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EXHIBIT 10.1
STANDSTILL AGREEMENT
THIS STANDSTILL AGREEMENT (this "Agreement"), dated as of
March 5, 1998 among BGLS INC., a Delaware corporation (the "Company"), AIF II,
L.P., a Delaware limited partnership ("AIF II") and ARTEMIS AMERICA PARTNERSHIP,
a Delaware partnership (as successor to Artemis America LLC, a Delaware limited
liability company) (together with AIF II, the "Participating Holders").
Capitalized terms not otherwise defined herein shall have the meanings specified
in the Indenture (as defined below).
WHEREAS, pursuant to that certain Indenture dated as of
January 1, 1996 (the "Indenture") between the Company and State Street Bank and
Trust Company, as successor to Fleet National Bank of Massachusetts (the
"Trustee"), the Company issued the Series A Securities and the Series B
Securities, of which only the Series B Securities remain outstanding;
WHEREAS, the Participating Holders (directly or through one or
more nominees or custodians, as more fully described on Schedule 1 hereto) and
certain other Holders (the "Other Holders") (the Participating Holders and the
Other Holders being collectively referred to herein as the "Holders") own all of
the outstanding Series B Securities;
WHEREAS, pursuant to the Standstill Agreement and Consent
dated as of August 28, 1997, as amended, among, inter alia, the Company and the
Participating Holders (the "Original Standstill Agreement"), the Participating
Holders agreed to refrain from exercising remedies as a result of the failure of
the Company to pay to the Participating Holders the interest due to the
Participating Holders on July 31, 1997 (the "July Interest Amount") and January
31, 1998 (the "January Interest Amount");
WHEREAS, all interest due to the Other Holders, in connection
with the July 31, 1997 Interest Payment Date has been paid to such Holders;
WHEREAS, the Company has requested, and each of the
Participating Holders has agreed, subject to the terms and conditions set forth
in this Agreement, for the period commencing on the date hereof and ending on
the earlier of the Maturity Date or the occurrence of a Termination Event (as
defined in Section 7) (the "Waiver Period"), (i) to waive any Default or Event
of Default existing solely as a result of the failure of the Company to pay to
such Participating Holder its pro rata share of the July Interest Amount, the
January Interest Amount and all amounts due to such Participating Holders on the
remaining Interest Payment Dates through and including July 31, 2000 (the
"Remaining Interest Payments" and, together with the July Interest Amount and
the January Interest Amount, the "Unpaid Interest Amounts"), with such interest
payments to be made to the Participating Holders on the Maturity Date, and (ii)
that it shall refrain from exercising its rights and remedies against the
Company in connection with the Company's failure to pay such Participating
Holder its pro rata share of the Unpaid Interest Amounts;
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NOW, THEREFORE, in consideration of the premises and the
mutual covenants and agreement of the parties hereinafter set forth, the parties
hereto hereby agree as follows:
1. WAIVER OF DEFAULT. Each of the Participating Holders
hereby waives, until the expiration of the Waiver Period, any Default or Event
of Default existing solely as a result of the Company's failure to pay to such
Participating Holder such Participating Holder's pro rata share of the Unpaid
Interest Amounts. The Company acknowledges that (i) interest at a rate of 16.75%
per annum has accrued pursuant to Section 2.12 of the Indenture on the July
Interest Amount from July 31, 1998 through the date of this Amendment and (ii)
interest shall accrue at the rate of 15.75% per annum, compounded on a
semi-annual basis, on (a) the July Interest Amount plus the amount accrued
pursuant to clause (i) above, (b) the January Interest Amount and (c) each
Remaining Interest Payment from the date each such payment is due pursuant to
Section 2.13 of the Indenture until all such amounts are paid in full in cash.
2. STANDSTILL. Each of the Participating Holders hereby
agrees that during the Waiver Period it will not exercise and shall not direct
the Trustee to exercise any remedy under the Indenture or the Series B
Securities, at law or in equity, which it or the Trustee now has or hereafter
may have in respect of any Default or Event of Default resulting solely from the
failure of the Company to pay to such Participating Holder its pro rata share of
the Unpaid Interest Amounts.
