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Exhibit 10.3
WESTERN REALTY REPIN LLC
LIMITED LIABILITY COMPANY AGREEMENT
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LIMITED LIABILITY COMPANY AGREEMENT
THIS LIMITED LIABILITY COMPANY AGREEMENT is entered into as of June 18,
1998, by and among Western Realty Repin 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"), and New Valley Corporation, a Delaware corporation
with offices at ▇▇▇ ▇.▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇, ▇▇▇▇▇▇▇ ("New
Valley") (Apollo and New Valley 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 Company has been formed to lend money, under the
Participating Loan Agreement (as hereinafter defined), to BrookeMil Ltd., a
Cayman Islands company ("BrookeMil"), which through its ownership of
approximately 92.8% of the shares in VNIIkholodmash-Holding, a Russian open
joint stock company ("Kremlin Entity-I"), and 52% of the shares in Kamennyi
Most, a Russian open joint stock company ("Kremlin Entity-II"), will hold the
rights to, develop, improve, maintain, repair, operate, lease and manage
properties located at Repin Square (Bolotnaya) 14, Moscow, Russia 109072
("Kremlin Site-I"), and Sofiiskaya ▇▇▇▇▇▇▇▇▇▇▇▇ ▇ (▇▇▇▇▇▇▇▇ ▇), ▇ (▇▇▇▇▇▇▇▇ ▇,
▇-▇▇ ▇▇▇ ▇-▇), ▇ (▇▇▇▇▇▇▇▇ ▇ and 3-4) and ▇▇ (▇▇▇▇▇▇▇▇▇ ▇, ▇ ▇▇▇ ▇), ▇▇▇▇▇▇,
▇▇▇▇▇▇ ▇▇▇▇▇▇ ("Kremlin Site-II") (Kremlin Entity-I and Kremlin Entity-II are
collectively referred to hereafter as the "Kremlin Entities" and Kremlin Site-I
and Kremlin Site-II are collectively referred to hereafter as the "Kremlin
Sites"), and engage in all activities incidental thereto;
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WHEREAS, the parties hereto have agreed that the Participating Loan
Agreement substantially in the form annexed hereto as Exhibit A (the
"Participating Loan Agreement") authorizing a $25,000,000 loan from the Company
to BrookeMil (the "Participating Loan") shall be entered into by and between the
Company and BrookeMil;
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 the 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:
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 in the State of Delaware on June 15, 1998 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.
2.2 Purpose. The Company was formed for the purpose of
investing, developing, improving, maintaining, repairing, operating, leasing and
managing, through the
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Participating Loan to BrookeMil, the Kremlin Sites, and for any other activities
incidental thereto. The purpose of the Company can be modified as provided in
Section 12.4 hereof or otherwise by written agreement of the Members.
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 $18,750,000, 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 $6,250,000, to be contributed in
cash and expenditures as set forth in Section 2.4(c). The Class A Interests and
the Class B Interests are hereinafter collectively referred to as the
"Interests." The subscriptions shall be made as follows:
Apollo:
-------
Type of Interests Number of Interests Contribution Value of Contribution
----------------- ------------------- ------------ ---------------------
Class A 10,000 Cash $18,750,000
Interests
New Valley:
-----------
Type of Interests Number of Interests Contribution Value of Contribution
----------------- ------------------- ------------ ---------------------
Class B 10,000 Expenditures $6,250,000
Interests as set forth
in Section 2.4(c)
and Cash
Total for all
Members: 20,000 $25,000,000
-------
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(b) At the Initial Closing (as defined in Section
10.1) the Company shall issue (i) 4,800 of its Class A Interests, at a price of
$1,875 per interest, and (ii) 4,800 of its Class B Interests, at a price of $625
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 Closing shall be as
follows:
Apollo:
-------
Type of Interests Number of Interests Contribution Value of Contribution
----------------- ------------------- ------------ ---------------------
Class A 4,800 Cash $9,000,000
Interests
New Valley:
-----------
Type of Interests Number of Interests Contribution Value of Contribution
----------------- ------------------- ------------ ---------------------
Class B 4,800 Expenditures $3,000,000
Interests as set forth
in Section 2.4(c)
Total for All
-------------
Members 9,600 $12,000,000
-------
(c) At the Initial Subsequent Closing (as defined in
Section 10.6), and from time to time thereafter 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 Subsequent
Closings described in Section 10.7 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 price per
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Interest set forth in Section 2.4(b). Such additional contributions shall be
made in such manner so as to maintain the ratio of $3.00 contributed by Apollo
for every $1.00 in value contributed by New Valley. Upon ten (10) Business Days'
written notice by the Company to each of Apollo and New Valley, such additional
contributions shall be made by Apollo in cash and by New Valley in expenditures
incurred with respect to the Kremlin Sites and the Kremlin Entities, including
those expenditures incurred through the date hereof and set forth in Schedule
2.4(c), and, after such expenditures have been contributed and to the extent
they do not cover the subscribed amount, thereafter in cash. 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 10.7 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 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(c) 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 incurred
by New Valley with respect to the Kremlin Sites and the Kremlin Entities and set
forth in Schedule 2.4(c) and of additional expenditures incurred by it before or
after the Initial Closing Date on items set forth in the approved Budget exceeds
25% of the total contributions by Apollo and New Valley, New Valley shall be
reimbursed by the Company from the proceeds of Subsequent Closings for such
expenditures in excess of such amount (to the extent New Valley provides to
Apollo proper documentation substantiating such expenditures).
