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EXHIBIT 10.10
PLEDGE AGREEMENT
This PLEDGE AGREEMENT (this "Agreement") dated as of March 2,
1998, is made between Brooke (Overseas) Ltd. (the "Pledgor") and Artemis
America Partnership, a Delaware partnership (the "Pledgee").
R E C I T A L S:
WHEREAS, BGLS Inc., a Delaware corporation (the "Company"),
has entered into the Indenture (as amended, modified, supplemented and in
effect from time to time, the "Indenture") dated as of January 1, 1996 between
the Company and State Street Bank and Trust Company (as successor to Fleet
National Bank of Massachusetts), as trustee (the "Trustee");
WHEREAS, pursuant to the terms and conditions of the
Standstill Agreement dated as of March 2, 1998 between the Company, the Pledgee
and AIF II, L.P. a Delaware limited partnership ("AIF", collectively with the
Pledgee, the "Participating Holders")(the "Standstill Agreement"), the
Participating Holders have agreed to defer the payment of interest due to the
Participating Holders under the Indenture until the occurrence of a Termination
Event (as defined in the Standstill Agreement);
WHEREAS, the Issuer has elected pursuant to Section 8103 of
the Delaware Commercial Code to treat interests in the Issuer as securities
which may be perfected through possession of the security;
WHEREAS, it is a condition to the Participating Holders
entering into the Standstill Agreement that the Pledgor shall (i) pledge the
Collateral (as defined below) to the Pledgee, (ii) pledge certain securities to
AAP pursuant to a Pledge Agreement dated as of the date of this Agreement and
(iii) guarantee for the benefit of the Participating Holders the Guaranteed
Obligations (as defined in the Limited Recourse Guarantee); and
NOW, THEREFORE, to induce the Participating Holders to enter
into the Standstill Agreement, and for other good and valuable consideration,
the receipt and sufficiency of which are
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hereby acknowledged, the Pledgor has agreed to pledge the Collateral upon the
terms and conditions of this Agreement. Accordingly, the parties hereto agree
as follows:
Section 1. Definitions and Interpretation.
1.01 Certain Defined Terms. (a) Each capitalized term
used in this Agreement and not defined in this Agreement shall have the meaning
assigned to such term (whether directly or by reference to another agreement or
document) in the Indenture or the Limited Recourse Guarantee. The principles of
interpretation set forth in Section 1.03 of the Indenture shall apply to this
Agreement. Unless otherwise defined in this Agreement or in the Indenture,
terms used in Article 9 of the Uniform Commercial Code (as defined below) are
used in this Agreement as defined in such Article 9.
(b) In addition, the following terms shall have the
meanings set forth below:
"Collateral" shall have the meaning assigned to that
term in Section 2.01.
"Equity Collateral" shall have the meaning assigned to that
term in Section 2.01(a).
"Equity Rights" shall have the meaning assigned to that
term in Section 2.01(a).
"Issuer" shall mean Western Tobacco Investments LLC, a
Delaware limited liability company.
"Limited Recourse Guarantee" shall mean the Limited Recourse
Guarantee dated as of March 2, 1998 between the Pledgor and the Participating
Holders.
"LLC Agreement" shall mean the Limited Liability Company
Agreement of Western Tobacco Investments LLC dated as of February 27, 1998
adopted and executed by the Issuer, the Pledgor and Western Realty Development
LLC.
"Pledged Equity" shall have the meaning assigned to
that term in Section 2.01(a).
"Secured Obligations" shall mean the Guaranteed Obligations
(as defined in the Limited Recourse Guarantee).
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"Uniform Commercial Code" shall mean the Uniform Commercial
Code as in effect in from time to time in any applicable jurisdiction.
Section 2. Collateral.
