(ii) The BGL/BGLS Commitment or any other loans,
guarantees or other credit support provided by Affiliates of
the Company to the Company; provided that any such loans shall
constitute Subordinated Indebtedness and that any right of
repayment, reimbursement, contribution or subrogation of any
such Affiliate of the Company in connection with such
guarantees or credit support shall be subordinated in all
respects to the repayment of the Senior Secured Notes;
(iii) Any investment by any Affiliate of the
Company in Capital Stock of the Company;
(iv) The Corporate Services Agreement, dated as
of June 29, 1990, by and between the Company (formerly Liggett
& Myers Tobacco Company) and Brooke Group Ltd. (formerly
Liggett Group Inc.); the Corporate Services Agreement, dated
as of June 29, 1990, by and between Brooke Group Ltd.
(formerly Liggett Group Inc.) and the Company (formerly
Liggett & Myers Tobacco Company); the Corporate Services
Agreement, dated as of October 1, 1991, by and between the
Company and Impel Marketing Inc.; the Services Agreement,
dated as of February 26, 1991, by and between Brooke
Management Inc. and the Company; the Agreement, dated June 29,
1990, by and among Brooke Group Ltd. (formerly Liggett Group
Inc.) and the Company (formerly Liggett & Myers Tobacco
Company), Eve Holdings Inc., Harrington Holdings Inc., Impel
Marketing Inc., Chesterfield Assets Inc. and BGI Subsidiary
Corp; the Corporate Services Agreement, dated as of January 1,
1992, by and between BGLS Inc. and the Company; the Agreement,
dated as of October 27, 1986, by and between Brooke Group Ltd.
(formerly Liggett Group Inc.), L Holdings Inc. and BGLS
(formerly B.S. LeBow, Inc.); and
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the Agreement, dated as of February 4, 1991, by and between
the Company and NETC/QMC Partnership (in each case as such
agreements are in effect as of the Initial Issuance Date and
as they may be further amended or modified from time to time;
PROVIDED that either (A) such further amendments or
modifications are for the purpose of extending or renewing the
term of any such agreement on substantially similar terms,
with reasonable adjustments to account for inflation on a
basis consistent with past practice or (B) such amendments
otherwise comply with the provisions of this Section 4.09;
PROVIDED, FURTHER, that (a) payments by the Company otherwise
permitted under this clause (iv) shall not exceed $3,600,000
cumulatively and in the aggregate during any calendar year,
commencing January 1, 1998 and (b) in no event shall any
salary be paid by the Company to Bennett S. LeBow subsequent
to January 1, 1998;
(v) Any amendment or modification of the
Working Capital Facility to the extent such amendment or
modification provides for the release and termination of any
guarantee of, or the release of any security interest in
collateral securing, the Working Capital Facility, in each
case as provided by any direct or indirect parent of the
Company on or prior to the Initial Issuance Date;
(vi) The payment in respect of pension funding
requirements relating to certain noncontributory defined
benefit retirement plans sponsored by the Company or an
Affiliate of the Company in which employees or leased
employees of the Company are then actively participating and
accruing benefits consistent with past practice;
(vii) The lease by the Company from BGLS of a
G.D. X2 NV Packing Machine for consideration not to exceed
$50,000 per month; and
(viii) The license by the Company to Liggett-Ducat
of the right to use the brand name "Taste of America" within
Russia and within the former CIS countries; provided that such
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license is on terms no less favorable to the Company than
could be obtained in an arms-length transaction.
SECTION 1.06. Section 4.17 of the Indenture is hereby amended
in its entirety to read as follows:
SECTION 4.17. LIMITATION ON SALE AND LEASEBACK TRANSACTIONS.
The Company shall not and shall not permit any Subsidiary to,
enter into any arrangement with any Person (other than the
Company or any Subsidiary) providing for the leasing by the
Company or any Subsidiary of any real or personal property
(including Collateral) for a term in excess of three years,
which property has been or is to be sold or transferred by the
Company or any Subsidiary to such Person in contemplation of
such leasing, except for sale and leaseback arrangements in
effect on January 30, 1998.
SECTION 1.07. The first sentence of paragraph 2(b) of each of
Exhibit A and Exhibit B to the Indenture and Exhibit A to the First Supplemental
Indenture is hereby amended to read as follows:
The Company will redeem $7,500,000 aggregate principal amount
of Senior Secured Notes on February 1 in each of the years
1993 through 1997, in each case at a redemption price of 100%
of the aggregate principal amount thereof, plus accrued
interest to the redemption date (subject to the provisions of
paragraph 2(c) hereof).
ARTICLE TWO
AMENDMENTS TO THE SERIES B AND SERIES C SENIOR SECURED NOTES
SECTION 2.01. The first sentence of paragraph 2(b) of each
Senior Secured Note is hereby amended to read as follows:
The Company will redeem $7,500,000 aggregate principal amount
of Senior Secured Notes on February 1 in each of the years
1993 through 1997, in each case at a redemption price of 100%
of
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the aggregate principal amount thereof, plus accrued interest
to the redemption date (subject to the provisions of paragraph
2(c) hereof).
ARTICLE THREE
EFFECTIVENESS
SECTION 3.01. The amendments set forth herein shall become
effective (the "EFFECTIVE DATE") upon the Trustee's receipt of each of the
following by February 2, 1998:
(a) fully executed originals of each of this Second
Supplemental Indenture and Amendment to Notes, Amendment No. 2 to Security
Agreement, dated as of January 30, 1998, by and between the Company, the
Guarantors and the Collateral Agent, the BOL Pledge Agreement, the Commitment
Agreement and the BGL Registration Rights Agreement (as defined below), as well
as any Board Resolutions, Officers' Certificates or Opinions of Counsel
reasonably requested by the Trustee pursuant to the Indenture, the TIA, the
Security Agreement, or otherwise;
(b) the February 1, 1998 interest installment in the amount of
$9,662,749.25 payable on the Senior Secured Notes, in immediately available
funds;
(c) written notice from the Company of the contemporaneous
consummation of the Liggett-Ducat Sale on the terms described in the Recitals
hereto;
(d) written notice from the Company, acknowledged by special
counsel to the Noteholder Committee, of the Company's payment in full of all
unpaid reasonable fees and disbursements of special counsel to the Noteholder
Committee, such fees and disbursements not to exceed $250,000, which amount
includes the approximately $150,000 already paid to such special counsel by the
Company;
(e) written notice of the Company's payment in full of all
unpaid reasonable fees and disbursements of counsel to the Trustee incurred
prior to February 1, 1998, such fees and disbursements not to exceed $75,000,
such payment acknowledged by telephone by White & Case;
(f) consents of the Requisite Holders, executed in a form
reasonably acceptable to the Trustee; and
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(g) an opinion of outside counsel to the Company, satisfactory
in form and substance to the Trustee.
SECTION 3.02. Notwithstanding the conditions set forth in
Section 3.01 having been satisfied, the amendments set forth in Section 1.07 and
Article Two hereof shall cease to be effective upon the failure of the Company
to pay either of the 1998 Interest Payments in full, as and when due (taking
into account any applicable grace period) and the Company's obligation under
paragraph 2(b) of each Senior Secured Note to have redeemed $37,500,000 in
aggregate principal amount of Senior Secured Notes by February 1, 1998 shall
thereupon be automatically reinstated.
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ARTICLE FOUR
EFFECTIVENESS FEE
SECTION 4.01. On the Effective Date (or as soon thereafter as
any necessary governmental consents or filings are obtained or made), the
Company shall (i) distribute to each Person that shall have complied with the
provisions of Section 5.01 hereof and was on January 15, 1998 a Holder of Series
B Senior Secured Notes (or pending such Holder's compliance with Section 5.01,
shall reserve for distribution to such Holders and deposit with the Trustee) a
number of shares of common stock of BGL (rounded up to the nearest whole number
of shares) equal to the product of 375,373 shares multiplied by a fraction the
numerator of which is the aggregate principal amount of Series B Senior Secured
Notes held by such Holder on January 15, 1998 and the denominator of which is
the aggregate principal amount of Series B Senior Secured Notes outstanding on
January 15, 1998 and (ii) distribute to each Person that shall have complied
with the provisions of Section 5.01 hereof and was on January 15, 1998 a Holder
of Series C Senior Secured Notes (or pending such Holder's compliance with
Section 5.01, shall reserve for distribution to such Holder and deposit with the
Trustee), a number of shares of common stock of BGL (rounded up to the nearest
whole number of shares) equal to the product of 107,597 shares multiplied by a
fraction the numerator of which is the aggregate principal amount of Series C
Senior Secured Notes held by such Holder on January 15, 1998 and the denominator
of which is the aggregate principal amount of Series C Senior Secured Notes
outstanding on January 15, 1998. Any BGL shares required to be issued to any
such Holder by the preceding sentence (the "BGL SHARES") shall be issued to such
Holder irrespective of whether such Holder shall have delivered a consent to
this Second Supplemental Indenture and Amendment to Notes. The Requisite Holders
and any other Noteholder that agrees to be bound by the Registration Rights
Agreement executed by BGL substantially in the form attached as Exhibit A hereto
(the "BGL REGISTRATION RIGHTS AGREEMENT") shall receive registration rights with
respect to the BGL Shares on the terms set forth in the BGL Registration Rights
Agreement. Any BGL Shares reserved for distribution with the Trustee shall be
held by the Trustee in trust for the benefit of the affected Noteholder pending
such Noteholder's compliance with Section 5.01. Notwithstanding the foregoing,
for the purpose of determining the Persons entitled to receive BGL Shares, Notes
held by the Company or its Affiliates shall not be deemed "outstanding", and
accordingly, BGL Shares shall not be issued in respect of any Senior Secured
Notes held by the Company or its Affiliates. The Trustee makes no representation
with respect to, and shall have no liability in connection with, the validity,
value or enforceability of the Effectiveness Fee.
<PAGE> 14
-14-
ARTICLE FIVE
NOTATION OF NOTES
SECTION 5.01. Pursuant to Section 9.05 of the Indenture, as a
precondition to the payment of the effectiveness fee referenced in Section 4.01,
the Trustee shall request each of the Noteholders to deliver its Senior Secured
Notes to the Trustee for notation by the Trustee as follows:
THIS SECURITY HAS BEEN MODIFIED, INCLUDING THE EXTENSION OF
THE FEBRUARY 1, 1998 MANDATORY REDEMPTION OF SENIOR SECURED
NOTES TO FEBRUARY 1, 1999, BY THE TERMS AND CONDITIONS OF THE
SECOND SUPPLEMENTAL INDENTURE AND AMENDMENT TO SERIES B AND
SERIES C SENIOR SECURED NOTES DATED AS OF JANUARY 30, 1998.
ARTICLE SIX
MISCELLANEOUS
SECTION 6.01. Except as otherwise provided herein, the
Indenture, the Guarantee and the Senior Secured Notes shall remain unchanged and
in full force and effect.
SECTION 6.02. The parties may sign any number of copies of
this Second Supplemental Indenture and Amendment to Notes. This Second
Supplemental Indenture and Amendment to Notes may be executed in two or more
counterparts, each of which shall be an original, but all of them together
represent the same agreement.
SECTION 6.03. The laws of the State of New York shall govern
this Second Supplemental Indenture and Amendment to Notes without regard to
principles of conflicts of law. The Company, the Guarantors and the Noteholders
agree to submit to the jurisdiction of the state and federal courts located in
the Borough of Manhattan of the State of New York in any action or proceeding
arising out of or relating to this Second Supplemental Indenture and Amendment
to Notes.
SECTION 6.04. In case any provision of this Second
Supplemental Indenture and Amendment to Notes shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 6.05. The captions of this Second Supplemental
Indenture and Amendment to Notes are for convenience only and shall not affect
the construction hereof.
<PAGE> 15
-15-
SECTION 6.06. The recitals contained herein shall be taken as
the statements of the Company, and the Trustee assumes no responsibility for
their correctness.
SECTION 6.07. The Trustee makes no representation as to the
validity or sufficiency of this Second Supplemental Indenture and Amendment to
Notes or the consents of the Holders thereto.
SECTION 6.08. All agreements of the Company and the Guarantors
in this Second Supplemental Indenture and Amendment to Notes shall bind their
respective successors. All agreements of the Trustee in this Second Supplemental
Indenture and Amendment to Notes shall bind its successors.
<PAGE> 16
-16-
IN WITNESS WHEREOF, the parties hereto have caused this Second
Supplemental Indenture and Amendment to Notes to be duly executed all as of the
date first written above.
LIGGETT GROUP INC.
By:
-------------------------------------
Name:
Title:
EVE HOLDINGS INC.
By:
-------------------------------------
Name:
Title:
BANKERS TRUST COMPANY,
as Trustee
By:
-------------------------------------
Name:
Title:
<PAGE> 17
-17-
ACKNOWLEDGED, AGREED AND CONSENTED TO:
BROOKE GROUP LTD.
By:
----------------------------------
Name:
Title:
BGLS INC.
By:
----------------------------------
Name:
Title:
BROOKE (OVERSEAS) LTD.
By:
----------------------------------
Name:
Title:
<PAGE> 1
Exhibit 99.3
AMENDMENT NO. 2 TO SECURITY AGREEMENT
AMENDMENT NO. 2 dated as of January 30, 1998 ("AMENDMENT NO.
2") among LIGGETT GROUP INC., a Delaware corporation (the "ISSUER"), EVE
HOLDINGS INC., a Delaware corporation, and each of the other Subsidiaries of the
Issuer that, as of the date hereof, is a party to the Security Agreement
referred to below (each a "GUARANTOR" and collectively, the "GUARANTORS", and
together with the Issuer, the "OBLIGORS"), and BANKERS TRUST COMPANY, acting not
in its individual capacity but solely as collateral agent under the Security
Agreement referred to below (in such capacity, the "COLLATERAL AGENT").