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(d) In the event any Member shall fail to make any
portion of its 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 bea
to the aggregate contributions of all paying Members.
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 bank account of the Company as shall be
specified in a notice by the Company to the Members sent by telecopy at least
one Business Day prior to the date of any Closing (as defined in Section 10
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 otherwise.
2.7 Rights of Class A Interests.
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(a) The holders of 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 20% 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 50% of the distribution. The
distribution rights of the Class A Interests are set forth in more detail in
Section A.11 of Schedul 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 holders of 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 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 holders of the Class A Interests to receive
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distributions in liquidation of the Company are subject to the provisions of
Section A.12 of Schedule 4 annexed hereto.
(c) The holders of the Class A Interests shall have
one vote in the aggregate.
2.8 Rights of Class B Interests.
(a) Upon completion of the Class A Distribution
Period, the holders of the Class B 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 the Class B Interests equals the total consideration paid for
such Class B Interests pursuant to Section 2.4 plus a 20% 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"); and (ii) after completion of
the Class A Distribution Period and the Class B Distribution Period, further
distributions by the Company, if any, in an amount equal to 50% of the
distribution. The distribution rights of the Class B 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 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 holders of the Class B Interests shall be
entitled to such Class B Liquidation Preference only in the event such
liquidation takes
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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(a)(ii) hereof.
Notwithstanding the foregoing provisions of this Section 2.8(b), the rights of
the holders 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) The holders of the Class B 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) managers or
more than six (6) managers. 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 New Valley on 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 New Valley. ▇▇▇▇▇▇▇ ▇.
▇▇▇▇▇ or such other person designated by New Valley (who shall count as one of
the appointments of New Valley) shall be the Chairman of the Board of Managers.
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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; to grant a consent required hereunder or thereunder or waive
any provisions hereof or thereof on behalf of the Company or any Affiliated
Entity; to amend the Participating Loan Agreement; or to grant a consent
required thereunder or waive any provisions thereof on behalf of the Company;
(b) unless specified in the approved Budget (as
hereinafter defined), to sell, transfer, assign, grant a right to use, grant a
right of first refusal, grant 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 $200,000 in the
aggregate in any given year;
(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;
(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
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(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 $200,000 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, except that domestication of
BrookeMil in the State of Delaware shall not be subject to this Section 2.9;
(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, except as contemplated
herein;
(i) to approve or amend the annual budget and
business plan, including capital expenditures, of the Company (collectively, the
"Budget"), which Budget shall incorporate the annual budgets and business plan
of the Kremlin Division of BrookeMil, as well as any contributions or resources
to be made available by the Company to any other Affiliated Entity;
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(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 $100,000 individually or
$250,000 in the aggregate in any 12 month period;
(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 a purchase price
exceeding $100,000 in each particular transaction or exceeding $200,000 in the
aggregate in any 12 month period, 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;
(m) unless specified in the approved Budget, 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 $100,000 per transaction or series of transactions in any 12 month
period;
(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;
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(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 or this Agreement)
from (i) the Company to the Members, or (ii) an Affiliated Entity to its
shareholders, members or participants, as applicable; and
(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 purpose of the ▇▇▇▇▇, shall be considered to be the
MICEX rate at the
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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.
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(c), received by the Company
from the Members shall be (i) advanced to BrookeMil under the Participating Loan
Agreement to be used as specified in the approved Budget and the Participating
Loan Agreement for financing the acquisition, repair, construction, improvement,
operation, management and development of the Kremlin Sites and such other
projects as may be approved in the Budget or in the Participating Loan
Agreement, and (ii) transferred to New Valley as reimbursement for the
expenditures in excess of 25% of the total contributions by Apollo and New
Valley as set forth in Section 2.4(c).
