Acknowledgment and Pledge Agreement among Vector Group Ltd., United States Trust Company of New York, and Noteholders (May 14, 2001)

Summary

This agreement, dated May 14, 2001, is between Vector Group Ltd., United States Trust Company of New York (as collateral agent), and the holders of 10% Senior Secured Notes of BGLS Inc. Vector pledges its interest in a $25 million secured promissory note as collateral to secure its obligations under a related Note Purchase Agreement. The agreement outlines Vector’s obligations, representations, and the rights of the collateral agent in case of default. It ensures that the noteholders have a perfected security interest in the pledged collateral until the secured obligations are fully repaid.

EX-10.6 7 g69558ex10-6.txt ACKNOWLEDGMENT AND PLEDGE AGREEMENT 1 EXHIBIT 10.6 ACKNOWLEDGMENT AND PLEDGE AGREEMENT ACKNOWLEDGEMENT AND PLEDGE AGREEMENT, dated as of May 14, 2001 (this "AGREEMENT"), by and among (i) Vector Group Ltd., a Delaware corporation ("VECTOR"), (ii) United States Trust Company of New York, a New York banking corporation, as collateral agent (together with its successors and assigns, the "COLLATERAL AGENT") on behalf of the holders (the "HOLDERS") of the 10% Senior Secured Notes Due March 31, 2006 of BGLS Inc. issued pursuant to that certain Note Purchase Agreement, dated as of May 14, 2001 (as amended, supplemented or modified from time to time) between the Company and the Holders and (iii) the Purchasers (as defined in the Note Purchase Agreement). Capitalized terms, unless otherwise defined herein, are used herein with the meanings ascribed to them in the Note Purchase Agreement. 1. ACKNOWLEDGEMENTS. Vector hereby acknowledges to the Holders that it has read and understood the Note Purchase Agreement, and hereby agrees, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, that it shall comply with Sections 7.5, 8.5, 8.25, 9.1, 9.3(b), 9.4 and 9.6 of the Note Purchase Agreement. Vector shall be liable to the Holders for any breach of such Sections of the Note Purchase Agreement to the extent of any benefit accruing directly to it as a result of such breach. 2. PLEDGE OF COLLATERAL. As collateral security for the prompt payment in full when due (whether at stated maturity, by acceleration or otherwise) and performance of the Secured Obligations (as defined in the BGLS Pledge Agreement), Vector hereby pledges and grants to the Collateral Agent for the benefit of the Holders and the Collateral Agent a security interest in all of Vector's right, title and interest in that certain $25,000,000 Secured Revolving Demand Promissory Note, dated as of March 6, 2001, made by Vector Tobacco (USA) Ltd. and Vector Tobacco Ltd. in favor of BGLS Inc. and Vector (the "SECURED NOTE" or the "COLLATERAL"). 3. NOTE POWER. Concurrently with the delivery to the Security Agent of the Secured Note, Vector shall deliver an undated note power covering the Secured Note, duly executed in blank by Vector. 4. REPRESENTATIONS AND WARRANTIES. Vector represents and warrants that: (a) Vector is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation; (b) Vector has the corporate power and authority and the legal right to execute and deliver, to perform its obligations under, and to grant the security interest in the Collateral pursuant to, this Agreement and has taken all necessary corporate action to authorize its execution, delivery and performance of, and grant of the security interest in the Collateral pursuant to, this Agreement; (c) this Agreement constitutes a legal, valid and binding obligation of Vector, enforceable in accordance with its terms, and upon delivery to the Collateral Agent of the Secured Note, the security interest created pursuant to this Agreement will constitute a valid, perfected first priority security interest in the Collateral, enforceable in accordance with its -1- 2 terms against all creditors of Vector and any Persons purporting to purchase any Collateral from Vector, except in each case as enforceability may be affected by bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and other similar laws relating to or affecting creditors' rights generally, general equitable principles (whether considered in a proceeding in equity or at law) and an implied covenant of good faith and fair dealing; (d) the execution, delivery and performance by Vector of this Agreement will not (i) contravene, result in any breach of, or constitute a default under, or result in the creation of any Lien in respect of any property of Vector under, any indenture, mortgage, deed of trust, loan, purchase or