WHEREAS, the Issuer and the Guarantor are parties to (i) an
Indenture dated as of February 14, 1992 (as supplemented and amended and in
effect from time to time, the "INDENTURE") with Bankers Trust Company, as
trustee (in such capacity, the "TRUSTEE"), under which there is currently
outstanding $112,612,000 aggregate principal amount of the Issuer's 11.50%
Series B Senior Secured Notes Due 1999 and $32,279,081 of the Issuer's Variable
Rate Series C Senior Secured Notes Due 1999 and (ii) a Security Agreement dated
as of February 14, 1992, as amended by Amendment No. 1 to Security Agreement
dated as of January 26, 1994 (the "SECURITY AGREEMENT"), with the Collateral
Agent providing, INTER ALIA and subject to the terms and conditions thereof, for
the granting by the Issuer and the Guarantor of a security interest in the
Collateral;
WHEREAS, the Issuer, the Guarantor and the Trustee are
concurrently executing a supplement to the Indenture providing for certain
amendments to the Indenture as described therein;
WHEREAS, pursuant to Section 9.02 of the Indenture, the
Requisite Holders (as defined in the Indenture) have consented to the amendment
of the Security Agreement as provided herein and the amendments to the Indenture
pursuant to the Second Supplemental Indenture and Amendment to Series B and
Series C Senior Secured Notes, dated as of January 30, 1998;
NOW, THEREFORE, in consideration of the premises and other
benefits to the Obligors, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
Section 1. DEFINITIONS. Except as otherwise defined in this
Amendment No. 2, terms defined in the Security Agreement are used herein as
defined therein.
<PAGE> 2
-2-
Section 2. AMENDMENTS. The Security Agreement is hereby
amended as follows:
A. References in the Security Agreement (including references
to the Security Agreement as amended hereby) to "this Agreement" or "this
Security Agreement" (and indirect references such as "hereunder", "hereby",
"herein" and "hereof") shall be deemed to be references to the Security
Agreement as amended hereby.
B. Section 6.5 of the Security Agreement is hereby amended in
its entirety to read as follows:
6.5. INVESTMENT OF PROCEEDS. The Issuer shall establish an
account at Bankers Trust Company (the "INVESTMENT ACCOUNT") in
the name of the Collateral Agent into which each Obligor shall
deposit the Net Cash Proceeds received from any Asset Sale
(other than Excluded Assets) or any insurance proceeds
received by the Issuer under the Mortgages and shall deliver
any instruments received in respect of such Asset Sale to the
Collateral Agent. The Issuer shall be entitled to apply up to
$2,000,000 cumulatively and in the aggregate of amounts held
in the Investment Account towards Capital Expenditures in
accordance with Section 4.06 of the Indenture. Amounts held in
the Investment Account shall be invested by the Collateral
Agent (provided that if no Event of Default shall have
occurred and be continuing the Collateral Agent shall invest
such amounts only at the written direction of such Obligor) in
Permitted Investments. Cash in the Investment Account, such
instruments and such Permitted Investments shall constitute
additional Collateral hereunder. The Collateral Agent shall
have no liability whatsoever for any investment loss resulting
from investments made at the direction of the Obligors.
Section 3. EFFECTIVENESS. The amendments set forth herein
shall become effective upon (i) the execution and delivery of this Amendment No.
2 by the Obligors and the Collateral Agent, as well as any financing statements,
officers' certificates or opinions of counsel reasonably requested by the
Trustee pursuant to the Security Agreement, the Indenture, or the TIA and (ii)
the satisfaction of each of the conditions set forth in Section 3.01 of the
Second Supplemental Indenture and Amendment to Series B and Series C Senior
Secured Notes of even date herewith.
<PAGE> 3
-3-
Section 4. MISCELLANEOUS. Except as herein provided, the
Security Agreement shall remain unchanged and in full force and effect. Each
Obligor hereby certifies that each of the representations and warranties
contained in the Security Agreement are true and correct in all material
respects as of the date hereof (except to the extent the such representations
and warranties solely relate to an earlier date) and each Obligor expressly
ratifies and confirms the Security Agreement as amended hereby. The liens,
security interests, superior titles, rights, remedies, powers, equities and
priorities under the Security Agreement (the "RIGHTS") are hereby ratified and
confirmed as valid, subsisting and continuing to secure the Obligations. Nothing
contained herein shall in any manner diminish, impair or extinguish any of the
Rights or be construed as a novation in any respect. This Amendment No. 2 may be
executed in any number of counterparts, all of which taken together shall
constitute one and the same amendatory instrument and each of the parties hereto
may execute this Amendment No. 2 by signing any such counterpart. In case any
provision of this Amendment No. 2 shall be invalid, illegal or unenforceable,
the validity, legality and enforceability of the remaining provisions shall not
in any way be affected or impaired thereby. The recitals contained herein shall
be taken as statements of the Issuer, and the Collateral Agent assumes no
responsibility for their correctness. The Collateral Agent makes no
representations as to the validity and sufficiency of this Amendment No. 2 or
the consents of the Requisite Holders in respect thereof. This Amendment No. 2
shall be governed by, and construed in accordance with, the law of the State of
North Carolina without regard to principles of conflicts of law, except to the
extent that perfection of the security interest granted by this Amendment No. 2
is governed by a jurisdiction other than the State of North Carolina; PROVIDED,
HOWEVER, that to the extent not precluded by the laws of the State of North
Carolina, the rights, duties and indemnitees of the Collateral Agent shall be
governed by the laws of the State of New York.
<PAGE> 4
-4-
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment No. 2 to be duly executed as of the day and year first above written.
LIGGETT GROUP INC.
By
--------------------------------
Name:
Title:
EVE HOLDINGS INC.
By
---------------------------------
Name:
Title:
BANKERS TRUST COMPANY,
as Collateral Agent,
acting on behalf of the
Secured Creditors
By
-------------------------------
Name:
Title:
<PAGE> 1
Exhibit 99.4
COMMITMENT, CONTRIBUTION AND SUBORDINATION AGREEMENT
COMMITMENT, CONTRIBUTION AND SUBORDINATION AGREEMENT, dated as
of January 30, 1998 (this "AGREEMENT"), executed by Liggett Group Inc., a
Delaware corporation, (the "COMPANY"), Brooke Group Ltd. ("BGL"), a Delaware
corporation, and BGLS Inc. ("BGLS"), a Delaware corporation, and Brooke
(Overseas) Ltd., a Delaware corporation, ("BOL" and, collectively with BGL and
BGLS, the "OBLIGORS") in favor of Bankers Trust Company, a New York banking
corporation organized under the laws of the State of New York, acting not in its
individual capacity but solely as Trustee under the Indenture (as defined below)
and Collateral Agent under the Security Agreement (the "TRUSTEE" or the
"COLLATERAL AGENT", as applicable) and the Noteholders.
W I T N E S S E T H:
--------------------
WHEREAS, LIGGETT GROUP INC., a Delaware corporation (together
with its successors and assigns, the "COMPANY") and EVE HOLDINGS INC., a
Delaware corporation, as a guarantor thereunder have entered into an Indenture
dated as of February 14, 1992 (as at any time amended or supplemented or
otherwise modified, the "INDENTURE"; capitalized terms defined in the Indenture
and not otherwise defined herein being used as defined therein) with the
Trustee; providing for, INTER ALIA, the issuance by the Company of 11.50% Series
A Senior Secured Notes Due 1999 (the "SERIES A NOTES"), 11.50% Series B Senior
Secured Notes Due 1999 (the "SERIES B NOTES") and Variable Rate Series C Senior
Secured Notes Due 1999 (the "SERIES C NOTES" and, together with the Series A
Notes and the Series B Notes, the "SENIOR SECURED NOTES");
WHEREAS, the Company desires to enter into a Second
Supplemental Indenture and Amendment to Series B and Series C Senior Secured
Notes, dated as of January 30, 1998 (the "SECOND SUPPLEMENTAL INDENTURE AND
AMENDMENT TO NOTES"), to amend the Indenture and the Senior Secured Notes to,
among other things, (i) extend the date of the February 1, 1998 mandatory
redemption of $37,500,000 aggregate principal amount of Senior Secured Notes,
required pursuant to paragraph 2(b)(ii) of the Senior Secured Notes (the "1998
MANDATORY REDEMPTION") and (ii) allow the Company to consummate the
Liggett-Ducat Sale (as defined below);
WHEREAS, in connection with the formation of a joint venture
or other entity (the "NEW RUSSIAN ENTITY") to finance the construction of a new
tobacco factory in Russia by Liggett-Ducat Limited, a Russian joint stock
company ("LIGGETT-DUCAT"), the Company intends to transfer to BOL its
approximately 19.97% ownership interest in, and options to acquire
<PAGE> 2
-2-
additional shares of, Capital Stock of Liggett-Ducat (the "LIGGETT-DUCAT SALE")
in consideration of (i) the execution and delivery of this Agreement by the
Obligors, (ii) the execution and delivery of the BOL Pledge Agreement by BOL and
(iii) the agreement by the Obligors that all intercompany debt owed by
Liggett-Ducat to Obligors shall either, at the option of the Obligors, be
converted to equity or canceled immediately prior to the consummation of the
Liggett-Ducat Sale; and
WHEREAS, in order to induce the Requisite Holders to consent
to and the Trustee to enter into the Second Supplemental Indenture and Amendment
to Series B and Series C Senior Secured Notes the Obligors have agreed to enter
into this Agreement.
A G R E E M E N T
-----------------
NOW, THEREFORE, in consideration of the premises and other
benefits to the Obligors, the receipt and sufficiency of which are hereby
acknowledged, the Obligors hereby agree as follows:
1. INTEREST FUNDING COMMITMENT. In connection with the
extension of the 1998 Mandatory Redemption, BGL and BGLS, jointly and severally,
agree that, in the event that the Company should fail to pay the interest
installment on the Senior Secured Notes due on February 1, 1998 or August 1,
1998 (the "1998 INTEREST PAYMENTS") in full when due, including with respect to
the August 1, 1998 installment, the applicable grace period, BGL and BGLS shall,
at their option, either (i) arrange for loans to be made to the Company, and, if
required by the lender thereof, guaranty the repayment of such loans or (ii)
make loans to the Company, all of which loans shall constitute Subordinated
Indebtedness, in either case so as to permit the Company to make each such 1998
Interest Payment in full when due, including with respect to the August 1, 1998
installment, the applicable grace period (the "BGL/BGLS COMMITMENT").
2. SUBORDINATION. BGL and BGLS agree that any claim against
the Company in connection with any right of repayment, reimbursement,
contribution or subrogation of BGL or BGLS against the Company arising out of
any of the transactions contemplated hereby or any claim against the Company in
connection with the loans or arising out of the guarantee of loans made under
the Working Capital Facility in connection with the Company's payment of the
August 1, 1997 interest installment, shall be subordinated in all respects to
the prior repayment of the Senior Secured Notes in full and the Company shall
not be obligated to make any payment in respect thereof until the Senior Secured
Notes shall have been repaid in full.
3. LIGGETT-DUCAT SALE; CONTRIBUTION/CANCELLATION OF
INDEBTEDNESS. Subject to BOL's execution and delivery of the BOL Pledge
Agreement, on the Effective Date (as defined
<PAGE> 3
-3-
in the Second Supplemental Indenture and Amendment to Notes) the Company shall
transfer to BOL its approximately 19.97% ownership interest in, and options to
acquire additional shares of Capital Stock of, Liggett-Ducat. The Obligors
hereby covenant and agree that immediately prior to the consummation of the
Liggett-Ducat Sale, all Indebtedness owed by Liggett-Ducat to any of the
Obligors shall have been either converted to equity or canceled.
4. CONTRIBUTION OF BGL SHARES. On or prior to the Effective
Date (as defined in the Second Supplemental Indenture and Amendment to Notes)
BGL shall contribute and deliver 482,970 shares of its common stock (together
with such additional shares as may be required as a result of rounding
requirements set forth in the Supplemental Indenture and Amendment to Notes) to
the Company in order to permit the Company to satisfy its obligations under
Section 4.01 of the Second Supplemental Indenture and Amendment to Series B and
Series C Senior Secured Notes. Such shares shall be duly authorized, validly
issued, fully paid and non-assessable and delivered to the Company on the
Effective Date, free and clear of any Lien created by or through BGL. Pending
the distribution of such shares to the Holders in accordance with the Second
Supplemental Indenture and Amendment to Notes, the Company shall deliver such
shares to the Trustee who shall hold such shares in trust for the benefit of the
Holders.
5. WAIVER OF MANAGEMENT FEES. BGL and BGLS hereby waive any
right to payments from the Company under the agreements set forth in Section
4.09(iv) of the Indenture in excess of $3,600,000 cumulatively and in the
aggregate during any calendar year commencing with January 1, 1998.
6. RIGHTS OF TRUSTEE AND COLLATERAL AGENT. Each of the
Obligors agrees that the Trustee shall have the right, in the name of and on
behalf of the Company, to enforce its obligations to the Company hereunder and
that the Company's rights hereunder shall constitute Collateral under the
Security Agreement.
7. REPRESENTATIONS AND WARRANTIES. Each the Obligors
represents and warrants to the Trustee, the Collateral Agent and the Noteholders
as follows:
(a) the execution and delivery of this Agreement by such
Obligor and the performance of its obligations hereunder have been duly
authorized by all necessary corporate action on the part of such Obligor and
this Agreement has been duly and validly executed and delivered by such Obligor
and constitutes its legal, valid and binding obligation, enforceable against it
in accordance with its terms; and
(b) the execution and delivery of this Agreement and the
performance of its obligations hereunder will not conflict with or result in a
breach of, or require any consent under, the charter or by-laws of such Obligor,
or any applicable law or regulation, or any order, writ,
<PAGE> 4
-4-
injunction or decree of any court or governmental authority or agency, or any
agreement or instrument to which such Obligor is a party or by which it is
subject or bound or constitute a default under any such agreement or instrument,
where such conflict, breach or failure to obtain consent will have a material
adverse effect on the transactions contemplated hereby.
8. AMENDMENT. The terms and conditions of this Agreement may
be changed, waived, modified or varied only by a writing executed by each of the
Obligors and the Trustee.