(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
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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 annexed
hereto.
5. Officers, Employees and Independent Accountants.
5.1 Chairman and Corporate Officers.
(a) Except as otherwise provided herein, the officers
of the Company and BrookeMil and the Chairman of the Board of Managers of the
Company and BrookeMil shall be appointed and removed by New Valley. The initial
Chairman of the Board of Managers of the Company will be ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇. The
initial officers of the Company will be as follows:
President - ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇;
Vice President - ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇;
Vice President - ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇; and
Secretary - ▇▇▇▇ ▇. ▇▇▇▇.
The Chairman of BrookeMil shall be ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇. The officers of BrookeMil
shall be:
President - ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇;
Executive Vice President and Director - ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇;
Secretary - Sentinel Corporation; and
Assistant Secretaries - ▇▇▇▇ ▇. ▇▇▇▇ and ▇. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ III.
(b) Apollo shall have the right to approve
replacements of any of the officers set forth in this Section 5.1. Such approval
shall not be unreasonably withheld or delayed.
(c) Any officer of the Company or any Affiliated
Entity shall be
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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, banking or other laws by a court of
competent jurisdiction, unless retention is approved unanimously by the Board of
Managers as provided in Section 2.9.
(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, subject to the
provisions of this Agreement.
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 of the Company.
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6.1 Books and Records; Audited Financial Statements. Each of
the Members acknowledges and agrees that the Company shall 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. 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. The Company shall prepare its financial statements in
accordance with U.S. generally accepted accounting principles, consistently
applied.
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 prepared in accordance with U.S. generally
accepted accounting principles, 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 the Kremlin
Division of BrookeMil and each Affiliated Entity for each fiscal year, at least
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 the Kremlin Sites 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 the Kremlin Sites or any other
Property may be used other than for budgeted capital expenditures involving the
same property that generated such proceeds, provided that for the purposes of
this Section 6.5(a) the Kremlin Sites together shall be considered one Property.
(b) The Company is intended to be a "real estate
operating company" (a "REOC") as this term is defined in 29 C.R.F. Section
2510.3-101(e). The Members shall conduct the affairs and operations of the
Company in such manner that the Company will qualify as a REOC. If Apollo or its
counsel shall reasonably determine at any time that the Company
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may not qualify for such status, Apollo and New Valley 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, giving due
consideration to the relative economic and tax benefits anticipated by the
parties to this Agreement.
(c) The parties hereto hereby agree that the Company
and the Affiliated Entities shall conduct their activities in compliance with
applicable laws. The parties further agree that the Company and the Affiliated
Entities shall at all times conform and limit their activities in accordance
with, among other things, certain U.S. laws and regulations that impose
comprehensive U.S. embargoes or other sanctions against certain countries. Such
embargoes and sanctions generally prohibit U.S. entities and individuals from
participating in, supporting or facilitating any transactions, trade, investment
or financing activities of any kind related to such countries. At this time, a
variety of U.S. sanctions and embargoes are in place against various countries,
including Cuba, Iran, Iraq, Libya, North Korea and Sudan. The United States also
generally bars U.S. entities from financing transactions associated with the
governments of India and Pakistan. Accordingly, neither the Company nor the
Affiliated Entities shall knowingly engage in any business activities associated
with any of the foregoing countries, for so long as such country is subject to
any such sanction or embargo, or with any other country subject to applicable
U.S. trade or transaction restrictions.
(d) The parties further agree that as soon as
permitted under the privatization laws they shall use their best efforts to
divest the scientific research operations of Kremlin Entity-I to a separate
entity not owned, directly or indirectly, by the Company. Prior to such time,
the business of Kremlin Entity-I unrelated to real estate operations shall be
limited to that described in the letter from the General Director of Kremlin
Entity-I dated June 17, 1998
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previously furnished to Apollo, and the ability of the current General Director
of Kremlin Entity-I to execute contracts on behalf of Kremlin Entity-I and to
expend money shall be limited by the board of directors of Kremlin Entity-I the
majority of which shall be elected by BrookeMil.