credit agreement, lease, corporate charter or by-laws, or any other agreement or instrument to which Vector is bound or by which Vector or any of its properties is bound or affected, (ii) conflict with or result in a breach of any of the terms, conditions or provisions of any order, judgment, decree, or ruling of any court, arbitrator or Governmental or Regulatory Authority applicable to Vector or (iii) violate any provision of any statute or other rule or regulation of any Governmental or Regulatory Authority applicable to Vector; (e) no consent, approval or authorization of, or registration, filing (other than the filing of any financing statements contemplated in any Note Document) or declaration with, any Governmental or Regulatory Authority is required in connection with the execution, delivery or performance by Vector of this Agreement; and (f) no litigation, investigation or proceeding of or before any arbitrator or Governmental or Regulatory Authority is pending or, to the knowledge of Vector, threatened by or against Vector against any of its properties or revenues with respect to this Agreement or any of the transactions contemplated hereby. 5. COVENANTS. Until the Secured Obligations have been repaid in full, Vector shall do the following: (a) give, execute, deliver, file and/or record any financing statement, continuation statement, notice, instrument, document, agreement or other papers that may be necessary or desirable or that the Collateral Agent may reasonably request to create, preserve, perfect or validate the security interest granted pursuant hereto or to enable the Collateral Agent to exercise and enforce its rights hereunder with respect to such pledge and security interest; (b) upon the occurrence and during the continuance of any Default, upon request of the Collateral Agent, promptly notify (and Vector hereby authorizes the Collateral Agent so to notify) each maker of the Secured Note that the Secured Note has been assigned to the Collateral Agent hereunder, and that any payments due or to become due in respect of such Collateral are to be made directly to the Securities Account; (c) without the prior written consent of the Collateral Agent, Vector shall not file or suffer to be on file, or authorize or permit to be filed or to be on file, in any jurisdiction, any financing statement or like -2- 3 instrument with respect to the Collateral in which the Collateral Agent is not named as the sole secured party. 6. PRESERVATION OF RIGHTS. The Collateral Agent shall not be required to take steps necessary to preserve any rights against third parties to any of the Collateral. 7. EVENTS OF DEFAULT, ETC. During the period during which an Event of Default shall have occurred and be continuing: (a) the Collateral Agent may make any reasonable compromise or settlement deemed desirable with respect to any of the Collateral and may extend the time of payment, arrange for payment in installments, or otherwise modify the terms of, any of the Collateral; (b) the Collateral Agent shall have all of the rights and remedies with respect to the Collateral of a secured party under the Uniform Commercial Code (whether or not the Uniform Commercial Code is in effect in the jurisdiction where the rights and remedies are asserted) and such additional rights and remedies to which a secured party is entitled under the laws in effect in any jurisdiction where any rights and remedies hereunder may be asserted, including, without limitation, the right, to the maximum extent permitted by law, to exercise all voting, consensual and other powers of ownership pertaining to the Collateral as if the Collateral Agent were the sole and absolute owner thereof (and Vector agrees to take all such action as may be appropriate to give effect to such right); (c) the Collateral Agent in its discretion may, in its name or in the name of Vector or otherwise, demand, sue for, collect or receive any money or property at any time payable or receivable on account of or in exchange for any of the Collateral, but shall be under no obligation to do so; and (d) the Collateral Agent may, upon ten business days' prior written notice to Vector of the time and place, with respect to the Collateral or any part thereof that shall then be or shall thereafter come into the possession, custody or control of the Collateral Agent or any of its agents, sell, lease, assign or otherwise dispose of all or any part of such Collateral, at such place or places as the Collateral Agent deems best, and for cash or for credit or for future delivery (without thereby assuming any credit