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Exhibit 10.1
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AMENDED AND RESTATED
WESTERN REALTY DEVELOPMENT LLC
LIMITED LIABILITY COMPANY AGREEMENT
(SECOND RESTATEMENT)
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AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT
(SECOND RESTATEMENT)
THIS AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (SECOND
RESTATEMENT), dated as of February 20, 1998, by and among Western Realty
Development LLC, a Delaware limited liability company with offices at ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the
"Company"), Apollo Real Estate Investment Fund III, L.P., a Delaware limited
partnership with offices at 1301 Avenue of the Americas, New York, New York
("Apollo"), New Valley Corporation, a Delaware corporation with offices at ▇▇▇
▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ("New Valley"), and BrookeMil
Ltd., a Cayman Islands company with offices at ▇.▇. ▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇▇ House, ▇▇▇▇▇▇ Town, Grand Cayman, B.W.I. ("BrookeMil") (New Valley
and BrookeMil are sometimes hereinafter referred to collectively as the "New
Valley Parties," and Apollo and the New Valley Parties are sometimes hereinafter
referred to collectively as the "Members" and individually as a "Member").
W I T N E S S E T H :
WHEREAS, the parties hereto have entered into the Amended and Restated
Western Realty Development LLC Limited Liability Company Agreement, dated as of
February 20, 1998, and, on April 28, 1998, hereby further amend and restate such
Agreement;
WHEREAS, the Company has been formed to act as a holding company and
(i) to own 100% of the interests of Western Realty Investments LLC, a Delaware
limited liability company ("Delaware LLC-2"), which in turn will own 99% of
Western Realty LLC, a Russian limited liability company (the "Russian LLC"),
created to hold the rights to, develop and manage properties in
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Moscow, Russia located at ▇▇. ▇▇▇▇▇▇▇ ▇ ("▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇") and 7 ("▇▇▇▇▇ Place
II") and (ii) to lend money (after giving effect to the transactions described
below) to Western Tobacco Investments LLC, a Delaware limited liability company
("Delaware LLC-3"), under the Participating Loan Agreement (as hereinafter
defined);
WHEREAS, BrookeMil has transferred its rights with respect to ▇▇▇▇▇
Place II, together with associated assets and liabilities, to the Russian LLC;
WHEREAS, BrookeMil currently holds rights with respect to ▇▇▇▇▇ Place
III and will transfer such rights, together with associated assets and
liabilities, to the Russian LLC;
WHEREAS, the parties hereto have agreed that the Western Tobacco
Investments LLC Limited Liability Company Agreement entered into among the
Company, Delaware LLC-3 and Brooke (Overseas) Ltd., a Delaware corporation
("Brooke (Overseas)"), dated as of February 27, 1998, shall be terminated and
that the Participating Loan Agreement substantially in the form annexed hereto
as Exhibit A (the "Participating Loan Agreement") contemplating a $20,000,000
loan from the Company to Delaware LLC-3 (the "Participating Loan") shall be
entered into among the Company, Delaware LLC-3 and Brooke (Overseas);
WHEREAS, each Member has agreed to subscribe for and to purchase
interests in the Company in return for the contributions to the Company
described below; and
WHEREAS, the Members wish to set forth their respective rights and
obligations as Members of the Company and to confirm the principles that will
govern the management of the Company and its Affiliated Entities;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
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1. Defined Terms.
Capitalized terms not otherwise defined herein shall have the meanings
set forth on Schedule A.
2. Organization; Interests.
2.1 Certificate of Formation. The parties acknowledge that the
Company was formed on October 27, 1997 and that the Certificate of Formation of
the Company is currently in the form annexed hereto as Schedule 2.1. The parties
hereby agree that the rights and liabilities of the Members shall be as provided
in the Act, except as provided herein. The parties acknowledge that the original
Limited Liability Company Agreement of the Company dated November 4, 1997 has
been terminated and superseded by the present Agreement.
2.2 Purpose. The Company was formed for the purpose of
investing, developing and operating, through its interests in Delaware LLC-2 and
through the Participating Loan to Delaware LLC-3, ▇▇▇▇▇ Place II, ▇▇▇▇▇ Place
III and other real estate interests as provided herein. The purpose of the
Company can be modified as provided in Section 14.4 hereof or otherwise by
agreement of the Members.
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2.3 Principal Office. The principal office of the Company
shall be located at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇.
2.4 Subscription for Interests.
(a) Apollo hereby subscribes for interests (the
"Class A Interests"), to be issued by the Company for an aggregate subscription
price of $40,000,000, to be contributed in cash as provided below. New Valley
hereby subscribes for interests (the "Class B Interests"), to be issued by the
Company for an aggregate subscription price of $10,000,000, to be contributed in
cash and expenditures as set forth in Section 2.4(d). BrookeMil hereby
subscribes for interests (the "Class C Interests"), to be issued by the Company
for an aggregate subscription price of $61,966,507, to be contributed by
transferring to the Russian LLC its interests in ▇▇▇▇▇ II and ▇▇▇▇▇ III, to
Delaware LLC-2 all of its interest in the Russian LLC, except for a 1% interest,
in exchange for promissory notes, and contributing such promissory notes to the
Company, as set forth in Section 2.4(e). The Class A Interests, the Class B
Interests and the Class C Interests are hereinafter collectively referred to as
the "Interests." The subscriptions shall be made as follows:
Apollo:
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Type of Interests Number of Interests Contribution Value of Contribution
----------------- ------------------- ------------ ---------------------
Class A 10,000 Cash $40,000,000
Interests
Total: 10,000 $40,000,000
New Valley:
----------
Type of Interests Number of Interests Contribution Value of Contribution
----------------- ------------------- ------------ ---------------------
Class B 1,400 Expenditures
Interests as set forth $10,000,000
in Section 2.4(d)
and Cash
Total: 1,400 $10,000,000
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BrookeMil:
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Type of Interests Number of Interests Contribution Value of Contribution
----------------- ------------------- ------------ ---------------------
Class C 6,381 Promissory Note $ 45,980,553
Interests for Interests
in the Russian LLC
(for ▇▇▇▇▇ Place II)
2,219 Promissory Note $ 15,985,954
for Interests
in the Russian LLC
(for ▇▇▇▇▇ Place III)
Total: 8,600 $ 61,966,507
Total for all
-------------
Members: 20,000 $111,966,507
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(b) At the Initial Closing (as defined in Section
12.1) the Company issued (i) five (5) of its Class A Interests, at a price of
$4,000 per interest and (ii) five (5) of its Class B Interests, at a price of
$1,000 per interest. The contributions of the Members to the Company and the
amounts and types of Interests issued to them at the Initial Closing were as
follows:
Apollo:
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Type of Interests Number of Interests Contribution Value of Contribution
----------------- ------------------- ------------ ---------------------
Class A 5 Cash $20,000
Interests
New Valley:
-----------
Type of Interests Number of Interests Contribution Value of Contribution
----------------- ------------------- ------------ ---------------------
Class B 5 Expenditures $ 5,000
Interests
Total Interests Issued: 10 $25,000
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At the Initial Closing, Apollo made a loan of $11,000,000 to the Company (the
"Apollo Loan") which was represented by a promissory note in favor of Apollo
dated February 27, 1998 (the "Promissory Note") which Promissory Note was
secured by the pledge of 99.1% of the outstanding shares of the capital stock of
BrookeMil under a pledge agreement between Apollo and New Valley dated as of
February 27, 1998 (the "Pledge Agreement"). The entire amount of the Apollo Loan
was disbursed to the order of the Company by wire transfer in immediately
available funds to the account specified in such wire instructions on the
Initial Closing Date.
(c) At the Initial Subsequent Closing (as defined in
Section 12.6) the Company shall issue (i) seven thousand eighty-one (7,081) of
its Class A Interests, at a price of $2,824.46 per interest, (ii) seven hundred
(700) of its Class B Interests, at a price of $7,142.85 per interest, and (iii)
six thousand three hundred eighty-one (6,381) of its Class C Interests, at a
price of $7,205.85 per interest. The contributions of the Members to the Company
and the amounts and types of Interests to be issued to them at the Initial
Subsequent Closing shall be as follows:
Apollo:
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Type of Interests Number of Interests Contribution Value of Contribution
----------------- ------------------- ------------ ---------------------
Class A 3,186 $9,000,000 in Cash $9,000,000
Interests
3,895 Conversion of $11,000,000
Apollo Loan
Total Since 7,086 $20,020,000
Initial Closing:
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New Valley:
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Type of Interests Number of Interests Contribution Value of Contribution
----------------- ------------------- ------------ ---------------------
Class B 700 Expenditures $5,000,000
Interests as set forth
in Section 2.4(d)
Total Since 705 $5,005,000
Initial Closing:
BrookeMil:
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Type of Interests Number of Interests Contribution Value of Contribution
----------------- ------------------- ------------ ---------------------
Class C 6,381 Promissory Note $45,980,553
Interests for Interests
in the Russian LLC
(for ▇▇▇▇▇ Place II)
Total Since 6,381 $45,980,553
Initial Closing:
Total for All
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Members Since 14,172 $71,005,553
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Initial Closing:
---------------
The entire amount of the Apollo Loan (including the principal and any interest
accrued thereon) shall be converted into the Class A Interests at the Initial
Subsequent Closing, to be credited as a contribution by Apollo in the amount of
$11,000,000 towards the aggregate subscription amount set forth in Section
2.4(a), which contribution, upon such conversion, shall be considered made for
the purposes of this Agreement as of the Initial Closing Date. For the avoidance
of doubt, upon the conversion of the Apollo Loan into the Class A Interests as
set forth herein, the Apollo Loan shall be terminated and no payment of
principal, interest or any other amounts shall be due thereon.
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(d) At the Initial Subsequent Closing, at the Second
Subsequent Closing and from time to time after the Second Subsequent Closing and
on or before the fifth anniversary of the Initial Closing Date, Apollo and New
Valley shall complete their subscribed contributions to the Company in
accordance with the Other Subsequent Closings described in Section 12.10 hereof,
up to the subscription amounts set forth in Section 2.4(a), in return for which
additional Class A Interests shall be issued to Apollo and additional Class B
Interests shall be issued to New Valley at the same price per Interest as set
forth in Section 2.4(c) hereof. Upon ten (10) Business Days' notice by the
Company to each of Apollo and New Valley (or, in case of the Initial Subsequent
Closing, on the Initial Subsequent Closing Date, and, in case of the Second
Subsequent Closing, on May 6, 1998), such additional contributions shall be made
by Apollo in cash and by New Valley in expenditures incurred since March 1,
1997, including those expenditures incurred through the date hereof and set
forth in Schedule 2.4(d), and, after such expenditures have been contributed and
to the extent they do not cover the subscribed amount, in cash, and such
contributions shall be made in such manner so as to maintain the ratio of $4.00
contributed by Apollo for every $1.00 in value contributed by New Valley, and
Apollo shall at all times have the number of interests equal to the number of
interests owned by New Valley and BrookeMil together. New Valley shall be deemed
to have made contributions to the Company in the form of the expenditures
referred to in the preceding sentence only on the due date determined for
additional contributions to the Company at a Subsequent Closing (and then only
to the extent that such expenditures are actually made as of the date of such
Subsequent Closing) as provided in Section 12.10 hereof (and New Valley shall
not be entitled to any interest thereon from the date such expenditures were
incurred to the date of such Subsequent Closing) regardless
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of the date such expenditures were incurred, and any expenditures that are to be
counted as New Valley's contributions but that are not set forth in Schedule
2.4(d) or that do not constitute items on the approved Budget shall be
unanimously approved by the Board of Managers. To the extent the sum of the
amount of expenditures of the New Valley Parties with respect to ▇▇▇▇▇ II and
▇▇▇▇▇ III incurred since March 1, 1997 and set forth in Schedule 2.4(d) and of
expenditures incurred by them after the Initial Closing Date on items set forth
in the approved Budget exceeds $10,000,000, the New Valley Parties shall be
reimbursed by the Company from the proceeds of Subsequent Closings for such
expenditures in excess of $10,000,000 (to the extent the New Valley Parties
provide to Apollo proper documentation substantiating such expenditures).
(e) BrookeMil (i) has made part of its capital
contribution hereunder by means of transferring (x) to the Russian LLC the
assets and assumed liabilities listed in Schedule 2.4(e) (the "Assets" and the
"Assumed Liabilities," respectively) related to ▇▇▇▇▇ Place II, (y) to Delaware
LLC-2 its entire interest in the Russian LLC, less a 1% interest, in exchange
for a promissory note, and (z) to the Company such promissory note in return for
6,381 Class C Interests; and (ii) shall make the remaining part of its capital
contribution by means of transferring, as soon as practicable hereafter (x) to
the Russian LLC, the Assets and the Assumed Liabilities listed in Schedule
2.4(e) related to ▇▇▇▇▇ Place III, (y) to Delaware LLC-2 its entire interest (as
it has been increased as a result of such transfer) in the Russian LLC at the
time of such transfer, less a 1% interest, in exchange for a promissory note,
and (z) to the Company such promissory note in return for 2,219 Class C
Interests. Upon the completion of the transfers contemplated in clauses (i) and
(ii) of the preceding sentence, BrookeMil shall have no further liability for
capital contributions to the Company hereunder.
(f) In the event any Member shall fail to make any
portion of its
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contribution to the Company when due for any reason, other than an Event of
Force Majeure, then, beginning on the fourth Business Day after the due date for
such contribution, the Company shall charge such non-paying Member interest on
the unpaid amount of such contribution at the rate equal to the lesser of (i)
10% over the base (prime) rate quoted by the Chase Manhattan Bank in New York,
New York (or its successor) at the close of business on the date on which such
payment was due, or (ii) the maximum rate as allowed by applicable law,
calculated from the date such contribution was due until the date of payment
compounded quarterly and based on a 360-day year ("Late Payment Interest"). Late
Payment Interest shall be distributed to the Members who made their
contributions in full on the due date therefor, pro rata in accordance with the
proportion that the aggregate contributions of each paying Member bear to the
aggregate contributions of all paying Members. In the event that such failure to
pay shall continue uncured for a period of one hundred and twenty (120) days
after notice thereof, such non-payment shall be deemed a payment default (a
"Payment Default"). Upon the occurrence and continuation of a Payment Default,
Late Payment Interest shall continue to accrue and Members who have made their
contributions in full on the due date therefor shall have the right to require
the sale of ▇▇▇▇▇ Place II and the New Factory as set forth in Section
2.10(a)(iv). Notwithstanding any other provision of this Agreement to the
contrary, the portion of the proceeds from the sale of ▇▇▇▇▇ Place II and/or the
New Factory to which the non-paying Member or Members would otherwise be
entitled shall be subject to reduction for any portion of such unpaid
contribution and any Late Payment Interest thereon and such amounts shall be
paid to the non-defaulting Members in proportion to their Interests in the
Company.
2.5 Payment of Cash Contributions by Members. The Members
shall effect their cash contributions to the Company by wire transfer in
immediately available funds to such
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bank account of the Company as shall be specified in a notice by the Company to
the Members sent at least one Business Day prior to the date of any Closing (as
defined in Section 12 hereof).
2.6 Restrictions on Subscriptions for Interests. The Company
shall not issue any Interests other than to the Members who are a party hereto,
unless the Members unanimously agree
2.7 Rights of Class A Interests.
(a) The Class A Interests shall be entitled to
receive (i) 100% of any amounts distributed by the Company (including
liquidating distributions) until such time as the aggregate amount of
distributions made with respect to Class A Interests equals the total
consideration paid for such Class A Interests plus a 15% annual cumulative rate
of return on such consideration compounded quarterly (such aggregate amount of
distributions is hereinafter referred to as the "Class A Distribution Amount"
and the period required to make such distributions with respect to Class A
Interests in full is hereinafter referred to as the "Class A Distribution
Period"); and (ii) after completion of the Class A Distribution Period and the
Class B Distribution Period (as hereinafter defined), further distributions by
the Company, if any, in an amount equal to 30% of the distribution. The
distribution rights of the Class A Interests are set forth in more detail in
Section A.11 of Schedule 4 annexed hereto.
(b) Upon the liquidation of the Company, the holders
of the Class A Interests shall be entitled to receive the Adjusted Realized
Equity Value of such Class A Interests (the "Class A Liquidation Preference")
before any assets of the Company may be distributed to the holders of the Class
B Interests; provided, however, that the Class A Interests shall be entitled to
such Class A Liquidation Preference only in the event such liquidation takes
place before the completion of the Class A Distribution Period and then only to
the extent that such
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Adjusted Realized Equity Value does not exceed the Class A Distribution Amount.
After the completion of the Class A Distribution Period and the Class B
Distribution Period and upon the liquidation of the Company, the holders of the
Class A Interests shall be entitled to receive distributions in accordance with
Section 2.7(a)(ii) hereof. Notwithstanding the foregoing provisions of this
Section 2.7(b), the rights of the Class A Interests to receive distributions in
liquidation of the Company are subject to the provisions of Section A.12 of
Schedule 4 annexed hereto.
(c) The holders of Class A Interests shall have one
vote in the aggregate.
2.8 Rights of Class B and Class C Interests.
(a) Upon completion of the Class A Distribution
Period, the Class B Interests shall be entitled to receive 100% of any amounts
distributed by the Company (including liquidating distributions) until such time
as the aggregate amount of distributions made with respect to the Class B
Interests equals the total consideration paid for such Class B Interests
pursuant to Section 2.4 plus a 15% annual cumulative rate of return on such
consideration paid for such Class B Interests compounded quarterly (such
aggregate amount of distributions is hereinafter referred to as the "Class B
Distribution Amount" and the period required to make such distributions with
respect to the Class B Interests in full is hereinafter referred to as the
"Class B Distribution Period").
(b) Upon the liquidation of the Company, the holders
of the Class B Interests shall be entitled to receive the Adjusted Realized
Equity Value of such Class B Interests (the "Class B Liquidation Preference")
before any assets of the Company may be distributed to the Members on a pro-rata
basis; provided, however, that the Class B Interests shall be entitled to
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such Class B Liquidation Preference only in the event such liquidation takes
place after the completion of the Class A Distribution Period but before the
completion of the Class B Distribution Period and then only to the extent that
such Adjusted Realized Equity Value does not exceed the Class B Distribution
Amount. After the completion of the Class B Distribution Period and upon the
liquidation of the Company, the holders of the Class B Interests shall be
entitled to receive distributions in accordance with Section 2.8(c) hereof.
Notwithstanding the foregoing provisions of this Section 2.8(b), the rights of
the Class B Interests to receive distributions in liquidation of the Company are
subject to the provisions of Section A.12 of Schedule 4 annexed hereto.
(c) After completion of the Class A Distribution
Period and the Class B Distribution Period, the Class B Interests and the Class
C Interests shall be entitled to further distributions by the Company, if any,
in an amount equal to 70% of the distribution. The distribution rights of the
Class B Interests and the Class C Interests are set forth in more detail in
Section A.11 of Schedule 4 annexed hereto.
(d) The holders of the Class B Interests and the
Class C Interests shall have one vote in the aggregate.
2.9 Management of the Company. Except to the extent that the
authority to conduct day-to-day operations of the Company shall be delegated to
the President as provided herein, the management of the Company shall be vested
in a managing board (the "Board" or the "Board of Managers"), which shall
consist of an even number of managers, but not less than two (2) or more than
six (6). An equal number of managers shall be appointed to the Board (and
subject to removal and replacement) by Apollo on the one hand and by the New
Valley Parties on
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the other hand. Meetings of the Board shall be held periodically (but in no
event less frequently than annually) and upon the request of any manager. The
Board may also take action by unanimous written consent without a meeting.
