0000909518-94-000103.txt : 19940602 0000909518-94-000103.hdr.sgml : 19940602 ACCESSION NUMBER: 0000909518-94-000103 CONFORMED SUBMISSION TYPE: SC 13D/A PUBLIC DOCUMENT COUNT: 2 FILED AS OF DATE: 19940601 GROUP MEMBERS: IAN M. CUMMING GROUP MEMBERS: STEINBERG JOSEPH S SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: LEUCADIA NATIONAL CORP CENTRAL INDEX KEY: 0000096223 STANDARD INDUSTRIAL CLASSIFICATION: 6199 IRS NUMBER: 132615557 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A SEC ACT: 1934 Act SEC FILE NUMBER: 005-03244 FILM NUMBER: 94532542 BUSINESS ADDRESS: STREET 1: 315 PARK AVE S CITY: NEW YORK STATE: NY ZIP: 10010 BUSINESS PHONE: 2124601900 FORMER COMPANY: FORMER CONFORMED NAME: TALCOTT NATIONAL CORP DATE OF NAME CHANGE: 19800603 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: STEINBERG JOSEPH S CENTRAL INDEX KEY: 0000924255 STANDARD INDUSTRIAL CLASSIFICATION: 0000 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D/A BUSINESS ADDRESS: STREET 1: C/O LEUCADIA NATIONAL CORP STREET 2: 315 PARK AVENUE SOUTH CITY: NEW YORK STATE: NY ZIP: 10010 BUSINESS PHONE: 2124601900 MAIL ADDRESS: STREET 1: C/O LEUCADIA NATIONAL CORP STREET 2: 315 PARK AVENUE SOUTH CITY: NEW YORK STATE: NY ZIP: 10010 SC 13D/A 1 AMEND NO. 5 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------- SCHEDULE 13D Under the Securities Exchange Act of 1934 ------------- (Amendment No. 5) Leucadia National Corporation -------------------------------------------------------------------------- (Name of Issuer) Common Shares, $1 par value 527288 5 10 4 ----------------------------------- ----------------------------------- (Title of class of securities) (CUSIP number) Stephen E. Jacobs, Esq. Weil, Gotshal & Manges 767 Fifth Avenue New York, NY 10153 (212) 310-8000 -------------------------------------------------------------------------- (Name, address and telephone number of person authorized to receive notices and communications) May 12, 1994 -------------------------------------------------------------------------- (Date of event which requires filing of this statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box [_]. Check the following box if a fee is being paid with the statement [_]. (A fee is not required only if the reporting person: (1) has a previous statement on file reporting beneficial ownership of more than five percent of the class of securities described in Item 1; and (2) has filed no amendment subsequent thereto reporting beneficial ownership of five percent or less of such class.) (See Rule 13d-7.) Note: When filing this statement in paper format, six copies of this statement, including exhibits, should be filed with the Commission. See Rule 13d-1(a) for other parties to whom copies are to be sent. CUSIP No. 527288 5 10 4 13D 1 NAME OF REPORTING PERSON: Ian M. Cumming S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [x] (b) [_] 3 SEC USE ONLY 4 SOURCE OF FUNDS: N/A 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [_] REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): 6 CITIZENSHIP OR PLACE OF United States ORGANIZATION: NUMBER OF 7 SOLE VOTING POWER: 5,917,122 SHARES BENEFICIALLY 8 SHARED VOTING POWER: 306,556 OWNED BY EACH 9 SOLE DISPOSITIVE POWER: 5,917,122(*) REPORTING PERSON WITH 10 SHARED DISPOSITIVE 306,556(**) POWER: 11 AGGREGATE AMOUNT BENEFICIALLY 6,223,678(*)(**) OWNED BY REPORTING PERSON: 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [_] EXCLUDES CERTAIN SHARES: 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 21.7% 14 TYPE OF REPORTING PERSON: IN Includes 690,000 shares acquirable upon the exercise of currently exercisable warrants. Includes 100,000 shares acquirable upon the exercise of currently exercisable warrants. CUSIP No. 527288 5 10 4 13D 1 NAME OF REPORTING PERSON: Joseph S. Steinberg S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON: 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP: (a) [x] (b) [_] 3 SEC USE ONLY 4 SOURCE OF FUNDS: N/A 5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS [_] REQUIRED PURSUANT TO ITEM 2(d) OR 2(e): 6 CITIZENSHIP OR PLACE OF United States ORGANIZATION: NUMBER OF 7 SOLE VOTING POWER: 5,674,706 SHARES BENEFICIALLY 8 SHARED VOTING POWER: 21,200 OWNED BY EACH 9 SOLE DISPOSITIVE POWER: 5,674,706(*) REPORTING PERSON WITH 10 SHARED DISPOSITIVE 21,200 POWER: 11 AGGREGATE AMOUNT BENEFICIALLY 5,695,906(*) OWNED BY REPORTING PERSON: 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) [x] EXCLUDES CERTAIN SHARES: Excludes 563,700 Common Shares beneficially owned by two trusts for the benefit of Joseph S. Steinberg's minor children as to which Mr. Steinberg disclaims beneficial ownership. 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11): 19.8% 14 TYPE OF REPORTING PERSON: IN Includes 796,000 shares acquirable upon the exercise of currently exercisable warrants. This Statement constitutes Amendment No. 5 to the Statement on Schedule 13D (the "Schedule 13D") filed with the Securities and Exchange Commission by Ian M. Cumming and Joseph S. Steinberg with respect to the Common Shares, par value $1 per share, of Leucadia National Corporation (the "Company"). This Amendment No. 5 is the first amendment to the Schedule 13D since the Company became an EDGAR filer. Accordingly, this Amendment No. 5 restates, in pertinent part, the Schedule 13D as follows: Item 1. Security and Issuer. ------------------- This Statement relates to the common shares, par value $1.00 (the "Common Shares"), of Leucadia National Corporation (the "Company"). The address of the principal executive office of the Company is 315 Park Avenue South, New York, New York 10010. All references to ownership of Common Shares have been adjusted to reflect a two-for-one stock split of the Common Shares in the form of a 100% stock dividend effected on January 8, 1993. This Schedule 13D is being filed by Ian M. Cumming and Joseph S. Steinberg. Item 2. Identity and Background. ----------------------- (a)-(c) Mr. Ian M. Cumming's principal occupation is Chairman of the Board of the Company and his business address is 529 East South Temple, Salt Lake City, Utah 84102. Mr. Joseph S. Steinberg's principal occupation is President of the Company and his business address is 315 Park Avenue South, New York, New York 10010. (d)-(f) During the last five years, neither Mr. Cumming nor Mr. Steinberg has been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) nor was a party to a civil proceeding of a judicial or administrative body of competent jurisdiction as a