2.01 Grant. As collateral security for the prompt payment
in full when due (whether at stated maturity, by acceleration or otherwise) and
timely performance of the Secured Obligations, the Pledgor hereby pledges and
grants to the Pledgee a security interest in all of the Pledgor's right, title
and interest in and to the following property, whether now owned or acquired in
the future by the Pledgor and whether now existing or in the future coming into
existence (collectively, the "Collateral"):
(a) a 21.90% membership interest in the Issuer together
with (i) the share certificates representing the same identified in Exhibit A
and (ii) the right, title and interest of the Pledgor with respect to such
21.90% membership interest in, to and under the LLC Agreement (collectively,
the "Pledged Equity"); and
(b) all shares, securities, moneys or property
representing a dividend on, or a distribution or return of capital in respect
of any of the Pledged Equity, resulting from a split-up, revision,
reclassification or other like change of any of the Pledged Equity or otherwise
received in exchange for any of the Pledged Equity and all subscriptions,
options, warrants or other rights of like nature (the "Equity Rights") issued
to the holders of, or otherwise in respect of, any of the Pledged Equity; and
(c) in the event of any consolidation or merger in which
the Issuer is not the surviving entity, all of the membership interest, or
other equity interests of the successor corporation or successor entity (unless
such successor entity is the Pledgor itself) formed by or resulting from such
consolidation or merger (collectively, and together with the property described
in clauses (a) and (b) above, the "Equity Collateral"); and
(d) all proceeds and products in whatever form of all or
any part of the foregoing.
2.02 Perfection and Registration of Pledge. Concurrently
with the execution and delivery of this Agreement, the Pledgor shall (i)
deliver to the Pledgee all of the certificates identified in Exhibit A,
accompanied by undated certificate powers duly executed in blank and (ii) take
all such
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other actions as shall be necessary or as the Pledgee may reasonably request to
perfect and establish the priority of the Liens granted by this Agreement.
2.03 Preservation and Protection of Security Interests.
The Pledgor shall:
(a) upon the acquisition after the date of this
Agreement by the Pledgor of any Equity Collateral, promptly either (x) transfer
and deliver to the Pledgee all such Equity Collateral (together with, if
applicable, the certificates representing such Equity Collateral duly endorsed
in blank or accompanied by undated powers duly executed in blank or such
instruments of transfer as the Pledgee shall direct in its discretion to
effectuate the purposes of this Agreement) or (y) take such other action as the
Pledgee shall deem reasonably necessary or appropriate to perfect, and
establish the priority of, the Liens granted by this Agreement in such Equity
Collateral; and
(b) give, execute, deliver, file or record any and all
financing statements, notices, contracts, agreements or other instruments,
obtain any and all governmental approvals and take such steps as are reasonably
necessary to create, perfect, establish the priority of, or to preserve the
validity, perfection or priority of, the Liens granted by this Agreement or to
enable the Pledgee to exercise and enforce its rights, remedies, powers and
privileges under this Agreement with respect to such Liens, including causing
any or all of the Equity Collateral to be transferred of record into the name
of the Pledgee or its nominee (and the Pledgee agrees that if any Equity
Collateral is transferred into its name or the name of its nominee, the Pledgee
will thereafter promptly give to the Pledgee copies of any notices and
communications received by it with respect to the Equity Collateral pledged by
the Pledgor).
2.04 Attorney-in-Fact. Subject to the rights of the
Pledgor under Section 2.05, the Pledgee is hereby appointed the
attorney-in-fact of the Pledgor for the purpose of carrying out the provisions
of this Agreement and taking any action and executing any instruments as are
reasonably necessary to accomplish the purposes of this Agreement, to preserve
the validity, perfection and priority of the Liens granted by this Agreement
and, following any Termination Event, to exercise its rights, remedies, powers
and privileges under this Agreement. This appointment as attorney-in-fact is
irrevocable and coupled with an interest. Without limiting the generality of
the foregoing, the Pledgee shall be entitled under this Agreement upon the
occurrence and continuation of any Termination Event (i) to ask, demand,
collect, sue for, recover, receive and give
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receipt and discharge for amounts due and to become due under and in respect of
all or any part of the Collateral; (ii) to receive, endorse and collect any
drafts, instruments, documents and chattel paper in connection with clause (i)
above; (iii) to file any claims or take any action or proceeding as is
reasonably necessary for the collection of all or any part of the Collateral;
and (iv) to execute, in connection with any sale or disposition of the
Collateral under Section 5, any endorsements, assignments, bills of sale or
other instruments of conveyance or transfer with respect to all or any part of
the Collateral.