4. REMOVAL OF SECURITIES FROM DTC. Each of the
Participating Holders agrees that, it shall remove its securities from the
Depository Trust Company registry prior to July 1, 1998.
5. CONDITIONS PRECEDENT TO EFFECTIVENESS OF THIS
AGREEMENT. This Agreement shall become effective upon the execution and delivery
by the Company and each of the Participating Holders of the following documents
and the payment of all reasonable fees and expenses of Sidley & Austin, counsel
to the Participating Holders:
(a) This Agreement;
(b) The five-year Warrants executed by Brooke Group
Limited ("BGL") in favor of the Participating Holders for the purchase of an
aggregate 2,000,000 shares of the common stock of BGL at an exercise price of
$5.00 per share;
(c) The Registration Rights Agreements of even date
herewith between BGL and the Participating Holders relating to the shares of BGL
referred to in clause 5(b);
(d) The Warrants executed by BGL in favor of the
Participating Holders for the purchase of 2,150,000 shares of the common stock
of BGL at an exercise price of $.10 per share;
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(e) The Registration Rights Agreements of even date
herewith between BGL and the Participating Holders relating to the shares of BGL
referred to in clause 5(d);
(f) The Limited Recourse Guarantee of even date herewith
between Brooke (Overseas) Ltd. (the "Guarantor") and the Participating Holders;
and
(g) The Pledge Agreements of even date herewith between
the Guarantor and each of the Participating Holders, securing the Limited
Recourse Guarantee.
(h) The opinion of Milbank, Tweed, Hadley & McCloy in
form and substance reasonably satisfactory to the Participating Holders.
6. TERMINATION. This Standstill Agreement and Consent
shall terminate upon the earlier of (i) the payment in full to each
Participating Holder of its pro rata share of the Unpaid Interest Amounts, plus
all amounts owing thereon pursuant to Section 2.12 of the Indenture and Section
1 hereof , (ii) the occurrence of an Event of Default (other than in connection
with the Unpaid Interest Amounts) and (iii) any redemption or other payment of
Securities pursuant to Section 3.08 or 3.09 of the Indenture; provided, that
this Standstill Agreement shall only terminate with respect to those
AgreementSecurities actually redeemed or repurchased from the Participating
Holders pursuant to such sections (a "Termination Event").
7. ABSENCE OF WAIVER. The parties hereto agree that,
except to the extent expressly set forth herein, nothing contained herein shall
be deemed to:
(a) be a consent to, or waiver of, any Default
or Event of Default;
(b) prejudice any right or remedy which any of
the Participating Holders may now have or may in the future have under
the Indenture, the Series B Securities or otherwise, including, without
limitation, any right or remedy resulting from any Default or Event of
Default; or
(c) constitute a waiver of the rights of any of
the Participating Holders under Section 2.12 of the Indenture, except
as provided in Section 2 hereof.
8. REPRESENTATIONS. Each party hereto hereby represents
and warrants to the other parties that:
(a) such party is a corporation or partnership,
as applicable, duly organized, validly existing, and in good standing
under the laws of the state of its incorporation or formation, as
applicable;
(b) the execution, delivery and performance of
this Standstill Agreement and Consent and each of the documents
contemplated hereby by such party is
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within its corporate or partnership powers, as applicable, has been
duly authorized by all necessary corporate or partnership action, as
applicable, has received all necessary consents and approvals (if any
shall be required), and does not and will not contravene or conflict
with any provisions of law or of the charter or by-laws, or partnership
agreement, as applicable, of such party or of any material agreement
binding upon such party or its property; and
(c) upon its effectiveness under Section 6
hereof, this Standstill Agreement and Consent will be a legal, valid
and binding obligation of such party, enforceable against it in
accordance with its terms.
In addition, the Company represents and warrants that to the best of its
knowledge, except as set forth herein no Default or Event of Default under the
Indenture has occurred and is continuing.