9. OBLIGATIONS ABSOLUTE. The obligations of each Obligor
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of the Company or any other
Obligor; (b) any exercise or non-exercise, or any waiver of, any right, remedy,
power or privilege under or in respect of the Indenture; (c) any amendment to or
modification of any agreement or any security for any of the Obligations;
whether or not the Obligors shall have notice or knowledge of any of the
foregoing or (d) to any right of setoff or any counterclaim.
10. SUCCESSORS. All agreements of the Obligors in this
Agreement shall bind their respective successors.
11. SEVERABILITY. In case any provision in this Agreement
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
12. GOVERNING LAW. This Agreement and the rights and
obligations of the parties hereunder shall be construed in accordance with and
governed by the law of the State of New York without regard to principles of
conflicts of law. The parties hereto agree to submit to the jurisdiction of the
state and federal courts located in the Borough of Manhattan of the State of New
York in any action or proceeding arising out of or relating to this Agreement.
13. COUNTERPARTS. All parties may sign any number of copies of
this Agreement. Each signed copy shall be an original, but all of them together
represent the same agreement.
<PAGE> 5
-5-
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed and delivered by their duly authorized officers as of
the date first above written.
LIGGETT GROUP INC.
By:
--------------------------------------
Name:
Title:
BROOKE GROUP LTD.
By:
--------------------------------------
Name:
Title:
BGLS INC.
By:
--------------------------------------
Name:
Title:
BROOKE (OVERSEAS) LTD.
By:
--------------------------------------
Name:
Title:
ACKNOWLEDGED AND AGREED:
BANKERS TRUST COMPANY, as
Trustee and Collateral Agent
By:
----------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 99.5
REGISTRATION RIGHTS AGREEMENT
Brooke Group Ltd.
REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") dated as of January
30, 1998 among Brooke Group Ltd., a Delaware corporation ("BROOKE"), and the
holders of record of the Shares described below who have either executed a
Consent (as defined in Section 6.9) or who have opted into this Agreement in
accordance with Section 6.9 below (the "APPLICABLE HOLDERS").
RECITALS
A. The Applicable Holders are owners of up to an aggregate of 482,970
shares (together with any additional shares issued as a result of rounding
requirements) of common stock of Brooke, $0.10 par value per share, (such shares
owned by the Applicable Holders are referred to herein as the "SHARES"), which
Shares were distributed to the holders (the "HOLDERS") of the Series B and
Series C Senior Secured Notes (the "NOTES") issued pursuant to the Indenture
dated as of February 14, 1992, as supplemented and amended by the First
Supplemental Indenture, dated as of January 26, 1994, and the Second
Supplemental Indenture and Amendment to Series B and Series C Senior Secured
Notes, dated as of January 30, 1998 (the "SECOND SUPPLEMENTAL INDENTURE AND
AMENDMENT TO NOTES"), among Liggett Group Inc., Eve Holdings Inc. and Bankers
Trust Company (as supplemented and amended and in effect from time to time, the
"INDENTURE").
B. On the terms and subject to the conditions set forth herein, Brooke
and the Applicable Holders desire that Brooke use its reasonable best efforts to
file, by February 12, 1998, with the SEC a Registration Statement to register
the resale of the Shares by the Applicable Holders.
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:
II.
DEFINITIONS AND USAGE
II. A. Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"Effectiveness Period" has the meaning set forth in Section 2.2.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
<PAGE> 2
"Indenture" has the meaning set forth in the Preamble.
"Losses" has the meaning set forth in Section 4.1.
"Majority Holders" means holders of at least 60% of the Registrable
Securities as of the time of determination.
"Notes" has the meaning set forth in the Preamble.
"Person" or "person" means an individual, trustee, corporation, limited
liability company, partnership, joint stock company, trust,
unincorporated association, union, business association, firm or other
entity.
"Preliminary Prospectus" means any preliminary prospectus that may be
included in any Registration Statement.
"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 plus any
additional shares of common stock of Brooke paid in respect of
Liquidated Damages under Section 2.5 hereof. However, a Share or any
such additional share, as applicable, 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) is eligible for resale without
restriction pursuant to Rule 144(k) of the Regulations or any similar
rule or regulation hereafter adopted by the SEC or (iv) 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
-2-
<PAGE> 3
and all material deemed part of such registration statement by Rule
430A of the Regulations.
"Regulations" means the regulations of the SEC under the Securities
Act.
"Rule 415" means Rule 415 of the Regulations or any similar rule or
regulation hereafter adopted by the SEC.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Majority Holders" means holders of at least 60% of the
Registrable Securities then being offered pursuant to a Registration
Statement.
"Shares" has the meaning set forth in the Preamble.
"Shelf Registration" has the meaning set forth in Section 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.
II. B. 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
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"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.
III.
REGISTRATION OF REGISTRABLE SECURITIES UNDER SECURITIES ACT
III. A. 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.
III. B. Shelf Registration. On or before February 12, 1998, Brooke
shall prepare and file with the SEC a Registration Statement on Form S-3 (or if
Form S-3 is unavailable, shall file a Registration Statement on Form S-1 as soon
as practicable after the date hereof) for an offering to be made by the
Applicable Holders on a continuous basis under Rule 415 covering all the
Registrable Securities (the "Shelf Registration"). Brooke shall use its
reasonable best efforts to cause the Shelf Registration to be declared effective
under the Securities Act by May 31, 1998 and to keep the 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) the Registration Statement has been effective for an aggregate of two
(2) years, (y) all Registrable Securities have been sold other than to an
Applicable Holder, or (z) in the opinion of Milbank, Tweed, Hadley & McCloy or
other nationally recognized counsel to Brooke reasonably acceptable to the
Majority Holders, which opinion shall be reasonably satisfactory in form, scope
and substance to the Majority Holders, registration of the Registrable
Securities is no longer required under the Securities Act for the Applicable
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 holder of
Registrable Securities may include any of its Registrable Securities in any
Shelf Registration pursuant to this Agreement unless and until such holder
furnishes to Brooke in writing such information as Brooke may reasonably
request. Notwithstanding the foregoing, Brooke shall not be required to file the
Shelf Registration or have it declared or remain effective during any period in
which Brooke is not permitted by the Regulations to use a Form S-3 or Form S-1
Registration Statement for the registration of the resale of Registrable
Securities.
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
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<PAGE> 5
required to be stated therein or necessary to make the statements therein not
misleading, or (iv) if reasonably requested by the Majority Holders.
III. C. Registration Procedures.
III. C. 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 Selling Majority
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 Applicable Holders of the Registrable Securities covered
by such Registration Statement, and the managing underwriters, if any, a
reasonable opportunity to review and, if they desire, comment on all such
documents (including any documents to be incorporated by reference therein
and all exhibits thereto) proposed to be filed.
b. COMPLIANCE WITH LAW. Comply with the provisions of the Securities
Act, the Exchange Act and the rules and regulations of the SEC promulgated
thereunder applicable to it with respect to the disposition of all
Registrable Securities covered by such Registration Statement as amended or
by such Prospectus as supplemented.
c. NOTICE. Notify the Applicable Holders owning 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 Applicable 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 incorporated by reference and exhibits), (ii) of the issuance
by the SEC of any stop order suspending the effectiveness of a Registration
Statement or of any order preventing or suspending the use of any
Preliminary Prospectus, the initiation of any proceedings for that purpose
or any other communication between the SEC and Brooke or their
representatives related to a Shelf Registration, (iii) if at any time when
a prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Securities, the representations
and warranties of 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
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<PAGE> 6
becoming known that requires the making of any changes in such Registration
Statement, Prospectus or documents so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary
to make the statements therein not misleading, and, in the case of the
Prospectus, it will not contain any untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein,
in light of the 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 Applicable 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 Applicable 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 Applicable 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.
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<PAGE> 7
h. BLUE SKY LAWS. Use its reasonable best efforts to register or
qualify, and to cooperate with the selling Applicable 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 the Selling
Majority 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 Applicable 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 such Applicable 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 Applicable 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 Applicable Holders' 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
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<PAGE> 8
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 Majority
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 Majority 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
selling Applicable Holder, any underwriter participating in any such
disposition of Registrable Securities, and any attorney, accountant or
other agent retained by any such selling
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<PAGE> 9
Applicable 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 Applicable
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. Each Applicable Holder shall not be prohibited from engaging in
market transactions if such information is not material, to the extent
permitted by applicable law. Each Applicable 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. NASD. 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 60 days in the aggregate in any twelve month period,
taking any action with respect to
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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 selling Applicable Holders an opinion or opinions of outside
counsel to Brooke (which counsel shall be reasonably satisfactory to the
Selling Majority 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 Majority Holders, to
effect the registration and distribution of the Registrable Securities
covered by the Registration Statement contemplated hereby.
III. C. 2. Applicable Holder Covenants. Each Applicable Holder
agrees by acceptance of the Registrable Securities that:
(a) 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 Applicable Holder shall forthwith discontinue disposition of
such Registrable Securities covered by such Registration Statement or
Prospectus until such Applicable 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;
(b) such Applicable Holder shall promptly furnish to Brooke in writing,
upon Brooke's reasonable request, any and all information as to such
Applicable 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 with 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; and
(c) all information to be furnished to Brooke by or on behalf of such
Applicable Holder expressly for use in connection with the preparation of
any Preliminary Prospectus, the Prospectus, the Registration Statement, or
any amendment or supplement
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thereto, will not include any untrue statement of a material fact required
to be stated therein or necessary to make the statements therein not
misleading.
III. D. Qualifications to Registration Obligations. Notwithstanding
anything in this Agreement to the contrary, if a Registration Statement does not
become effective after Brooke has filed it solely by reason of a written request
not to proceed made by the Majority Holders, Brooke's obligations to file such
Registration Statement and attempt to cause it to become effective shall be
deemed completely satisfied and discharged to the extent of such request.
III. E. Liquidated Damages. Brooke agrees that the Applicable Holders
holding Registrable Securities will suffer damages if Brooke fails to fulfill
its obligations under Sections 2.1 and 2.2 and that it would not be feasible to
ascertain the extent of such damages with precision. Accordingly, (i) if Brooke
does not cause the Shelf Registration to be made effective by May 31, 1998, then
liquidated damages ("Liquidated Damages") shall accrue on and attach to each
Registrable Security at the Daily Rate for each day until the Shelf Registration
is effective or (ii) if Brooke fails to maintain the effectiveness of the Shelf
Registration on any day during the Effectiveness Period, Liquidated Damages
shall accrue on and attach to the Registrable Securities at the Daily Rate for
each day until the Shelf Registration or a substitute thereof is effective;
provided, however, that the number of days on which Liquidated Damages shall
accrue on any Registrable Securities shall not exceed 300 days in the aggregate;
provided, further, however, Liquidated Damages shall not accrue on the
Registrable Securities on any day in which Brooke is not required to maintain an
effective Registration Statement with respect to the Registrable Security
pursuant to the provisions of this Article II. For purposes hereof, "Daily Rate"
shall be equal to $0.0499476 per day per share of Registrable Security. The
Daily Rate shall be equitably adjusted in the event the Registrable Shares are
combined or subdivided or similar corporate action is taken by Brooke.
Liquidated Damages on each Registrable Security shall be payable, at
the option of Brooke, either (i) in cash; (ii) in shares of common stock of
Brooke, par value $0.10 per share, which shares shall be valued based on the
closing sales price of such common stock on the last trading day of the month
immediately prior to the month in which any such shares are issued pursuant to
this paragraph, as reported on the New York Stock Exchange, Inc. Composite Tape
and published in the Wall Street Journal, or (iii) in a combination of (i) and
(ii). All Liquidated Damages accruing during any calendar month shall be paid on
the first day of the month immediately following the calendar month in which
such Liquidated Damages accrued (or if such date is a Saturday, Sunday or a day
in which banks in New York are authorized to close, the next subsequent day
which is not a Saturday, Sunday or day in which banks in New York are authorized
to close) to holders of record of the Registrable Securities as they appear on
the stock transfer books of Brooke on the 15th day of the calendar month in
which such Liquidated Damages accrued.
Notwithstanding the foregoing, Liquidated Damages will not be required
to be paid in respect of Registrable Securities if the applicable default under
the foregoing paragraphs of this Section 2.5 arises from the failure of Brooke
to either cause to become effective or to maintain the effectiveness of, as
applicable, a Shelf Registration primarily by reason of the failure of an
Applicable Holder to provide such information as (i) Brooke reasonably requests,
with reasonable prior written notice, for use in such Shelf Registration
pursuant to the provisions of Section 2.3.2. or (ii) the SEC or NASD may request
in connection with such Shelf Registration.
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IV.
REGISTRATION EXPENSES
All reasonable 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 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 Applicable Holder owning Registrable Securities shall pay (i) all
underwriting discounts and commissions or broker's commissions incurred in
connection with the sale or other disposition of Registrable Securities for or
on behalf of such Applicable Holder's account and (ii) all fees and
disbursements of legal counsel for such Applicable Holder or any underwriter.
V.
INDEMNIFICATION
V. A. Indemnification by Brooke. Brooke shall indemnify and hold
harmless, to the fullest extent permitted by law, each Applicable Holder and its
affiliates and any investment funds managed thereby and their respective
shareholders, partners, officers, directors, agents and employees, each Person
who controls such Applicable Holder (within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act) and the shareholders,
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
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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 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 such Applicable 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 Applicable 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 Applicable Holder or such underwriter pursuant to Section 2.3.1(g),
after Brooke shall have notified such Applicable 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).
V. B. Indemnification by Applicable Holder. In connection with any
Registration Statement in which an Applicable Holder is participating, such
Applicable Holder shall indemnify and hold harmless, to the fullest extent
permitted by law, Brooke and its shareholders, 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 shareholders,
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
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writing to Brooke by such Applicable Holder expressly for use therein by notice
referring to this Section 4.2.
V. C. 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 (which counsel shall be reasonably satisfactory to the
indemnifying 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 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.