6.6 Purchase of Additional Shares in Kremlin Entity-I. New
Valley agrees to use its best efforts to cause BrookeMil to purchase on the
secondary market 5% of the shares of the Kremlin Entity-I that will be
distributed by the Moscow Property Fund to the existing and former employees of
Kremlin Entity-I from the "FARP" fund formed in the process of the privatization
of Kremlin Entity-I, and thereby increase BrookeMil's interest in Kremlin
Entity-I to approximately 97.8% of the shares
6.7 Approvals from the Russian Authorities. New Valley agrees
to use its best efforts to cause BrookeMil and the Kremlin Entities, as
applicable, to (i) obtain the approval of the appropriate Russian antimonopoly
authorities with respect to BrookeMil's purchase of approximately 2.8% of the
shares in Kremlin Entity-I not covered by the existing approval authorizing the
purchase of 90% of the shares in Kremlin Entity-I by BrookeMil; (ii) obtain
ownership certificates in favor of Kremlin Entity-II with respect to the
following buildings at Kremlin Site-II: Sofiiskaya Naberezhnaya 6 (buildings
2-6a and 7-9) and 8 (building 3-4); (iii) amend the charter of Kremlin Entity-I
in accordance with the Russian Law on Joint Stock Companies; and (iv) register
the issuance of the shares of Kremlin Entity-I with the appropriate authorities
competent to register the issuance of such shares.
7. Operation and Management of Affiliated Entities.
7.1 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 direct management rights with respect to each
Affiliated Entity:
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(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 business issues; and to meet
regularly with management fo such consultation and advice; and
(b) Apollo shall have the right to appoint one (1)
member of the board of directors of BrookeMil and shall have the right to
dismiss and replace such member at any time.
7.2 Books and Records; Audited Financial Statements. The
Company 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 each year by Coopers & ▇▇▇▇▇▇▇ LLP o 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 45 days of the end of each fiscal year.
7.3 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
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all normal business hours. Apollo shall have access in Moscow, Russia and Miami,
Florida to the books and records of each Affiliated Entity.
8. Restrictions on Transfers of Interests.
8.1 Limitations on Members' Right to Sell Interests. Except as
contemplated by Section 8.2 and Section 8.4, 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 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 8. 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 60 days from the placement or occurrence thereof.
8.2 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 8.2 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 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.
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8.3 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 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 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 New Valley, 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 New Valley, respectively.
8.4 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 days after such event occurs. The Interests owned by the
Dissolving Member shall first be offered for purchase by the other Members
within 90 days after 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 8.4.
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8.5 Termination of the Provisions Restricting the Sale of
Interests. The provisions restricting the sale of Interests contained in this
Section 8 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 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.
9. Representations and Warranties.
9.1 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
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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, moratorium and similar laws of general
application affecting the rights and remedies of creditors and, with respect to
equitable remedies, subject to the discretion of the court.
(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 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.
9.2 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
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27
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.
(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 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.
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9.3 Additional Representations by New Valley. In addition to
the representations made by New Valley in Section 9.2 above, New Valley
represents and warrants as follows:
(a) To the knowledge of New Valley, Kremlin Entity-I
is the lessee of the land plot located at Kremlin Site-I in accordance with the
terms of the Land Lease Agreement, dated October 7, 1995, between the Government
of the City of Moscow, as landlord, and Kremlin Entity-I, as tenant (the
"Kremlin-I Land Lease"), demising the land at Kremlin Site-I, and is the owner
of the building located at Repin Square (Bolotnaya) 14 (buildings 1, 2, 3, 4, 5,
6, 7, 8, 9-12, 10, 13, 14 and 15).
(b) To the knowledge of New Valley, Kremlin Entity-I
(i) is the tenant under the existing unregistered lease agreement for the land
plot at Kremlin Site-II dated May 23, 1991 that may, because of its unregistered
status, no longer be valid, (ii) is expected to be granted leasehold rights with
respect to the land plot located at Kremlin Site-II in accordance with Prefect
Order No. 330-r MKZ dated March 4, 1995 and the Government of the City of Moscow
Decree No. 156 dated March 3, 1998, and New Valley has no reasons to believe
that a new land lease agreement with respect to Kremlin Site-II will not be
entered into between Kremlin Entity-II and the Government of the City of Moscow
as set forth in the above-mentioned documents; (iii) is the owner of the
buildings located at Sofiiskaya ▇▇▇▇▇▇▇▇▇▇▇▇ ▇ (▇▇▇▇▇▇▇▇ ▇), ▇ (▇▇▇▇▇▇▇▇ ▇), ▇
(▇▇▇▇▇▇▇▇ 1) and 10 (buildings 4, 5 and 6), and therefore is entitled to the use
of land underlying the buildings; and (iv) is the successor in interest,
including any and all rights associated with land and buildings at Kremlin
Site-II, to the previously existing Joint Venture Kamennyi Most.