risk), at public or private sale, without demand of performance or notice of intention to effect any such disposition or of the time or place thereof (except such notice as is required above or by applicable statute and cannot be waived), and the Collateral Agent or anyone else may be the purchaser, lessee, assignee or recipient of any or all of the Collateral so disposed of at any public sale (or, to the extent permitted by law, at any private sale) and thereafter hold the same absolutely, free from any claim or right of whatsoever kind, including any right or equity of redemption (statutory or otherwise), of Vector, any such demand, notice and right or equity being hereby expressly waived and released. The Collateral Agent may, without notice or publication, adjourn any public or -3- 4 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. 8. WAIVER OF SURETYSHIP DEFENSES. To the extent this Agreement is deemed a guarantee, Vector hereby waves all defenses available to guarantors and sureties, including, without limitation, the following: (a) the occurrence of any Event of Default under, or any lack of validity, legality or enforceability of any provision of any Note Document or any other agreement or document; (b) the failure of any Holder: (i) to assert any claim or demand or to enforce any right or remedy against any Document Party or any other Person under the provisions of any Note Document, or otherwise, or (ii) to exercise any right or remedy against any other guarantor of or other Person pledging collateral securing any of the Secured Obligations; (c) any change in the time, manner or place of payment of, or in any term of, all or any of the Secured Obligations, or any other extension, compromise, indulgence or renewal of any Secured Obligation; (d) any reduction, limitation, variation, impairment, discontinuance or termination of the Secured Obligations for any reason (other than by reason of any payment which is not required to be rescinded), including any claim of waiver, release, discharge, surrender, alteration or compromise, and shall not be subject to any defense or setoff, counterclaim, recoupment or termination whatsoever by reason of the invalidity, illegality, nongenuineness, irregularity, compromise, unenforceability of, or any other event or occurrence affecting, the Secured Obligations or otherwise (other than by reason of any payment which is not required to be rescinded); (e) any amendment to, rescission, waiver or other modification of, or any consent to any departure from, any of the terms of the Secured Obligations or any guarantees or security; (f) any addition, exchange, release, discharge, realization or non-perfection of any collateral security in respect of the Secured Obligations; (g) any amendment to, rescission, waiver or other modification of, or release or addition of, or consent to any departure from, any other guarantee held by the Holders as security for any of the Secured Obligations; (h) the loss of or in respect of or the unenforceability of any guarantee or other security which the Holders may now or hereafter hold in respect of the Secured Obligations, whether occasioned by the fault of the Holders or otherwise; -4- 5 (i) any change in the name of the Company or in the constitutive documents, capital structure, capacity or constitution of the Company, the bankruptcy or insolvency of the Company, the sale of any or all of the Company's business or assets or the Company being consolidated, merged or amalgamated with any other Person; (j) any failure on the part of the Company or any other Person to perform or comply with any term of the Note Purchase Agreement, the Notes, any of the Secured Obligations or any other agreement or document; (k) any suit or other action brought by any beneficiaries or creditors of, or by, the Company or any other Person for any reason whatsoever, including without limitation any suit or action in any way attacking or involving any issue, matter or thing in respect of any Note Document, any of the Secured Obligations or any other agreement or document; (l) any lack or limitation of status or of power, incapacity or disability of the Company or any trustee or agent thereof; or (m) any other circumstance (other than final and indefeasible payment in full) which might otherwise constitute a defense available to, or a legal or equitable discharge of, the Company, Brooke Holding or NV Holdings or any surety or any other guarantor of the foregoing. 