V. D. 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
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<PAGE> 15
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 as any
other relevant equitable considerations. The relative fault of such indemnifying
party, on the one hand, and indemnified party, on the other hand, shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been taken by, or relates to
information supplied by, such indemnifying party or indemnified party, and the
parties, relative intent, knowledge, access to information and opportunity to
correct or prevent any such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include any
legal or other fees or expenses reasonably incurred by such party in connection
with any Proceeding, to the extent such party would have been indemnified for
such expenses if the applicable indemnification provided for in Section 4.1 or
4.2 were available to such party.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 4.4 were determined by pro rata allocation
or by any other method of allocation that does not take account of the equitable
considerations referred to in the immediately preceding paragraph. 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.
V. E. 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).
VI.
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 Majority Holders with the consent of Brooke (not to be unreasonably
withheld or delayed).
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<PAGE> 16
VII.
MISCELLANEOUS
VII. A. 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.
VII. B. Amendments and Waivers. The 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 Majority
Holders. 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 Applicable 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 the other Applicable Holder may be given by
the Selling Majority Holders; 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.
VII. C. 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: Mark L. Weissler, Esq., telecopy (212) 530-5219, and
(ii) if to a Applicable Holder, to the address and telecopier number set forth
in the records of Brooke, with a copy to the Company at the address set forth
above, 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.
VII. D. 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.
VII. E. 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 or in Section 6.8, is not intended to confer
upon any Person other than the parties hereto any rights or remedies hereunder.
The obligations of Brooke pursuant hereto shall be limited to those obligations
of Brooke expressly set forth herein.
VII. F. 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. The parties hereto hereby agree to submit to the
jurisdiction of the state and federal courts located in
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<PAGE> 17
the Borough of Manhattan, New York City, New York, in any action or proceeding
arising out of or in relation to this Agreement.
VII. G. 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.
VII. H. 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 an Applicable Holder as follows: in
connection with the transfer of its Registrable Securities in whole or in part
to another Person; provided that the transferee executes an appropriate document
agreeing to be bound hereby as an Applicable 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.
VII. I. Applicable Holders' Consents and Opting-In. For the purposes of
this Agreement, any Holder or former Holder who either (i) executes and delivers
a consent to the Second Supplemental Indenture and Amendment to Notes, in the
form of the consent letter dated January 30, 1998 by Liggett Group Inc. (a
"Consent") or (ii) informs Brooke in writing by May 1, 1998 in such form as is
reasonably acceptable to Brooke that such Holder chooses to opt into this
Agreement and be bound by all the terms hereof, shall be deemed, in either case
of (i) or (ii), to be a party to this Agreement and an Applicable Holder
hereunder as of the date of receipt of such Consent or opt-in notice, as
applicable. Brooke shall maintain a list of Applicable Holders and update such
list from time to time throughout the term of this Agreement. Each Applicable
Holder agrees to the addition of Applicable Holders pursuant to the foregoing.
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<PAGE> 18
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement as of the date first written above.
"Brooke"
Brooke Group Ltd.,
a Delaware corporation
By:
----------------------------------------
Its:
---------------------------------------
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<PAGE> 1
EXHIBIT 99.6
PLEDGE AGREEMENT
DATED AS OF JANUARY 30, 1998
AMONG
BROOKE (OVERSEAS) LTD.
AND
BANKERS TRUST COMPANY,
AS COLLATERAL AGENT
FOR THE HOLDERS OF THE
11.50% SERIES B SENIOR SECURED NOTES DUE 1999,
AND
VARIABLE RATE SERIES C SENIOR SECURED NOTES DUE 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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ARTICLE I
<S> <C>
SECURITY INTERESTS................................................................. 2
1.1 Grant of Security Interest......................................................... 2
1.2 Substitution of Pledged Stock...................................................... 2
1.3 Substitution of Cash Collateral.................................................... 2
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS.................................. 3
2.1 Necessary Filings.................................................................. 3
2.2 No Liens........................................................................... 3
2.3 Financing Statements............................................................... 3
2.4 Chief Executive Office............................................................. 4
2.5 Intercompany Indebtedness.......................................................... 4
2.6 Delivery of Notice of Pledge of Shares; New Russian Entity......................... 4
2.7 Ownership of Liggett-Ducat; New Russian Entity..................................... 4
ARTICLE III
PROVISIONS CONCERNING COLLATERAL................................................... 5
3.1 Protection of Collateral Agent's Security.......................................... 5
3.2 Stock Collateral................................................................... 5
3.3 Anti-Dilution...................................................................... 5
3.4 Further Action..................................................................... 5
3.5 Power of Attorney.................................................................. 6
3.6 Confirmation of Release of Lien; Termination of Lien............................... 6
ARTICLE IV
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT....................................... 6
4.1 Remedies; Obtaining the Collateral Upon Default.................................... 6
4.2 Remedies; Disposition of the Collateral............................................ 7
4.3 Remedies; Registration Rights...................................................... 8
4.4 Proceeds Cash Collateral Account................................................... 8
4.5 Waiver of Claims................................................................... 8
</TABLE>
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<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.6 Application of Proceeds........................................................... 9
4.7 Remedies Cumulative............................................................... 10
4.8 Discontinuance of Proceedings..................................................... 10
ARTICLE V
INDEMNITY......................................................................... 11
5.1 Indemnity......................................................................... 11
5.2 Indemnity Obligations Secured by Collateral; Survival............................. 12
5.3 Action Contrary to Directions..................................................... 12
ARTICLE VI
DEFINITIONS....................................................................... 13
6.1 Definitions....................................................................... 13
ARTICLE VII
MISCELLANEOUS..................................................................... 15
7.1 Notices........................................................................... 15
7.2 Collateral Agent; Additional Collateral Agents.................................... 15
7.3 Waiver; Amendment................................................................. 17
7.4 Obligations Absolute.............................................................. 17
7.5 Successors........................................................................ 17
7.6 Headings Descriptive.............................................................. 18
7.7 Severability...................................................................... 18
7.8 Governing Law..................................................................... 18
7.9 Pledgor's Duties.................................................................. 18
7.10 Duplicate Originals............................................................... 18
7.11 Non-Recourse Liability............................................................ 18
7.12 Arbitration....................................................................... 19
APPENDIX A TO PLEDGE AGREEMENT.................................................................. 1
</TABLE>
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<PAGE> 4
PLEDGE AGREEMENT
----------------
PLEDGE AGREEMENT, dated as of January 30, 1998, by and between
BROOKE (OVERSEAS) LTD., a Delaware corporation (together with its successors and
assigns, the "PLEDGOR") and BANKERS TRUST COMPANY, acting not in its individual
capacity but solely as collateral agent hereunder (in such capacity, and
together with any successors in such capacity, the "COLLATERAL AGENT").
W I T N E S S E T H:
--------------------
WHEREAS, LIGGETT GROUP INC., a Delaware corporation (together
with its successors and assigns, the "ISSUER") and EVE HOLDINGS INC., a Delaware
corporation, as a guarantor thereunder (the "GUARANTOR") have entered into an
Indenture dated as of February 14, 1992 (as at any time amended or supplemented
or otherwise modified, the "INDENTURE"; capitalized terms defined in the
Indenture and not otherwise defined herein being used as defined therein) with
Bankers Trust Company, acting not in its individual capacity,but solely as
trustee thereunder (in such capacity, the "TRUSTEE"), providing for, INTER ALIA,
the issuance by the Issuer of 11.50% Series A Senior Secured Notes Due 1999 (the
"SERIES A NOTES"), 11.50% Series B Senior Secured Notes Due 1999 (the "SERIES B
NOTES") and Variable Rate Series C Senior Secured Notes Due 1999 (the "SERIES C
NOTES" and, together with the Series A Notes and the Series B Notes, the
"NOTES");
WHEREAS, in connection with the formation of a joint venture
or other entity (the "NEW RUSSIAN ENTITY") to finance the construction of a new
tobacco factory in Russia by Liggett-Ducat Limited, a Russian joint stock
company ("LIGGETT-DUCAT"), the Issuer intends to transfer its approximately
19.97% ownership interest in, and options to acquire additional shares of,
Capital Stock of Liggett-Ducat (the "LIGGETT-DUCAT SALE") to the Pledgor, which
interest is subject to the Lien of the Collateral Agent; and
WHEREAS, the Issuer desires to amend the Senior Secured Notes
and the Indenture to, among other things, allow the Liggett-Ducat Sale and
extend the date of the February 1, 1998 mandatory redemption of $37,500,000
aggregate principal amount of Senior Secured Notes, required pursuant to
paragraph 2(b)(ii) of the Senior Secured Notes; and
WHEREAS, in order to induce the Requisite Holders to consent
to the Second Supplemental Indenture and Amendment to Series B and Series C
Senior Secured Notes, the
<PAGE> 5
Pledgor has agreed to pledge and grant a security interest in the Collateral (as
hereinafter defined), as provided for herein.
NOW, THEREFORE, in consideration of the premises and other
benefits to the Pledgor, the receipt and sufficiency of which are hereby
acknowledged, the Pledgor hereby makes the following representations and
warranties and hereby covenants and agrees as follows:
ARTICLE I
SECURITY INTERESTS
1.1 GRANT OF SECURITY INTEREST. As collateral security for the
prompt and complete payment and performance when due of the Obligations, the
Pledgor does hereby grant to the Collateral Agent for the ratable benefit of the
Secured Creditors a continuing interest in all of the right, title and interest
of the Pledgor in, to and under the Pledged Stock.
1.2 SUBSTITUTION OF PLEDGED STOCK. In connection with the
formation of the New Russian Entity, the Pledgor will contribute all of its
interest in Liggett-Ducat, including the Pledged Stock, to the New Russian
Entity in exchange for an ownership interest in the New Russian Entity. Upon the
formation of the New Russian Entity and the contribution of the Pledged Stock
thereto, the Collateral Agent agrees that the Pledged Stock shall be released by
the Collateral Agent contemporaneously with the Pledgor's pledge and deposit of
interests of the Pledgor in the New Russian Entity in an amount not less than
16% of the total interests in the New Russian Entity, which interest shall
constitute the Pledged Stock thereafter.
1.3 SUBSTITUTION OF CASH COLLATERAL. The Pledgor may, upon the
occurrence of an Event of Default and a demand for registration pursuant to
Section 4.3, substitute for the Pledged Stock cash collateral in an amount equal
to the fair market value of the Pledged Stock determined as follows (any such
determination, an "APPRAISAL"):
(a) The Pledgor shall retain, at its own expense, an appraiser
(the "PLEDGOR'S APPRAISER") who shall assign a fair market
value to the Pledged Stock. If the Collateral Agent is
notified by the Requisite Holders that they agree with the
fair market value determined by the Pledgor's Appraiser, such
market value shall be deemed conclusive.
(b) In the event that the Collateral Agent is notified by the
Requisite Holders that they do not agree with the fair market
value determined by the Pledgor's Appraiser, the Collateral
Agent shall retain, at the sole expense of the Pledgor an
appraiser (the
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<PAGE> 6
"COLLATERAL AGENT'S APPRAISER") who shall assign a fair market
value to the Pledged Stock. In the event that the fair market
value determined by the Collateral Agent's Appraiser differs
from the previously assessed fair market value by a margin of
15% or less, the fair market value of the Pledged Stock shall
be deemed to be the average of the two appraisals.
(c) In the event that the fair market value determined by the
Collateral Agent's Appraiser differs from the previously
assessed fair market value by a margin of greater than 15%,
then the Pledgor's Appraiser and the Collateral Agent's
Appraiser shall retain, at the sole expense of the Pledgor, a
third appraiser whose determination of the fair market value
of the Pledged Stock shall be conclusive.
Upon the Collateral Agent's receipt of cash collateral in the
amount of the fair market value of the Pledged Stock as determined above, the
Collateral Agent shall release the Pledged Stock to the Pledgor without any
further action being required by the Pledgor. The cash collateral shall be
deposited in the Proceeds Cash Collateral Account and maintained therein in
accordance with Section 4.4.
ARTICLE II
GENERAL REPRESENTATIONS, WARRANTIES AND COVENANTS
The Pledgor represents, warrants and covenants, as follows:
2.1 NECESSARY FILINGS. All filings, registrations and
recordings necessary or appropriate to create, preserve, protect and perfect the
security interest granted by the Pledgor to the Collateral Agent hereby in
respect of the Collateral of the Pledgor have been accomplished and upon
delivery of the Pledged Stock to the Collateral Agent, the security interest
granted to the Collateral Agent pursuant to this Pledge Agreement in and to the
Collateral constitutes a perfected security interest therein superior and prior
to the rights of all other Persons and subject to no Liens (other than
restrictions not affecting the perfection or priority of the Lien of the
Collateral Agent).
2.2 NO LIENS. The Pledgor is the owner of all the Collateral
free from any Lien (other than restrictions not affecting the perfection or
priority of the Lien of the Collateral Agent), and the Pledgor shall defend the
Collateral against all claims and demands of all Persons at any time claiming
the same or any interest therein adverse to the Collateral Agent.
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<PAGE> 7
2.3 FINANCING STATEMENTS. There is no financing statement (or
similar statement or instrument of registration under the law of any
jurisdiction) covering or purporting to cover any interest of any kind in the
Collateral of the Pledgor in the jurisdictions in which the Collateral is
located and so long as the Obligations remain unpaid, the Pledgor will not
execute or authorize to be filed in any public office any financing statement
(or similar statement or instrument of registration under the law of any
jurisdiction) or statements relating to such Collateral except financing
statements (or similar statement or instrument of registration under the law of
any jurisdiction) filed or to be filed in respect of and covering the security
interests granted hereby by the Pledgor.
2.4 CHIEF EXECUTIVE OFFICE. The chief executive office of the
Pledgor is located at 100 S.E. Second Street, 32nd Floor, Miami, Florida, 33131.