(c) (i) New Valley has provided to Apollo access to
complete and correct copies of all amendments, protocols and other documents and
agreements in its
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possession relating to the Kremlin-I Land Lease and to the granting of land
rights for Kremlin Site-II; (ii) to the knowledge of New Valley, the Kremlin-I
Land Lease has been duly authorized, executed and delivered and is the legal,
valid and binding agreement, enforceable in accordance with its terms; (iii) to
the knowledge of New Valley, the tenant under the Kremlin-I Land Lease is not in
default, except with respect to the preparation of feasibility study and the
payment of approximately $2,700,000 for the purchase of land lease rights,
however, to the knowledge of New Valley, Kremlin Entity-I has not received any
notice of default, imposition of penalties, termination or suspension of the
Kremlin-I Land Lease from the landlord thereunder and BrookeMil does not have
reasons to believe that such default would result in termination of the
Kremlin-I Land Lease and intends to make the payment for the purchase of land
lease rights in full without delay upon the Initial Closing, and,; and (iv) to
the knowledge of New Valley, Kremlin Entity-I has not subleased, assigned or
pledged any of its interests in the Kremlin-I Land Lease.
(d) To the knowledge of New Valley and subject to the
requirements of the Russian Law on Joint Stock Companies to amend the charter in
accordance with such Law, Kremlin Entity-I was duly incorporated as an open
joint stock company, is validly existing as a legal entity registered under the
laws of the Russian Federation as of May 26, 1994, and has full corporate 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. To the knowledge of New Valley, Kremlin Entity-II was
duly incorporated initially as a joint venture as of February 25, 1991, was
reorganized into an open joint stock company as of May 21, 1998, is validly
existing as a legal entity registered under the laws of the Russian Federation,
and has full corporate power and authority required to carry on its business as
it is currently being conducted and/or as described in the business plans, an to
own, lease and operate its properties.
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(e) BrookeMil is a company duly organized, validly
existing and in good standing under the laws of Cayman Islands, with full power
and authority to consummate the transactions contemplated by this Agreement. All
of the outstanding shares of BrookeMil have been duly authorized and validly
issued and are fully paid and non-assessable. New Valley owns 99.1% of the
issued and outstanding shares of BrookeMil free and clear of any security
interest, claim, lien, or encumbrance. There are no outstanding options,
preemptive or similar rights granted by New Valley with respect to the shares of
BrookeMil. BrookeMil has no active subsidiaries except for the Kremlin Entities,
Western Realty LLC and Western Realty Development LLC. To the knowledge of New
Valley, open joint stock company Kholodmashinvest is the only subsidiary of
Kremlin Entity-I. Kremlin Entity-I also owns a minority interest in open joint
stock company Scientific Technical Experimental Center for Refrigeration
Industry, a subsidiary of BrookeMil. To the knowledge of New Valley, Kremlin
Entity-II has no subsidiaries. Open joint stock company Kholodmashinvest and
open joint stock company Scientific Technical Experimental Center for
Refrigeration Industry have been created for the purposes of scientific research
but are inactive. BrookeMil owns approximately 92.8% of the outstanding shares
of Kremlin Entity-I and 52% of the outstanding shares of Kremlin Entity-II.
BrookeMil has received all approvals and filed all notices necessary for its
acquisition of such shares in the Kremlin Entities, except that no approval was
received from the Russian antimonopoly authorities with respect to the
acquisition of 2.98% out of 92.8% of the shares in Kremlin Entity-I owned by
BrookeMil. To the knowledge of New Valley, (i) all of the outstanding shares of
capital stock of Kremlin Entity-I have been duly authorized, validly issued,
properly registered with the appropriate authorities competent for registration
of the issuanc of such shares, and are fully paid, (ii) all of the outstanding
shares of capital stock of Kremlin Entity-II have been duly authorized and are
fully paid; and (iii) except as may be established in Russian law and/or set
forth in the respective charters of the Kremlin Entities, the outstanding shares
of capital stock of the Kremlin Entities are not subject to any preemptive or
similar rights granted by them, and to the extent owned by BrookeMil, are free
and clear of any security interest, claim, lien, or encumbrance of any nature.