Except as otherwise provided herein, the actions of the Board shall be by
majority vote, which majority shall include the vote of at least one (1) manager
appointed by each of Apollo and the New Valley Parties. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ or such
other person designated by the New Valley Parties (who shall count as one of the
appointments of the New Valley Parties) shall be the Chairman of the Board of
Managers.
Notwithstanding the foregoing, the unanimous decision of the Board of
Managers of the Company shall be required in order for the Company itself, or in
its capacity as a direct or indirect shareholder, member or participant of any
Affiliated Entity, to vote or otherwise approve a decision:
(a) to amend this Agreement or the constituent
documents of the Company and to adopt or amend the constituent documents of any
Affiliated Entity, or to waive any provisions hereof or thereof, and to amend
the Participating Loan Agreement or to waive any provisions thereof;
(b) unless specified in the approved Budget (as
hereinafter defined), to sell, transfer, assign, grant a right to use, a right
of first refusal, an option or a similar right, or otherwise dispose of (i) any
of the Properties, or any rights thereto or interests therein (including but not
limited to ownership rights, leasehold interests (whether as landlord or
tenant), rights to use or easements) or (ii) any asset (or group of assets in a
transaction or series of transactions) the cost or fair market value (whichever
is greater) of which exceeds $100,000 individually or $500,000 in the aggregate
in any given year, except as permitted by Section 2.10 and except for
transactions between the Russian LLC and Delaware LLC-2;
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(c) unless specified in the approved Budget, to
borrow, issue guarantees or assume other contingent obligations to pay money in
an amount which exceeds $100,000 in the aggregate outstanding at any given time,
except for transactions between the Russian LLC and Delaware LLC-2;
(d) unless specified in the approved Budget, to grant
a security interest or otherwise encumber (i) any of the Properties or any
rights thereto or interests therein (including but not limited to ownership
rights, leasehold interests (whether as landlord or tenant), rights to use or
easements), or (ii) any asset (or group of assets in a transaction or series of
transactions) the cost, fair market value or value assigned in such
transaction(s) (whichever is greater) of which exceeds $100,000 at any one time
or $500,000 in the aggregate in any given year;
(e) to take any actions regarding registration of the
Interests in the Company or any Affiliated Entity necessary for a public
offering;
(f) to merge, reorganize or consolidate the Company
or any Affiliated Entity with any other corporation or entity unless the
surviving entity shall be the Company or such other Affiliated Entity,
respectively, or the Company or other Affiliated Entity is merged, reorganized
or consolidated with an Affiliate thereof;
(g) to dissolve voluntarily the Company or any
Affiliated Entity or to revoke voluntary dissolution proceedings or to
terminate, liquidate or wind up the Company or Affiliated Entity;
(h) to change materially the principal businesses
conducted by the Company or any Affiliated Entity or to make any expenditures
with respect to ▇▇▇▇▇ Place III except as may be specified in the approved
Budget;
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(i) to approve the annual budget and business plan,
including capital expenditures, of the Company (collectively, the "Budget"),
which Budget shall incorporate the annual budgets and business plans of Delaware
LLC-2, the Russian LLC and Delaware LLC-3, as well as any contributions or
resources to be made available by the Company to any other Affiliated Entity;
(j) unless specified in the approved Budget, to make
or incur, or to enter into a contractual commitment to make or incur
expenditures or financial obligations which exceed $250,000 individually or
$1,000,000 in the aggregate in any calendar year;
(k) unless specified in the approved Budget, to
purchase ownership interests, leasehold interests, rights to use, easements or
other rights to or interests in the Properties or elsewhere for the price
exceeding $100,000 in each particular transaction or exceeding $500,000 in the
aggregate in any given year, including approval of agreements with respect to
acquiring such rights, or to waive any rights of first refusal, preemptive or
similar rights relating to the purchase of any such rights to or interest in
such Properties or elsewhere;
(l) to enter into, modify, renew, terminate or grant
any material waiver relating to any significant leases and other material
contracts other than contracts in the ordinary course of business with trade
counterparties or customary real estate leases involving no more than 1000
square meters as approved by the President; provided that real estate lease
agreements with Members or any of their Affiliates exceeding 500 square meters
shall be considered significant for purposes of this clause;
(m) to enter into any transaction with a party that
is related to any Member or Affiliate, excluding transactions in the ordinary
course of business of the Company or an Affiliated Entity on an arm's-length
basis involving amounts which shall not exceed $250,000
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per transaction or series of transactions and excluding transactions in the
ordinary course of business of ▇▇▇▇▇▇▇-▇▇▇▇▇ involving ▇▇▇▇▇▇▇ Group Inc. on an
arm's-length basis; provided that written notice of all such transactions or
series of transactions involving more than $100,000, together with a description
of the material terms thereof, shall be promptly furnished to Apollo;
(n) to commence or settle any litigation, arbitration
or other dispute, the result of which could have a material adverse effect on
the business, financial condition or prospects of the Company or any Affiliated
Entity;
(o) to resolve tax or other governmental proceedings
or disputes relating to the Company or any Affiliated Entity or to approve any
action of New Valley as tax matters partner of the Company;
(p) to establish, acquire, dispose of or transfer any
subsidiary or any interest in any subsidiary or other entity (whether or not
incorporated) or make any investment in any business venture or enterprise
(whether or not incorporated), other than as contemplated in the approved
Budget;
(q) to change the outside accountants of the Company
or any Affiliated Entity;
(r) to issue, sell, transfer, assign or otherwise
dispose of any shares, capital stock, securities or interests of or owned by the
Company or any Affiliated Entity, or change the ownership structure of the
Company or any Affiliated Entity;
(s) unless specified in the approved Budget or in
this Agreement, to make a decision not to distribute all available cash (to the
extent such distributions are permitted by applicable law) of (i) the Company to
the Members, or (ii) an Affiliated Entity to its shareholders, members or
participants, as applicable; and
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(t) to retain any officer subject to mandatory
dismissal as provided in Section 5.1(c).
All figures set forth in this Section 2.9 shall be determined on a
consolidated basis in accordance with U.S. generally accepted accounting
principles, consistently applied. To the extent that any amounts or payments are
incurred in any currency other than U.S. dollars, such amounts or payments
shall, for purposes of such calculation, be converted into U.S. dollars on the
date of the conclusion of the transaction at the official exchange rate of such
country (which, for purposes of the ▇▇▇▇▇, shall be considered to be the MICEX
rate at the opening of business in Moscow on such date). The Parties hereby
agree that the Participating Loan Agreement shall include provisions requiring
the Company's approval (directly or indirectly) of the issues set forth in this
Section 2.9 and that Apollo shall be authorized to grant the approvals to be
granted by the Company under Section 5.1 of the Participating Loan Agreement.
2.10 Sale of Interests in the Company and Its Assets.
(a) Sale of Assets.
(i) At any time after at least 80% of the net
leasable space of ▇▇▇▇▇ Place III has been leased to tenants, the New Valley
Parties shall have the right to sell, or cause to be sold, ▇▇▇▇▇ Place III
without the consent of Apollo, provided that (x) the cash price payable in one
lump sum at the closing of such sale shall be no less than $175,000,000; (y)
▇▇▇▇▇ Place III is sold to one or more purchasers through an auction process
conducted by an internationally recognized investment bank or real estate
brokerage firm; and (z) construction of ▇▇▇▇▇ Place III has been completed.
(ii) The Participating Loan Agreement shall provide
that at any time
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after the completion of the construction of the New Factory, Brooke (Overseas)
shall have the right to sell, or cause to be sold, the New Factory without
Apollo's consent, provided that (x) the cash price payable in one lump sum at
the closing of such sale shall be no less than $175,000,000; and (y) the New
Factory is sold to one or more purchasers through an auction process conducted
by an internationally recognized investment bank or real estate brokerage firm.
(iii) At any time after February 20, 2005, Apollo
shall have the right to require the sale, without the consent of the New Valley
Parties, of all of the assets of the Company, directly and indirectly held,
including but not limited to ▇▇▇▇▇ Place II, ▇▇▇▇▇ Place III, Delaware LLC-2 and
Russian LLC, and, through the Company's interest in the Participating Loan
Agreement, all the assets of Delaware LLC-3, including the New Factory, provided
that (x) the cash price payable for all the assets of the Company and Delaware
LLC-3 in one lump sum at the closing of such sale shall be no less than
$430,000,000; and (y) all assets are sold to one or more purchasers through an
auction process conducted by an internationally recognized investment bank or
real estate brokerage firm.
(iv) In the event of (A) a Payment Default by a
Member as set forth in Section 2.4(f) or (B) a material breach by the New Valley
Parties with respect to the provisions of Section 2.9 hereof, which material
breach remains uncured 60 days after receipt by the New Valley Parties of
written notice from Apollo setting forth in detail the alleged default, then, in
each such instance, the non-defaulting Members shall have the right to require
the sale of ▇▇▇▇▇ Place II, provided that (x) the cash price payable in one lump
sum at the closing of such sale shall be no less than $75,000,000, and (y) ▇▇▇▇▇
Place II is sold to one or more purchasers through an auction process conducted
by an internationally recognized investment bank or real estate brokerage firm.
In the event that such sale of ▇▇▇▇▇ Place II and the distribution of the
proceeds
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therefrom to the non-defaulting Members shall not exceed the Adjusted Realized
Equity Value of the Interests of such non-defaulting Members, such
non-defaulting Members shall have the right to require the sale of the New
Factory, provided that (x) the cash price payable in one lump sum at the closing
of such sale shall be no less than $165,000,000, and (y) the New Factory is sold
to one or more purchasers through an auction process conducted by an
internationally recognized investment bank or real estate brokerage firm.
(v) In the event of (A) the failure of Brooke
(Overseas) to secure or provide the Russian Bank Loan or to arrange other
financing, each on terms that shall not differ materially from those set forth
on Schedule 2.10(v) by July 1, 1998 or (B) a payment default under the Russian
Bank Loan which default results in the acceleration of all amounts due
thereunder or the commencement of enforcement proceedings by the bank against
▇▇▇▇▇▇▇-▇▇▇▇▇ under the Russian Bank Loan (a "Loan Default"), then, in each such
instance, Apollo shall have the right to require the sale, without the consent
of the New Valley Parties, of all of the assets of the Company, directly or
indirectly held, including but not limited to, ▇▇▇▇▇ Place II, ▇▇▇▇▇ Place III,
Delaware LLC-2 and the Russian LLC, and, through the Company's interest in the
Participating Loan Agreement, all the assets of Delaware LLC-3, including the
New Factory, provided that (x) the sale shall be on commercially reasonable
terms and (y) prior to entering into a definitive agreement with respect to any
such sale, Brooke (Overseas) shall not have secured or provided the Russian Bank
Loan or arranged other financing on terms that shall not differ materially from
those set forth on Schedule 2.10(v), or ▇▇▇▇▇▇▇-▇▇▇▇▇ or ▇▇▇▇▇▇ (Overseas) shall
not have cured the Loan Default, whether by payment, purchase or refinancing of
the Russian Bank Loan or otherwise, provided the Loan Default can be cured at
any time as long as after it has been cured Delaware LLC-3 shall have the same
rights with respect to the New Factory as it had prior to the occurrence of the
Loan Default, respectively.
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(vi) In the event Apollo has terminated this
Agreement in accordance with Section 14.2(c), then Apollo shall have the right
to require the sale, without the consent of the New Valley Parties, of all of
the assets of the Company, directly or indirectly held, including but not
limited to, ▇▇▇▇▇ Place II, ▇▇▇▇▇ Place III, Delaware LLC-2 and the Russian LLC,
and, through the Company's interest in the Participating Loan Agreement, all the
assets of Delaware LLC-3, including the New Factory, provided that (x) the sale
shall be on commercially reasonable terms and (y) prior to entering into a
definitive agreement with respect to any such sale, the grounds for such
termination by Apollo under Section 14.2(c) shall not have been eliminated.
(b) Sale of Interests.
(i) Sale of Interests by New Valley. Notwithstanding
the provisions of Section 9 hereof, at any time after at least 80% of the net
leasable space of ▇▇▇▇▇ Place III has been leased to tenants and the
construction of ▇▇▇▇▇ Place III has been completed, the New Valley Parties shall
have the right to sell all of their Interests in the Company without the consent
of Apollo, provided that (x) the cash price payable in one lump sum at the
closing of the sale of all the Interests in the Company shall be no less than
$430,000,000; and (y) the Interests of New Valley are sold to one or more
purchasers through an auction process conducted by an internationally recognized
investment bank or real estate brokerage firm. In the event the New Valley
Parties elect to exercise such right to sell all of their Interests in the
Company, they shall send to Apollo a written notice of such election at least
sixty (60) days prior to the closing of such sale, and Apollo shall have the
right and, at the request of the New Valley Parties, Apollo shall be obligated,
to sell all of its Interests within sixty (60) days of receipt of such notice to
the
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same purchaser or group of purchasers as the New Valley Parties on the same
terms and conditions as the New Valley Parties.
(ii) Sale of Interests by Apollo. At any time after
February 20, 2005, Apollo shall have the right to sell all of its Interests in
the Company without the consent of the New Valley Parties, provided that (x) the
cash price payable in one lump sum at the closing of the sale of all the
Interests in the Company shall be no less than $430,000,000; and (y) the
Interests of Apollo are sold to one or more purchasers through an auction
process conducted by an internationally recognized investment bank or real
estate brokerage firm. In the event Apollo elects to exercise such right to sell
all of its Interests in the Company, it shall send the New Valley Parties a
written notice of such election at least sixty (60) days prior to the closing of
such sale, and the New Valley Parties shall have the right and, at the request
of Apollo, the New Valley Parties shall be obligated, to sell all of their
Interests within sixty (60) days of receipt of such notice to the same purchaser
or group of purchasers as Apollo on the same terms and conditions as Apollo.
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(c) Notwithstanding anything to the contrary in this
Agreement, (i) a partial sale of Interests by any Member shall not be permitted,
(ii) all sales of Interests or assets of the Company or Delaware LLC-3 shall be
on a cash basis in U.S. Dollars, and (iii) no Member shall be entitled to
pledge, create a lien against, mortgage or otherwise encumber any Interests
owned by it or any distributions that such Member would be entitled to hereunder
as a result of owning such Interests. Each of the New Valley Parties and Apollo
shall retain the right to approve any provisions of any agreement for the sale
of Interests or any assets of the Company or Delaware LLC-3 with respect to
indemnification or other post-closing contingent liabilities or price
adjustments. It shall be a condition to any transfer under Section 2.10(b) that
the transferee becomes a party to this Agreement.
(d) Notwithstanding any provision of this Section
2.10 to the contrary, no sales of the assets of the Company or Delaware LLC-3 or
Interests shall be permitted by any Member to any of its Affiliates without the
prior written consent of the other Members.
3. Use of Contributions and Financing.
3.1 Use of Contributions.
(a) The contributions in cash and, in the case of New
Valley, expenditures as set forth in Section 2.4(d), received by the Company
from the Members shall be used as follows: (i) $30,000,000 will be used as
specified in the approved Budget for financing the construction, operation and
development of ▇▇▇▇▇ Place II, ▇▇▇▇▇ Place III and such other projects as may be
approved in the Budget, and to reimburse the New Valley Parties for the
expenditures in excess of $10,000,000 as set forth in Section 2.4(d); and (ii)
$20,000,000 will be loaned to Delaware LLC-3 in accordance with the
Participating Loan Agreement to finance the construction of the New Factory and
the acquisition of related equipment, and to reimburse
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Brooke (Overseas) for expenditures incurred by Brooke in connection therewith
since March 1, 1997, as shall be specified in the Participating Loan Agreement.
(b) At the time of any capital call, the purpose for
which funds are being called shall be set forth in an approved Budget.
3.2 Financing. The Company may obtain additional working
capital or other funds required for the business of the Company through
borrowings on the basis of its own credit rating from commercial banks or other
institutional lenders, subject to the Budget or the unanimous approval of the
Board of Managers as set forth in Section 2.9. Although the Members will not be
required to guarantee any such borrowings, the Members shall use good faith
efforts to assist the Company in obtaining such funds on the most favorable
commercial terms.
4. Allocations of Income and Loss. The Company's net taxable income and
loss shall be allocated among the Members as set forth in Schedule 4 hereto.
5. Officers, Principal Office and Independent Accountants.
5.1 Chairman and Corporate Officers.
(a) Except as otherwise provided herein, the officers
of the Company and the Russian LLC and the Chairman of the Board of Managers of
the Company shall be appointed and removed by New Valley. The initial Chairman
of the Board of Managers of the Company will be ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇. The officers
of the Company will be as follows:
President - ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇;
Vice President - ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇; and
Secretary - ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
The officers of Delaware LLC-2 shall be as follows:
President - ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇;
Vice President - ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇; and
Secretary - ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
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The officers of the Russian LLC shall be as follows:
General Director - ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, to be replaced by
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ as soon as practicable hereafter;
Deputy General Director - ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ (upon such replacement);
and
Deputy General Director - ▇▇▇▇ ▇. Grigorieva.
The Chairman of Delaware LLC-3 shall be ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇. The officers of
Delaware LLC-3 shall be:
President - ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇;
Chief Financial Officer - ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇; and
Secretary - ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
The General Director of ▇▇▇▇▇▇▇-▇▇▇▇▇ shall be ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
The General Director of LD Tobacco shall be ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
(b) Apollo shall have the right to approve (i)
replacements of any of the officers set forth in this Section 5.1; and (ii) the
appointment of any senior executive officer of an Affiliated Entity. Such
approval shall not be unreasonably withheld or delayed.
(c) Any officer of the Company or any Affiliated
Entity shall be subject to mandatory dismissal for fraud, bad faith, gross
negligence, criminal conviction or plea, and a final, non-appealable finding of
or consent to injunction with respect to violations of antifraud or
antimanipulative provisions of securities, commodities or banking laws by a
court of competent jurisdiction, unless retention is approved unanimously by the
Board of Managers as provided in Section 2.9.
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(d) Subject to Section 2.9(o) hereof, New Valley
shall be the tax matters partner for the Company.
5.2 Responsibilities of the President. The President of the
Company shall execute the decisions of the Board of Managers and have all
authority to conduct the day-to-day operations of the Company except as
otherwise provided herein.
5.3 Salaries to Employees.
(a) The parties agree that neither the Company nor
any Affiliated Entity shall pay any salaries to employees of Apollo or New
Valley, other than to the employees involved in day-to-day business operations
in Russia (the latter category including, among others, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ ,
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇).
(b) The salaries of the officers of the Company and
each Affiliated Entity shall be approved in the Budget or as determined from
time to time by the Board of Managers.
5.4 Independent Accountants. The independent certified public
accountants of the Company and each Affiliated Entity shall be a firm of
internationally recognized accountants selected by unanimous vote of the Board
of Managers as set forth in Section 2.9, and initially shall be Coopers &
▇▇▇▇▇▇▇ LLP.
6. Operation and Management of the Company.
6.1 Books and Records; Audited Financial Statements. Each of
the Members acknowledges and agrees that the Company and the Russian LLC shall
each be treated as a partnership of which the Members are partners for income
tax purposes, and further agrees to cooperate to achieve and maintain such
treatment. In this regard, an election will be filed with
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the U.S. Internal Revenue Service under Treasury Regulations Section 301.7701-3
on behalf of the Russian LLC to elect treatment of the Russian LLC as a
partnership for U.S. tax purposes, effective as of the date of its initial
formation. The Company's books of account shall be maintained on a basis
consistent with such treatment and on the same basis used in preparing the
Company's United States federal income tax return. The year-end balance sheet,
statement of operations and statement of change in financial position shall be
audited each year by the independent certified public accountants of the
Company, whose written report shall be provided to each of the Members no later
than 60 days after the end of each fiscal year.
6.2 Other Reports. In addition to annual audited financial
statements, each fiscal quarter the President shall prepare and distribute to
each Member of the Company a report providing for each Member its allocable
share of income, gain, loss, deduction and credit and such other general reports
as determined by the Members, which shall include unaudited quarterly financial
statements.