The Pledgor will not move its chief executive office until (a) it shall have
given to the Collateral Agent not less than thirty (30) days' prior written
notice of its intention so to do, clearly describing such new location and
providing such other information in connection therewith as the Collateral Agent
may reasonably request, and (b) with respect to such new location, it shall have
taken all action, satisfactory to the Collateral Agent, to maintain the security
interest of the Collateral Agent in the Collateral intended to be granted hereby
(including the priority thereof) at all times fully perfected and in full force
and effect (except with respect to Collateral in which a security interest may
not be perfected by filings or as to which filings are not necessary to achieve
perfection).
2.5 INTERCOMPANY INDEBTEDNESS. As of the date hereof,
Liggett-Ducat has no outstanding Indebtedness to the Pledgor, BGL or BGLS.
2.6 DELIVERY OF NOTICE OF PLEDGE OF STOCK; NEW RUSSIAN ENTITY.
As soon as is practicable following the execution of this Agreement the Pledgor
shall (i) deliver notice to Liggett-Ducat, substantially in the form set forth
in Annex 2 hereof, of the Lien on the Pledged Stock granted hereby and (ii)
cause Liggett-Ducat to deliver to the Collateral Agent a confirmation of such
notice, substantially in the form set forth in Annex 3 hereof.
2.7 OWNERSHIP OF LIGGETT-DUCAT; RUSSIAN ENTITY. It owns more
than 50% of the Capital Stock of Liggett-Ducat and covenants that it shall
continue to own more than 50% of such Capital Stock or, in the event of a
substitution of interests in the New Russian Entity under Section 1.2 hereof,
shall own and shall continue to own more than 50% of all outstanding interests
in the New Russian Entity. Upon such a substitution, all references herein to
"Liggett-Ducat" shall be deemed to refer to the New Russian Entity and Secured
Creditors shall have all the rights and remedies with respect to such interests
as are conferred hereunder with respect to the Capital Stock of Liggett-Ducat.
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<PAGE> 8
ARTICLE III
PROVISIONS CONCERNING COLLATERAL
3.1 PROTECTION OF COLLATERIAL AGENT'S SECURITY. The Pledgor
will do nothing to, and use its best efforts to not permit any other Person to,
impair the rights of the Collateral Agent and the Secured Creditors in the
Collateral.
3.2 STOCK COLLATERIAL. The Pledgor shall deliver to the
Collateral Agent for the benefit of the Secured Creditors, certificates
representing the Pledged Stock with appropriate stock power or assignment, duly
executed in blank. So long as no Event of Default 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 Pledged Stock and the Collateral
Agent shall execute and deliver to the Pledgor, at the expense of the Pledgor,
all such proxies, powers of attorney, dividend and other payment orders, and all
such instruments, without recourse, as the Pledgor may reasonably request for
the purpose of enabling the Pledgor or its designees to exercise the rights and
powers which it is entitled to exercise pursuant to this Section 3.2. Unless and
until an Event of Default has occurred and is continuing (and provided that the
rights of the Collateral Agent and the Secured Creditors shall not be impaired
by any of the following actions) the Pledgor shall be entitled to receive and
retain any dividends and other distributions on or in respect of the Pledged
Stock paid in cash. If any Event of Default shall have occurred, then so long as
such Event of Default shall continue, and whether or not the Collateral Agent
exercises any available right to declare any Obligation due and payable or seeks
or pursues any other relief or remedy available to it under applicable law or
under this Pledge Agreement, all dividends and other distributions on or in
respect of the Pledged Stock shall be paid directly to the Collateral Agent,
subject to the terms of this Pledge Agreement, and if the Collateral Agent shall
so request in writing, the Pledgor agrees to execute and deliver to the
Collateral Agent appropriate additional dividends, distributions and other
payment orders and documents to that end, PROVIDED that if such Event of Default
is cured, any such dividend or distribution or principal or interest theretofore
paid to the Collateral Agent shall, upon request of the Pledgor (except to the
extent theretofore applied to the Obligations), be returned by the Collateral
Agent to the Pledgor.
3.3 ANTI-DILUTION. Upon the occurrence of any event as a
result of which the interest pledged to the Collateral Agent in Liggett-Ducat or
the New Russian Entity, as applicable, would constitute less than 16% of the
outstanding equity of such entity, the Pledgor shall cause such entity to take
such actions such that at all times the Pledged Stock shall constitute 16% of
the outstanding equity of such entity.
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<PAGE> 9
3.4 FURTHER ACTION. The Pledgor will, at its own expense,
make, execute, endorse, acknowledge, file or deliver to the Collateral Agent
from time to time such lists and descriptions of its Collateral, schedules,
confirmatory assignments, conveyances, financing statements, transfer
endorsements, powers of attorney, certificates, reports and other assurances or
instruments and take such further steps relating to the Collateral, which the
Collateral Agent deems reasonably appropriate or advisable to perfect, preserve
or protect its security interest in the Collateral (including the priority
thereof).
3.5 POWER OF ATTORNEY. The Pledgor hereby constitutes and
appoints the Collateral Agent its true and lawful attorney-in-fact, to the
fullest extent permitted by applicable law, irrevocably, with full power (in the
name of the Pledgor or otherwise) after the occurrence and during the
continuance of an Event of Default to take any action and to execute any
instrument which is reasonably necessary to accomplish the purposes of this
Pledge Agreement, including, without limitation, to protect, maintain, and
preserve the Collateral, and (a) to act, require, demand, receive, compound and
give acquittance for any and all monies and claims for monies due or to become
due to the Pledgor under or arising out of the Collateral, (b) to endorse any
checks or other instruments (including any instruments necessary to accomplish
the assignment of all or any right, title or interest in all or any part of the
Collateral to the Collateral Agent to the full extent permitted by law) or
orders in connection with clause (a) above, and (c) to file any claims or take
any action or institute any proceedings which the Collateral Agent acting on the
written instructions of the Requisite Holders may deem to be necessary or
advisable in connection with the security interest granted hereby, which
appointment as attorney-in-fact is coupled with an interest.
3.6 CONFIRMATION OF REALESE OF LIEN; TERMIANTION OF LIEN. At
such time as the Obligations are paid in full, the security interest granted to
the Collateral Agent pursuant to this Pledge Agreement in and to the Collateral
shall terminate, and the Collateral Agent, at the Pledgor's expense, will, at
the request of the Pledgor, confirm the termination of such security interest
and the release of the Collateral from the Lien of this Pledge Agreement. The
Collateral Agent, at the request and expense of the Pledgor, will execute and
deliver to the Pledgor the proper instruments (including, without limitation,
Uniform Commercial Code termination statements on form UCC-3) acknowledging the
termination of the security interest created by this Pledge Agreement, and will
duly assign, transfer and deliver to the Pledgor (without recourse and without
any representation or warranty) the Collateral affected by such termination.
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<PAGE> 10
ARTICLE IV
REMEDIES UPON OCCURRENCE OF EVENT OF DEFAULT
4.1 REMEDIES; OBTAINING THE COLLATERIAL UPON DEFAULT. The
Pledgor agrees that, if any Event of Default shall have occurred and be
continuing, then and in every such case, subject to any mandatory requirements
of applicable law then in effect, the Collateral Agent may, and upon written
instruction from the Requisite Holders, the Collateral Agent shall:
(a) personally, or by agents or attorneys, immediately retake
possession of the Collateral or any part thereof not then in possession
of the Collateral Agent, from the Pledgor or any other Person who then
has possession of any part thereof with or without notice or process of
law, and for that purpose may enter upon the Pledgor's premises where
any of the Collateral is located and remove the same and use in
connection with such removal any and all services, supplies, aids and
other facilities of the Pledgor;
(b) instruct the obligor or obligors on any agreement,
instrument or other obligation constituting the Collateral to make any
payment or render any performance required by the terms of such
instrument or agreement directly to the Collateral Agent or its
designees;
(c) withdraw all monies, securities and instruments held by
the Collateral Agent for the benefit of the Collateral Agent and the
Secured Creditors for application to the Obligations;
(d) sell or otherwise liquidate, or direct the Pledgor to sell
or otherwise liquidate, any or all investments made in whole or in part
with the Collateral or any part thereof, and take possession of the
proceeds of any such sale or liquidation; and
(e) take possession of the Collateral or any part thereof that
is not then in the possession of the Collateral Agent, by directing the
Pledgor in writing to deliver the same to the Collateral Agent at any
place or places designated by the Collateral Agent that are reasonably
convenient to both parties, in which event the Pledgor shall at its own
expense, it being understood that the Pledgor's obligation so to
deliver the Collateral is of the essence of this Pledge Agreement and
that, accordingly, upon application to a court of equity having
jurisdiction, the Collateral Agent shall be entitled to a decree
requiring specific performance by the Pledgor of said obligation.
Any other remedies provided in this Pledge Agreement are in addition to those
provided herein.
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4.2. REMEDIES; DISPOSITION OF THE COLLATERIAL. Any Collateral
repossessed by the Collateral Agent under or pursuant to Section 4.1 and any
other Collateral whether or not so repossessed by the Collateral Agent, may (if
any Event of Default shall have occurred and be continuing) be sold or otherwise
disposed of under one or more contracts or as an entirety, and without the
necessity of gathering at the place of sale the property to be sold, and in
general in such manner, at such time or times, at such place or places and on
such terms as the Collateral Agent may, in compliance with any mandatory
requirements of applicable law, determine to be commercially reasonable. Any
such disposition which shall be a private sale or other private proceedings
permitted by such requirements shall be made upon not less than ten (10) days'
written notice to the Pledgor specifying the time at which such disposition is
to be made. Any such disposition which shall be a public sale permitted by such
requirements shall be made upon not less than ten (10) days written notice to
the Pledgor specifying the time and place of such sale and, in the absence of
applicable requirements of law, shall be by public auction (which may, at the
Collateral Agent's option, be subject to reserve), after publication of notice
of such auction not less than ten (10) days prior thereto in two newspapers in
general circulation in the City of New York and in any other appropriate
publication as provided in the Uniform Commercial Code. All expenses incurred by
the Collateral Agent in connection with such disposition shall be for the
account of the Pledgor, shall be repaid to the Collateral Agent upon request
therefor and shall constitute part of the Obligations secured by this Pledge
Agreement. To the extent permitted by any requirement of law, the Collateral
Agent or any Secured Creditor may itself bid for and become the purchaser of the
Collateral or any item thereof, offered for sale in accordance with this Section
4.2 without accountability to the Pledgor (except to the extent of surplus money
received as provided in Section 4.6). If, under mandatory requirements of
applicable law, the Collateral Agent shall be required to make disposition of
the Collateral within a period of time which does not permit the giving of
notice to the Pledgor as hereinabove specified, the Collateral Agent need give
the Pledgor any such notice of disposition as shall be reasonably practicable in
view of such mandatory requirements of applicable law.
4.3 REMEDIES; REGISTRATION RIGHTS. In addition to the remedies
set forth above, but subject to Section 1.3, upon the occurrence of an Event of
Default, the Collateral Agent at the direction of the Requisite Holders shall be
entitled to direct the Pledgor to cause Liggett-Ducat or the New Russian Entity,
as applicable, to register the sale of the Pledged Stock on the terms set forth
in Appendix A hereto. In connection with the consummation of an offering in
connection with such registration, the Collateral Agent will release its Lien
upon the Pledged Stock, the Lien of the Collateral Agent shall attach to the
proceeds of such offering and such proceeds shall be applied in accordance
herewith.
4.4 PROCEEDS CASH COLLATERIAL ACCOUNT. The Collateral Agent
shall establish a special account at Bankers Trust Company in the name of the
Collateral Agent (the "PROCEEDS
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<PAGE> 12
CASH COLLATERAL ACCOUNT") into which the Collateral Agent shall deposit the
proceeds of any Collateral obtained pursuant to Section 1.3, Section 4.1 or
Section 4.3 or disposed of pursuant to Section 4.2. The amounts deposited in the
Proceeds Cash Collateral Account may be invested by the Collateral Agent in
Permitted Investments. The amounts deposited in the Proceeds Cash Collateral
Account shall be applied as set forth in Section 4.6.
4.5 WAIVER OF CLAIMS. Except as otherwise provided in this
Pledge Agreement, THE PLEDGOR HEREBY WAIVES, TO THE EXTENT PERMITTED BY
APPLICABLE LAW, NOTICE OR JUDICIAL HEARING IN CONNECTION WITH THE COLLATERAL
AGENT'S TAKING POSSESSION OR THE COLLATERAL AGENT'S DISPOSITION OF ANY OF THE
COLLATERAL, INCLUDING, WITHOUT LIMITATION, ANY AND ALL PRIOR NOTICE AND HEARING
FOR ANY PREJUDGMENT REMEDY OR REMEDIES AND ANY SUCH RIGHT WHICH THE PLEDGOR
WOULD OTHERWISE HAVE UNDER THE CONSTITUTION OR ANY STATUTE OF THE UNITED STATES
OR OF ANY STATE, and the Pledgor hereby further waives:
(a) all damages occasioned by such taking of possession
except any damages which are the direct result of the Collateral
Agent's gross negligence or willful misconduct;
(b) all other requirements as to the time, place and terms
of sale or other requirements with respect to the enforcement of the
Collateral Agent's rights hereunder; and
(c) all rights of redemption, appraisal, valuation, stay,
extension or moratorium now or hereafter in force under any applicable
law in order to prevent or delay the enforcement of this Pledge
Agreement or the absolute sale of the Collateral or any portion
thereof, and the Pledgor, for itself and all who may claim under it,
insofar as it or they now or hereafter lawfully may, hereby waives the
benefit of all such laws.
Any sale of, or the grant of options to purchase, or any other
realization upon, any Collateral shall operate to divest all right, title,
interest, claim and demand, either at law or in equity, of the Pledgor therein
and thereto, and shall be a perpetual bar both at law and in equity against the
Pledgor and against any and all Persons claiming or attempting to claim the
Collateral so sold, optioned or realized upon, or any part thereof, from,
through and under the Pledgor.