9. NO WAIVER OF RIGHTS. No failure on the part of any Holder or the Collateral Agent to exercise, and no course of dealing with respect to, and no delay in exercising, any right, power or remedy hereunder shall operate as a waiver thereof; nor shall any single or partial exercise by any Holder or the Collateral Agent of any right, power or remedy hereunder preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies herein are cumulative and are not exclusive of any remedies provided by law. 10. NOTICES. All notices and communications provided for hereunder shall be in writing and sent (a) by telecopy if the sender on the same day sends a confirming copy of such notice by a recognized overnight delivery service (charges prepaid), or (b) by registered or certified mail with return receipt requested (postage prepaid), or (c) by a recognized overnight delivery service (with charges prepaid). Any such notice must be sent: (a) if to any Holder, to such Holder or it at the address specified for such communications in SCHEDULE A to the Note Purchase Agreement, or at such other address as it shall have specified to Vector and the Collateral Agent in writing, (b) if to the Collateral Agent, to the Collateral Agent at such address as is set forth on its signature page thereto or at such other address or at such other address as the Collateral Agent shall have specified to each Holder and to Vector in writing, or -5- 6 (c) if to Vector, to Vector at its address set forth on its signature page thereto to the attention of the General Counsel, or at such other address as Vector shall have specified to each Holder and to the Collateral Agent. Notices under this SECTION 10 will be deemed given when actually received if sent by telecopy, upon the succeeding Business Day if sent by overnight courier and three days after deposit in the U.S. mail if sent by registered or certified mail. 11. AMENDMENTS, ETC. The terms of this Agreement may be waived, altered or amended only by an instrument in writing duly executed by Vector, the Majority Holders and the Collateral Agent. Any such amendment or waiver shall be binding upon the Collateral Agent, each holder of any of the Secured Obligations and Vector. 12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and inure to the benefit of the respective successors and assigns of Vector, the Holders, the Collateral Agent and each holder of any of the Secured Obligations (PROVIDED, however, that Vector shall not assign or transfer its rights hereunder without the prior written consent of the Collateral Agent). 13. CAPTIONS. The captions and section headings appearing herein are included solely for convenience of reference and are not intended to affect the interpretation of any provision of this Agreement. 14. 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 hereto may execute this Agreement by signing any such counterpart. Delivery of an executed counterpart of a signature page of this Agreement by facsimile transmission shall be as effective as delivery of a manually executed counterpart of this Agreement. 15. GOVERNING LAW. This Agreement shall be construed and enforced in accordance with, and the rights of the parties shall be governed by, the law of the State of New York excluding choice-of-law principles of the law of such State that would require the application of the laws of a jurisdiction other than such State. 16. AGENTS AND ATTORNEYS-IN-FACT. The Collateral Agent may employ agents and attorneys-in-fact in connection herewith and shall not be responsible for the negligence or misconduct of any such agents or attorneys-in-fact selected by it in good faith. 17. SEVERABILITY. If any provision hereof is invalid and unenforceable in any jurisdiction, then, to the fullest extent permitted by law, (i) the other provisions hereof shall remain in full force and effect in such jurisdiction and shall be liberally construed in favor of the Collateral Agent in order to carry out the intentions of the parties hereto as nearly as may be possible and (ii) the invalidity or unenforceability of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction. 18. ENVIRONMENTAL INDEMNIFICATION OF COLLATERAL AGENT AND HOLDERS. Vector hereby agrees to indemnify the Collateral Agent and the Holders from, and hold the Collateral Agent and the Holders harmless against, any losses, liabilities, claims, damages or expenses arising under any Environmental Law (as -6- 7 defined in the BGLS Pledge Agreement) as a result of the past, present or future operations of the Company or any of its Subsidiaries following the exercise by the Collateral Agent of its rights and remedies under any Note Document. 