result of which he was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to, federal or state securities laws or finding any violation with respect to such laws. For information concerning certain litigation in which Messrs. Cumming and Steinberg have been named as defendants, see Appendix A filed with the initial Schedule 13D. Both Messrs. Cumming and Steinberg are United States citizens. Item 3. Source and Amount of Funds or Other Consideration. ------------------------------------------------- The information contained in Item 4 of this Schedule 13D is incorporated herein by reference. NYFS04...:\30\76830\0001\570\SCH42794.R80 Item 4. Purpose of the Transaction. -------------------------- TLC Associates, a New York general partnership ("TLC"), was organized in April 1979 by Ian M. Cumming, Joseph S. Steinberg, CMCO, Inc. (formerly Carl Marks & Co., Inc.) ("CMCO"), a New York corporation engaged in investment banking, and Stern & Stern Industries, Inc. (formerly Stern & Stern Textiles, Inc.), a New York corporation engaged in the manufacture and sale of textiles. TLC was formed to acquire control of the Company. As of May 31, 1990, TLC beneficially owned 17,298,752 Common Shares, or approximately 58% of the outstanding Common Shares. On May 31, 1990, TLC dissolved and distributed its assets, consisting solely of 17,298,752 Common Shares, to its partners according to the terms of the TLC partnership agreement (the "Dissolution"). In the Dissolution, Mr. Cumming received 3,899,518 Common Shares, Mr. Steinberg received 3,509,566 Common Shares and a trust for the benefit of Mr. Steinberg's minor children received 389,952 Common Shares (as to which Mr. Steinberg disclaims beneficial ownership). As a result of the Dissolution, Messrs. Cumming and Steinberg directly own the Common Shares that each had indirectly beneficially owned prior to the Dissolution and all previously existing voting arrangements with respect to the Common Shares beneficially owned by TLC terminated. On August 30, 1990, Marks Investing Corporation ("MIC"), a Delaware corporation that beneficially owned 9,129,464 Common Shares, was merged (the "Merger") with and into the Company pursuant to the Agreement and Plan of Merger dated as of April 5, 1990, a copy of which was filed as Exhibit 1 to the initial Schedule 13D. In the Merger, in exchange for their aggregate 6.88% interest in MIC, Mr. Cumming received 400,960 Common Shares, plus $10.98 in lieu of fractional shares, Mr. Steinberg received 227,210 Common Shares, plus $24.21 in lieu of fractional shares, and a trust for the benefit of Mr. Steinberg's minor children received 173,748 Common Shares (as to which Mr. Steinberg disclaims beneficial ownership), plus $6.40 in lieu of fractional shares. On January 10, 1992, Leucadia purchased warrants (the "Old Warrants") to purchase an aggregate of 1,600,000 Common Shares from Mr. Cumming, Mr. Steinberg and certain of their respective family members and donees at a purchase price of $9.1875 per Common Share (calculated by taking the difference between the $11.00 per Common Share exercise price of the Old Warrants and $20.1875, the closing price of a Common Share on the NYFS04...:\30\76830\0001\570\SCH42794.R80 New York Stock Exchange Composite Tape on January 9, 1992). The Old Warrants were issued on May 23, 1991 and were transferable and exercisable, in whole or in part, from May 23, 1991 through June 5, 1995. The form of Old Warrants was filed as Exhibit 3 to Amendment No. 2 to the Schedule 13D and the form of Warrant Purchase Agreement was filed as Exhibit 4 to Amendment No. 3 to the Schedule 13D. The information contained in Item 6 of this Schedule 13D is incorporated herein by reference. Messrs. Cumming and Steinberg have an oral agreement pursuant to which they will consult with each other as to the election of a mutually acceptable Board of Directors of the Company. Except as discussed above, neither Mr. Cumming nor Mr. Steinberg has any present plans or intentions which would result in or relate to any of the transactions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D. Item 5. Interest in Securities of the Issuer. ------------------------------------ (a)-(b) As of May 12, 1994, Ian M. Cumming and Joseph S. Steinberg owned the following Common Shares: Ian M. Cumming is the beneficial owner of 5,917,122 Common Shares (including 690,000 Common Shares issuable upon the exercise of warrants described in Item 6 hereto (the "Warrants") which are exercisable within 60 days). The Common Shares represent approximately 20.6% of the 27,973,623 Common Shares outstanding as of May 6, 1994. Mr. Cumming has sole dispositive power over such Common Shares. Mr. Cumming also may be deemed to be the beneficial owner of an additional 206,556 Common Shares (.7%) beneficially owned by his wife (directly and through trusts for the benefit of Mr. Cumming's children of which Mr. Cumming's wife is trustee (the "Trusts")) and 100,000 Common Shares (.4%) issuable upon the exercise of the Warrants which are exercisable within 60 days that are owned by the Trusts. Joseph S. Steinberg is the beneficial owner of 5,674,706 Common Shares (including 796,000 Common Shares issuable upon the exercise of the Warrants which are exercisable within 60 days). The Common Shares represent approximately 19.7% of the 27,973,623 Common Shares outstanding as of May 6, 1994. Mr. Steinberg has sole dispositive power over such Common Shares. Mr. Steinberg also may be deemed to be the beneficial owner of an NYFS04...:\30\76830\0001\570\SCH42794.R80 additional 21,200 Common Shares (less than .1%) beneficially owned by his wife and minor daughter. Mr. Steinberg disclaims beneficial ownership as to an aggregate of an additional 563,700 Common Shares (approximately 2.0%) beneficially owned by two trusts for the benefit of Mr. Steinberg's minor children of which Mr. Steinberg's brother is trustee. Messrs. Cumming and Steinberg have an oral agreement pursuant to which they will consult with each other as to the election of a mutually acceptable Board of Directors of the Company. (c) Not applicable. (d) The information set forth in response to Item 6 hereof is hereby incorporated herein by reference. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. ------------------------------------------- Pursuant to an agreement dated as of August 1, 1988 among the Company, Ian M. Cumming and Joseph S. Steinberg, a copy of which was filed as Exhibit 1 to the initial Schedule 13D, upon the death of either Mr. Cumming or Mr. Steinberg, the Company has agreed to purchase from the respective estate up to 55% of his direct and/or indirect interest in the Company, subject to reduction in certain circumstances, not to exceed $50,000,000 in value. The agreement provides that Messrs. Cumming's and Steinberg's interests in the Company will be valued at the higher of the average closing price of the Common Shares on the New York Stock Exchange for the 40 trading days preceding the date of death or the net book value of the Common Shares at the end of the fiscal quarter preceding the date of date. The Company has agreed to fund the purchase of Common Shares pursuant to this agreement by purchasing and maintaining insurance on the life of each of Messrs. Cumming and Steinberg in the aggregate face amount of $50,000,000 per individual. The agreement will expire in December 1997 (subject to earlier termination in certain circumstances). Following receipt of shareholder approval at the 1992 Annual Meeting of Shareholders of the Company held on August 12, 1992, the Company issued warrants (the "Warrants") to purchase 800,000 Common Shares to each of Ian M. Cumming and Joseph S. NYFS04...:\30\76830\0001\570\SCH42794.R80 Steinberg, at a purchase price of $20.1875 per share, the closing price of a Common Share on the New York Stock Exchange, Inc. on January 9, 1992, the day prior to the date the Warrants were authorized by the Board of Directors of the Company. The Warrants expire on January 10, 1997, and were not exercisable or transferable (other than by gift or pursuant to the laws of descent and distribution) prior to April 1, 1993. The number of Common Shares that may be purchased pursuant to the Warrants is subject to adjustment to reflect stock splits, combinations of shares, recapitalizations, stock dividends, and subscriptions and/or purchase rights in respect of Common Shares. Each of the holders of the Warrants is entitled to demand registration and incidental registration rights, the cost of which will be borne by the Company. The foregoing description of the Warrants is qualified in its entirety by reference to the form of Warrants filed as Exhibit 5 to Amendment No. 4 to the Schedule 13D. In connection with a private transaction, Mr. Cumming has entered into a certain Stock Pledge Agreement dated as of May 12, 1994 pursuant to which Mr. Cumming has pledged to The First National Bank of Boston, as Agent, 500,000 Common Shares and Warrants to purchase an aggregate of 690,000 Common Shares as security for certain obligations, which, subject to certain conditions, mature on different dates between May 1997 and May 1999. So long as there is no event of default under the Stock Pledge Agreements, Mr. Cumming is entitled to continue to exercise all voting rights with respect to such Common Shares and to receive dividends, if any, with respect thereto. The foregoing is qualified in its entirety by reference to the form of Stock Pledge Agreement filed as Exhibit 6 hereto. From time to time Mr. Cumming has pledged certain Common Shares in connection with the maintenance of margin accounts and other extensions of credit entered into in the normal course. As a result, in addition to the pledges described herein, Mr. Cumming currently has pledged an aggregate of 477,400 Common Shares to Chemical Bank and an aggregate of 600,000 Common Shares to Republic New York Securities Corp. The information contained in Item 4 of this Schedule 13D is incorporated herein by reference. NYFS04...:\30\76830\0001\570\SCH42794.R80 Item 7. Material to be Filed as Exhibits. -------------------------------- 1. Agreement dated as of August 1, 1988 among Leucadia National Corporation, Ian M. Cumming and Joseph S. Steinberg (previously filed). 2. Agreement among the Reporting Persons with respect to the filing of this Schedule 13D (previously filed). 3. Form of the Old Warrants (previously filed). 4. Form of Warrant Purchase Agreement (previously filed). 5. Form of the New Warrants (previously filed). 6. Form of Stock Pledge Agreement (filed herewith). NYFS04...:\30\76830\0001\570\SCH42794.R80 SIGNATURE --------- After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct. Dated: May 31, 1994 /s/ Ian M. Cumming ------------------ Ian M. Cumming NYFS04...:\30\76830\0001\570\SCH42794.R80 SIGNATURE --------- After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this Statement is true, complete and correct. Dated: May 31, 1994 /s/ Joseph S. Steinberg ----------------------- Joseph S. Steinberg NYFS04...:\30\76830\0001\570\SCH42794.R80 EXHIBIT INDEX Exhibit No. Document Page ----------- -------- ---- 1 Agreement dated as of August 1, 1988 among Leucadia National Corporation, Ian M. Cumming and Joseph S. Steinberg (previously filed). 2 Agreement among the Reporting Persons with respect to the filing of this Schedule 13D (previously filed). 3 Form of the Old Warrants (previously filed). 4 Form of Warrant Purchase Agreement (previously filed). 5 Form of the New Warrants (previously filed). 6 Form of Stock Pledge Agreement EX-6 2 STOCK PLEDGE Exhibit No. 6 STOCK PLEDGE AGREEMENT ---------------------- This STOCK PLEDGE AGREEMENT made as of May 12, 1994, by and between IAN M. CUMMING, an individual with an address at 1470 Military Way, Salt Lake City, Utah 84103 (the "Pledgor"), and THE FIRST NATIONAL BANK OF BOSTON, a national banking association, as agent (hereinafter, in such capacity, the "Agent") for itself and the other financial institutions (hereinafter, collectively, the "Banks") which are or may become parties to a Term Loan Agreement dated as of May 12, 1994 (as amended and in effect from time to time, the "Loan Agreement"), among the Pledgor, the Banks and the Agent. WHEREAS, the Pledgor is the direct legal and beneficial owner of certain of the issued and outstanding shares of the capital stock and other securities of certain corporations described on Annex A ----- - (the "Companies"); and WHEREAS, it is a condition precedent to the Banks' making any loans or otherwise extending credit to the Pledgor under the Loan Agreement that the Pledgor execute and deliver to the Agent, for the benefit of the Banks and the Agent, a pledge agreement in substantially the form hereof; and WHEREAS, the Pledgor has entered into a Guaranty dated as of the date hereof (the "Guaranty") in favor of the Agent for the benefit of the Banks and the Agent, pursuant to which the Pledgor guarantees all of the obligations of Powdr Corp. ("Powdr") to the Banks and the Agent