4.6 APPLICATION OF PROCEEDS. The proceeds of any Collateral
obtained pursuant to Section 1.3, Section 4.1 or Section 4.3 or disposed of
pursuant to Section 4.2 and any other monies held by the Collateral Agent under
the provisions of this Pledge Agreement, shall be applied by the Collateral
Agent, as follows:
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(a) first, to the payment of any and all reasonable costs,
expenses and fees (including reasonable attorneys' fees) incurred by
the Collateral Agent in obtaining, taking possession of, removing,
insuring, repairing, storing and disposing of the Collateral and any
and all amounts incurred by the Collateral Agent in connection
therewith or payable to the Trustee under Section 7.07 of the
Indenture;
(b) next, any surplus then remaining to the payment of so
much of the Obligations under the Notes as constitutes accrued and
unpaid interest on the Notes to be paid by the Collateral Agent ratably
according to the amounts of such interest owing in respect of the
Notes; and
(c) next, any surplus then remaining to the payment of so
much of Obligations as constitute unpaid principal of and premium, if
any, on the Notes then due and payable, to be paid by the Collateral
Agent ratably according to the amounts of such principal of, and
premium, if any, owing in respect of the Notes; and
(d) next, any surplus then remaining to the payment of any
other Obligations remaining unpaid and then due and payable, to be paid
ratably by the Collateral Agent according to the amounts of such
Obligations owing to the Secured Creditors; and
(e) next, any surplus then remaining shall be paid to the
Pledgor.
4.7 REMEDIES CUMULATIVE. Each and every right, power and
remedy hereby specifically given to the Collateral Agent shall be in addition to
every other right, power and remedy specifically given to the Trustee under the
Indenture or now or hereafter existing at law or in equity, or by statute and
each and every right, power and remedy whether specifically herein given or
otherwise existing may be exercised from time to time or simultaneously and as
often and in such order as may be deemed expedient by the Collateral Agent. All
such rights, powers and remedies shall be cumulative and the exercise or the
beginning of exercise of one shall not be deemed a waiver of the right to
exercise of any other or others. No delay or omission of the Collateral Agent in
the exercise of any such right, power or remedy and no renewal or extension of
any of the Obligations shall impair any such right, power or remedy or shall be
construed to be a waiver of any Event of Default or an acquiescence therein. In
the event that the Collateral Agent shall bring any suit to enforce any of its
rights hereunder and shall be entitled to judgment, then in such suit the
Collateral Agent may recover reasonable costs and expenses, including attorneys'
fees, and the amounts thereof shall be included in such judgment.
4.8 DISCONTINUANCE OF PROCEEDINGS. In case the Collateral
Agent shall have instituted any proceeding to enforce any right, power or remedy
under this Pledge Agreement by
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foreclosure, sale, entry or otherwise, and such proceeding shall have been
discontinued or abandoned for any reason or shall have been determined adversely
to the Collateral Agent, then and in every such case the Pledgor, the Collateral
Agent and each Secured Creditor shall be restored to their former positions and
rights hereunder with respect to the Collateral subject to the security interest
created under this Pledge Agreement, and all rights, remedies and powers of the
Collateral Agent shall continue as if no such proceeding had been instituted.
ARTICLE V
INDEMNITY
. 5.1 INDEMNITY
(a) The Pledgor agrees to indemnify, reimburse and hold the
Collateral Agent and its respective successors, assigns, employees and agents,
officers and directors and each person who controls the Collateral Agent (within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act) (hereinafter in this Section 5.1 referred to individually as "INDEMNITEE",
and collectively as "INDEMNITEES") harmless from any and all liabilities,
obligations, damages, injuries, penalties, claims, demands, actions, suits,
judgments and any and all costs and expenses (including reasonable attorneys'
fees and expenses) (for the purposes of this Section 5.1 the foregoing are
collectively called "EXPENSES") of whatsoever kind and nature imposed on,
asserted against or incurred by any of the Indemnitees in any way relating to or
arising out of this Pledge Agreement or the documents executed in connection
herewith or in any other way connected with the administration of the
transactions contemplated hereby or the enforcement of any of the terms of, or
the preservation of any rights under any thereof, or in any way relating to or
arising out of the ownership, purchase, delivery, acceptance, possession, sale
or other disposition of the Collateral, or contract claim excluding those
arising from the gross negligence or willful misconduct of any Indemnitee making
a claim and those claims that are not related in any way to the property or
actions of the Pledgor. The Pledgor agrees that upon written notice by any
Indemnitee of the assertion of such a liability, obligation, damage, injury,
penalty, claim, demand, action, judgment or suit, the Pledgor shall assume full
responsibility for the defense thereof. Each Indemnitee agrees to use its best
efforts to promptly notify the Pledgor of any such assertion of which such
Indemnitee has received written notice; provided, however, that any failure to
so notify the Pledgor shall not relieve the Pledgor of its obligations
hereunder.
(b) Without limiting the application of Section 5.1(a), the
Pledgor agrees to pay, or reimburse the Collateral Agent for, any and all fees,
costs and expenses of whatever kind or nature incurred in connection with the
creation, preservation or protection of the Collateral Agent's Liens on, and
security interest in, the Collateral, including, without limitation, all fees
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<PAGE> 15
and taxes in connection with the recording or filing of instruments and
documents in public offices, payment or discharge of Liens upon or in respect of
the Collateral and all other reasonable fees, costs and expenses in connection
with protecting, maintaining or preserving the Collateral Agent's interest in
the Collateral, whether through judicial proceedings or otherwise, or in
defending or prosecuting any actions, suits or proceedings arising out of or
relating to the Collateral.
(c) Without limiting the application of Section 5.1(a) or (b),
the Pledgor agrees to pay, indemnify and hold each Indemnitee harmless from and
against any loss, costs, damages and expenses which such Indemnitee may suffer,
expend or incur in consequence of or growing out of any misrepresentation by the
Pledgor in this Pledge Agreement or in any statement or writing contemplated by
or made or delivered pursuant to or in connection with this Pledge Agreement.
(d) If and to the extent that the obligations of the Pledgor
under this Section 5.1 are unenforceable for any reason, the Pledgor hereby
agrees to make the maximum contribution to the payment and satisfaction of such
obligations which is permissible under applicable law.
5.2 INDEMNITY OBLIGATIONS SECURED BY COLLATERAL; SURVIVAL. Any
amounts paid by any Indemnitee as to which such Indemnitee has the right to
reimbursement shall constitute Obligations secured by the Collateral. The
indemnity obligations of the Pledgor contained in this Article V shall continue
in full force and effect notwithstanding the full payment of the Notes and all
of the other Obligations and notwithstanding the discharge thereof, and the
resignation or removal of the Collateral Agent.
5.3 ACTION CONTRARY TO DIRECTIONS. The Collateral Agent may
refuse to follow any direction from the Secured Creditors that conflicts with
law or this Pledge Agreement, that the Collateral Agent, in its sole discretion,
determines may be unduly prejudicial to the rights of a Secured Creditor, that
may involve the Collateral Agent in personal liability or if the Collateral
Agent determines that it does not have adequate indemnification against any
costs, losses or expenses in connection with such action; PROVIDED that, in such
case, the Collateral Agent may request adequate indemnification from the Secured
Creditors. Notwithstanding the foregoing, the Collateral Agent may take any
other action deemed proper by the Collateral Agent which is not inconsistent
with any such direction.
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ARTICLE VI
DEFINITIONS
6.1 DEFINITIONS. The following terms shall have the meanings
herein specified unless the context otherwise requires. Such definitions shall
be equally applicable to the singular and plural forms of the terms defined.
"ADDITIONAL COLLATERAL AGENT" shall have the meaning provided
in Section 7.2(b).
"APPRAISAL" shall have the meaning provided in Section 1.3.
"BGL" shall mean Brooke Group Ltd., a Delaware corporation.
"BGLS" shall mean BGLS Inc., a Delaware corporation.
"COLLATERAL" shall mean individually or collectively, as the
case may be, the Pledged Stock and the proceeds thereof.
"COLLATERAL AGENT'S APPRAISER" shall have the meaning provided
in Section 1.3.
"INDEMNITEE" shall have the meaning provided in Section 5.1.
"INDENTURE" shall have the meaning provided in the second
paragraph of this Pledge Agreement.
"INSTRUMENT" shall have the meaning assigned that term under
the Uniform Commercial Code.
"LIGGETT-DUCAT" shall mean Liggett-Ducat Limited, a joint
stock company registered in the Russian Federation and having the
postal address: 6, Gasheka Street, Moscow, 123047, Russian Federation.
"NEW RUSSIAN ENTITY" shall have the meaning provided in the
Recitals hereof.
"OBLIGATIONS" means (a) all Indebtedness, obligations, and
liabilities of the Issuer to the Trustee, the Collateral Agent, or any
Secured Creditor, in each case, under the Indenture, the Mortgages, the
Notes, and any other documents or instruments
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<PAGE> 17
executed and delivered in connection therewith; (b) any and all sums
advanced by the Collateral Agent in order to preserve the Collateral or
preserve its security interest in the Collateral; (c) all obligations
and liabilities of the Pledgor to any Indemnitee pursuant to Section
5.1; and (d) in the event of any proceeding for the collection or
enforcement of any Indebtedness, obligations, or liabilities of the
Pledgor referred to in clause (b), the reasonable costs and expenses of
retaking, holding, preparing for sale, selling or otherwise disposing
or realizing on the Collateral, or of any exercise by the Collateral
Agent of its rights hereunder with respect to the Collateral, together
with reasonable attorneys' fees and court costs.
"PLEDGE AGREEMENT" means this Pledge Agreement as the same
may be modified, supplemented or amended from time to time in
accordance with its terms.
"PLEDGED STOCK" means the 112,160 shares, more fully
described on Annex 1 hereof, and such additional number of shares as
shall be included pursuant to Section 3.3, held by the Pledgor of
Liggett-Ducat, together with in each case the certificates evidencing
the same, PROVIDED THAT upon the substitution of shares in the New
Russian Entity referenced in Section 1.2, "Pledged Stock" shall mean
the shares substituted in lieu of the currently pledged stock of
Liggett-Ducat.
"PLEDGOR'S APPRAISER" shall have the meaning provided in
Section 1.3.
"PROCEEDS" means any "proceeds", as such term is defined
under the Uniform Commercial Code and, in any event, shall include, but
shall not be limited to, (a) any and all proceeds of any indemnity,
warranty or guaranty payable to the Collateral Agent or the Pledgor
from time to time with respect to any of the Collateral, (b) any and
all payments (in any form whatsoever) made or due and payable to the
Pledgor from time to time in connection with any confiscation, seizure
or forfeiture of all or any part of the Collateral by any governmental
authority (or any person acting under color of governmental authority)
and (c) any and all other amounts from time to time paid or payable
under or in connection with any of the Collateral.
"SECURED CREDITORS" means the Holders.
"UNIFORM COMMERCIAL CODE" means the Uniform Commercial
Code, as in effect in the State of New York or any other jurisdiction
relevant to the disposition of Collateral from time to time.
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ARTICLE VII
MISCELLANEOUS
7.1 NOTICES. Except as otherwise specified herein, all
notices, requests, demands or other communications to or upon the respective
parties hereto shall be deemed to have been duly given or made to the party to
which such notice, request, demand or other communication is required or
permitted to be given or made under this Pledge Agreement, when deposited in the
mail, first class postage pre-paid and addressed to such party at its address
set forth on the signature pages attached hereto.
7.2 COLLATERAL AGENT; ADDITIONAL COLLATERAL AGENTS.
-----------------------------------------------
(a) The Collateral Agent shall act or be required to act only
in accordance with the Indenture, the Security Agreement and this Pledge
Agreement. At any time that the Trustee and the Collateral Agent are the same,
neither shall be required to issue instructions or notices to the other in
carrying out its respective duties hereunder and under the Indenture.
(b) Whenever the Collateral Agent shall deem it necessary or
prudent in order either to conform to any law of any jurisdiction in which all
or any part of the Collateral shall be situated or to make any claim or bring
any suit with respect to the Collateral or in the event that the Collateral
Agent shall have been requested to do so by the Requisite Holders, the Requisite
Holders shall, within 30 days of receipt of written notice from the Collateral
Agent, take such action as may be necessary or proper to retain another bank or
trust company, or one or more Persons approved by the Pledgor, either to act as
an additional collateral agent of all or any part of the Collateral, jointly
with the Collateral Agent, or to act as a separate collateral agent or trustee
of all or any part of the Collateral (any such additional or separate agent or
trustee being herein called an "ADDITIONAL COLLATERAL AGENT"), in any such case
with such powers as may be granted pursuant to such action, and to vest in such
bank, trust company or Person as an Additional Collateral Agent any property,
title, right or power of the Collateral Agent deemed necessary or advisable by
the Collateral Agent, subject to the remaining provisions of this Section 7.2.
The Collateral Agent may execute, deliver and perform any deed, conveyance,
assignment or other instrument in writing as may be required by any Additional
Collateral Agent for more fully and certainly vesting in and confirming to it,
him or her any property, title, right or power which by the terms of such
agreement supplemental hereto are expressed to be conveyed or conferred to or
upon such Additional Collateral Agent.
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(c) Every Additional Collateral Agent shall, to the extent
permitted by law, be appointed and act, and the Collateral Agent shall act,
subject to the following provisions and conditions:
(i) all powers, duties, obligations and rights
conferred upon the Collateral Agent in respect of the receipt, custody,
investment and payment of moneys, shall be exercised solely by the
Collateral Agent;
(ii) all other rights, powers, duties and obligations
conferred or imposed upon the Collateral Agent shall be conferred or
imposed upon and exercised or performed by the Collateral Agent, except
to the extent that under any law of any jurisdiction in which any
particular act or acts are to be performed, the Collateral Agent shall
be incompetent or unqualified to perform such act or acts singly, in
which event such rights, powers, duties and obligations (including the
holding of title to any part of the Collateral in any such
jurisdiction) shall be exercised and performed by such Additional
Collateral Agent and the Collateral Agent jointly, except to the extent
that under any such law, the Collateral Agent shall be incompetent or
unqualified to perform such acts jointly, in which event such rights,
powers, duties and obligations shall be exercised and performed by such
Additional Collateral Agent;
(iii) no power hereby given to, or with respect to
which it is hereby provided may be exercised by, any such Additional
Collateral Agent shall be exercised hereunder by such Additional
Collateral Agent except jointly with, or with the consent of, the
Collateral Agent; and
(iv) neither the Collateral Agent nor any Additional
Collateral Agent shall be personally liable by reason of any act or
omission of any other of the foregoing hereunder.