6.3 Access. Each of the Members, together with their lawful
agents, attorneys and representatives, shall have access to the books and
records and facilities and senior management of the Company during all normal
business hours.
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6.4 Business Plan and Budget. The Company shall provide to
each of the Members a proposed annual Budget, which shall include information
with respect to the operation of the business to be conducted by each Affiliated
Entity for each fiscal year, at least thirty (30) days before the beginning of
such fiscal year. Such Budget shall include estimates of anticipated capital
calls. The initial Budget of the Company, for the year 1998, is annexed hereto
as Schedule 6.4. The Members of the Company shall approve the Budget as provided
in Section 2.9 hereof. The day-to-day operations of the Company and each
Affiliated Entity shall be conducted by the officers of the Company within 10%
variances from the Budget agreed upon by the Members. The Budget shall be
designed to ensure that the Company shall at all times qualify as a "real estate
operating company" under the provisions of ERISA.
6.5 Limitations on Activities.
(a) Except as provided by the Board of Managers or as
contemplated in the approved Budget or the Participating Loan Agreement, (i) no
part of ▇▇▇▇▇ Place II, ▇▇▇▇▇ Place III, the New Factory or any other Property
shall be used as collateral for the purpose of any development other than its
own development and (ii) no sale, refinancing or other capital proceeds from
▇▇▇▇▇ Place II, ▇▇▇▇▇ Place III, the New Factory or any other Property may be
used other than for budgeted capital expenditures involving the same property
that generated such proceeds.
(b) For ERISA purposes only, the Company shall
maintain its status as a "real estate operating company" at all times. If Apollo
or its counsel shall reasonably determine at any time that the Company may not
qualify for such status, Apollo and the New Valley Parties shall reorganize the
corporate structure of the Company and its Affiliates or take such other
necessary action in order to permit the Company to so qualify, unless the reason
that
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the Company may not qualify as a "real estate operating company" is due to a
breach by Apollo of the provisions of this Agreement or actions of Apollo
unrelated to the assets or business of the Company or any of its Affiliates, in
which case Apollo and the New Valley Parties shall be required to use only
reasonable efforts to reorganize the corporate structure of the Company and its
Affiliates or take such other reasonably necessary action in order to permit the
Company to so qualify, giving due consideration to the relative economic and tax
benefits anticipated by the parties to this Agreement.
(c) The Members agree that, after the execution of
this Agreement, a new entity may be formed by Delaware LLC-2 and the Assets
relating to ▇▇▇▇▇ Place III may be transferred thereto, provided, however, that
BrookeMil shall contribute the Assets relating to ▇▇▇▇▇ Place III to the Russian
LLC as set forth in Section 2.4(e)(ii) hereof, unless the Members agree that
such new entity shall be formed prior to such transfer and that BrookeMil should
make its contribution directly to such new entity.
7. Establishment of Delaware LLC-2 and the Russian LLC.
7.1 Establishment of Delaware LLC-2.
(a) The parties acknowledge that Delaware LLC-2 was
formed on October 27, 1997 and that the Certificate of Formation of Delaware
LLC-2 is currently in the form the English translation of which is annexed
hereto as Schedule 7.1(a).
(b) The Limited Liability Company Agreement with
respect to
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Delaware LLC-2 shall be substantially in the form annexed hereto as Schedule
7.1(b).
7.2 Establishment of the Russian LLC. The parties acknowledge
that the Russian LLC has been established on December 15, 1997, that the
Certificate of Registration of the Russian LLC is annexed hereto as Schedule
7.2. The Members shall cause the Company to use all best efforts to obtain all
registrations, listings and filings and take all other actions required for its
operation under Russian law. Notwithstanding anything in this Agreement to the
contrary, no additional approval of the Board of Managers or any Member shall be
required for BrookeMil, the Russian LLC or the Company to complete the
transactions contemplated by Section 2.4(e), Sections 11.1 and 11.2 and this
Section 7.
8. Operation and Management of Affiliated Entities.
8.1 Management of Affiliated Entities. In addition to
management rights with respect to the Company as set forth in this Agreement,
Apollo shall have the following management rights with respect to each
Affiliated Entity:
(a) Apollo shall have the right to be kept informed,
consult with and advise management of each Affiliated Entity with regard to any
material developments in or affecting each Affiliated Entity's business; to
discuss business operations, properties and the financial or other condition of
each Affiliated Entity with its officers, employees and any relevant management
committee; to consult with and advise management on significant business issues;
and to meet regularly with management for such consultation and advice; and
(b) Apollo shall have the right to appoint one (1)
member of the management committee or board of directors, as applicable, of each
Affiliated Entity and shall have the right to dismiss and replace such member at
any time.
8.2 Books and Records; Audited Financial Statements. The
Company shall
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cause each Affiliated Entity, in addition to maintaining its books and accounts
in accordance with the law of the applicable jurisdiction, to prepare its
financial statements in accordance with U.S. generally accepted accounting
principles, consistently applied. The year-end balance sheet, statement of
operations and statement of change in financial position shall be audited each
year by Coopers & ▇▇▇▇▇▇▇ LLP or another firm of independent certified public
accountants selected in accordance with Section 5.4 hereof, and the Company
shall provide the written report of such accountants to each of the Members. The
Company shall cause each Affiliated Entity to prepare all tax returns as soon as
practicable after the end of each fiscal year and, in any event, shall supply
the Members with reasonable estimates of the taxable income of each Affiliated
Entity within forty-five (45) days of the end of each fiscal year.
8.3 Access. The Company shall ensure that each of the Members,
at the cost of such Member, together with their lawful agents, attorneys and
representatives, shall have access to the books and records, facilities and
senior management of each Affiliated Entity during all normal business hours.
Apollo shall have access in Moscow, Russia and Miami, Florida to the books and
records of each Affiliated Entity.
9. Restrictions on Transfers of Interests.
9.1 Limitations on Members' Right to Sell Interests. Except as
contemplated by Section 2.10, Section 9.2 and Section 9.4, each of the Members
agrees not to transfer all or any of its Interests in the Company, and each
Member shall hold its Interests and, by accepting the same upon original issue,
upon distributions or upon subsequent transfer, agrees for itself, its
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successors, legal representatives and assigns that the Interests shall not be
sold, transferred, assigned, pledged, hypothecated or otherwise encumbered,
whether voluntarily or involuntarily, by operation of law, legal proceedings or
otherwise, other than as provided in this Section 9 or in Section 2.10. In the
event an involuntary lien or encumbrance is placed on the Interests, the
affected Member shall not be in violation of this provision if it discharges or
causes to be discharged such lien or encumbrance within a period of sixty (60)
days from the placement or occurrence thereof.
9.2 Transfers to Affiliates. Any Member may transfer its
Interests in the Company to an Affiliate, except where prohibited by applicable
laws or where in the reasonable judgment of any other Member such transfer would
have a material adverse effect on the business of the Company or such other
Member. Any Member wishing to transfer its Interests to an Affiliate under this
Section 9.2 shall first notify the other Members in writing of such proposed
transfer. Each such other Member shall make its determination as to whether such
transfer would have a material adverse effect on the business of the Company or
such other Member within ten (10) days of receiving such notice and shall notify
such first Member in writing of its determination. It is a condition of any such
transfer that the transferee become a signatory to this Agreement and agree to
perform all of the obligations of the transferor hereunder.
9.3 Change in Control. In the event of a change in control of
a Member, such Member thereupon shall cease to have any voting rights, and the
remaining Members shall have the right to purchase, or to cause the Company to
purchase, such first Member's Interests at a price equal to the Adjusted
Realized Equity Value of such Interests, which right may be exercised by the
remaining Members for a period of sixty (60) days after such event constituting
a change in control. For purposes of this Agreement, a change in control shall
be deemed to occur when a
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person or entity that was not, at the time of the Initial Closing, an Affiliate
of a Member becomes the beneficial owner, directly or indirectly, of securities
or ownership interests representing 40% or more of the combined voting power of
all outstanding securities or ownership interests of such Member. A change of
control shall not be deemed to occur due to a reconfiguration of the ownership
or changes of the ownership of the limited partnership interests of Apollo or
any of the New Valley Parties, as the case may be, provided that Apollo Real
Estate Management III, L.P. or its Affiliates remain the owners, directly or
indirectly, of the Interests previously owned by Apollo, or Brooke Group Ltd.,
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ or their Affiliates remain the owners, directly or indirectly,
of the Interests previously owned by the New Valley Parties, respectively.
9.4 Dissolution of a Member. In the event of the bankruptcy,
reorganization, liquidation, winding-up or dissolution of a Member (the
"Dissolving Member"), the Dissolving Member shall notify the other Members in
writing within five (5) days of such event. The Interests owned by the
Dissolving Member shall first be offered for purchase by the other Members
within ninety (90) days of the date of such notice for the then existing
Adjusted Realized Equity Value of such Interests. In the event that such other
Members decline to purchase such additional Interests, such unpurchased
Interests may be offered by the Company to third parties for purchase on terms
and conditions to be determined by the Members, and the Dissolving Member shall
sell its Interests in accordance with the provisions of this Section 9.4.
9.5 Termination of the Provisions Restricting the Sale of
Interests. The provisions restricting the sale of Interests contained in this
Section 9 shall automatically terminate upon the happening of any of the
following events:
(a) the adjudication of the Company as a bankrupt,
the execution by the Company of an assignment for
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the benefit of creditors, or the appointment of a receiver for all or
substantially all of its properties; or
(b) the voluntary or involuntary dissolution of the
Company.
10. Representations and Warranties.
10.1 The Company. The Company represents and warrants as
follows:
(a) The Company is a limited liability company duly
formed under the laws of the State of Delaware, with full power and authority to
enter into this Agreement and to consummate the transactions contemplated
herein.
(b) The execution and delivery by the Company of this
Agreement and the consummation by it of the transactions contemplated herein
will not violate its constituent documents, any law or any contract to which the
Company is a party, and no approval, authorization, consent, or order or filing
with, any third party, court, administrative agency or other governmental
authority is required for the execution and delivery by the Company of this
Agreement or any other agreements to be entered into by the parties hereto in
accordance with this Agreement, including but not limited to the Participating
Loan Agreement and all agreements and documents relating to the asset transfers
contemplated by this Agreement, or the consummation by it of the transactions
contemplated herein.
(c) This Agreement is the legal, valid and binding
obligation of the Company enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization and similar laws of general application
affecting the rights and remedies of creditors.
(d) There exists no litigation pending or threatened
in writing (or any basis therefor) against the Company that (i) might adversely
affect the operations, business or business prospects of the Company, (ii) might
impede, delay or adversely affect the transactions
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contemplated by this Agreement, or (iii) has not been disclosed to Apollo. There
are no valid, effective and enforceable orders, injunctions or decrees of any
court or arbitral body with respect to the Company that might adversely affect
the operations, business or business prospects of the Company.
10.2 Members. Each Member represents and warrants as follows:
(a) The Member is a corporation or a partnership, as
the case may be, duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation or establishment, as the case may be,
with full power and authority to enter into this Agreement and to consummate the
transactions contemplated herein.
(b) The execution and delivery by the Member of this
Agreement and the consummation by it of the transactions contemplated herein
have been authorized by the board of directors of the Member or other management
authority of the Member and will not violate its constituent documents, any law
or any contract to which the Member is a party, and no approval, authorization,
consent or order of, or filing with, any third party, court, administrative
agency, or governmental authority is required for the execution and delivery by
the Member of this Agreement or the consummation by it of the transactions
contemplated herein (except as may be required for BrookeMil to consummate the
transactions contemplated herein).
(c) This Agreement is the legal, valid and binding
obligation of the Member enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization and similar laws of general application
affecting the rights and remedies of creditors.
(d) The Member is acquiring the Interests of the
Company for investment purposes for its own account and not with a view to any
distribution of the same, and
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shall not dispose of any of the Interests except in compliance with applicable
securities laws and the terms of this Agreement. The Member acknowledges that
the Interests have not been registered under the securities laws or regulations
of any jurisdiction and that the Interests may not be sold on a public market
without proper registration. The Member is sophisticated in making investments
and represents that it has the knowledge and experience to evaluate its
investment in the Interests and is not relying on any representation or warranty
made by the Company or any of its representatives or agents.
(e) The individual signing this Agreement on behalf
of the Member is a duly authorized officer or representative of the Member and
is empowered to execute this Agreement on behalf of the Member.
(f) No agent, broker, investment banker, person or
firm acting on behalf of the Member or under the authority of the Member is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee from any of the parties hereto in connection with the transactions
contemplated hereby.
10.3 Additional Representations by the New Valley Parties. In
addition to the representations made by the New Valley Parties in Section 10.2
above, each of the New Valley Parties represents and warrants as follows:
(a) BrookeMil has transferred its ownership of the
building and the leasehold rights to the land plot located at ▇▇▇▇▇ Place II to
the Russian LLC. The Russian LLC is the owner of the buildings and is the lessee
of the land plot located at ▇▇▇▇▇ Place II and is entitled to dispose of such
rights at its own discretion, subject to compliance with the terms of the Land
Lease Agreement, dated July 1, 1997, between the Government of the City of
Moscow, as landlord, and BrookeMil, as tenant, demising the land at ▇▇▇▇▇ Place
II, as amended to date and
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assigned to the Russian LLC (the "▇▇▇▇▇ II Land Lease"), and applicable law, and
there are no encumbrances on, or rights of third parties to, ▇▇▇▇▇ Place II
other than the Assumed Liabilities.
(b) BrookeMil is the owner of the buildings and is
the lessee of the land plot located at ▇▇▇▇▇ Place III and is entitled to
dispose of such rights at its own discretion, subject to compliance with the
terms of the Land Lease Agreement, dated October 30, 1992, between the
Government of the City of Moscow, as landlord, and BrookeMil, as tenant,
demising the land at ▇▇▇▇▇ Place III, as amended to date (the "▇▇▇▇▇ III Land
Lease"), and applicable law, and there are no encumbrances on, or rights of
third parties to, ▇▇▇▇▇ Place III other than the Assumed Liabilities.
(c) LD Tobacco is the owner of the buildings and is
the lessee of the land plot located at the site of the New Factory and, upon
purchase of the land lease rights, will be entitled to dispose of such rights at
its own discretion, subject to compliance with the terms of the Land Lease
Agreement, dated March 27, 1996, between the Government of the City of Moscow,
as landlord, and LD Tobacco, as tenant, demising the land at the site of the New
Factory, as amended to date (the "New Factory Land Lease") and applicable law,
and there are no encumbrances on, or rights of third parties to, the New
Factory.
(d) BrookeMil is the current tenant under the ▇▇▇▇▇
III Land Lease. LD Tobacco is the current tenant under the New Factory Land
Lease. (The ▇▇▇▇▇ III Land Lease and New Factory Land Lease, including all
amendments, protocols and other documents and agreements relating thereto, are
herein occasionally referred to collectively as the "Land Leases").
(e) (i) The New Valley Parties have provided to
Apollo access to complete and correct copies of all amendments, protocols and
other documents and agreements
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relating to the Land Leases; (ii) each of the Land Leases has been duly
authorized, executed and delivered by the tenant and is the legal, valid and
binding agreement of the tenant thereunder, and, to the knowledge of the New
Valley Parties, of the landlord thereunder, enforceable in accordance with its
terms; (iii) each of the Land Leases is in full force and effect without default
by either the tenant or, to the knowledge of the New Valley Parties, the
landlord thereunder, and, to the knowledge of the New Valley Parties, no
condition exists and no event has occurred that would result in, either after
notice thereof or a lapse of time or both, a breach, termination or default
under any of the Land Leases; (iv) the tenant under each Land Lease is current
in the payment of all rent and other amounts due and has fulfilled all other
obligations under the terms of such leases as of the date hereof; (v) except in
connection with the Assumed Liabilities and the Use Agreement, dated as of
January 31, 1997, between BrookeMil and ▇▇▇▇▇▇▇-▇▇▇▇▇, neither BrookeMil nor LD
Tobacco has subleased, assigned or pledged any of its interests in the Land
Leases; and (vi) to the knowledge of the New Valley Parties, each of the Land
Leases covers the entire estate that it purports to cover, and upon consummation
of the transactions contemplated by this Agreement, the Russian LLC will
continue to be entitled to the use, occupancy and possession of the real
property as contemplated herein.
(f) Each of ▇▇▇▇▇▇▇-▇▇▇▇▇ and LD Tobacco was duly
incorporated as a closed joint stock company and is validly existing as a legal
entity registered under the laws of the Russian Federation as of August 5, 1993,
and December 29, 1995, respectively; the Russian LLC has been duly incorporated
as a limited liability company and is validly existing as a legal entity
registered under the laws of the Russian Federation; and each of ▇▇▇▇▇▇▇-▇▇▇▇▇,
▇▇ Tobacco and the Russian LLC has full power and authority required to carry on
its business as it is currently being conducted and/or as described in the
business plans, and to own, lease and operate its properties.
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(g) All of the outstanding shares of capital stock of
each of ▇▇▇▇▇▇▇-▇▇▇▇▇ and LD Tobacco (i) have been duly authorized and validly
issued and are fully paid; (ii) are not subject to any preemptive or similar
rights granted by ▇▇▇▇▇▇▇-▇▇▇▇▇ or LD Tobacco, respectively (except as may be
established in Russian law and/or set forth in the respective charters of
▇▇▇▇▇▇▇- ▇▇▇▇▇ and LD Tobacco), and were properly registered with the
appropriate authorities competent for registration of the issuance of such
shares and to the extent owned by Brooke (Overseas) and ▇▇▇▇▇▇▇-▇▇▇▇▇,
respectively, are free and clear of any security interest, claim, lien, or
encumbrance of any nature, except with respect to those shares pledged by Brooke
(Overseas) to Belgrave Limited and ▇▇▇▇▇▇▇▇ Tumentsev to secure the payment
obligations of Brooke (Overseas) for 6.8% of the outstanding shares of
▇▇▇▇▇▇▇-▇▇▇▇▇; (iii) Brooke (Overseas) has transferred 95.8% of the outstanding
shares of ▇▇▇▇▇▇▇-▇▇▇▇▇ to Delaware LLC-3; (iv) ▇▇▇▇▇▇▇-▇▇▇▇▇ owns 100% of the
outstanding shares of LD Tobacco; and (v) there is no existing option, warrant,
call, right, commitment or other agreement of any character to which
▇▇▇▇▇▇▇-▇▇▇▇▇ is a party requiring, and there are no securities of ▇▇▇▇▇▇▇-▇▇▇▇▇
outstanding which upon conversion, exercise or exchange would require, the
issuance, sale or transfer of any additional shares of capital stock or other
securities of ▇▇▇▇▇▇▇-▇▇▇▇▇ to its employees or any other person.
(h) Neither ▇▇▇▇▇▇▇-▇▇▇▇▇ nor LD Tobacco is in
violation of its respective charter.
(i) (i) Each of BrookeMil and each Affiliated Entity
has such licenses, permits and approvals as are necessary to conduct its
respective business as described to Apollo, except where the failure to have
such license, permit or approval would not have a material adverse effect on
such entity; (ii) each of BrookeMil and each Affiliated Entity has fulfilled and
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performed all of its obligations with respect to such licenses, permits and
approvals except any obligation which the failure to fulfill or perform would
not have a material adverse effect on such Affiliated Entity; and (iii) no event
has occurred which allows, or after notice or lapse of time would allow,
revocation or termination thereof or results, or after notice or lapse of time
would result, in any other material impairment of the rights of the holder of
such license, permit or approval.