2.05 Special Provisions Relating to Equity Collateral.
(a) So long as no Termination Event shall have occurred
and be continuing, the Pledgor shall have the right to exercise all voting,
consensual and other powers of ownership pertaining to the Equity Collateral
for all purposes not inconsistent with the terms of this Agreement; provided
that the Pledgor agrees that it will not vote the Equity Collateral in any
manner that is inconsistent with the terms of this Agreement; and the Pledgee
shall, at the Pledgor's expense, execute and deliver to the Pledgor or cause to
be executed and delivered to the Pledgor all such proxies, powers of attorney,
dividend or distribution and other orders and other instruments, without
recourse, as the Pledgor may reasonably request for the purpose of enabling the
Pledgor to exercise the rights and powers which it is entitled to exercise
pursuant to this Section 2.05(a).
(b) So long as no Termination Event shall have occurred
and be continuing, the Pledgor shall be entitled to receive and retain any
dividends or other distributions on the Equity Collateral.
(c) If any Termination Event shall have occurred and be
continuing, and whether or not the Pledgee exercises any available right to
declare any Secured Obligation due and payable or seeks or pursues any other
right, remedy, power or privilege available to it under applicable law or this
Agreement, all dividends and other distributions on the Equity Collateral shall
be paid directly to the Pledgee as part of the Equity Collateral, subject to
the terms of this Agreement, and, if the Pledgee shall so request, the Pledgor
agrees to execute and deliver to the Pledgee appropriate additional dividend,
distribution and other orders and instruments to that end; provided that if
such Termination Event is cured or rescinded, any such dividend or distribution
paid to the Pledgee prior to such cure shall, upon request of the Pledgor
(except to the extent applied to the Secured Obligations), be returned by the
Pledgee to the Pledgor.
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2.06 Rights and Obligations.
(a) No reference in this Agreement to proceeds or to the
sale or other disposition of Collateral shall authorize the Pledgor to sell or
otherwise dispose of any Collateral except to the extent otherwise expressly
permitted by the terms of this Agreement.
(b) The Pledgee shall not be required to take steps
necessary to preserve any rights against prior parties to any part of the
Collateral.
(c) The Pledgor shall remain liable to perform its
duties and obligations under the LLC Agreement in accordance with its terms to
the same extent as if this Agreement had not been executed and delivered. The
exercise by the Pledgee of any right, remedy, power or privilege in respect of
this Agreement shall not release the Pledgor from any of its duties and
obligations under the LLC Agreement. The Pledgee shall have no duty, obligation
or liability under the LLC Agreement by reason of this Agreement.
2.07 Termination. When all Secured Obligations shall have
been satisfied in full, this Agreement shall terminate, and the Pledgee shall
forthwith cause to be assigned, transferred and delivered, against receipt but
without any recourse, warranty or representation whatsoever, any remaining
Collateral and money received in respect of the Collateral, to or on the order
of the Pledgor.
Section 3. Representations and Warranties. As of the date
of this Agreement, the Pledgor represents and warrants to the Pledgee as
follows:
3.01 Title. The Pledgor is the sole beneficial owner of
the Collateral in which it purports to grant a Lien pursuant to this Agreement,
and such Collateral is free and clear of all Liens (and, with respect to the
Equity Collateral, of any Equity Right in favor of any other Person). The Liens
granted by this Agreement in favor of the Pledgee have attached and constitute
a perfected security interest in all of such Collateral prior to all other
Liens.
3.02 Pledged Equity.
(a) The Pledged Equity evidenced by the certificates
identified in Exhibit A is duly authorized, validly existing, fully paid and
nonassessable, and none of such Pledged Equity is subject to any contractual
restriction, or any restriction under
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the organizational documents of the Issuer of such Pledged Equity, upon the
transfer of such Pledged Equity (except for any such restriction contained in
this Agreement).