If, at any time, the Collateral Agent shall deem it no longer necessary or
prudent in order to conform to any such law or take any such action, or in the
event that the Collateral Agent shall have been requested to do so in writing by
the Requisite Holders, the Collateral Agent shall execute and deliver an
agreement supplemental hereto and all other instruments and agreements necessary
or proper to remove any Additional Collateral Agent.
(d) In case any such Additional Collateral Agent shall die,
become incapable of acting, resign or be removed, all the assets, property,
rights, powers, trusts, duties and obligations of such Additional Collateral
Agent, so far as permitted by law, shall vest in and be exercised by the
Collateral Agent, without the appointment of a new successor to such Additional
Collateral Agent unless and until a successor is appointed in the manner
hereinbefore provided.
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<PAGE> 20
(e) Any request, approval or consent in writing by the
Collateral Agent to any Additional Collateral Agent shall be sufficient warrant
to such Additional Collateral Agent to take such action as may be so requested,
approved or consented.
(f) Each Additional Collateral Agent appointed pursuant to
this Section 7.2 shall be subject to, and shall have the benefits of this
Agreement, insofar as they apply to the Collateral Agent.
(g) Nothing in this Agreement shall require the Collateral
Agent to subject itself to the jurisdiction of a non-United States court or
governmental authority or enforce remedies or take any action outside the United
States.
7.3 WAIVER; AMENDMENT. No delay on the part of the Collateral
Agent in exercising any of its rights, remedies, powers and privileges hereunder
or partial or single exercise thereof, shall constitute a waiver thereof. The
terms and conditions of this Pledge Agreement may be changed, waived, modified
or varied only as provided in Article 9 of the Indenture. The consent of any
Additional Collateral Agent shall not be required to effect any change, waiver
or modification of any of the provisions of this Pledge Agreement other than the
provisions of Section 7.2(b) through (f) hereof. No notice to or demand on the
Pledgor in any case shall entitle it to any other or further notice or demand in
similar or other circumstances or constitute a waiver of any of the rights of
the Collateral Agent to any other or further action in any circumstances without
notice or demand.
7.4 OBLIGATIONS ABSOLUTE. The obligations of the Pledgor
hereunder shall remain in full force and effect without regard to, and shall not
be impaired by, (a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of the Pledgor; (b) any
exercise or non-exercise, or any waiver of, any right, remedy, power or
privilege under or in respect of the Indenture except as specifically set forth
in a waiver granted pursuant to the restrictions of Section 7.3 hereof; or (c)
any amendment to or modification of any agreement or any security for any of the
Obligations; whether or not the Pledgor shall have notice or knowledge of any of
the foregoing. The rights and remedies of the Collateral Agent herein provided
are cumulative and not exclusive of any rights or remedies which the Collateral
Agent would otherwise have.
7.5 SUCCESSORS. All agreements of the Pledgor in this Pledge
Agreement shall bind its successors. All agreements of the Collateral Agent in
this Pledge Agreement shall bind its successors.
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<PAGE> 21
7.6 HEADINGS DESCRIPTIVE. The headings of the several sections
of this Pledge Agreement are inserted for convenience only and shall not in any
way affect the meaning or construction of any provision of this Pledge
Agreement.
7.7 SEVERABILITY. In case any provision in this Pledge
Agreement shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby, and a Secured Creditor shall have no claim therefor against
any party hereto.
7.8 GOVERNING LAW. This Pledge Agreement and the rights and
obligations of the parties hereunder shall be construed in accordance with and
governed by the law of the State of New York without regard to principles of
conflicts of law, except to the extent that perfection of the security interest
granted by this Pledge Agreement is governed by a jurisdiction other than the
State of New York.
7.9 PLEDGOR'S DUTIES. It is expressly agreed, anything herein
contained to the contrary notwithstanding, that the Pledgor shall remain liable
to perform all of the obligations, if any, assumed by it with respect to the
Collateral and the Collateral Agent shall not have any obligations or
liabilities with respect to any Collateral by reason of or arising out of this
Pledge Agreement, nor shall the Collateral Agent be required or obligated in any
manner to perform or fulfill any of the obligations of the Pledgor under or with
respect to any of the Collateral.
7.10 DUPLICATE ORIGINALS. All parties may sign any number of
copies of this Pledge Agreement. Each signed copy shall be an original, but all
of them together represent the same agreement.
7.11 NON-RECOURSE LIABILITY. Except with respect to the
Collateral Agent which shall be entitled to full and unrestricted
indemnifications by the Pledgor hereunder, notwithstanding anything contained in
this Pledge Agreement to the contrary, satisfaction of the Obligations with
respect to the Pledgor shall be had solely from the Pledged Stock. Except with
respect to indemnification of the Collateral Agent as set forth immediately
above, the liability of the Pledgor with respect to the Obligations is limited
to the Pledged Stock, and no recourse shall be had in the event of any
nonperformance by the Issuer of the Obligations to (a) any assets or properties
of the Pledgor other than its interest in the Pledged Stock or (b) the Pledgor
or any of the officers, directors, employees, incorporators or stockholders of
the Pledgor. No judgment for any deficiency upon the Obligations shall be
obtainable by the Collateral Agent against the Pledgor or any incorporator,
stockholder, officer, employee or director, past, present or future, of the
Pledgor or of any predecessor or successor of the Pledgor.
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<PAGE> 22
7.12 ARBITRATION. The Pledgor hereby agrees that, to the
extent required under Russian law to enable the Pledgee to enforce a judgement
in Russia, any dispute hereunder shall be submitted to binding arbitration
conducted in accordance with the rules and regulations of the American
Arbitration Association.
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<PAGE> 23
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be executed and delivered by their duly authorized officers as of
the date first above written.
BROOKE (OVERSEAS) LTD.
By
---------------------------------------
Name:
Title:
Address for notices:
Brooke (Overseas) Ltd.
100 S.E. Second Street
32nd Floor
Miami, Florida 33131
BANKERS TRUST COMPANY,
as Collateral Agent
By
---------------------------------------
Name:
Title:
Address for notices:
Bankers Trust Company,
as Collateral Agent
Corporate Trust and Agency Services
Four Albany Street, 4th Floor
New York, New York 10006
Attention: Corporate Market Services
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<PAGE> 24
APPENDIX A TO PLEDGE AGREEMENT
II.
DEFINITIONS AND USAGE
II. A. Definitions. Capitalized terms used but not defined
herein, shall have the meanings assigned to such terms in the Pledge Agreement,
including by reference therein. As used in this Appendix, the following terms
shall have the following meanings:
"Effective Date" has the meaning set forth in Section 2.1.
"Effectiveness Period" has the meaning set forth in Section
2.2.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Losses" has the meaning set forth in Section 4.1.
"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 Pledged Stock.
However, a share of Pledged Stock will cease to be a
Registrable Security when (i) such share of Pledged Stock is
sold in an open market transaction or in an underwritten
public offering, (ii) such share of Pledged Stock is sold to
any person other than an "affiliate" of Liggett-Ducat (as
defined under the Regulations) pursuant to a Registration
Statement, (iii) such share of Pledged 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 or (iv) such share of Pledged Stock ceases
to be outstanding.
"Registration Statement" means any registration statement of
Liggett-Ducat under the Securities Act that covers any of the
Registrable Securities, including the
<PAGE> 25
Prospectus, amendments and supplements to such registration
statement, including post-effective amendments, all exhibits
and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement and
all material deemed part of such registration statement by
Rule 430A of the Regulations.
"Regulations" means the regulations of the SEC under the
Securities Act.
"Rule 415" means Rule 415 of the Regulations or any similar
rule or regulation hereafter adopted by the SEC.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Shelf Registration" has the meaning set forth in Section 2.2.
"Underwritten registration" or "underwritten offering" means a
registration in which securities of Liggett-Ducat are sold to
one or more underwriters or group or a syndicate of
underwriters for offering to the public.
II. B. Usage. This Appendix 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.
II. C. Joint Nature of Covenants; Representations; Etc. In
each instance in this Appendix in which a representation and warranty or a
covenant or other agreement is made by "Liggett-Ducat" (i) such representation
and warranty shall be deemed to have been made jointly and severally by the
Pledgor and Liggett-Ducat and (ii) the Pledgor shall be deemed to have agreed to
cause Liggett-Ducat to comply with such covenant or other agreement, as the case
may be.
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III.
REGISTRATION OF REGISTRABLE SECURITIES UNDER SECURITIES ACT
III. A. Required Registration of Registrable Securities. Upon
the occurrence of an "Event of Default" under the Indenture (as such term is
defined in the Indenture) (the date of such event being referred to herein as
the "Effective Date"), Pledgor shall cause Liggett-Ducat to use its reasonable
best efforts to register the Registrable Securities upon the terms, and subject
to the limitations and conditions, hereinafter set forth; provided, however,
that the Effective Date shall be suspended during any period in which any
Appraisal is being conducted.
III. B. Shelf Registration. Within sixty (60) days following
the Effective Date, Liggett-Ducat shall prepare and file with the SEC a
Registration Statement for an offering to be made by the Pledgor on a continuous
basis under Rule 415 covering all the Registrable Securities (the "Shelf
Registration"). The Shelf Registration shall be on an appropriate form
permitting registration of all Registrable Securities for resale by the Pledgor
in the manner reasonably designated by the Pledgor. Liggett-Ducat shall use its
reasonable best efforts to cause the Shelf Registration to be declared effective
under the Securities Act within ninety (90) days following the date of filing of
the Registration Statement with the SEC and to keep the 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) the Registration Statement has been effective for an aggregate of two
(2) years, (y) all Registrable Securities have been sold other than to the
Pledgor, or (z) in the opinion of Milbank, Tweed, Hadley & McCloy or other
nationally recognized counsel to Liggett-Ducat reasonably acceptable to the
Requisite Holders, which opinion shall be reasonably satisfactory in form, scope
and substance to the Requisite Holders, registration of the Registrable
Securities is no longer required under the Securities Act for the Pledgor 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; provided, however, that the
Effectiveness Period shall be suspended during any period in which any Appraisal
is being conducted. No holder of Registrable Securities may include any of its
Registrable Securities in any Shelf Registration pursuant to this Appendix
unless and until such holder furnishes to Liggett-Ducat in writing such
information as Liggett-Ducat may reasonably request.
Subject to Section 2.3.1(q), Liggett-Ducat 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
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required to be stated therein or necessary to make the statements therein not
misleading, or (iv) if reasonably requested by the Pledgor.
III. C. Registration Procedures.
III. C. 1. Shelf Registration. In connection with a Shelf
Registration, Liggett-Ducat 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 Pledgor, and
pursuant thereto Liggett-Ducat shall:
a. FILING OF REGISTRATION STATEMENT. Before filing any
Registration Statement or Prospectus or any amendments or supplements
thereto, furnish to and afford the Pledgor, and the managing
underwriters, if any, a reasonable opportunity to review and, if they
desire, comment on all such documents (including any documents to be
incorporated by reference therein and all exhibits thereto) proposed to
be filed.
b. COMPLIANCE WITH LAW. Comply with the provisions of the
Securities Act, the Exchange Act and the rules and regulations of the
SEC promulgated thereunder applicable to it with respect to the
disposition of all Registrable Securities covered by such Registration
Statement as amended or by such Prospectus as supplemented.
c. NOTICE. Notify the Pledgor, 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 the Pledgor may, upon request, obtain, without
charge, one conformed copy of such Registration Statement or
post-effective amendment including financial statements and schedules,
documents incorporated or deemed to be incorporated by reference and
exhibits), (ii) of the issuance by the SEC of any stop order suspending
the effectiveness of a Registration Statement or of any order
preventing or suspending the use of any Preliminary Prospectus, the
initiation of any proceedings for that purpose or any other
communication between the SEC and Liggett-Ducat or their
representatives related to a Shelf Registration, (iii) if at any time
when a prospectus is required by the Securities Act to be delivered in
connection with sales of the Registrable Securities, the
representations and warranties of Liggett-Ducat 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
Liggett-Ducat 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
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initiation or threatening of any proceeding for such purpose, (v) of
the happening of any event or any information becoming known that
requires the making of any changes in such Registration Statement,
Prospectus or documents so that, in the case of the Registration
Statement, it will not contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and, in the
case of the Prospectus, it will not contain any untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading, and (vi) of Liggett-Ducat'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 Pledgor upon 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 Pledgor, 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 Liggett-Ducat hereby consents to the use of
each such Prospectus and Preliminary Prospectus and each amendment or
supplement thereto by the Pledgor, and the underwriters or agents, if
any, and dealers, if any, in connection with the offering
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<PAGE> 29
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 Pledgor, the underwriters, if
any, and their respective counsel in connection with the registration
or qualification (or exemption from such registration or qualification)
of such Registrable Securities for offer and sale under the securities
or Blue Sky laws of such jurisdictions within the United States as the
Pledgor 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
Liggett-Ducat 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 Pledgor 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 enable such
Registrable Securities to be in such denominations and registered in
such names as the managing underwriters, if any, or the Pledgor 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 domestic or foreign
governmental agencies, or authorities as may be necessary to enable the
Pledgor, 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 the Pledgor's business, in which case
Liggett-Ducat 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
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<PAGE> 30
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 a national securities exchange or (ii)
authorized to be quoted on the NASDAQ Stock Market or the NASDAQ
National Market.