under that certain Term Loan Agreement dated as of May 2, 1994 (the "Powdr Agreement") among Powdr, the Banks and the Agent, and the other Loan Documents (as defined in the Powdr Agreement); and WHEREAS, the Pledgor has agreed to secure its obligations under the Guaranty and the Loan Agreement with a pledge agreement in substantially the form hereof; and WHEREAS, the Pledgor wishes to grant pledges and security interests in favor of the Agent, for the benefit of the Banks and the Agent, as herein provided; NOW, THEREFORE, in consideration of the premises contained herein and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: NYFS04...:\30\76830\0001\1197\AGR52494.L80 1. PIEDGE OF STOCK, ETC. -------------------- 1.1. PLEDGE OF STOCK. The Pledgor hereby pledges, --------------- assigns, grants a security interest in, and delivers to the Agent, for the benefit of the Banks and the Agent, (i) those certain shares of capital stock of the Companies and (ii) those certain securities consisting of warrants to purchase the capital stock of the Companies, each as more fully described on Annex A hereto, to be held by the Agent, for ----- - the benefit of the Banks and the Agent, subject to the terms and conditions hereinafter set forth. The certificates for such shares and other securities, accompanied by stock powers or other appropriate instruments of assignment thereof duly executed in blank by the Pledgor, have been delivered to the Agent. 1.2. ADDITIONAL OR SUBSTITUTED STOCK. In case the ------------------------------- Pledgor shall be required to provide additional security in accordance with Section 9(d) of the Loan Agreement or wishes to substitute shares or other securities in accordance with Section 6 of the Loan Agreement, then the Pledgor shall forthwith deliver to and pledge such additional or substituted shares or other securities to the Agent, for the benefit of the Banks and the Agent, under this Agreement and shall deliver to the Agent forthwith any certificates therefor, accompanied by stock powers or other appropriate instruments of assignment duly executed by the Pledgor in blank. The Pledgor agrees that the Agent may from time to time attach as Annex A hereto an updated list of the shares ----- - of capital stock or securities at the time pledged with the Agent hereunder. 1.3. PLEDGE OF CASH COLLATERAL ACCOUNT. The Pledgor --------------------------------- also hereby pledges, assigns, grants a security interest in, and delivers to the Agent, for the benefit of the Banks and the Agent, the Cash Collateral Account and all of the Cash Collateral as such terms are hereinafter defined. 2. DEFINITIONS. All capitalized terms used herein without ----------- definition shall have the respective meanings provided therefor in the Loan Agreement. Terms used herein and not defined in the Loan Agreement or otherwise defined herein that are defined in the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts or in any other applicable jurisdiction have such defined meanings herein, unless the context otherwise indicated or requires, and the following terms shall have the following meanings: Cash Collateral. See Section 4. --------------- NYFS04...:\30\76830\0001\1197\AGR52494.L80 Cash Collateral Account. See Section 4. ----------------------- Obligations. Collectively, all obligations of the Pledgor ----------- to the Banks, whether direct or indirect, absolute or contingent, due or to become due, now existing or hereafter arising under or in relation to the Loan Agreement, the related promissory notes of the Pledgor and the Guaranty, in each case as now in effect or as hereafter amended, modified, supplemented or restated. Stock. Includes the shares of stock described in Annex A ----- ----- - attached hereto, any shares of stock obtained through the exercise of warrants described in Annex A attached hereto and any additional ----- - shares of stock at the time pledged with the Agent hereunder. Stock Collateral. The property at any time pledged to the ---------------- Agent hereunder (whether described herein or not) and all income therefrom, increases therein and proceeds thereof, including without limitation the stock, the warrants described in Annex A and that included in Cash Collateral, but excluding from the definition of "Stock Collateral" any income, increases or proceeds received by the Pledgor to the extent expressly permitted by Section 6. Time Deposits. See Section 4. ------------- 3. SECURITY FOR OBLIGATIONS. This Agreement and the ------------------------ security interest in and pledge of the Stock Collateral hereunder are made with and granted to the Agent, for the benefit of the Banks and the Agent, as security for the payment and performance in full of all the Obligations. 4. LIQUIDATION, RECAPITALIZATION, ETC. ---------------------------------- 4.1. DISTRIBUTIONS PAID TO AGENT. Any sums or other --------------------------- property paid or distributed upon or with respect to any of the Stock, whether by dividend or redemption or upon the liquidation or dissolution of the issuer thereof or otherwise, shall, except to the limited extent provided in Section 6, be paid over and delivered to the Agent to be held by the Agent, for the benefit of the Banks and the Agent, as security for the payment and performance in full of all of the Obligations. In case, pursuant to the recapitalization or reclassification of the capital of the issuer thereof or pursuant to the reorganization thereof, any distribution of capital shall be made on or in respect of any of the Stock or any property shall be distributed upon or with respect to any of the Stock or the Stock Collateral, the property so distributed NYFS04...:\30\76830\0001\1197\AGR52494.L80 shall be delivered to the Agent, for the benefit of the Banks and the Agent, to be held by it as security for the Obligations. Except to the limited extent provided in Section 6, all sums of money and property paid or distributed in respect of the Stock Collateral, whether as a dividend or upon such a liquidation, dissolution, recapitalization or reclassification or otherwise, that are received by the Pledgor shall, until paid or delivered to the Agent, be held in trust for the Agent, for the benefit of the Banks and the Agent, as security for the payment and performance in full of all of the Obligations. 