(j) Subject to Schedule 10.3(l), there exists no
litigation pending or, to the knowledge of the New Valley Parties, threatened in
writing (or any basis therefor) against BrookeMil, the Affiliated Entities, any
of their ventures, Assets and/or Properties that might (i) detrimentally affect
the ownership, value, use or operation of the Assets and/or Properties for their
intended purposes; (ii) adversely affect the operations, business or business
prospects of BrookeMil or any Affiliated Entity; or (iii) impede, delay or
adversely affect the transactions contemplated by this Agreement. There are no
valid, effective and enforceable orders, injunctions or decrees of any court or
arbitral body with respect to BrookeMil, the Affiliated Entities, any of their
ventures, Assets and/or Properties that might (x) detrimentally affect the
value, use, ownership or operation of the Assets and/or Properties for their
intended purposes; (y) adversely affect the operations, business or business
prospects of BrookeMil or any Affiliated Entity; or (z) impede, delay or
adversely affect the transactions contemplated by this Agreement. To the
knowledge of the New Valley Parties, there are no material impediments to
BrookeMil obtaining all necessary approvals for BrookeMil's planned development
of ▇▇▇▇▇ Place III. Neither BrookeMil nor any of the Affiliated Entities or
their ventures has filed, nor been the subject of any filing of, a petition
under bankruptcy laws, insolvency laws, laws for the composition of
indebtedness, or laws for the reorganization of debtors.
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(k) There are no material physical or mechanical
defects with respect to the buildings (other than the existing cigarette factory
at Ul. Gasheka 6) and/or the other improvements comprising the Assets and/or
Properties (including, but not limited to, the structural and load-bearing
components, the roofs and the plumbing, heating, ventilation, air conditioning,
electrical and life safety systems of the improvements) or to the knowledge of
the New Valley Parties, the land, and all of such items (to the extent installed
or constructed on the date hereof, with respect to the building at ▇▇▇▇▇ Place
II) are in good operating condition and repair and in compliance in all material
respects with all applicable laws and zoning requirements. To the knowledge of
the New Valley Parties, ▇▇▇▇▇ Place II and ▇▇▇▇▇ Place III will have access, on
the basis generally provided to businesses in the City of Moscow, to available
water, sewer and power utilities. BrookeMil has not received, and has no
knowledge of, any notice or request from any governmental agency requesting or
requiring the performance of any work or alteration in respect of the land, the
buildings (other than the Old Factory) and/or the other improvements comprising
the Assets and/or Properties.
(l) The Schedule of Leases with respect to ▇▇▇▇▇
Place II annexed hereto as Schedule 10.3(l) (the "▇▇▇▇▇ II Leases") is complete
and correct in all respects. The ▇▇▇▇▇ II Leases have been duly authorized,
executed and delivered by the landlord, are the legal, valid and binding
agreements of the landlord thereunder enforceable in accordance with their terms
and are in full force and effect, as assigned by BrookeMil to the Russian LLC,
subject to Schedule 10.3(l). Other than as part of the Assumed Liabilities,
there are no free rent allowances, prepaid rents or other prepaid charges. The
▇▇▇▇▇ II Leases are bona-fide in all respects, and were entered into by
BrookeMil and the respective tenants thereunder on an arm's-length basis and in
the ordinary course of BrookeMil's business. Subject to Schedule 10.3(l),
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there is no default by BrookeMil under the terms of any of the ▇▇▇▇▇ II Leases
(including, but not limited to, any such default that has or might give rise to
any offset, defense, claim, or counterclaim to the payment of the rents and/or
other charges payable by the tenant thereunder), nor, to the knowledge of the
New Valley Parties, are there any material defaults by the tenants thereunder;
and, to the knowledge of the New Valley Parties, no condition exists and no
event has occurred that would result in, either after notice thereof or a lapse
of time or both, a breach, termination or default under any of the ▇▇▇▇▇ II
Leases. All the ▇▇▇▇▇ II Leases have been assigned by BrookeMil to the Russian
LLC, and the Russian LLC continues to be entitled to all of the rights and
privileges to which BrookeMil was previously entitled under such ▇▇▇▇▇ II
Leases. Subject to Schedule 10.3(l), none of the ▇▇▇▇▇ II Leases nor the rents
payable thereunder have been subleased, assigned or pledged. All tenants are
current with their rent obligations.
(m) To the knowledge of the New Valley Parties, the
business of BrookeMil and the Affiliated Entities is not being, nor has it in
the past been, conducted in violation of any law or any governmental order
applicable to BrookeMil or any of its assets or properties, including, without
limitation, the Foreign Corrupt Practices Act of 1977, as amended, except for
possible violations which individually or in the aggregate would not have a
material adverse effect on BrookeMil, the Company or the Affiliated Entities. To
the knowledge of the New Valley Parties, BrookeMil, the Company and the
Affiliated Entities are in compliance with all applicable environmental laws and
have not received any communication from any governmental authority that alleges
that BrookeMil, the Company or the Affiliated Entities are not in compliance
with applicable environmental laws where such noncompliance would have a
material adverse effect on BrookeMil or the Affiliated Entities.
(n) All material tax returns and reports required to
be filed by
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BrookeMil prior to the date hereof or with respect to taxable periods ending
prior to the date hereof have been or will be filed with the appropriate
governmental authorities prior to the date hereof or by the due date thereof
including extensions. Such tax returns and reports correctly reflect (and as to
returns not filed as of the date hereof, will correctly reflect) all material
tax liabilities of BrookeMil required to be shown thereon. To the knowledge of
the New Valley Parties, all material tax returns and reports required to be
filed by the Affiliated Entities prior to the date hereof or with respect to
taxable periods ending prior to the date hereof have been or will be filed with
the appropriate governmental authorities prior to the date hereof or by the due
date thereof including extensions. Such tax returns and reports correctly
reflect (and as to returns not filed as of the date hereof, will correctly
reflect) all material tax liabilities of the respective Affiliated Entities
required to be shown thereon. To the knowledge of the New Valley Parties, there
are no pending tax investigations or outside audits of BrookeMil or of any
Affiliated Entity being conducted and, except as set forth in Schedule 10.3(n),
neither BrookeMil nor any Affiliated Entity has any outstanding tax penalties
against it. BrookeMil shall remain liable for the payment of profits taxes due
to the conduct of BrookeMil's business for the periods prior to the Initial
Closing Date.
(o) The New Valley Parties have identified to Apollo
and have provided to Apollo complete and correct copies of all material
employment agreements or employee benefit plans covering present and former
employees of BrookeMil or their beneficiaries.
(p) A schedule of the material contracts of BrookeMil
and the status of each is annexed hereto as Schedule 10.3(p) (the "Material
Contracts"). (i) The Material Contracts have been duly authorized, executed and
delivered by the New Valley Parties party
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thereto and are legal, valid and binding agreements of the New Valley Parties
party thereto enforceable against such New Valley Parties in accordance with
their respective terms; (ii) BrookeMil has fully performed all obligations
required to be performed under each of the Material Contracts including but not
limited to the payment of all amounts due and owing thereunder; (iii) neither
BrookeMil nor, to the knowledge of the New Valley Parties, any other party is in
default under any of the Material Contracts; and (iv) to the knowledge of the
New Valley Parties, no condition exists and no event has occurred that would
result in, either after notice of or lapse of time or both, in a breach,
termination or default under any of the Material Contracts. BrookeMil has not
assigned any of its interests in the Material Contracts, and upon consummation
of the transactions contemplated herein, the Russian LLC will continue to be
entitled to the rights and privileges to which BrookeMil was previously
entitled.
(q) The unaudited financial statements of BrookeMil
and the audited financial statements of ▇▇▇▇▇▇▇-▇▇▇▇▇ Ltd. for the years ended
December 31, 1995 and 1996 furnished to Apollo have been prepared in accordance
with U.S. generally accepted accounting principles consistently applied and
fairly present the matters set forth therein.
(r) A schedule of all material related party
obligations relating to the Company and its Affiliates that will be outstanding
as of the date of the Initial Closing is annexed hereto as Schedule 10.3(r).
(s) That certain Use Agreement, dated as of January
31, 1997, between BrookeMil and ▇▇▇▇▇▇▇-▇▇▇▇▇, is in full force and effect.
(t) ▇▇▇▇▇▇▇-▇▇▇▇▇ has all necessary authority and
approvals to operate the Old Factory.
(u) The previously existing intercompany loan from
Brooke (Overseas) to ▇▇▇▇▇▇▇-▇▇▇▇▇ has been cancelled.
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10.4 Additional Representations by Apollo. In addition to the
representations made by Apollo in Section 10.2 above, Apollo represents and
warrants that the purchase of the Interests does not violate any provisions of
ERISA and that the contemplated Participating Loan does not violate the
provisions of ERISA.
11. Covenants of the New Valley Parties.
11.1 Contribution of ▇▇▇▇▇ Place II to the Russian LLC.
BrookeMil has contributed the Assets and Assumed Liabilities related to ▇▇▇▇▇
Place II to the Russian LLC.
11.2 Contribution of ▇▇▇▇▇ Place III to the Russian LLC. As
soon as practicable following the purchase of all the buildings and land lease
rights at ▇▇▇▇▇ Place III, BrookeMil shall contribute the Assets and Assumed
Liabilities related to ▇▇▇▇▇ Place III to the Russian LLC.
11.3 Beneficial Ownership. Except for a one percent (1%)
interest to be retained indirectly by BrookeMil through BrookeMil's ownership in
the Russian LLC, as of the Initial Closing, and until the legal title to the
Assets shall have been transferred to the Russian LLC and a 99% interest in the
Russian LLC is owned by Delaware LLC-2, the Assets shall be beneficially owned
by the Company and, as such, the Company shall be entitled to participate in the
earnings, appreciation in value and management of the Assets, and BrookeMil
hereby designates the Company as attorney-in-fact and agent for BrookeMil, to
act, in the name of BrookeMil or otherwise, as may be deemed appropriate by the
Board of Managers of the Company, in order to obtain for the Company the
economic benefits derived from the ownership of such property, asset, contract,
lease or other instrument, document or agreement constituting the Assets, and,
as evidence thereof, BrookeMil shall execute a power of attorney in favor of the
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Company substantially in the form annexed hereto as Exhibit 4. Notwithstanding
the foregoing, any property or asset of BrookeMil constituting an Asset and any
contract, lease or other instrument, document or agreement to be assigned or
otherwise transferred to the Russian LLC hereunder, the assignment or other
transfer, or the attempted assignment or other transfer of which would be
invalid or ineffective, unless the consent or approval of another person or
entity to such assignment or other transfer shall have first been obtained,
shall not be assigned or otherwise transferred under this Agreement, and the
provisions of this Agreement shall not constitute an attempt to assign or
transfer, unless and until such consents or approvals shall have been obtained.
12. Closings. Subject to the terms and conditions set forth in Section
2.4 hereof, the closings (each, a "Closing," the date of a Closing being
referred to herein as a "Closing Date") of the transactions contemplated herein
shall occur as follows:
12.1 Date, Time and Place of Initial Closing. The closing of
the transactions contemplated in Section 2.4(b) hereof (the "Initial Closing")
took place on February 26, 1998 at 10:00 a.m. at the offices of Coudert
Brothers, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇ (the date and time of
the Initial Closing being referred to herein as the "Initial Closing Date").
12.2 Conditions to Obligations of the New Valley Parties. The
obligations of the New Valley Parties hereunder are subject to the fulfillment,
prior to or at any Closing, of each of the following conditions:
(a) All authorizations, consents, orders and
approvals of regulatory authorities and third parties, if any, necessary for the
performance by the Company, Apollo and the New Valley Parties of this Agreement
shall have been obtained.
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(b) The representations and warranties of Apollo
contained in this Agreement shall be true and correct in all material respects
at the date hereof and at and as of such Closing, with the same force and effect
as if made at and as of such Closing Date (except that representations and
warranties that by their terms speak as of such Closing Date shall be true and
correct as of such date); and Apollo shall have performed or complied in all
material respects with all agreements and covenants required by this Agreement
to be performed or complied with by it on or prior to such Closing.
(c) No action shall have been commenced in a court of
competent jurisdiction or by or before any governmental authority against any of
the Company, Apollo or the New Valley Parties seeking to prohibit the
transactions contemplated by this Agreement.
12.3 Conditions to Obligations of Apollo. The obligations of
Apollo hereunder are subject to the fulfillment, prior to or at any Closing, of
each of the following conditions:
(a) Except as set forth in Section 10.2(b), all
authorizations, consents, orders and approvals of regulatory authorities and
third parties, if any, necessary for the performance by the Company and the New
Valley Parties of their obligations under this Agreement shall have been
obtained.
(b) The representations and warranties of the New
Valley Parties contained in this Agreement shall be true and correct in all
material respects at the date hereof and at and as of such Closing, with the
same force and effect as if made at and as of such Closing Date (except that
representations and warranties that by their terms speak as of such Closing Date
shall be true and correct as of such date); and the New Valley Parties shall
have performed or complied in all material respects with all agreements and
covenants required by this Agreement to be performed or complied with by them on
or prior to such Closing.
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(c) No action shall have been commenced in a court of
competent jurisdiction or by or before any governmental authority against either
the Company, Apollo or any of the New Valley Parties seeking to prohibit the
transactions contemplated by this Agreement.
(d) There shall not have been any material adverse
change in the financial condition of the New Valley Parties since the date
hereof.
(e) There shall not have occurred an event or events
that has or have a material adverse effect on the operations of ▇▇▇▇▇ Place II
or the New Factory or the ability of any Member to perform its obligations with
respect to such Closing.
(f) Expenditures for the New Factory and ▇▇▇▇▇ Place
III are within a 10% variance from the Budget.
12.4 Additional Conditions to Obligations of Apollo Satisfied
at Initial Closing.
(a) Apollo received a legal opinion from Coudert
Brothers, special New York counsel to New Valley, in form and substance
reasonably satisfactory to it, with respect to the due organization and good
standing of New Valley, the due execution of this Agreement and the Pledge
Agreement by New Valley, the organization of the Company, and such other matters
as have been reasonably requested by it.
(b) Apollo's counsel received a legal opinion from
Coudert Brothers, special New York counsel to New Valley, with respect to the
beneficial ownership of the Assets by the Company pending their transfer to the
Russian LLC.
(c) The Company issued the Promissory Note.
(d) New Valley pledged 99.1% of the outstanding
shares of BrookeMil to Apollo as security for the Apollo Loan under the Pledge
Agreement.
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(e) The Company, Delaware LLC-3 and Brooke (Overseas)
entered into the Western Tobacco Investments LLC Limited Liability Company
Agreement on terms unanimously approved by the Members.
12.5 Funding and Advance of Apollo Loan at Initial Closing. At
the Initial Closing, (i) each of Apollo and the New Valley Parties funded their
initial contributions to the Company as set forth in Section 2.4(b), and (ii)
Apollo advanced the Apollo Loan to the Company.
12.6 Date, Time and Place of Initial Subsequent Closing. The
closing of the transactions set forth in Section 2.4(c) hereof (the "Initial
Subsequent Closing") shall take place on April 28, 1998 at the offices of
Coudert Brothers, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, or on such
other date and time and at such other place as shall be mutually agreed by the
parties hereto (the date and time of the Initial Subsequent Closing being
referred to herein as the "Initial Subsequent Closing Date").
12.7 Transactions at Initial Subsequent Closing. Upon the
satisfaction and/or waiver of the conditions to the Initial Subsequent Closing,
(a) the Apollo Loan shall be converted into Class A Interests as set forth in
Section 2.4(c); (b) the Promissory Note shall be cancelled; (c) the Pledge
Agreement shall be terminated; and (d) the parties shall make additional capital
contributions and shall be issued additional Interests as set forth in Section
2.4(c).
12.8 Additional Conditions to Obligations of Apollo at Initial
Subsequent Closing.
(a) The Russian LLC shall have received a certificate
of ownership of ▇▇▇▇▇ Place II building from the Moscow Property Management
Committee (or the state authorities that shall have assumed its functions with
respect to issuing such certificates or
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equivalent documents) and shall have entered into a land lease agreement with
the Moscow Land Committee (or the state authorities that shall have assumed its
functions with respect to entering into such land lease agreements) with respect
to land at ▇▇▇▇▇ Place II on essentially the same terms as the Land Lease
Agreement, dated July 1, 1997, between the Government of the City of Moscow, as
landlord, and BrookeMil, as tenant, demising the land at ▇▇▇▇▇ Place II.
(b) BrookeMil shall have entered into an agreement
with the Company to transfer to the Company or an entity designated by it all of
BrookeMil's interest in the Russian LLC, except for such part of its interest
that shall be redeemed by the Russian LLC in accordance with an agreement
between the Russian LLC and BrookeMil entered into before the Initial Subsequent
Closing or simultaneously with it, and less a 1% interest.
(c) The conditions set forth in Section 95.8 (h) and
(i) of the Participating Loan Agreement, as in effect on the date hereof, have
been satisfied, unless otherwise agreed by the parties to the Participating Loan
Agreement.
12.9 Second Subsequent Closing. The second Subsequent Closing
(the "Second Subsequent Closing") shall take place on May 6, 1998. At the Second
Subsequent Closing, Apollo shall contribute to the Company $7,900,000 in cash in
exchange for 200 Class A Interests to be issued to Apollo and New Valley shall
contribute $1,975,000 in expenditures as set forth in Section 2.4(d) in exchange
for 200 Class B Interests to be issued to New Valley. At the Second Subsequent
Closing, to the extent the sum of the amount of expenditures of the New Valley
Parties with respect to ▇▇▇▇▇ Place II and ▇▇▇▇▇ Place III incurred since March
1, 1997 and set forth in Schedule 2.4(d)
and of expenditures incurred by them after the Initial Closing Date on items set
forth in the approved Budget exceeds $10,000,000, the New Valley Parties shall
be reimbursed by the Company from the proceeds of the Initial Subsequent Closing
for such
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expenditures in excess of $10,000,000 (to the extent the New Valley Parties
provide to Apollo proper documentation substantiating such expenditures).
12.10 Subsequent Closings. Upon written notice by the Board of
Managers to each of Apollo and New Valley as set forth in Section 2.4(d) hereof,
other subsequent closings (the "Other Subsequent Closings"; the Initial
Subsequent Closing, the Second Subsequent Closing and the Other Subsequent
Closings are collectively referred to herein as the "Subsequent Closings") shall
be scheduled for purposes of funding additional contributions by each of Apollo
and New Valley to the Company. At each of the Other Subsequent Closings, Apollo
and New Valley shall fund additional contributions to the Company as set forth
in Section 2.4 on the dates and in the amounts set forth in the written notice
by the Board of Managers.
13. Notices and Account Information for Distributions.
13.1 Notices. All notices required to be given hereunder shall
be in writing and shall be deemed to have been properly given if sent by
registered or certified mail, postage prepaid, or by telecopy, addressed as
follows:
(a) If to the Company:
Western Realty Development LLC
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
(b) If to Apollo:
Apollo Real Estate
Investment Fund III, L.P.
c/o Apollo Real Estate Management III, L.P.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
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Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Copy to:
Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
(c) If to New Valley:
New Valley Corporation
▇▇▇ ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Copy to:
Coudert Brothers
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
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(d) If to BrookeMil:
BrookeMil Ltd.
P.O. Box 219
Fifth Floor
Butterfield House
▇▇▇▇▇▇ Town, Grand Cayman, B.W.I.
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Chairman
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Copy to:
Coudert Brothers
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Such notices shall be deemed to have been received five (5) days after deposit
in the mail or within twenty-four (24) hours after transmission by telecopy. Any
party may change the address to which notices shall be sent by notice in writing
to the other parties as provided herein.
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13.2 Account Information for Distributions. All distributions
to the Members by the Company shall be made to the accounts of the Members as
may be specified from time to time in a notice from the Members to the Company
in accordance with Section 13.1.