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(f) (i) BrookeMil and, to the knowledge of New
Valley, without any independent investigation, each Affiliated Entity has such
licenses, permits and approvals as are necessary to conduct its business as
described to Apollo, except where the failure to have such license, permit or
approval would not have a material adverse effect on the operations of BrookeMil
or such Affiliated Entity; (ii) BrookeMil and, to the knowledge of New Valley,
without any independent investigation, each Affiliated Entity 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 the operations of BrookeMil or 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.
(g) Subject to Schedule 9.3(g), there are no
litigations pending or, to the knowledge of New Valley, threatened in writing
against BrookeMil, or, to the knowledge of New Valley, the Affiliated Entities,
any of their ventures 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 BrookeMil or any
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32
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, or, to the knowledge of New Valley, the Affiliated Entities, any of
their ventures and/or Properties that might (x) detrimentally affect the value,
use, ownership or operation of the 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. Neither BrookeMil nor, to the knowledge of New
Valley, 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, except for a special administrative insolvency procedure with respect
to Kremlin Entity-I.
(h) To the knowledge of New Valley, the Kremlin Sites
will have access, on the basis generally provided to businesses in the City of
Moscow, to available water, sewer and power utilities.
(i) To the knowledge of New Valley, the business of
BrookeMil 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 or the Company.
To the knowledge of New Valley, BrookeMil and the Company are in compliance with
all applicable environmental laws and have not received any communication from
any governmental authority that alleges that BrookeMil or the Company is not in
compliance with applicable environmental laws where such noncompliance would
have a material adverse effect
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33
on BrookeMil or the Affiliated Entities. To the knowledge of New Valley, the
business of BrookeMil is not being, nor has it in the past been, conducted in
violation of Russian antimonopoly law, except for possible violations which
individually or in the aggregate would not have a material adverse effect on
BrookeMil or the Company, or on the validity of BrookeMil's interest in the
Affiliated Entities. To the knowledge of New Valley, each of BrookeMil and the
Affiliated Entities is in compliance with all applicable environmental laws and
has not received any communication from any governmental authority that alleges
that it is not in compliance with applicable environmental law where such
noncompliance would have a material adverse effect on the operations of
BrookeMil or such Affiliated Entity.
(j) All material tax returns and reports required to
be filed by 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 BrookeMi required to be shown thereon. To the
knowledge of New Valley, there are no pending tax investigations or outside
audits of BrookeMil being conducted and, except as set forth in Schedule 9.3(j),
BrookeMil does not have any outstanding tax penalties against it. To the
knowledge of New Valley, all material tax returns and reports required to be
filed by Kremlin Entity-I 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
appropriat governmental authorities prior to the date hereof or by the due date
thereof including extensions. To the knowledge of New Valley, there are no
outstanding tax liabilities with respect to Kremlin Entity-II, except for
contingent tax liabilities the amount of which does not exceed the amount
deposited in escrow in accordance with the
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Escrow Agreement among BrookeMil, Austreal Consult Immobilienverwertung
Ges.m.b.H. and U.S. Bank Trust National Association, dated April 3, 1998, for
the purposes of indemnifying BrookeMil in accordance with the Share Purchase and
Sale Agreement between BrookeMil and Austreal Consult Immobilienverwertung
Ges.m.b.H., dated April 2, 1998.
(k) New Valley has identified to Apollo and has
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. To the knowledge of New Valley, there are no
material employment agreements or employee benefit plans with respect to the
employees of the Kremlin Entities.
(l) A schedule of the material contracts of BrookeMil
relating to the Kremlin Entities and of the material contracts of the Kremlin
Entities related to the Kremlin Operations of which New Valley is aware is
annexed hereto as Schedule 9.3(l) (the "Material Contracts"). To the knowledge
of New Valley and except as set forth on Schedule 9.3(l), (i) the Material
Contracts have been duly authorized, executed and delivered by BrookeMil or a
Kremlin Entity party thereto and are legal, valid and binding agreements of
BrookeMil or such Kremlin Entity, as the case may be, enforceable against it in
accordance with their respective terms; (ii) BrookeMil or a Kremlin Entity, as
the case may be, has fully performed all its 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
any Kremlin Entity, nor, to the knowledge of New Valley, without independent
investigation, any other party is in default under any of the Material
Contracts; and (iv) 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. Neither BrookeMil
nor any of the Kremlin Entities assigned any of its interests in the Material
Contracts.
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(m) The unaudited financial statements of BrookeMil
for the years ended December 31, 1996 and 1997 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. The
balance sheets of the Kremlin Entities received by BrookeMil from the Kremlin
Entities, prepared, to the knowledge of BrookeMil, without independent
investigation, in accordance with Russian accounting principles, are attached
hereto as Schedule 9.3(m).