4.2. CASH COLLATERAL ACCOUNT. All sums of money that ----------------------- are delivered to the Agent pursuant to this Section 4 shall be deposited into an interest bearing account with the Agent (the "Cash Collateral Account"). Some or all of the funds from time to time in the Cash Collateral Account may be invested in time deposits, including, without limitation, certificates of deposit issued by the Agent (such certificates of deposit or other time deposits being hereinafter referred to, collectively, as "Time Deposits"), that are satisfactory to the Agent after consultation with the Pledgor, provided, that, in each such case, arrangements -------- satisfactory to the Agent are made and are in place to perfect and to insure the first priority of the Agent's security interest therein. Interest earned on the Cash Collateral Account and on the Time Deposits, and the principal of the Time Deposits at maturity that is not invested in new Time Deposits, shall be deposited in the Cash Collateral Account. The Cash Collateral Account, all sums from time to time standing to the credit of the Cash Collateral Account, any and all Time Deposits, any and all instruments or other writings evidencing Time Deposits and any and all proceeds or any thereof are hereinafter referred to as the "Cash Collateral." 4.3. PLEDGOR'S RIGHTS TO CASH COLLATERAL, ETC. Except ---------------------------------------- as otherwise expressly provided in Section 15 hereof, the Pledgor shall have no right to withdraw sums from the Cash Collateral Account, to receive any of the Cash Collateral or to require the Agent to part with the Agent's possession of any instruments or other writings evidencing any Time Deposits. 5. WARRANTY OF TITLE; AUTHORITY. The Pledgor hereby ---------------------------- represents and warrants that: (a) the Pledgor has good and marketable title to, and is the sole record and beneficial owner of, the Stock Collateral described in Section 1, subject to no pledges, liens, security interests, charges, options, restrictions or other encumbrances except the pledge and security interest created by this Agreement, (b) all of the Stock described in Section 1 is validly issued, fully paid and non-assessable, (c) the Pledgor has the legal capacity to NYFS04...:\30\76830\0001\1197\AGR52494.L80 execute, deliver and perform his obligations under this Agreement and to pledge and grant a security interest in all of the Stock Collateral pursuant to this Agreement, and the execution, delivery and performance hereof and the pledge of and granting of a security interest in the Stock Collateral hereunder do not contravene any law, rule or regulation or of any judgment, decree or order of any tribunal or constitute a default under any agreement or instrument to which the Pledgor is a party or by which he or any of his property is bound or affected, and (d) the information set forth in Annex A hereto relating ----- - to the Stock Collateral is true, correct and complete in all respects. The Pledgor covenants that he will defend the rights of the Banks and the Agent and security interest of the Agent, for the benefit of the Banks and the Agent, in such Stock Collateral against the claims and demands of all other persons. The Pledgor further covenants that he will have the like title to and right to pledge and grant a security interest in the Stock Collateral hereafter pledged or in which a security interest is granted to the Agent hereunder and will likewise defend the rights, pledge and security interest thereof and therein of the Banks and the Agent. 6. DIVIDENDS, VOTING, ETC., PRIOR TO MATURITY. So long as ------------------------------------------ no Event of Default shall have occurred and be continuing, the Pledgor shall be entitled to receive all cash dividends paid in respect of the Stock, to vote the Stock and to give consents, waivers and ratifications in respect of the Stock; provided, however, that no vote -------- ------- shall be cast or consent, waiver or ratification given by the Pledgor if the effect thereof would impair any of the Stock Collateral or be inconsistent with or result in any violation of any of the provisions of the Loan Agreement, the Notes or any of the other Loan Documents. So long as no Event of Default shall have occurred and be continuing, the Pledgor shall be entitled to exercise, in whole or in part, the warrants to purchase shares of capital stock of the Companies pledged hereunder, subject at all times to the pledge thereof, provided that, ------------- the Pledgor shall forthwith deliver to the Agent all certificates representing the capital stock of the Companies issued upon such exercise, accompanied by stock powers duly executed by the Pledgor in blank. All such rights of the Pledgor to receive cash dividends or exercise the warrants shall cease in case an Event of Default shall have occurred and be continuing. All such rights of the Pledgor to vote and give consents, waivers and ratifications with respect to the Stock shall, at the Agent's option, as evidenced by the Agent's notifying the Pledgor of such election, cease in case an Event of Default shall have occurred and be continuing. 7. REMEDIES. -------- 7.1. IN GENERAL. If an Event of Default shall have ---------- occurred and be continuing, the Agent shall thereafter have the following rights and remedies (to the extent permitted by applicable law) in addition to the rights and remedies of a secured party under the Uniform Commercial Code as in effect in the NYFS04...:\30\76830\0001\1197\AGR52494.L80 Commonwealth of Massachusetts or in any other applicable jurisdiction, all such rights and remedies being cumulative, not exclusive, and enforceable alternatively, successively or concurrently, at such time or times as the Agent deems expedient: (a) if the Agent so elects and gives notice of such election to the Pledgor, the Agent may vote any or all shares of the Stock (whether or not the same shall have been transferred into its name or the name of its nominee or nominees) for any lawful purpose, including, without limitation, if the Agent so elects, for the liquidation of the assets of the issuer thereof, and give all consents, waivers and ratifications in respect of the Stock and otherwise act with respect thereto as though it were the outright owner thereof and the Agent may exercise all rights of the holder of the warrants pledged hereunder, including, without limitation, the right to demand registration of the capital stock issuable on exercise thereof (in each case, the Pledgor hereby irrevocably constituting and appointing the Agent the proxy and attorney-in-fact of the Pledgor, with full power of