14. Miscellaneous.
14.1 Further Assurances. The parties will, in a timely manner
and as required from time to time, take all such actions as may be necessary or
appropriate to cause their Affiliates, the Company and the Affiliated Entities
to implement the transactions contemplated by this Agreement and to ensure that
such entities take all such actions as may be necessary to give full effect to
the provisions of this Agreement and to refrain from taking any actions which
would contravene the intent or the provisions of this Agreement.
14.2 Term of Agreement. This Agreement will continue in full
force and effect until the earlier of (a) termination by mutual consent of the
parties hereto, (b) the dissolution of the Company, or (c) termination by
Apollo, in its sole discretion, on or before October 10, 1998, by written notice
to the other Members, if the amendments to the foundation documents of the
Russian LLC shall not have been registered with the State Registration Chamber
of the Ministry of Economy of the Russian Federation and the Moscow Registration
Chamber, or the state authorities that shall have assumed the registration
functions currently performed by the above Registration ▇▇▇▇▇▇▇▇, to reflect the
ownership by Delaware LLC-2 of all the interests in the Russian LLC, less a 1%
interest retained by BrookeMil and less any treasury interests owned by the
Russian LLC, by September 30, 1998, provided that Apollo shall have complied, in
all material respects, with the terms of this Agreement and shall have
cooperated, in good faith, with the New Valley Parties, the Company and the
Russian LLC in order to complete such registrations and shall have not taken any
actions impeding or delaying such registrations.
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14.3 Assignment. Except as provided in Section 9.2 hereof,
this Agreement shall not be assigned by any party hereto without the prior
written consent of the other parties hereto. This Agreement shall inure to the
benefit of the parties hereto and shall be binding upon the successors and
assigns of the parties hereto.
14.4 Amendment, Modification and Waiver. This Agreement shall
be amended to include any person who acquires any Interests in the Company,
provided that such person acquires such Interest in accordance with Section 2.6
hereof. This Agreement may be further modified, amended and supplemented only
upon the unanimous approval of the Board of Managers as provided in Section 2.9
and the unanimous mutual written agreement of the parties hereto. Each party may
waive any term, provision or condition intended for its benefit, provided that
such waiver be in writing and be signed by the party so waiving.
14.5 Severability. If any one or more of the provisions of
this Agreement shall be held invalid, illegal or unenforceable under applicable
law, the validity, legality and enforceability of the remaining provisions shall
not be affected or impaired thereby.
14.6 Entire Agreement; Headings. This Agreement, including the
schedules hereto, constitutes the entire agreement of the parties with respect
to the subject matter hereof and may not be changed, terminated or discharged
orally. The headings appearing in this Agreement have been inserted solely for
the convenience of the parties and shall be of no force or effect in the
construction of the provisions of this Agreement.
14.7 Indemnification. Each party to this Agreement agrees to
indemnify, defend and hold the other party free and harmless from and against,
and to reimburse the other party on a current basis for, all claims, damages,
expenses and liabilities of such other party arising from any breach of such
indemnifying party of the terms of this Agreement, including,
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57
without limitation, reasonable legal expenses and attorneys' fees paid or
incurred by the indemnified party in defense of any proceedings brought against
such indemnified party individually or against such indemnified party and such
indemnifying party (jointly or severally) arising out of any of the foregoing.
The provisions of this Section 14.7 shall survive the termination of this
Agreement and the representations and warranties given by the parties shall
survive for the applicable statute of limitations.
14.8 Governing Law. This Agreement shall be governed by
Delaware law, without regard to its conflict of laws principles, except with
respect to the provisions establishing beneficial ownership of the Assets in
favor of the Company, which shall be governed by New York law, without regard to
its conflict of laws principles.
14.9 Arbitration. Any dispute, controversy or claim arising
out of or relating to this Agreement or to the business and affairs of the
Company or the rights and obligations of any of the Members shall be finally
settled by binding arbitration to be conducted in New York, New York in
accordance with the rules then in force of the American Arbitration Association,
including the rules governing the appointment of arbitrators. Any final decision
in any such arbitration proceeding shall be final and non-appealable and shall
be binding on the parties thereto and enforceable in courts of competent
jurisdiction without a further review on the merits.
14.10 Confidentiality. By executing this Agreement, each
Member expressly agrees, at all times during the term of this Agreement, to
maintain the confidentiality of, and not to disclose to any person not a party
hereto, any information relating to the business, financial structure, financial
position or financial results, clients or affairs of the Company, its Affiliates
or Affiliated Entities that shall not be generally known to the public, except
as otherwise required by applicable law or by any regulatory organization having
jurisdiction. Except as provided by law,
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58
no press releases, announcements or other public disclosures related to this
Agreement or the transactions contemplated herein will be issued or made,
without the joint approval of Apollo and New Valley. Nothing in this Section
shall be deemed to prohibit Apollo from making any disclosures regarding this
Agreement or the transactions contemplated herein to any of its partners.
14.11 Counterparts. This Agreement may be executed by the
parties in one or more counterparts, each of which shall be deemed an original
but all of which taken together shall constitute one and the same instrument.
14.12 Fees and Expenses. All fees and expenses incurred in the
negotiation, preparation and execution of this Agreement, including all exhibits
hereto and all related documents shall be for the account of and payable by the
party incurring them.
14.13 Future Business Opportunities.
(a) If any Member or any of its Affiliates (an
"Offering Party") has the opportunity to engage in any other business in Russia
or to purchase or invest in any other business interests in Russia ("Russian
Opportunities"), it shall promptly notify the other Members of such opportunity
and the Members shall decide whether such opportunity shall be conducted by the
Company or through a separate entity owned by the Members on a commercially
reasonable basis substantially consistent with the terms of this Agreement, to
be negotiated in good faith. The New Valley Parties hereby agree that, except as
provided herein with respect to the Kremlin Sites (as defined below), with
respect to Russian Opportunities in which any of the New Valley Parties or their
respective Affiliates are the Offering Party, Apollo shall have the option to
participate in any such Russian Opportunities on a commercially reasonable basis
that is substantially consistent with this Agreement with respect to Apollo's
percentage ownership
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59
interests in any venture formed by the Offering Party to invest in or develop
such Russian Opportunity, to be negotiated in good faith. The Offering Party
shall provide from time to time all material information relating to such
Russian Opportunity (the "Information") that it has in its possession to the
other Members, provided that such Members enter into any confidentiality
arrangement as may be required by third parties. Each Member receiving such
notice shall have the right to participate in such Russian Opportunity if it has
responded within thirty (30) days of the receipt of the notice (the "Notice
Period"); provided, however, that in the event of a material change in the
Information, including, without limitation, with respect to the terms and/or
governmental approvals regarding such Russian Opportunity, the Notice Period
shall recommence with respect to such Russian Opportunity for an additional
thirty (30) day period as of the date of the event of such material change.
Apollo shall be considered an Offering Party only with respect to real estate
opportunities originated by Apollo or its Affiliates.
(b) The New Valley Parties hereby agree that with
respect to BrookeMil's investment in two adjoining plots at Repin Square
(Bolotnaya), Moscow (the "Kremlin Sites"), subject to the execution of mutually
acceptable documentation, Apollo will co-invest with BrookeMil or any Affiliates
of the New Valley Parties that may invest in and develop the Kremlin Sites
(collectively, the "New Valley Entities") such that Apollo and the New Valley
Entities will make an investment on a 75% and 25% basis, respectively, up to an
aggregate amount of $25,000,000 in the venture or ventures that will be formed
to invest in and develop the Kremlin Sites, and with respect to any
distributions from such venture or ventures, Apollo and the New Valley Entities
will agree to the following order of priority: (i) Apollo shall be entitled to a
return of its capital invested plus a 20% rate of return
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compounded quarterly; (ii) the New Valley Entities will be entitled to a return
of their capital invested plus a 20% rate of return compounded quarterly, and
(iii) any remaining distribution will be made 50% to Apollo, on the one hand,
and the New Valley Entities, on the other.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have duly executed or
caused their duly authorized officers to execute this Agreement as of the date
and year first above written.
APOLLO REAL ESTATE
INVESTMENT FUND III, L.P.
By: Apollo Real Estate Advisors III, L.P.,
its General Partner
By: Apollo Real Estate Capital Advisors
III, Inc., its General Partner
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Vice President
NEW VALLEY CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman of the Board and
Chief Executive Officer
BROOKEMIL LTD.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman of the Board
WESTERN REALTY
DEVELOPMENT LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman of the Board
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Schedule A
To Western Realty Development LLC
Limited Liability Company Agreement
The following terms shall have the following definitions:
"Act" shall mean the Delaware Limited Liability Company Act, as in
effect on the date hereof, and as amended from time to time, or any successor
law.
"Adjusted Realized Equity Value" shall mean, with respect to any
Interest, the capital contribution received by the Company for such Interest in
cash or expenditures (provided, however, that for the purposes of this
definition (i) all the expenditures set forth in Schedule 2.4(d) and (ii) any
additional expenditures incurred by the New Valley Parties after the Initial
Closing Date on items set forth in the approved Budget, to the extent the New
Valley Parties (x) provide to Apollo proper documentation substantiating such
additional expenditures and (y) have not been reimbursed for such expenditures
in accordance with Section 12.7(v), will be deemed to have been contributed by
New Valley to the Company at the time of the Initial Closing, irrespective of
whether they are considered actually contributed for any other purposes) plus a
15% annual cumulative rate of return on such contribution compounded on a
quarterly basis, less distributions or dividends in cash or the fair market
value of distributions of property or in-kind distributions received by the
Member in respect of such Interest as of the date such Adjusted Realized Equity
Value is calculated.
"Affiliate" shall mean, with respect to any person, a person or entity
which directly or indirectly controls, is controlled by, or is under common
control with, such person.
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"Affiliated Entity" shall mean the Russian LLC, Delaware LLC-2, any
other direct or indirect wholly-owned subsidiary of the Company, Delaware LLC-3,
▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇ Tobacco and any other entity (whether or not incorporated) in
which any of the foregoing entities or the Company has or hereafter acquires a
controlling interest.
"Apollo" shall have the meaning ascribed thereto in the introductory
paragraph hereof.
"Apollo Loan" shall have the meaning ascribed thereto in Section 2.4(b)
hereof.
"Assets" shall have the meaning ascribed thereto in Section 2.4(e)
hereof.
"Assumed Liabilities" shall have the meaning ascribed thereto in
Section 2.4(e) hereof.
"Board" or "Board of Managers" shall have the meaning ascribed thereto
in Section 2.9 hereof.
"Brooke" shall mean Brooke (Overseas) Ltd. or any of its Affiliates.
"Brooke (Overseas)" shall have the meaning ascribed thereto in the
fifth "WHEREAS" clause hereof.
"BrookeMil" shall have the meaning ascribed thereto in the introductory
paragraph hereof.
"Budget" shall have the meaning ascribed thereto in Section 2.9(i)
hereof.
"Business Day" shall mean any day except a Saturday, Sunday or other
day on which commercial banks are authorized by law to close in New York City or
Moscow.
"Class A Distribution Amount" shall have the meaning ascribed thereto
in Section 2.7(a) hereof.
"Class A Distribution Period" shall have the meaning ascribed thereto
in Section 2.7(a) hereof.
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"Class A Interests" shall have the meaning ascribed thereto in Section
2.4(a) hereof.
"Class A Liquidation Preference" shall have the meaning ascribed
thereto in Section 2.7(b) hereof.
"Class B Distribution Amount" shall have the meaning ascribed thereto
in Section 2.8(a) hereof.
"Class B Distribution Period" shall have the meaning ascribed thereto
in Section 2.8(a) hereof.
"Class B Interests" shall have the meaning ascribed thereto in Section
2.4(a) hereof.
"Class B Liquidation Preference" shall have the meaning ascribed
thereto in Section 2.8(b) hereof.
"Class C Interests" shall have the meaning ascribed thereto in Section
2.4(a) hereof.
"Closing" shall have the meaning ascribed thereto in Section 12 hereof.
"Closing Date" shall have the meaning ascribed thereto in Section 12
hereof.
"Company" shall have the meaning ascribed thereto in the introductory
paragraph hereof.
"Delaware LLC-2" shall have the meaning ascribed thereto in the second
"WHEREAS" clause hereof.
"Delaware LLC-3" shall have the meaning ascribed thereto in the second
"WHEREAS" clause hereof.
"Dissolving Member" shall have the meaning ascribed thereto in Section
9.4 hereof.
"▇▇▇▇▇ II Leases" shall have the meaning ascribed thereto in Section
10.3(l) hereof.
"▇▇▇▇▇ III Land Lease" shall have the meaning ascribed thereto in
Section 10.3(b) hereof.
"▇▇▇▇▇ Place II" shall have the meaning ascribed thereto in the second
"WHEREAS" clause hereof.
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"▇▇▇▇▇ Place III" shall have the meaning ascribed thereto in the second
"WHEREAS" clause hereof.
"ERISA" means the U.S. Employee Retirement Income Security Act of 1974,
as amended and as hereafter amended, or any successor law.
"Event of Force Majeure" means any unforeseeable event as a result of
which a Member shall be rendered unable in whole or in part to carry out any
covenant, agreement, obligation or undertaking hereunder to be kept or performed
by such party. The term "force majeure" shall include acts of God, governmental
action (whether in its sovereign or contractual capacity), fire, flood, or other
catastrophes, national emergencies (including political and economic
emergencies), insurrections, riots, wars, strikes, labor disputes or actions or
other similar causes, not within the control of the party claiming force majeure
and which by the commercially reasonable exercise of due diligence or the
commercially reasonable payment of money such party is unable to overcome.
"Initial Closing" shall have the meaning ascribed thereto in Section
12.1 hereof.
"Initial Closing Date" shall have the meaning ascribed thereto in
Section 12.1 hereof.
"Initial Subsequent Closing" shall have the meaning ascribed thereto in
Section 12.6 hereof.
"Initial Subsequent Closing Date" shall have the meaning ascribed
thereto in Section 12.6 hereof.
"Information" shall have the meaning ascribed thereto in Section
14.13(a) hereof.
"Interests" shall have the meaning ascribed thereto in Section 2.4(a)
hereof.
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"Kremlin Sites" shall have the meaning ascribed thereto in Section
14.13(b)
"Land Leases" shall have the meaning ascribed thereto in Section
10.3(d) hereof.
"Late Payment Interest" shall have the meaning ascribed thereto in
Section 2.4(f) hereof.
"LD Tobacco" shall mean ▇▇▇▇▇▇▇-▇▇▇▇▇ Tobacco Ltd., a Russian closed
joint stock company.
"▇▇▇▇▇▇▇-▇▇▇▇▇" shall mean ▇▇▇▇▇▇▇-▇▇▇▇▇ Ltd., a Russian joint stock
company.
"Loan Default" shall have the meaning ascribed thereto in Section
2.10(a) hereof.
"Material Contracts" shall have the meaning ascribed thereto in Section
10.3(p) hereof.
"Member" shall have the meaning ascribed thereto in the introductory
paragraph hereof.
"New Factory" shall mean a new cigarette factory to be located at
Kashirskoye Shosse, Moscow, Russian Federation, to be constructed by LD Tobacco.
"New Factory Land Lease" shall have the meaning ascribed thereto in
Section 10.3(c) hereof.
"New Valley" shall have the meaning ascribed thereto in the
introductory paragraph hereof.
"New Valley Entities" shall have the meaning ascribed thereto in
Section 14.13(b) hereof.
"New Valley Parties" shall have the meaning ascribed thereto in the
introductory paragraph hereof.
"Notice Period" shall have the meaning ascribed thereto in Section
14.13(a) hereof.
"Offering Party" shall have the meaning ascribed thereto in Section
14.13(a) hereof.
"Old Factory" shall mean the existing cigarette factory located in
Moscow at Ul. Gasheka 6.
"Other Subsequent Closings" shall have the meaning ascribed thereto in
Section 12.10 hereof.
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"Participating Loan Agreement" shall have the meaning ascribed thereto
in the fifth "WHEREAS" clause hereof.
"Payment Default" shall have the meaning ascribed thereto in Section
2.4(f) hereof.
"Pledge Agreement" shall have the meaning ascribed thereto in Section
2.4(b) hereof.
"Promissory Note" shall have the meaning ascribed thereto in Section
2.4(b) hereof.
"Properties" shall mean ▇▇▇▇▇ Place II, ▇▇▇▇▇ Place III, the New
Factory and any other property to which the Company or any Affiliated Entity has
or hereafter acquires rights.
"Russian Bank Loan" shall mean a loan from a Russian bank for the
construction of the New Factory in the principal amount of $20,000,000, to be
secured by the shares and assets of ▇▇▇▇▇▇▇- ▇▇▇▇▇ and LD Tobacco and guaranteed
by Brooke.
"Russian LLC" shall have the meaning ascribed thereto in the second
"WHEREAS" clause hereof.
"Russian Opportunities" shall have the meaning ascribed thereto in
Section 14.13(a).
"Second Subsequent Closing" shall have the meaning ascribed thereto in
Section 12.9 hereof.
"Subsequent Closings" shall have the meaning ascribed thereto in
Section 12.10 hereof.
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Exhibit 10.2
U.S.$20,000,000
PARTICIPATING LOAN AGREEMENT
Among
WESTERN REALTY DEVELOPMENT LLC,
WESTERN TOBACCO INVESTMENTS LLC
and
BROOKE (OVERSEAS) LTD.
Dated as of April 28, 1998
69
PARTICIPATING LOAN AGREEMENT
THIS PARTICIPATING LOAN AGREEMENT is entered into as of April 28, 1998,
by and among Western Realty Development LLC, a Delaware limited liability
company with offices at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Lender"), Western Tobacco Investments LLC, a Delaware
limited liability company with offices at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇ (the "Borrower"), and Brooke (Overseas) Ltd., a
Delaware corporation with offices at ▇▇▇ ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇,
▇▇▇▇▇▇▇ ("Brooke (Overseas)").
W I T N E S S E T H :
WHEREAS, the Lender, Apollo Real Estate Investment Fund III, L.P., a
Delaware limited partnership ("Apollo"), New Valley Corporation, a Delaware
corporation ("New Valley"), and BrookeMil Ltd., a Cayman Islands company
("BrookeMil"), have entered into that certain Amended and Restated Western
Realty Development LLC Limited Liability Company Agreement (Second Restatement),
dated as of February 20, 1998 (the "Joint Venture-I Agreement"), and Apollo, New
Valley and BrookeMil are members of the Lender;
WHEREAS, the Lender, Brooke (Overseas) and the Borrower have entered
into that certain Western Tobacco Investments LLC Limited Liability Company
Agreement, dated as of February 27, 1998 (the "Joint Venture-II Agreement"), and
the Lender was issued 16,500 interests in the Borrower and Brooke (Overseas) was
issued 38,500 interests in the Borrower (each such interest, an "Interest");
WHEREAS, the Joint Venture-I Agreement contemplates the execution of
this Agreement;
70
WHEREAS, the Borrower wishes to borrow from the Lender and the Lender
wishes to lend to the Borrower $9,000,000 as part of the facility extended
hereunder; and
WHEREAS, the parties wish to convert the 16,500 Interests in the
Borrower held by the Lender into a portion of the loan hereunder and to
terminate the Lender's membership in the Borrower and the existing Joint
Venture-II Agreement;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Defined Terms.
Capitalized terms not otherwise defined herein shall have the
meanings set forth on Schedule A.