(n) 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 9.3(n).
(o) To the knowledge of New Valley, the operations of
the Kremlin Entities have not been conducted in violation of the restrictions
set forth in Section 6.5(c) and (d) hereof.
(p) To the knowledge of New Valley, there are no
material liabilities of the Affiliated Entities other than those set forth in
Schedule 9.3(g) hereof or otherwise disclosed to Apollo in writing.
9.4 Additional Representations by Apollo. In addition to the
representations made by Apollo in Section 9.2 above, Apollo represents and
warrants that, to the best of its knowledge, 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.
10. 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:
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10.1 Date, Time and Place of Initial Closing. The closing of
the transactions set forth in Section 2.4(b) hereof (the "Initial Closing")
shall take place on June 18, 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 Closing being referred to herein as the "Initial Closing
Date").
10.2 Conditions to Obligations of New Valley. The obligations
of New Valley 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 New Valley of this Agreement shall have
been obtained.
(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 New Valley seeking to prohibit the transactions
contemplated by this Agreement.
10.3 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:
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(a) All authorizations, consents, orders and
approvals of regulatory authorities and third parties, if any, necessary for the
performance by the Company and New Valley of their obligations under this
Agreement shall have been obtained.
(b) The representations and warranties of New Valley
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 New Valley 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.
(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, New Valley or any of the Affiliated Entities seeking to
prohibit the transactions contemplated by this Agreement.
(d) There shall not have been any material adverse
change in the financial condition of New Valley or any of the Affiliated
Entities 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 Affiliated
Entities or the ability of any Member to perform its obligations with respect to
such Closing.
(f) Expenditures for the Kremlin Sites are within a
10% variance from the Budget.
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10.4 Additional Conditions to Obligations of Apollo Satisfied
at Initial Closing.
(a) Apollo shall have 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 by New Valley and
the organization of the Company.
(b) Apollo shall have received a legal opinion from
▇.▇. ▇▇▇▇▇▇ & Co, special Cayman Islands counsel to BrookeMil, in form and
substance reasonably satisfactory to it, with respect to the due organization of
BrookeMil and the validity of the choice of New York law in the Pledge Agreement
(as defined in the Participating Loan Agreement).
(c) The Company and BrookeMil shall have entered into
the Participating Loan Agreement and the Pledge Agreement (as defined therein),
and all the conditions for the Initial Closing under the Participating Loan
Agreement shall have been satisfied.
10.5 Funding and Advance of Apollo Loan at Initial Closing. At
the Initial Closing, (i) each of Apollo and New Valley shall fund their initial
contributions to the Company as set forth in Section 2.4(b), and (ii) the
Company shall make an advance to BrookeMil under the Participating Loan
Agreement.
10.6 Initial Subsequent Closing. The initial Subsequent
Closing (the "Initial Subsequent Closing") shall take place on June 30, 1998 or
on such other date as shall be mutually agreed by the parties hereto. At the
Initial Subsequent Closing, Apollo shall contribute to the Company $5,300,000 in
cash in exchange for 2,826 Class A Interests to be issued to Apollo, and New
Valley shall contribute $1,766,666 in expenditures as set forth in Section
2.4(c) in exchange for 2,826 Class B Interests to be issued to New Valley. At
the Initial Subsequent Closing, New
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Valley shall be reimbursed by the Company from the proceeds of the Initial
Subsequent Closing for expenditures with respect to the Kremlin Sites and the
Kremlin Entities set forth in Schedule 2.4(c) and for other expenditures
incurred by it before or after the Initial Closing Date on items set forth in
the approved Budget, to the extent such expenditures exceed 25% of the total
contributions by Apollo and New Valley.
10.7 Subsequent Closings. Upon written notice by the Board of
Managers to each of Apollo and New Valley as set forth in Section 2.4(c) hereof,
other subsequent closings (the "Other Subsequent Closings"; the Initial
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.
11. Notices and Account Information for Distributions.
11.1 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 Repin LLC
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: ▇▇▇-▇▇▇-▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
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(b) If to Apollo:
Apollo Real Estate
Investment Fund III, L.P.
c/o Apollo Real Estate Management III, L.P.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
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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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.
11.2 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 11.1.
12. Miscellaneous.
12.1 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 o the provisions of this Agreement.
12.2 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 or (b) the dissolution of the Company.
12.3 Assignment. Except as provided in Section 8.2 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.
12.4 Amendment, Modification and Waiver. This Agreement shall
be amended to include any person who acquires any Interests in the Company,
provided that such person
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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.