substitution, to do so); (b) the Agent may demand, sue for, collect or make any compromise or settlement the Agent deems suitable in respect of any Stock Collateral; (c) the Agent may sell, resell, assign and deliver, or otherwise dispose of any or all of the Stock Collateral, for cash or credit or both and upon such terms at such place or places, at such time or times and to such entities or other persons as the Agent thinks expedient, all without demand for performance by the Pledgor or any notice or advertisement whatsoever except as expressly provided herein or as may otherwise be required by law; (d) the Agent may cause all or any part of the Stock Collateral held by it to be transferred into its name or the name of its nominee or nominees; and (e) the Agent may set off against the Obligations any and all sums deposited with it or held by it, including without limitation, any sums credited to the Cash Collateral Account and any Time Deposits issued by the Agent. NYFS04...:\30\76830\0001\1197\AGR52494.L80 7.2. SALE OF STOCK COLLATERAL. In the event of any ------------------------ disposition of the Stock Collateral as provided in paragraph (c) of Section 7.1 above, the Agent shall give to the Pledgor at least five (5) Business Days prior written notice of the time and place of any public sale of the Stock Collateral or of the time after which any private sale or any other intended disposition is to be made. The Pledgor hereby acknowledges that five (5) Business Days prior written notice of such sale or sales shall be reasonable notice. The Agent may enforce its rights hereunder without any other notice and without compliance with any other condition precedent now or hereunder imposed by statute, rule of law or otherwise (all of which are hereby expressly waived by the Pledgor, to the fullest extent permitted by law). The Agent may buy any part or all of the Stock Collateral at any public sale and if any part or all of the Stock Collateral is of a type customarily sold in a recognized market or is of the type which is the subject of widely-distributed standard price quotations, the Agent may buy at private sale and may make payments thereof by any means. The Agent may apply the cash proceeds actually received from any sale or other disposition to the reasonable expenses of retaking, holding, preparing for sale, selling and the like, to reasonable attorneys' fees, travel and all other expenses which may be incurred by the Agent in attempting to collect the Obligations or to enforce this Agreement or in the prosecution or defense of any action or proceeding related to the subject matter of this Agreement, and then to the Obligations in such order or preference as the Agent may determine after proper allowance for Obligations not then due. Only after such applications, and after payment by the Agent of any amount required by Section 9-504(1)(c) of the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts or any similar provision of the UCC as in effect in any other applicable jurisdiction, need the Agent account to the Pledgor for any surplus. To the extent that any of the Obligations are to be paid or performed by a person other than the Pledgor, the Pledgor waives and agrees not to assert any rights or privileges which it may have under Section 9-112 of the Uniform Commercial Code as in effect in the Commonwealth of Massachusetts or any similar provision of the UCC as in effect in any other applicable jurisdiction. 7.3. REGISTRATION OF STOCK. If the Agent shall --------------------- determine to exercise its right to sell any or all of the Stock Collateral pursuant to this Section 7, and if in the opinion of counsel for the Agent it is necessary, or if in the reasonable opinion of the Agent it is advisable, to have the Stock, or that portion thereof to be sold, registered under the provisions of the Securities Act of 1933, as amended (the "Securities Act"), the Pledgor agrees to use his best NYFS04...:\30\76830\0001\1197\AGR52494.L80 efforts to cause the issuer or issuers of the Stock contemplated to be sold, to execute and deliver, and cause the directors and officers of such issuer to execute and deliver, all at the Pledgor's expense, all such instruments and documents, and to do or cause to be done all such other acts and things as may be necessary or, in the reasonable opinion of the Agent, advisable to register such Stock under the provisions of the Securities Act and to cause the registration statement relating thereto to become effective and to remain effective for a period of nine (9) months from the date such registration statement became effective, and to make all amendments thereto or to the related prospectus or both that, in the reasonable opinion of the Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Pledgor agrees to use his best efforts to cause such issuer or issuers to comply with the provisions of the securities or "Blue Sky" laws of any jurisdiction which the Agent shall designate and to cause such issuer or issuers to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 11(a) of the Securities Act. 7.4. PRIVATE SALES. The Pledgor recognizes that the ------------- Agent may be unable to effect a public sale of the Stock Collateral by reason of certain prohibitions contained in the Securities Act, federal banking laws, and other applicable laws, but may be compelled to resort to one or more private sales thereof to a restricted group of purchasers. The Pledgor agrees that any such private sales may be at prices and other terms less favorable to the seller than if sold at public sales and that such private sales shall not by reason thereof be deemed not to have been made in a commercially reasonable manner. The Agent shall be under no obligation to delay a sale of any of the Stock Collateral for the period of time necessary to permit the issuer of such securities to register such securities (or securities issuable upon exercise thereof) for public sale under the Securities Act, or such other federal banking or other applicable laws, even if the issuer would agree to do so. Subject to the foregoing, the Agent agrees that any sale of the Stock Collateral shall be made in a commercially reasonable manner, and the Pledgor agrees to use his best efforts to cause the issuer or issuers of the Stock Collateral contemplated to be sold, to execute and deliver, and cause the directors and officers of such issuer to execute and deliver, all at the Pledgor's expense, all such instruments and