2. Loan.
2.1 Agreement to Lend. Subject to the satisfaction of the
conditions set forth in Section 4.3, the Lender agrees to extend a loan (the
"Loan") to the Borrower in the aggregate principal amount of Twenty Million
Dollars (U.S.$20,000,000), consisting of the First Advance (as hereinafter
defined) and the Second Advance (as hereinafter defined). The Loan shall bear no
fixed interest. The Loan shall bear contingent participating interest equal to
30% of all distributions made by the Borrower to Brooke (Overseas), starting
from the time when the principal amount of the Loan has been repaid. Subject to
Schedule 2.1, the principal of the Loan, and, after the payment of the
principal, the contingent participating interest, shall be payable in
installments at such times as distributions, if any, are made by the Borrower to
Brooke (Overseas), in the amount of 30% of such distributions (with Brooke
(Overseas) retaining 70% of such distributions). Solely for the purpose of
calculating the amount of each such payment of principal or the contingent
participating interest, as the case may be, of the Loan under this Section 2.1,
any debt service payments with respect to the Russian Bank Loan (as hereinafter
defined) shall be counted as distributions to Brooke (Overseas) from the
Borrower. However, no
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payments under the Loan shall be due until actual
distributions (other than debt service payments under the Russian Bank Loan)
have been made to Brooke (Overseas). The debt service payments under the Russian
Bank Loan shall be debited against the amounts of distributions to be retained
by Brooke (Overseas). The Loan shall become due and payable upon the dissolution
of the Borrower (the "Maturity Date").
2.2 Subordination of Loan. Any rights of the Lender and
payments from the Borrower to the Lender hereunder shall be subordinate to the
rights of any and all other creditors of the Borrower and, except as provided in
Section 7.2(c), shall be equal in priority with any payments made to Brooke
(Overseas) as a member of the Borrower.
2.3 First Advance. At the Closing, 16,500 Interests in the
Borrower owned by the Lender shall be converted into a portion of the Loan in
the principal amount of $11,000,000 (such portion of the Loan, the "First
Advance"). Upon such conversion, the First Advance shall be deemed disbursed,
all the Interests of the Lender in the Borrower shall be deemed cancelled, the
Joint Venture-II Agreement shall be terminated and replaced by the Western
Realty Tobacco LLC Limited Liability Company Agreement dated as of the date
hereof in the form attached hereto as Exhibit A, and Brooke (Overseas) shall
become the sole member of the Borrower.
2.4 Disbursement of Second Advance. At the Closing, the
remaining portion of the Loan in the amount of $9,000,000 (the "Second Advance")
shall be disbursed by wire transfer in immediately available funds to such bank
account of the Borrower and/or Brooke (Overseas) as shall be specified in a
notice from the Borrower to the Lender delivered at least one Business Day prior
to the Closing Date.
2.5 Payments. Payment of all sums under this Agreement by the
Borrower to the Lender shall be made to the account of the Lender as may be
specified from time to time in a notice from the Lender to the Borrower in
accordance with Section 10.
2.6 Proceeds. The proceeds from the Loan hereunder shall be
used as follows: (i) the proceeds shall be first applied to pay to Brooke
(Overseas) the amount
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of the expenditures incurred by Brooke (Overseas) since
March 1, 1997 through the date of the Closing in connection with the
construction of the New Factory (the "Reimbursement Amount"), limited to (x) the
amount of expenditures incurred through the date of this Agreement set forth in
Schedule 2.6 and (y) the amount of other expenditures incurred after the date of
this Agreement, provided that such expenditures that are not set forth on
Schedule 2.6 or that do not constitute items on the approved Budget shall be
subject to approval by the Lender; the Reimbursement Amount shall be paid to
Brooke (Overseas) or to its order by wire transfer in immediately available
funds to the account specified in the wire instructions, which wire instructions
shall have been submitted to the Borrower by Brooke (Overseas) no later than one
Business Day prior to the Closing Date; and (ii) only if, and after the
Reimbursement Amount has been paid in full to Brooke (Overseas), the remaining
amount shall be used for the construction of the New Factory, purchase of land
lease rights for the New Factory and acquisition of related equipment.
3. Pledge Agreement.
Obligations of the Borrower and Brooke (Overseas) under
Section 8.8 of this Agreement shall be secured by a pledge agreement between
Brooke (Overseas) and the Lender, acknowledged by the Borrower, substantially in
the form attached hereto as Exhibit B (the "Pledge Agreement"), granting the
Lender a security interest in 84% of the Interests owned by Brooke (Overseas).
4. Closing.
4.1 Date, Time and Place of Closing. The closing of the
transactions contemplated herein (the "Closing," the date of the Closing being
referred to herein as the "Closing Date") shall take place on April 28, 1998 at
10:00 a.m. at the offices of Coudert Brothers, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇ ▇▇▇▇▇, or on such other date and time and at such other place as shall
be mutually agreed by the parties hereto.
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4.2 Conditions to Obligations of Lender. The obligations of
the Lender hereunder are subject to the fulfillment, prior to or at the Closing,
of each of the following conditions:
(a) All authorizations, consents, orders and
approvals of regulatory authorities and third parties, if any, necessary for the
performance by the Borrower and Brooke (Overseas) of their obligations under
this Agreement shall have been obtained.
(b) The representations and warranties of the
Borrower and Brooke (Overseas) contained in this Agreement shall be true and
correct in all material respects at the date hereof and at and as of the
Closing, with the same force and effect as if made at and as of the Closing Date
(except that representations and warranties that by their terms speak as of the
Closing Date shall be true and correct as of such date); and Brooke (Overseas)
shall have performed or complied in all material respects with all agreements
and covenants required by this Agreement to be performed or complied with by it
on or prior to the Closing.
(c) No action shall have been commenced in a court of
competent jurisdiction or by or before any governmental authority against either
the Borrower, the Lender or Brooke (Overseas) seeking to prohibit the
transactions contemplated by this Agreement.
(d) There shall not have been any material adverse
change in the financial condition of the Borrower or Brooke (Overseas) since the
date hereof.
(e) There shall not have occurred an event or events
that has or have a material adverse effect on the operations of the New Factory.
(f) Expenditures for the New Factory are within a 10%
variance from the Budget.
(g) Conditions to the obligations of Apollo at the
Initial Subsequent Closing under the Joint Venture-I Agreement shall have been
satisfied.
(h) Brooke (Overseas) shall have contributed 95.8% of
the shares of ▇▇▇▇▇▇▇-▇▇▇▇▇ to the Borrower.
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(i) The Pledge Agreement shall have been entered into
by the parties thereto.
4.3 Transactions at Closing. Upon satisfaction of all the
conditions to the Closing set forth in Section 4.2, the transactions described
in Sections 2.3 and 2.4 hereof shall take place.
5. Covenants.
5.1 Approval by Lender. Without the consent of the Lender,
neither Brooke (Overseas), in its capacity as the sole member of the Borrower,
nor the Borrower, in its capacity as a direct or indirect shareholder, member or
participant of any Affiliated Entity, shall vote or otherwise approve a decision
to:
(a) amend the constituent documents of the Borrower
and adopt or amend the constituent documents of any Affiliated Entity or waive
any provisions hereof or thereof;
(b) unless specified in the approved Budget (as
hereinafter defined) and except as otherwise provided herein, sell, transfer,
assign, grant a right to use, a right of first refusal, an option or a similar
right, or otherwise dispose of (i) any of the Properties, or any rights thereto
or interests therein (including but not limited to ownership rights, leasehold
interests (whether as landlord or tenant), rights to use or easements) or (ii)
any asset (or group of assets in a transaction or series of transactions) the
cost or fair market value (whichever is greater) of which exceeds $100,000
individually or $500,000 in the aggregate in any given year, except as permitted
by Section 7;
(c) unless specified in the approved Budget, borrow,
issue guarantees or assume other contingent obligations to pay money in an
amount which exceeds in the aggregate $100,000 outstanding at any given time;
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(d) unless specified in the approved Budget, grant a
security interest or otherwise encumber (i) any of the Properties or any rights
thereto or interests therein (including but not limited to ownership rights,
leasehold interests (whether as landlord or tenant), rights to use or
easements), or (ii) any asset (or group of assets in a transaction or series of
transactions) the cost, fair market value or value assigned in such
transaction(s) (whichever is greater) of which exceeds $100,000 at any one time
or $500,000 in the aggregate in any given year;
(e) take any actions regarding registration of the
Interests in the Borrower or interests in any Affiliated Entity necessary for a
public offering;
(f) merge, reorganize or consolidate the Borrower or
any Affiliated Entity with any other corporation or entity unless the surviving
entity shall be the Borrower or such other Affiliated Entity, respectively, or
the Borrower or other Affiliated Entity is merged, reorganized or consolidated
with an Affiliate thereof;
(g) dissolve voluntarily the Borrower or any
Affiliated Entity or revoke voluntary dissolution proceedings or terminate,
liquidate or wind up the Borrower or any Affiliated Entity;
(h) change materially the principal businesses
conducted by the Borrower or any Affiliated Entity;
(i) approve the annual budget and business plan,
including capital expenditures, of the Borrower (collectively, the "Budget"),
which Budget shall incorporate the annual budgets and business plans of
▇▇▇▇▇▇▇-▇▇▇▇▇ and LD Tobacco, as well as any contributions or resources to be
made available by the Borrower to any other Affiliated Entity;
(j) unless specified in the approved Budget, make or
incur, or enter into a contractual commitment to make or incur expenditures or
financial obligations which exceed $250,000 individually or $1,000,000 in the
aggregate in any calendar year;
(k) unless specified in the approved Budget, purchase
ownership interests, leasehold interests, rights to use, easements or other
rights to or
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interests in the Properties or elsewhere for the price exceeding $100,000 in
each particular transaction or exceeding $500,000 in the aggregate in any given
year, including approval of agreements with respect to acquiring such rights, or
waive any rights of first refusal, preemptive or similar rights relating to the
purchase of any such rights to or interest in such Properties or elsewhere;
(l) enter into, modify, renew, terminate or grant any
material waiver relating to any significant leases and other material contracts
other than contracts in the ordinary course of business with trade
counterparties;
(m) enter into any transaction with a party that is
related to Brooke (Overseas) or its Affiliate, excluding transactions in the
ordinary course of business of the Borrower or an Affiliated Entity on an
arm's-length basis involving amounts which shall not exceed $250,000 per
transaction or series of transactions and excluding transactions in the ordinary
course of business of ▇▇▇▇▇▇▇-▇▇▇▇▇ involving ▇▇▇▇▇▇▇ Group Inc. on an
arm's-length basis; provided that written notice of all such transactions or
series of transactions involving more than $100,000, together with a description
of the material terms thereof, shall be promptly furnished to the Lender and
Apollo;
(n) commence or settle any litigation, arbitration or
other dispute, the result of which could have a material adverse effect on the
business, financial condition or prospects of the Borrower or any Affiliated
Entity;
(o) resolve tax or other governmental proceedings or
disputes relating to the Borrower or any Affiliated Entity;
(p) establish, acquire, dispose of or transfer any
subsidiary or any interest in any subsidiary or other entity (whether or not
incorporated) or make any investment in any business venture or enterprise
(whether or not incorporated), other than as contemplated in the approved
Budget;
(q) change the outside accountants of the Borrower or
any Affiliated Entity (the Lender agrees that the initial outside accountants of
the Borrower shall be Coopers & ▇▇▇▇▇▇▇ LLP);
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(r) issue, sell, transfer, assign or otherwise
dispose of any shares, capital stock, securities or interests of or owned by the
Borrower or any Affiliated Entity, or change the ownership structure of the
Borrower or any Affiliated Entity;
(s) make a decision not to distribute all available
cash (to the extent such distributions are permitted by applicable law) of (i)
the Borrower to Brooke (Overseas), with a corresponding payment under the Loan
as set forth in Section 2.1, or (ii) an Affiliated Entity to its shareholders,
members or participants, as applicable, except as permitted under Sections 2.6
and 6;
(t) except as contemplated in the approved Budget or
as set forth herein, use any part of the New Factory or any other Property as
collateral for the purpose of any development other than its own development, or
use the proceeds from refinancing or sale with respect to the New Factory or any
other Property other than for budgeted capital expenditures involving the same
Property that generated such proceeds;
(u) retain any officer of the Borrower or any
Affiliated Entity notwithstanding fraud, bad faith, gross negligence, criminal
conviction or plea, and a final, non-appealable finding of or consent to
injunction with respect to violations of antifraud or antimanipulative
provisions of securities, commodities or banking laws by a court of competent
jurisdiction;
(v) unless specified in the approved Budget, use the
proceeds of the Loan other than as set forth in Section 2.6;
(w) replace the Chairman of the Board of Managers of
the Borrower (the Lender agrees that ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ is currently the Chairman)
or any of the following officers of the Borrower: the President, the Chief
Financial Officer and the Secretary (the Lender agrees that ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
is currently the President, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ is the Chief Financial Officer
and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ is the Secretary of the Borrower);
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78
(x) appoint any senior executive officer of an
Affiliated Entity (the Lender agrees that currently ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ is the
General Director of LD Tobacco and of ▇▇▇▇▇▇▇-▇▇▇▇▇);
(y) unless specified in the approved Budget, pay any
salaries to employees of Brooke (Overseas), other than to the employees involved
in day-to-day business operations in Russia (the latter category including,
among others, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇); and
(z) unless specified in the approved Budget, pay the
salaries of the officers of the Borrower and each Affiliated Entity.
The approval of the Lender with respect to any
matters set forth in this Section 5.1 shall not be unreasonably withheld or
delayed.
All figures set forth in this Section 5.1 shall be
determined on a consolidated basis in accordance with U.S. generally accepted
accounting principles, consistently applied. To the extent that any amounts or
payments are incurred in any currency other than U.S. dollars, such amounts or
payments shall, for purposes of such calculation, be converted into U.S. dollars
on the date of the conclusion of the transaction at the official exchange rate
of such country (which, for purposes of the ▇▇▇▇▇, shall be considered to be the
MICEX rate at the opening of business in Moscow on such date).
5.2 Books and Records; Audited Financial Statements. (a) The
year-end balance sheet, statement of operations and statement of change in
financial position shall be audited each year by the independent certified
public accountants of the Borrower, whose written report shall be provided to
the Lender no later than sixty (60) days after the end of each fiscal year.
(b) The Borrower shall cause each Affiliated Entity,
in addition to maintaining its books and accounts in accordance with the law of
the applicable jurisdiction, to prepare its financial statements in accordance
with U.S. generally accepted accounting principles, consistently applied. The
year-end balance sheet, statement of operations and statement of change in
financial position shall be audited
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79
each year by Coopers & ▇▇▇▇▇▇▇ LLP or another firm of independent certified
public accountants selected subject to the provision of Section 5.1(q), and the
Borrower shall provide the written report of such accountants to the Lender. The
Borrower shall cause each Affiliated Entity to prepare all tax returns as soon
as practicable after the end of each fiscal year.
5.3 Other Reports. In addition to annual audited financial
statements, each fiscal quarter the President of the Borrower shall prepare and
distribute to the Lender a report including unaudited quarterly financial
statements.
5.4 Access. (a) The Borrow shall provide to the Lender, at the
cost of the Lender, together with its lawful agents, attorneys and
representatives access to the books and records and facilities and senior
management of the Borrower and each Affiliated Entity during all normal business
hours. The Lender and Apollo shall have access in Miami, Florida to the books
and records of the Borrower and in Moscow, Russia and Miami, Florida to the
books and records of each Affiliated Entity.
(b) The Borrower shall permit the Lender and Apollo
to be kept informed, consult with and advise management of each Affiliated
Entity with regard to any material developments in or affecting each Affiliated
Entity's business; to discuss business operations, properties and the financial
or other condition of each Affiliated Entity with its officers, employees and
any relevant management committee; to consult with and advise management on
significant business issues; and to meet regularly with management for such
consultation and advice.
(c) The Borrower shall permit the Lender, upon the
Lender's written request and subject to the provisions of applicable law, to
appoint one (1) member of the management committee or board of directors, as
applicable, of each Affiliated Entity, and to dismiss and replace such member at
any time.
5.5 Business Plan and Budget. The Borrower shall provide to
the Lender a proposed annual Budget, which shall include information with
respect to the operation of the business to be conducted by each Affiliated
Entity for each fiscal year, at least thirty (30) days before the beginning of
such fiscal year. Such Budget
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shall include estimates of anticipated capital calls. The initial Budget, for
the year 1998, is annexed hereto as Schedule 5.5. The Lender shall approve the
Budget as provided in Section 5.1 hereof. The day-to-day operations of the
Borrower and each Affiliated Entity shall be conducted by the officers of the
Borrower within 10% variances from the Budget approved by the Lender.
5.6 Restrictions on Operations of Old Factory. The Borrower
shall ensure that, from the date hereof until the construction of the New
Factory is completed and the New Factory is operational, during the contemplated
period of operation of the Old Factory, unless specified in the Budget or
otherwise, each of ▇▇▇▇▇▇▇-▇▇▇▇▇ and LD Tobacco, as the case may be, shall:
(a) conduct the operations of the Old Factory in the
ordinary course of business consistent with past practice, including without
limitation maintaining inventory and supplies;
(b) use its best efforts to (i) preserve its present
business operations, organization (including, without limitation, management and
sales force) and goodwill and (ii) preserve its present relationship with
persons with whom it has business dealings;
(c) maintain (i) all of its assets and Properties in
their current condition, ordinary wear and tear excepted, and (ii) insurance
upon all of its Properties and assets in such amounts and of such kinds
comparable to that in effect on the date of this Agreement (with insurers of
substantially the same or better financial condition);
(d) (i) maintain its books, accounts, and records in
the ordinary course of business consistent with past practice, (ii) continue to
collect accounts receivable and pay accounts payable utilizing normal business
practices for the collection and payment thereof and (iii) continue to comply
with all its contractual and other obligations;
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(e) refrain from (i) directly or indirectly,
redeeming, purchasing or otherwise acquiring any of its capital stock or other
equity securities (including, without limitation, warrants, options and other
rights to acquire such capital stock or other equity securities); or (ii) except
as expressly contemplated herein, authorizing, issuing or entering into any
agreement providing for the issuance (contingent or otherwise) of (1) any notes
or debt securities containing equity features (including, without limitation,
any notes or debt securities convertible into or exchangeable for capital stock
or other equity securities, issued in connection with the issuance of capital
stock or other equity securities or containing profit participation features) or
(2) any capital stock or other equity securities (or any securities convertible
into or exchangeable for any capital stock or other equity securities);
(f) refrain from acquiring any interest in any
company or business (whether by a purchase of assets, purchase of stock, merger
or otherwise), or entering into any joint venture; and
(g) refrain from entering into the ownership, active
management or operation of any business other than the business conducted in
connection with the Old Factory.
6. Arrangement of Russian Bank Loan. Brooke (Overseas) shall arrange a
loan from a Russian bank on terms that shall not differ materially from those
set forth on Schedule 6 (the "Russian Bank Loan") for construction of the New
Factory in the principal amount of $20,000,000, to be secured by the shares and
assets of ▇▇▇▇▇▇▇-▇▇▇▇▇ and LD Tobacco, no later than July 1, 1998, it being
agreed that neither Western Realty Development LLC nor Western Realty
Investments LLC shall be the primary obligor under the Russian Bank Loan. Any
cash revenues generated by the operations of ▇▇▇▇▇▇▇-▇▇▇▇▇ and LD Tobacco
payable or distributable to the Borrower and payable to the Lender hereunder
shall be used first to make any payments due under the Russian Bank Loan.
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7. Sale of Assets of Borrower and Sale of Interests.
7.1 Sale of Assets.
(a) At any time after the completion of the
construction of the New Factory, Brooke (Overseas) shall have the right to sell,
or cause to be sold, the New Factory without the consent of the Lender or
Apollo, provided that (x) the cash price payable in one lump sum at the closing
of such sale shall be no less than $175,000,000; and (y) the New Factory is sold
to one or more purchasers through an auction process conducted by an
internationally recognized investment bank or real estate brokerage firm.