19. INDEMNIFICATION OF NV HOLDINGS. Vector hereby agrees to indemnify NV Holdings for, and hold it harmless against, any claim, demand, expense (including but not limited to attorneys' fees), loss or liability incurred by it arising solely out of or in connection with its being an affiliate of Vector. Vector hereby acknowledges that the indemnity contained in this Section 19 for the benefit of NV Holdings and that NV Holdings is relying on said indemnity as a basis for entering into the NV Holdings Pledge Agreement. 20. INTEGRATION. This Agreement and the other Note Documents represent the agreement of Vector, the Collateral Agent and the Holders with respect to the subject matter hereof and thereof, and there are no promises, undertakings, representations or warranties by the Collateral Agent or any Holder relative to subject matter hereof and thereof not expressly set forth or referred to herein or in the other Note Documents. 21. ACKNOWLEDGEMENTS. Vector hereby acknowledges that: (a) it has been advised by counsel in the negotiation, execution and delivery of this Agreement and the other Note Documents to which it is a party; (b) neither the Collateral Agent nor any Holder has any fiduciary relationship with or duty to Vector arising out of or in connection with this Agreement or any of the other Note Documents, and the relationship between Vector, on the one hand, and the Collateral Agent and Holders, on the other hand, in connection herewith or therewith is solely that of debtor and creditor; and (c) no joint venture is created hereby or by the other Note Documents or otherwise exists by virtue of the transactions contemplated hereby among the Holders or among Vector and the Holders. -7- 8 IN WITNESS WHEREOF, Vector Group Ltd. has executed this Acknowledgment and Undertaking, intending to be legally bound, as of May 14, 2001. VECTOR GROUP LTD. By: /s/ RICHARD J. LAMPEN ----------------------------------- Name: Richard J. Lampen Title: Executive Vice President 100 S.E. Second Street Miami, Florida 33131 Telephone: (305) 579-8000 Facsimile: (305) 579-8009 Attention: Richard J. Lampen Executive Vice President -8- 9 UNITED STATES TRUST COMPANY OF NEW YORK By: /s/ PATRICIA GALLAGHER ----------------------------------- Name: Patricia Gallagher Title: Assistant Vice President ADDRESS FOR NOTICES: ------------------- 114 West 47th Street, 25th Floor New York, New York 10036-1532 Telephone: (212) 852-1664 Facsimile: (212) 852-1626 Attention: Patricia Gallagher -9- 10 TCW LEVERAGED INCOME TRUST, L.P. By: TCW Advisers (Bermuda), Ltd. as its General Partner By: /s/ DARRYL L. SCHALL ---------------------------------- Name: Darryl L. Schall Title: Managing Director By: TCW Investment Management Company as Investment Adviser By: /s/ MARK ATTANASIO ---------------------------------- Name: Mark Attanasio Title: Group Managing Director -10- 11 TCW LEVERAGED INCOME TRUST II, L.P. By: TCW (LINC II), L.P. as its General Partner By: TCW Advisers (Bermuda), Ltd. its General Partner By: /s/ DARRYL L. SCHALL ---------------------------- Name: Darryl L. Schall Title: Managing Director By: TCW Investment Management Company as Investment Adviser By: /s/ MARK ATTANASIO ---------------------------- Name: Mark Attanasio Title: Group Managing Director -11- 12 TCW LINC III CBO LTD. By: TCW Investment Management Company as Collateral Manager By: /s/ DARRYL L. SCHALL -------------------------- Name: Darryl L. Schall Title: Managing Director By: /s/ MARK ATTANASIO -------------------------- Name: Mark Attanasio Title: Group Managing Director -12- 13 POWRs 1997-2 (Participating Obligations with Residuals 1997-2) By: Citibank Global Asset Management Its Investment Advisor By: TCW Asset Management Company Its Portfolio Manager By: /s/ DARRYL L. SCHALL ------------------------------------------- Name: Darryl L. Schall Title: Managing Director By: /s/ MARK ATTANASIO ------------------------------------------- Name: Mark Attanasio Title: Group Managing Director -13- 14 CAPTIVA II FINANCE LTD. By: TCW Advisors, Inc. Its Financial Manager By: /s/ DARRYL L. SCHALL --------------------------------- Name: Darryl L. Schall Title: Managing Director By: /s/ MARK ATTANASIO --------------------------------- Name: Mark Attanasio Title: Group Managing Director -14- 15 AIMCO CDO, SERIES 2000-A By: Allstate Investment Management Company Its Collateral Manager By: TCW Asset Management Company Its Investment Advisor By: /s/ DARRYL L. SCHALL --------------------------------- Name: Darryl L. Schall Title: Managing Director By: /s/ MARK ATTANASIO --------------------------------- Name: Mark Attanasio Title: Group Managing Director -15-