documents, and to do or cause to be done all such other acts and things as may be necessary or, in the reasonable opinion of the Agent, advisable to exempt NYFS04...:\30\76830\0001\1197\AGR52494.L80 such Stock Collateral from registration under the provisions of the Securities Act, and to make all amendments to such instruments and documents which, in the opinion of the Agent, are necessary or advisable, all in conformity with the requirements of the Securities Act and the rules and regulations of the Securities and Exchange Commission applicable thereto. The Pledgor further agrees to use his best efforts to cause such issuer or issuers to comply with the provisions of the securities or "Blue Sky" laws of any jurisdiction which the Agent shall designate and, if required, to cause such issuer or issuers to make available to its security holders, as soon as practicable, an earnings statement (which need not be audited) which will satisfy the provisions of Section 11(a) of the Securities Act. 7.5. PLEDGOR'S AGREEMENTS, ETC. The Pledgor further ------------------------- agrees to do or cause to be done all such other acts and things as may be reasonably necessary to make any sales of any portion or all of the Stock Collateral pursuant to this Section 7 valid and binding and in compliance with any and all applicable laws (including, without limitation, the Securities Act, the Securities Exchange Act of 1934, as amended, the rules and regulations of the Securities and Exchange Commission applicable thereto and all applicable state securities or "Blue Sky" laws), regulations, orders, writs, injunctions, decrees or awards of any and all courts, arbitrators or governmental instrumentalities, domestic or foreign, having jurisdiction over any such sale or sales, all at the Pledgor's expense. The Pledgor further agrees that a breach of any of the covenants contained in this Section 7 will cause irreparable injury to the Agent and the Banks, that the Agent and the Banks have no adequate remedy at law in respect of such breach and, as a consequence, agrees that each and every covenant contained in this Section 7 shall be specifically enforceable against the Pledgor by the Agent and the Pledgor hereby waives and agrees not to assert any defenses against an action for specific performance of such covenants. Notwithstanding the provisions of this Article 7, no registration statement shall be required to be filed or become or remain effective if (a) it would require a special audit of the financial statements of the issuer, (b) registrations may not be appropriately effected in light of any material pending transaction of the issuer or its subsidiaries, or any registration of any underwritten public offering of securities made on behalf of the issuer has become effective within 90 days prior to the anticipated effectiveness of the registration requested pursuant to this Article 7 or (c) such registration statement would be filed prior to the earlier of the 90th day after the end of any fiscal year of the issuer or the date NYFS04...:\30\76830\0001\1197\AGR52494.L80 on which the issuer's audited financial statements for such fiscal year are available. NYFS04...:\30\76830\0001\1197\AGR52494.L80 8. MARSHALLING. Neither the Agent nor any Bank shall be ----------- required to marshal any present or future collateral security for (including but not limited to this Agreement and the Stock Collateral), or other assurances of payment of, the Obligations or any of them, or to resort to such collateral security or other assurances of payment in any particular order. All of the Agent's rights hereunder and of the Banks and the Agent in respect of such collateral security and other assurances of payment shall be cumulative and in addition to all other rights, however existing or arising. To the extent that he lawfully may, the Pledgor hereby agrees that he will not invoke any law relating to the marshalling of collateral that might cause delay in or impede the enforcement of the Agent's rights under this Agreement or under any other instrument evidencing any of the Obligations or under which any of the Obligations is outstanding or by which any of the Obligations is secured or payment thereof is otherwise assured, and to the extent that he lawfully may the Pledgor hereby irrevocably waives the benefits of all such laws. 9. PLEDGOR'S OBLIGATIONS NOT AFFECTED. The obligations of ---------------------------------- the Pledgor hereunder shall remain in full force and effect without regard to, and shall not be impaired by (a) any exercise or nonexercise, or any waiver, by the Agent or any Bank of any right, remedy, power or privilege under or in respect of any of the Obligations or any security thereof (including this Agreement); (b) any amendment to or modification of the Loan Agreement, the Notes, the other Loan Documents, the Guaranty or any of the Obligations; (c) any amendment to or modification of any instrument (other than this Agreement) securing any of the Obligations, including, without limitation, any of the Security Documents; or (d) the taking of additional security for, or any other assurances of payment of, any of the Obligations or the release or discharge or termination of any security or other assurances of payment or performance for any of the Obligations; whether or not the Pledgor shall have notice or knowledge of any of the foregoing. 10. TRANSFER, ETC., BY PLEDGOR. Except as otherwise -------------------------- permitted herein, without the prior written consent of the Agent, the Pledgor will not sell, assign, transfer or otherwise dispose of, grant any option with respect to, or pledge or grant any security interest in or otherwise encumber or restrict any of the Stock Collateral or any interest therein, except for the pledge thereof and security interest therein provided for in this Agreement. 11. FURTHER ASSURANCES. The Pledgor will do all such acts, ------------------ and will furnish to the Agent all such financing statements, certificates, legal opinions and other documents and will obtain all such governmental consents and corporate approvals and will do or cause to be done all such other things as the Agent may reasonably request from time NYFS04...:\30\76830\0001\1197\AGR52494.L80 to time in order to give full effect to this Agreement and to secure the rights of the Banks and the Agent hereunder, all without any cost or expense to the Agent or any Bank. If the Agent so elects, a photocopy of this Agreement may at any time and from time to time be filed by the Agent as a financing statement in any recording office in any jurisdiction. 