(b) At any time after February 20, 2005, Apollo shall
have the right to require the sale, without the consent of the Borrower or
Brooke (Overseas), of the New Factory, provided that (x) the cash price payable
in one lump sum at the closing of such sale shall be no less than $175,000,000;
and (y) the New Factory is sold to one or more purchasers through an auction
process conducted by an internationally recognized investment bank or real
estate brokerage firm.
(c) In the event of a material breach by Brooke
(Overseas) with respect to the provisions of Section 2.1 or Section 5.1(a)-(u)
hereof, which material breach remains uncured sixty (60) days after receipt by
Brooke (Overseas) of written notice from the Lender setting forth in detail the
alleged default, then the Lender shall have the right to require the sale of the
New Factory, provided that (x) the cash price payable in one lump sum at the
closing of such sale shall be no less than $165,000,000; and (y) the New Factory
is sold to one or more purchasers through an auction process conducted by an
internationally recognized investment bank or real estate brokerage firm.
(d) In the event of (A) the failure of Brooke
(Overseas) to secure or provide the Russian Bank Loan or to arrange other
financing on terms that shall not differ materially from those set forth on
Schedule 6 by July 1, 1998 or (B) a payment default by ▇▇▇▇▇▇▇-▇▇▇▇▇ and ▇▇▇▇▇▇
(Overseas), as guarantor, under the
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Russian Bank Loan which default results in the acceleration of all amounts due
thereunder or the commencement of enforcement proceedings by the bank against
▇▇▇▇▇▇▇-▇▇▇▇▇ under the Russian Bank Loan (a "Russian Loan Default"), then, in
each such instance, Apollo shall have the right to require the sale, without the
consent of the Borrower or Brooke (Overseas), of all of the assets of the
Borrower, directly or indirectly held, including but not limited to, the New
Factory, ▇▇▇▇▇▇▇-▇▇▇▇▇ and LD Tobacco, provided that (x) the sale shall be on
commercially reasonable terms; and (y) prior to entering into a definitive
agreement with respect to any such sale, Brooke (Overseas) shall not have
secured or provided the Russian Bank Loan or arranged other financing on terms
that shall not differ materially from those set forth on Schedule 6, or
▇▇▇▇▇▇▇-▇▇▇▇▇ or ▇▇▇▇▇▇ (Overseas) shall not have cured the Russian Loan
Default, whether by payment, purchase or refinancing of the Russian Bank Loan or
otherwise, provided the Russian Loan Default can be cured at any time as long as
after it has been cured the Borrower shall have the same ownership rights and
use of the New Factory as it had prior to the occurrence of the Russian Loan
Default.
(e) In the event Apollo has terminated the Joint
Venture-I Agreement in accordance with Section 14.2(c) thereof, then Apollo
shall have the right to require the sale, without the consent of Brooke
(Overseas), of all of the assets of the Borrower, directly or indirectly held,
including but not limited to, the New Factory, ▇▇▇▇▇▇▇-▇▇▇▇▇ and LD Tobacco,
provided that (x) the sale shall be on commercially reasonable terms; and (y)
prior to entering into a definitive agreement with respect to any such sale, the
grounds for such termination by Apollo under such Section 14.2(c) of the Joint
Venture-I Agreement shall not have been eliminated.
(f) Subject to Schedule 2.1 and to the prior
repayment in full of the Russian Bank Loan, in the event of the sale (or other
cash distribution as a result of a substantial refinancing) of the New Factory,
whether under this Section 7.1 or otherwise, the Lender shall be entitled to
receive an amount equal to the Adjusted Realized Value of the Loan before any
proceeds shall be distributed to Brooke
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(Overseas), and thereafter 70% of the remaining proceeds shall be distributed to
Brooke (Overseas) and 30% to the Lender.
7.2 Sale of Interests.
(a) Notwithstanding any provisions of this Agreement
to the contrary, at any time after the completion of the construction of the New
Factory, Brooke (Overseas) shall have the right to sell all of its Interests in
the Borrower without the consent of the Lender or Apollo, provided that (x) the
cash price payable in one lump sum at the closing of the sale of all the
Interests in the Borrower shall be no less than $175,000,000; and (y) the
Interests of Brooke (Overseas) are sold to one or more purchasers through an
auction process conducted by an internationally recognized investment bank or
real estate brokerage firm. In the event Brooke (Overseas) elects to exercise
such right to sell all of its Interests in the Company, it shall send to the
Lender and Apollo a written notice of such election at least sixty (60) days
prior to the closing of such sale, and the Lender shall have the right
(exercisable by Apollo without the consent of any other member of the Lender)
and, at the request of Brooke (Overseas), the Lender shall be obligated, to sell
all of the Lender's Rights (as hereinafter defined) within sixty (60) days of
receipt of such notice to the same purchaser or group of purchasers as Brooke
(Overseas) on the same terms and conditions as Brooke (Overseas).
(b) In the event Apollo has terminated the Joint
Venture-I Agreement in accordance with Section 14.2(c) thereof, then Apollo
shall have the right to require the sale, without the consent of the Borrower or
Brooke (Overseas), of all of the Interests in the Borrower and all the Lender's
Rights, provided that (x) the sale shall be on commercially reasonable terms;
and (y) prior to entering into a definitive agreement with respect to any such
sale, the grounds for such termination by Apollo under such Section 14.2(c) of
the Joint Venture-I Agreement shall not have been eliminated.
(c) Subject to Schedule 2.1 and to the prior
repayment in full of the Russian Bank Loan, in the event of the sale (or other
cash distribution as a
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result of a substantial refinancing) of all the Interests in the Borrower and
the Lender's Rights, under this Section 7.2 or otherwise, the Lender shall be
entitled to receive the Adjusted Realized Value of the Loan before any proceeds
shall be distributed to Brooke (Overseas), and thereafter 70% of the remaining
proceeds shall be distributed to Brooke (Overseas) and 30% to the Lender.
7.3 Limitations on Right to Sell Interests. Except as
contemplated by this Section 7 and Section 8 and except for pledges of
Interests, Brooke (Overseas) agrees not to transfer all or any of its Interests
in the Borrower, and Brooke (Overseas) shall hold its Interests and, by
accepting the same upon original issue, upon distributions or upon subsequent
transfer, agrees for itself, its successors, legal representatives and assigns
that the Interests shall not be sold, transferred, assigned, pledged,
hypothecated or otherwise encumbered, whether voluntarily or involuntarily, by
operation of law, legal proceedings or otherwise, other than as provided in this
Section 7 and Section 8. In the event an involuntary lien or encumbrance is
placed on the Interests, Brooke (Overseas) shall not be in violation of this
provision if it discharges or causes to be discharged such lien or encumbrance
within a period of sixty (60) days from the placement or occurrence thereof.
7.4 Transfers to Affiliates. Brooke (Overseas) may transfer
its Interests in the Borrower to an Affiliate, except where prohibited by
applicable laws or where in the reasonable judgment of the Lender such transfer
would have a material adverse effect on the business of the Borrower or the
Lender. In the event Brooke (Overseas) wishes to transfer its Interests to an
Affiliate under this Section 7.4, it shall first notify the Lender in writing of
such proposed transfer. The Lender shall make its determination as to whether
such transfer would have a material adverse effect on the business of the
Borrower or the Lender within ten (10) days of receiving such notice and shall
notify Brooke (Overseas) in writing of its determination. It is a condition to
any such transfer that the transferee become a signatory to this Agreement and
agree to perform all of the obligations of the transferor hereunder.
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7.5 Change of Control. In the event of a change in control of
Brooke (Overseas), the Lender shall have the right to adopt all the management
decisions with respect to the Borrower instead of Brooke (Overseas) and to
purchase all the Interests of Brooke (Overseas) at a price equal to the Adjusted
Realized Value of such Interests, which right may be exercised by the Lender for
a period of sixty (60) days after such event constituting a change in control.
For purposes of this Agreement, a change in control shall be deemed to occur
when a person or entity that is not, at the time of the Initial Closing, an
Affiliate of Brooke (Overseas) becomes the beneficial owner, directly or
indirectly, of securities or ownership interests representing 40% or more of the
combined voting power of all outstanding securities or ownership interests of
Brooke (Overseas). A change of control shall not be deemed to occur due to a
reconfiguration of the ownership or changes of the ownership of Brooke
(Overseas), provided that Brooke Group Ltd., ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇ or their
Affiliates remain the owners, directly or indirectly, of the Interests owned by
Brooke (Overseas) as of the date hereof.
7.6 Dissolution of Brooke (Overseas). In the event of the
bankruptcy, reorganization, liquidation, winding-up or dissolution of Brooke
(Overseas), Brooke (Overseas) shall notify the Lender in writing within five (5)
days of such event. The Interests owned by Brooke (Overseas) shall first be
offered for purchase by the Lender within ninety (90) days of the date of such
notice for the then existing Adjusted Realized Value of such Interests. In the
event that the Lender declines to purchase such Interests, such unpurchased
Interests may be offered by the Borrower to third parties for purchase on terms
and conditions to be determined by the Lender and Brooke (Overseas), and Brooke
(Overseas) shall sell its Interests in accordance with the provisions of this
Section 7.6.
7.7 Partial Sales Prohibited. Notwithstanding anything to the
contrary in this Agreement, a partial sale of Interests shall not be permitted
and all sales of Interests or assets of the Borrower to the extent permitted
hereunder shall be on a cash basis. Each of Brooke (Overseas) and the Lender
shall retain the right to approve any
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provisions of any agreement for the sale of Interests or any assets of the
Borrower with respect to indemnification or other post-closing contingent
liabilities or price adjustments.
7.8 Termination of Provisions Restricting Sale of Interests.
The provisions restricting the sale of Interests contained in this Section 7
shall automatically terminate upon the happening of any of the following events:
(a) the adjudication of the Borrower as a bankrupt,
the execution by the Borrower of an assignment for the benefit of creditors, or
the appointment of a receiver for all or substantially all of its Properties; or
(b) the voluntary or involuntary dissolution of the
Borrower.
8. Transfer of Loan.
8.1 Transfer of Loan. Except as contemplated by Section 7 or
this Section 8, the Lender agrees not to assign, transfer, sell or otherwise
dispose of any or all of the Loan or any or all of its rights hereunder
(collectively, the "Lender's Rights"), and the Lender agrees for itself, its
successors, legal representatives and assigns that the Lender's Rights shall not
be sold, transferred, assigned, pledged, hypothecated or otherwise encumbered,
whether voluntarily or involuntarily, by operation of law, legal proceedings or
otherwise, other than as provided in Section 7 or this Section 8. In the event
an involuntary lien or encumbrance is placed on the Lender's Rights, the Lender
shall not be in violation of this provision if it discharges or causes to be
discharged such lien or encumbrance within a period of sixty (60) days from the
placement or occurrence thereof.
8.2 Sale of Lender's Rights after February 20, 2005. At any
time after February 20, 2005, Apollo shall have the right to sell all of the
Lender's Rights without the consent of Brooke (Overseas), provided that (x) the
cash price payable in one lump sum at the closing of the sale of the Lender's
Rights shall be no less than $175,000,000; and (y) the Lender's Rights are sold
to one or more purchasers through an auction process conducted by an
internationally recognized investment bank or real estate brokerage firm. In the
event Apollo elects to exercise such right to sell all of
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the Lender's Rights, it shall send Brooke (Overseas) a written notice of such
election at least sixty (60) days prior to the closing of such sale, and Brooke
(Overseas) shall have the right and, at the request of Apollo, Brooke (Overseas)
shall be obligated, to sell all of its Interests within sixty (60) days of
receipt of such notice to the same purchaser or group of purchasers as the
Lender on the same terms and conditions as the Lender.
8.3 Transfers to Affiliates. The Lender may transfer the
Lender's Rights to an Affiliate, except where prohibited by applicable laws or
where in the reasonable judgment of the Borrower or Brooke (Overseas) such
transfer would have a material adverse effect on the business of the Borrower or
Brooke (Overseas). In the event the Lender wishes to transfer the Lender's
Rights to an Affiliate under this Section 8.3, it shall first notify the
Borrower and Brooke (Overseas) in writing of such proposed transfer. The
Borrower and Brooke (Overseas) shall make their determination as to whether such
transfer would have a material adverse effect on the business of the Borrower or
Brooke (Overseas) within ten (10) days of receiving such notice and shall notify
the Lender in writing of their determination. It is a condition to any such
transfer that the transferee become a signatory to this Agreement and agree to
perform all of the obligations of the transferor hereunder.
8.4 Change of Control. In the event of a change in control of
the Lender, the Borrower and Brooke (Overseas) shall have the right to take all
actions set forth in Section 5.1 without Lender's approval and to prepay the
Loan at a price equal to the Adjusted Realized Value of the Loan, which right
may be exercised by the Borrower or Brooke (Overseas) for a period of sixty (60)
days after such event constituting a change in control. For purposes of this
Agreement, a change in control shall be deemed to occur when a person or entity
that is not, at the time of the Closing, an Affiliate of the Lender, becomes the
beneficial owner, directly or indirectly, of securities or ownership interests
representing 40% or more of the combined voting power of all outstanding
securities or ownership interests of the Lender. A change of control shall not
be deemed to occur due to a reconfiguration of
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the ownership or changes in the ownership of the limited partnership interests
of Apollo, provided that Apollo remains the owner, directly or indirectly, of
the Class A Interests in Joint Venture-I (as defined therein) owned by it as of
the date hereof.
8.5 Dissolution of Lender. In the event of the bankruptcy,
reorganization, liquidation, winding-up or dissolution of the Lender, the Lender
shall notify the Borrower and Brooke (Overseas) in writing within five (5) days
of such event. The Lender shall offer to the Borrower and Brooke (Overseas) to
prepay the Loan within ninety (90) days of the date of such notice for the then
existing Adjusted Realized Value of the Loan. In the event that the Borrower and
Brooke (Overseas) decline to prepay the Loan, the Lender's Rights may be offered
by the Borrower to third parties for purchase on terms and conditions to be
determined by the Borrower, the Lender and Brooke (Overseas), and the Lender
shall sell its Lender's Rights in accordance with the provisions of this Section
8.5.
8.6 Effect of Prepayment; Partial Sales Prohibited. In the
event of a prepayment of the Loan by the Borrower or by Brooke (Overseas) as set
forth in Section 8.4 or 8.5 hereof, this Agreement shall terminate and the
Borrower and Brooke (Overseas) shall have no further obligations to the Lender.
Notwithstanding anything to the contrary in this Agreement, a partial sale of
the Lender's Rights shall not be permitted and all sales of the Lender's Rights
shall be on a cash basis. Each of the Borrower, Brooke (Overseas) and the Lender
shall retain the right to approve any provisions of any agreement for the sale
of the Lender's Rights with respect to indemnification or other post-closing
contingent liabilities or price adjustments.
8.7 Termination of Provisions Restricting Transfer of Lender's
Rights. The provisions restricting the transfer of Lender's Rights contained in
this Section 8 shall automatically terminate upon the happening of any of the
following events:
(a) the adjudication of the Borrower as a bankrupt,
the execution by the Borrower of an assignment for the benefit of creditors, or
the appointment of a receiver for all or substantially all of its Properties; or
(b) the voluntary or involuntary dissolution of the
Borrower.
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8.8 Assurances with Respect to Sections 7 and 8. Upon (a) the
occurrence of the conditions that give rise to the right of the Lender or Brooke
(Overseas) (such party, the "Seller") to sell, or require the sale of, the
assets of the Borrower, the Interests and/or the Lender's Rights under Sections
7 or 8 of this Agreement and (b) the written request of the Seller, then the
other parties hereto shall take any action specified in such request reasonably
necessary to enable the Seller to exercise its rights under Sections 7 or 8 of
this Agreement.
9. Representations and Warranties.
9.1 Borrower. The Borrower represents and warrants as follows:
(a) The Borrower is a limited liability company duly
formed under the laws of the State of Delaware, with full power and authority to
enter into this Agreement and to consummate the transactions contemplated
herein.
(b) The execution and delivery by the Borrower of
this Agreement and the consummation by it of the transactions contemplated
herein will not violate its constituent documents, any law or any contract to
which the Borrower is a party, and no approval, authorization, consent, or order
or filing with, any third party, court, administrative agency or other
governmental authority is required for the execution and delivery by the
Borrower of this Agreement or any other agreements to be entered into by the
parties hereto in accordance with this Agreement and all agreements and
documents relating to the asset transfers contemplated by this Agreement, or the
consummation by it of the transactions contemplated herein.
(c) This Agreement is the legal, valid and binding
obligation of the Borrower enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization and similar laws of general application
affecting the rights and remedies of creditors.
(d) There exists no litigation pending or threatened
in writing (or any basis therefor) against the Borrower that (i) might adversely
affect the operations, business or business prospects of the Borrower, (ii)
might impede, delay or adversely affect the transactions contemplated by this
Agreement, or (iii) has not
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been disclosed to Apollo. There are no valid, effective and enforceable orders,
injunctions or decrees of any court or arbitral body with respect to the
Borrower that might adversely affect the operations, business or business
prospects of the Borrower.
9.2 Lender and Brooke (Overseas). Each of the Lender and
Brooke (Overseas) represents and warrants as follows:
(a) Such party is a corporation or a limited
liability company, as the case may be, duly organized, validly existing and in
good standing under the laws of its jurisdiction of incorporation or
establishment, as the case may be, with full power and authority to enter into
this Agreement and to consummate the transactions contemplated herein.
(b) The execution and delivery by such party of this
Agreement and the consummation by it of the transactions contemplated herein
have been authorized by the board of directors of such party or other management
authority of such party and will not violate its constituent documents, any law
or any contract to which such party hereto is a party, and no approval,
authorization, consent or order of, or filing with, any third party, court,
administrative agency, or governmental authority is required for the execution
and delivery by such party of this Agreement or the consummation by it of the
transactions contemplated herein.
(c) This Agreement is the legal, valid and binding
obligation of such party enforceable in accordance with its terms, subject to
bankruptcy, insolvency, reorganization and similar laws of general application
affecting the rights and remedies of creditors.
(d) The individual signing this Agreement on behalf
of such party is a duly authorized officer or representative of such party and
is empowered to execute this Agreement on behalf of such party.
(e) No agent, broker, investment banker, person or
firm acting on behalf of such party or under the authority of such party is or
will be entitled to any broker's or finder's fee or any other commission or
similar fee from any of the parties hereto in connection with the transactions
contemplated hereby.
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9.3 Additional Representations by Borrower and Brooke
(Overseas). In addition to the representations made by the Borrower and Brooke
(Overseas) in Sections 9.1 and 9.2, respectively, the Borrower and Brooke
(Overseas) represent and warrant as follows:
(a) LD Tobacco is the owner of the buildings and is
the lessee of the land plot located at the site of the New Factory and, upon
purchase of the land lease rights, will be entitled to dispose of such rights at
its own discretion, subject to compliance with the terms of the Land Lease
Agreement, dated March 27, 1996, between the Government of the City of Moscow,
as landlord, and LD Tobacco, as tenant, demising the land at the site of the New
Factory, as amended to date (the "New Factory Land Lease"), and applicable law,
and there are no encumbrances on, or rights of third parties to, the New
Factory.
(b) LD Tobacco is the current tenant under the New
Factory Land Lease.
(c) (i) Brooke (Overseas) has provided to the Lender
and Apollo access to complete and correct copies of all amendments, protocols
and other documents and agreements relating to the New Factory Land Lease; (ii)
the New Factory Land Lease has been duly authorized, executed and delivered by
the tenant and is the legal, valid and binding agreement of the tenant
thereunder, and, to the knowledge of Brooke (Overseas), of the landlord
thereunder, enforceable in accordance with its terms; (iii) the New Factory Land
Lease is in full force and effect without default by either the tenant or, to
the knowledge of Brooke (Overseas), the landlord thereunder, and, to the
knowledge of Brooke (Overseas), no condition exists and no event has occurred
that would result in, either after notice thereof or a lapse of time or both, a
breach, termination or default under the New Factory Land Lease; (iv) the tenant
under the New Factory Land Lease is current in the payment of all rent and other
amounts due and has fulfilled all other obligations under the terms of such New
Factory Land Lease as of the date hereof; (v) LD Tobacco has not subleased,
assigned or pledged any of its interests in the New Factory Land Lease; and (vi)
to the knowledge
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of the Brooke Parties, the New Factory Land Lease covers the entire estate that
it purports to cover.