12.5 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.
12.6 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.
12.7 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 material breach of
such indemnifying party of the terms of this Agreement or any material
misrepresentation hereunder, 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
12.7 shall survive the termination of this Agreement and the representations and
warranties given by the parties shall survive for the applicable statute of
limitations.
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12.8 Governing Law. This Agreement shall be governed by
Delaware law, without regard to its conflict of laws principles.
12.9 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.
12.10 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, 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 12.10 shall be deemed to prohibit Apollo
from making any disclosures regarding this Agreement or the transactions
contemplated herein to any of its partners.
12.11 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.
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12.12 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.
[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: Executive Vice President
WESTERN REALTY REPIN LLC
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Vice President
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Schedule A
To Western Realty Repin 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(c) and (ii) any
additional expenditures incurred by New Valley before or after the Initial
Closing Date on items set forth in the approved Budget, to the extent New Valley
(x) provides to Apollo proper documentation substantiating such additional
expenditures and (y) has not been reimbursed for such expenditures in accordance
with Section 3.1, 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 20% 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.
"Affiliated Entity" shall mean the Kremlin Division of BrookeMil, the
Kremlin Entities any other direct or indirect wholly-owned subsidiary of the
Company or the foregoing entities and any other entity (whether or not
incorporated) in which any of the foregoing entities or the Company has or
hereafter acquires a majority interest.
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"Apollo" shall have the meaning ascribed thereto in the introductory
paragraph hereof.
"Board" or "Board of Managers" shall have the meaning ascribed thereto
in Section 2.9 hereof.
"BrookeMil" shall have the meaning ascribed thereto in the first
"WHEREAS" clause 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.
"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.
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"Closing" shall have the meaning ascribed thereto in Section 10 hereof.
"Closing Date" shall have the meaning ascribed thereto in Section 10
hereof.
"Company" shall have the meaning ascribed thereto in the introductory
paragraph hereof.
"Dissolving Member" shall have the meaning ascribed thereto in Section
8.4 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
10.1 hereof.
"Initial Closing Date" shall have the meaning ascribed thereto in
Section 10.1 hereof.
"Initial Subsequent Closing" shall have the meaning ascribed thereto in
Section 10.6 hereof.
"Initial Subsequent Closing Date" shall have the meaning ascribed
thereto in Section 12.6 hereof.
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"Interests" shall have the meaning ascribed thereto in Section 2.4(a)
hereof.
"Kremlin-I Land Lease" shall have the meaning ascribed thereto in
Section 9.3(a) hereof.
"Kremlin Division" shall mean the division of the Borrower that
conducts the Kremlin Operations.
"Kremlin Entity-I" shall have the meaning ascribed thereto in the first
"WHEREAS" clause hereof.
"Kremlin Entity-II" shall have the meaning ascribed thereto in the
first "WHEREAS" clause hereof.
"Kremlin Entities" shall have the meaning ascribed thereto in the first
"WHEREAS" clause hereof.
"Kremlin Operations" shall mean any activities of BrookeMil related to
the Kremlin Entities or the Kremlin Sites.
"Kremlin Site-I" shall have the meaning ascribed thereto in the first
"WHEREAS" clause hereof.
"Kremlin Site-II" shall have the meaning ascribed thereto in the first
"WHEREAS" clause hereof.
"Kremlin Sites" shall have the meaning ascribed thereto in the first
"WHEREAS" clause hereof.
"Late Payment Interest" shall have the meaning ascribed thereto in
Section 2.4(d) hereof.
"Material Contracts" shall have the meaning ascribed thereto in Section
9.3(l) hereof.
"Member" shall have the meaning ascribed thereto in the introductory
paragraph hereof.
"New Valley" shall have the meaning ascribed thereto in the
introductory paragraph hereof.
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"Other Subsequent Closings" shall have the meaning ascribed thereto in
Section 10.7 hereof.
"Participating Loan Agreement" shall have the meaning ascribed thereto
in the second "WHEREAS" clause hereof.
"Participating Loan" shall have the meaning ascribed thereto in the
second "WHEREAS" clause hereof.
"President" shall have the meaning ascribed thereto in Sections 5
hereof.
"Properties" shall mean the Kremlin Sites and any other property to
which the Company or any Affiliated Entity has or hereafter acquires rights.
"REOC" shall have the meaning ascribed thereto in Section 6.5(b)
hereof.
"Subsequent Closings" shall have the meaning ascribed thereto in
Section 10.7 hereof.
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