12. AGENT'S EXONERATION. Under no circumstances shall the ------------------- Agent be deemed to assume any responsibility for or obligation or duty with respect to any part or all of the Stock Collateral of any nature or kind or any matter or proceedings arising out of or relating thereto, other than (a) to exercise reasonable care in the physical custody of the Stock Collateral and (b) after an Event of Default shall have occurred and be continuing to act in a commercially reasonable manner. Neither the Agent nor any Bank shall be required to take any action of any kind to collect, preserve or protect its or the Pledgor's rights in the Stock Collateral or against other parties thereto. The Agent's prior recourse to any part or all of the Stock Collateral shall not constitute a condition of any demand, suit or proceeding for payment or collection of any of the Obligations. 13. NO WAIVER, ETC. Neither this Agreement nor any term -------------- hereof may be changed, waived, discharged or terminated except by a written instrument expressly referring to this Agreement and to the provisions so modified or limited, and executed by the Agent, with the consent of the Majority Banks, and the Pledgor. No act, failure or delay by the Agent shall constitute a waiver of its rights and remedies hereunder or otherwise. No single or partial waiver by the Agent of any default or right or remedy that it may have shall operate as a waiver of any other default, right or remedy or of the same default, right or remedy on a future occasion. The Pledgor hereby waives presentment, notice of dishonor and protest of all instruments, included in or evidencing any of the Obligations or the Stock Collateral, and any and all other notices and demands whatsoever (except as expressly provided herein or in the Loan Agreement). 14. NOTICE, ETC. All notices, requests and other ----------- communications hereunder shall be made in the manner set forth in Section 18 of the Loan Agreement. 15. TERMINATION; PARTIAL RELEASE. Upon final payment and ---------------------------- performance in full of the Obligations, this Agreement shall terminate and the Agent shall, at the Pledgor's request and expense, return such Stock Collateral in the possession or control of the Agent as has not theretofore been disposed of pursuant to the provisions hereof, together with any moneys and other property at the time held by the Agent hereunder. Upon repayment or prepayment in full or in part of the Term Loan or the term loan under the Powdr Agreement, the Agent shall, within ten (10) Business Days after receipt of a request from the Pledgor, release Stock Collateral having a fair market value of up to two times the principal amount NYFS04...:\30\76830\0001\1197\AGR52494.L80 so repaid or prepaid, provided that after giving effect to such -------- release, the Collateral Coverage Ratio shall equal or exceed 2.00 to 1.00. 16. OVERDUE AMOUNTS. Until paid, all amounts due and --------------- payable by the Pledgor hereunder shall be a debt secured by the Stock Collateral and shall bear, whether before or after judgment, interest at the rate of interest for overdue principal set forth in the Loan Agreement. 17. GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT -------------------------------------- IS INTENDED TO TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. The Pledgor agrees that any suit for the enforcement of this Agreement may be brought in the courts of the Commonwealth of Massachusetts or any federal court sitting therein and consents to the non-exclusive jurisdiction of such court and to service of process in any such suit being made upon the Pledgor by mail at the address specified in Section 18 of the Loan Agreement. The Pledgor hereby waives any objection that he may now or hereafter have to the venue of any such suit or any such court or that such suit is brought in an inconvenient court. 18. WAIVER OF JURY TRIAL. THE PLEDGOR WAIVES HIS RIGHT TO A -------------------- JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, the Pledgor waives any right which he may have to claim or recover in any litigation referred to in the preceding sentence any special, exemplary, punitive or consequential damages or any damages other than, or in addition to, actual damages. The Pledgor (a) certifies that neither the Agent or any Bank nor any representative, agent or attorney of the Agent or any Bank has represented, expressly or otherwise, that the Agent or any Bank would not, in the event of litigation, seek to enforce the foregoing waivers and (b) acknowledges that, in entering into the Loan Agreement and the other Loan Documents to which the Agent is a party, the Agent and the Banks are relying upon, among other things, the waivers and certifications contained in this Section 18. 19. MISCELLANEOUS. The headings of each section of this ------------- Agreement are for convenience only and shall not define or limit the provisions thereof. This Agreement and all rights and obligations hereunder shall be binding upon the Pledgor and his respective successors and assigns, and shall inure to the benefit of the Agent and the Banks and their respective successors and assigns. If any term of this Agreement shall be held to be invalid, illegal or unenforceable, the validity of all other terms hereof shall be in no way affected NYFS04...:\30\76830\0001\1197\AGR52494.L80 thereby, and this Agreement shall be construed and be enforceable as if such invalid, illegal or unenforceable term had not been included herein. The Pledgor acknowledges receipt of a copy of this Agreement. IN WITNESS WHEREOF, intending to be legally bound, the Pledgor and the Agent have caused this Agreement to be executed as of the date first above written. ----------------------------------- Ian M. Cumming THE FIRST NATIONAL BANK OF BOSTON, as Agent By: -------------------------------- Title: NYFS04...:\30\76830\0001\1197\AGR52494.L80 ANNEX A TO PLEDGE AGREEMENT --------------------------- Capital Stock ------------- Par or Class of Number of Liquidation Issuer Shares Shares Value ------ -------- --------- ----------- Powdr Corp. Common 13,334 $.01/share Leucadia National Common 500,000 $1.00/share Corporation Warrants -------- Number of Exercise Expiration Issuer Shares Price Date ------ --------- -------- ---------- Leucadia 690,000 $20.1875 January 10, 1997 National Corporation