(b) The Equity Collateral constitutes 21.90% of the
total number of membership interests or shares of each class of capital stock,
as applicable, of the Issuer currently outstanding. The attached Exhibit A
correctly identifies, as of the date of this Agreement, the membership
interests comprising such Pledged Equity and the respective percentage interest
in the Issuer as a whole. All such membership interests or shares are duly
authorized, validly issued, fully paid and nonassessable and will be free of
any contractual restriction or any restriction under the charter or bylaws of
the Issuer of the Equity Collateral, upon the transfer of the Equity Collateral
(except for any such restriction contained in this Agreement).
Section 4. Covenants.
4.01 Books and Records. The Pledgor shall:
(a) keep full and accurate books and records relating to
the Collateral and stamp or otherwise mark such books and records in such
manner as the Pledgee may reasonably require in order to reflect the Liens
granted by this Agreement; and
(b) permit representatives of the Pledgee, upon
reasonable notice, at any time during normal business hours to inspect and make
abstracts from its books and records pertaining to the Collateral, permit
representatives of the Pledgee to be present at the Pledgor's place of business
to receive copies of all communications and remittances relating to the
Collateral and forward copies of any notices or communications received by the
Pledgor with respect to the Collateral, all in such manner as the Pledgee may
reasonably request.
4.02 Removals, Etc. Without at least 30 days' prior
written notice to the Pledgee, the Pledgor shall not (i) maintain any of its
books and records with respect to the Collateral at any office or maintain its
principal place of business at any place, other than at the address initially
indicated for notices to it under Section 6(c) or (ii) change its corporate
name, or the name under which it does business, from the name shown on the
signature pages to this Agreement.
4.03 Sales and Other Liens. Except as otherwise permitted
under the Indenture, the Pledgor shall not sell, transfer or otherwise dispose
of all or any part of the Collateral, create, incur, assume or suffer to exist
any Lien upon all or any part of the Collateral or file or suffer to be on
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file or authorize to be filed, in any jurisdiction, any financing statement or
like instrument with respect to all or any part of the Collateral in which the
Pledgee is not named as the sole secured party.
4.04 Further Assurances. The Pledgor agrees that, from
time to time upon the written request of the Pledgee, the Pledgor will execute
and deliver such further documents and do such other acts and things as the
Pledgee may reasonably request in order fully to effect the purposes of this
Agreement.
4.05 Dilution. The Pledgor shall cause the Equity
Collateral to constitute at all times 21.90% of the total equity interests in
the Issuer. The Pledgor shall cause all such interests to be duly authorized,
validly issued, fully paid and nonassessable and to be free of any contractual
restriction or any restriction under the Limited Liability Company Agreement,
upon the transfer of such Equity Collateral.
4.06 Financial Reports. Within 45 days after the close of
the first three quarterly accounting periods in each fiscal year of the
Pledgor, the Pledgor shall deliver to the Pledgee, the unaudited financial
statements of the Pledgor and the Issuer. Within 120 days after the close of
each fiscal year, the Pledgor shall deliver to the Pledgee, the financial
statements of the Pledgor and the Issuer, certified by an independent certified
public accountant of recognized national standing. The Pledgor represents and
warrants that all such financial statements shall be true and correct in all
material respects.
Section 5. Remedies.