(d) Each of ▇▇▇▇▇▇▇-▇▇▇▇▇ and LD Tobacco was duly
incorporated as a closed joint stock company and is validly existing as a legal
entity registered under the laws of the Russian Federation as of August 5, 1993
and December 29, 1995, respectively, and each of ▇▇▇▇▇▇▇-▇▇▇▇▇ and LD Tobacco
has full power and authority required to carry on its business as it is
currently being conducted as described in the business plans, and to own, lease
and operate its Properties.
(e) All of the outstanding shares of capital stock of
each of ▇▇▇▇▇▇▇-▇▇▇▇▇ and LD Tobacco (i) have been duly authorized and validly
issued and are fully paid; (ii) are not subject to any preemptive or similar
rights granted by ▇▇▇▇▇▇▇-▇▇▇▇▇ or LD Tobacco, respectively (except as may be
required by Russian law and/or set forth in the respective charters of
▇▇▇▇▇▇▇-▇▇▇▇▇ and LD Tobacco), and were properly registered with the appropriate
authorities competent for registration of the issuance of such shares and to the
extent owned by Brooke (Overseas) and ▇▇▇▇▇▇▇-▇▇▇▇▇, respectively, are free and
clear of any security interest, claim, lien, or encumbrance of any nature,
except with respect to those shares pledged by Brooke (Overseas) to Belgrave
Limited and ▇▇▇▇▇▇▇▇ Tumentsev to secure the payment obligations of Brooke
(Overseas) for 6.8% of the outstanding shares of ▇▇▇▇▇▇▇-▇▇▇▇▇; (iii) Brooke
(Overseas) has transferred 95.8% of the outstanding shares of ▇▇▇▇▇▇▇-▇▇▇▇▇ to
the Company; (iv) ▇▇▇▇▇▇▇-▇▇▇▇▇ owns 100% of the outstanding shares of LD
Tobacco; and (v) there is no existing option, warrant, call, right, commitment
or other agreement of any character to which ▇▇▇▇▇▇▇-▇▇▇▇▇ is a party requiring,
and there are no securities of ▇▇▇▇▇▇▇-▇▇▇▇▇ outstanding which upon conversion,
exercise or exchange would require, the issuance, sale or transfer of any
additional shares of capital stock or other securities of ▇▇▇▇▇▇▇-▇▇▇▇▇ to its
employees or any other person.
(f) Neither ▇▇▇▇▇▇▇-▇▇▇▇▇ nor LD Tobacco is in
violation of its respective charter.
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(g) Each of ▇▇▇▇▇▇▇-▇▇▇▇▇ and LD Tobacco has such
licenses, permits and approvals as are necessary to conduct its respective
business as described to Lender, except where the failure to have such license,
permit or approval would not have a material adverse effect on such entity; (ii)
each of ▇▇▇▇▇▇▇-▇▇▇▇▇ and LD Tobacco has fulfilled and performed all of its
obligations with respect to such licenses, permits and approvals except any
obligation which the failure to fulfill or perform would not have a material
adverse effect on such Affiliated Entity; and (iii) no event has occurred which
allows, or after notice or lapse of time would allow, revocation or termination
thereof or results, or after notice or lapse of time would result, in any other
material impairment of the rights of the holder of such license, permit or
approval.
(h) There exists no litigation pending or threatened
in writing (or any basis therefor) against ▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇ Tobacco and/or
Properties that might (i) detrimentally affect the ownership, value, use or
operation of the Properties for their intended purposes; (ii) adversely affect
the operations, business or business prospects of ▇▇▇▇▇▇▇-▇▇▇▇▇ or LD Tobacco;
or (iii) impede, delay or adversely affect the transactions contemplated by this
Agreement. There are no valid, effective and enforceable orders, injunctions or
decrees of any court or arbitral body with respect to ▇▇▇▇▇▇▇-▇▇▇▇▇ and/or
Properties that might (x) detrimentally affect the ownership, value, use or
operation of the Properties for their intended purposes; (y) adversely affect
the operations, business or business prospects of ▇▇▇▇▇▇▇-▇▇▇▇▇ or LD Tobacco;
or (z) impede, delay or adversely affect the transactions contemplated by this
Agreement. To the knowledge of Brooke (Overseas), there are no material
impediments to LD Tobacco obtaining all necessary approvals for LD Tobacco's
planned construction of the New Factory. Neither ▇▇▇▇▇▇▇-▇▇▇▇▇ nor LD Tobacco
has filed, nor been the subject of any filing of, a petition under bankruptcy
laws, insolvency laws, laws for the composition of indebtedness, or laws for the
reorganization of debtors.
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(i) The business of ▇▇▇▇▇▇▇-▇▇▇▇▇ and LD Tobacco is
not being, nor has it in the past been, conducted in violation of any law or any
governmental order applicable to ▇▇▇▇▇▇▇-▇▇▇▇▇ or LD Tobacco or any of their
assets or Properties, including, without limitation, the Foreign Corrupt
Practices Act of 1977, as amended, except for possible violations which
individually or in the aggregate would not have a material adverse effect on
▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇ Tobacco or the Borrower. ▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇ Tobacco and the
Borrower are in compliance with all applicable environmental laws and have not
received any communication from any governmental authority that alleges that
▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇ Tobacco or the Borrower is not in compliance with applicable
environmental laws where such noncompliance would have a material adverse effect
on ▇▇▇▇▇▇▇-▇▇▇▇▇ or LD Tobacco.
(j) All material tax returns and reports required to
be filed by ▇▇▇▇▇▇▇-▇▇▇▇▇ and LD Tobacco prior to the date hereof or with
respect to taxable periods ending prior to the date hereof have been or will be
filed with the appropriate governmental authorities prior to the date hereof or
by the due date thereof including extensions. Such tax returns and reports
correctly reflect (and as to returns not filed as of the date hereof, will
correctly reflect) all material tax liabilities of ▇▇▇▇▇▇▇-▇▇▇▇▇ and LD Tobacco
required to be shown thereon. To the knowledge of Brooke (Overseas), all
material tax returns and reports required to be filed by ▇▇▇▇▇▇▇-▇▇▇▇▇ and LD
Tobacco prior to the date hereof or with respect to taxable periods ending prior
to the date hereof have been or will be filed with the appropriate governmental
authorities prior to the date hereof or by the due date thereof including
extensions. Such tax returns and reports correctly reflect (and as to returns
not filed as of the date hereof, will correctly reflect) all material tax
liabilities of ▇▇▇▇▇▇▇-▇▇▇▇▇ and LD Tobacco required to be shown thereon. To the
knowledge of Brooke (Overseas), there are no pending tax investigations or
outside audits of ▇▇▇▇▇▇▇-▇▇▇▇▇ or LD Tobacco being conducted and, except as set
forth in Schedule 9.3(j), neither ▇▇▇▇▇▇▇-▇▇▇▇▇ nor LD Tobacco has any
outstanding tax penalties against it.
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(k) Brooke (Overseas) has identified to the Lender
and Apollo and has provided to the Lender and Apollo complete and correct copies
of all material employment agreements or employee benefit plans covering present
and former employees of ▇▇▇▇▇▇▇-▇▇▇▇▇ and LD Tobacco or their beneficiaries.
(l) A schedule of the material contracts of LD
Tobacco and the status of each is annexed hereto as Schedule 9.3(l) (the
"Material Contracts"). (i) The Material Contracts have been duly authorized,
executed and delivered by LD Tobacco and are legal, valid and binding agreements
of LD Tobacco enforceable against it in accordance with their respective terms;
(ii) LD Tobacco has fully performed all obligations required to be performed
under each of the Material Contracts including but not limited to the payment of
all amounts due and owing thereunder; (iii) neither LD Tobacco nor, to the
knowledge of Brooke (Overseas), any other party is in default under any of the
Material Contracts; and (iv) to the knowledge of Brooke (Overseas), no condition
exists and no event has occurred that would result in, either after notice of or
lapse of time or both, in a breach, termination or default under any of the
Material Contracts. LD Tobacco has not assigned any of its interests in the
Material Contracts.
(m) The unaudited financial statements of LD Tobacco
and the audited financial statements of ▇▇▇▇▇▇▇-▇▇▇▇▇ for the years ended
December 31, 1995 and 1996 furnished to the Lender and Apollo have been prepared
in accordance with U.S. generally accepted accounting principles consistently
applied and fairly present the matters set forth therein.
(n) A schedule of all material related party
obligations relating to ▇▇▇▇▇▇▇-▇▇▇▇▇ and LD Tobacco that will be outstanding as
of the Closing Date is annexed hereto as Schedule 9.3(n).
(o) ▇▇▇▇▇▇▇-▇▇▇▇▇ has all necessary authority and
approvals to operate the Old Factory.
(p) The previously existing intercompany loan from
Brooke (Overseas) to ▇▇▇▇▇▇▇-▇▇▇▇▇ has been cancelled.
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10. Notices. All notices required to be given hereunder shall be in
writing and shall be deemed to have been properly given if sent by registered or
certified mail, postage prepaid, or by telecopy, addressed as follows:
(a) If to the Borrower:
Western Tobacco Investments LLC
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
(b) If to the Lender:
Western Realty Development LLC
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Copy to:
Apollo Real Estate
Investment Fund III, L.P.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Copy to:
Akin, Gump, Strauss, ▇▇▇▇▇ & ▇▇▇▇, L.L.P.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
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Copy to:
Coudert Brothers
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
(c) If to Brooke (Overseas):
Brooke (Overseas) Ltd.
▇▇▇ ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Copy to:
Coudert Brothers
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Such notices shall be deemed to have been received five (5) days after deposit
in the mail or within twenty-four (24) hours after transmission by telecopy. Any
party may change the address to which notices shall be sent by notice in writing
to the other parties as provided herein.
11. Miscellaneous.
11.1 Further Assurances. The parties will, in a timely manner
and as required from time to time, take all such actions as may be necessary or
appropriate to cause their Affiliates, the Borrower and the Affiliated Entities
to implement the transactions contemplated by this Agreement and to ensure that
such entities take all such actions as may be necessary to give full effect to
the provisions of this Agreement and to refrain from taking any actions which
would contravene the intent or the provisions of this Agreement.
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11.2 Term of Agreement. This Agreement will continue in full
force and effect until the earlier of (a) termination by mutual consent of the
parties hereto, (b) the dissolution of the Borrower, or (c) the prepayment of
the Loan under Section 8.4 or 8.5.
11.3 No Acceleration. The Lender expressly acknowledges that
no breach of this Agreement by any party hereto or any other cause or event
shall cause the Loan or any part thereof to become due and payable or shall give
the Lender a right to declare the Loan or any part thereof due and payable.
11.4 Assignment. Except as provided in Section 7 or 8 hereof,
this Agreement shall not be assigned by any party hereto without the prior
written consent of the other parties hereto. This Agreement shall inure to the
benefit of the parties hereto and shall be binding upon the successors and
assigns of the parties hereto.
11.5 Amendment, Modification and Waiver. This Agreement may be
modified, amended and supplemented only upon the unanimous mutual written
agreement of the parties hereto. Each party may waive any term, provision or
condition intended for its benefit, provided that such waiver be in writing and
be signed by the party so waiving.
11.6 Severability. If any one or more of the provisions of
this Agreement shall be held invalid, illegal or unenforceable under applicable
law, the validity, legality and enforceability of the remaining provisions shall
not be affected or impaired thereby.
11.7 Entire Agreement; Headings. This Agreement, including the
schedules hereto, constitutes the entire agreement of the parties with respect
to the subject matter hereof and may not be changed, terminated or discharged
orally. The headings appearing in this Agreement have been inserted solely for
the convenience of the parties and shall be of no force or effect in the
construction of the provisions of this Agreement.
11.8 Indemnification. Each party to this Agreement agrees to
indemnify, defend and hold the other party free and harmless from and against,
and to
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reimburse the other party on a current basis for, all claims, damages,
expenses and liabilities of such other party arising from any breach of such
indemnifying party of the terms of this Agreement, including, without
limitation, reasonable legal expenses and attorneys' fees paid or incurred by
the indemnified party in defense of any proceedings brought against such
indemnified party individually or against such indemnified party and such
indemnifying party (jointly or severally) arising out of any of the foregoing.
The provisions of this Section 11.8 shall survive the termination of this
Agreement and the representations and warranties given by the parties shall
survive for the applicable statute of limitations.
11.9 Governing Law. This Agreement shall be governed by New
York law, without regard to its conflict of laws principles.
11.10 Arbitration. Any dispute, controversy or claim arising
out of or relating to this Agreement or to the business and affairs of the
Borrower or the rights and obligations of any of the parties hereto shall be
finally settled by binding arbitration to be conducted in New York, New York in
accordance with the rules then in force of the American Arbitration Association,
including the rules governing the appointment of arbitrators. Any final decision
in any such arbitration proceeding shall be final and non-appealable and shall
be binding on the parties thereto and enforceable in courts of competent
jurisdiction without a further review on the merits.
11.11 Confidentiality. By executing this Agreement, each party
hereto expressly agrees, at all times during the term of this Agreement, to
maintain the confidentiality of, and not to disclose to any person not a party
hereto, any information relating to the business, financial structure, financial
position or financial results, clients or affairs of the Borrower, its
Affiliates or Affiliated Entities that shall not be generally known to the
public, except as otherwise required by applicable law or by any regulatory
organization having jurisdiction. Except as provided by law, no press releases,
announcements or other public disclosures related to this Agreement or the
transactions contemplated herein will be issued or made, without the joint
approval of Apollo and Brooke (Overseas). Nothing in this Section shall be
deemed to prohibit
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Apollo from making any disclosures regarding this Agreement or the transactions
contemplated herein to any of its partners.
11.12 Counterparts. This Agreement may be executed by the
parties in one or more counterparts, each of which shall be deemed an original
but all of which taken together shall constitute one and the same instrument.
11.13 Rights of Apollo. Any rights Apollo may have hereunder
are conditioned upon Apollo being a member in the Lender and shall terminate
upon Apollo ceasing to be a member of the Lender.
11.14 Liability of Brooke (Overseas). Nothing in this
Agreement shall be interpreted to imply that Brooke (Overseas) is liable for the
repayment of the Loan as an obligor, guarantor or otherwise.
11.15 Fees and Expenses. All fees and expenses incurred in the
negotiation, preparation and execution of this Agreement, including all exhibits
hereto and all related documents shall be for the account of and payable by the
party incurring them.
[The remainder of this page is intentionally left blank.]
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IN WITNESS WHEREOF, the parties hereto have duly executed or caused
their duly authorized officers to execute this Agreement as of the date and year
first above written.
WESTERN TOBACCO
INVESTMENTS LLC
By: Brooke (Overseas) Ltd.,
-------------------------------
its Manager
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President
WESTERN REALTY
DEVELOPMENT LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Chairman
BROOKE (OVERSEAS) LTD.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Executive Vice President
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Schedule A
to Participating Loan Agreement
The following terms shall have the following definitions:
"Adjusted Realized Value" shall mean (i) with respect to any Interest,
the capital contribution received by the Borrower for such Interest in cash plus
a 15% annual cumulative rate of return on such contribution compounded on a
quarterly basis, less distributions or dividends in cash or the fair market
value of distributions of property or in-kind distributions received by Brooke
(Overseas) in respect of such Interest as of the date such Adjusted Realized
Value is calculated or (ii) with respect to the Loan, the amount advanced to the
Borrower as a Loan in cash plus a 15% annual cumulative rate of return on such
advance compounded on a quarterly basis, less payments in cash made to the
Lender hereunder or the fair market value of payments in-kind made to the Lender
in respect of the Loan as of the date such Adjusted Realized Value is
calculated, provided that for the purposes of this definition the amount of the
First Advance shall be considered advanced in cash to the Borrower by the Lender
on February 27, 1998.
"Affiliate" shall mean, with respect to any person, a person or entity
which directly or indirectly controls, is controlled by, or is under common
control with, such person.
"Affiliated Entity" shall mean ▇▇▇▇▇▇▇-▇▇▇▇▇, ▇▇ Tobacco and any other
direct or indirect wholly-owned subsidiary of the Borrower and any other entity
(whether or not incorporated) in which any of the foregoing entities or the
Borrower has or hereafter acquires a controlling interest.
"Apollo" shall have the meaning ascribed thereto in the first "WHEREAS"
clause hereof.
"Borrower" shall have the meaning ascribed thereto in the introductory
paragraph hereof.
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"Brooke (Overseas)" shall have the meaning ascribed thereto in the
introductory paragraph hereof.
"BrookeMil" shall have the meaning ascribed thereto in the first
"WHEREAS" clause hereof.
"Budget" shall have the meaning ascribed thereto in Section 5.1(i)
hereof.
"Business Day" shall mean any day except a Saturday, Sunday or other
day on which commercial banks are authorized by law to close in New York City or
Moscow.
"Closing" shall have the meaning ascribed thereto in Section 4.1
hereof.
"Closing Date" shall have the meaning ascribed thereto in Section 4.1
hereof.
"First Advance" shall have the meaning ascribed thereto in Section 2.3
hereof.
"Interests" shall have the meaning ascribed thereto in second "WHEREAS"
clause hereof.
"Joint Venture-I Agreement" shall have the meaning ascribed thereto in
the first "WHEREAS" clause hereof.
"Joint Venture-II Agreement" shall have the meaning ascribed thereto in
the second "WHEREAS" clause hereof.
"Lender" shall have the meaning ascribed thereto in the introductory
paragraph hereof.
"Lender's Rights" shall have the meaning ascribed thereto in Section
8.1 hereof.
"LD Tobacco" shall mean ▇▇▇▇▇▇▇-▇▇▇▇▇ Tobacco Ltd., a Russian closed
joint stock company.
"▇▇▇▇▇▇▇-▇▇▇▇▇" shall mean ▇▇▇▇▇▇▇-▇▇▇▇▇ Ltd., a Russian closed joint
stock company.
"Loan" shall have the meaning ascribed thereto in Section 2.1 hereof.
"Material Contracts" shall have the meaning ascribed thereto in Section
9.3(l) hereof.
"Maturity Date" shall have the meaning ascribed thereto in Section 2.1
hereof.
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"New Factory" shall mean a new cigarette factory to be located at
Kashirskoye Shosse, Moscow, Russian Federation, to be constructed and operated
by LD Tobacco.
"New Factory Land Lease" shall have the meaning ascribed thereto in
Section 9.3(a) hereof.
"New Valley" shall have the meaning ascribed thereto in the first
"WHEREAS" clause hereof.
"Old Factory" shall mean the existing cigarette factory located in
Moscow at ▇▇. ▇▇▇▇▇▇▇ ▇ operated by ▇▇▇▇▇▇▇-▇▇▇▇▇.
"Pledge Agreement" shall have the meaning ascribed thereto in Section 3
hereof.
"Properties" shall mean the New Factory and any other property to which
the Company or any Affiliated Entity has or hereafter acquires rights.
"Reimbursement Amount" shall have the meaning ascribed thereto in
Section 2.6 hereof.
"Russian Bank Loan" shall have the meaning ascribed thereto in Section
6 hereof.
"Russian Loan Default" shall have the meaning ascribed thereto in
Section 7.1(d) hereof.
"Second Advance" shall have the meaning ascribed thereto in Section 2.4
hereof.
"Seller" shall have the meaning ascribed thereto in Section 8.8 hereof.
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