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 Liggett-Ducat 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 Liggett-Ducat and
updates thereof (which counsel and opinions shall be reasonably
satisfactory to the managing underwriters and the Pledgor), 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 Pledgor) from the independent certified public
accountants of Liggett-Ducat (and, if necessary, any other independent
certified public accountants of any subsidiary of Liggett-Ducat or of
any business acquired by Liggett-Ducat for which financial statements
and financial data are, or are required to be, included in the
Registration Statement), addressed to each of the underwriters and the
holders of Registrable Securities included in such underwritten
offering (to the extent such accountants are permitted under applicable
law and accounting literature so to address "cold comfort" letters),
such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings by selling security holders; and (iv) if an
underwriting agreement is entered into, undertake such indemnification
and contribution provisions and procedures as are customarily
undertaken in such agreements. The above shall be done in connection
with each closing under such underwriting agreement, or as and to the
extent required thereunder.
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n. FINANCIAL RECORDS, ETC.. Make available for inspection by
the Pledgor, any underwriter participating in any such disposition of
Registrable Securities, and any attorney, accountant or other agent
retained by the Pledgor 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 Liggett-Ducat 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 Liggett-Ducat and its
subsidiaries to supply all information reasonably requested by any such
Inspectors in connection with such Registration Statement. Records
which Liggett-Ducat 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, the Pledgor 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 Liggett-Ducat or its affiliates unless and until such
information is made generally available to the public. The Pledgor
shall not be prohibited from engaging in market transactions if such
information is not material, to the extent permitted by applicable law.
The Pledgor further agrees that it will, upon learning that disclosure
of such Records is sought in a court of competent jurisdiction, give
notice to Liggett-Ducat and allow Liggett-Ducat 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
Liggett-Ducat after the effective date of a Registration Statement
which statements shall cover such 12-month periods.
p. NASD. 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
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<PAGE> 32
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, Liggett-Ducat may
postpone, for a period of not in excess of 60 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 Liggett-Ducat'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 Liggett-Ducat to make public disclosure of information the
public disclosure of which would have a material adverse effect upon
Liggett-Ducat.
r. DELIVERY OF OPINION. Upon the filing of any Registration
Statement, deliver to the Holders an opinion or opinions of outside
counsel to Liggett-Ducat (which counsel shall be reasonably
satisfactory to the Requisite 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 Pledgor, to
effect the registration and distribution of the Registrable Securities
covered by the Registration Statement contemplated hereby.
III. C. 2. Pledgor Covenants. The Pledgor agrees by acceptance
of the Registrable Securities that:
(a) upon receipt of any notice from Liggett-Ducat of the
happening of any event of the kind described in clause (ii), (iv), (v)
or (vi) of Section 2.3.1(c), the Pledgor shall forthwith discontinue
disposition of such Registrable Securities covered by such Registration
Statement or Prospectus until the Pledgor'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 Liggett-Ducat that the
use of the applicable Prospectus may be resumed, and has received
copies of any amendments or supplements thereto;
(b) the Pledgor shall promptly furnish to Liggett-Ducat in
writing, upon Liggett-Ducat's reasonable request, any and all
information as to the Pledgor and its plan of distribution as may be
necessary to comply with the provisions of the Securities Act, the
Regulations, the Exchange Act and with the rules and regulations of the
SEC thereunder
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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; and
(c) all information to be furnished to Liggett-Ducat by or on
behalf of the Pledgor expressly for use in connection with the
preparation of any Preliminary Prospectus, the Prospectus, the
Registration Statement, or any amendment or supplement thereto, will
not include any untrue statement of a material fact required to be
stated therein or necessary to make the statements therein not
misleading.
III. D. Qualifications to Registration Obligations.
Notwithstanding anything in this Appendix to the contrary, if a Registration
Statement does not become effective after Liggett-Ducat has filed it solely by
reason of a written request not to proceed made by the Collateral Agent, acting
at the direction of the Requisite Holders, the Pledgor's obligation to cause
Liggett-Ducat to file such Registration Statement and attempt to cause it to
become effective shall be deemed completely satisfied and discharged to the
extent of such request.
IV.
REGISTRATION EXPENSES
All reasonable fees and expenses incident to the performance of or
compliance with this Appendix by Liggett-Ducat shall be borne by Liggett-Ducat,
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 Liggett-Ducat 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 Liggett-Ducat, (iv) fees and disbursements of all
independent certified public accountants for Liggett-Ducat (including the
expenses of any "cold comfort" letters required by or incident to such
performance), (v) Securities Act liability insurance, if Liggett-Ducat so
desires such insurance, (vi) internal expenses of Liggett-Ducat (including all
salaries and expenses of officers and employees of Liggett-Ducat 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
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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 Liggett-Ducat
in its sole discretion.
The Pledgor shall pay (i) all underwriting discounts and
commissions or broker's commissions incurred in connection with the sale or
other disposition of Registrable Securities for or on behalf of the Pledgor's
account and (ii) all fees and disbursements of legal counsel for the Pledgor or
any underwriter. or the Collateral Agent.
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V.
INDEMNIFICATION
V. A. Indemnification by Liggett-Ducat. Liggett-Ducat shall
indemnify and hold harmless, to the fullest extent permitted by law, the Pledgor
and the Collateral Agent and their respective affiliates and their respective
shareholders, partners, officers, directors, agents and employees, each Person
who controls the Pledgor (within the meaning of Section 15 of the Securities Act
or Section 20 of the Exchange Act) and the shareholders, 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 in reliance upon
and in conformity with information furnished in writing to Liggett-Ducat 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
Pledgor or any underwriter in an underwritten offering to provide to any person
purchasing Registrable Securities from it any supplement to a Prospectus
provided by Liggett-Ducat pursuant to Section 2.3.1(g), or (iii) to the extent
such Losses result from the sale of Registrable Securities by the Pledgor 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 Liggett-Ducat pursuant to Section
2.3.1(k) and provided to the Pledgor or such underwriter pursuant to Section
2.3.1(g), after Liggett-Ducat shall have notified the Pledgor 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).
V. B. Indemnification by Pledgor. In connection with any
Registration Statement in which the Pledgor is participating, the Pledgor shall
indemnify and hold harmless, to the fullest
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extent permitted by law, Liggett-Ducat and the Collateral Agent and their
respective shareholders, directors, officers, agents and employees, each Person
who controls Liggett-Ducat (within the meaning of Section 15 of the Securities
Act and Section 20 of the Exchange Act), and the shareholders, 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 Liggett-Ducat by the Pledgor
expressly for use therein by notice referring to this Section 4.2.
V. C. 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 (which counsel shall be reasonably satisfactory to the
indemnifying party) determines that one counsel may not
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<PAGE> 37
properly represent both the indemnifying party and such indemnified party in
which case, if such indemnified party or parties notifies the indemnifying
parties in writing that it elects to employ separate counsel at the expense of
the indemnifying parties, the indemnifying parties shall not have the right to
assume the defense thereof and the fees and expenses of counsel retained by the
indemnified party or parties shall be at the expense of the indemnifying
parties, it being understood, however, that the indemnifying parties shall not,
in connection with any one such Proceeding, arising out of the same general
allegations or circumstances, be liable for the reasonable fees and expenses of
more than one separate firm of attorneys (together with appropriate local
counsel) at any time for such indemnified party or parties. Whether or not such
defense is assumed-by the indemnifying parties, such indemnifying parties will
not be subject to any liability for any settlement made without its or their
consent (but such consent will not be unreasonably withheld). No indemnifying
party shall be liable for any settlement of any such action or proceeding
effected without its written consent, but if settled with its written consent
each indemnifying party jointly and severally agrees, subject to the exception
and limitations set forth above, to indemnify and hold harmless each indemnified
party from and against any Losses by reason of such settlement.
V. D. 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 as any other relevant equitable considerations.
The relative fault of such indemnifying party, on the one hand, and indemnified
party, on the other hand, shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been taken by, or relates to information supplied by, such
indemnifying party or indemnified party, and the parties, relative intent,
knowledge, access to information and opportunity to correct or prevent any such
action, statement or omission. The amount paid or payable by a party as a result
of any Losses shall be deemed to include any legal or other fees or expenses
reasonably incurred by such party in connection with any Proceeding, to the
extent such party would have been indemnified for such expenses if the
applicable indemnification provided for in Section 4.1 or 4.2 were available to
such party.
The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 4.4 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. No Person guilty of fraudulent misrepresentation (within the
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<PAGE> 38
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.
V. E. 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 Appendix
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).
VI.
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 Pledgor with the consent of Liggett-Ducat (not to be unreasonably
withheld or delayed).
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<PAGE> 39
ANNEX 1
(BEING AN INTEGRAL PART OF THE PLEDGE AGREEMENT, DATED AS OF JANUARY 30, 1998,
EXECUTED BY BROOKE (OVERSEAS) LTD. IN FAVOR OF BANKERS TRUST COMPANY, AS
COLLATERAL AGENT)
PLEDGED STOCK
DESCRIPTION VALUE
112,160 ordinary registered shares 112,160,000 Roubles
(Certificate No. 1139)
- ----------------------
(1) THE VALUE OF THE PLEDGED SHARES SET FORTH IN THIS ANNEX IS THE AMOUNT
WHICH HAS BEEN AGREED BY THE PLEDGEE AND THE PLEDGOR AT THE MOMENT OF
SIGNATURE OF THE PRESENT CONTRACT. THE VALUE OF THE PLEDGED SHARES AT THE
MOMENT OF THE EXERCISE OF THE RIGHTS OF THE PLEDGEE SHALL BE EQUAL TO THE
PRICE OF SUCH SHARES RECEIVED BY THE PLEDGEE AFTER THE SALE OR REALIZATION
BY OTHER MEANS OF THE PLEDGED SHARES, TAKING INTO ACCOUNT THE LOCATION AND
CONDITION OF THE ASSETS OF THE PLEDGOR AT THE MOMENT OF THE EXERCISE OF THE
RIGHTS OF THE PLEDGEE.
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<PAGE> 40
ANNEX 2
(BEING AN INTEGRAL PART OF THE PLEDGE AGREEMENT, DATED AS OF JANUARY 30, 1998,
EXECUTED BY BROOKE (OVERSEAS) LTD. IN FAVOR OF BANKERS TRUST COMPANY, AS
COLLATERAL AGENT)
FORM OF NOTICE OF PLEDGE
From: Brooke (Overseas) Ltd.
To: Joint Stock Company Liggett-Ducat Limited
Copy to: Bankers Trust Company, as Collateral Agent
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<PAGE> 41
PLEDGE INSTRUCTION
- ------------------------------ -------------------------------
Registrar's service notes Registrar's service notes
- --------------------------------------------------------------------------------
We hereby request you to make in the Register a record of the following:
- --------------------------------------------------------------------------------
- ----------------- ---------------------
arising of pledge termination of pledge
- ----------------- ---------------------
Type of pledge:
- ---------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Full name of Issuer:
------------------------------------
- --------------------------------------------------------------------------------
Type of category of securities:
- ---------------------------------------------------------
- ---------------------------------------------------------
State registration number of the issue:
---------------------------------------
number of securities:
-----------------------------------------------------
(to be filed in handwriting)
- ---------------------------------------------------
THE ENTRY MADE IN THE REGISTER IS BASED ON THE FOLLOWING DOCUMENT:
name and details of the document:
---------------------------------------------
- ------------------------------------------------------------
- -------------------------------------------------------------------------------
-xviii-
<PAGE> 42
- -------------------------------------------------------------------------------
PLEDGOR
- -------------------------------------------------------------------------------
-------------------------
number of
personal account
-------------------------
Full name:
Certifying document:
- ---------------- --------------------- ----------------------------
No. of document: Series: Date of issue (registration):
- -------------------------------------------------------------------------------
Body which has issued (or registered) the document:
- -------------------------------------------------------------------------------
PLEDGEE
- --------------------------------------------------------------------------------
Full name:
Certifying document:
- ---------------- ----------------------- ----------------------------
No. of document: Series: Date of issue (registration):
- -------------------------------------------------------------------------------
Body which has issued (or registered) the document:
- -------------------------------------------------------------------------------
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<PAGE> 43
the certificates are held by: / / the pledgor / / the pledgee
the person entitled to benefit
is: / / pledgor / / the pledgee
the right to use is vested in: / / the pledgor / / pledgee
Conditions of use:
---------------------------------------------------
- -------------------------------------------------------------------------------
AUTHORIZED REPRESENTATIVE
- -------------------------------------------------------------------------------
Full name:
Certifying document:
- ---------------- ------------------ -----------------------------
No. of document: Series: Date of issue (registration):
Body which has issued (or registered) the document:
- --------------------------------------------------------------------------------
Signature of pledgor or its authorized Signature of pledgee or its authorized
representative representative
Seal Seal
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<PAGE> 44
ANNEX 3
(BEING AN INTEGRAL PART OF THE PLEDGE AGREEMENT, DATED AS OF JANUARY 30, 1998,
EXECUTED BY BROOKE (OVERSEAS) LTD. IN FAVOR OF BANKERS TRUST COMPANY, AS
COLLATERAL AGENT)
FORM OF ACKNOWLEDGEMENT OF PLEDGE
From: Joint Stock Company Liggett-Ducat Limited
To: Bankers Trust Company, as Collateral Agent
January 30, 1998
Dear Sirs,
We acknowledge receipt of a notice of pledge dated January 30, 1998 from Brooke
(Overseas) Ltd. and confirm that the notice is adequate notice of a Pledge
Agreement, dated as of January 30, 1998, (the "PLEDGE AGREEMENT") and we further
acknowledge the rights of Bankers Trust Company, as Collateral Agent, as
pledgeholder in respect of 112,160 of Pledgor's shares in Joint Stock Company
Liggett-Ducat Limited.
We confirm that:
(a) the issuance of Joint Stock Company Liggett-Ducat Limited
shares has been registered in accordance with applicable laws
and pursuant an executed request in substantially the form set
forth in Annex 2 of the Pledge Agreement; and
(b) the pledge in favor of the Collateral Agent has been noted in
the share register of Joint Stock Company Liggett-Ducat
Limited.
Yours faithfully,
- -------------------------
For and on behalf of
Joint Stock Company Liggett-Ducat Limited
-xxi-