5.01 Events of Default, Etc. If a Termination Event
shall have occurred and be continuing:
(a) the Pledgee in its discretion may, in its name or in
the name of the Pledgor or otherwise, demand, sue for, collect or receive any
money or property at any time payable or receivable on account of or in
exchange for all or any part of the Collateral, but shall be under no
obligation to do so;
(b) the Pledgee in its discretion may, upon ten business
days' prior written notice to the Pledgor of the time and place and subject to
the terms of the LLC Agreement, with respect to all or any part of the
Collateral which shall then be or shall thereafter come into the possession,
custody or control of the Pledgee or its agents, sell, lease or otherwise
dispose of all or any part of such Collateral, at such place or places as the
Pledgee deems best, for cash, for credit or for future
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delivery (without thereby assuming any credit risk) and at public or private
sale, without demand of performance or notice of intention to effect any such
disposition or of time or place of any such sale (except such notice as is
required above or by applicable statute and cannot be waived), and the Pledgee
or any other Person may be the purchaser, lessee or recipient of any or all of
the Collateral so disposed of at any public sale (or, to the extent permitted
by law, at any private sale) and thereafter hold the same absolutely, free from
any claim or right of whatsoever kind, including any right or equity of
redemption (statutory or otherwise), of the Pledgor, any such demand, notice
and right or equity being hereby expressly waived and released. The Pledgee
may, without notice or publication, adjourn any public or private sale or cause
the same to be adjourned from time to time by announcement at the time and
place fixed for the sale, and such sale may be made at any time or place to
which the sale may be so adjourned; and
(c) the Pledgee shall have, and in its discretion may
exercise, all of the rights, remedies, powers and privileges with respect to
the Collateral of a secured party under the Uniform Commercial Code (whether or
not the Uniform Commercial Code is in effect in the jurisdiction where such
rights, remedies, powers and privileges are asserted) and such additional
rights, remedies, powers and privileges to which a secured party is entitled
under the laws in effect in any jurisdiction where any rights, remedies, powers
and privileges in respect of this Agreement or the Collateral may be asserted,
including the right, to the maximum extent permitted by law (subject to the
terms of the LLC Agreement), to exercise all voting, consensual and other
powers of ownership pertaining to the Collateral as if the Pledgee was the sole
and absolute owner of the Collateral (and the Pledgor agrees to take all such
action as may be appropriate to give effect to such right).
The proceeds of, and other realization upon, the Collateral by virtue of the
exercise of remedies under this Section 5.01 shall be applied in accordance
with Section 5.04.
5.02 Limited Recourse. Notwithstanding anything to the
contrary in this Agreement, the Limited Recourse Guarantee, the Standstill
Agreement, the Indenture or otherwise, the security interest granted herein
secures a limited recourse obligation and recourse for the Secured Obligations
is expressly limited solely to the Pledgee's interest in the Collateral.
5.03 Private Sale.
(a) The Pledgee shall incur no liability as a result of
the sale, lease or other disposition of all or any part of the
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Collateral at any private sale pursuant to Section 5.01 conducted in a
commercially reasonable manner. The Pledgor hereby waives any claims against
the Pledgee arising by reason of the fact that the price at which the
Collateral may have been sold at such a private sale was less than the price
which might have been obtained at a public sale or was less than the aggregate
amount of the Secured Obligations, even if the Pledgee accepts the first offer
received and does not offer the Collateral to more than one offeree.
(b) The Pledgor recognizes that, by reason of certain
prohibitions contained in the Securities Act of 1933 and applicable state
securities laws, the Pledgee may be compelled, with respect to any sale of all
or any part of the Collateral, to limit purchasers to those who will agree,
among other things, to acquire the Collateral for their own account, for
investment and not with a view to distribution or resale. The Pledgor
acknowledges that any such private sales may be at prices and on terms less
favorable to the Pledgee than those obtainable through a public sale without
such restrictions, and, notwithstanding such circumstances, agrees that any
such private sale shall be deemed to have been made in a commercially
reasonable manner and that the Pledgee shall have no obligation to engage in
public sales and no obligation to delay the sale of any Collateral for the
period of time necessary to permit the Issuer of the Collateral to register it
for public sale.
5.04 Application of Proceeds. Except as otherwise
expressly provided in this Agreement, the proceeds of, or other realization
upon, all or any part of the Collateral by virtue of the exercise of remedies
under Section 5.01, and any other cash at the time held by the Pledgee under
this Section 5, shall be applied by the Pledgee:
First, to the payment of the reasonable costs and expenses of
such exercise of remedies, including reasonable out-of-pocket costs and
expenses of the Pledgee and the reasonable fees and expenses of its counsel;
Next, to the payment in full of the remaining Secured
Obligations then due and owing; and
Finally, to the Pledgor, or its respective successors or
assigns, or as a court of competent jurisdiction may direct, of any surplus
then remaining.