9. CONTINUING EFFECT, ETC. Except as expressly provided
herein, the Company hereby agrees that the Indenture and the Series B Securities
shall continue unchanged and in full force and effect, and all rights, powers
and remedies of the Participating Holders thereunder and under applicable law
are hereby expressly reserved. In addition, the Company hereby agrees that its
obligations under this Standstill Agreement constitute "Secured Obligations" as
defined in each of the BGLS Pledge Agreement, the NV Holdings Pledge Agreement
and the Pledge Agreements referenced in Section 5(g) above.
10. EXPENSES AND INDEMNIFICATIONS.
(a) The Company hereby agrees to reimburse each of the
Participating Holders for their reasonable attorneys fees and expenses incurred
in connection with this Standstill Agreement, the Original Standstill Agreement,
the letter dated August 28, 1997 between the Company and the Participating
Holders, and for legal expenses incurred in connection with a due diligence
review of certain litigation matters involving the Company and its subsidiaries
and a structuring analysis of various alternatives for the proposed
restructuring..
(b) The Company agrees that an actual or threatened or
potential claim, action, suit or proceeding against or affecting an Indemnitee
(as defined in the Exchange Agreement dated as of November 21, 1995 among inter
alia the Company and the Participating Holders) that at any time results from,
relates to or arises out of the execution, delivery or performance by the
Participating Holders of this Agreement is deemed to be an Indemnification Event
(as defined in the Exchange Agreement).
11. MISCELLANEOUS.
(a) Section headings used in this Agreement are for
convenience of reference only and shall not affect the construction of this
Agreement.
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(b) This Agreement may be executed in any number of
counterparts and by the different parties on separate counterparts and each such
counterpart shall be deemed to be an original, but all such counterparts shall
together constitute but one and the same agreement.
(c) This Agreement shall be a contract made under and
governed by the laws of the State of New York.
(d) All obligations of the Company and rights of the
Participating Holders expressed herein shall be in addition to and not in
limitation of those provided by applicable law.
(e) This Agreement shall be binding upon the Company, the
Participating Holders and their respective successors and assigns, and shall
inure to the benefit of the Company, the Participating Holders and their
respective successors and assigns.
(f) All amendments or modifications of this Agreement and
all consents, waivers and notices delivered hereunder or in connection herewith
shall be in writing.
12. WAIVER OF JURY TRIAL. EACH OF THE COMPANY AND THE
PARTICIPATING HOLDERS HEREBY IRREVOCABLY WAIVES ALL RIGHT TO A TRIAL BY JURY IN
ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY. THE PARTIES HERETO FURTHER
AGREE THAT THIS AGREEMENT MAY BE FILED AS EVIDENCE OF THE WAIVER REFERRED TO
ABOVE IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO
THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
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IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized representatives as of the date
first above written.
BGLS INC.
By /s/ Richard J. Lampen
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Name: Richard J. Lampen
Title: Executive Vice President
AIF II, L.P.
By APOLLO ADVISORS, L.P.
Managing General Partner
By APOLLO CAPITAL MANAGEMENT, INC.
General Partner
By /s/ John J. Hannan
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Name: John J. Hannan
Title:
ARTEMIS AMERICA PARTNERSHIP
By LION ADVISORS, L.P.
Attorney-in-Fact
By LION CAPITAL MANAGEMENT, INC.
General Partner
By /s/ John J. Hannan
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Name: John J. Hannan
Title:
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ACKNOWLEDGED, AGREED & CONSENTED TO
WITH RESPECT TO SECTION 11(b):
BROOKE GROUP LTD.
By /s/ Richard J. Lampen
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Name: Richard J. Lampen
Title: Executive Vice President
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SCHEDULE I
PRINCIPAL AMOUNT ($)
HOLDER DTC PARTICIPANT (NO.) OF SERIES B NOTES
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Artemis America The Bank of New York (901) $42,513,000
Partnership
AIF II, L.P. Chase Manhattan Bank, Trust (931) $54,726,000
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