As used in this Section 5, "proceeds" of Collateral shall
mean cash, securities and other property realized in respect of, and
distributions in kind of, Collateral, including any property received under any
bankruptcy, reorganization or
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other similar proceeding as to the Pledgor or any issuer of, or account debtor
or other obligor on, any of the Collateral.
Section 6. Miscellaneous.
(a) No Waiver. No failure on the part of the Pledgee to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, remedy, power or privilege under this Agreement shall operate as a
waiver of such right, remedy, power or privilege, nor shall any single or
partial exercise of any right, remedy, power or privilege under this Agreement
preclude any other or further exercise of any such right, remedy, power or
privilege or the exercise of any other right, remedy, power or privilege. The
rights, remedies, powers and privileges provided in this Agreement are
cumulative and not exclusive of any rights, remedies, powers and privileges
provided by law.
(b) Amendments, Etc. Any provision of this Agreement may
be modified, supplemented or waived only by an instrument in writing duly
executed by the Pledgor and the Pledgee. Any such modification, supplement or
waiver shall be for such period and subject to such conditions as shall be
specified in the instrument effecting the same and shall be binding upon the
Pledgee and the Pledgor, and any such waiver shall be effective only in the
specific instance and for the purposes for which given.
(c) Addresses for Notices. All notices and other
communications required or permitted to be given or made under this Agreement
shall be given or made by mail, overnight courier or facsimile (or, unless such
notice is specifically required to be given in writing, by telephone, confirmed
in writing by facsimile by the close of business on the day notice is given)
and faxed, mailed certified or registered (return receipt requested) or sent by
overnight courier, or personally delivered (or telephoned, as the case may be)
at the address specified below or at such other address as shall be designated
in a notice in writing.
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If to the Pledgee:
Artemis America Partnership
c/o Lion Advisors, L.P.
2 Manhattanville Road
Purchase, New York 10577
Facsimile: (914) 694-8032
Attention: Tony Tortorelli
With a copy to:
Sidley & Austin
875 Third Avenue
New York, New York 10022
Facsimile No.: (212) 906-2021
Attention: Daniel G. Kelly, Jr.
If to the Pledgor:
Brooke (Overseas) Ltd.
100 S.E. Second Street, 32nd Floor
Miami, Florida 33131
Telephone No.: (305) 579-8000
Facsimile No.: (305) 579-8009
Attention: Richard J. Lampen, Esq.
With a copy to:
Milbank, Tweed, Hadley & McCloy
601 S. Figueroa Street
30th Floor
Los Angeles, California 90017
Telephone No.: (213) 892-4408
Facsimile No.: (213) 629-5063
Attention: Eric R. Reimer
(d) Captions. The captions and section headings
appearing in this Agreement are included solely for convenience of reference
and are not intended to affect the interpretation of any provision of this
Agreement.
(e) Severability. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement, and any such prohibition
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or unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(f) Counterparts. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and
the same instrument and any of the parties to this Agreement may execute this
Agreement by signing any such counterpart.
Section 7. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK
APPLICABLE TO CONTRACTS MADE AND TO BE PERFORMED IN THAT STATE.
REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK
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IN WITNESS WHEREOF, the parties to this Agreement have caused
this Agreement to be duly executed as of the day and year first above written.
BROOKE (OVERSEAS) LTD.
By: /s/ Richard J. Lampen
---------------------------------
Name: Richard J. Lampen
Title: Executive Vice President
ARTEMIS AMERICA PARTNERSHIP, L.P.
By: /s/ John J. Hannan
---------------------------------
Name: John J. Hannan
Title:
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EXHIBIT A
PLEDGED CERTIFICATES
Member Membership Interest Certificates
------ ------------------- ------------
Brooke (Overseas) Ltd. 21.90% 002